<PAGE> 1
As filed with the Securities and Exchange Commission on August 13, 1999
Registration Nos. 333-
and 811-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. ___ [ ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [X]
ACT OF 1940
Amendment No. ___ [ ]
FARMERS ANNUITY SEPARATE ACCOUNT A
----------------------------------
(Exact Name of Registrant)
FARMERS NEW WORLD LIFE INSURANCE COMPANY
----------------------------------------
(Name of Depositor)
3003 77th Avenue, S.E., Mercer Island, Washington 98040
-------------------------------------------------------
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code:
(206) 232-8400
<TABLE>
Name and Address of Agent for Service: Copy to:
<S> <C>
John R. Patton, FLMI, FLHC, CLU, ChFC Stephen E. Roth, Esq.
Assistant Vice President -- Staff Operations Sutherland Asbill & Brennan LLP
Farmers New World Life Insurance Company 1275 Pennsylvania Avenue, N.W.
3003 77th Avenue, S.E. Washington, D.C. 20004-2415
Mercer Island, Washington 98040
</TABLE>
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement.
-------------------
Title of securities being registered:
Units of interest in a separate account under individual flexible premium
variable annuity contracts.
The Registrant hereby amends this Registration Statement on such date or 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),
shall determine.
<PAGE> 2
PROSPECTUS
, 1999
- ------------
Please read this prospectus carefully before investing, and keep it for future
reference. It contains important information about the [__________] variable
annuity.
To learn more about the Contract, you may want to look at the Statement of
Additional Information dated [___________], 1999 (known as the "SAI"). For a
free copy of the SAI, contact us at:
Farmers New World Life Insurance Company
SERVICE CENTER
-----------------------
-----------------------
1-800-
----------------
We have filed the SAI with the U.S. Securities and Exchange Commission ("SEC")
and have incorporated it by reference into this prospectus. The SAI's table of
contents appears at the end of this prospectus.
The SEC maintains an Internet website (http://www.sec.gov) that contains the
SAI, material incorporated by reference, and other information. You may also
read and copy these materials at the SEC's public reference room in Washington,
D.C. Call 1-800-SEC-0330 for information about the SEC's public reference room.
VARIABLE ANNUITY CONTRACTS INVOLVE CERTAIN RISKS, AND YOU MAY LOSE SOME OR ALL
OF YOUR INVESTMENT.
- - The investment performance of the portfolios in which the variable
accounts invest will vary.
- - We do not guarantee how any of the portfolios will perform.
- - The Contract is not a deposit or obligation of any bank, and no bank
endorses or guarantees the Contract.
- - Neither the U.S. Government nor any federal agency insures your
investment in the policy.
[CONTRACT NAME]
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY
issued by
FARMERS NEW WORLD LIFE INSURANCE COMPANY
through the
FARMERS ANNUITY SEPARATE ACCOUNT A
Home Office
3003 - 77th Avenue, S.E.
Mercer Island, Washington 98040
Telephone: (206) 232-8400
The [______________] Contract (the "Contract") has 14 funding choices -- one
fixed account (paying a guaranteed minimum fixed rate of interest) and 13
subaccounts (including one subaccount which provides only dollar cost
averaging). The subaccounts invest in the following 12 mutual fund portfolios:
JANUS ASPEN SERIES
- - Janus Capital Appreciation
KEMPER VARIABLE SERIES
- - Kemper Government Securities Portfolio
- - Kemper High Yield Portfolio
- - Kemper Small Cap Growth Portfolio
- - Kemper-Dreman High Return Equity Portfolio
PIMCO VARIABLE INSURANCE TRUST
- - PIMCO Low Duration Bond Portfolio
- - PIMCO Foreign Bond Portfolio
SCUDDER VARIABLE LIFE INVESTMENT FUND
- - Scudder VLIF Money Market Portfolio
- - Scudder VLIF Growth and Income Portfolio (Class A Shares)
- - Scudder VLIF International Portfolio (Class A Shares)
- - Scudder VLIF Bond Portfolio (Class A Shares)
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- - Developing Markets Fund (Class 2 Shares)
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Glossary.......................................................................... 1
Highlights........................................................................ 3
The Contract.................................................................... 3
How to Invest................................................................... 3
Cancellation -- The Right To Examine Period..................................... 3
Investment Options.............................................................. 4
Transfers....................................................................... 4
Asset Allocation Program........................................................ 5
Dollar Cost Averaging Program................................................... 5
Access to Your Money............................................................ 5
Death Benefit................................................................... 6
Fees and Charges................................................................ 6
Annuity Provisions.............................................................. 8
Guaranteed Retirement Income Benefit............................................ 8
Federal Tax Status.............................................................. 8
Inquiries....................................................................... 8
Fee Table......................................................................... 9
Examples........................................................................ 11
Condensed Financial Information................................................. 12
About Farmers New World Life Insurance Company and the Variable Account........... 13
Farmers New World Life Insurance Company........................................ 13
Farmers New World Life Variable Annuity Separate Account A...................... 13
The Portfolios.................................................................... 14
Investment Objectives of the Portfolios......................................... 14
Availability of the Funds....................................................... 15
The Pay-In Period................................................................. 16
Purchasing a Contract........................................................... 16
Premium Payments................................................................ 16
Cancellation -- The 10 Day Right to Examine Period.............................. 16
Designating Your Investment Options............................................. 16
Your Contract Value............................................................... 18
Variable Account Value.......................................................... 18
Transfers Between Investment Options.............................................. 19
Asset Allocation Program........................................................ 19
Dollar Cost Averaging Program................................................... 19
Telephone Transfers............................................................. 20
Transfer Fee.................................................................... 20
Access to Your Money.............................................................. 20
Surrenders...................................................................... 20
Partial Withdrawals............................................................. 21
Surrender and Partial Withdrawal Restrictions................................... 21
Systematic Withdrawal Plan...................................................... 21
Death Benefits.................................................................... 22
Death Benefits Before the Annuity Start Date.................................... 22
Distribution Upon the Owner's or Annuitant's Death.............................. 22
Death Benefits After the Annuity Start Date..................................... 23
Fees and Charges.................................................................. 23
Mortality and Expense Risk Charge............................................... 23
Asset-Based Administration Charge............................................... 23
Transfer Fee.................................................................... 24
Surrender Charge................................................................ 24
Annual Administration Fee....................................................... 25
Portfolio Fees and Charges...................................................... 25
Premium Taxes................................................................... 26
Other Taxes..................................................................... 26
The Payout Period................................................................. 26
The Annuity Start Date.......................................................... 26
</TABLE>
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<TABLE>
<S> <C>
Annuity Options................................................................. 26
Determining the Amount of Your Annuity Payment.................................. 27
Fixed Annuity Payments.......................................................... 27
Variable Annuity Payments....................................................... 27
Annuity Unit Value.............................................................. 28
Transfers....................................................................... 28
Description of Annuity Options.................................................. 28
Guaranteed Retirement Income Benefit.............................................. 29
The Fixed Account................................................................. 30
Fixed Account Value............................................................. 30
Fixed Account Transfers......................................................... 31
Investment Performance of the Variable Accounts................................... 31
Voting Rights..................................................................... 33
Federal Tax Matters............................................................... 33
Taxation of Non-Qualified Contracts............................................. 34
Taxation of Qualified Contracts................................................. 35
Other Tax Issues................................................................ 36
Our Income Taxes................................................................ 36
Possible Tax Law Changes........................................................ 36
Other Information................................................................. 37
Payments........................................................................ 37
Modification.................................................................... 37
Distribution of the Contracts................................................... 37
Legal Proceedings............................................................... 38
Reports to Owners............................................................... 38
Inquiries....................................................................... 38
Year 2000 Matters............................................................... 38
Financial Statements............................................................ 39
Statement of Additional Information Table of Contents............................. 39
</TABLE>
ii
<PAGE> 5
GLOSSARY
For your convenience, we are providing a glossary of the special terms we
use in this prospectus.
ACCUMULATION UNIT
An accounting unit we use to calculate subaccount values during the pay-in
period. It measures the net investment results of each of the variable
subaccounts.
ANNUITANT
You are the annuitant, unless you state otherwise in your application or you
later name another person with our approval. The annuitant is the person (or
persons) on whose life (or lives) the Contract is issued. When you begin to
receive annuity payments, an annuitant is a person during whose lifetime we may
make payments under one of the annuity payment options.
ANNUITY OPTION
The arrangement you choose under which we pay annuity payments to you after the
Annuity Start Date. You may choose whether the dollar amount of the payments you
receive will be fixed, or will vary with the investment experience of the
subaccounts in which you are invested at that time, or whether you will receive
a combination of fixed and variable payments.
ANNUITY START DATE
The date when we will begin to pay annuity payments to the annuitant.
ANNUITY UNIT
The accounting unit we use to calculate annuity payments under the variable
annuity options after the Annuity Start Date.
BENEFICIARY
The person you select to receive the death benefit if you or the annuitant die
before the Annuity Start Date.
CASH VALUE
The Contract Value minus any applicable surrender charge, annual administration
fee, and premium tax.
COMPANY (WE, US, OUR)
Farmers New World Life Insurance Company.
CONTINGENT ANNUITANT
A person you designate to become the annuitant if the annuitant dies before the
Annuity Start Date.
CONTRACT ANNIVERSARY
The same date in each year as the issue date.
CONTRACT VALUE
The sum of the amounts you have accumulated under the Contract. It is equal to
the money you have under the Contract in the variable account and the fixed
account.
DUE PROOF OF DEATH
Proof of death that we find satisfactory, such as a certified copy of the death
record, an order of a court of competent jurisdiction or a statement from a
physician who attended the deceased.
FIXED ACCOUNT
An option to which you can direct your money under the Contract. It provides a
guarantee of principal and interest. The assets supporting the fixed account are
held in our general account and are not part of, or dependent on, the investment
performance of the variable account.
FIXED ACCOUNT VALUE
Your Contract Value in the fixed account.
FREE PARTIAL WITHDRAWAL AMOUNT
The amount you can withdraw as a partial withdrawal without incurring surrender
charges. Surrender charges will be imposed retroactively on any amounts
withdrawn without charge during the 12 months before the surrender of the
Contract.
FUNDS
Investment companies listed on the front page of this prospectus. Each is
registered with the U.S. Securities and Exchange Commission. This Contract
allows you to invest in certain investment portfolios of the Funds.
GENERAL ACCOUNT
The account containing all of Farmers' assets, other than those held in its
separate account.
ISSUE DATE
The later of the date on which the initial premium is received and the date that
the properly completed application is received at our Service Center. It is also
the date when, depending on your state of
1
<PAGE> 6
residence, we allocate your premium(s) either to the reallocation account or to
the fixed account and the subaccounts you selected on your application. We
measure Contract years, Contract months and Contract anniversaries from the
issue date.
PAYEE
The person(s) entitled to receive annuity payments.
PAY-IN PERIOD
The period that begins when we issue your Contract and ends on the Annuity Start
Date. During the pay-in period, earnings accumulate on a tax-deferred basis.
PAYOUT PERIOD
The period that begins on the Annuity Start Date during which you receive
annuity payments based on the money you have accumulated under your Contract.
PORTFOLIO
A separate investment portfolio of a Fund in which a subaccount invests.
QUALIFIED CONTRACT
A Contract issued in connection with retirement plans that qualify for special
federal income tax treatment under the Internal Revenue Code.
REALLOCATION ACCOUNT
The fixed account.
REALLOCATION DATE
The date shown on the Contract specifications page when we reallocate all
Contract Value held in the reallocation account to the fixed account and the
subaccounts based on the allocation percentages you specified in the
application. We place your premium in the reallocation account only if your
state requires us to return the full premium in the event you exercise you right
to cancel the Contract. In those states, the reallocation date is 35 days after
the issue date.
SERVICE CENTER
The address of the Service Center is ______. [_______] is the adminstrator of
the Contract. You can call the Service Center office at 1-800-XXX-XXXX.
SUBACCOUNT
A subdivision of the variable account that invests exclusively in shares of a
single portfolio of a Fund. The investment performance of each subaccount is
linked directly to the investment performance of the portfolio in which it
invests.
SURRENDER
The termination of a Contract at the option of the owner.
VARIABLE ACCOUNT
Farmers Annuity Separate Account A. It is a separate investment account divided
into subaccounts, each of which invests in a corresponding portfolio of a
designated mutual fund.
VALUATION DAY
Each day that the New York Stock Exchange ("NYSE") is open for trading, except
when a subaccount's corresponding portfolio does not value its shares. Farmers
New World Life Insurance Company is open to administer the Contract on each day
the NYSE is open.
VALUATION PERIOD
The period of time over which we determine the change in the value of the
subaccounts in order to price accumulation units. Each valuation period begins
at the close of normal trading on the NYSE (currently 4:00 p.m. Eastern time on
each Valuation Day) and ends at the close of normal trading on the NYSE on the
next Valuation Day.
WRITTEN NOTICE
The written notice you must sign and send to us to request or exercise your
rights as owner under the Contract. To be complete, it must: (1) be in a form we
accept; (2) contain the information and documentation that we determine is
necessary, and (3) be received at our Service Center.
YOU (YOUR, OWNER)
The person(s) entitled to exercise all rights as owner under the Contract.
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HIGHLIGHTS
These highlights provide only a brief overview of the more important
features of the Contract. More detailed information about the Contract appears
later in this prospectus. Please read this prospectus carefully.
THE CONTRACT
An annuity is a contract where you agree to make one or more payments to
us and, in return, we agree to pay a series of payments to you at a later date
you choose. The ________Contract is a special kind of annuity that is:
- FLEXIBLE PREMIUM - you may add premium payments at any time.
- TAX-DEFERRED - you do not have to pay taxes on earnings until you
take money out by surrender, partial cash withdrawals, or we make
annuity payments to you, or we pay the death benefit.
- VARIABLE - you can direct your premium into any of 12 subaccounts.
Each subaccount invests exclusively in a single portfolio of a fund.
The money you invest in the subaccounts will fluctuate daily based
on the performance of mutual fund portfolios. You bear the
investment risk on the amounts you invest in the subaccounts.
You can also direct money to the fixed account. Amounts in the fixed
account earn interest annually at a fixed rate that is guaranteed by us never to
be less than 3%, and may be more. We guarantee the interest, as well as
principal, on money placed in the fixed account.
The Contract allows you to select on your application, for an additional
fee, a Guaranteed Minimum Death Benefit Rider and the Guaranteed Retirement
Income Benefit Rider.
Like all deferred annuities, the Contract has two phases: the "pay-in"
period and the "payout" period. During the pay-in period, you can allocate money
to any combination of investment alternatives. Any earnings on your investments
accumulate tax-deferred. The payout period begins once you start receiving
regular annuity payments from your Contract Value. The money you can accumulate
during the pay-in period, as well as the annuity payout option you choose, will
determine the dollar amount of any annuity payments you receive.
HOW TO INVEST
You may purchase the Contract with a single payment of $1,000 or more. We
will not issue a Contract if you are older than age 90 on the issue date.
You can pay additional premiums of $500 or more ($50 or more if you
authorize us to draw on an account by check or electronic debit) at any time
before the Annuity Start Date. You may send your premium payments to the Service
Center, or pay them to one of our authorized agents. You can call our Service
Center at 1-800-XXX-XXXX. We may limit the total premium(s) paid to use during
any Contract year.
CANCELLATION -- THE RIGHT TO EXAMINE PERIOD
You may return your Contract for a refund within 10 days after you receive
it. In most states, the amount of the refund will be the total premiums we have
received, plus (or minus) any gains (or losses) in the amounts you invested in
the subaccounts. If state law requires, we will refund your original premium(s).
In those states, we will place your premium(s) in the reallocation account until
the reallocation date. We will pay the refund within 7 days after we receive the
Contract. The Contract will then be deemed void. In some states you may have
more than 10 days, or receive a different refund amount.
3
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INVESTMENT OPTIONS
You may invest your money in any of 12 portfolios by directing it into the
corresponding subaccount. The portfolios now available to you under the Contract
are:
JANUS ASPEN SERIES
-Capital Appreciation Portfolio
KEMPER VARIABLE SERIES
-Kemper Government Securities Portfolio
-Kemper High Yield Portfolio
-Kemper Small Cap Growth Portfolio
-Kemper-Dreman High Return Equity
Portfolio
PIMCO VARIABLE INSURANCE TRUST
-Low Duration Bond Portfolio
-Foreign Bond Portfolio
SCUDDER VLIF
-Money Market Portfolio
-Growth and Income Portfolio
-International Portfolio
-Bond Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
-Developing Markets Fund
EACH ALLOCATION TO A SUBACCOUNT OR THE FIXED ACCOUNT MUST BE AT LEAST
$500.
Two subaccounts invest in the Scudder VLIF Money Market Portfolio. One of
those subaccounts is only available if you participate in the dollar cost
averaging program at the time you complete your application.
Each subaccount invests exclusively in shares of one portfolio of a Fund.
Each portfolio's assets are held separately from the other portfolios and each
portfolio has separate investment objectives and policies. The portfolios are
described in the prospectuses for the Funds that accompany this prospectus. The
value of your investment in the subaccounts will fluctuate daily based on the
investment results of the portfolios in which you invest, and on the fees and
charges deducted.
DEPENDING ON MARKET CONDITIONS, YOU CAN MAKE OR LOSE MONEY IN ANY OF THE
SUBACCOUNTS. WE RESERVE THE RIGHT TO OFFER OTHER INVESTMENT CHOICES IN THE
FUTURE.
You may also direct your money to the fixed account and receive a
guaranteed rate of return. Money you place in the fixed account will earn
interest for one year periods at a fixed rate that we guarantee to be 3.0%.
TRANSFERS
You have the flexibility to transfer assets within your Contract. At any
time during the pay-in period, you may transfer amounts among the subaccounts
and between the fixed account and the subaccounts. Certain restrictions apply:
- transfers must be at least $100, unless the total value in a subaccount
or fixed account is transferred;
- Contract Value remaining in a subaccount or the fixed account must be
at least $500, unless the total value is transferred;
- only one transfer may be made from the fixed account each Contract
year. The transfer must be made during the 30 days following a Contract
anniversary; and
- transfers cannot be made from any subaccount to the fixed account over
the 6 months following any transfer from the fixed account into one or
more subaccounts.
You may make 12 free transfers each contract year. We impose a $25 charge
per transfer on each transfer after the twelfth during a contract year before
the Annuity Start Date. Transfers made under the asset allocation or dollar cost
averaging programs do not count toward the 12 free transfers.
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<PAGE> 9
Once you begin to receive annuity payments, you may make one transfer
among the subaccounts every three months. You may not make transfers between the
subaccounts and the fixed account.
ASSET ALLOCATION PROGRAM
Under the asset allocation program, we will automatically transfer amounts
among the subaccounts on a quarterly, semi-annual or annual basis so that the
allocation of your Contract Value matches the percentages you specify.
DOLLAR COST AVERAGING PROGRAM
The dollar cost averaging program permits you to systematically transfer
(on a monthly, quarterly, semi-annual or annual basis) a set dollar amount from
one or more subaccounts or the fixed account to other subaccounts. Dollar cost
averaging is available only during the pay-in period.
If you choose to participate in the dollar cost averaging program when you
purchase the Contract, you may allocate all or part of your initial premium
payment to the Scudder VLIF Money Market Subaccount #2. This subaccount will not
deduct any charges for mortality and expense risks and administrative costs. You
must transfer all amounts out of the Scudder VLIF Money Market Subaccount # 2
within one year from the issue date.
If your Contract Value in the fixed account is at least $10,000, you may
elect to have us make calendar quarter transfers of the interest you accrue in
the fixed account to one or more of the subaccounts.
ACCESS TO YOUR MONEY
During the pay-in period, you may receive a cash withdrawal of part of
your Contract Value. You may also fully withdraw all your value from the
Contract and receive its surrender value. This is called a surrender.
Partial withdrawals are subject to the following conditions:
- the minimum amount you can withdraw is $100, or the entire
amount in a subaccount or the fixed account, if less;
- you must leave at least $500 in the subaccount (or fixed
account) from which you request the withdrawal, unless the
total value is withdrawn;
- partial withdrawals are not permitted from the fixed account
during the first Contract year.
Surrenders and partial withdrawals may be subject to a surrender charge.
In any contract year, you may withdraw a portion of your Contract Value, called
the free withdrawal amount, without incurring a surrender charge.
We offer a systematic withdrawal plan whereby you may receive periodic
payments of at least $100 on a monthly, quarterly, semi-annual or annual basis
during the pay-in period.
You may have to pay federal income taxes and a penalty tax on any money
you withdraw from the Contract.
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DEATH BENEFIT
We will pay the death benefit to the beneficiary at the death of either
the owner or the annuitant before the Annuity Start Date.
The standard death benefit will be the Contract Value determined on the
valuation day we receive due proof of death and the beneficiary's election
regarding payment.
GUARANTEED MINIMUM DEATH BENEFIT RIDER
For an additional daily mortality and expense risk charge, you may add the
guaranteed minimum death benefit rider. The death benefit under this rider
depends on the age of the decreased owner or annuitant when the death benefit is
payable.
If the deceased dies before age 91 and before the Annuity Start Date, the
death benefit will equal the greatest of the following:
- Contract Value determined on the valuation day we received due proof
of death and the beneficiary's election regarding payment;
- Premiums paid (minus any prior withdrawals) with interest at 4% per
year until the earlier of: (i) the deceased's age 80, or (ii) the
date of death; plus premium payments (minus any prior withdrawals)
from the deceased's age 80 until the date of death; or
- the greatest Contract Value on any Contract anniversary before
death prior to age 81, plus any premiums paid and minus any
withdrawals since that anniversary.
A different death benefit calculation applies if the owner or annuitant
dies at or after age 91.
FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE. We will deduct a daily mortality and
expense risk charge from your value in the subaccounts at an annual rate of
____% (X.XX% if you select the Guaranteed Minimum Death Benefit rider). We will
continue to deduct this charge after you begin to receive annuity payments if
you choose to receive variable annuity payments.
ASSET-BASED ADMINISTRATIVE CHARGE. We will deduct a daily administrative
charge from your value in the subaccount at an annual rate of ____%. We will
continue to assess this charge after you begin to receive annuity payments if
you choose to receive variable annuity payments.
GUARANTEED RETIREMENT INCOME BENEFIT CHARGE. If you choose the guaranteed
retirement income benefit, we will deduct a guaranteed retirement income benefit
charge on each Contract quarter from your Contract Value. This charge is
deducted on a pro-rata basis from all subaccounts and the fixed account at the
annual rate of ___% of your Contract Value as of each Contract quarter.
ANNUAL ADMINISTRATION FEE. We deduct an annual administration fee of $30
from your Contract Value at the beginning of each contract year during the
pay-in period, on the date of surrender, and on the Annuity Start Date. We will
waive this charge if your Contract Value is $50,000 or more on the date the
charge is assessed.
TRANSFER FEE. You may make 12 free transfers each contract year. We impose
a $25 charge per transfer on each transfer after the twelfth during a contract
year before the Annuity Start Date.
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SURRENDER CHARGE. During the pay-in period, you may withdraw all or part
of your Contrat Value before your death. Certain withdrawals may be made without
payment of any surrender charge. Other withdrawals are subject to surrender
charges.
We calculate the surrender charge from the date you made the premium
payment(s) being withdrawn. The surrender charge will vary depending on the
number of years since you made the premium payment(s).
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PAYMENT YEAR: 1 2 3 4 5 6 7 8+
----------------------------------------------------
SURRENDER CHARGE: 7% 6% 5% 5% 4% 3% 2% 0
</TABLE>
In determining surrender charges, we will treat your premium payments are
being withdrawn in the order in which we received them -- that is on a first-in,
first-out basis.
We do not assess a surrender charge on:
- the death benefit;
- if your Contract has been in force for at least three contract years,
on annuity payments made under annuity options one, two or three;
- on withdrawals that qualify under the waiver of surrender charge
rider as extended hospitalization, long-term care, or terminal
illness (described below); or
- on the free withdrawal amount.
Each year, free of surrender charge, you may withdrawal the free
withdrawal amount, which equals the greater of:
1. the excess of Contract Value over premiums subject to surrender
charges, less prior withdrawals that were previously assessed a
surrender charge; and
2. 10% of Contract Value at the time the withdrawal is requested.
If you surrender your Contract, we will impose surrender charges
retroactively on any amounts free withdrawal amounts that were taken out during
the 12 months before the surrender.
In addition, you may withdraw, free of surrender charge, any premium that
has been held by us for more than seven years.
PREMIUM TAXES. We will deduct state premium taxes, which currently range
from 0% up to 3.5%, if your state requires us to pay the tax. If necessary, we
will make the deduction either: (a) from premium payments as we receive them,
(b) from your Contract Value upon surrender or partial withdrawal, (c) on the
Annuity Start Date, or (d) upon payment of a death benefit.
PORTFOLIO FEES AND CHARGES. Each portfolio deducts portfolio management
fees and charges from the amounts you have invested in the portfolios. These
charges currently range from .44% to 1.91% annually. See the Fee Table in this
Prospectus and the prospectuses for the portfolios.
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ANNUITY PROVISIONS
ANNUITY OPTIONS. The Contract allows you to receive income under one of
three annuity payment options beginning on the Annuity Start Date you select.
You may choose from fixed payment options, variable payments options, or a
combination of both. You may receive income payments for a specific period of
time or for life, with or without a guaranteed number of payments.
If you have held the Contract for three years, we will use your Contract
Value (less any applicable premium taxes) on the Annuity Start Date to calculate
the amount of your annuity payments under the payment plan you choose. If the
Policy has been in force less than three years, we will used the Cash Value to
provide annuity payments. If you select a variable payout option, the dollar
amount of your payments may go up or down depending on the investment results of
the portfolios you invest in at that time.
GUARANTEED RETIREMENT INCOME BENEFIT
You may add this feature for an additional charge. This feature provides a
guaranteed amount of fixed annuity payments for the lifetime of the annuitant,
generally once the Contract has been in force for at least 7 Contract years. You
must elect the guaranteed retirement income benefit on your Contract
application.
FEDERAL TAX STATUS
Generally, a Contract's earnings are not taxed until you take them out.
For federal tax purposes, if you take money out during the pay-in period,
including a surrender, partial withdrawal or death benefit payment, earnings
come out first and are taxed as ordinary income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% federal penalty tax on
earnings. The annuity payments you receive during the payout phase are
considered partly a return of your original investment so that part of each
payment is not taxable as income until the "investment in the contract" has been
fully recovered. Different tax consequences may apply for a qualified Contract.
For a further discussion of the federal tax status of variable annuity
contracts, see "Federal Tax Status."
INQUIRIES
If you need additional information, please contact us at:
our Home Office:
3003 - 77th Avenue, S.E.
Mercer Island, WA 98040
1-(206) 232-8400
or the Service Center:
---------------------
---------------------
1-800-XXX-XXXX
8
<PAGE> 13
FEE TABLE
The Fee Table illustrates the current expenses and fees under the Contract
and for the portfolios. The purpose of this table is to help you understand the
various costs and expenses that you will pay directly and indirectly.
YOUR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Charge Imposed on Premium Payments..........................................None
Maximum Surrender Charge
(as a percentage of your premium payment) (1)...................................7.0%
Transfer Fee..........................................No fee in the first 12 transfers
in a contract year then $25
per additional transfer
Guaranteed Retirement Income Benefit Rider Fee (2) Quarterly Fee of [__]% of X
ANNUAL ADMINISTRATION FEE (3)............................................................$30
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily net assets in the subaccounts)
With the Guaranteed Minimum Death Benefit Rider
Mortality and Expense Risk Charge................................................[__]%
Administrative Expenses..........................................................[__]%
Total Variable Account Annual Expenses...........................................[__]%
With Standard Death Benefit
Mortality and Expense Risk Charge................................................[__]%
Administrative Expenses..........................................................[__]%
Total Variable Account Annual Expenses...........................................[__]%
</TABLE>
ANNUAL PORTFOLIO EXPENSES
(as a percentage of average daily net assets in the subaccounts after fee
waivers and expense reimbursements)
<TABLE>
<CAPTION>
TOTAL ANNUAL
EXPENSES
MANAGEMENT (AFTER
FEES OTHER EXPENSES WAIVERS
(AFTER 12b-1 (AFTER AND
NAME OF PORTFOLIO WAIVERS) FEES REIMBURSEMENT) REIMBURSEMENT)
- ----------------- -------- ---- -------------- --------------
<S> <C> <C> <C> <C>
Janus Aspen Series
- ------------------
Capital Appreciation Portfolio(4) .70% -- % .22% .92%
Kemper Variable Series
- ----------------------
Kemper Government Securities Portfolio .55% -- % .11% .66%
Kemper High Yield Portfolio .60% -- % .05% .65%
Kemper Small Cap Growth Portfolio .65% -- % .05% .70%
Kemper-Dreman High Return Equity
Portfolio(5)(6) .42% -- % .45% .87%
PIMCO Variable Insurance Trust(7)
- ---------------------------------
Low Duration Bond Portfolio .63% -- % .02% .65%
Foreign Bond Portfolio .88% -- % .02% .90%
</TABLE>
9
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
Scudder VLIF
- ------------
Money Market Portfolio .37% --% .07% .44%
Growth and Income Portfolio (Class A Shares) .47% --% .09% .56%
International Portfolio (Class A Shares) .87% --% .18% 1.05%
Bond Portfolio (Class A Shares) .47% --% .09% .56%
Templeton Variable Products Series Fund
- ---------------------------------------
Developing Markets Fund (Class 2 Shares)(8) 1.25% .25% .41% 1.91%
</TABLE>
1/ We do not assess a surrender charge on death benefit payments, or if your
Contract has been in force for at least three contract years and you begin to
receive annuity payments under annuity options one, two or three.
2/ [information to be provided by subsequent amendment]
3/ We will also deduct this fee on the Annuity Start Date or the date you
surrender your Contract. We waive this fee for Contracts with a Contract Value
of $50,000 or more on the date the fee is assessed.
4/ The expense figures shown for the Janus Aspen Capital Appreciation
Portfolio are net of certain fee waivers or reductions from Janus Capital
Corporation. Without such waivers, the Management Fees, Other Expenses and Total
Annual Expenses for the Janus Aspen Capital Appreciation Portfolio for the
fiscal year ended December 31, 1998 would have been: .75%, .22% and .97%,
respectively. See the prospectus and Statement of Additional Information of
Janus Aspen Series for a description of these waivers.
5/ The Kemper-Dreman High Return Equity Portfolio commenced operations on or
after 5/1/98. As a result, "Other Expenses" for fiscal year 1998 have been
annualized.
6/ Pursuant to their respective agreements with Kemper Variable Series, the
investment manager and the accounting agent have agreed, for the period
commencing on the date of this prospectus until May 1, 2000, to limit their
respective fees and to reimburse other operating expenses, in a manner
communicated to the Board of the Fund, to the extent necessary to limit total
operating expenses of the Kemper-Dreman High Return Equity Portfolio to the
levels set forth in the table above. Without taking into effect these expense
caps, for the High Return Equity Portfolio, the Management Fees are estimated to
be .75%; Other Expenses are estimated to be .45%; and Total Annual Expenses are
estimated to be 1.20%.
7/ For the PIMCO Variable Insurance Trust portfolios, management fees include
fixed advisory and administrative fees. The administrative fee covers most of
the expenses of these portfolios. However, the portfolios are responsible for
bearing certain expenses associated with their operations that are not covered
by the administrative fee. While it is expected that these expenses generally
will not have a material effect on the portfolio expense ratios, they may have a
material effect in certain circumstances, such as when the average net assets of
a portfolio are lower than anticipated. Pacific Investment Management Company
has agreed to reduce its administrative fee, subject to potential future
reimbursement, to the extent that Total Annual Expenses would exceed, due to
organizational expenses and the payment by the portfolio of its pro rata portion
of the Trust's Trustees' fees, 0.65% of average daily net assets of the PIMCO
Low Duration Bond portfolio and 0.90% of average daily net assets of the PIMCO
Foreign Bond portfolio. "Other Expenses" are based on estimates for the current
fiscal year. Without such reductions, Management Fees, Other Expenses and Total
Annual Expenses for the fiscal year ended December 31, 1998 would have been: for
the PIMCO Low Duration Bond Portfolio, .65%, .02% and .67%, respectively; and
for the PIMCO Foreign Bond Portfolio, .90%, .02% and .92%, respectively.
8/ Class 2 of the Templeton Developing Market Portfolio has a distribution
plan or "Rule 12b-1 Plan" which is described in the portfolio's prospectus.
The purpose of these tables is to assist you in understanding the costs and
expenses that you will bear directly or indirectly. The table reflects the
actual charges and expenses for the variable account and for each portfolio for
the fiscal year ended December 31, 1998.
10
<PAGE> 15
EXAMPLES
(NOTE: The examples shown below are entirely hypothetical. They do not
represent past or future performance or expenses. Actual performance and/or
expenses may be more or less than those shown.)
Example 1 below shows the dollar amount of expenses that you would bear directly
or indirectly if you:
- invested $1,000 in a subaccount;
- earned a 5% annual return on your investment;
- fully surrender your Contract, or began receiving annuity payments
during the first three Contract years; and
- elected the Guaranteed Minimum Death Benefit Rider (with total
variable account expenses of 1.XX%) and the Guaranteed Retirement
Income Benefit Rider (with an annual charge of X.XX%).
EXAMPLE 2
Same assumptions as Example 1, except that you elected the standard death
benefit (with total variable account expenses of 1.XX%) and do not elect the
Guaranteed Retirement Income Benefit Rider.
<TABLE>
<CAPTION>
EXAMPLE 1 EXAMPLE 2
- --------------------------------------------------------------------------------------
SUBACCOUNT 1 YEAR 3 YEARS 1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------------
Capital Appreciation
- --------------------------------------------------------------------------------------
KEMPER VARIABLE SERIES
- --------------------------------------------------------------------------------------
Kemper Government Securities
- --------------------------------------------------------------------------------------
Kemper High Yield
- --------------------------------------------------------------------------------------
Kemper Small Cap Growth
- --------------------------------------------------------------------------------------
Kemper-Dreman High Return Equity
- --------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- --------------------------------------------------------------------------------------
PIMCO Low Duration Bond
- --------------------------------------------------------------------------------------
PIMCO Foreign Bond
- --------------------------------------------------------------------------------------
SCUDDER VLIF
- --------------------------------------------------------------------------------------
Scudder VLIF Money Market
- --------------------------------------------------------------------------------------
Scudder VLIF Growth and Income
- --------------------------------------------------------------------------------------
Scudder VLIF International
- --------------------------------------------------------------------------------------
Scudder VFIL Bond
- --------------------------------------------------------------------------------------
TEMPLETON VARIABLE PRODUCT SERIES
- --------------------------------------------------------------------------------------
Developing Markets Fund
- --------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 16
EXAMPLE 3
Same assumptions as Example 1, except that you decided not to surrender your
Contract, or you began receiving annuity payments three years after the issue
date. We assume that you elected the Guaranteed Minimum Death Benefit Rider
(with total variable account expenses of 1.XX%) and the Guaranteed Retirement
Income Benefit Rider (with an annual charge of X.XX%).
EXAMPLE 4
Same assumptions as Example 3, except that you elected the standard death
benefit (with total variable account expenses of X.XX%) do not elect the
Guaranteed Retirement Income Benefit Rider.
<TABLE>
<CAPTION>
EXAMPLE 3 EXAMPLE 4
- --------------------------------------------------------------------------------------
SUBACCOUNT 1 YEAR 3 YEARS 1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------------
Capital Appreciation
- --------------------------------------------------------------------------------------
KEMPER VARIABLE SERIES
- --------------------------------------------------------------------------------------
Kemper Government Securities
- --------------------------------------------------------------------------------------
Kemper High Yield
- --------------------------------------------------------------------------------------
Kemper Small Cap Growth
- --------------------------------------------------------------------------------------
Kemper-Dreman High Return Equity
- --------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- --------------------------------------------------------------------------------------
PIMCO Low Duration Bond
- --------------------------------------------------------------------------------------
PIMCO Foreign Bond
- --------------------------------------------------------------------------------------
SCUDDER VLIF
- --------------------------------------------------------------------------------------
Scudder VLIF Money Market
- --------------------------------------------------------------------------------------
Scudder VLIF Growth and Income
- --------------------------------------------------------------------------------------
Scudder VLIF International
- --------------------------------------------------------------------------------------
Scudder VLIF Bond
- --------------------------------------------------------------------------------------
TEMPLETON VARIABLE PRODUCT SERIES
- --------------------------------------------------------------------------------------
Developing Markets Fund
- --------------------------------------------------------------------------------------
</TABLE>
The examples assume that you made no transfers. The example also do not
take into account any premium taxes. The examples reflect the annual
administration fee of $30 as an annual charge of X.xx% which we calculated by
dividing the total annual administration fees expected to be collected during a
year by an assumed average investment of $XX,000 in the subaccount.
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN
THOSE SHOWN. THE ASSUMED 5% ANNUAL RATE OF RETURN IS HYPOTHETICAL. IT DOES NOT
REPRESENT PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THIS
ASSUMED RATE.
CONDENSED FINANCIAL INFORMATION
No condensed financial information is available for the variable account,
because it has not commenced operations as of the date of this prospectus.
12
<PAGE> 17
ABOUT FARMERS NEW WORLD LIFE INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
FARMERS NEW WORLD LIFE INSURANCE COMPANY
Farmers New World Life Insurance Company ("Farmers"), is the insurance
company issuing the Contract. Farmers is located at 3003 77th Avenue, S.E.,
Mercer Island, Washington 98040, and was incorporated under Washington law on
February 21, 1910. Farmers established the variable account to support the
investment options under this Contract and under other variable annuity
contracts Farmers may issue. Farmers' general account supports the fixed account
under the Contract.
Farmers is a wholly-owned direct subsidiary of Farmers Group, Inc. In
December 1988, BATUS Inc., a subsidiary of B.A.T Industries p.l.c. ("B.A.T"),
acquired 100% ownership of Farmers Group, Inc. through its wholly-owned
subsidiary BATUS Financial Services. Immediately thereafter, BATUS Financial
Services was merged into Farmers Group, Inc. The acquisition was accounted for
as a purchase and, accordingly, the acquired assets and liabilities were
recorded in Farmers Group, Inc.'s consolidated balance sheets based on their
estimated market values at December 31, 1988. In January 1990, ownership of
Farmers Group, Inc. was transferred to South Western Nominees Limited, a
subsidiary of B.A.T.
On December 22, 1997, a definitive agreement was reached to merge B.A.T's
Financial Services Businesses, which included Farmers Group, Inc., with Zurich
Insurance Company ("Zurich"). In June 1998, the merger was approved by the
shareholders of B.A.T and Zurich. In September 1998, this merger was completed
and the businesses of Zurich and B.A.T's Financial Services Businesses were
transferred to Zurich Financial Services ("ZFS"), a new Swiss company with
headquarters in Zurich. As a result, each two shares of Farmers Group, Inc.'s
prior outstanding stock were recapitalized into one share of Class A Common
Stock, par value $1.00 per share ("Ordinary Share"), and one share of Class B
Common Stock, par value $1.00 per share ("Income Share"). Under the merger
agreement, all Ordinary Shares became wholly owned by ZFS and all Income Shares
became wholly owned by Allied Zurich Holdings Limited, an affiliated company
created during the restructuring of B.A.T. The merger was accounted for by ZFS
as a pooling of interests and, therefore, no purchase accounting adjustments
were made to Farmers Group, Inc.'s assets and liabilities.
Farmers currently is licensed to sell insurance in 38 states and the
District of Columbia. The states where Farmers is not licensed are Alaska,
Connecticut, Florida, Hawaii, Louisiana, Maine, Massachusetts, New Hampshire,
New Jersey, New York, North Carolina, and Vermont.
FARMERS ANNUITY SEPARATE ACCOUNT A
We established the Farmers Annuity Separate Account A (the "variable
account") as a variable account under Washington insurance law on April 6, 1999.
The variable account will receive and invest net premium payments made under the
Contracts and under other variable annuity contracts we may issue in the future.
Although the assets in the variable account are our property, the portion
of the assets in the variable account that are attributable to contracts are not
chargeable with the liabilities arising out of any other business that we may
conduct. All obligations arising under the Contracts are our general corporate
obligations. Income, gains and losses, whether or not realized, from assets
allocated to the variable account are credited to or charged against the
variable account without regard to our other income, gains or losses.
The variable account is divided into 13 subaccounts. Additional
subaccounts may be available in the future. Each subaccount invests exclusively
in shares of a single corresponding portfolio. The income, gains and losses,
whether or not realized, from the assets allocated to 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 with the SEC as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of a separate account under the federal securities
13
<PAGE> 18
laws. Registration with the SEC does not involve supervision of the management
or investment practices or policies of the variable account, the funds or of us
by the SEC. The variable account is also subject to the laws of the State of
Washington which regulate the operations of insurance companies domiciled in
Washington.
THE PORTFOLIOS
Each subaccount of the variable account invests exclusively in shares of a
designated portfolio of a Fund. Shares of each portfolio are purchased and
redeemed at net asset value, without a sales charge. Each Fund currently
available under the Contract is registered with the SEC under the 1940 Act as an
open-end, management investment company.
The assets of each portfolio of each Fund are separate from the assets of
that Fund's other portfolios, and each portfolio has separate investment
objectives and policies. As a result, each portfolio operates as a separate
investment portfolio and the income or losses of one portfolio has no effect on
the investment performance of any other portfolio.
Each of the Funds is managed by an investment adviser registered with the
SEC under the Investment Advisers Act of 1940, as amended. Each investment
adviser is responsible for the selection of the investments of the portfolio.
These investments must be consistent with the investment objective, policies and
restrictions of that portfolio.
In addition, the investment objectives and policies of certain portfolios
are similar to the investment objectives and policies of other portfolios that
may be managed by the same investment adviser or manager. The investment results
of the portfolios, however, may be higher or lower than the results of other
such portfolios. We make no assurance, and no representation, that the
investment results of any of the portfolios will be comparable to the investment
results of any other portfolio, even if the other portfolio has the same
investment adviser or manager.
An investment in a subaccount, or in any portfolio, including the Scudder
VLIF Money Market Portfolio, is not insured or guaranteed by the U.S. Government
and there can be no assurance that the Scudder VLIF Money Market Portfolio will
be able to maintain a stable net asset value per share.
We cannot guarantee that each Portfolio will always be available for its
variable annuity contracts. Shares of each portfolio are purchased and redeemed
at net asset value, without a sales charge.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objective of each portfolio is summarized below. WE GIVE NO
ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVES. You can find
more detailed information, including a description of risks, fees and expenses
of each portfolio in the prospectuses for the Funds which accompany this
prospectus.
CERTAIN PORTFOLIOS HAVE SIMILAR INVESTMENT OBJECTIVES AND/OR POLICIES. YOU
SHOULD CAREFULLY READ THE PROSPECTUSES FOR THE PORTFOLIOS BEFORE YOU INVEST.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER
- --------------------------------------------------------------------------
<S> <C>
JANUS ASPEN CAPITAL seeks long-term growth of capital. Investment
APPRECIATION adviser is Janus Capital Corporation.
PORTFOLIO
- --------------------------------------------------------------------------
KEMPER GOVERNMENT seeks high current return consistent with
SECURITIES PORTFOLIO preservation of capital. Investment adviser is
Scudder Kemper Investments, Inc.
- --------------------------------------------------------------------------
KEMPER HIGH YIELD seeks to provide a high level of current income.
PORTFOLIO Investment adviser is Scudder Kemper Investments,
Inc.
- --------------------------------------------------------------------------
KEMPER SMALL CAP seeks maximum appreciation of investors' capital.
Investment
- --------------------------------------------------------------------------
</TABLE>
14
<PAGE> 19
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
GROWTH PORTFOLIO adviser is Scudder Kemper Investments, Inc.
- --------------------------------------------------------------------------
KEMPER-DREMAN HIGH seeks to achieve a high rate of total return.
RETURN EQUITY Investment adviser is Scudder Kemper Investments,
PORTFOLIO Inc.; investment sub-adviser is Dreman Value
Management L.L.C.
- --------------------------------------------------------------------------
PIMCO LOW DURATION seeks to maximize total return, consistent with
BOND PORTFOLIO preservation of capital and prudent investment
management. Investment adviser is Pacific
Investment Management Company.
- --------------------------------------------------------------------------
PIMCO FOREIGN BOND seeks to maximize total return, consistent with
PORTFOLIO preservation of capital and prudent investment
management. Investment adviser is Pacific
Investment Management Company.
- --------------------------------------------------------------------------
SCUDDER VLIF MONEY seeks stability and current income from a
MARKET PORTFOLIO portfolio of money market instruments. Investment
adviser is Scudder Kemper Investments, Inc.
- --------------------------------------------------------------------------
SCUDDER VLIF GROWTH seeks long-term growth of capital, current income
PORTFOLIO and growth of income from a portfolio consisting
(CLASS A SHARES) primarily of common stocks and securities AND INCOME
convertible into common stocks. Investment adviser
is Scudder Kemper Investments, Inc.
- --------------------------------------------------------------------------
SCUDDER VLIF seeks long-term growth of capital principally from
INTERNATIONAL a diversified portfolio of foreign equity
PORTFOLIO (CLASS A securities. Investment adviser is Scudder Kemper
SHARES) Investments, Inc.
- --------------------------------------------------------------------------
SCUDDER VLIF BOND seeks high income from a high quality portfolio of
PORTFOLIO (CLASS A bonds. Investment adviser is Scudder Kemper
SHARES) Investments, Inc.
- --------------------------------------------------------------------------
TEMPLETON DEVELOPING seeks long-term capital appreciation. Investment
MARKETS FUND (CLASS adviser is Templeton Asset Management Ltd.
2 SHARES)
- --------------------------------------------------------------------------
</TABLE>
AVAILABILITY OF THE FUNDS
We cannot guarantee that each portfolio will always be available for
investment through the Contracts.
We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a portfolio that are held in
the variable account. If the shares of a portfolio are no longer available for
investment or if, in our judgment, further investment in any portfolio should
become inappropriate, we may redeem the shares of that portfolio and substitute
shares of another portfolio. We will not substitute any shares without notice
and prior approval of the SEC and state insurance authorities, to the extent
required by the 1940 Act or other applicable law.
We also reserve the right in our sole discretion to establish additional
subaccounts, or eliminate or combine one or more subaccounts, if marketing
needs, tax considerations or investment conditions warrant. We will determine if
new or substituted subaccounts will be available to existing contract owners.
Subject to obtaining any approvals or consents required by law, the assets of
one or more subaccounts may also be transferred to any other subaccount if, in
our sole discretion, marketing, tax, or investment conditions warrant.
Additional information regarding termination of participation agreements,
substitutions of investments and resolving conflicts among Funds may be found in
the SAI.
15
<PAGE> 20
THE PAY-IN PERIOD
The pay-in period begins when your first premium payment is made and
continues until you begin to receive annuity payments during the payout period.
The pay-in period will also end if you surrender your Contract before the payout
period.
PURCHASING A CONTRACT
You may purchase a Contract with a premium payment of $1,000 or more. The
maximum first premium payment is $________________.
To purchase a Contract, you must make an application to us either through
one of our authorized agents who is also a registered representative of
_________________________ or of a broker-dealer having a selling agreement with
_______________________. Contracts may be sold to or in connection with
retirement plans that do not qualify for special tax treatment as well as
retirement plans that qualify for special tax treatment under the tax code. We
will not issue you a Contract if you are older than age 90 on the issue date.
PREMIUM PAYMENTS
Premium payments must be at least $500 ($50 if you authorize us to draw on
an account by check or electronic debit). You may make premium payments at any
time until the earliest of: (a) the Annuity Start Date; (b) the date you fully
withdraw all Contract Value; or (c) the date you reach age 70 1/2 for Qualified
Contracts other than Roth IRAs).
We will not accept total premium payments in excess of the cumulative
premium limit that is specified on your Contract specification page. The
Internal Code may also limit the amount of premiums you may make.
CANCELLATION -- THE 10 DAY RIGHT TO EXAMINE PERIOD
You have the right to cancel the Contract for any reason within 10 days
after you receive it. In some jurisdictions, this period may be longer than 10
days. To cancel the Contract, you must send it to the agent through whom you
purchased it, to a branch office, or to the Home Office before the end of the
right to cancel period.
In most states, the amount of the refund will be the total premiums we
have received, plus (or minus) any gains (or losses) in the amounts you invested
in the subaccounts. If state law requires, we will refund your original
premium(s). In those states, we will place your premium(s) in the reallocation
account until the reallocation date. We will pay the refund within 7 days after
we receive the Contract. The Contract will then be deemed void. In some states
you may have more than 10 days, or receive a different refund amount.
DESIGNATING YOUR INVESTMENT OPTIONS
When you fill out your application, you will give us instructions on how
to allocate your first net premium payment among the 13 subaccounts and the
fixed account. The amount you direct to a particular subaccount and/or to the
fixed account must be in whole percentages from 1%-100% of the premium payment,
and must equal at least $500.
Once we receive your premium payment and your completed application at the
Home Office, we will issue your Contract and credit your initial premium payment
to your Contract. If we are unable to credit your initial premium payment, we
will contact you within 5 valuation days and explain why. We will also return
your
16
<PAGE> 21
premium payment at that time, unless you tell us to keep it. We will credit it
as soon as we receive all necessary application information.
The date we credit your initial premium payment to your Contract is the
issue date. The issue date is used to determine Contract years, Contract months,
Contract quarters, and Contract anniversaries.
We may reject any application or premium payment for any reason permitted
by law.
ADDITIONAL PREMIUM PAYMENTS
We will credit any additional premium payments you make to your Contract
at the accumulation unit value computed at the end of the valuation day on which
we receive them. Our valuation day closes at 4:00 p.m. Eastern Time (1 p.m.
Pacific Time). If we receive your premium payments after the close of a
valuation day, we will calculate and credit them the next valuation day.
We will direct your premium payment to the subaccounts and/or the fixed
account according to your written instructions in effect at the time we receive
it. However, you may direct individual premium payments to a specific subaccount
and/or to the fixed account without changing your instructions. You may change
your instructions directing your investments at any time by sending us a written
request or by telephone authorization. Changing your instructions will not
change the way existing Contract Value is apportioned among the subaccounts or
the fixed account.
If you choose to participate in the dollar cost averaging program when you
purchase your Contract, you may allocate all or part of your initial premium
payment to the Scudder VLIF Money Market Subaccount #2. (See "Dollar Cost
Averaging Program.")
THE CONTRACT VALUE YOU DIRECTED TO A SUBACCOUNT WILL VARY WITH THE
INVESTMENT EXPERIENCE OF THAT SUBACCOUNT. YOU BEAR THE ENTIRE INVESTMENT RISK
FOR AMOUNTS YOU ALLOCATE TO THE SUBACCOUNTS. YOU SHOULD PERIODICALLY REVIEW YOUR
PREMIUM PAYMENT ALLOCATION INSTRUCTIONS IN LIGHT OF MARKET CONDITIONS AND YOUR
OVERALL FINANCIAL OBJECTIVES.
REALLOCATION ACCOUNT
If your state requires us to return your initial premium in the event you
exercise your right to cancel the Contract, we will allocate the initial premium
on the Contract date to the reallocation account (our fixed account). While held
in the reallocation account, your premium will be credited with interest at
current fixed account rates. The premium(s) will remain in the reallocation
account for 35 days from the issue date.
On the first valuation day on or after the reallocation date, we will
reallocate all Contract Value from the reallocation account to the fixed account
and/or the subaccounts you selected on the application.
For states that do not require a full refund of the initial premium, the
reallocation date is the same date as the issue date and will be allocate the
initial premium on the issue date to the fixed account and/or subaccounts in
accordance with the instructions you gave us on your application.
17
<PAGE> 22
YOUR CONTRACT VALUE
VARIABLE ACCOUNT VALUE
Your variable account value will reflect the investment experience of the
selected subaccounts, any net premium payments paid, any surrenders or partial
withdrawals, any transfers, and any charges assessed in connection with the
Contract. There is no guaranteed minimum variable account value. A Contract's
variable account value depends upon a number of variables, therefore it cannot
be predetermined.
CALCULATING VARIABLE ACCOUNT VALUE
Your variable account value is determined at the end of each valuation
day. The value will be the total of your Contract's value in each of the
subaccounts, we determine your Contract's value in each subaccount by
multiplying that subaccount's unit value for the relevant valuation period by
the number of accumulation units of that subaccount allocated to the Contract.
NUMBER OF ACCUMULATION UNITS
Any amounts you allocate or transfer to the subaccounts will be converted
into subaccount accumulation units. We determine the number of accumulation
units to be credited to your Contract by dividing the dollar amount being
allocated or transferred to a subaccount by the accumulation unit value for that
subaccount at the end of the valuation day during which the amount was allocated
or transferred. The number of accumulation units in any subaccount will be
increased at the end of the valuation day by any net premium payments allocated
to the subaccount during the current valuation day and by any amounts
transferred to the subaccount from another subaccount or from the fixed account
during the current valuation day.
Any amounts transferred, surrendered or deducted from a subaccount will be
processed by canceling or liquidating accumulation units. The number of
accumulation units to be canceled is determined by dividing the dollar amount
being removed from a subaccount by the accumulation unit value for that
subaccount at the end of the valuation day during which the amount was removed.
The number of accumulation units in any subaccount will be decreased at the end
of the valuation day by:
- any amounts transferred (including any applicable transfer fee)
from that subaccount to another subaccount or to the fixed account;
- any amounts withdrawn or surrendered on that valuation day;
- any surrender charge or premium tax assessed upon a partial
withdrawal or surrender; and
- the Annual Administration Fee and Guaranteed Retirement Income
Benefit Rider Fee, if assessed on that valuation day.
ACCUMULATION UNIT VALUE
The accumulation unit value for each subaccount's first valuation day was
set at $10. The accumulation unit value for a subaccount is calculated for each
subsequent valuation day by multiplying the accumulation unit value at the end
of the immediately preceding valuation day by the Net Investment Factor for the
valuation day for which the value is being determined.
The formula for computing the Net Investment Factor is in the SAI.
18
<PAGE> 23
TRANSFERS BETWEEN INVESTMENT OPTIONS
After the right to examine period and before the annuity start date and
subject to the restrictions described below, you may transfer all or part of the
amount in a subaccount or the fixed account to another subaccount or the fixed
account.
The minimum amount that you may transfer is $100 or your total Contract
Value in that subaccount, whichever is less. If you request a transfer that
would reduce the amount in a subaccount below $500, we will transfer the whole
amount.
You may make one transfer from the fixed account to the subaccounts each
contract year during the 30 days following a contract anniversary. We measure a
contract year from the anniversary of the day we issued your Contract. You may
not make a transfer to the fixed account during the six months following any
transfer you make from the fixed account to any subaccount(s).
Transfers will be made as of the valuation day on which we receive your
written request or telephone authorization to transfer, provided we receive it
before the close of our valuation day, usually 3:00 p.m. Central Time. If we
receive your request after the close of our valuation day, we will make the
transfer as of the next valuation day. There currently is no limit on the number
of transfers that you can make before the Annuity Start Date among or between
subaccounts or to the fixed account
ASSET ALLOCATION PROGRAM
The asset allocation program permits you to make automatic transfers among
the subaccounts on a quarterly, semi-annual, or annual basis so that your
Contract Value is reallocated to match the percentage allocations you specify.
Transfers under this program are not subject to the $100 minimum transfer
limitation. In order to participate in the asset allocation program, you must
complete a form and return it to us.
DOLLAR COST AVERAGING PROGRAM
The dollar cost averaging program permits you to systematically transfer
for a specified duration (on a monthly, quarterly, semi-annual, or annual basis)
a set dollar amount from one or more subaccounts, or the fixed account to any
other subaccounts. If you choose to have your transfers made from the fixed
account, you must continue the program for at least one year. The fixed dollar
amount will purchase more accumulation units of a variable account when their
value is lower and fewer units when their value is higher. Over time, the cost
per unit averages out to be less than if all purchases of units had been made at
the highest value and greater than if all purchases had been made at the lowest
value. The dollar cost averaging method of investment reduces the risk of making
purchases only when the price of accumulation units is high. It does not assure
a profit or protect against a loss in declining markets.
Dollar cost averaging is only available during the pay-in period.
You may enroll in the dollar cost averaging program at any time by
completing our dollar cost averaging form. We make transfers on the second
Tuesday of every month. We must receive the form at least 5 valuation days
before the transfer date, for your transfers to begin on that date. When you
enroll in the dollar cost averaging program, your total Contract Value in an
account must be at least equal to the amount you designate to be transferred on
each transfer date, times the duration you select. Transfers from a subaccount
or the fixed account must be at least $100.
If you choose to participate in the dollar cost averaging program when you
purchase the Contract, you may allocate all or a part of your initial premium
payment to the Scudder VLIF Money Market Subaccount #2. This subaccount is only
available to owners who participate in the dollar cost averaging program. We
make no
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<PAGE> 24
deductions from this subaccount for mortality and expense risk charges or
administrative charges. You must transfer all of your Contract Value out of this
subaccount within one year of your initial premium payment. If you terminate
the dollar cost averaging program, or do not transfer all your Contract Value
out of this subaccount within one year, we will transfer any remaining Contract
Value in this subaccount to the Scudder VLIF Money Market Subaccount #1 (which
is subject to the mortality and expense risk charge and the administrative
charges).
If your Contract Value in the fixed account is at least $10,000, you may
elect to have us make calendar quarter transfers of the interest you accrue in
the fixed account to one or more of the subaccounts. We make these transfers
within 5 valuation days of the end of the calendar quarter. You may enroll in
this program at any time by completing our dollar cost averaging form. We must
receive this form 10 days before the end of the calendar quarter, for your
transfers to begin that quarter.
TELEPHONE TRANSFERS
We will make a transfer based upon instructions you give us over the
telephone, provided we have on file a currently valid telephone transfer
authorization that you have signed. If you have not completed such an
authorization on your application, you must send a telephone transfer
authorization form to our Home Office. Your authorization is valid until you
revoke it in writing or until the Home Office receives a subsequently dated form
that you have signed. You may use your telephone to authorize a transfer from
one subaccount or the fixed account to another subaccount or the fixed account,
to change the allocation instructions for future investments, to change asset
allocation and dollar cost averaging programs, and/or to request a partial
withdrawal.
We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If we follow such procedures we will not
be liable for any losses due to unauthorized or fraudulent instructions. We may
be liable for such losses if we do not follow those reasonable procedures.
The procedures that we may follow for telephone transfers include:
- providing you with a written confirmation of all transfers made
according to telephone instructions,
- requiring a form of personal identification prior to acting on
instructions received by telephone, and
- tape recording instructions received by telephone.
We reserve the right to modify, restrict, suspend or eliminate the
transfer privileges (including the telephone transfer facility) at any time, for
any class of Contracts, for any reason. In particular, we reserve the right not
to honor transfers requested by a third party holding a power of attorney from
you where that third party requests simultaneous transfers on your behalf of two
or more Contracts.
TRANSFER FEE
We will impose a transfer fee of $25 for the thirteenth and each
subsequent transfer request you make per contract year. Transfers you make
pursuant to the asset allocation and dollar cost averaging programs do not count
toward your 12 free transfers. See Fees and Charges.
ACCESS TO YOUR MONEY
SURRENDERS
At any time before the Annuity Start Date, you may surrender your Contract
for its surrender value.
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<PAGE> 25
The surrender value is equal to:
- the Contract Value; MINUS
- any applicable surrender charges; MINUS
- any premium taxes not previously deducted; and MINUS
- the Annual Administration Fee unless waived.
The surrender value will be determined as of the valuation day on which we
receive your written request for surrender at our Home Office, unless you
specify a later date in your request. The surrender value will be paid in a lump
sum unless you request payment under a payout plan. A surrender may have adverse
federal income tax consequences, including a penalty tax.
PARTIAL WITHDRAWALS
Once each calendar quarter before the Annuity Start Date, you may request
a withdrawal of part of your Contract Value. You must withdraw at least $100, or
the total value in the subaccount from which you request the withdrawal.
We will withdraw the amount you request from the Contract Value as of the
valuation day on which we receive your written request for the partial
withdrawal. We will then reduce the amount remaining in the Contract by any
applicable surrender charge. You must leave at least $500 in each subaccount
from which you make a withdrawal, unless you withdraw the total value. We will
not allow you to make a partial withdrawal if such withdrawal would cause your
Contract Value to fall below $500.
You may specify how much you wish to withdraw from each subaccount and/or
the fixed account. If you do not specify, or if you do not have sufficient
assets in the subaccounts or fixed account you specified to comply with your
request, we will make the partial withdrawal on a pro rata basis from the fixed
account and those subaccounts in which you are invested. We will base the pro
rata reduction on the ratio that the value in each subaccount and the fixed
account has to the entire Contract Value before the partial withdrawal.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
SURRENDER AND PARTIAL WITHDRAWAL RESTRICTIONS
You may not make a partial withdrawal from the fixed account in the first
contract year. Your right to make surrenders and partial withdrawals is also
subject to any restrictions imposed by applicable law or employee benefit plan.
SYSTEMATIC WITHDRAWAL PLAN
The systematic withdrawal plan permits you to pre-authorize us to make
periodic withdrawals during the pay-in period. You instruct us to withdraw
selected amounts, or amounts based on your life expectancy, from the fixed
account or any of the subaccounts. We will make these withdrawals on a monthly,
quarterly, semi-annual, or annual basis. You or we may terminate the systematic
withdrawal plan at any time. We will give you 30 days notice if we amend the
plan.
There are some limitations to the systematic withdrawal plan:
- Withdrawals must be at least $100.
- We do not permit withdrawals under the systematic withdrawal plan
from the fixed account during your first contract year.
- You may not withdraw more than your free withdrawal amount from the
fixed account.
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<PAGE> 26
- We will deduct a surrender charge to any amounts deducted exceeding
your free withdrawal amount.
DEATH BENEFITS
DEATH BENEFITS BEFORE THE ANNUITY START DATE
DEATH BENEFIT
We will pay a death benefit to the beneficiary if any of the following
occurs during the pay-in period:
- The owner or a joint owner dies;
- The annuitant dies, and there is no living contingent annuitant; or
- The contingent annuitant dies after the annuitant.
STANDARD DEATH BENEFIT
The standard death benefit will be the Contract Value determined on the
valuation day we receive due proof of death and the beneficiary's election
regarding payment.
GUARANTEED MINIMUM DEATH BENEFIT RIDER
For an additional daily mortality and expense risk charge, you may add the
guaranteed minimum death benefit rider. The death benefit under this rider
depends on the age of the decreased owner or annuitant when the death benefit is
payable.
If the deceased dies before age 91 and before the Annuity Start Date, we
will pay the beneficiary the greatest of the following:
1. Contract Value determined on the valuation day we receive due proof
of death and the beneficiary's election regarding payment;
2. Premium payments (minus any previous withdrawals) with interest at
a rate of 4% per year to the earlier of (i) the deceased's age 80,
or (ii) the date of death, plus premium payments minus all
withdrawals from age 80 to the date of death; or
3. The greatest anniversary value before death. The greatest
anniversary value equals the [HIGHEST] Contract Value on any
Contract anniversary prior to the deceased's age 81, plus the dollar
amount of any premium payments made since that anniversary, minus
any withdrawals since that anniversary.
If the deceased dies after age 91, we will pay the beneficiary the
Contract Value.
In determining the death benefit, we will also subtract any applicable
premium taxes not previously deducted.
DISTRIBUTION UPON THE OWNER'S OR THE ANNUITANT'S DEATH
If you or the annuitant die before the Annuity Start Date, we will pay the
death benefit, described above in "Death Benefits Before the Annuity Start
Date", in a lump sum to your named beneficiaries within five years after the
date of the annuitant's death. If you have named two or more primary
beneficiaries, they will share
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equally in the death benefit unless you have specified otherwise. If there are
no living primary beneficiaries at the time of the annuitant's death, payments
will be made to those contingent beneficiaries who are living when payment of
the death benefit is due. If all the beneficiaries have predeceased the
annuitant, we will pay the death benefit to you, if living, or the annuitant's
estate. In lieu of a lump sum payment, the beneficiary may elect, within 60 days
of the date we receive due proof of the annuitant's death, to apply the death
benefit to a payout plan. For Non-Qualified Plan Contacts, if the beneficiary is
your spouse, he or she may become the successor owner, with no requirement to
begin death benefit distribution.
If you are also the annuitant and you die, the provisions described
immediately above apply, except that the beneficiary may only apply the death
benefit payment to a payout plan if:
- payments under the option begin within one (1) year of the annuitant's
death; and
- payments under the option are payable over the beneficiary's life or
over a period not greater than the beneficiary's life expectancy.
DEATH BENEFITS AFTER THE ANNUITY START DATE
If the annuitant dies after the Annuity Start Date, we will pay any
remaining guaranteed payments to the beneficiary as provided in the annuity
option selected. If you are not the annuitant and you die while the annuitant is
still living, we will continue to pay the income payments for the annuitant's
lifetime in the same manner as before your death.
FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
As compensation for assuming mortality and expense risks, we deduct a
daily mortality and expense risk charge from your assets of the variable
account. The charge is at a daily rate of ________%. On an annual basis this
rate is ____%. We continue to assess this charge if annuity payments are made on
a variable basis either before or after the Annuity Start Date.
The mortality risk we assume is that annuitants may live for a longer
period of time than estimated when we established the guarantees in the
Contract. Because of these guarantees, each annuitant is assured that longevity
will not have an adverse effect on the annuity payments received. The mortality
risk that we assume also includes a guarantee to pay a death benefit if the
annuitant dies before the Annuity Start Date. The expense risk that we assume is
the risk that the administrative fees and transfer fees (if imposed) may be
insufficient to cover actual future expenses. We may use any profits from this
charge to pay the costs of distributing the Contracts.
ASSET-BASED ADMINISTRATION CHARGE
We deduct a daily asset-based administration charge from each subaccount
to reimburse us for our administrative costs, such as owner inquiries, changes
in allocations, owner reports, Contract maintenance costs and data processing
costs. This charge is equal to _____% annually. This charge is designed to cover
the average anticipated administrative expenses we incur while the Contracts are
in force. There is not necessarily a direct relationship between the amount of
the charge and the administrative costs of a particular Contract.
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TRANSFER FEE
A transfer fee of $25 will be imposed for the thirteenth and each
subsequent transfer during a contract year. Each written or telephone request
would be considered to be one transfer, [REGARDLESS OF THE NUMBER OF SUBACCOUNTS
AFFECTED BY THE TRANSFER]. Transfers you make through our asset allocation and
dollar cost averaging programs do not count toward your twelve free transfers.
We deduct the transfer fee from the amount transferred.
SURRENDER CHARGE
GENERAL
We do not deduct a charge for sales expenses from premium payments at the
time premium payments are paid to us. However, we will deduct any applicable
surrender charge if you surrender your Contract or partially withdraw Contract
Value before the Annuity Start Date. We do not assess a surrender charge on
withdrawals made in the event the Contract terminates due to your death or the
death of the annuitant, or if you decide to begin to receive annuity payments,
the Contract has been in force for at least three contract years, and you use
one of the three annuity options discussed below. (See "Description of Annuity
Options".)
As a general rule, the surrender charge equals a percentage of the premium
payments withdrawn that: (a) we have held for less than seven years; and (b) are
not eligible for a free withdrawal. The applicable percentage depends on how
many years ago you made the premium payment being withdrawn, as shown on this
chart:
<TABLE>
<CAPTION>
PAYMENT SURRENDER CHARGE
YEAR PERCENTAGE
------------------------------------------ -----------------
<S> <C>
First ................................ 7%
Second ................................ 6%
Third ................................... 5%
Fourth ................................ 5%
Fifth.................................... 4%
Sixth.................................... 3%
Seventh.................................. 2%
Eighth and later......................... 0%
</TABLE>
In determining surrender charges, we will deem premiums to be surrendered
in the order in which they were received -- that is, on a first-in, first-out
basis.
Because surrender charges are based on the date each premium payment is
made, you may be subject to a surrender charge, even though the Contract may
have been issued many years earlier.
When you request a withdrawal, you will be sent a check in the amount you
requested. If a surrender charge applies, your Contract Value will be reduced by
the dollar amount we send you, plus the surrender charge. We subtract the
surrender charge pro-rata from the contract value remaining after your
withdrawal. If the remaining subaccount or fixed account value is not enough to
pay the charge, the surrender charge is deducted pro-rata from all subaccounts
and the fixed account in which the Contract is invested based on the remaining
Contract Value in each subaccount and the fixed account.
FREE WITHDRAWAL AMOUNT
In any Contract year, you may withdraw a portion of your Contract Value
without incurring a surrender charge. This amount is called the free withdrawal
amount. The free withdrawal amount is equal to the greater of:
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(i) your Contract Value, MINUS your total premium payments subject to a
surrender charge, MINUS prior withdrawals from which we previously
deducted a surrender charge; and
(ii) 10% of your Contract Value at the time you request the withdrawal.
In addition, you may withdraw, free of surrender charge, any premium that has
been held by us for more than seven years.
[example to be provided by subsequent amendment]
Free withdrawals may be subject to the 10% federal penalty tax if made before
you reach age 59 1/2. They also may be subject to federal income tax.
If you surrender your Contract, we will impose surrender charges
retroactively on any amounts free withdrawal amounts that were taken out during
the 12 months before the surrender.
WAIVER OF WITHDRAWAL CHARGE
If state law permits, we will waive the surrender charge:
- after an owner has been confined in a hospital or skilled heath care
facility for at least thirty days, and remains confined at the time of
the request;
- within thirty days following an owner's discharge from a hospital or
skilled heath care facility after a confinement of at least thirty
days;
- if the owner of annuitant becomes disabled after we issue the Contract
and before age 65; or
- if the owner or annuitant is diagnosed with a terminal illness after
we issue the Contract and is expected to live fewer than 12 months.
EMPLOYEE AND AGENT PURCHASES
If state law permits, we will waive the surrender charge on any surrenders
or partial withdrawals from Contracts sold to agents or employees of Farmers New
World Life Insurance Company (or its affiliates and subsidiaries).
ANNUAL ADMINISTRATION FEE
At the beginning of each Contract year before the Annuity Start Date, we
will deduct from the Contract Value an annual administration of $30 as
reimbursement for our administrative expenses relating to the Contract. We will
deduct the fee from each subaccount and the fixed account based on the
proportion that the value in each such subaccount and the fixed account bears to
the total Contract Value. We will also deduct this charge on the Annuity Start
Date, or the date you surrender the Contract.
We will not this fee after annuity payments have begun. We also currently
waive deduction of the charge for Contracts whose Contract Value is $50,000 or
more on the date of assessment.
PORTFOLIO FEES AND CHARGES
Each portfolio deducts investment fees and expenses from the amounts you
have invested in the portfolios. In addition, one portfolio deducts 12b-1 fees.
These fees and expense range from .44% to 1.91%. See the Fee Table in this
Prospectus and the prospectuses for the portfolios.
We may receive compensation from the investment advisers, administrators,
distributors (and/or an affiliate thereof) of the portfolios in connection with
administrative, distribution, or other services and cost savings
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experienced by the investment advisers, administrators or distributors. It is
anticipated that such compensation will be based on assets of the particular
portfolios attributable to the Policy. Some advisers, administrators or
distributors may pay us more than others.
PREMIUM TAXES
Various states and other governmental entities charge a premium tax on
annuity contracts issued by insurance companies. Premium tax rates currently
range up to 3.5%, depending on the state. We are responsible for paying these
taxes. If necessary, we will deduct the cost of such taxes from the value of
your Contract either:
- from premium payments as we receive them,
- from Contract Value upon surrender or partial withdrawal,
- when annuity payments begin, or
- upon payment of a death benefit.
OTHER TAXES
Currently, no charge is made against the variable account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the variable account or the Contracts. We may, however, deduct
such a charge in the future, if necessary.
THE PAYOUT PERIOD
When the payout period begins you will receive a steady stream of annuity
payments from the money you have accumulated under your Contract. The payout
period begins on the Annuity Start Date. You may choose to receive your annuity
payments on a fixed or variable basis, or a combination of both. If you choose
to have your payout option on a variable basis, you may keep the same
subaccounts to which your premium payments were allocated during the pay-in
period, or transfer to different subaccounts.
THE ANNUITY START DATE
If you own a Non-Qualified Contract, you must select the Annuity Start
Date on which you will begin to receive annuity payments. If you do not specify
a date, the Annuity Start Date is the later of the Annuitant's 91st birthday
(100th birthday if the Contract is part of a charitable remainder trust) or 10
years after the issue date. However, we will delay annuitization beyond the
Annuity Start Date if we are making systematic withdrawals based on the owner's
life expectancy. In that case, annuitization begins when we stop making the life
expectancy withdrawals.
For Qualified Contracts purchased in connection with qualified plans under
tax code sections 401(a), 401(k), 403(b) and 457, the tax code requires that the
Annuity Start Date must be no later than April 1 of the calendar year following
the later of the year in which you (a) reach age 70 1/2 or (b) retire and the
payment must be made in a specified form or manner. If you are a "5 percent
owner" (as defined in the Code), or in the case of an IRA that satisfies tax
code section 408, the Annuity Start Date must be no later than the date
described in (a). Roth IRAs under 408A of the tax code do not require
distributions at any time prior to your death.
ANNUITY OPTIONS
The payout option you select will affect the dollar amount of each annuity
payment you receive. You may elect or change your annuity payout plan at any
time before the Annuity Start Date while the annuitant is living by sending us a
written request signed by you and/or your beneficiary, as appropriate. You may
choose one of the payout plans described below or any other plan being offered
by us as of the Annuity Start Date. The
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payout plans we currently offer provide either variable annuity payments or
fixed annuity payments or a combination of both.
You may elect to receive annuity payments on a monthly, quarterly,
semi-annual or annual basis. The first payment under any payout plan will be
made on the fifteenth day of the month immediately after we approve payout plan.
Subsequent payments shall be made on the fifteenth of the month.
If you do not select an annuity payout plan by the Final Annuity Date (the
contract anniversary when the annuitant is age 95), we will apply the Contract
Value under the Second Option, Life Income with 120 or 240 monthly payments
guaranteed, as described below. The Contract Value will be allocated to a fixed
and variable payout in the same proportion that your interest in the fixed and
subaccounts bears to the total Contract Value on the Annuity Start Date.
A beneficiary may have the death benefit paid as an annuity under one of
the payout plans.
We reserve the right to pay you the Contract Value in a lump sum and not
as an annuity if on the Annuity Start Date, the payment for a 12 month interval
would be less than $100.
DETERMINING THE AMOUNT OF YOUR ANNUITY PAYMENT
If, on the Annuity Start Date, your Contract has been in force for three
years, we will use the Contract Value to calculate your annuity payments under
the payout plan you select. If you Contract has not been in force for three
years as of the Annuity Start Date, we will use the Cash Value to calculate your
annuity payments under the payout plan you choose.
On the Annuity Start Date, we will subtract the Annual Contract Fee and
any applicable premium taxes from your Contract Value
For Qualified Contracts, distributions must satisfy certain requirements
specified in the tax code.
FIXED ANNUITY PAYMENTS
Fixed annuity payments are periodic payments that we make to the
annuitant. The amount of the fixed annuity payment is fixed and guaranteed by
us.
The amount of each payment depends on:
- the form and duration of the payout plan you choose;
- the age of the annuitant;
- the sex of the annuitant (if applicable);
- the amount of your Contract Value on the Annuity Start Date; and
- the applicable annuity purchase rates in the Contract.
The annuity purchase rates in the Contract are based on a minimum
guaranteed interest rate of [3.0%]. We may, in our sole discretion, make annuity
payments in an amount based on a higher interest rate.
VARIABLE ANNUITY PAYMENTS
Variable annuity payout plans provide the annuitant with periodic payments
that increase or decrease with the annuity unit values of the subaccounts in
which you are invested. Your contract contains annuity tables which demonstrate
how the initial annuity payment rate is derived. This rate is different for each
payout plan, and varies by age and sex of the annuitant.
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<PAGE> 32
The Contract has an assumed interest rate of 3.0% annually. If the net
investment performance of the subaccounts you invest in is greater than this
assumed interest rate, your payments will increase. If the performance falls
below this assumed interest rate, your payments will decline. The performance of
the portfolios in which you are invested must grow at a rate at least equal to
the assumed interest rate (plus the mortality and expense risk charge and the
administrative expense charge) in order to avoid a decrease in variable annuity
payments. This means that each month a portfolio's annualized investment return
must be at least X.X% in order for payments with a 3.0% assumed interest rate to
remain level. For further details on variable annuity payments, see the SAI.]
ANNUITY UNIT VALUE
On the Annuity Start Date, we will use your adjusted Contract Value (or
Cash Value, if applicable) to purchase annuity units at that day's annuity unit
value for each subaccount in which you have value. The number of annuity units
we credit will remain fixed unless you transfer units among subaccounts. The
value of each annuity unit will vary each valuation day to reflect the
investment experience of the underlying portfolio, reduced by the mortality and
expense risk charge, and adjusted by an interest factor to neutralize the
assumed interest rate.
TRANSFERS
After the Annuity Start Date, an annuitant may change the subaccount(s) in
which the annuity payout plan is invested once every three months by sending us
a written request. No charge is assessed for this transfer. We will make the
transfer by exchanging annuity units of one subaccount for another subaccount on
an equivalent dollar value basis. See the SAI for examples of annuity unit value
calculations and variable annuity payment calculations.
DESCRIPTION OF ANNUITY OPTIONS
FIRST OPTION -- LIFE INCOME.* We will make monthly payments for the annuitant's
lifetime. We will stop making monthly payments with the last payment due prior
to the annuitant's death.
SECOND OPTION -- LIFE INCOME WITH A GUARANTEE PERIOD. We will make monthly
payments for the annuitant's lifetime, with the guarantee that we will make at
least 120 or 240 monthly payments. You select either the 120 or 240 month
guarantee period.
THIRD OPTION -- JOINT AND SURVIVOR LIFE ANNUITY.* Under this option, we will
make annuity payments each month so long as two annuitants are alive. After the
death of one of the annuitants, we will continue to make monthly payments for
the lifetime of the surviving annuitant. We will stop making monthly payments
with the last payment due before the last surviving annuitant's death.
- ---------------
* IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE
ANNUITANT DIES (OR ANNUITANTS DIE) BEFORE THE DUE DATE OF THE SECOND PAYMENT OR
TO RECEIVE ONLY TWO ANNUITY PAYMENTS IF THE ANNUITANT DIES (OR ANNUITANTS DIE)
BEFORE THE DUE DATE OF THE THIRD PAYMENT, AND SO ON.
The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the annuitant's age (and if
applicable, sex). Age will be determined from the last birthday at the due date
of the first payment.
Other options may be available.
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GUARANTEED RETIREMENT INCOME BENEFIT
We offer an optional guaranteed retirement income benefit ("GRIB") under
this Contract. Here are some terms you will need to know before reading this
section:
GREATEST ANNIVERSARY VALUE equals the highest of the Contract Values on
each Contract anniversary prior to the annuitant's age 81, plus the dollar
amount of any premium payments you made since that anniversary, minus any
withdrawals you made since that anniversary.
THE GUARANTEED ANNUITY FACTORS are based on the 1983a table projected
using projection scale G, with interest at 2.5% (the "Annuity 2000
table"). If you exercise the GRIB on or after your 10th contract
anniversary, we will assume interest at 3.5%.
GRIB BASE equals the greatest of:
(i) Contract Value;
(ii) Premium payments (minus previous withdrawals) with interest at 5.00%
per year to the earlier of the annuitant's age 80 or the date you
exercise the GRIB, plus premium payments minus all withdrawals from
the annuitant's age 80 to the date you exercise the GRIB; and
(iii) the greatest anniversary value before you exercise the GRIB.
* * *
GRIB provides a minimum fixed annuity guaranteed lifetime income to the
annuitant. You must elect GRIB on your initial Contract application. You may
discontinue GRIB after your seventh contract anniversary. You must notify us in
writing. Once you discontinue GRIB, you may not elect it again.
You may exercise GRIB only within 30 days after the seventh or later
contract anniversary. You must exercise GRIB between the annuitant's 60th and
91st birthdays. Therefore, GRIB may not be appropriate for annuitants who are
age 80 and older. If the annuitant is younger than 44 on the issue date, GRIB
may be exercised after your 15th contract anniversary.
GRIB payments will be based on the greater of:
- the income provided by applying the GRIB base to the guaranteed
annuity factors; and
- the income provided by applying Contract Value to the current annuity
factors.
We will pay GRIB for the life of a single annuitant, or the lifetimes of
two annuitants. If we pay GRIB for the life of two annuitants, then we will use
the age of the older annuitant to determine the GRIB base.
If you elect GRIB payable for the lifetime of a single annuitant, you may
elect a period certain of 5, 10, 15, or 20 years. If the beneficiary is a
natural person and the annuitant dies before we have paid GRIB for the period
you elected, we will pay the remaining GRIB payments as they fall due to the
beneficiary. If the beneficiary is not a natural person, we will commute the
payments at a minimum 2.50% interest rate and pay them in a lump sum.
If you elect GRIB payable for the lifetimes of two annuitants, the period
certain is 25 years. We will pay the full GRIB as long as at least one of the
two annuitants is alive, but for no less than 25 years. If both annuitants die
before we have paid GRIB for 25 years, we will pay the remaining GRIB as they
fall due to the beneficiary, if the beneficiary is a natural person. If the
beneficiary is not a natural person, we will commute the remaining payments at a
minimum 2.50% interest rate and pay them in a lump sum.
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You may also choose to have us make GRIB payments on a quarterly,
semi-annual, or annual basis. We may also make other options available.
GRIB IS BASED ON CONSERVATIVE ACTUARIAL FACTORS, THEREFORE THE INCOME
GUARANTEED BY GRIB MAY OFTEN BE LESS THAN THE INCOME PROVIDED BY APPLYING
CONTRACT VALUE TO CURRENT ANNUITY FACTORS.
THE FIXED ACCOUNT
You may allocate some or all of your net premium payments and transfer
some or all of your Contract Value to the fixed account. The fixed account
offers a guarantee of principal, after deductions for fees and expenses. We also
guarantee that you will earn interest at a rate of a least 3% per year on
amounts in the fixed account. The fixed account is part of our general account.
Our general account supports our insurance and annuity obligations. Because the
fixed account is part of the general account, we assume the risk of investment
gain or loss on this amount. All assets in the general account are subject to
our general liabilities from business operations. The fixed account may not be
available in all states.
The fixed account is not registered with the SEC under the Securities Act
of 1933 (the "1933 Act"). Neither the fixed account nor our general account have
been registered as an investment company under the 1940 Act. Therefore, neither
our general account, the fixed account, nor any interests therein are generally
subject to regulation under the 1933 Act or the 1940 Act. The disclosures
relating to the fixed account which are included in this prospectus are for your
information and have not been reviewed by the SEC. However, such disclosures may
be subject to certain generally applicable provisions of federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
FIXED ACCOUNT VALUE
On each valuation day, the fixed account value is equal to:
A + B + C - D - E - F
- "A" is the fixed account value on the preceding valuation day plus
interest from the preceding valuation day to the date of calculation.
- "B" is the portion of the premium payments, less any premium tax, that
we received since the preceding valuation day and allocated to the
fixed account, plus interest from the date we received such net premium
payment to the date of calculation.
- "C" is the total amount of any transfers you make from the subaccounts
to the fixed account since the preceding valuation day, plus interest
on each such transferred amount from the effective date of each
transfer to the date of calculation.
- "D" is the total amount of any transfers you make from the fixed
account to the subaccounts since the preceding valuation day, plus
interest on each such transferred amount from the effective date of
each transfer to the date of calculation.
- "E" is the total amount of any partial withdrawals and any applicable
surrender charges deducted from the fixed account since the preceding
valuation day, plus interest on the amounts you withdraw from the
effective date of each partial withdrawal to the date of calculation.
- "F" is the portion of the Annual Administration Fee charged to the
fixed account. This fee is only deducted on the first valuation day in
each policy year, on the Annuity Start Date, and at the time of
surrender, and is zero at all other times.
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We intend to credit the fixed account with interest at current rates in
excess of the minimum guaranteed rate of 3%, but we are not obligated to do so.
We have no specific formula for determining current interest rates.
The fixed account value will not share in the investment performance of
our general account. Because we, in our sole discretion, anticipate changing the
current interest rate from time to time, different allocations you make to the
fixed account will be credited with different current interest rates. You assume
the risk that interest credited to amounts in the fixed account may not exceed
the minimum 3% guaranteed rate.
We reserve the right to change the method of crediting interest from time
to time, provided that such changes do not reduce the guaranteed rate of
interest below 3% per year or shorten the period for which the interest rate
applies to less than one calendar year (except for the year in which such amount
is received or transferred).
FIXED ACCOUNT TRANSFERS
GENERAL
A transfer charge of $25 will be imposed for the thirteenth and each
subsequent request you make to transfer Contract Value from one or more
subaccounts to the fixed account (or to one or more subaccounts) during a single
contract year before the Annuity Start Date.
Before the Annuity Start Date, you may make one transfer each contract
year during the 30 days following a contract anniversary from the fixed account
to one or more of the subaccounts in any contract year.
You may not make transfers from any subaccount to the fixed account during
the six months following any transfer you make from the fixed account to any
subaccount, or after you begin to receive annuity payments.
PAYMENT DEFERRAL
We have the right to defer payment of any surrender, partial withdrawal,
or transfer from the fixed account for up to six months from the date we receive
your written request at our Home Office. During such deferral, we will continue
to credit interest at the current guaranteed interest rate for the fixed
account.
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS
From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the subaccounts. THESE FIGURES ARE BASED
ON HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT FUTURE PERFORMANCE. We
also may, from time to time, advertise or include in sales literature subaccount
performance relative to certain performance rankings and indices compiled by
independent organizations. More detailed information as to the calculation of
performance, as well as comparisons with unmanaged market indices, appears in
the SAI.
Performance data for the subaccounts is based on the investment
performance of the corresponding portfolio of a Fund and reflects the deduction
of some or all fees and charges currently assessed under the contract. (See the
accompanying prospectuses for the Funds.)
The "yield" of the Scudder VLIF Money Market Subaccounts refers to the
annualized income generated by an investment in the subaccount over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the
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income earned by an investment in the subaccount is assumed to be reinvested.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a subaccount (other than the Scudder VLIF Money Market
Subaccounts) refers to the annualized income generated by an investment in the
subaccount over a specified 30-day or one-month period. The yield is calculated
by assuming that the income generated by the investment during that 30-day or
one-month period is generated each period over a 12-month period and is shown as
a percentage of the investment.
Yield quotations do not reflect the surrender charge.
The "total return" of a subaccount refers to return quotations assuming an
investment under a Contract has been held in the subaccount for various periods
of time. When a subaccount has been in operation for one, five, and ten years,
respectively, the total return for these periods will be provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the subaccount from the beginning date of the
measuring period to the end of that period. This standardized version of average
annual total return reflects all historical investment results, less all charges
and deductions applied against the subaccount (including any surrender charge
that would apply if you terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
In addition to the standard version described above, total return
performance information computed on different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the surrender charge. In addition, we may from time to time
disclose average annual total return in non-standard formats and cumulative
total return for Contracts funded by the subaccounts.
We may also disclose yield and total returns for the portfolios, including
such disclosures for periods before the date the subaccount commenced
operations. Sales literature or advertisements may quote adjusted yields and
total returns for the portfolios since their inception reduced by some or all of
the fees and charges under the Contract. Such adjusted historic portfolio
performance may include data that precedes the inception dates of the
subaccounts. This data is designed to show the performance that could have
resulted if the Contract had been in existence during that time.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the SAI.
In advertising and sales literature (including illustrations), the
performance of each subaccount may be compared with the performance of other
variable annuity issuers in general or to the performance of particular types of
variable annuities investing in mutual funds, or investment portfolios of mutual
funds with investment objectives similar to the subaccount. Lipper Analytical
Services, Inc. ("Lipper"), CDA Investment Technologies ("CDA"), Variable Annuity
Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar") are
independent services which monitor and rank the performance of variable annuity
issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance
issuers as well as variable annuity issuers. VARDS rankings compare only
variable annuity issuers. The performance analyses prepared by Lipper, CDA,
VARDS and Morningstar rank or illustrate such issuers on the basis of total
return, assuming reinvestment of distributions, but do not take sales charges,
redemption fees, or certain expense deductions at the variable account level
into consideration. In addition, VARDS prepares risk rankings, which consider
the effects of market risk on total return performance. This type of ranking
provides data as to which funds provide the highest
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total return within various categories of funds defined by the degree of risk
inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for the expense of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
We may also report other information including the effect of systematic
withdrawals, systematic investments and tax-deferred compounding on a
subaccount's investment returns, or returns in general. We may illustrate this
information by using tables, graphs, or charts. All income and capital gains
derived from subaccount investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the subaccount investment
experience is positive.
VOTING RIGHTS
We are the legal owner of the portfolio shares held in the subaccounts.
However, when a portfolio is required to solicit the votes of its shareholders
through the use of proxies, we believe that current law requires us to solicit
you and other contract owners as to how we should vote the portfolio shares held
in the subaccounts. If we determine that we no longer are required to solicit
your votes, we may vote the shares in our own right.
When we solicit your vote, the number of votes you have will be calculated
separately for each subaccount in which you have an investment. The number of
your votes is based on the net asset value per share of the portfolio in which
the subaccount invests. It may include fractional shares. Before the Annuity
Start Date, you hold a voting interest in each subaccount to which the Contract
Value is allocated. After the Annuity Start Date, the annuitant has a voting
interest in each subaccount from which variable annuity payments are made. If
you have a voting interest in a subaccount, you will receive proxy materials and
reports relating to any meeting of shareholders of the portfolio in which that
subaccount invests.
If we do not receive timely voting instructions for portfolio shares or if
we own the shares, we will vote those shares in proportion to the voting
instructions we receive. Instructions we receive to abstain on any item will
reduce the total number of votes being cast on a matter. For further details as
to how we determine the number of your votes, see the SAI.
FEDERAL TAX MATTERS
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax advisor. No attempt
is made to consider any applicable state tax or other tax laws.
We believe that our Contracts will qualify as annuity contracts for
federal income tax purposes and the following discussion assumes that they will
so qualify. Further information on the tax status of the Contract can be found
in the SAI under the heading "Tax Status of the Contracts."
When you invest in an annuity contract, you usually do not pay taxes on
your investment gains until you withdraw the money -- generally for retirement
purposes. In this way, annuity contracts have been recognized by the tax
authorities as a legitimate means of deferring tax on investment income.
We believe that if you are a natural person you will not be taxed on
increases in the Contract Value of your Contract until a distribution occurs or
until annuity payments begin. (The agreement to assign or pledge any portion of
a Contract's accumulation value and, in the case of a Qualified Contract
described below, any portion
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of an interest in the qualified plan, generally will be treated as a
distribution.) When annuity payments begin, you will be taxed only on the
investment gains you have earned and not on the payments you made to purchase
the Contract. Generally, withdrawals from your annuity should only be made once
the annuitant reaches age 59 1/2, dies or is disabled, otherwise a tax penalty
of ten percent of the amount treated as income could be applied against any
amounts included in income, in addition to the tax otherwise imposed on such
amount.
If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your Contract is called a Qualified
Contract. If your annuity is independent of any formal retirement or pension
plan, it is called a Non-Qualified Contract.
TAXATION OF NON-QUALIFIED CONTRACTS
NON-NATURAL PERSON
If a non-natural person owns a non-qualified annuity contract, the owner
generally must include in income any increase in the excess of the accumulation
value over the investment in the contract (generally, the premiums or other
consideration paid for the contract) during the taxable year. There are some
exceptions to this rule and a prospective owner that is not a natural person
should discuss these with a tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
WITHDRAWALS
When a withdrawal from a Non-Qualified Contract occurs, the amount
received will be treated as ordinary income subject to tax up to an amount equal
to the excess (if any) of the accumulation value immediately before the
distribution over the Owner's investment in the contract (generally, the
premiums or other consideration paid for the Contract, reduced by any amount
previously distributed from the Contract that was not subject to tax) at that
time. In the case of a surrender under a Non-Qualified Contract, the amount
received generally will be taxable only to the extent it exceeds the Owner's
investment in the contract.
PENALTY TAX ON CERTAIN WITHDRAWALS
In the case of a distribution from a Non-Qualified Contract, there may be
imposed a federal tax penalty equal to ten percent of the amount treated as
income. In general, however, there is no penalty on distributions:
- made on or after the taxpayer reaches age 59 1/2;
- made on or after the death of an Owner;
- attributable to the taxpayer's becoming disabled; or
- made as part of a series of substantially equal periodic payments for
the life (or life expectancy) of the taxpayer.
Other exceptions may apply under certain circumstances and special rules
may apply in connection with the exceptions enumerated above. You should consult
a tax adviser with regard to exceptions from the penalty tax.
ANNUITY PAYMENTS
Although tax consequences may vary depending on the payout option elected
under an annuity contract, a portion of each annuity payment is generally not
taxed and the remainder is taxed as ordinary income. The non-taxable portion of
an annuity payment is generally determined in a manner that is designed to allow
you to recover your investment in the contract ratably on a tax-free basis over
the expected stream of annuity payments, as determined when annuity payments
start. Once your investment in the contract has been fully recovered, however,
the full amount of each annuity payment is subject to tax as ordinary income.
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TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of your death or the
death of the annuitant. Generally, such amounts are includible in the income of
the recipient as follows: (i) if distributed in a lump sum, they are taxed in
the same manner as a surrender of the Contract, or (ii) if distributed under a
payout option, they are taxed in the same way as annuity payments.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer or assignment of ownership of a Contract, the designation of an
annuitant, the selection of certain Annuity Start Dates, or the exchange of a
Contract may result in certain tax consequences to you that are not discussed
herein. An Owner contemplating any such transfer, assignment or exchange, should
consult a tax advisor as to the tax consequences.
WITHHOLDING
Annuity distributions are generally subject to withholding for the
recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS
All annuity contracts that are issued by us (or our affiliates) to the
same Owner during any calendar year are treated as one annuity contract for
purposes of determining the amount includible in such Owner's income when a
taxable distribution occurs.
TAXATION OF QUALIFIED CONTRACTS
The tax rules that apply to Qualified Contracts vary according to the type
of retirement plan and the terms and conditions of the plan. Your rights under a
Qualified Contract may be subject to the terms of the retirement plan itself,
regardless of the terms of the Qualified Contract. Adverse tax consequences may
result if you do not ensure that contributions, distributions and other
transactions with respect to the Contract comply with the law.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs), as defined in Sections 219 and 408
of the Internal Revenue Code (the "Code"), permit individuals to make annual
contributions of up to the lesser of $2,000 or 100% of adjusted gross income.
The contributions may be deductible in whole or in part, depending on the
individual's income. Distributions from certain pension plans may be rolled over
into an IRA on a tax-deferred basis without regard to these limits. So-called
Simple IRAs under section 408(p) of the Code, and Roth IRAs under section 408A,
may also be used in connection with variable annuity contracts. Simple IRAs
allow employees to defer a percentage of annual compensation up to $6,000 to a
retirement plan, provided the sponsoring employer makes matching or non-elective
contributions. The penalty for a premature distribution from a SIMPLE IRA that
occurs within the first two years after the employee begins to participate in
the plan is 25%, rather than the usual 10%. Contributions to Roth IRAs are not
tax-deductible, and contributions must be made in cash, or as a rollover or
transfer from another Roth IRA or IRA. A rollover or conversion of an IRA to a
Roth IRA may be subject to tax. Distributions from Roth IRAs are generally not
taxed. In addition to the 10% penalty which generally applies to distributions
made before age 59 1/2, a 10% penalty will be imposed for any distribution made
from a Roth IRA during the five taxable years starting after you first
contribute to any Roth IRA.
CORPORATE PENSION AND PROFIT-SHARING PLANS under section 401(a) of the
Code allow corporate employers to establish various types of retirement plans
for employees, and self-employed individuals to establish qualified plans for
themselves and their employees.
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Adverse tax consequences to the retirement plan, the participant or both
may result if the Contract is transferred to any individual as a means to
provide benefit payments, unless the plan complies with all the requirements
applicable to such benefits prior to transferring the Contract.
TAX-SHELTERED ANNUITIES under section 403(b) of the Code permit public
schools and other eligible employers to purchase annuity contracts and mutual
fund shares through custodial accounts on behalf of employees. Generally, these
premium payments are excluded for tax purposes from employee gross incomes.
However, these payments may be subject to Social Security taxes.
Distributions of salary reduction contributions and earnings (other than
your salary reduction accumulation as of December 31, 1988) are not allowed
prior to age 59 1/2, separation from service, death or disability. Salary
reduction contributions may also be distributed upon hardship, but would
generally be subject to penalties.
OTHER TAX ISSUES
You should note that the Contract includes a death benefit that in some
cases may exceed the greater of the Premium Payments or the Contract Value. The
death benefit could be viewed as an incidental benefit, the amount of which is
limited in any 401(a) or 403(b) plan. Because the death benefit may exceed this
limitation, employers using the Contract in connection with corporate pension
and profit-sharing plans, or tax-sheltered annuities, should consult their tax
adviser.
Qualified Contracts (other than Roth IRAs) have minimum distribution rules
that govern the timing and amount of distributions. You should refer to your
retirement plan, adoption agreement, or consult a tax advisor for more
information about these distribution rules.
OUR INCOME TAXES
At the present time, we make no charge for any federal, state or local
taxes (other than the charge for state and local premium taxes) that we incur
that may be attributable to the investment divisions (that is, the subaccounts)
of the variable account or to the Contracts. We do have the right in the future
to make additional charges for any such tax or other economic burden resulting
from the application of the tax laws that we determine is attributable to the
investment divisions of the variable account or the Contracts.
Under current laws in several states, we may incur state and local taxes
(in addition to premium taxes). These taxes are not now significant and we are
not currently charging for them. If they increase, we may deduct charges for
such taxes.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Contracts could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract.
We have the right to modify the Contract in response to legislative
changes that could otherwise diminish the favorable tax treatment that annuity
contract owners currently receive. We make no guarantee regarding the tax status
of any contract and do not intend the above discussion as tax advice.
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OTHER INFORMATION
PAYMENTS
We will usually pay you any surrender, partial withdrawal, death benefit
payment, or for Qualified Contracts only, payment of your loan proceeds, within
seven days after we receive all the required information. The required
information includes your written request, any information or documentation we
reasonably need to process your request, and, in the case of a death benefit,
receipt and filing of due proof of death.
However, we may be required to suspend or postpone payments during any
period when:
- the New York Stock Exchange is closed, other than customary weekend
and holiday closings;
- trading on the New York Stock Exchange is restricted as determined by
the SEC;
- the SEC determines that an emergency exists that would make the
disposal of securities held in the variable account or the
determination of the value of the variable account's net assets not
reasonably practicable; or
- the SEC permits, by order, the suspension or postponement of payments
for your protection.
If a recent check or draft has been submitted, we have the right to delay
payment until we have assured ourselves that the check or draft has been
honored.
We have the right to defer payment for a surrender, partial withdrawal or
transfer from the fixed account for up to six months from the date we receive
your written request.
MODIFICATION
Upon notice to you, we may modify the Contract to:
- permit the Contract or the variable account to comply with any
applicable law or regulation issued by a government agency;
- assure continued qualification of the Contract under the tax code or
other federal or state laws relating to retirement annuities or
variable annuity contracts;
- reflect a change in the operation of the variable account; or
- provide additional investment options.
In the event of most such modifications, we will make appropriate
endorsement to the Contract.
DISTRIBUTION OF THE CONTRACTS
[NAME OF DISTRIBUTOR AND ADDRESS] acts as the distributor for the
Contracts. [DISCLOSE AFFILIATION WITH FARMERS, IF ANY]. __________________ is
registered with the SEC under the Securities Exchange Act of 1934 as a
broker-dealer, and is a member of the National Association of Securities
Dealers, Inc.
Sales commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions of up to 7.0% of premium payments.
[OTHER COMMISSIONS OF UP TO _____% MAY ALSO BE PAID. WE MAY ALSO PAY UP TO
_____% OF PREMIUM PAYMENTS TO _____________________ TO COMPENSATE IT FOR CERTAIN
DISTRIBUTION EXPENSES.] These broker-dealers are expected to compensate sales
representatives in varying amounts from these commissions. In addition, we may
pay other distribution expenses such as production incentive bonuses, agent's
insurance and pension benefits, and agency expense allowances. These
distribution expenses do not result in any additional charges against the
Contracts other than those described under "Fees and Charges."
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LEGAL PROCEEDINGS
Like other life insurance companies, we are involved in lawsuits . These
actions are in various stages of discovery and development, and some seek
punitive as well as compensatory damages. While it is not possible to predict
the outcome of such matters with absolute certainty, we believe that the
ultimate disposition of these proceedings should not have a material adverse
effect on the financial position for Farmers New World Life Insurance Company.
In addition, we are, from time to time, involved as a party to various
governmental and administrative proceedings. There are no pending or threatened
lawsuits that will adversely impact the variable account.
[TO BE UPDATED IN PRE-EFFECTIVE AMENDMENT]
REPORTS TO OWNERS
We will mail a report to you at least annually at your last known address
of record. The report will state the Contract Value (including the Contract
Value in each subaccount and the fixed account) of the Contract, premium
payments paid and charges deducted since the last report, partial withdrawals
made since the last report and any further information required by any
applicable law or regulation.
INQUIRIES
Inquiries regarding your Contract may be made by writing to us at our Home
Office.
YEAR 2000 MATTERS
In 1995, Farmers Group, Inc., our parent company, initiated the "Year 2000
Project" in order to prepare for the information processing challenges presented
by the approach of the new millennium. This project encompasses all major areas
of our operations, including internal and vendor mainframe applications,
mainframe systems software, third party interfaces, non-mainframe systems
software, forms, facilities, and equipment. As we rely on computer software
logic to maintain accurate records, the impact of the issues relating to the
approach of the new millennium is significant to our ongoing performance. As
such, a phased plan has been developed for completing this project. As of
December 31, 1998, the first two phases of the project (the "Awareness and
Initial Impact Assessment" and the "Year 2000 Workpackage and Development
Blueprint Project" phases) have been successfully completed. The project is
currently in its final phase (the "Year 2000 Conversion and Implementation
Phase"). We have completed converting, implementing and testing 99% of its Year
2000 conversion programs. We are currently in the process of testing the
remaining 1%. Management expects this phase to be completed by mid-1999.
As of the date of this prospectus, we have identified and made available
what we believe are the appropriate resources of hardware, people and dollars,
including engaging outside third parties, to ensure that the our Year 2000 plan
will be completed. In addition, we have evaluated our relationships with third
parties with which we have a direct and material relationship to determine
whether they are Year 2000 compliant. We have sent out questionnaires and
warranty requests to all third party vendors and are currently in the process of
performing compliance testing with all vendors to validate the vendors' claims
regarding Year 2000 compliance. However, it is not possible to state with
certainty that the operations of third parties will not be materially impacted
in turn by other parties with whom they have business relationships.
Preliminary drafts of our Year 2000 contingency plans have been completed.
These plans are being reviewed and updated as more information become available.
In the event that our vendors do not expect to be Year 2000 compliant, our
contingency plans may include replacing such vendors.
Resolving the Year 2000 computer problem is complex and multifaceted. We
cannot know conclusively whether a response plan is successful until the Year
2000 arrives (or an earlier date if the systems or equipment address Year 2000
data prior to the Year 2000). Even with the appropriate and diligent pursuit of
a well-conceived response plan, including testing procedures, there is no
certainty that any company will achieve complete success. Also, the actions (or
failure to act) of third parties beyond our knowledge or control may affect
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our ability to function unaffected to and through the Year 2000. See the Funds'
prospectuses for information on their preparation for Year 2000.
FINANCIAL STATEMENTS
Our audited balance sheets as of December 31, 1998 and 1997, and the
related statements of income, shareholder's equity, and cash flows for each of
the three years in the period ended December 31, 1998, as well as the Report of
the Independent Auditors, are contained in the SAI. Our financial statements
should be considered only as bearing on our ability to meet our obligations
under the Contracts. They should not be considered as bearing on the investment
performance of the assets held in the variable account.
There are no financial statements for the variable account, because it has
not commenced operations as of the date of this prospectus.
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
Page
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STATEMENT OF ADDITIONAL INFORMATION
for the
[ ]
------------
Individual Flexible Premium Variable Annuity Contract
-----------------------------------------------------
Issued Through
FARMERS ANNUITY SEPARATE ACCOUNT A
Offered by
FARMERS NEW WORLD LIFE INSURANCE COMPANY
3003 - 77th Avenue, S.E.
Mercer Island, Washington 98040
(206) 232-8400
SERVICE CENTER:
----------------
----------------
1-800-
-----------
This Statement of Additional Information expands upon subjects discussed
in the current Prospectus for the ____________ individual flexible premium
variable annuity contract offered by Farmers New World Life Insurance Company.
You may obtain a copy of the Prospectus for the Contract dated _______________],
1999 by calling 1-800-XXX-XXXX or by writing to our [SERVICE CENTER at
________].
This Statement incorporates terms used in the current Prospectus for each
Contract.
- -------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR YOUR CONTRACT AND THE FUNDS.
The date of this Statement of Additional Information is ________________,
1999.
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ADDITIONAL CONTRACT PROVISIONS....................................................... 2
The Contract................................................................... 2
Incontestability............................................................... 2
Incorrect Age or Sex........................................................... 2
Nonparticipation............................................................... 3
Waiver of Surrender Charge Rider............................................... 3
Tax Status of the Contracts.................................................... 3
CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA..... 4
Money Market Variable Account Yields........................................... 4
Other Variable Account Yields.................................................. 5
Average Annual Total Returns for the Subaccounts............................... 6
Non-Standard Subaccount Total Returns.......................................... 7
Adjusted Historic Portfolio Performance Data................................... 7
Effect of the Annual Administration Fee on Performance Data.................... 8
Historic Performance Data............................................................ 8
General Limitations............................................................ 8
NET INVESTMENT FACTOR................................................................ 11
VARIABLE ANNUITY PAYMENTS............................................................ 12
Assumed Investment Rate........................................................ 12
Amount of Variable Annuity Payments............................................ 12
Annuity Unit Value............................................................. 13
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.................................... 14
Resolving Material Conflicts................................................... 14
VOTING RIGHTS........................................................................ 15
SAFEKEEPING OF ACCOUNT ASSETS........................................................ 15
DISTRIBUTION OF THE CONTRACTS........................................................ 15
LEGAL MATTERS........................................................................ 16
EXPERTS.............................................................................. 16
OTHER INFORMATION.................................................................... 16
FINANCIAL STATEMENTS................................................................. 16
</TABLE>
<PAGE> 46
FARMERS NEW WORLD LIFE INSURANCE COMPANY
Farmers New World Life Insurance Company is a direct subsidiary of
Farmers Group, Inc. ("Farmers Group"). Ordinary shares of Farmers Group are
wholly owned by Zurich Financial Services and Income shares of Farmers Group
are wholly owned by Allied Zurich Holdings Limited.
ADDITIONAL CONTRACT PROVISIONS
THE CONTRACT
The entire contract is the Contract, the signed application attached at
issue, any attached amendments and supplements to the application, and any
attached riders and endorsements. In the absence of fraud, we consider all
statements in the application to be representations and not warranties. We will
not use any statement to contest a claim unless that statement is in an attached
application or in an amendment or supplement to the application attached to the
Contract.
Any change in the Contract or waiver of its provisions must be in writing
and signed by one of our officers. No other person -- no agent or Registered
Representative -- has authority to change or waive any provision of this
Contract.
Upon notice to you, we may modify the Contract if necessary to:
- permit the Contract or the Separate Account to comply with any
applicable law or regulation that a governmental agency issues; or
- assure continued qualification of the Contract under the
Internal Revenue Code or other federal or state laws relating to
retirement annuities or variable annuity contracts; or
- effect a change in the operation of the Separate Account or to
provide additional investment options.
In the event of such modifications, we will make the appropriate
endorsement to the Contract.
INCONTESTABILITY
We will not contest the Contract after the issue date.
INCORRECT AGE OR SEX
We may require proof of age, sex, and right to payments before making any
life annuity payments. If the age or sex (if applicable) of the annuitant has
been stated incorrectly, then we will determine the Annuity Start Date and the
amount of the annuity payments by using the correct age and sex. After the
Annuity Start Date, any adjustment for underpayment will be paid immediately.
Any adjustment for overpayment will be deducted from future payments. We will
make adjustments for overpayments or underpayments with interest at the rate
then in use to determine the rate of payments.
2
<PAGE> 47
NONPARTICIPATION
The Contract does not participate in our surplus earnings or profits. We
will pay not dividends on this Contract.
WAIVER OF SURRENDER CHARGE RIDER
On issuance we will automatically issue a rider that waives surrender
charges if:
- the owner is confined in a hospital or skilled health care
facility for at lease 30 days and remains confined at the time of
the surrender request;
- the owner requests a surrender within 30 days following
discharge from a hospital or skilled health care facility after
a confinement of at least 30 days;
- the owner or annuitant becomes disabled after the Contract is
issued and before age 65; or
- the owner or annuitant is diagnosed with a terminal illness
after the Contract is issued and is expected to live fewer than
12 months.
There is no additional charge for the issuance of this rider, which is
available only at the issuance of the Contract. The rider may not be available
in all states.
TAX STATUS OF THE CONTRACTS
Tax law imposes several requirements that variable annuities must satisfy
in order to receive the tax treatment normally accorded to annuity contracts.
Diversification Requirements. The Code requires that the investments of
each investment division of the separate account underlying the Contracts be
"adequately diversified" in order for the Contracts to be treated as annuity
contracts for Federal income tax purposes. It is intended that each investment
division, through the fund in which it invests, will satisfy these
diversification requirements.
Owner Control. In certain circumstances, owners of variable annuity
contracts have been considered for Federal income tax purposes to be the owners
of the assets of the separate account supporting their contracts due to their
ability to exercise investment control over those assets. When this is the case,
the contract owners have been currently taxed on income and gains attributable
to the variable account assets. There is little guidance in this area, and some
features of our Contracts, such as the flexibility of an owner to allocate
premiums and transfer amounts among the investment divisions of the separate
account, have not been explicitly addressed in published rulings. While we
believe that the Contracts do not give Owners investment control over separate
account assets, we reserve the right to modify the Contracts as necessary to
prevent an Owner from being treated as the Owner of the separate account assets
supporting the Contract.
Required Distributions. In order to be treated as an annuity contract for
Federal income tax purposes, section 72(s) of the Internal Revenue Code requires
any Non-Qualified Contract to contain certain provisions specifying how your
interest in the Contract will be distributed in the event of the death of a
holder of the Contract. The Non-Qualified Contracts contain provisions that are
intended to comply with these Code requirements, although no regulations
interpreting these requirements have yet been issued. We intend to review such
provisions and modify them if necessary to assure that they comply with the
applicable requirements when such requirements are clarified by regulation or
otherwise.
3
<PAGE> 48
Other rules may apply to Qualified Contracts.
CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA
We may advertise and disclose historic performance data for the
subaccounts, including yields, standard annual total returns, and nonstandard
measures of performance of the subaccounts. Such performance data will be
computed, or accompanied by performance data computed, in accordance with the
SEC defined standards.
MONEY MARKET VARIABLE ACCOUNT YIELDS
Advertisements and sales literature may quote the current annualized yield
of the Money Market subaccount for a seven-day period in a manner that does not
take into consideration any realized or unrealized gains or losses, or income
other than investment income, on shares of the Scudder VLIF Money Market
Portfolio.
We compute this current annualized yield by determining the net change
(not including any realized gains and losses on the sale of securities,
unrealized appreciation and depreciation, and income other than investment
income) at the end of the seven-day period in the value of a hypothetical
subaccount under a Contract having a balance of one unit of the Money Market
subaccount at the beginning of the period. We divide that net change in
subaccount value by the value of the hypothetical subaccount at the beginning of
the period to determine the base period return. Then we annualize this quotient
on a 365-day basis. The net change in account value reflects (i) net income from
the Scudder VLIF Money Market Portfolio in which the hypothetical subaccount
invests; and (ii) charges and deductions imposed under the Contract that are
attributable to the hypothetical subaccount.
These charges and deductions include the per unit charges for the Annual
Administration Fee, the mortality and expense risk charge for the standard death
benefit (and the mortality and expense risk for the Guaranteed Minimum Death
Benefit Rider and the Guaranteed Retirement Income Benefit Rider) and the
asset-based administration charge. For purposes of calculating current yields
for a Contract, we use an average per unit Annual Administration Fee based on
the $30 Annual Administration Fee.
We calculate the current yield by the following formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Scudder VLIF Money
Market Portfolio (not including any realized gains or losses
on the sale of securities, unrealized appreciation and
depreciation, and income other than investment income) for
the seven-day period attributable to a hypothetical
subaccount having a balance of one subaccount unit.
ES = per unit charges deducted from the hypothetical subaccount
for the seven-day period.
4
<PAGE> 49
UV = the unit value for the first day of the seven-day period.
We may also disclose the effective yield of the Money Market subaccount
for the same seven-day period, determined on a compounded basis. We calculate
the effective yield by compounding the unannualized base period return by adding
one to the base return, raising the sum to a power equal to 365 divided by 7,
and subtracting one from the result.
365/7
Effective Yield = (1 + ((NCS-ES)/UV)) - 1
Where:
NCS = the net change in the value of the Scudder VLIF Money
Market Portfolio (not including any realized gains or losses
on the sale of securities, unrealized appreciation and
depreciation, and income other than investment income) for
the seven-day period attributable to a hypothetical
subaccount having a balance of one subaccount unit.
ES = per unit charges deducted from the hypothetical subaccount
for the seven-day period.
UV = the unit value for the first day of the seven-day period.
The Money Market subaccount yield is lower than the Scudder VLIF Money
Market Portfolio's yield because of the charges and deductions that the Contract
imposes.
The current and effective yields on amounts held in the Money Market
subaccount normally fluctuate on a daily basis. THEREFORE, THE DISCLOSED YIELD
FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS OR RATES OF RETURN. The Money Market subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Scudder VLIF Money Market Portfolio, the types and
quality of securities held by the Scudder VLIF Money Market Portfolio and that
Portfolio's operating expenses. We may also present yields on amounts held in
the Money Market subaccount for periods other than a seven-day period.
Yield calculations do not take into account the Surrender Charge that we
assess on certain withdrawals of Contract Value.
OTHER VARIABLE ACCOUNT YIELDS
Sales literature or advertisements may quote the current annualized yield
of one or more of the subaccounts (except the Money Market subaccount) under the
Contract for 30-day or one-month periods. The annualized yield of a subaccount
refers to income that the subaccount generates during a 30-day or one-month
period and is assumed to be generated during each period over a 12-month period.
We compute the annualized 30-day yield by:
1. dividing the net investment income of the portfolio
attributable to the subaccount units, less subaccount expenses
attributable to the Contract for the period, by the maximum
offering price per unit on the last day of the period;
2. multiplying the result by the daily average number of units
outstanding for the period;
3. compounding that yield for a 6-month period; and
4. multiplying the result by 2.
5
<PAGE> 50
Expenses of the subaccount include the Annual Administration Fee, the
asset-based administration charge and the mortality and expense risk charge for
the standard death benefit (and the mortality and expense risk for the
Guaranteed Minimum Death Benefit Rider and the Guaranteed Retirement Income
Benefit Rider). The yield calculation assumes that we deduct the Annual
Administration Fee at the beginning of each Contract Year. For purposes of
calculating the 30-day or one-month yield, we divide an average Annual
Administration Fee collected by the average Contract Value in the subaccount to
determine the amount of the charge attributable to the subaccount for the 30-day
or one-month period. We calculate the 30-day or one-month yield by the following
formula:
6
Yield = 2 X (((NI - ES)/(U X UV)) + 1) - 1)
Where:
NI = net income of the portfolio for the 30-day or one-month
period attributable to the subaccount's units.
ES = charges deducted from the subaccount for the 30-day or
one-month period.
U = the average number of units outstanding.
UV = the unit value at the close of the last day in the 30-day
or one-month period.
The yield for the subaccount is lower than the yield for the corresponding
portfolio because of the charges and deductions that the Contract imposes.
The yield on the amounts held in the subaccounts normally fluctuates over
time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN
INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. The types and
quality of securities that a portfolio holds and its operating expenses affect
the corresponding subaccount's actual yield.
Yield calculations do not take into account the Surrender Charge that we
assess on certain withdrawals of Contract Value.
AVERAGE ANNUAL TOTAL RETURNS FOR THE SUBACCOUNTS
Sales literature or advertisements may quote average annual total returns
for one or more of the subaccounts for various periods of time. If we advertise
total return for the Scudder VLIF Money Market Subaccount, then those
advertisements and sales literature will include a statement that yield more
closely reflects current earnings than total return.
When a subaccount has been in operation for 1, 5, and 10 years,
respectively, we will provide the average annual total return for these periods.
We may also disclose average annual total returns for other periods of time.
Standard average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods. Each period's ending date for which we provide total
return quotations will be for the most recent calendar quarter-end practicable,
considering the type of the communication and the media through which it is
communicated.
We calculate the standard average annual total returns using subaccount
unit values that we calculate on each valuation day based on the performance of
the subaccount's underlying portfolio, the
6
<PAGE> 51
deductions for the mortality and expense risk charge for the standard death
benefit (and the mortality and expense risk for the Guaranteed Minimum Death
Benefit Rider and the Guaranteed Retirement Income Benefit Rider), the
deductions for the asset-based administration charge and the Annual
Administration Fee. The calculation assumes that we deduct a Annual
Administration Fee of $ 30.00 at the beginning of the year. For purposes of
calculating average annual total return, we use an average per-dollar per-day
Annual Administration Fee attributable to the hypothetical subaccount for the
period. The calculation also assumes total surrender of the Contract at the end
of the period for the return quotation and will take into account the Surrender
Charge applicable to the Contract that we assess on surrenders of Contract
Value.
We calculate the standard total return by the following formula:
1/N
TR = ((ERV/P) ) - 1
Where:
TR = the average annual total return net of subaccount
recurring charges.
ERV = the ending redeemable value (net of any applicable
Surrender Charge) of the hypothetical subaccount at the
end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
NON-STANDARD SUBACCOUNT TOTAL RETURNS
Sales literature or advertisements may quote average annual total returns
for the subaccounts that do not reflect any Surrender Charges. We calculate such
nonstandard total returns in exactly the same way as the average annual total
returns described above, except that we replace the ending redeemable value of
the hypothetical subaccount for the period with an ending value for the period
that does not take into account any Surrender Charges.
We may disclose cumulative total returns in conjunction with the standard
formats described above. We calculate the cumulative total returns using the
following formula:
CTR = (ERV/P) - 1
Where:
CTR = the cumulative total return net of subaccount recurring
charges for the period.
ERV = the ending redeemable value of the hypothetical
investment at the end of the period.
P = a hypothetical single payment of $1,000.
ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA
Sales literature or advertisements may quote adjusted yields and total
returns for the portfolios since their inception reduced by some or all of the
fees and charges under the Contract. Such adjusted historic Portfolio
performance may include data that precedes the inception dates of the
subaccounts. This data is designed to show the performance that would have
resulted if the Contract had been in existence during that time.
7
<PAGE> 52
We will disclose nonstandard performance data only if we disclose the
standard performance data for the required periods.
EFFECT OF THE ANNUAL ADMINISTRATION FEE ON PERFORMANCE DATA
The Contract provides for the deduction of a $30.00 Annual Administration
Fee at the beginning of each Contract year from the fixed account and the
subaccounts. We base it on the proportion that the value of each such Account
bears to the total Contract Value. For purposes of reflecting the Annual
Administration Fee in yield and total return quotations, we convert the Annual
Administration Fee into a per-dollar per-day charge based on the average
Contract Value in the subaccount for all Contracts on the last day of the period
for which quotations are provided. Then, we adjust the per-dollar per-day
average charge to reflect the basis upon which we calculate the particular
quotation.
HISTORIC PERFORMANCE DATA
GENERAL LIMITATIONS
The funds have provided the portfolios' performance data. We derive the
subaccount performance data from the data that the funds provide. In preparing
the tables below, we relied on the funds' data. While we have no reason to doubt
the accuracy of the figures provided by the funds, we have not verified those
figures.
TIME PERIODS BEFORE THE DATE THE VARIABLE ACCOUNT COMMENCED OPERATIONS
The variable account may also disclose non-standardized total return for time
periods before the variable account commenced operations. This performance data
is based on the actual performance of the portfolios since their inception,
adjusted to reflect the effect of the current level of charges that apply to the
subaccounts under the Contract.
TABLES OF ADJUSTED HISTORIC TOTAL RETURN QUOTATIONS
The tables below set out the adjusted historic total returns for the portfolios
for various periods as of December 31, 1998. This performance data is based on
the actual performance of the portfolios since their inception, adjusted to
reflect the effect of the current level of charges that apply to the subaccounts
under the Contract.
<TABLE>
<CAPTION>
TABLE 1
ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 1998(2)
ASSUMING CONTRACT IS SURRENDERED
AVERAGE ANNUAL TOTAL RETURN(3)
- ----------------------------------------------------------------------------------
WITH STANDARD DEATH BENEFIT
(TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.XX%)
- --------------------------------------------------------------------------------------
Inception 1 Year 5 Year 10 Year Since
PORTFOLIO Date(2) (%) (%) (%) Inception (%)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------------
Capital Appreciation
- --------------------------------------------------------------------------------------
KEMPER VARIABLE SERIES
- --------------------------------------------------------------------------------------
Kemper High Yield
- --------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C>
Kemper Government Securities
- ------------------------------------------------------------------------------------------------
Kemper-Dreman High Return Equity
- ------------------------------------------------------------------------------------------------
Kemper Small Cap Growth
- ------------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- ------------------------------------------------------------------------------------------------
PIMCO Low Duration Bond
- ------------------------------------------------------------------------------------------------
PIMCO Foreign Bond
- ------------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND
- ------------------------------------------------------------------------------------------------
Scudder VLIF International
- ------------------------------------------------------------------------------------------------
Scudder VLIF Growth and Income
- ------------------------------------------------------------------------------------------------
Scudder VLIF Bond
- ------------------------------------------------------------------------------------------------
Scudder VLIF Money Market(1)
- ------------------------------------------------------------------------------------------------
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- ------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
WITH GUARANTEED MINIMUM DEATH BENEFIT RIDER AND GUARANTEED RETIREMENT INCOME BENEFIT RIDER
(TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: X.XX%)
- ------------------------------------------------------------------------------------------------
Inception 1 Year 5 Year 10 Year Since
PORTFOLIO Date(2) (%) (%) (%) Inception (%)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES
- -------------------------------------------------------------------------------------------------
Capital Appreciation
- -------------------------------------------------------------------------------------------------
KEMPER VARIABLE SERIES
- -------------------------------------------------------------------------------------------------
Kemper High Yield
- -------------------------------------------------------------------------------------------------
Kemper Government Securities
- -------------------------------------------------------------------------------------------------
Kemper-Dreman High Return Equity
- -------------------------------------------------------------------------------------------------
Kemper Small Cap Growth
- -------------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- -------------------------------------------------------------------------------------------------
PIMCO Low Duration Bond
- -------------------------------------------------------------------------------------------------
PIMCO Foreign Bond
- -------------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND
- -------------------------------------------------------------------------------------------------
Scudder VLIF International
- -------------------------------------------------------------------------------------------------
Scudder VLIF Growth and Income
- -------------------------------------------------------------------------------------------------
Scudder VLIF Bond
- -------------------------------------------------------------------------------------------------
Scudder VLIF Money Market(1)
- -------------------------------------------------------------------------------------------------
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) An investment in the Scudder VLIF Money Market Portfolio is neither insured
nor guaranteed by the U.S. Government and there can be no assurance that the
Scudder VLIF Money Market Portfolio will maintain a stable $1.00 share price.
Yield more closely reflects current earnings of the Scudder VLIF Money Market
Portfolio than its total return.
(2) The variable account has not yet commenced operations. Once available,
standardized performance data for the periods after the inception of Contract
sales will reflect the actual performance of the Contracts.
(3) Total return includes changes in share price, reinvestment of dividends,
and capital gains. The performance figures: (1) represent past performance and
neither guarantee nor predict future investment results; (2) assume an initial
hypothetical investment of $1,000 as required by the SEC for the standardized
returns; (3) reflects the deduction of either 1.XX% (for the Standard Death
Benefit) or X.XX% (for the election of the Guaranteed Minimum Death Benefit
Rider and the Guaranteed Retirement Income Benefit Rider) in annual variable
account charges and a $30 annual contract maintenance charge, and (4) the
applicable Surrender Charge. The impact of the Annual Administration Fee on
investment returns will vary depending on the size of the Contract and is
reflected as an annual charge of 0.XXX% of subaccount assets. The investment
return and value of a Contract will fluctuate so that a Contract, when
surrendered, may be worth more or less than the amount of the purchase
payments.
(4) Total returns reflect that certain investment advisers waived all or part of
the advisory fee or reimbursed the portfolio for a portion of its expenses.
Otherwise, total returns would have been lower.
9
<PAGE> 54
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
TABLE 2
ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 1998(2)
ASSUMING CONTRACT IS NOT SURRENDERED
AVERAGE ANNUAL TOTAL RETURN(3)
- --------------------------------------------------------------------------------------------
WITH STANDARD DEATH BENEFIT
(TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.XX%)
- --------------------------------------------------------------------------------------------
Inception 1 Year 5 Year 10 Year Since
PORTFOLIO Date(2) (%) (%) (%) Inception (%)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------------------
Capital Appreciation
- --------------------------------------------------------------------------------------------
KEMPER VARIABLE SERIES
- --------------------------------------------------------------------------------------------
Kemper High Yield
- --------------------------------------------------------------------------------------------
Kemper Government Securities
- --------------------------------------------------------------------------------------------
Kemper-Dreman High Return Equity
- --------------------------------------------------------------------------------------------
Kemper Small Cap Growth
- --------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- --------------------------------------------------------------------------------------------
PIMCO Low Duration Bond
- --------------------------------------------------------------------------------------------
PIMCO Foreign Bond
- --------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND
- --------------------------------------------------------------------------------------------
Scudder VLIF International
- --------------------------------------------------------------------------------------------
Scudder VLIF Growth and Income
- --------------------------------------------------------------------------------------------
Scudder VLIF Bond
- --------------------------------------------------------------------------------------------
Scudder VLIF Money Market(1)
- --------------------------------------------------------------------------------------------
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- --------------------------------------------------------------------------------------------
Templeton Developing Markets Fund
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
WITH GUARANTEED MINIMUM DEATH BENEFIT RIDER AND GUARANTEED
RETIREMENT INCOME BENEFIT RIDER
(TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: X.XX%)
- --------------------------------------------------------------------------------------------
Inception 1 Year 5 Year 10 Year Since
PORTFOLIO Date(2) (%) (%) (%) Inception (%)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN SERIES
- --------------------------------------------------------------------------------------------
Capital Appreciation
- --------------------------------------------------------------------------------------------
KEMPER VARIABLE SERIES
- --------------------------------------------------------------------------------------------
Kemper High Yield
- --------------------------------------------------------------------------------------------
Kemper Government Securities
- --------------------------------------------------------------------------------------------
Kemper-Dreman High Return Equity
- --------------------------------------------------------------------------------------------
Kemper Small Cap Growth
- --------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST
- --------------------------------------------------------------------------------------------
PIMCO Low Duration Bond
- --------------------------------------------------------------------------------------------
PIMCO Foreign Bond
- --------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND
- --------------------------------------------------------------------------------------------
Scudder VLIF International
- --------------------------------------------------------------------------------------------
Scudder VLIF Growth and Income
- --------------------------------------------------------------------------------------------
Scudder VLIF Bond
- --------------------------------------------------------------------------------------------
Scudder VLIF Money Market(1)
- --------------------------------------------------------------------------------------------
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- --------------------------------------------------------------------------------------------
Templeton Developing Markets Fund
- --------------------------------------------------------------------------------------------
</TABLE>
(1) An investment in the Scudder VLIF Money Market Portfolio is neither insured
nor guaranteed by the U.S. Government and there can be no assurance that the
Scudder VLIF Money Market Portfolio will maintain a stable $1.00 share price.
Yield more closely reflects current earnings of the Scudder VLIF Money Market
Portfolio than its total return.
(2) The variable account has not yet commenced operations. Once available,
standardized performance data for the periods after the inception of Contract
sales will reflect the actual performance of the Contracts.
(3) Total return includes changes in share price, reinvestment of dividends, and
capital gains. The performance figures: (1) represent past performance and
neither guarantee nor predict future investment results; (2) assume an initial
hypothetical investment of $1,000 as required by the SEC for the standardized
returns; and (3) reflects the deduction of either 1.XX% (for
10
<PAGE> 55
the Standard Death Benefit) or X.XX% (for the election of the Guaranteed
Minimum Death Benefit Rider and the Guaranteed Retirement Income Benefit Rider)
in annual variable account charges and a $30 annual contract maintenance charge.
The applicable Surrender Charge is not deducted. The impact of the Annual
Administration Fee on investment returns will vary depending on the size of the
Contract and is reflected as an annual charge of 0.XXX% of subaccount assets.
The investment return and value of a Contract will fluctuate so that a Contract,
when surrendered, may be worth more or less than the amount of the purchase
payments.
(4) Total returns reflect that certain investment advisers waived all or part of
the advisory fee or reimbursed the portfolio for a portion of its expenses.
Otherwise, total returns would have been lower.
NET INVESTMENT FACTOR
The net investment factor is an index that measures the investment
performance of a subaccount from one valuation day to the next. Each subaccount
has its own net investment factor, which may be greater or less than one. The
net investment factor for each subaccount equals the fraction obtained by
dividing (X) by (Y) minus (Z) where:
(X) is the net result of:
1. the net asset value per accumulation unit held in the
subaccount at the end of the current valuation day; plus
2. the per accumulation unit amount of any dividend or capital
gain distribution on shares held in the subaccount during the
current valuation day; less
3. the per accumulation unit amount of any capital loss, realized
or unrealized, on shares held in the subaccount during the
current valuation day; less
4. the per accumulation unit amount of any taxes or any amount
set aside during the valuation day as a reserve for taxes.
(Y) equals the net asset value per accumulation unit held in the
subaccount as of the end of the immediately preceding valuation day.
(Z) equals charges and fees deducted from the subaccount. These consist
of:
1. the amount charged for mortality and expense risk on that
valuation day; and
2. the amount charged for administration on that valuation day.
VARIABLE ANNUITY PAYMENTS
We determine the dollar amount of the first variable annuity payment in
the same manner as that of a fixed annuity payment. Therefore, for any
particular amount applied to a variable payout plan, the dollar amount of the
first variable annuity payment and the first fixed annuity payment (assuming the
fixed payment is based on the minimum guaranteed 3.0% interest rate) will be the
same. Later variable annuity payments, however, will vary to reflect the net
investment performance of the subaccount(s) that you or the Annuitant select.
Annuity units measure the net investment performance of a subaccount for
purposes of determining the amount of variable annuity payments. On the Annuity
Start Date, if the Contract has been issued for less than three Contract years,
we use the Cash Value of each subaccount to purchase annuity units at the
annuity unit value for that subaccount. If the Annuity Start Date is three or
more Contract years from the issue date, then we use the Contract Value of each
subaccount to purchase annuity units at the annuity unit value for that
subaccount. The number of annuity units in each
11
<PAGE> 56
subaccount then remains fixed unless an exchange of annuity units is made as
described below. Each subaccount has a separate annuity unit value that changes
each valuation day in substantially the same way as does the value of an
accumulation unit of a subaccount.
We determine the dollar value of each variable annuity payment after the
first by multiplying the number of annuity units of a particular subaccount by
the annuity unit value for that subaccount on the Valuation day immediately
preceding the date of each payment. If the net investment return of the
subaccount for a payment period equals the pro-rated portion of the [3.0%]
annual assumed investment rate, then the variable annuity payment for that
subaccount for that period will equal the payment for the prior period. If the
net investment return exceeds an annualized rate of [3.0%] for a payment period,
then the payment for that period will be greater than the payment for the prior
period. Similarly, if the return for a period falls short of an annualized rate
of [3.0%], then the payment for that period will be less than the payment for
the prior period.
ASSUMED INVESTMENT RATE
The discussion concerning the amount of variable annuity payments which
follows this section is based on an assumed investment rate of 3.0% per year. We
use the assumed investment rate to determine the first monthly payment per
thousand dollars of applied value. This rate does not bear any relationship to
the actual net investment experience of the Separate Account or any subaccount.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
The amount of the first variable annuity payment to a payee will depend on
the amount (i.e., the Contract Value, the Cash Value, the death benefit) applied
to effect the variable annuity payment as of the Annuity Start Date, the annuity
payout plan option selected, and the annuitant's age and sex (if applicable).
The Contracts contain tables indicating the dollar amount of the first annuity
payment under each annuity payment option for each $1,000 applied at various
ages. These tables are based upon the [XXXX ANNUITY MORTALITY TABLES]
(promulgated by the Society of Actuaries) and an assumed investment rate of 3.0%
per year.
The portion of the first monthly variable annuity payment derived from a
subaccount is divided by the annuity unit value for that subaccount (calculated
as of the date of the first monthly payment). The number of such units remain
fixed during the annuity period, assuming that the Annuitant makes no exchanges
of annuity units for annuity units of another subaccount or to provide a fixed
annuity payment.
In any subsequent month, for any Contract, we determine the dollar amount
of the variable annuity payment derived from each subaccount by multiplying the
number of annuity units of that subaccount attributable to that Contract by the
value of such annuity unit at the end of the valuation period immediately
preceding the date of such payment.
The annuity unit value will increase or decrease from one payment to the
next in proportion to the net investment return of the subaccount(s) supporting
the variable annuity payments, less an adjustment to neutralize the 3.0% assumed
investment rate referred to above. Therefore, the dollar amount of variable
annuity payments after the first will vary with the amount by which the net
investment return of the appropriate subaccounts is greater or less than 3.0%
per year. For example, for a Contract using only one subaccount to generate
variable annuity payments, if that subaccount has a cumulative net investment
return of 5% over a one year period, the first annuity payment in the next year
will be approximately 2% greater than the payment on the same date in the
preceding year. If such net
12
<PAGE> 57
investment return is 1% over a one year period, then the first annuity payment
in the next year will be approximately 2 percentage points less than the payment
on the same date in the preceding year.
ANNUITY UNIT VALUE
We calculate the value of an annuity unit at the same time that we
calculate the value of an accumulation unit and we base it on the same values
for fund shares and other assets and liabilities. The annuity unit value for
each subaccount's first valuation period was set at $100. We calculate the
annuity unit value for a subaccount for each subsequent valuation period by
dividing (1) by (2), then multiplying this quotient by (3) and then multiplying
the result by (4), where:
(1) is the accumulation unit value for the current valuation period;
(2) is the accumulation unit value for the immediately preceding valuation
period;
(3) is the annuity unit value for the immediately preceding valuation
period; and
(4) is a special factor designed to compensate for the assumed investment
rate of 3.0% built into the table used to compute the first variable
annuity payment.
The following illustrations show, by use of hypothetical examples, the
method of determining the annuity unit value and the amount of several variable
annuity payments based on one subaccount.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
<TABLE>
<S> <C> <C>
1. Accumulation unit value for current
valuation period...................................................... $11.15
2. Accumulation unit value for immediately preceding valuation period $11.10
3. Annuity unit value for immediately preceding valuation period............ $105.00
4. Factor to compensate for the assumed investment rate of 3.0%............. 9975
5. Annuity unit value of current valuation period ((1) / (2)) x (3) x (4)... $105.2093
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
1. Number of accumulation units at Annuity Start Date....................... 10,000
2. Accumulation unit value ................................................. $11.1500
3. Contract Value (1)x(2)................................................... $111,500
4. First monthly annuity payment per $1,000 of Contract Value............... $5.89
5. First monthly annuity payment (3)x(4) / 1,000 ........................... $656.74
6. Annuity unit value....................................................... $105.2093
7. Number of annuity units (5)/(6).......................................... 6.2422
8. Assume annuity unit value for second month equal to...................... $105.3000
9. Second monthly annuity payment (7)x(8)................................... $657.30
10. Assume annuity unit value for third month equal to....................... $104.9000
11. Third monthly annuity payment (7)x(10)................................... $654.81
</TABLE>
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
13
<PAGE> 58
In the event of any such substitution or change, we may (by appropriate
endorsement, if necessary) change the Contract to reflect the substitution or
change. If we consider it to be in the best interest of Owners and Annuitants,
and subject to any approvals that may be required under applicable law, the
variable account may be operated as a management investment company under the
1940 Act, it may be deregistered under that Act if registration is no longer
required, it may be combined with other of our variable accounts, or the assets
may be transferred to another variable account. In addition, we may, when
permitted by law, restrict or eliminate any voting rights you have under the
Contracts.
RESOLVING MATERIAL CONFLICTS
The funds currently sell shares to registered separate accounts of
insurance companies other than us to support other variable annuity contracts
and variable life insurance contracts. In addition, our other separate accounts
and separate accounts of other affiliated life insurance companies may purchase
some of the funds to support other variable annuity or variable life insurance
contracts. Moreover, qualified retirement plans may purchase shares of some of
the funds. As a result, there is a possibility that an irreconcilable material
conflict may arise between your interests in owning a Contract whose Contract
Value is allocated to the variable account and of persons owning Contracts whose
Contract Values are allocated to one or more other separate accounts investing
in any one of the funds. There is also the possibility that a material conflict
may arise between the interests of Owners generally, or certain classes of
Owners, and participating qualified retirement plans or participants in such
retirement plans.
We currently do not foresee any disadvantages to you that would arise from
the sale of fund shares to support variable life insurance contracts or variable
annuity contracts of other companies or to qualified retirement plans. However,
the management of each fund will monitor events related to its fund in order to
identify any material irreconcilable conflicts that might possibly arise as a
result of such fund offering its shares to support both variable life insurance
contracts and variable annuity contracts, or support the variable life insurance
contracts and/or variable annuity contracts issued by various affiliated and
unaffiliated insurance companies.
In addition, the management of the funds will monitor the funds in order
to identify any material irreconcilable conflicts that might possibly arise as a
result of the sale of its shares to qualified retirement plans, if applicable.
In the event of such a conflict, the management of the appropriate fund would
determine what action, if any, should be taken in response to the conflict. In
addition, if we believe that the response of the funds to any such conflict does
not sufficiently protect you, then we will take our own appropriate action,
including withdrawing the variable account's investment in such funds, as
appropriate.
VOTING RIGHTS
We determine the number of votes you may cast by dividing your Contract
Value in a subaccount by the net asset value per share of the portfolio in which
that subaccount invests. For each annuitant, we determine the number of votes
attributable to a subaccount by dividing the liability for future variable
annuity payments to be paid from that subaccount by the net asset value per
share of the portfolio in which that subaccount invests. We calculate this
liability for future payments on the basis of the mortality assumptions. We use
the assumed investment rate in determining the number of annuity units of that
subaccount credited to the annuitant's Contract and annuity unit value of that
subaccount on the date that we determine the number of votes. As we make
variable annuity payments to the Annuitant, the liability for future payments
decreases as does the number of votes.
14
<PAGE> 59
We determine the number of votes available to you or an annuitant as of
the same date that the fund establishes for determining shareholders eligible to
vote at the relevant meeting of the portfolio's shareholders. We will solicit
voting instructions by sending you written materials before the fund's meeting
in accordance with the fund's procedures.
SAFEKEEPING OF ACCOUNT ASSETS
We hold the title to the assets of the variable account. The assets are
kept physically segregated and held separate and apart from our general account
assets and from the assets in any other separate account. We maintain records of
all purchases and redemptions of portfolio shares held by each of the
subaccounts. Additional protection for the assets of the variable account is
provided by a blanket fidelity bond issued by Federal Insurance Company to
Farmers Group, Inc., providing aggregate coverage of $30,000,000 (subject to a
$500,000 deductible) for all officers and employees of Farmers Group, Inc.
DISTRIBUTION OF THE CONTRACTS
[NAME AND ADDRESS] acts as distributor for the Contracts.
[_________________] is registered with the SEC under the Securities Exchange Act
of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
We offer the Contracts to the public on a continuous basis. We anticipate
continuing to offer the Contracts, but we reserve the right to discontinue the
offering. Agents who sell the Contracts are licensed by applicable state
insurance authorities to sell the Contracts and are registered representatives
of [NAME OF DISTRIBUTOR] or broker-dealers having selling agreements with [NAME
OF DISTRIBUTOR] or broker-dealers having selling agreements with such
broker-dealers.
We may pay sales commissions to broker-dealers up to an amount equal to
___% of the Premiums paid under a Contract. [Describe commission arrangements.]
We expect the broker-dealers to compensate sales representatives in varying
amounts from these commissions. We may pay other distribution expenses such as
production incentive bonuses, an agent's insurance and pension benefits, and
agency expense allowances. These distribution expenses do not result in any
additional charges against the Contracts other than those described in the
prospectus under "Fees and Charges."] [_____________] has received no
underwriting commissions for the last three fiscal years, because the variable
account had not yet commenced operations.
LEGAL MATTERS
M. Douglas Close, Vice President and General Counsel, Farmers New World
Life Insurance Company, has passed upon all matters relating to Washington law
pertaining to the Contracts, including the validity of the Contracts and the
Company's authority to issue the Contracts. Sutherland Asbill & Brennan LLP of
Washington, D.C. has provided advice on certain matters relating to the federal
securities laws.
15
<PAGE> 60
EXPERTS
[NAME AND ADDRESS], independent auditors, have audited the balance sheets
of Farmers New World Life Insurance Company as of December 31, 1998 and 1997 and
the related statements of income, shareholder's equity and cash flows for each
of the three years in the period ended December 31, 1998, appearing in this
Statement of Additional Information and Registration Statement. These are set
forth in their reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing. There are no financial statements available for the
Variable Account, because the Variable Account has not commenced operations as
of the date of this prospectus.
OTHER INFORMATION
We have filed a registration statement with the SEC under the Securities
Act of 1933, as amended, with respect to the Contracts discussed in this
Statement of Additional Information. The Statement of Additional Information
does not include all of the information set forth in the registration statement,
amendments and exhibits. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, you should refer to the instruments filed with the SEC.
FINANCIAL STATEMENTS
16
<PAGE> 61
PART C
<TABLE>
<S> <C> <C>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
All required financial statements are included in Part B
of this Registration Statement.
(b) EXHIBITS
(1) Certified resolution of the Board of Directors of Farmers New World Life
Insurance Company (the "Company") authorizing establishment of Farmers
Annuity Separate Account A (the "Separate Account").(2/)
(2) Not applicable.
(3) (a) Form of Distribution Agreement.(3/)
(b) Form of Sales Agreement.(3/)
(4) (a) Form of Contract for the Individual Flexible Premium Variable Annuity.(2/)
(b) Guaranteed Minimum Death Benefit Rider.(2/)
(c) Guaranteed Retirement Income Benefit Rider.(2/)
(d) Waiver of Surrender Charges Rider.(2/)
(5) Form of Application for the Individual Flexible Premium Variable Annuity.(3/)
(6) (a) Articles of Incorporation of Farmers New World Life Insurance Company.(1/)
(b) By-Laws of Farmers New World Life Insurance Company.(1/)
(7) Not Applicable.
(8) (a) Form of Participation Agreement between Kemper Variable Series Fund and
Farmers New World Life Insurance Company.(3/)
(b) Form of Participation Agreement between Scudder Variable Life Investment
Fund and Farmers New World Life Insurance Company.(3/)
(c) Form of Participation Agreement between Janus Aspen Series and Farmers New
World Life Insurance Company.(3/)
(d) Form of Participation Agreement between PIMCO Variable Insurance Trust and
Farmers New World Life Insurance Company.(3/)
(e) Form of Participation Agreement between Templeton Variable Products Series
Fund and Farmers New World Life Insurance Company.(3/)
(9) Opinion and Consent of M. Douglas Close, Esq.(3/)
(10) (a) Consent of Sutherland Asbill & Brennan LLP.(3/)
(b) Consent of Auditors.(3/)
(11) No financial statements will be omitted from Item 23.
(12) Not applicable.
(13) Schedule of Performance Computations.(3/)
(14) Not applicable.
(15) Powers of Attorney.(2/)
</TABLE>
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<PAGE> 62
- ---------
1/ Incorporated herein by reference to the initial registration statement on
Form S-6 for Farmers Variable Life Separate Account A filed with the SEC via
EDGARLINK on July 29, 1999 (File No. 333-84023).
2/ Filed herewith.
3/ To be filed by amendment.
ITEM 25. DIRECTORS AND OFFICERS OF FARMERS NEW WORLD LIFE INSURANCE COMPANY
<TABLE>
Name and Principal Business Address Position and Office with Depositor
- ----------------------------------- ----------------------------------
<S> <C>
C. Paul Patsis(1) President and Director
Richard E. Bangert(3) Director
Donald J. Covey(4) Director
Martin D. Feinstein(2) Director
Paul N. Hopkins(2) Director
Dennis I. Okamato(5) Director
Keitha T. Schofield(2) Director
Gary R. Severson(6) Director
John F. Sullivan, Jr.(7) Director
Gerald E. Faulwell(2) Vice President
Howard E. Falk, Jr.(2) Vice President and Assistant Treasurer
Paul G. Secord(2) Vice President
Kathryn M. Callahan(1) Vice President and Actuary
M. Douglas Close(2) Vice President and General Counsel
James I. Randolph(1) Vice President and Assistant Secretary
David A. Demmon(1) Assistant Vice President and Treasurer
</TABLE>
Principal business address is:
1. 3003 - 77th Avenue, S.E., Mercer Island, WA 98040
2. 4680 Wilshire Blvd., Los Angeles, CA 90010
3. 2615 - 42nd Avenue West, Seattle, WA 98199
4. 6300 Sand Point Way, N.E., #307, Seattle, WA 98115
5. 1600 Seventh Avenue, Room 1802, Seattle, WA 98191
6. 6131 - 128th Avenue, N.E., Kirkland, WA 98033
7. 1201 Third Avenue, Suite 3390, Seattle, WA 98101
C-2
<PAGE> 63
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
<TABLE>
<CAPTION>
Percent of Voting
Name Jurisdiction Securities Owned Principal Business
- ---- ------------ ---------------- ------------------
<S> <C> <C> <C>
</TABLE>
[To be added by subsequent amendment.]
* Files separate statutory-basis Financial Statements.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of the date hereof, there are no contract owners.
ITEM 28. INDEMNIFICATION
Under its By-laws, Farmers, to the full extent permitted by the
Washington Business Corporation Act, will indemnify any person who was or is a
party to any proceeding by reason of the fact that he or she is or was a
director of Farmers, as provided below.
By-laws of Farmers New World Life Insurance Company (as amended October 24,
1995)
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
SECTION 47. (a) RIGHT OF INDEMNITY. Each person who acts as a Director, officer
or employee of the corporation shall be indemnified by the corporation for all
sums which he becomes obligated to pay, (including counsel fees, expenses and
court costs actually and necessarily incurred by him) in connection with any
action, suit or proceeding in which he is made a party by reason of his being,
or having been a Director, officer, or employee of the corporation, except in
relation to matters as to which he shall be adjudged in such action, suit or
proceeding to be liable for bad faith or misconduct in the performance of his
duties as such Director, officer or employee, and except any sum paid to the
corporation in settlement of an action, suit or proceeding based upon bad faith
or misconduct in the performance of his duties.
(b) SCOPE OF INDEMNITY. The right of indemnification in this article
provided shall inure to each Director, officer and employee of the corporation,
whether or not he is such Director, officer or employee at the time he shall
become obligated to pay such sums, and whether or not the claim asserted against
him is based on matters which antedate the adoption of this article; and in the
event of his death shall extend to his legal representatives. Each person who
shall act as a Director, officer or employee of the corporation shall be deemed
to be doing so in reliance upon such right of indemnification; and such right
shall not be deemed exclusive of any other right to which any such person may be
entitled, under any by-law, agreement, vote of stockholders, or otherwise.
(c) DETERMINATION OF CLAIMS FOR INDEMNITY. The Board of Directors of
the corporation, acting at a meeting at which a majority of the quorum is
unaffected by self-interest
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<PAGE> 64
(notwithstanding that other members of the quorum present but not voting may be
so affected), shall determine the propriety and reasonableness of any indemnity
claimed under this article, and such determination shall be final and
conclusive. If, however, a majority of a quorum of the Board which is unaffected
by self-interest and willing to act is not obtainable, the Board in its
discretion may appoint from among the stockholders who are not Directors or
officers or employees of the corporation, a committee of two or more persons to
consider and determine any such question, and the determination of such
committee shall be final and conclusive.
ITEM 29. PRINCIPAL UNDERWRITER
[To be added by subsequent amendment.]
(a) [______________] is the registrant's principal underwriter. It is
also the principal underwriter for [__________________].
(b) Officers and Directors of [_________________], and their
addresses, are as follows:
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions and Offices with the Underwriter
- ------------------------------------ ------------------------------------------
<S> <C>
[To be added by subsequent amendment.]
</TABLE>
* All of the persons listed above have as their principal business address:
________________.
<TABLE>
<CAPTION>
(c)(1) (2) (3) (4) (5)
Name of Net Underwriting
Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions Compensation
- ----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
[To be added by subsequent amendment.]
</TABLE>
ITEM 30. LOCATION OF BOOKS AND RECORDS
All of the accounts, books, records or other documents required to
be kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Farmers New World Life Insurance Company at 3007 -
77th Avenue, S.E., Mercer Island, WA 98040 and by [_______________].
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this
registration statement.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS.
(a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement
are never more than 16 months
C-4
<PAGE> 65
old for as long as purchase payments under the contracts offered
herein are being accepted.
(b) The registrant undertakes that it will include either (1) as part of
any application to purchase a contract offered by the prospectus, a
space that an applicant can check to request a statement of additional
information, or (2) a post card or similar written communication
affixed to or included in the prospectus that the applicant can remove
and send to Farmers New World Life Insurance Company for a statement
of additional information.
(c) The registrant undertakes to deliver any statement of additional
information and any financial statements required to be made available
under this Form N-4 promptly upon written or oral request to the
Company at the address or phone number listed in the prospectus.
(d) The Company represents that in connection with its offering of the
contracts as funding vehicles for retirement plans meeting the
requirements of Section 403(b) of the Internal Revenue Code of 1986,
it is relying on a no-action letter dated November 28, 1988, to the
American Council of Life Insurance (Ref. No. IP-6-88) regarding
Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, and that paragraphs numbered (1) through (4) of that letter will
be complied with.
(e) The Company hereby represents that the fees and charges deducted under
the Contracts, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks
assumed by the Company.
C-5
<PAGE> 66
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, Farmers Annuity Separate Account A, has caused this
registration statement to be signed on its behalf, in the City of Mercer Island,
and the State of Washington, on this 4th day of August, 1999.
<TABLE>
<S> <C>
FARMERS ANNUITY
SEPARATE ACCOUNT A (Registrant)
Attest: /s/ John R. Patton By: /s/ C. Paul Patsis
------------------------------------ ------------------
John R. Patton C. Paul Patsis
Assistant Vice President President
Farmers New World Life Farmers New World Life
Insurance Company Insurance Company
By: FARMERS NEW WORLD LIFE
INSURANCE COMPANY (Depositor)
Attest: /s/ John R. Patton By: /s/ C. Paul Patsis
------------------------------------ ------------------
John R. Patton C. Paul Patsis
Assistant Vice President President
Farmers New World Life Farmers New World Life
Insurance Company Insurance Company
</TABLE>
As required by the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ C. Paul Patsis President and Director (Principal August 4, 1999
- ------------------------------------- Executive Officer)
C. Paul Patsis
/s/ David A. Demmon * Assistant Vice President and Treasurer August 4, 1999
- ------------------------------------- (Principal Accounting Officer and
David A. Demmon Principal Financial Officer)
/s/ Richard E. Bangert * Director August 4, 1999
- ------------------------------------
Richard E. Bangert
/s/ Donald J. Covey * Director August 4, 1999
- -------------------------------------
Donald J. Covey
/s/ Martin D. Feinstein * Director August 4, 1999
- -------------------------------------
Martin D. Feinstein
</TABLE>
C-6
<PAGE> 67
<TABLE>
<S> <C> <C>
/s/ Paul N. Hopkins * Director August 4, 1999
- ----------------------------------------
Paul N. Hopkins
/s/ Dennis I. Okamoto * Director August 4, 1999
- ----------------------------------------
Dennis I. Okamoto
/s/ Keitha T. Schofield * Director August 4, 1999
- ----------------------------------------
Keitha T. Schofield
/s/ Gary R. Severson * Director August 4, 1999
- ----------------------------------------
Gary R. Severson
/s/ John F. Sullivan, Jr. * Director August 4, 1999
- ----------------------------------------
John F. Sullivan, Jr.
</TABLE>
/s/ C. Paul Patsis On August 4, 1999, as Attorney-in-Fact pursuant
- ------------------------ to powers of attorney filed herewith.
* By: C. Paul Patsis
C-7
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit 1 Certified resolution of the Board of Directors of Farmers New World Life Insurance Company
authorizing establishment of Farmers Annuity Separate Account A
Exhibit 4(a) Form of Contract for the Individual Flexible Premium Variable Annuity
Exhibit 4(b) Guaranteed Minimum Death Benefit Rider
Exhibit 4(c) Guaranteed Retirement Income Benefit Rider
Exhibit 4(d) Waiver of Surrender Charges Rider
Exhibit 15 Powers of Attorney
</TABLE>
<PAGE> 1
FARMERS NEW WORLD LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT A RESOLUTION
BE IT RESOLVED, That the Board of Directors of Farmers New World Life Insurance
Company (the "Company"), hereby establishes a separate account, pursuant to the
provisions of Section 48.18A.020 of the Washington Insurance Laws, designated
Farmers Annuity Separate Account A (hereinafter the "Variable Account"), for the
following use and purposes, and subject to such conditions as hereinafter set
forth; and
FURTHER RESOLVED, That the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable annuity 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, gaines 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, gaines or losses
of the Company; and
FURTHER RESOLVED, That the assets of the Variable Account equal to the reserves
and other liabilities under the Policies and any other policies issued through
the Variable Account may not be charged with liabilities arising out of any
other business the Company may conduct; and
FURTHER RESOLVED, That the Variable Account shall be divided into investment
subaccounts (the "Subaccounts"), each of which shall invest in the shares of a
mutual fund portfolio, and net premiums under the Policies shall be allocated in
accordance with instructions received from owners of the Policies; and
FURTHER RESOLVED, That the Variable Committee (hereinafter the "Committee" is C.
Paul Patsis, President; Paul G. Secord, Vice President; David A. Demmon,
Treasurer, and M. Douglas Close, Corporate Counsel, and each of them, with full
power to act without the others, be, and they hereby are, severally] authorized
to add or remove any Subaccount of the Variable Account or add or remove any
mutual fund as may hereafter be deemed necessary or appropriate; and
FURTHER RESOLVED, That the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account, without
regard to other income, gains or losses of any other Subaccount of the Variable
Account; and
FURTHER RESOLVED, That C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
and each of them, with full power to act without the others, be, and they hereby
are, severally authorized to invest such amount or amounts of the Company's cash
in the Variable Account or in any Subaccount
<PAGE> 2
thereof or in any mutual fund as may be deemed necessary or appropriate to
facilitate the commencement of the Variable Account's and/or the fund's
operations and/or to meet any minimum capital requirements under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
FURTHER RESOLVED, That the Committee, 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 Committee, and each of them, with full power to act
without the others, with such assistance from the Company's independent
certified public accounts, legal counsel and independent consultants or others
as they may require, be, and they hereby are, severally authorized and directed
to take all action necessary to: (a) register the Variable Account as a unit
investment trust under the 1940 Act; (b) register the Policies in such amounts,
which may be an indefinite amount, as such officers of the Company shall from
time to time deem appropriate under the Securities Act of 1933 (the "1933 Act");
and (c) take all other actions that are necessary in connection with the
offering of the Policies for sale and the operation of the Variable Account in
order to comply with the 1940 Act, the Securities Exchange Act of 1934, the 1933
Act, and other applicable Federal laws, including the filing of any registration
statements, and undertakings, no-action requests, consents, and any applications
for exemptions from the 1940 Act or other applicable federal laws and any
amendments to the foregoing as the officers of the Company shall deem necessary
or appropriate; and
FURTHER RESOLVED, That C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
and each of them, with full power to act without the others, are severally
authorized and empowered to prepare, execute and cause to be filed with the
Securities and Exchange Commission on behalf of the Variable Account, and by the
Company as sponsor and depositor, a Notification of Registration on Form N-8A, a
registration statement registering the Account as an investment Company under
the 1940 Act, and the Policies under the 1933 Act, and any and all amendments to
the foregoing on behalf of the Variable Account and the Company and on behalf of
and as attorneys-in-fact for the principal executive officer and/or the
principal financial officer and/or the principal account officer and/or any
other officer of the Company; and
FURTHER RESOLVED, That C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
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
FURTHER RESOLVED, That C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
and each of them,
<PAGE> 3
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 actions
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 C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
and each of them, with full power to act without the others, be, and they hereby
are, severally authorized in the names and on behalf of the Variable Account and
the Company to execute and file irrevocable written consents on the part of the
Variable Account and of the Company to be used in such states wherein such
consents to service of process may be required under the insurance or securities
laws therein in connection with the registration or qualification of the
Policies and to appoint the appropriate state official, or such other person as
may be allowed by insurance or securities laws, agent of the Variable Account
and of the Company for the purpose of receiving and accepting process; and
FURTHER RESOLVED, That C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
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 C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
and each of them, with full power to act without the others, are hereby
severally authorized to execute such agreement or agreements as deemed necessary
and appropriate (i) with "Farmers Brokerage Services, Inc." or other qualified
entity under which "Farmers Brokerage Services, Inc." or such other entity will
be appointed principal underwriter and distributor for the Policies, (ii) with
one or more qualified banks or other qualified entities to provide
administrative and/or custody services in connection with the establishment and
maintenance of the Variable Account and the design, issuance, and administration
of the Policies, and (iii) with the designated mutual funds and/or the principal
underwriter and distributor of those funds for the purchase and redemption of
fund shares; and
FURTHER RESOLVED, That C. Paul Patsis, President; Paul G. Secord, Vice
President; David A. Demmon, Treasurer, and M. Douglas Close, Corporate Counsel,
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.
<PAGE> 4
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
contractowner's insurance and financial needs and shall
make no recommendation that the prospective
contractowner purchase a Policy when such a purchase is
not reasonably 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 rules of the National
Association of Securities Dealers, 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
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.
<PAGE> 5
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 a 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 provisions.
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.
<PAGE> 6
April 6, 1999
<PAGE> 1
FARMERS NEW WORLD LIFE INSURANCE COMPANY
Home Office: 3003 - 77th Ave., S.E., Mercer Island,
Washington 98040 / (206) 232-8400
A STOCK COMPANY
<TABLE>
<S> <C>
Annuitant Jane Doe Policy Number 001234567
</TABLE>
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY CONTRACT
In this policy "we," "us," and "our" refer to Farmers New World Life Insurance
Company. "You" and "your" refer to the Owner of this policy.
This policy is a legal contract between you and us. PLEASE READ YOUR POLICY
CAREFULLY.
Your benefits under this policy, the amount of the premium, the premium due
dates, and other policy data are shown as the Policy Specifications on the last
page of this policy.
THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY INCREASE OR DECREASE AS
DESCRIBED IN THIS CONTRACT, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE
SUBACCOUNTS.
THE CONTRACT VALUE OF THIS CONTRACT MAY INCREASE OR DECREASE DAILY DEPENDING ON
THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS. THERE IS NO GUARANTEED MINIMUM
CONTRACT VALUE.
NOTICE OF YOUR RIGHT TO RETURN THIS POLICY
RIGHT TO EXAMINE PERIOD: YOU MAY CANCEL THIS POLICY AT ANY TIME WITHIN 10 DAYS
AFTER YOU RECEIVE IT BY DELIVERING OR MAILING IT TO THE AGENT THROUGH WHOM YOU
PURCHASED IT, TO A BRANCH OFFICE, OR TO OUR HOME OFFICE AT MERCER ISLAND,
WASHINGTON. THIS SHALL VOID THE POLICY FROM THE BEGINNING AND THE PARTIES SHALL
BE IN THE SAME POSITION AS IF NO POLICY OR CONTRACT HAD BEEN ISSUED. ALL
PREMIUMS PAID FOR THE POLICY WILL BE REFUNDED TO YOU.
<TABLE>
<S> <C>
Paul Patsis
President
Jeffrey T. Blackburn
Secretary
</TABLE>
<TABLE>
<S> <C>
1998-XXX NONPARTICIPATING INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY.
MONTHLY INCOME BEGINS ON ANNUITY START DATE. DEATH BENEFIT PAYABLE
BEFORE ANNUITY START DATE. ALL PAYMENTS AND VALUES PROVIDED BY THIS
POLICY, WHEN
</TABLE>
<PAGE> 2
BASED ON THE INVESTMENT EXPERIENCE OF A SUBACCOUNT, ARE VARIABLE AND
ARE NOT GUARANTEED.
<PAGE> 3
<TABLE>
<CAPTION>
ALPHABETIC GUIDE TO YOUR POLICY
<S> <C>
DEFINITIONS 4
GENERAL PROVISIONS 7
CONTRACT 7
CHANGE OF CONTRACT 7
INCONTESTABILITY 7
MISSTATEMENT OF AGE OR SEX 7
MINIMUM BENEFITS 7
NONPARTICIPATING 7
TRANSACTION DELAY 7
REPORTS 7
PROOF OF SURVIVAL 9
OWNERSHIP 9
OWNER 9
RIGHTS OF OWNER 9
ASSIGNMENT 9
TRANSFERABILITY OF QUALIFIED PLANS, TSAs OR IRAs 9
BENEFICIARY 9
BENEFICIARY 9
DESIGNATION 9
CHANGE OF BENEFICIARY 10
DEATH BENEFIT 10
BEFORE ANNUITY START DATE 10
AFTER ANNUITY START DATE 10
PREMIUM PROVISIONS 10
PAYMENT OF PREMIUMS 10
ALLOCATION OF PREMIUM PAYMENTS 10
POLICY VALUES 12
CONTRACT VALUE 12
RECORDS MAINTENANCE CHARGE 12
CASH VALUE 12
SURRENDER CHARGE 13
SURRENDER OF THE POLICY 13
PARTIAL WITHDRAWALS 13
POSTPONEMENT OF SURRENDERS AND PARTIAL SURRENDERS 14
FIXED ACCOUNT 15
FIXED ACCOUNT VALUE 15
GUARANTEED INTEREST RATE FOR FIXED ACCOUNT VALUE 15
CURRENT INTEREST RATE FOR FIXED ACCOUNT VALUE 15
VARIABLE ACCOUNT 16
</TABLE>
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<TABLE>
<S> <C>
GENERAL DESCRIPTION 16
VARIABLE ACCOUNT VALUE 16
SUBACCOUNTS 16
ACCUMULATION UNIT VALUE 18
TRANSFER PRIVILEGE 19
TRANSFER FEES 19
TRANSFERS FROM 19
SUBACCOUNTS 19
TRANSFERS FROM THE FIXED ACCOUNT 19
ELECTION OF ANNUITY OPTION 20
INCOME BENEFITS 19
PAYMENT INTERVAL 20
PROOF OF AGE AND SEX 20
EVIDENCE OF LIVING 20
DATE OF PAYMENT 20
ALLOCATION OF ANNUITY 20
VARIABLE ANNUITY 20
FIXED DOLLAR ANNUITY 21
ANNUITY OPTIONS 21
FIRST OPTION 21
SECOND OPTION 21
THIRD OPTION 21
OTHER OPTIONS 21
ANNUITY TABLES 22
DESCRIPTION OF TABLES 22
MINIMUM PAYMENT 22
GUARANTEED ANNUITY TABLES 23
POLICY SPECIFICATIONS 24
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
DEFINITIONS
<S> <C>
ACCUMULATION UNIT An accounting unit used to calculate the variable account value of this policy before
annuity payments begin. It is a measure of the net investment results of each of the
variable subaccounts.
RECORDS MAINTENANCE An amount deducted from the Contract Value at the beginning of each policy year and on the
CHARGE Annuity Start Date or the date when the policy is surrendered. The Records Maintenance Charge
is shown on the Policy Specifications page.
ANNUITANT Before any annuity payments begin, the Annuitant is the person on whose life this policy is
issued. When annuity payments begin, an Annuitant is a person during whose lifetime payments
may be made under one of the Annuity Options.
ANNUITY START DATE The date on which annuity payments are to begin as described under Income Benefits section of
this policy.
ANNUITY UNIT An accounting unit of measure used to calculate the amount of annuity payments under the variable
Annuity Option.
BENEFICIARY A person entitled to receive benefits in case of the death of the Owner or Annuitant, as
applicable.
CASH VALUE The Contract Value less any applicable Surrender Charge and less any applicable Records
Maintenance Charge and premium tax.
CONTINGENT ANNUITANT A person so designated by the Owner who becomes the Annuitant upon the Annuitant's death prior
to the Annuity Commencement Date.
CONTRACT VALUE The sum of the values you have in the variable account and the fixed account.
DUE PROOF OF DEATH A certified copy of the death certificate, an order of a court of competent jurisdiction, a
statement from a physician who attended the deceased, or any other proof acceptable to the Company.
FINAL ANNUITY DATE The policy anniversary when the Annuitant is age 95.
FIXED ACCOUNT An account that is part of our general account, and is not part of or dependent on the investment
performance of the variable account.
FIXED ACCOUNT VALUE Your contract value in the fixed account.
FIXED ANNUITY PAYMENT Annuity payment supported by the General Account. Payment does not vary in amount from one
payment to the next.
FIXED ACCOUNT VALUE The portion of the Contract Value allocated to the Fixed Account.
FREE PARTIAL The amount that can be withdrawn as a partial withdrawal during a policy year without incurring
WITHDRAWAL AMOUNT surrender charges.
</TABLE>
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<TABLE>
<S> <C>
ISSUE DATE The date this policy becomes effective. The issue date is shown on the Policy Specifications page.
Policy months, years, and anniversaries are measured from the issue date. The initial premium (less
any premium tax) is allocated to the money market subaccount on the issue date. Funds (less
charges) remain in the money market subaccount until the Reallocation Date.
MORTALITY AND EXPENSE A charge deducted from the subaccounts on each Valuation Day that compensates us for providing
RISK CHARGE the mortality and expense guarantees and assuming the risks under this contract.
NET INVESTMENT FACTOR The ratio of the subaccount value at the end of the current valuation day to its value at the end
of the immediately preceding valuation day. The subaccount value reflects gains and losses in the
subaccounts, dividends paid, any capital gains and losses, any taxes paid, and the deduction of the
Mortality and Expense Risk Charge and charges for administrative costs.
PAYEE A person or entity who receives any proceeds payable under this policy. A payee must be a natural
person unless we agree otherwise.
POLICY MONTH, YEAR, OR A policy month, year, or anniversary as measured from the issue date.
ANNIVERSARY
PREMIUM TAX The amount of tax, if any, charged by any government entity on premium payments, on any portion of
the Contract Value, or on any other funds associated with this policy.
REALLOCATION DATE The date the contract value in the money market subaccount is allocated to the subaccounts and
to the fixed account based on the premium payment allocation percentages specified in the
application. The reallocation date is 35 days after the issue date.
SEC The US Securities and Exchange Commission.
SUBACCOUNT A division of the variable account. The assets of each subaccount are invested in a corresponding
portfolio of a designated mutual fund.
VALUATION DAY Each day on which both the New York Stock Exchange and Farmers New World Life are open for
business.
VALUATION PERIOD The interval of time commencing at the close of business one valuation day and ending at the
close of business on the next succeeding valuation day.
VARIABLE ACCOUNT The variable account is named on the Policy Specifications page (last page of the policy).
The variable account is not part of our general account. The variable account has subaccounts,
each of which is invested in a corresponding portfolio of a designated mutual fund.
VARIABLE ACCOUNT The portion of the total value of your contract that is allocated to the subaccounts of
</TABLE>
Page 5
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VALUE the variable account.
Page 6
<PAGE> 8
<TABLE>
<CAPTION>
GENERAL PROVISIONS
<S> <C>
CONTRACT The entire contract is:
1. this policy;
2. the application attached at issue;
3. any attached amendments and supplements to the application;
4. any attached riders and endorsements; and
5. any attached application for reinstatement, increase in principal sum, or change in death benefit
option.
In the absence of fraud, we will consider all statements in the application to be representations and not
warranties. No statement will be used by us to contest a claim unless that statement is in an attached
application or in an amendment or supplement to the application attached to this policy.
CHANGE OF CONTRACT Any change in the terms of this contract must be in writing and signed by one of our officers. A copy of
the change will be attached to this policy. No agent has the authority to change any terms or conditions
of this contract.
INCONTESTABILITY We will not contest this policy after the issue date.
MISSTATEMENT OF AGE If the Annuitant's age or sex has been misstated, the benefits provided by this policy will be adjusted to
OR SEX reflect the correct age or sex. After the Annuity Start Date any adjustment for underpayment will be paid
immediately. Any adjustment for overpayment will be deducted from future payments.
MINIMUM BENEFITS Benefits available under this policy are not less than the minimums required by the law of the state in
which this policy is delivered.
NONPARTICIPATING This policy is nonparticipating. It does not share in our surplus earnings. We will pay no dividends on
this policy.
TRANSACTION DELAY Payment(s) and transfers from the Subaccounts will usually be made promptly but may be delayed under any
of the following circumstances:
1. the New York Stock Exchange is closed; or
2. the SEC permits or orders a postponement; or
3. the SEC declares an emergency requiring trade to be restricted; or
4. the SEC determines an emergency exists, making the disposal of, or determination of value of,
securities held in the Variable Account not reasonably practicable.
We may defer a withdrawal or transfer from the Fixed Account for up to 6 months from the date we receive
your request for such a withdrawal or transfer.
REPORTS At least once each year, the Owner will receive a statement showing:
1. the current Contract Value and Cash Value;
2. interest credited;
3. investment experience;
4. changes made since the last report;
</TABLE>
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<TABLE>
<S> <C>
5. any other information required by law.
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C>
PROOF OF SURVIVAL The payment of any annuity benefit is subject to evidence that the Annuitant is alive on the date such
payment is otherwise due.
OWNERSHIP
OWNER The Annuitant is the Owner of this policy contract unless:
1. another person is named as owner in the application; or
2. a new person is named as provided in the Change of Owner section below.
RIGHTS OF OWNER During the lifetime of the Annuitant all rights and privileges granted by this policy belong to the
Owner. Before the Annuity Start Date the Owner may:
1. Change the beneficiary or Owner. Any change of Owner requires our approval and is subject to our
underwriting rules then in effect.
2. Change the Annuity Start Date.
3. Select the Annuity Option
4. Select the person to receive the income payments.
5. Assign or surrender the policy.
6. Withdraw funds from the policy.
After the Annuity Start Date the Owner may change:
1. the beneficiary and
2. the person to receive the income payments.
We must receive a signed request to exercise any ownership rights.
ASSIGNMENT We are not bound by an assignment unless duplicate signed forms are filed with us. We are not
responsible for the validity of any assignment. . The rights of the owner and the beneficiary
are subject to the rights of the assignee.
TRANSFERABILITY OF If this policy is part of a Qualified Plan, as defined in Internal Revenue Code Section 401a, a Tax
QUALIFIED PLANS, TSAs Sheltered Annuity (TSA), as defined in IRC Section 403b, or an Individual Retirement Annuity (IRA), as
OR IRAs defined in IRC Section 408b, it is nontransferable. This policy cannot be sold, assigned, discounted,
used as collateral for a loan, or as security for the performance of any obligation.
If this policy is owned by a trust as part of a Qualified Plan, the trustee may transfer ownership to the
Annuitant.
BENEFICIARY
BENEFICIARY The beneficiary is the person or persons named to receive any death benefit payable. The beneficiary is as
DESIGNATION named in the application or as changed by the owner's most recent signed request.
If no beneficiary is living at the time a death benefit becomes payable, we will pay any death benefit to
you or your estate.
</TABLE>
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<TABLE>
<S> <C>
CHANGE OF BENEFICIARY The beneficiary may be changed at any time before the annuitant dies. The change must be signed by the
owner and sent to us. The change will take effect on the date it was signed, subject to any action taken
by us before we receive the request.
If you have named a beneficiary irrevocably, both you and the beneficiary must sign any change.
DEATH BENEFIT
BEFORE ANNUITY START At the death of either the Owner or the Annuitant before the Annuity Start Date, we will pay the Death
DATE Benefit to the beneficiary either in one lump sum or under the terms of one of the Annuity Options shown
in the Annuity Options section. The amount of Death Benefit paid will be the Contract Value determined on
the date we receive due proof of death.
AFTER ANNUITY START If the Annuitant dies after the Annuity Start Date, we will pay any remaining guaranteed payments to
DATE the beneficiary as provided by the Annuity Option selected.
If the Owner is not the Annuitant and the Owner dies while the Annuitant is still living, we will continue
to pay the income payments for the lifetime of the Annuitant in the same manner as before the Owner's
death.
PREMIUM PROVISIONS
PAYMENT OF PREMIUMS Premiums are payable at our home office or to one of our authorized agents. We will provide a receipt
signed by one of our officers upon request.
The initial premium is shown on the Policy Specifications page and is due on the issue date. Subsequent
premiums are flexible and may be paid at any time before the Annuity Start Date. Each premium must be at
least equal to the minimum subsequent premium payment shown on the Policy Specifications page.
The sum of all premiums paid to us may not exceed the Cumulative Premium Limit shown on the Policy
Specifications Page without our prior approval. The Internal Revenue Code may also limit the maximum
amount of premiums.
ALLOCATION OF PREMIUM This policy provides investment options for the contract value. The initial premium allocation percentages
PAYMENTS are indicated in the application for this policy, a copy of which is attached.
These percentages will also apply to subsequent premium allocations until you change them. Such allocation
percentages may be changed by written notice to us.
Allocation percentages must be zero or a whole number not greater than 100. The sum of the premium
allocation percentages must equal 100. An allocation to any subaccount or to the Fixed Account must be at
least $500.
We reserve the right to limit the number of subaccount allocations in effect at any one
</TABLE>
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<TABLE>
<S> <C>
time.
On the issue date the contract value will be allocated to the money market subaccount. We will process the
allocation at the accumulation unit value next determined as of the end of the issue date. Any subsequent
premiums that are received from this time until the reallocation date will also be allocated to the money
market subaccount.
On the reallocation date, the contract value in the money market subaccount will be reallocated to the
subaccounts at the accumulation unit value next determined and to the fixed account based on the premium
payment allocation percentages in the contract application.
After the reallocation date, planned periodic premiums and unscheduled premiums will be invested as
requested on the valuation day they are received by our home office. The premium payments will be credited
to the subaccounts at the accumulation unit value next determined after receipt of each payment.
</TABLE>
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<TABLE>
<CAPTION>
POLICY VALUES
<S> <C>
CONTRACT VALUE The contract value on the issue date is equal to:
1. the initial premium paid; less
2. any premium taxes due.
On each date after the issue date, the contract value is equal to the fixed account value plus the
variable account value.
RECORDS MAINTENANCE We will charge an Records Maintenance Charge each year until the Annuity Start Date. The amount is shown
CHARGE on the Policy Specifications Page. The charge for a policy year will be imposed on the last valuation day
of each policy year unlessthe contract value is at least $50,000 on that day.
Unless the contract value is at least $50,000, this charge will also be imposed on the Annuity Start Date
or the date when the policy is surrendered.
The fee will be charged against the variable subaccounts and the fixed account proportionately. The
portion of the fee charged to each subaccount will reduce the number of accumulation units standing to the
credit of the policy in that subaccount.
CASH VALUE The cash value of this policy on any date is:
1. the contract value; minus
2. the surrender charge, if any, that you would incur if you surrendered the entire policy on that date;
minus
3. the Records Maintenance Charge that would be assessed if you surrendered the entire policy on that
date; minus
4. any premium taxes that would be assessed on this policy if you surrendered the entire policy on that
date.
Surrender charges are shown in the Surrender Charge Table shown below.
</TABLE>
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<TABLE>
<S> <C>
SURRENDER CHARGE A will apply to certain partial withdrawals and surrender transactions.
When one of these transactions occurs, we will determine if a charge applies. If a charge applies, it
will be calculated as if all payments were withdrawn in the same order in which they were made. Each
Contract Year, the Owner may withdraw up to the greater of:
(i) the excess of Contract Value over total Purchase Payments subject to Withdrawal Charges
less prior withdrawals that were previously assessed a Withdrawal Charge, and
(ii) 10% of the Contract Value determined at the time the withdrawal is requested without
assessment of any charge.
If you withdraw an amount in excess of the above amount, the excess amount withdrawn will be subject to a
surrender charge. The Surrender charge applies during the entire seven year period following each premium
payment as follows:
</TABLE>
<TABLE>
<CAPTION>
Number of Complete Years Surrender Charge
from Date of Premium payment Percentage
---------------------------- -------------
<S> <C> <C>
0 7%
1 6%
2 5%
3 5%
4 4%
5 3%
6 2%
7 and thereafter 0%
</TABLE>
<TABLE>
<S> <C>
SURRENDER OF THE POLICY You can surrender this policy at any time prior to the Annuity Start Date by notice to us in writing.
Upon surrender, the Policy will terminate and we will pay you the Cash Value at the accumulation unit
value next determined as of the close of business on the surrender date. Unless a later date is specified
in your request, the surrender date is the date your written request in proper form is received at our
Home Office.
PARTIAL WITHDRAWALS Before the Annuity Start Date you may withdraw part of the Cash Value. Withdrawals are subject to a
surrender charge as shown in the Surrender Charge section.
You will receives a check in the amount of withdrawal you request, if available. If a surrender charge
applies, the Contract Value will be reduced by the Surrender charge plus the dollar amount sent to you.
Any premium taxes assessed against this policy on the date of partial withdrawal will also be deducted
from the Contract Value.
The minimum withdrawal is $100. You may make only one withdrawal per calendar quarter. A partial
withdrawal is not available if the withdrawal plus the surrender charge would cause the Contract Value to
fall below $500.
</TABLE>
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<TABLE>
<S> <C>
A partial withdrawal will reduce the amount in each of the Subaccounts and the Fixed Account
proportionately, unless you request otherwise.
The partial withdrawal will be processed at the accumulation unit values next determined after receipt of
your request.
POSTPONEMENT OF We can postpone payment of any amounts withdrawn from the Fixed Account for up to six months from the date
SURRENDERS AND of the request for surrender or partial withdrawal.
PARTIAL SURRENDERS
</TABLE>
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<TABLE>
<CAPTION>
FIXED ACCOUNT
<S> <C>
FIXED ACCOUNT VALUE On each valuation day the fixed account value will be equal to:
A + B + C - D - E - F
"A" is the fixed account value on the preceding valuation day plus interest from the preceding valuation
day to the date of calculation.
"B" is the portion of the premium, less any premium tax, that is received since the preceding valuation
day and allocated to the fixed account, plus interest from the date such net premium was received to the
date of calculation.
"C" is the total amount of any transfers from the subaccounts to the fixed account since the preceding
valuation day, plus interest on each such transferred amount from the effective date of each transfer to
the date of calculation.
"D" is the total amount of any transfers from the fixed account to the subaccounts since the preceding
valuation day, plus interest on each such transferred amount from the effective date of each transfer to
the date of calculation.
"E" is the total amount of any partial surrenders and any applicable surrender charges deducted from the
fixed account since the preceding valuation day, plus interest on these surrendered amounts from the
effective date of each partial surrender to the date of calculation.
"F" is the portion of the Records Maintenance Charge charged to the fixed account, as described under the
heading "Records Maintenance Charge " in the Policy Values section. This fee is only deducted:
- on the first valuation day in each policy year,
- on the Annuity Start Date, and
- at the time of surrender.
Guaranteed minimum fixed account values are not less than the minimum values required by the state in
which this policy is delivered. Where required, a statement of the method of computing these values has
been filed with the state insurance department.
GUARANTEED INTEREST The guaranteed minimum rate used to calculate interest on the fixed account is 3% per year, compounded
RATE FOR FIXED ACCOUNT annually. This is equal to .2466% per month, compounded monthly.
VALUE
CURRENT INTEREST RATE We may use rates that are higher than the guaranteed minimum rate to calculate interest on the fixed
FOR FIXED ACCOUNT account. These rates are subject to change at any time and may apply to all or a portion of the fixed
VALUE account. Different rates may apply to different portions of the fixed account.
</TABLE>
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<TABLE>
<CAPTION>
VARIABLE ACCOUNT
<S> <C>
GENERAL DESCRIPTION The name of the variable account is shown on the Policy Specifications page. The variable account is
administered and accounted for as part of our general business, but the income, gains and losses of the
variable account are credited to or charged against the assets held in the variable account, without
regard to any other income, gains or losses of any other variable account or arising out of any other
business we may conduct.
The assets of the variable account are segregated by investment options, thus establishing a series of
subaccounts within the variable account.
When permitted by law, we reserve the right to :
1. create new variable accounts;
2. combine variable accounts;
3. remove, combine or add subaccounts and make the new subaccounts available to you at our
discretion;
4. substitute shares of another portfolio of the funds or shares of another investment company
for those of the funds;
5. deregister the variable account under the Investment Company Act of 1940 if registration is
no longer required;
6. make any changes required by the Investment Company Act of 1940 or any other law; and
7. operate the variable account as a managed investment company under the Investment Company
Act of 1940 or any other form permitted by law.
If a change is made, we will send you a revised prospectus and any notice required by law. If required, we
would first seek the approval of the Securities and Exchange Commission, and when required, the
appropriate state regulatory authorities before making a change in the investment options.
VARIABLE ACCOUNT The variable account value is the sum of the values of the subaccounts under this policy.
VALUE
SUBACCOUNTS The subaccounts are separate investment accounts named by the company. The subaccount values will
fluctuate in accordance with the investment experience of the applicable portfolio of the fund held within
each subaccount.
The subaccount value is determined by multiplying the number of accumulation units credited to the
subaccount by the appropriate accumulation unit value.
The number of accumulation units to be purchased or redeemed in a transaction is found by dividing:
1. the dollar amount of the transaction; by
2. the subaccount's accumulation unit value on the date of that transaction.
</TABLE>
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<TABLE>
<S> <C>
At the end of each valuation day:
- The portion of any premiums, less any premium tax, received since the preceding valuation day and
allocated to each subaccount will be applied to purchase additional accumulation units in that
subaccount.
- Any transfers to the subaccount from another subaccount or from the fixed account since the end of the
previous valuation day will be applied to purchase additional accumulation units in that subaccount.
- Accumulation units will be redeemed from each subaccount to cover any transfers from that subaccount to
other subacounts or to the fixed accounts since the preceding valuation day.
- Accumulation units will be redeemed from each subaccount to cover any applicable surrender charges
assessed against that subaccount since the preceding valuation day.
- Accumulation units will be redeemed from each subaccount to cover the portion of the Records
Maintenance Charge charged to that subaccount, as described under the heading "Records Maintenance
Charge " in the Policy Values section. This fee is only deducted:
- on the first valuation day in each policy year,
- on the Annuity Start Date, and
- at the time of surrender.
</TABLE>
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<TABLE>
<S> <C>
ACCUMULATION UNIT The value of an accumulation unit for each of the subaccounts was arbitrarily set at $10 when the first
VALUE investments were bought. The value at the end of any later valuation day is equal to:
A x B
"A" is equal to the subaccount's accumulation unit value for the end of the immediately
preceding valuation day.
"B" is equal to the net investment factor for the most current valuation day.
The net investment factor equals:
X
--- - Z
Y
"X" equals:
1. the net asset value per accumulation unit held in the subaccount at the end of the current valuation
day; plus
2. the per accumulation unit amount of any dividend or capital gain distribution on shares held in the
subaccount during the current valuation day; less
3. the per accumulation unit amount of any capital loss distribution on shares held in the subaccount
during the current valuation day; less
4. the per accumulation unit amount of any taxes or any amount set aside during the valuation day as a
reserve for taxes.
"Y" equals the net asset value per accumulation unit held in the subaccount as of the end of the
immediately preceding valuation day.
"Z" equals charges and fees deducted from the subaccount. These consist of:
1. Mortality and expense risk charges. The mortality and expense risk charges are deducted from each of
the subaccounts on each valuation day. They compensate us for providing the mortality and expense
guarantees and assuming the risks under this policy. These charges are shown on the Policy
Specifications page.
2. Charge for administrative costs. A charge for administrative costs is deducted from each of the
subaccounts on each valuation day. The charge is a percentage of the assets in each subaccount. The
Administrative Cost Charge is shown on the Policy Specifications page. This charge compensates us for
expenses incurred to administer contracts.
3. The portion of the Records Maintenance Charge charged to the subaccount, as described under the
heading "Records Maintenance Charge " in the Policy Values section. This fee is deducted at the
beginning of each policy year, on the Annuity Start Date, and at the time of surrender.
The net investment factor may be greater, less than or equal to one. Therefore, the value of the
subaccount may increase, decrease or remain the same.
</TABLE>
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<TABLE>
<CAPTION>
TRANSFER PRIVILEGE
<S> <C>
TRANSFER FEES Twelve transfers per year may be made free of charge. Any unused free transfers do not carry over to the
next policy year. Any additional transfers during a policy year will be charged a $25 transfer fee. For
the purpose of assessing a fee, each written request or telephone request is considered to be one
transfer. Transfers made pursuant to an Asset Allocation or Dollar Cost Averaging program we may offer do
not count toward these 12 transfers The transfer fee will be deducted from the amount being transferred.
TRANSFERS FROM After the Right to Examine Period, you may transfer all or a part of an amount from the value in any
SUBACCOUNTS subaccount of the variable account to one or more of the subaccounts of the variable account. Transfers
may also be made to the fixed account, but not during the six months following any transfer from the Fixed
Account into one or more Subaccounts. The minimum amount that you may transfer is the lesser of :
1. $100; or
2. the total value in that subaccount on that date.
Any transfer that would reduce the amount in a subaccount below $500 will be treated as a transfer request
for the entire amount in that subaccount.
A transfer fee may apply as described above.
We may suspend or modify this transfer privilege at any time.
Transfers will be processed based on values determined at the end of the Valuation Day during which the
transfer request is received at our home office.
TRANSFERS FROM THE You may transfer an amount from the value in the fixed account to one or more subaccounts of the variable
FIXED ACCOUNT account one time during the Policy Year during the 30 days following an anniversary of a Policy Year.
The minimum amount that you may transfer is the lesser of :
1. $100; or
2. the total value in that subaccount on that date.
Any transfer that would reduce the amount in the fixed account below $500 will be treated as a transfer
request for the entire amount in the fixed account.
We can postpone transfers from the Fixed Account for up to six months from the date of the request. The
effective date of the transfer is the date on which values are transferred from the Fixed Account to the
Subaccount.
A transfer fee may apply as described above.
We may suspend or modify this transfer privilege at any time.
INCOME BENEFITS
</TABLE>
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<TABLE>
<S> <C>
ELECTION OF ANNUITY On or before the Final Annuity Date (the policy anniversary when the Annuitant is age 95), an Annuity
OPTION Start Date must be chosen. If a Death Benefit is payable and an Annuity Option is chosen, the Annuity
Start Date will be the date we receive due proof of the Annuitant's death. The Annuity Option and
whether annuity payments will be variable, fixed, or a combination of variable and fixed must be chosen on
or before the Annuity Start Date. On the Annuity Start Date, the Cash Value (or, in case of death, the
Death Benefit will be used to provide annuity payments. On the Final Annuity Date, we will use the Second
Annuity Option for payment of the Cash Value if no choice is made.
If this policy has been in force for at least three policy years and the First, Second or Third Annuity
Option is used, no surrender charge will be deducted from the Contract Value.
PAYMENT INTERVAL You may choose to have payments made at the end of 1, 3, 6, or 12 month intervals. If any payment would
be less than $100, we may change the payment interval to the next longer interval. If, on the Annuity
Start Date, the payment for the 12 month interval is less than $100, we may pay the Cash Value or Death
Benefit on that date in one sum.
PROOF OF AGE AND SEX We may require proof of the age and sex of the Annuitant(s) and Payee before any payments are made.
EVIDENCE OF LIVING We may require satisfactory proof that the Annuitant is living when each payment is due. If proof is
required, payments will stop until such proof is given. If any payment is made by check and the Annuitant
personally endorses the check on or after the date on which such payment is due, no other proof will be
required.
DATE OF PAYMENT The first payment under any option shall be made on the fifteenth day of the month immediately following
approval of claim for settlement. Subsequent payments shall be made on the fifteenth day of each
subsequent month in accordance with the manner of payment selected.
ALLOCATION OF ANNUITY The person electing an Annuity Option may further elect to have the cash value applied to provide a
variable annuity, a fixed dollar annuity or a combination of both. Once every 3 months, following the
commencement of annuity payments, the Owner may elect, in writing, to transfer among any Subaccount(s) on
which variable annuity payments are based. No transfers may be made between the Subaccounts and the Fixed
Account.
If no election is made to the contrary, the value of each Subaccount on the Annuity Start Date shall be
applied to provide a variable annuity, and the value of the Fixed Account shall be applied to provide a
fixed dollar annuity.
VARIABLE ANNUITY A variable annuity is an annuity with payments increasing or decreasing in amount in accordance with the
net investment results of the Subaccount(s) of the Separate Account. After the first periodic payment
for a variable annuity has been determined in accordance with the provisions of this policy, the number of
Subaccount Annuity Units is determined by dividing that first periodic payment by the appropriate
Subaccount Annuity Unit value on the effective date of the annuity payments.
</TABLE>
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<TABLE>
<S> <C>
Once variable annuity payments have begun, the number of Annuity Units remains fixed with respect to a
particular Subaccount. If the Owner elects that continuing annuity payments be based on a different
Subaccount, the number will change effective with that election but will remain fixed in number following
such election.
The dollar amount of the second and subsequent variable annuity payments is not predetermined and may
increase or decrease from month to month. The actual amount of each variable annuity payment after the
first is determined by multiplying the number of Subaccount Annuity Units by the Subaccount Annuity Unit
value. The Subaccount Annuity Unit value will be determined no earlier than the fifth Valuation date
preceding the date the annuity payment is due.
We guarantee that the dollar amount of variable annuity payments will not be adversely affected by
variations in the expense results and in the actual mortality experience of Annuitants from the mortality
assumptions, including any age adjustment, used in determining the first periodic payment.
FIXED DOLLAR ANNUITY A fixed dollar annuity is an annuity with payments which remain fixed as to dollar amount throughout the
payment period.
ANNUITY OPTIONS
FIRST OPTION We will pay a monthly income for the lifetime of the Annuitant, ceasing with the last payment due prior to
the death of the Annuitant.
SECOND OPTION We will pay a monthly income for the lifetime of the Annuitant, with the guarantee that we will make at
least 120 or 240 monthly payments. You select either the 120 or 240 month guarantee period.
If less than 120 or 240 monthly payments have been made at the Annuitant's death, we will pay the balance
of the guaranteed payments to the beneficiary or beneficiaries as monthly payments for the rest of the
guaranteed period.
If the guaranteed payments have been paid, the monthly payments will stop with the last payment due before
the Annuitant's death.
THIRD OPTION Joint and Survivor Life Annuity - We will pay a monthly income during the joint lifetime of two
Annuitants. After the death of one of the Annuitants, we will continue the monthly payments for the
lifetime of the surviving Annuitant. The monthly payments will stop with the last payment due before the
death of the last surviving Annuitant.
OTHER OPTIONS May be available with our consent.
</TABLE>
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<TABLE>
<CAPTION>
ANNUITY TABLES
<S> <C>
DESCRIPTION OF TABLES The attached tables show the minimum dollar amount of the first monthly payments for each $1,000 applied
under the First, Second and Third Annuity Options. Under the First or Second Options, the amount of each
payment will depend upon the age and sex of the Annuitant at the time the first payment is due. Under the
Third Option, the amount of each payment will depend upon the sex of both Annuitants and their ages at the
time the first payment is due.
The payment tables for the First, Second and Third Options are based on the 1983 Annuity Mortality Tables
at 4.00% interest per year.
Once the Owner has elected an Annuity Option, that election may not be changed with respect to any
Annuitant following the commencement of annuity payments.
MINIMUM PAYMENT No election of any options or combination of options may be made under this policy unless the first
payment for each affected Account would be at least equal to the minimum payment amount according to
Company rules then in effect. If at any time, payments to be made to any payee from each Account are or
become less than the minimum payment amount, the Company shall have the right to change the frequency of
payment to such intervals as will result in a payment at least equal to the minimum. If any amount due
would be less than the minimum payment amount per year, we may make such other settlements as may be
equitable to the payee.
</TABLE>
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<TABLE>
<CAPTION>
GUARANTEED ANNUITY TABLES
Monthly Payments for Each $1000 Applied
- -----------------------------------------------------------------------------------
AGE OPTION 1 OPTION 2
- --- LIFE INCOME LIFE INCOME
-------------------------------------------------------------------------
120 Payments Guaranteed 240 Payments Guaranteed
----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Male Female Male Female Male Female
- -----------------------------------------------------------------------------------
55 3.98 3.62 3.94 3.60 3.81 3.54
56 4.05 3.68 4.01 3.66 3.86 3.59
57 4.14 3.75 4.09 3.73 3.92 3.65
58 4.22 3.82 4.17 3.79 3.99 3.71
59 4.31 3.89 4.25 3.86 4.05 3.77
60 4.41 3.97 4.34 3.94 4.11 3.83
61 4.51 4.05 4.44 4.02 4.18 3.89
62 4.62 4.14 4.54 4.10 4.25 3.96
63 4.74 4.23 4.64 4.19 4.31 4.03
64 4.86 4.33 4.75 4.28 4.38 4.10
65 4.99 4.44 4.87 4.38 4.45 4.17
66 5.14 4.55 4.99 4.48 4.51 4.24
67 5.29 4.67 5.12 4.59 4.58 4.31
68 5.45 4.79 5.25 4.70 4.64 4.39
69 5.62 4.93 5.39 4.82 4.71 4.46
70 5.81 5.07 5.54 4.95 4.77 4.53
71 6.00 5.23 5.69 5.09 4.83 4.61
72 6.21 5.39 5.85 5.23 4.88 4.68
73 6.44 5.57 6.01 5.38 4.93 4.74
74 6.68 5.76 6.17 5.53 4.98 4.81
75 6.94 5.96 6.35 5.70 5.02 4.87
76 7.21 6.19 6.52 5.87 5.06 4.93
77 7.50 6.43 6.70 6.05 5.09 4.98
78 7.82 6.69 6.88 6.24 5.12 5.03
79 8.16 6.97 7.06 6.43 5.15 5.07
80 8.52 7.28 7.24 6.63 5.17 5.11
81 8.90 7.61 7.42 6.83 5.19 5.14
82 9.32 7.97 7.59 7.03 5.21 5.17
83 9.77 8.36 7.76 7.24 5.22 5.19
84 10.24 8.78 7.93 7.44 5.24 5.21
85 10.75 9.24 8.09 7.64 5.24 5.22
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
OPTION 3
Joint Life Annuity With 100% To Survivor - Male and Female Joint Annuitants
MALE FEMALE AGE
AGE
55 60 65 70 75 80 85
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.32 3.47 3.60 3.71 3.80 3.87 3.91
60 3.41 3.60 3.79 3.96 4.11 4.22 4.30
65 3.47 3.71 3.96 4.22 4.45 4.64 4.78
70 3.52 3.80 4.11 4.46 4.80 5.12 5.38
75 3.56 3.86 4.23 4.66 5.14 5.63 6.07
80 3.58 3.90 4.31 4.81 5.42 6.11 6.80
85 3.60 3.93 4.36 4.92 5.63 6.51 7.51
</TABLE>
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FARMERS NEW WORLD LIFE INSURANCE COMPANY
Policy Specifications
<TABLE>
<S> <C> <C> <C>
OWNER GEORGE B DOE POLICY NUMBER 001234567
ANNUITANT JOHN A DOE ISSUE DATE OCTOBER 1, 1998
ISSUE AGE 35 ANNUITY START DATE OCTOBER 1, 2073
SEX M MONTHLY DUE DATE 01
</TABLE>
VARIABLE ACCOUNT: FARMERS NEW WORLD LIFE VARIABLE ANNUITY SEPARATE ACCOUNT "A"
<TABLE>
<S> <C>
INITIAL PREMIUM: $XXX.XX
MINIMUM SUBSEQUENT PREMIUM $XXX.XX, OR $XX FOR PAYMENTS DRAWN BY US ON YOUR ACCOUNT VIA CHECK OR ELECTRONIC
PAYMENT: DEBIT.
CUMULATIVE PREMIUM LIMIT: $XX,XXX,XXX
RECORDS MAINTENANCE CHARGE
(ANNUAL): $30 (OR $0 IF CONTRACT VALUE AT END OF PREVIOUS POLICY YEAR IS AT LEAST $50,000)
MORTALITY AND EXPENSE RISK
CHARGE BASIC POLICY: 0.90% (ON AN ANNUAL BASIS) OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT.
GUARANTEED MINIMUM
DEATH BENEFIT RIDER: 0.50% (ON AN ANNUAL BASIS) OF THE AVERAGE DAILY NET ASSETS OF THE VARIABLE ACCOUNT.
ADMINISTRATIVE COST CHARGE: X.XX% (ON AN ANNUAL BASIS) OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT.
REQUESTED ANNUAL REPORT FEE $5.00
</TABLE>
<TABLE>
<S> <C>
1998-XXX NONPARTICIPATING INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY. MONTHLY INCOME BEGINS ON ANNUITY START DATE.
DEATH BENEFIT PAYABLE BEFORE ANNUITY START DATE. ALL PAYMENTS AND VALUES PROVIDED BY THIS POLICY, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SUBACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED.
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
GUARANTEED MINIMUM DEATH BENEFIT RIDER
<S> <C>
BENEFIT We will pay a death benefit to the Beneficiary if any of the following occurs during The Accumulation
Period:
- the Owner, or a joint owner, dies
- the Annuitant dies with no living contingent annuitant
- the contingent annuitant dies after the Annuitant
The amount of the death benefit depends on the age of the deceased Owner or Annuitant when the death
benefit becomes payable. If the deceased Owner or Annuitant dies before age 91, We will pay the
Beneficiary the greatest of the following:
- Contract Value
- Purchase Payments minus previous withdrawals, accumulated at 4.00% interest per year to the
earlier of the deceased's age 80 or the date of death, plus Purchase Payments minus all
withdrawals from age 80 to the date of death; and
- the greatest anniversary value before death
The greatest anniversary value equals:
- the Contract Values on each Contract anniversary prior to the deceased's age 81, plus
- the dollar amount of any Purchase Payments made since that anniversary, minus
- withdrawals since that anniversary
We will pay the Contract Value to the Beneficiary if the Owner or Annuitant dies after Age 91. The Owner
or Beneficiary, as appropriate, may elect to have all or a part of the death proceeds paid to the
Beneficiary under one of the Annuity Options described under the "Annuity Options" section of the
contract.
For Non-Qualified Plan Contracts, if the Beneficiary is the Owner's surviving Spouse, the surviving
spouse may elect to be treated as the successor Owner of the Contract with no requirement to begin Death
Benefit distribution.
CONTRACT This rider is subject to all the terms of the policy, except as modified in this rider.
Attached to and made a part of this policy effective as of the date of issue of the policy.
FARMERS NEW WORLD LIFE INSURANCE COMPANY
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
GUARANTEED RETIREMENT INCOME BENEFIT RIDER
<S> <C>
BENEFIT This rider provides a minimum fixed annuity guaranteed lifetime income to the Annuitant as described
below. This benefit may be commenced only within thirty days after the seventh or later Contract
anniversary. It must be exercised between the Annuitant's 60th and 91st birthdays except that if the
Annuitant is younger than age 44 on the Date of Issue, the benefit may be exercised after the Contract's
15th Anniversary.
The minimum guaranteed income ("GRIB") payments are based on the greater of:
- the income provided by applying the GRIB base to the guaranteed annuity factors; and
- the income provided by applying Contract Value to the current annuity factors.
The GRIB base is the greatest of:
- Contract Value
- Purchase Payments minus previous withdrawals, accumulated at 5.00% interest per year to the
earlier of the Annuitant's age 80 or the GRIB exercise date plus Purchase Payments minus all
withdrawals from age 80 to the GRIB exercise date; and
- the greatest anniversary value before the exercise date
The greatest anniversary value equals:
- the highest of the Contract Values on each Contract anniversary prior to the Annuitant's age
81, plus
- the dollar amount of any Purchase Payments made since that anniversary, minus
- withdrawals since that anniversary
The guaranteed annuity factors are based on the 1983a table projected using projection scale G, with
interest at 2.5% (the "Annuity 2000" table). However, if GRIB is exercised on or after the 10th Contract
anniversary, interest at 3.50% is assumed.
GRIB is paid for the life of a single Annuitant or the lifetimes of two Annuitants. If paid for the life
of a single Annuitant, GRIB is paid in the amount determined above. If paid for the lifetimes of two
Annuitants, GRIB is paid in the amount determined above, but the age of the older Annuitant is used to
determine the GRIB base.
If the Owner elects GRIB payable for the life of a single Annuitant, the Owner may elect a period certain
of 5, 10, 15, or 20 years. If the Annuitant dies before GRIB has been paid for the period elected, the
remaining GRIB payments are paid as they fall due to the Beneficiary, if the Beneficiary is a natural
person. If the Beneficiary is not a natural person, the remaining payments may be commuted at a minimum
2.50% interest rate and paid in
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
a lump sum. If the Owner elects GRIB payable for the lifetimes of two Annuitants, the period certain is
25 years. The full GRIB is payable as long as at least one of the two Annuitants is alive, but for no less
than 25 years, the remaining GRIB payments are paid as they fall due to the Beneficiary, if the
Beneficiary is a natural person. If the Beneficiary is not a natural person, the remaining payments may be
commuted at a minimum 2.50% interest rate and paid in a lump sum.
TERMINATION This rider will end when:
OF RIDER
1. the policy ends; or
2. the owner's signed request for termination is received any time after the seventh Contract
anniversary.
GUARANTEED This rider does not increase or decrease the guaranteed values of this policy.
VALUES
CONTRACT This rider is subject to all the terms of the policy, except as modified in this rider.
Attached to and made a part of this policy effective as of the date of issue of the policy.
FARMERS NEW WORLD LIFE INSURANCE COMPANY
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
WAIVER OF SURRENDER CHARGES RIDER
<S> <C>
BENEFIT Surrender charges will not be assessed on withdrawals:
- after an Owner has been confined in a hospital or skilled health care facility for at least
thirty days and the Owner remains confined at the time of the request;
- within thirty days following an Owner's discharge from a hospital or skilled health care
facility after a confinement of at least thirty days;
- if the Owner or Annuitant becomes disabled after the Contract is issued and before age 65.; or
- if the Owner or Annuitant is diagnosed with a terminal illness after the Contract is issued and
is expected to live fewer than 12 months.
CONTRACT This rider is subject to all the terms of the policy, except as modified in this rider.
Attached to and made a part of this policy effective as of the date of issue of the policy.
FARMERS NEW WORLD LIFE INSURANCE COMPANY
</TABLE>
<PAGE> 1
EXHIBIT 15
POWER OF ATTORNEY
The undersigned directors and officers of Farmers New World Life Insurance
Company, a Washington corporation (the "Company"), hereby constitute and appoint
C. Paul Patsis, Paul G. Secord, David A. Demmon, and M. Douglas Close, 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 the
variable annuity contracts to be issued through the Farmers Annuity Separate
Account A: 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 hereunto set his or her hand on the date
set forth below.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ C. Paul Patsis President and Director July 27, 1999
- -------------------------
C. Paul Patsis
/s/ David A. Demmon Assistant Vice President and July 20, 1999
- ------------------------- Treasurer
David A. Demmon
/s/ Richard E. Bangert Director July 20, 1999
- -------------------------
Richard E. Bangert
/s/ Donald J. Covey Director July 20, 1999
- -------------------------
Donald J. Covey
/s/ Martin D. Feinstein Director July 20, 1999
- -------------------------
Martin D. Feinstein
/s/ Paul N. Hopkins Director July 20, 1999
- -------------------------
Paul N. Hopkins
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Dennis I. Okamoto Director July 20, 1999
- -------------------------
Dennis I. Okamoto
/s/ Keitha T. Schofield Director July 20, 1999
- -------------------------
Keitha T. Schofield
/s/ Gary R. Severson Director July 20, 1999
- -------------------------
Gary R. Severson
/s/ John F. Sullivan, Jr. Director July 20, 1999
- -------------------------
John F. Sullivan, Jr.
</TABLE>
