SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] For the Fiscal Year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the Transition Period from to
Commission File Number 2-40764
KANSAS CITY LIFE INSURANCE COMPANY
(Exact Name of Registrant as Specified in its Charter)
Missouri 44-0308260
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3520 Broadway, Kansas City, Missouri 64111-2565
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 816-753-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the Registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of February 26, 1999, 6,201,665 shares of the Company's capital stock
par value $2.50 were outstanding, and the aggregate market value of the common
stock (based upon the average bid and asked price according to Company records)
of Kansas City Life Insurance Company held by non-affiliates was approximately
$165,045,561. Part II
Documents Incorporated by Reference
Item 5: Market for Registrant's Common Page 33 of Annual Report to
Equity and Related Stockholder Shareholders for the year
Matters. ended December 31, 1998.
Item 6: Selected Financial Data. Page 14 of Annual Report to
Shareholders for the year
ended December 31, 1998.
Item 7: Management's Discussion Pages 12 through 15 of Annual
and Analysis of Financial Report to Shareholders for
Condition and Results of the year ended December 31,
Operations. 1998.
Item 7A: Quantitative and Qualitative Pages 14 and 15 of Annual
Disclosures about Market Risk Report to Shareholders for
the year ended December 31,
1998.
Item 8: Financial Statements and Pages 16 through 29 of Annual
Supplementary Data. Report to Shareholders for the
year ended December 31, 1998.
Part IV
Index to Exhibits Page 16
PART I
Item 1. BUSINESS
Kansas City Life Insurance Company (KCL) was incorporated under the assess-
ment laws of Missouri in 1895 as the Bankers Life Association. In 1900, its
present corporate title was adopted and it was reorganized as a legal reserve
company in 1903. The Company operates nationwide, being licensed in 49 states
and the District of Columbia.
The Company primarily operates in four business segments: Kansas City Life
Insurance Company, divided between its individual and group businesses, and its
two insurance affiliates, Sunset Life Insurance Company of America (Sunset) and
Old American Insurance Company (Old American). KCL markets its individual
products, principally interest sensitive and variable products, through a career
general agency sales force and these products generate 42% of consolidated
insur- ance revenues. Variable universal life and annuities totaled 49% of new
statutory premiums in 1998. The group products, largely life, disability and
administrative services only, are sold through the general agency sales force
and appointed group agents. Group revenues account for 19% of insurance
revenues. Sunset markets interest sensitive and traditional products to
individuals through a personal pro- ducing general agency system. Sunset
operates in 24 states generally west of the Mississippi and is in the process of
filing for admission to operate in most of the remaining states. This segment
provides 10% of revenues. The Old American segment markets whole life final
expense products to seniors through a general agency sales force. Old American
operates in 46 states and accounts for 29% of consolidated insurance revenues.
Old American's administrative operations are merged into KCL's home office
and its administrative and accounting systems. Sunset's administrative
operations likewise will be merged into KCL's home office during 1999. Increased
efficiencies and expense savings should be realized in 2000 and subsequent
years.
KCL and its subsidiaries are subject to state regulations in their states
of domicile and in the states in which they do business. Although the federal
govern- ment generally does not regulate the business of insurance, federal
initiatives often have an impact on the business in a variety of ways including
the taxation of insurance companies and the tax treatment of insurance products.
KCL and Old American respectively have 529 and 76 full time employees who
are located in KCL's home office. Sunset has 92 full time employees currently
located in Olympia, Washington.
The Company is engaged in a competitive industry, competing with 1,500 to
2,000 other life insurance companies in the United States. The industry is
highly competitive with respect to pricing, selection of products and quality of
service. No single competitor nor any small group of competitors dominates any
of the markets in which the Company operates.
Item 2. PROPERTIES
Kansas City Life's home office is located at 3520 Broadway in Kansas City,
Missouri. The Company owns and wholly occupies two five story buildings on an
eight acre site.
Sunset currently owns and wholly occupies a two story office building at
3200 Capitol Boulevard in Olympia, Washington. The building is situated on
four acres of land. This building will be offered for sale in the latter half
of 1999.
The Company owns various other properties held for investment.
Item 3. LEGAL PROCEEDINGS
In recent years, life insurance companies have been named as defendants in
litigation related to life insurance pricing and sales practices. It has become
increasingly common for plaintiffs in these cases and other cases to seek class
action status and punitive damages. Among cases of this nature involving the
Company are the following:
Stewart, et al, v. Security Benefit Life Insurance Company; Tenth Judicial
District Court of Kansas, Johnson County, Kansas; Case No. 98-C04036. The
Company, through a coinsurance agreement, purchased a block of insurance
business, including the policies at issue, from Security Benefit Life ("SBL").
The Company is providing a defense to SBL pursuant to the agreement. This
lawsuit was filed by four SBL policyholders who allege SBL (through its agent,
Bank Market Service, Inc.) sold the policies as retirement plans when, in fact,
the policies are for life insurance and have only a minimal cash value. The
plaintiffs seek to rescind their insurance contracts with SBL and recover the
benefits that "true" retirement plans would have provided. Plaintiffs seek to
certify a class comprised of "all persons who have an ownership interest (or had
at the time the policy terminated) in one or more life insurance policies
marketed as retirement plans by defendants between 1977 and the present." The
Company's motion to dismiss has been denied and discovery is cur- rently in
process.
Adams v. Kansas City Life Insurance Company, et al; United States District
Court for the Western District of Missouri; Case No. 98-1053-CV-W-9. This liti-
gation was brought by four Company policyholders in the Middle District of
Florida but was subsequently transferred based on a motion by the Company to the
Western District of Missouri. The policyholders allege the Company marketed the
policies as policies that would pay for themselves after a certain period of
time - i.e., the premiums would "vanish". Plaintiffs seek to certify a class
comprised of "all persons and/or entities who have (or had at the time of the
policy's termination) an ownership interest in one or more permanent life
insurance policies that were issued by Kansas City Life...based upon the
nationwide fraudulent scheme and common course of conduct involving deceptive
sales practices described herein from January 1, 1985 to the present...and who
were thereby harmed." A motion to dismiss is pending and limited discovery has
been conducted.
Management denies the allegations, including the existence of a legitimate
class and intends to defend these cases vigorously. To date, class certification
has not been granted in any of the cases in which the Company is involved.
In addition to the above, the Company and certain of its subsidiaries are
defendants in lawsuits involving claims and disputes with policyholders that may
include clients seeking class action status and/or punitive damages. Some of
these lawsuits arise in jurisdictions where juries sometime award punitive
damages grossly disproportionate to the actual damages.
Although no assurances can be given and no determinations can be made at
this time as to the outcome of any particular lawsuit or proceeding, management
believes that the total amounts that would ultimately be paid, if any, would
have no material effect on the Company's results of operations and financial
position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended December 31, 1998.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Incorporated by Reference.
Item 6. SELECTED FINANCIAL DATA
Incorporated by Reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Incorporated by Reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Incorporated by Reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by Reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information, as of December 31, 1998, is provided with
respect to each Director:
Term as
Director Served as
Expires Other Positions Director
Name of Director Age in April with the Company From
W. E. Bixby, III (3)(6) 40 1999 None 1996
Webb R. Gilmore 54 1999 None 1990
(2)(3)(4)(5)(6)
Nancy Bixby Hudson (3)(6) 46 1999 None 1996
Daryl D. Jensen (3)(6) 59 1999 None 1978
Term as
Director Served as
Expires Other Positions Director
Name of Director Age in April with the Company From
C. John Malacarne 57 1999 Vice President, 1991
(1)(2)(3) General Counsel
and Secretary
J. R. Bixby (1)(2) 73 2000 Chairman of the Board 1957
R. Philip Bixby 45 2000 President and CEO 1985
(1)(2)
Richard L. Finn 57 2000 Senior Vice President, 1983
(1)(2) Finance
Warren J. Hunzicker, M.D. 78 2000 None 1989
(6)
Larry Winn, Jr. 79 2000 None 1985
(2)(4)(5)(6)
W. E. Bixby (1)(2) 66 2001 Vice Chairman of 1966
the Board
Jack D. Hayes (1) 58 2001 Senior Vice President, 1995
Marketing
Francis P. Lemery 59 2001 Senior Vice President 1985
(1)(2) and Actuary
Michael J. Ross 57 2001 None 1972
(2)(4)(5)(6)
Elizabeth T. Solberg 59 2001 None 1997
(6)
(1) See below with respect to the business experience of executive officers of
the Company.
(2) Member of Executive Committee.
(3) Subject to the approval of the shareholders at the annual meeting of share-
holders to be held on April 22, 1999, will be elected for a three year term
ending in 2002.
(4) Member of Audit Committee.
(5) Member of Compensation Committee.
(6) W. E. Bixby, III was elected Assistant Vice President of the Company in
1985, Vice President, Marketing in 1990, Vice President, Marketing
Operations in 1992, and President of Old American, a subsidiary, in 1996.
He also serves as a Director of Sunset Life and Old American, subsidiaries.
Mr. Gilmore is Chairman, CEO and Shareholder of the law firm of Gilmore &
Bell. Nancy Bixby Hudson has served as a Director of Sunset Life, a sub-
sidiary, since 1986. Dr. Hunzicker was elected by the Board of Directors to
an unexpired term in 1989. Dr. Hunzicker served as the Company's Medical
Director from 1987 to 1989; he formerly served as a member of the Company's
Board of Directors from 1977 to 1980. Mr. Jensen has been President of
Sunset Life Insurance Company of America, a subsidiary of Registrant, since
1973. Mr. Ross has been Chairman of the Board of Jefferson Bank and Trust
Company, St. Louis, Missouri, since 1983. Mrs. Solberg became a Regional
President and Senior Partner of Fleishman-Hillard, Inc., in January, 1998.
She had been Executive Vice President since 1984. Mr. Winn is retired as
the Kansas Third District Representative to the U.S. Congress.
Name, Age and Business Experience
Position During Past 5 Years
J. R. Bixby, 73 Chairman since 1972; President from 1964 until he
Chairman of the Board retired in April, 1990. Responsible for overall
corporate policy. Director of Sunset Life and Old
American, subsidiaries.
W. E. Bixby, 66 Vice Chairman of the Board since 1974; elected
Vice Chairman of Executive Vice President in January, 1987;
the Board President and CEO from 1990 until he retired in
April, 1998. Chairman of the Board of Sunset Life
and Old American, subsidiaries.
R. Philip Bixby, 45 Elected Assistant Secretary in 1979; Assistant Vice
President and CEO President in 1982; Vice President in 1984; Senior
Vice President, Operations in 1990; Executive Vice
President in 1996; and to present position in
April, 1998. Director of Sunset Life and Old
American, subsidiaries.
Richard L. Finn, 57 Elected Vice President in 1976; Financial Vice
Senior Vice President, President in 1983; and to present position in 1984.
Finance Chief financial officer and responsible for
investment of the Company's funds, accounting and
taxes. Director and Treasurer of Sunset Life and
Director, Vice President and Chief Financial
Officer and Assistant Treasurer of Old American,
subsidiaries.
Jack D. Hayes, 58 Elected Senior Vice President, Marketing in
Senior Vice President, February, 1994. Responsible for Marketing,
Marketing Marketing Administration, Communications and Public
Relations. Served as Executive Vice President and
Chief Marketing Officer of Fidelity Union Life,
Dallas, Texas, from June, 1981 to January, 1994.
Francis P. Lemery, 59 Elected Vice President in 1979; Vice President and
Senior Vice President Actuary in 1980; and to present position in 1984.
Actuary Responsible for Group Insurance Department,
Actuarial Services, State Compliance, New Business
and Underwriting. Director of Sunset Life and Old
American, subsidiaries.
Robert C. Miller, 52 Elected Assistant Auditor in 1972; Auditor in 1973;
Senior Vice President, Vice President and Auditor in 1987; and to present
Administrative Services position in 1991. Responsible for Human Resources
and Home Office building and maintenance.
Charles R. Duffy, Jr., 51 Elected Vice President, Computer Information
Senior Vice President, Services in 1989; Vice President, Insurance
Operations Administration in 1992; and to present position in
1996. Responsible for the Company's Computer
Operations, Customer Services, Claims, Premium
Collection and Agency Administration. Director of
Sunset Life and Old American, subsidiaries.
Name, Age and Business Experience
Position During Past 5 Years
John K. Koetting, 53 Elected Assistant Controller in 1975; and to
Vice President and present position in 1980. Chief accounting officer
Controller responsible for all corporate accounting reports.
Director of Old American, a subsidiary.
C. John Malacarne, 57 Elected Associate General Counsel in 1976; General
Vice President, General Counsel in 1980; Vice President and General Counsel
Counsel and Secretary in 1981; and to present position in 1991.
Responsible for Legal Department, Office of the
Secretary, Stock Transfer Department and Market
Compliance. Director and Secretary of Sunset Life
and Old American, subsidiaries.
(d) J. R. Bixby, Chairman of the Board, and W. E. Bixby, Vice Chairman of
the Board, are brothers. Nancy Bixby Hudson is the daughter of J. R. Bixby; R.
Philip Bixby and W. E. Bixby, III are the sons of W. E. Bixby.
(e) See Business Experience During Past 5 Years above.
(f) There have been no events under any bankruptcy act, no criminal pro-
ceedings and no judgments or injunctions material to the evaluation of the
ability and integrity of any Director, nominee or executive officer during the
past five years.
Item 11. EXECUTIVE COMPENSATION
(a) Compensation
The following table sets forth information concerning cash compensation
paid or accrued by the Company and its subsidiaries to the Chief Executive
Officer and the other four most highly paid executive officers as of December
31, 1998 for the fiscal years ending December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
Long Term Other All
Annual Compensation Incentive Annual Other
Compensa- Compen- Compen-
Name and Salary Bonus tion Payouts sation sation
Principal Position Year $ $ $ $ $
R. P. Bixby, Presi- 1998 348,692 77,971 0 7,000 22,857
dent and CEO and 1997 284,700 400 132,660 4,750 29,820
Director, Kansas City 1996 176,880 12,081 0 4,000 18,488
Life; Director of
Sunset Life and Old
American, subsidiaries.
W. E. Bixby, Vice 1998 156,032 34,132 0 68,500 69,541
Chairman of the 1997 445,800 400 374,976 7,000 61,575
Board, retired as 1996 416,640 58,042 0 7,000 55,586
President and CEO of
Kansas City Life in
April, 1998; Chairman
of the Board of Sunset
Life and Old American,
subsidiaries.
Long Term Other All
Annual Compensation Incentive Annual Other
Compensa- Compen- Compen-
Name and Salary Bonus tion Payouts sation sation
Principal Position Year $ $ $ $ $
R. L. Finn, Senior 1998 221,712 33,748 0 7,000 17,842
Vice President, 1997 212,160 400 151,560 7,000 25,540
Finance and Director, 1996 202,080 28,336 0 5,500 24,305
Kansas City Life;
Director of Sunset
Life and Old American,
subsidiaries.
F. P. Lemery, Senior 1998 221,712 33,748 0 7,000 17,842
Vice President and 1997 212,160 400 151,560 7,000 25,540
Actuary and Director, 1996 202,080 28,336 0 7,000 24,305
Kansas City Life;
Director of Sunset
Life and Old American,
subsidiaries.
Jack D. Hayes, Senior 1998 192,624 71,211 0 4,000 15,621
Vice President, Mar- 1997 184,320 400 132,930 4,000 22,309
keting, and Director, 1996 177,240 45,713 0 4,000 21,442
Kansas City Life.
ALL OTHER COMPENSATION INCLUDES THE FOLLOWING:
The Company has a contributory Internal Revenue Code Section 401(k) savings
and profit sharing plan. Directors and officers who are full time employees of
the Registrant or its subsidiaries participate in the plan on the same basis as
all other employees. Employees may contribute from 1% to 15% of their monthly
base salary. Highly compensated employees are limited to contributions of 6%.
The Company contributes an amount equal to 50%, 75% or 100% of the employee
contributions based on a schedule of years of employment to a maximum of 6% of
an employee's compensation in the form of capital stock of the Company. The
Company contributed $9,362 to the plan for the account of W. E. Bixby and
$10,000 to the accounts of the other named individuals.
The Company has adopted a nonqualified deferred compensation plan for
approximately 53 highly compensated officers and employees. It is similar to the
Company's 401(k) plan. Participants contribute amounts to this plan that they
cannot contribute to the 401(k) plan up to a total of 15% of their monthly
salary and the Company contributes up to a maximum of 6% of their monthly
salary. The amount contributed to the plan in 1998 for the accounts of the named
indi- viduals are as follows: W. E. Bixby, $0; R. P. Bixby, $9,997; R. L. Finn,
$3,303; F. P. Lemery, $3,303; J. D. Hayes, $1,557.
The Company provides yearly renewable term insurance to its employees in
the amount of 2 times their annual salary. Directors and officers who are full
time employees participate in the program on the same basis as all other
employees. Premiums paid for the named individuals for 1998 are as follows: W.
E. Bixby, $5,970; R. P. Bixby, $2,860; R. L. Finn, $4,539; F. P. Lemery, $4,539;
J. D. Hayes, $4,064.
(f) Defined Benefit or Actuarial Plan Disclosure
The Company has a noncontributory defined benefit pension plan which covers
employees age 21 and over. Effective January 1, 1998, the pension plan was con-
verted to a cash balance plan. Benefits under the plan will no longer be
determined primarily by final average compensation and years of service. Each
participant's benefit accrued under the prior plan formula as of December 31,
1997 was converted to an opening account balance in the cash balance plan.
Beginning in 1998, participants accumulate annual pay credits equal to a
percentage of annual compensation, ranging from 3% to 16% based on service of
the participant. The cash balance account is further credited with interest
annually which is based on the 30-year treasury bond rate in effect for November
of the prior plan year. For 1998, however, a 7% pay credit was used. Upon
termination of employment, the account balance as of such date may be
distributed to the participant in lump sum or annuity form, at the election of
the participant. Benefits vest according to years of service after age 18 on a
graded scale, beginning with 30% vesting with 3 years, and becoming 100% vested
with 7 years. Compensation for determining benefits under the plan is equal to
base salary, excluding overtime and bonuses.
Participants age 55 with 15 years of service as of December 31, 1997 will
receive the greater of the benefit under the cash balance plan, or the prior
plan formula based on final average compensation and years of service. The
following table illustrates the possible annual pension benefits under the prior
plan formula based upon final average compensation and years of service, for
these employees. Participants may elect a lump sum distribution.
PENSION PLAN TABLE
Compensation Years of Service SS**
10 20 30 40
$ 75,000 $ 18,750 $ 37,500 $ 51,948* $ 51,948* $16,104
100,000 25,000 50,000 70,000 71,948* 16,104
125,000 31,250 62,500 87,500 91,948* 16,104
150,000 37,500 75,000 105,000 111,948* 16,104
200,000 50,000 100,000 140,000 151,948* 16,104
250,000 62,500 125,000 175,000 191,948* 16,104
300,000 75,000 150,000 210,000 231,948* 16,104
350,000 87,500 175,000 245,000 271,948* 16,104
400,000 100,000 200,000 280,000 311,948* 16,104
450,000 112,500 225,000 315,000 351,948* 16,104
500,000 125,000 250,000 350,000 391,948* 16,104
*Maximum pension based on an estimate of Social Security.
**Estimated annual Social Security benefit at age 65.
A participant's base salary not to exceed $150,000 (as adjusted for cost of
living) commencing January 1, 1994, was used to determine compensation under the
plan for benefits from the qualified plan. For the individuals named in the Cash
Compensation Table, the years of service covered by the plan for the year ended
December 31, 1998, were: R. P. Bixby, 21 years; R. L. Finn, 25 years; F. P.
Lemery, 34 years; J. D. Hayes, 5 years.
The estimated annual annuity benefit payable starting at normal retirement
age (age 65) as accrued through December 31, 1998 under the cash balance plan
for each of the named individuals are as follows: W. E. Bixby $0; R. P. Bixby,
$128,457; R. L. Finn, $121,272; F. P. Lemery, $150,662; J. D. Hayes, $21,812.
The Company has adopted an unfunded excess benefit plan which covers any
employee who is an active participant in the noncontributory defined benefit
pension plan and whose pension benefit under that plan would exceed the maximum
benefit limited under Internal Revenue Code Section 415. A participant under
this plan is entitled to a monthly benefit of the difference between the maxi-
mum monthly normal, early, or deferred vested retirement benefit determined
without regard to the Internal Revenue Code Section 415 limitation and the
monthly equivalent of the maximum benefit permitted by Internal Revenue Code
Section 415. Participants may elect a lump sum distribution. (g) Compensation of
Directors
Outside Directors are paid $4,000 quarterly; $2,000 if they attend Special
Board Meetings; $1,000 if they attend Executive Committee Meetings; $500 if they
attend all other Committee Meetings. Inside Directors are paid $1,000 quarterly
and $400 if they attend Special Board Meetings. J. R. Bixby, Chairman of the
Board, is paid $30,000 quarterly. Directors of Sunset Life, a subsidiary, are
paid $500 quarterly and Directors of Old American are paid $250 quarterly. W. E.
Bixby receives $75,000 annually for his services as Chairman of the Board of
Sunset Life and $25,000 annually for his services as Chairman of the Board of
Old American. Director fees are included in the Compensation Table.
(h) Employment Contracts and Termination of Employment and Change in
Control Arrangements
There are no employment contracts between the Company and its executive
officers. The Company's benefit plans contain typical provisions applicable to
all employees for termination of employment.
(j) Additional Information with Respect to Compensation Committee
The members of the Compensation Committee: Webb R. Gilmore, Michael J.
Ross and Larry Winn, Jr.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The following sets forth information as of February 26, 1999, concerning
holding of voting securities of the Company's $2.50 par value capital stock,
which is the Company's only class of voting stock.
Name and Address of Beneficial Owners:
John K. Koetting, Robert C. Miller
and Anne C. Moberg, Trustees of the
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
423,902 shares 6.8
John K. Koetting, Robert C. Miller
and Anne C. Moberg, Trustees of the
Kansas City Life Employee Stock Plan
3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
36,053 shares .6
*Trustees have the power to sell plan assets. Participants may instruct the
Trustees how to vote their shares.
Angeline I. O'Connor
c/o William A. Hirsch, Esq.
Morrison & Hecker
2600 Grand Avenue, Kansas City, MO 64108
Amount and Nature of Ownership** Percent of Class
351,344 shares 5.7
**Includes 174,500 shares in the Walter E. Bixby Descendants Trust.
Angeline I. O'Connor, R. Philip Bixby and W. E. Bixby, III are Co-Trustees.
The Trustees share voting and investment power. The terms of the Trust
restrict the transfer of the shares.
Angeline I. O'Connor (then known as Angeline I. Oxler); J. R. Bixby; Margie
Morris Bixby; Kathryn A. Bixby-Haddad; Kathryn A. Bixby-Haddad as Custodian for
Kellie S. Curtis; Sorouch Haddad; Nancy Bixby Hudson; R. Philip Bixby; W. E.
Bixby, III; James R. Gammon as Trustee of the Walter E. Bixby Family Trust; R.
Philip Bixby, Angeline I. O'Connor and W. E. Bixby, III as Co-Trustees of the
Walter E. Bixby Descendants Trust; W. E. Bixby; W. E. Bixby as Trustee for Trust
B created pursuant to the Will of Edwin Bixby and Trust B created pursuant to
the Will of Angeline Reynolds Bixby were members of a group that agreed to act
together for the purpose of holding common stock, and the common stock ownership
of such group was reflected in a Schedule 13D filed with the Commission on
November 23, 1988 and subsequently amended. The agreement that documented the
various rights and obligations among all of the members of that group expired
May 20, 1990.
Nonetheless, Mrs. O'Connor and other former members of the Bixby Group in
subsequent filings with the Commission have indicated that they currently share
the expectation of many members of their extended family that a majority of the
common stock will continue to be beneficially owned by such individuals or be
under the control of Trustees under certain testamentary or inter vivos Trusts
for the benefit of such individuals.
(b) Security Ownership of Management
The names of the nominees proposed by management for election to three year
terms at the annual meeting to be held April 22, 1999 are set forth as follows:
Served Shares of
as a Record and
Principal Director Beneficially Percent
Nominee Occupation Since Owned of Class
W. E. Bixby, III President, Old 1996 176,004 5.7
3520 Broadway American Insur- 2,451(1)
Kansas City, MO ance Company, 174,500(2)
Kansas City, MO 5,456(3)
Webb R. Gilmore Chairman, CEO 1990 500 *
833 Westover Rd. and Shareholder,
Kansas City, MO Gilmore & Bell,
Kansas City, MO
Nancy Bixby Hudson Investor 1996 165,783(4) 2.7
425 Baldwin Creek Rd.
Lander, WY
Daryl D. Jensen Vice Chairman of the 1978 24
2143 Old Port Dr. Board and President, 11,272(1) *
Olympia, WA Sunset Life Insurance
Company of America,
Olympia, WA
Served Shares of
as a Record and
Principal Director Beneficially Percent
Nominee Occupation Since Owned of Class
C. John Malacarne Vice President, 1991 10
3520 Broadway General Counsel 6,302(1) *
Kansas City, MO and Secretary
The following Directors were elected April 24, 1997 for a three year term:
J. R. Bixby Chairman of the 1957 1,484,056(5) 24.0
3520 Broadway Board
Kansas City, MO
R. Philip Bixby President 1985 174,599 5.9
3520 Broadway and CEO 6,752(1)
Kansas City, MO 174,500(2)
10,602(6)
Richard L. Finn Senior Vice Presi- 1983 12
3520 Broadway dent, Finance 6,895(1) *
Kansas City, MO
Warren J. Hunzicker, M.D. Director 1989 150 *
1248 Stratford Rd.
Kansas City, MO
Larry Winn, Jr. Retired Represent- 1985 166 *
8420 Roe Ave. ative, U.S. Congress
Prairie Village, KS
The following Directors were elected April 23, 1998 for a three year term:
W. E. Bixby Vice Chairman of 1966 1,179,170 19.0
3520 Broadway the Board
Kansas City, MO
Jack D. Hayes Senior Vice Presi- 1995 250 *
3520 Broadway dent, Marketing 521(1)
Kansas City, MO
Francis P. Lemery Senior Vice Presi- 1985 1,713 *
3520 Broadway dent and Actuary 7,929(1)
Kansas City, MO
Michael J. Ross Chairman of the 1972 300 *
12826 Dubon Lane Board, Jefferson
St. Louis, MO Bank and Trust
Company,
St. Louis, MO
Elizabeth T. Solberg Regional President 1997 100 *
850 W. 52nd St. and Senior Partner,
Kansas City, MO Fleishman-Hillard, Inc.,
Kansas City, MO
All Directors, executive officers
and their spouses (also includes all
shares held by Trustees of Company
benefit plans and shares held by the
Bixby Family and related Trusts) 4,208,662 67.9
*Less than 1%.
(1) Approximate beneficial interest in shares held by the Trustees of Kansas
City Life Insurance Company employee benefit plans. Participants in the
plans may instruct the Trustees how to vote those shares held in their
account.
(2) Shares in the Walter E. Bixby Descendants Trust. R. Philip Bixby, W. E.
Bixby, III and Angeline I. O'Connor are Co-Trustees. The Trustees share
voting and investment power. The terms of the Trust restrict transferring
shares.
(3) Shares as to which W. E. Bixby, III is Custodian for his minor niece and
nephews under the Missouri Uniform Gifts to Minors law.
(4) Shares held by Nancy Bixby Hudson, Trustee, Nancy Bixby Hudson Revocable
Trust.
(5) Includes 900 shares owned by the spouse of J. R. Bixby. Beneficial
ownership of these shares is disclaimed.
(6) Shares as to which R. Philip Bixby is Custodian for his minor niece and
nephews under the Missouri Uniform Gifts to Minors law.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of Kansas City Life Insurance Company
are incorporated by reference from the Company's Annual Report to Shareholders
for the year ended December 31, 1998 at the following pages:
Page
Consolidated Income Statement - Years ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . 16
Consolidated Balance Sheet -
December 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . 17
Consolidated Statement of Stockholders' Equity -
Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . 18
Consolidated Statement of Cash Flows -
Years ended December 31, 1998, 1997 and 1996 . . . . . . . . . 19
Notes to Consolidated Financial Statements . . . . . . . . . . . 20-28
Report of Independent Auditors . . . . . . . . . . . . . . . . . 29
(a)(2) Supplementary Data and Financial Statement Schedules
Schedules are attached hereto at the following pages:
Page
I - Summary of Investments - Other than Investments
in Related Parties, December 31, 1998 . . . . . . . . . 18
II - Condensed Financial Information of Registrant,
Years ended December 31, 1998, 1997 and 1996 . . . . . . 19-21
III - Supplementary Insurance Information, Years ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 22
IV - Reinsurance Information, Years ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 23
V - Valuation and Qualifying Accounts, Years ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 24
All other schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.
(b) Reports on Form 8-K
None.
(c) Exhibits
Exhibit
Number: Basic Documents:
3(a) 1986 Restatement of Articles of Incorporation. [Filed as
Exhibit 3(a) to the Company's 10-K Report for 1986 and
incorporated herein by reference]
3(b) Bylaws as amended October 26, 1986. [Filed as Exhibit 3(b)
to the Company's 10-K Report for 1986 and incorporated
herein by reference]
3(c) Specimen copies of Capital Stock Certificates, (a) less than
100 shares; (b) 100 shares; and (c) unlimited. [Filed as
Exhibit 3(d) to the Company's 10-K Report for 1985 and in-
corporated herein by reference]
10(a)Seventh Amendment, Kansas City Life Deferred Compensation
Plan.
10(b)Twenty-second Amendment, Kansas City Life Insurance Company
Savings and Profit Sharing Plan.
10(c) Tenth Amendment, Kansas City Life Employee Stock Plan.
10(d) First Amendment, Kansas City Life Excess Benefit Plan.
10(e)Kansas City Life Insurance Company Long-Term Incentive Plan
for 1994-1996. [Filed as Exhibit 10(e) to the Company's 10-K
Report for 1997 and incorporated herein by reference]
13 Annual Report to Shareholders for the year ended December
31, 1998.
21 Subsidiaries.
23(a) Consent of Independent Auditors.
23(b) Consent of Independent Auditors.
27 Financial Data Schedule.
99(a)Form 11-K for the Kansas City Life Insurance Company
Savings and Profit Sharing Plan for the year 1998 and filed
as a part hereof and incorporated herein by reference.
99(b)Prospectus for Kansas City Life Insurance Company Savings
and Investment Plan. [Filed as Exhibit 99(b) to the
Company's 10-K Report for 1995 and incorporated herein by
reference]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
KANSAS CITY LIFE INSURANCE COMPANY
By: /s/ John K. Koetting
John K. Koetting
Vice President and Controller
(Principal Accounting Officer)
Date: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Regis-
trant and in the capacities and on the dates indicated.
By: /s/ R. Philip Bixby By: /s/ Richard L. Finn
R. Philip Bixby Richard L. Finn
Director; President and Director; Senior Vice
Chief Executive Officer President, Finance
(Principal Executive Officer) (Principal Financial Officer)
Date: March 29, 1999 Date: March 29, 1999
By: /s/ J. R. Bixby By: /s/ Francis P. Lemery
J. R. Bixby Francis P. Lemery
Director; Chairman of Director; Senior Vice
the Board President and Actuary
Date: March 29, 1999 Date: March 29, 1999
By: /s/ W. E. Bixby By: /s/ C. John Malacarne
W. E. Bixby C. John Malacarne
Director; Vice Chairman Director; Vice President,
of the Board General Counsel and Secretary
Date: March 29, 1999 Date: March 29, 1999
By: /s/ W. E. Bixby, III By: /s/ Warren J. Hunzicker, M.D.
W. E. Bixby, III Warren J. Hunzicker, M.D.
Director Director
Date: March 29, 1999 Date: March 29, 1999
Schedule I
KANSAS CITY LIFE INSURANCE COMPANY
SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
December 31, 1998
Amount at
Which Shown
Fair in Balance
Type of Investment Cost Value Sheet
(in thousands)
Fixed maturity securities,
available for sale:
Bonds:
United States government and government
agencies and authorities $ 45,079 46,445 46,445
Mortgage-backed securities 278,657 288,981 288,981
States, municipalities and political
subdivisions 65,264 68,658 68,658
Public utilities 294,016 307,920 307,920
All other bonds 1,326,328 1,378,734 1,378,734
Redeemable preferred stocks 3,631 3,624 3,624
Total 2,012,975 2,094,362 2,094,362
Equity securities, available for sale:
Common stocks 19,958 19,851 19,851
Nonredeemable preferred stocks 78,551 80,898 80,898
Total 98,509 100,749 100,749
Fixed maturity securities,
held to maturity:
Bonds:
States, municipalities and political
subdivisions 1,548 1,713 1,548
Public utilities 25,325 27,252 25,325
All other bonds 88,631 94,550 88,631
Total 115,504 123,515 115,504
Mortgage loans on real estate, net 315,705 315,705
Real estate, net 43,840 43,840
Real estate joint ventures 39,388 39,388
Policy loans 122,860 122,860
Short-term 59,160 59,160
Total investments $2,807,941 2,891,568
Schedule II
KANSAS CITY LIFE INSURANCE COMPANY
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
December 31
1998 1997
(in thousands)
Assets
Investments:
Fixed maturity securities:
Available for sale, at fair value $1,614,849 1,546,655
Held to maturity, at amortized cost 68,354 90,688
Equity securities available for sale, at fair value:
Investments in affiliates 237,340 218,128
Other 72,314 86,803
Mortgage loans on real estate, net 254,987 221,323
Real estate, net 43,227 36,163
Real estate joint ventures 30,758 34,666
Policy loans 101,620 102,106
Short-term 36,235 46,203
Total investments 2,459,684 2,382,735
Deferred acquisition costs 102,850 95,638
Value of purchased insurance in force 68,557 73,217
Other 105,796 157,686
Separate account assets 143,008 57,980
Total assets $2,879,895 2,767,256
Liabilities and stockholders' equity
Future policy benefits $ 539,767 538,361
Accumulated contract values 1,397,507 1,427,769
Other 221,680 212,552
Separate account liabilities 143,008 57,980
Total liabilities 2,301,962 2,236,662
Stockholders' equity:
Common stock 23,121 23,121
Paid in capital 17,633 16,256
Accumulated other comprehensive income 45,466 36,448
Retained earnings including $122,538,000 undis-
tributed earnings of affiliates ($107,260,000 - 1997) 581,074 543,715
Less treasury stock, at cost (89,361) (88,946)
Total stockholders' equity 577,933 530,594
Total liabilities and stockholders' equity $2,879,895 2,767,256
The above condensed financial statement should be read in conjunction with the
consolidated financial statements and notes thereto of Kansas City Life
Insurance Company.
Schedule II
(continued)
KANSAS CITY LIFE INSURANCE COMPANY
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCOME STATEMENT
Years ended December 31
1998 1997 1996
(in thousands)
Revenues
Insurance revenues:
Premiums:
Life insurance $ 31,899 28,145 26,186
Accident and health 37,963 39,435 31,264
Contract charges 82,273 68,431 55,123
Investment revenues:
Investment income, net 152,033 148,291 142,119
Dividends from affiliates 100 150 5,000
Realized investment gains, net 9,198 13,175 3,089
Other 10,359 5,786 7,877
Total revenues 323,825 303,413 270,658
Benefits and expenses
Policy benefits:
Death benefits 58,929 51,762 46,033
Surrenders of life insurance 14,589 11,280 11,737
Other benefits 64,404 62,997 56,239
Increase in benefit and contract reserves 58,118 56,126 52,348
Amortization of deferred policy
acquisition costs 16,861 15,138 14,619
Insurance operating expenses 71,075 66,891 53,338
Management fees from affiliates (5,923) (6,291) (5,721)
Total benefits and expenses 278,053 257,903 228,593
Income before federal income taxes and
equity in undistributed net income
of affiliates 45,772 45,510 42,065
Federal income taxes 12,538 12,602 9,844
Income before equity in undistributed
net income of affiliates 33,234 32,908 32,221
Equity in undistributed net income
of affiliates 15,278 11,953 10,094
Net income $ 48,512 44,861 42,315
The above condensed financial statement should be read in conjunction with the
consolidated financial statements and notes thereto of Kansas City Life
Insurance Company.
Schedule II
(continued)
KANSAS CITY LIFE INSURANCE COMPANY
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Years ended December 31
1998 1997 1996
(in thousands)
Net cash from operating activities $ 40,286 14,081 38,020
Investing activities
Investments called, matured or repaid 218,805 215,239 225,957
Decrease (increase) in short-term
investments, net 9,968 (35,291) 16,053
Investments sold 364,541 492,920 102,733
Investments purchased or originated (620,514) (840,802) (387,849)
Other 3,403 3,685 1,056
Acquisitions and dispositions of insur-
ance blocks - net cash received (paid) (13,250) 213,092 -
Net cash from (used in)
investing activities (37,047) 48,843 (42,050)
Financing activities
Proceeds from borrowings - 245,050 1,650
Repayment of borrowings - (245,050) (1,650)
Policyowner contract deposits 126,743 119,639 115,493
Withdrawals of policyowner
contract deposits (154,172) (127,341) (107,073)
Cash dividends to stockholders (11,153) (10,894) (10,393)
Other 962 278 592
Net cash (used in) financing activities (37,620) (18,318) (1,381)
Increase (decrease) in cash (34,381) 44,606 (5,411)
Cash at beginning of year 44,519 (87) 5,324
Cash at end of year $ 10,138 44,519 (87)
The above condensed financial statement should be read in conjunction with the
consolidated financial statements and notes thereto of Kansas City Life
Insurance Company.
Schedule III
KANSAS CITY LIFE INSURANCE COMPANY
SUPPLEMENTARY INSURANCE INFORMATION
Future Policy
Deferred Benefits, Contract Other
Acquisition Values and Claim Unearned Policyholders'
Costs Liabilities Premiums Funds
(in thousands)
December 31, 1998:
KCL - Individual $102,850 1,939,018 330 120,781
KCL - Group - 19,070 55 -
Sunset 47,240 380,134 17 10,966
Old American 68,867 249,729 413 5,197
Total $218,957 2,587,951 815 136,944
December 31, 1997:
KCL - Individual $ 95,638 1,970,235 306 114,504
KCL - Group - 20,685 91 -
Sunset 47,044 373,228 31 11,117
Old American 67,144 232,292 520 4,348
Total $209,826 2,596,440 948 129,969
December 31, 1996:
KCL - Individual $ 94,096 1,680,110 251 89,278
KCL - Group - 19,174 58 -
Sunset 48,337 365,910 26 11,828
Old American 64,587 216,303 574 2,096
Total $207,020 2,281,497 909 103,202
Insurance Accident and
Policy Operating Health Written
Benefits Expenses@ Premiums
(in thousands)
1998: @Allocations
KCL - Individual $161,236 48 149 385 of Insurance
KCL - Group 34,801 20,289 38,820 Operating
Sunset 29,255 10,452 28 Expenses are
Old American 58,048 17,457 4,354 based on a
Total $283,340 96,347 43,587 number of
assumptions
1997: and esti-
KCL - Individual $145,561 44,309 402 mates, and
KCL - Group 36,603 19,065 40,065 the results
Sunset 29,756 11,013 31 would change
Old American 61,258 16,994 5,419 if different
Total $273,178 91,381 45,917 methods were
applied.
1996:
KCL - Individual $135,798 34,154 449
KCL - Group 30,561 14,488 31,434
Sunset 29,872 10,268 34
Old American 58,248 16,317 6,249
Total $254,479 75,227 38,166
All other information required by this Schedule is shown in the accompanying
Segment Information Note to the Consolidated Financial Statements.
Schedule IV
KANSAS CITY LIFE INSURANCE COMPANY
REINSURANCE INFORMATION
Life Insurance Premiums Accident and Health Premiums
1998 1997 1996 1998 1997 1996
(in thousands)
Direct
KCL - Individual $ 26,836 25,105 25,010 440 467 496
KCL - Group 12,537 12,974 12,136 46,736 46,710 39,232
Sunset 5,656 5,049 4,770 31 34 38
Old American 83,555 85,363 85,234 6,815 7,811 8,928
Total $128,584 128,491 127,150 54,022 55,022 48,694
Ceded
KCL - Individual (11,967) (11,528) (9,447) (55) (62) (56)
KCL - Group (2,181) (2,229) (2,006) (9,158) (7,680) (8,659)
Sunset (4,584) (3,642) (3,112) (3) (3) (4)
Old American (8,016) (8,863) (9,815) (2,365) (2,346) (2,651)
Total (26,748) (26,262) (24,380) (11,581) (10,091) (11,370)
Assumed
KCL - Individual 6,674 3,822 493 - - 251
KCL - Group - - - - - -
Sunset - - - - - -
Old American - - - - - -
Total 6,674 3,822 493 - - 251
Net $108,510 106,051 103,263 42,441 44,931 37,575
% of Assumed to Net 6 4 - - - -
Life Insurance in Force
1998 1997 1996
(in millions)
Direct
KCL - Individual $ 12,569 11,768 11,250
KCL - Group 3,823 4,278 4,155
Sunset 5,768 5,615 5,501
Old American 1,101 1,139 1,215
Total 23,261 22,800 22,121
Ceded
KCL - Individual (2,832) (2,111) (1,777)
KCL - Group (256) (295) (197)
Sunset (1,274) (830) (617)
Old American (126) (139) (151)
Total (4,488) (3,375) (2,742)
Assumed
KCL - Individual 3,380 3,796 28
KCL - Group - - -
Sunset - - -
Old American - - -
Total 3,380 3,796 28
Net $ 22,153 23,221 19,407
% of Assumed to Net 15 16 -
All other information required by this Schedule is shown in the accompanying
Reinsurance Note to the Consolidated Financial Statements.
Schedule V
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31
1998 1997 1996
(in thousands)
Real estate valuation account
Beginning of year $ 3,686 5,227 7,378
Deductions ( 809) (1,541) (2,151)
End of year $ 2,877 3,686 5,227
Mortgage loan valuation account
Beginning of year $ 8,500 8,500 10,500
Deductions - - (2,000)
End of year $ 8,500 8,500 8,500
Allowance for uncollectible accounts
Beginning of year $ 1,209 1,160 1,123
Additions 449 230 845
Deductions (321) (181) (808)
End of year $ 1,337 1,209 1,160
Exhibit 10 (a), Form 10-K
Kansas City Life
Insurance Company
SEVENTH AMENDMENT
KANSAS CITY LIFE
DEFERRED COMPENSATION PLAN
ARTICLE I
Creation and Purpose
1. It is the intention of the Company to establish this Plan of
deferred compensation for the benefit of designated employees
whose contributions have been restricted by law and regulation
under the Kansas City Life Insurance Company Savings and
Profit Sharing Plan.
2. By enrolling in this Plan, an employee agrees to defer a
portion of his or her current earnings. It is the intent of
this Plan that accumulated and vested benefits will be paid to
such participants at the time of retirement, termination,
death or total and permanent disability.
ARTICLE II
Definitions
(a) "Salary" shall mean only the fixed amounts, weekly, semi-
monthly, or monthly, due and payable to the employee by
the Company, and does not include any bonuses, overtime
pay or other extraordinary payments by the Company.
(b) "Deferred compensation" shall mean the amount of salary
not yet earned, which the participant and the Company
mutually agree shall be deferred in accordance with the
provisions of this Plan.
(c) "Normal retirement" shall mean termination from em-
ployment with the Company becoming effective on or about
the first day of the calendar month following the
participant's attainment of age sixty-five (65).
(d) "Early retirement" shall mean retirement from employment
with the Company on the first day of any month following
a participant's fifty-fifth (55th) birthdate with the
attainment of at least five years of employment. For
purposes of determining the attainment of at least five
(5) years of employment, the years of employment of a
participant with Old American Insurance Company prior to
November 1, 1991 shall not be taken into account.
(e) "Termination of employment" shall mean the severance of
the participant's employment with the Company prior to
his or her eligibility for retirement.
(f) "Participant" shall mean any employee of Kansas City Life
Insurance Company, or any subsidiary corporation, under
the rules of common law, who shall be a member of a
select group of management or highly compensated
employees designated for participation by Kansas City
Life Insurance Company from time to time.
(g) "Company" means Kansas City Life Insurance Company, a
Missouri Corporation, Sunset Life Insurance Company of
America, a Washington Corporation, Old American Insurance
Company, a Missouri Corporation and any other subsidiary
corporation of Kansas City Life Insurance Company, any or
all of which may sometimes be referred to herein as
affiliated corporations.
(h) "Company stock" shall mean shares of the common capital
stock of Kansas City Life Insurance Company.
ARTICLE III
Administration
1. The Administrative Committee, sometimes herein referred to as
the "Committee", shall consist of a number of persons, not
less than three (3) nor more than five (5), designated by the
Executive Committee of Kansas City Life Insurance Company, who
shall serve terms of one (1) year or until their successors
are designated, and said Committee shall have the responsi-
bility for the general administration of the Plan and for
carrying out the provisions of the Plan in accordance with its
terms. The Committee shall have absolute discretion in
carrying out its responsibilities.
2. The Committee may appoint from its members such committees
with such powers as it shall determine; may authorize one (1)
or more of its number or any agent to execute or deliver any
instrument or make any payment on its behalf; and may utilize
counsel, employ agents and provide for such clerical and
accounting services as it may require in carrying out the
provisions of the Plan.
3. The Committee shall hold meetings upon such notice, at such
place or places, and at such time or times as it may from time
to time determine.
4. The action of a majority of the members expressed from time to
time by a vote in a meeting or in writing without a meeting
shall constitute the action of the Committee and shall have
the same effect for all purposes as if assented to by all
members of the Committee at the time in office.
5. No member of the Committee shall receive any compensation for
his services as such, and, except as required by law, no bond
or other security shall be required of him in such capacity in
any jurisdiction.
6. Subject to the limitations of this Plan and Trust, the Commit-
tee from time to time shall establish rules or regulations for
the administration of the Plan and the transaction of its
business. The Committee shall have full and complete
discretionary authority to construe and interpret the Plan and
decide any and all matters arising hereunder, except such
matters which the Executive Committee of the Company from time
to time may reserve for itself, including the right to remedy
possible ambiguities, inconsistencies or omissions. All
interpretations, determinations and decisions of the Committee
or the Executive Committee of Kansas City Life Insurance
Company in respect of any matter hereunder shall be final,
conclusive and binding on all parties affected thereby. The
Committee shall, when requested, submit a report to the
Executive Committee of Kansas City Life Insurance Company
giving a brief account of the operation of the Plan and the
performance of the various funds and accounts established
pursuant to the Plan.
7. The Administrative Committee shall have full and complete
discretionary authority to make all determinations as to the
right of any person to a benefit. Any denial by the Committee
of a claim for benefits under this Plan by a participant or a
beneficiary shall be stated in writing by the Committee and
delivered or mailed to the participant or the beneficiary,
whichever is appropriate; and such notice shall set forth the
specific reason for the denial, written to the best of the
Committee's ability in a manner that may be understood without
legal or actuarial counsel. In addition, the Committee shall
provide a reasonable opportunity to any participant or
beneficiary whose claim for benefits has been denied for a
review of the decision denying the claim.
8. Any member of the Committee may resign by giving notice to the
Executive Committee at least fifteen (15) days before the
effective date of his resignation. Any Committee member shall
resign upon request of the Executive Committee. The Executive
Committee shall fill all vacancies on the Committee as soon as
is reasonably possible after a resignation takes place, and
until a new appointment takes place, the remaining members of
the Committee shall have authority to act, if approved by
either a majority of the remaining members or by two (2)
members, whichever number is lesser.
ARTICLE IV
Participation in the Plan
1. A qualified employee may commence his participation in this
Plan as of the first day of the month coinciding with or next
following his designation, whichever first occurs. He shall
be notified of his eligibility from time to time by the
Company.
2. The eligible employee who desires to participate must execute
a salary reduction agreement in form prescribed by the
Company, and the employee shall thereby agree to the terms of
this Plan and any amendments hereafter adopted.
3. At such time as the participating employee is no longer
qualified, because of the criteria established by this Plan,
no further salary reductions shall be made until he shall
again be qualified and have elected to participate.
4. Commencing January 1, 1998, each participant may elect to have
his or her salary reduced in an amount equivalent to one per-
cent (1%) through fifteen percent (15%), and said amount shall
be withheld by payroll deduction. These amounts shall be the
participants' deferred compensation. Commencing January 1,
1998, the amount subject to this reduction shall not exceed
nine percent (9%) of annual salary. However, if the partici-
pant's elective deferrals to the Kansas City Life Insurance
Company Savings and Profit Sharing Plan exceed ten thousand
dollars ($10,000.00) during any year (subject to annual
adjustments of this amount in the Kansas City Life Insurance
Company Savings and Profit Sharing Plan under Internal Revenue
Code Sections 415(d), 402(g) and regulations), an additional
amount in excess of nine percent (9%) of annual salary may be
contributed by the participant. The additional amount con-
tributed may not exceed fifteen percent (15%) of annual
salary. A participant may change the percentage contribution
rate as of the first day of any month, but not more than once
in any six (6) month period pursuant to the rules of the
Kansas City Life Insurance Company Savings and Profit Sharing
Plan. However, this limitation shall not apply to a change in
percentage contribution rate made effective January 1, 1998.
The contributions herein may sometimes be referred to as the
participant's "elective account".
5. The Company shall maintain accounts reflecting the amount of
salary withheld from an individual pursuant to this Plan, and
the balance in each participant's elective account shall be
fully vested at all times. The assets reflected in such
accounts shall be owned by the Company and shall be subject to
the claims of the Company's creditors.
6. At such time as Kansas City Life Insurance Company shall
determine, it may provide a means whereby the respective
participant may direct the investment of the value of his
elective accounts during the period of his participation in
the Plan. The valuation of the participant's account shall be
made by the Company not less often than quarterly, and the
participant shall be entitled to receive an investment report
from time to time.
7. Amounts held in a participant's elective account shall be
distributed to him or her within a period of ninety (90) days
following his retirement, termination of employment, death, or
total and permanent disability as determined under the law and
regulations regarding Social Security.
ARTICLE V
Company Contributions
1. The Company shall, with respect to each participant, maintain
an account in an amount equal to one hundred percent (100%) of
such participant's contribution resulting from his salary
reduction agreement prior to December 31, 1997. The Company
may, solely at its discretion, add additional amounts for the
accounts of designated individuals as offsetting deferred
compensation for amounts which would have otherwise been
credited to them except for regulatory restrictions. Com-
mencing January 1, 1998, with respect to participants whose
elective deferrals to the Kansas City Life Insurance Company
Savings and Profit Sharing Plan exceed ten thousand dollars
($10,000.00) during any year (subject to annual adjustments of
this amount under Internal Revenue Code Sections 415(d),
402(g) and regulations), these additional amounts will include
an amount equal to that which would otherwise have been con-
tributed for these participants as a matching contribution
under the Kansas City Life Insurance Company Savings and
Profit Sharing Plan. Such Company contributions account
shall be separate from the participant's elective account.
Gains and losses regarding the value of such accounts shall be
determined by the changes in market value of the common
capital stock of the Company and the accumulation of divi-
dends. In the event of any change in the outstanding stock of
the Company by reason of a stock dividend, recapitalization,
merger, consolidation, exchange of shares, or any similar
device, the account balance shall be adjusted appropriately.
2. For purposes of fixing the amount of contributions made
pursuant to this paragraph, the value of stock shall be at the
average of its bid price on the over-the-counter market for
all business days following the previous monthly valuation
date. The participant shall not have the right to direct the
investment of the Company account established for his benefit.
3. The balance in the Company account established for each
participant shall be subject to the vesting provisions of
Article VII. The value of the Company account for such
participant shall be distributed to him or her at the time of
his retirement, termination of employment, death or total and
permanent disability as defined under the law and regulations
of the Social Security law. The participant shall not be
entitled to shares of the Company stock, and shall be entitled
only to cash.
ARTICLE VI
Allocation to and Evaluation of Participants' Accounts
1. Investment funds. The value of all accounts shall be
determined on the basis of market values as of the last market
business day of each month, except that when the value of any
account is determined based upon the value of Kansas City Life
stock the Kansas City Life stock shall be valued at the
average of its bid price on the over-the-counter market for
all business days following the previous monthly valuation
date. Accounting procedures shall reflect the establishment
of at least four (4) separate accounts, sometimes herein
referred to as Fund I, Fund II, Fund III and Fund IV, and
commencing September 1, 1993, five (5) additional separate
accounts shall be established, sometimes hereinafter referred
to as Fund V, Fund VI, Fund VII, Fund VIII and Fund IX, with
the intent that all participants' deferred compensation, and
any earnings thereon, will be accounted for in Fund I, Fund
II, Fund IV, Fund V, Fund VI, Fund VII, Fund VIII and Fund IX,
and with the intent that all Company contributions, and any
earnings thereon, will be accounted for in Fund III. The
value of deferred compensation referenced to Funds I, IV, V,
VI, VII, VIII and IX shall be determined by the Company's
general investments and the values of Funds II and III shall
be determined by reference to the stock of Kansas City Life
Insurance Company. The Company shall have the right to
segregate and maintain in trust specific assets for the
purpose of valuing, managing and holding assets for the
respective accounts.
2. Participants' accounts. An account shall be established for
each participant with respect to Fund I, Fund II, Fund III and
with respect to Fund IV, Fund V, Fund VI, Fund VII, Fund VIII
and Fund IX or any other such fund that reasonable accounting
practices shall require be established. All Funds shall be
maintained in United States dollars. A determination shall be
made on each monthly valuation date of the value with respect
to each fund, and shall reflect contributions made by both the
participant and the Company and any gains or losses of the
funds. Notwithstanding the foregoing, the Company shall have
the right to change the method of accounting from time to
time.
3. Selected investment. Commencing September 1, 1993, a par-
ticipant's deferred compensation may be invested one hundred
percent (100%) in any one (1) of Funds I, II, IV, V, VI, VII,
VIII or IX, or if he wishes to invest in more than one (1)
fund, he shall specify the percentage to be invested in each
fund. However, such percentage must be a whole percentage,
for example, one percent (1%), twenty-six percent (26%) or
eighty percent (80%), and no fractional percentages will be
permitted. Each participant may make new investment choices
for his deferred compensation to be effective September 1,
1993 notwithstanding any changes made in the prior twelve (12)
months. Thereafter, a participant may request changes not
more often than once a month. However, if a participant is
investing all or a portion of his deferred compensation in
Fund II and transfers all or a part of his Fund II account to
another fund (as described in the following paragraph 4),
deferred compensation investment in Fund II must cease until
at least six (6) months from the date of said transfer from
Fund II. The participant's deferred compensation shall also
be invested in the same manner as the participant shall have
designated pursuant to the rules of The Kansas City Life
Insurance Company Savings and Profit Sharing Plan.
Commencing November 1, 1996, a participant may request changes
in the investment choices not more often than once a month
without regard to investment choices made in the Kansas City
Life Insurance Company Savings and Profit Sharing Plan.
However, if a participant is investing all or a portion of his
deferred compensation in Fund II and transfers all or a part
of his Fund II account to another fund (as described in the
following Paragraph 4), deferred compensation investment in
Fund II must cease until at least six (6) months from the date
of said transfer from Fund II.
4. Investment changes. Commencing September 1, 1993, any par-
ticipant shall have the right not more often than once a month
and notwithstanding any transfers made in the twelve (12)
months prior to September 1, 1993, to require the value of any
one (1) or more of his accounts be transferred for his account
in any of Funds I, II, IV, V, VI, VII, VIII or IX provided
such transfer shall be in whole percentages. This right shall
not apply to Fund III, and a participant that transferred the
value of his account from Fund II to another fund in the six
(6) months prior to September 1, 1993 may not transfer any
amount into Fund II until at least six (6) months after the
date of said transfer from Fund II. Thereafter, transfers to
or from Fund II may occur only once in a six (6) month period.
Such transfers shall also be governed by reasonable rules of
the Committee regarding the timeliness of notice. Such
transfers shall only occur at such time, and in the same
manner, as the participant shall have designated pursuant to
the rules of the Kansas City Life Insurance Company Savings
and Profit Sharing Plan.
Commencing November 1, 1996, the participant may require the
value of his accounts be transferred not more often than once
a month to any one (1) or more of the other funds without
regard to transfers made in the Kansas City Life Insurance
Company Savings and Profit Sharing Plan except for Fund II.
Transfers to or from Fund II may only occur once in a six (6)
month period and must be transferred at such time and in the
same manner as the participant shall have designated pursuant
to the rules of the Kansas City Life Insurance Company Savings
and Profit Sharing Plan.
ARTICLE VII
Vesting
1. The value of a participant's account with respect to Company
contributions made for his benefit shall be vested, to the
extent of the percentage applicable, upon the valuation date
of the month in which the participant completes the years of
employment with the Company in accordance with the following
schedule:
Years of Employment Percentage Vested
1 0
2 0
3 30
4 40
5 60
6 80
7 100
2. A "year of employment" shall mean a twelve (12) consecutive
monthly period of employment with the Company dating from
commencement of employment, during which he or she shall
complete at least one thousand (1,000) hours of employment.
If an employee's employment with either Kansas City Life
Insurance Company or one of its affiliated corporations shall
be terminated, and he is immediately employed by any other of
such affiliated corporations, his employment shall be regarded
as continuous and treated as if under one employer for vesting
purposes. However, years of employment of an employee of Old
American Insurance Company prior to November 1, 1991 shall not
be taken into account for purposes of this Article VII.
3. In the event a participant shall be terminated from employment
with the Company or any of its affiliated corporations, by
reason of death or retirement or early retirement as defined
herein, the value of his account shall be one hundred percent
(100%) vested upon the valuation date of the month in which
such death or retirement occurs, and shall be distributed to
him or her within a period of ninety (90) days thereafter.
ARTICLE VIII
Miscellaneous
1. All distributions provided or pursuant to this Plan shall be
in the form of a lump sum payment. If a payment is made as a
result of the death of the participant, the payment shall be
made to the surviving spouse of the participant, if any,
unless a beneficiary designation has been provided.
2. Any participant or retired participant shall have the right to
designate a new beneficiary at any time by filing with the
Company a written request for such change, but any such change
shall become effective only upon receipt of such request by
the Company. Upon receipt by the Company of such request, the
change shall relate back to and take effect as of the date
such participant signs such request whether or not such parti-
cipant is living at the time the Company receives such request.
3. If there be no designated beneficiary living or in effect at
the death of such participant when any payment hereunder shall
be payable to the beneficiary, then such payment shall be made
as follows: To such participant's spouse, if living; if not
living, to such participant's then living lineal descendents,
in equal shares, per stirpes; if none survives, to such par-
ticipant's surviving parents, equally. If neither survives,
to such participant's executors or administrators.
4. The interest hereunder of any participant, retired participant
or beneficiary shall not be alienable, either by assignment or
by any other method, and to the maximum extent permissible by
law, shall not be subject to being taken, by any process
whatever, by the creditors of such participant, retired
participant or beneficiary.
5. Nothing herein contained nor any action taken under the
provisions hereof shall be construed as giving any employee
the right to be retained in the employment of the Company.
6. The Company shall have the right to amend or terminate this
Plan at any time.
Exhibit 10 (b), Form 10-K
Kansas City Life
Insurance Company
TWENTY-SECOND AMENDMENT
KANSAS CITY LIFE INSURANCE COMPANY
SAVINGS AND PROFIT SHARING PLAN
THIS TWENTY-SECOND AMENDMENT, comprising the restated Kansas
City Life Insurance Company Savings and Profit Sharing Plan, except
as otherwise specifically stated in the Plan, is effective the lst
day of January, 1998, and is entered into by and between Kansas
City Life Insurance Company, a Corporation organized and existing
under the Laws of the State of Missouri, hereinafter called the
"Company", and Ronald E. Hiatt, John K. Koetting and Robert C.
Miller, hereinafter referred to as the "Trustees".
ARTICLE I
Creation and Purpose of Trust
1.1 Name. The Company hereby creates this Plan and Trust to
be known as the "Kansas City Life Insurance Company Savings and
Profit Sharing Plan" (formerly the Kansas City Life Insurance
Company Savings and Investment Plan), hereinafter sometimes re-
ferred to as the "Plan" or "Trust".
1.2 Purpose. It is the purpose of this Plan to recognize the
contributions of its employees to the successful operation of the
Company and to reward such contributions by providing certain
savings and investment and profit sharing benefits for those who
become participants under the Plan, and for their beneficiaries.
1.3 Exclusive Benefit of Employees. This Agreement has been
made, and this Plan and Trust created, for the exclusive benefit of
the Company's full time employees and their beneficiaries. The
terms of this Plan are intended to comply with the provisions of
Sections 401(a), 501(a) and 401(k) of the Internal Revenue Code of
1986 as amended from time to time, and Treasury Department Regu-
lations in connection therewith in order that the Plan and Trust
may qualify for tax exemption. Under no circumstances shall any
part of the principal or income of the Plan and Trust be used for,
or revert to, the Company, or be used for, or diverted to, any pur-
poses other than for the exclusive benefit of the employees and
their beneficiaries. This Plan and Trust shall not be construed,
however, as giving any employee, or any other person, any right,
legal or equitable as against the Company, the Trustees, or the
principal or income of the Trust, except as specifically provided
for herein, nor shall it be construed as giving any employee the
right to remain with the Company or in the Company's employment.
ARTICLE II
Qualification and Eligibility
2.1 Qualification. The requirements of qualification for
employees are set forth hereinafter.
A. Employees. Each present and future employee shall be
qualified as a participant in this Plan,
(1) who shall have completed one (1) year of employment
with the Company during which he shall have com-
pleted one thousand (1,000) hours of employment
from date of hire, or if he has not completed one
thousand (1,000) hours of employment within such
period, then one thousand (1,000) hours of employ-
ment during a calendar year beginning with the
calendar year which includes the first anniversary
of the employee's date of hire, and
(2) who shall have attained the age of twenty-one (21)
years.
(3)With respect to this Plan, an "hour of employment"
shall mean:
(a) Each hour for which an employee is directly or
indirectly paid, or entitled to payment, by
the Company for the performance of duties.
These hours shall be credited to the employee
for the computation period or periods in which
the duties are performed; and
(b) Each hour for which back pay, irrespective of
mitigation of damages, has been either awarded
or agreed to by the Company. These ours shall
be credited to the employee for the computa-
tion period or periods to which the award or
agreement pertains rather than the computation
period in which the award, agreement or pay-
ment is made.
(c) Each hour for which an employee is directly or
indirectly paid, or entitled to payment, by
the Company for reasons such as vacation,
holidays, illness, incapacity (including disa-
bility), layoff, jury duty, military leave or
leave of absence in a period during which no
duties are performed (irrespective of whether
the employment relationship has terminated).
These hours shall be credited to the employee
for the computation period or periods during
which the nonperformance of such duties occurs
and shall only be considered up to a maximum
of five hundred one (501) hours. Hours of
service for periods of time during which no
duties are performed under Subparagraphs (b)
and (c) shall be calculated and credited
according to Department of Labor Regulations
2530.200b-2(b) and (c).
(d) In computing an employee's hours of employment
on a weekly or monthly basis, when a record of
hours of employment is not available to
determine the hours of employment under
Subparagraphs (a), (b) and (c), the employee
shall be assumed to have worked forty-five
(45) hours for each week, or one hundred
ninety (190) hours for each month (as appli-
cable), for which the employee would be
required to be credited with at least one (1)
hour of employment under Subparagraphs (a),
(b) and (c) above.
(e)An "hour of employment" shall also include
time for which an employee is absent from work
either
(i) by reason of the pregnancy of such
employee,
(ii) by reason of the birth of a child of
the employee,
(iii) by reason of the placement of a
child in connection with the
adoption of the child by the
employee, or
(iv) for purposes of caring for the child
during the period immediately fol-
lowing the birth or placement for
adoption, or
(v) a leave of absence covered under the
Family and Medical Leave Act of
1993.
However, the total number of hours of such
service counted for any one (1) period shall
not exceed five hundred one (501) hours.
(4) For the purpose of computing continuous
employment, leaves of absence may be included
which have been authorized by the Company for
any of the following reasons:
(a) Sickness.
(b) Disability.
(c) Service with the armed forces of the
United States during any war or national
emergency declared by the President or
the Congress, or undeclared.
(d) Pregnancy, not to exceed twelve (12)
months.
(e) Public service, whether elected or
otherwise.
(f) Obtaining additional education, involving
periods of time not to exceed twelve (12)
months for each leave of absence granted,
but only after completion of one (1) full
year of full time employment.
(5) Such leaves of absence may be counted in
computing continuous employment provided the
employee returns to active employment on or
before the end of such leave of absence, and
when because of service in the armed forces as
stated above, provided the employee returns to
active employment with the Company within
ninety (90) days following his discharge from
such service, or such longer period during
which his re-employment rights are protected
by law.
(6) Any such employee who is not qualified as a
participant prior to the commencement of such
a leave of absence shall not be so qualified
until his return to active employment. The
provisions of this Section shall be applied in
a like manner to all employees under similar
circumstances.
2.2 Eligibility Date. Except as provided in the next
sentence, any employee of the Company who becomes qualified after
the effective date of this Agreement, shall be eligible to become
a participant as of the first (1st) business day of the month
coinciding with or next following the employee's qualification,
whichever first occurs. Any employee of Old American Insurance
Company shall be eligible to become a participant no earlier than
November 1, 1992 and in accordance with the terms of the Adoption
Agreement dated December 19, 1991.
2.3 Company to Furnish Eligibility Lists. Each month, the
Company shall transmit to the Committee the names of all employees
and such other information concerning them as the Committee may
request. The Committee shall then determine the employees who are
eligible, or who will be eligible as of the first (1st) business
day of each month to become participants and shall notify each such
employee in writing of the existence of this Trust and of its basic
provisions, and of the employee's eligibility, and shall provide a
form or application for participation, and such other forms, if
any, as may be required to effect participation.
2.4 Election to Participate. Any eligible employee who
desires to become a participant must execute and deliver to the
Committee an application for participation on the form provided by
the Committee and such other forms, if any, as may be required. In
such application for participation, the employee shall agree to be
bound by the terms of this Plan and Trust and of all amendments
hereafter adopted with the same force and effect as if the employee
had executed this Plan and Trust, and shall set forth such reason-
able information as may be required by the Committee to effect
participation and maintain the qualified status of this Plan and
Trust.
2.5 Failure to Elect. Any employee who fails to elect to
become a participant at the time of first becoming eligible, may
elect to commence participation on the first (1st) business day of
any succeeding month provided the employee shall then be eligible.
Any employee on a leave of absence authorized by the Company, as
defined in Subparagraph A(4) hereinabove, at a time when he or she
could otherwise be eligible to become a participant, shall be
eligible on the first (1st) business day of the first (1st) month
coinciding with or next following return to active employment with
the Company provided that on such date he shall meet the eligi-
bility requirements.
2.6 Participation and Service on Re-employment. Subject to
the provisions of this Plan, participation in the Plan by an
employee shall cease upon termination of employment with the
Company. Upon an employee's termination on or after January 1,
1976, any twelve (12) month employment period during which the
employee completes less than five hundred one (501) hours of
employment or work due to a termination shall constitute a one (1)
year break in service.
Upon the re-employment by the Company of any person whose
participation has been terminated from January 1, 1976 through
December 31, 1984, the following rule shall apply in determining
his participation and vesting in the Plan:
(a) Participation - before a break in service: If the
employee is rehired before he has a one (1) year break in
service, he shall be eligible to participate in the plan
on the first (1st) business day of the month immediately
following the date of his re-employment if he shall be
otherwise qualified.
After a break in service: If an employee is rehired
after he has a one (1) year break in service, he shall be
eligible to participate in the Plan upon his completion
of the requirements set forth in Paragraph 2.1 herein.
(b) Service - for vested participants: In the case of a
person who was vested when his prior period of employment
terminated, any service attributable to his prior period
of employment shall be reinstated as of the date of his
reparticipation and he shall be vested immediately upon
his reparticipation.
For other persons: In the case of a re-employed employee
who was not a participant in the Plan during his prior
period of employment, or in the case of a participant who
was not vested when his prior period of employment
terminated, any service attributable to his prior period
of employment shall be restored only if the number of
consecutive years of his break in service was less than
the aggregate number of his years of prebreak service.
Upon the re-employment by the Company of any person who has
been terminated on or after January 1, 1985, the following rules
shall apply in determining his participation and vesting in the
Plan:
(a) Participation - before a five (5) year break in service:
If the employee is rehired before the number of one (1)
year breaks in service equals or exceeds the greater of
five (5) consecutive years of service, or the aggregate
number of years of service earned before the consecutive
breaks in service, he shall be eligible to participate in
the Plan on the first (1st) business day of the month
immediately following the date of his re-employment if he
shall be otherwise qualified. This rule of parity will
apply to employees who had no vested interest on
separation of employment.
After a five (5) year break in service: If an employee
is re-hired and he does not qualify for participation or
vesting under the rule in the above Paragraph, he shall
be eligible to participate in the Plan upon his com-
pletion of the requirements set forth in Paragraph 2.1
herein.
(b) Service - for vested participants: In the case of a
person who was fully or partially vested in his Fund III
account when his prior period of employment terminated,
any service attributable to his prior period of
employment shall be reinstated as of the date of his re-
employment and he shall participate immediately and also
be vested in accordance with prior years of service.
For other persons: In the case of a re-employed employee
who was not a participant in the Plan during his prior
period of employment, or in the case of a participant who
was not vested when his prior period of employment
terminated, any service attributable to his prior period
of employment shall be restored unless the number of one
(1) year breaks in service equals or exceeds the greater
of five (5) consecutive years of service, or the
aggregate number of years of service earned before the
consecutive breaks in service.
Sunset Life and Old American Insurance Company: If an
employee's employment with either Kansas City Life
Insurance Company, Sunset Life Insurance Company of
America, Old American Insurance Company, or any other
affiliated corporation of Kansas City Life Insurance
Company, shall be terminated and he is subsequently
employed by any other of the affiliated corporations, his
employment shall be treated as if under one (1) employer
for the purpose of this Plan.
2.7 In determining whether a break in service has occurred,
and not for purposes of determining a participant's vesting
service, the hours described in Paragraph 2.1A(3)(e) above shall be
treated as hours of service (i) only in the year in which the
absence from work begins, if a participant would be prevented from
incurring a one (1) year break in service in such year solely
because the period of absence is treated as hours of service as
provided in Paragraph 2.1A(3)(e), or (ii) in any other case, in the
immediately following year.
ARTICLE III Member Contributions
3.1 Rate of Contribution. Commencing January 1,
1988, each participant may elect to enter into a compensation reduction
agreement with the Company by which a contribution will be made for his or
her respective account in an amount equivalent to one percent (1%)
(commencing September 1, 1993), two percent (2%), three percent (3%), four
percent (4%), five percent (5%), six percent (6%), seven percent (7%),
eight percent (8%), nine percent (9%), ten percent (10%), and commencing
January 1, 1998, eleven percent (11%), twelve percent (12%), thirteen
percent (13%), fourteen percent (14%), or fifteen percent (15%) of his
unreduced monthly salary or earnings, whichever may be applicable; provided
however, that no contribution in excess of five percent (5%), and,
commencing January 1, 1994, six percent (6%), shall be made for any
participant who shall be classified as a highly compensated person. A
participant may elect to change his contribution percentage rate as of the
first (1st) day of any month, but not more than once in any six (6) month
period, by giving such written notice as shall be prescribed by the
Committee. However, this limitation shall not apply to a change in
contribution percentage rate effective January 1, 1994 made by a highly
compensated person, or a change in contribution percentage rate made by any
participant that was effective January 1, 1998. The contribution for each
participant shall be paid to the Trustees not less often than monthly and
credited to the respective participant's accounts. No contribution for a
participant shall exceed ten thousand dollars ($10,000.00) each calendar
year, subject to annual adjustments pursuant to Internal Revenue Code
Sections 415(d), 402(g) and regulations. The contributions herein may
sometimes be referred to as the participant's "elective account". 3.2
Salary or Compensation Defined.
A. For the purposes of Paragraph 3.1 herein and with respect
to employees of the Company, the term "salary" or
"compensation", includes only the fixed amounts, hourly,
weekly, semi-monthly or monthly, due and payable to the
employees of the Company, not reduced by any salary
reductions, but not to exceed two hundred thousand
dollars ($200,000.00) commencing January 1, 1989, and,
commencing January 1, 1994, one hundred fifty thousand
dollars ($150,000.00), for each calendar year, and does
not include any bonuses, overtime, pay in lieu of
vacation, pay while on layoff, severance pay, or other
extraordinary payments by the Company.
B. The two hundred thousand dollar ($200,000.00) amount
shall be adjusted at the same time and in such manner as
permitted under Code Section 415(d) and regulations
thereunder. The one hundred fifty thousand dollar
($150,000.00) amount shall be adjusted at the same time
and in such manner as permitted under Code Sections
401(a)(17), 415(d) and regulations thereunder. For all
other purposes of this Plan, compensation shall be
defined by the provisions of Internal Revenue Code
Regulation 1.415-2(d)(11)(i) and shall also include any
amount not includable in the gross income of an employee
under Code Sections 125, 402(e)(3), 402(h) and 403(b).
C. The family aggregation rules of Section 414(q) of the
Internal Revenue Code, as modified by Section 401(a)(17),
apply with respect to the requirement that the Plan must
limit the amount of contributions taken into account in
determining contributions. That is, the Plan must treat
the following family unit as a single employee with one
compensation to which the annual compensation limit under
the plan applies:
An employee who is either a five percent (5%) owner or is
both a highly compensated employee and one of the ten
(10) most highly compensated employees, such employee's
spouse, and any lineal descendants of such employee who
have not attained age nineteen (19) before the close of
the year. If the compensation for the family unit
exceeds the annual compensation limit, then the Plan must
prorate the limit among the members of the family unit in
proportion to each individual's compensation.
The family aggregation rules shall not apply effective
January 1, 1997.
3.3 Suspension of Contributions. A participant may suspend his compensation
reduction agreement as of the last day of any month by giving such notice
as shall be prescribed by the Com- mittee, and no contribution shall be
made during such suspension period. Such suspension may last indefinitely.
The participant may resume his compensation reduction agreement on the
first (1st) day of any month following the expiration of six (6) months
from the date his agreement was suspended, providing he shall then be
eligible to participate, by giving such notice as shall be prescribed by
the Committee.
3.4 Distribution Conditions. The balance in each partici- pant's elective
account shall be fully vested at all times and shall not be subject to
forfeiture for any reason. Amounts held in the participant's elective
account may not be distributable prior to the earlier of,
(1) his retirement, termination of employment or death;
(2) his attainment of age fifty-nine and one-half (59 1/2);
(3) termination of the Plan without establishment of a
successor Plan by the Company or an affiliated employer;
(4) the date of the sale by the Company to an entity that is
not an affiliated employer of substantially all the
assets, within the meaning of Code Section 409(d)(2),
with respect to a participant who continues employment
with the corporation acquiring such assets;
(5) the date of the sale by the Company or an affiliated
employer of its interest in a subsidiary to an entity
which is not an affiliated employer with respect to a
participant who continues employment with such sub-
sidiary; or
(6) proven financial hardship, subject to the limitations of
Section 3.5.
In the event that the dollar limitation provided for in Para-
graph 3.1 is exceeded, the Administrative Committee shall direct
the Trustees to distribute such excess amount, and any income
allocable to such amount, to the participant not later than April
15th following the close of the participant's taxable year. If
there is a loss allocable to such excess amount, the distribution
shall in no event be less than the lesser of the participant's
elective account or the amount of the contribution made for such
participant's elective account in the calendar year resulting from
his salary reduction agreement.
In the event that a participant is also a participant in
another qualified cash or deferred arrangement as defined in Code
Section 401(k), a simplified employee pension plan as defined in
Code Section 408(k), or a salary reduction arrangement within the
meaning of Code Section 3121(a)(5)(d), and the elective deferrals,
as defined in Code Section 402(g)(3), made under such other
arrangements and this Plan cumulatively exceed ten thousand dollars
($10,000.00) or such amount adjusted annually as provided in Code
Section 415(d) and regulations for such participant's taxable year,
the participant may, not later than March 1st following the close
of his taxable year, notify the Administrative Committee in writing
of such excess and request that his deferred compensation to this
Plan be reduced by an amount specified by the participant. Such
amount shall then be distributed in the same manner as provided in
the previous Paragraph.
3.5 Withdrawal, Extreme Financial Necessity. The Adminis-
trative Committee, in its sole discretion, may direct the Trustees
to distribute to any participant or his beneficiary up to one
hundred percent (100%) of the participant's elective account,
valued as of the most recent valuation date, in the case of proven
extreme financial necessity. Commencing January 1, 1988, such
distribution shall be limited solely to the participant's deferred
compensation without regard to any earnings on such deferred com-
pensation. Withdrawal under this section shall only be authorized
in the event of financial hardship resulting from accident to or
sickness of a participant or his dependents; or financial hardship
resulting from the establishing or preserving of the home in which
the participant resides, provided funds are not reasonably
available from other financial resources to the participant.
Furthermore, any withdrawal pursuant to the provisions of this
section shall be governed by the provisions of ARTICLE IX herein
regarding suspension of participation and forfeitures, except that
the period of suspension shall be twelve (12) months, and the
Administrative Committee's determination with respect to any
question herein shall be final. However, withdrawals pursuant to
this Paragraph may not be made by an individual who is an alternate
payee under a Qualified Domestic Relations Order and for whom an
account is being separately maintained, nor shall withdrawals
pursuant to this Paragraph be made by a former employee who was a
participant and who has not withdrawn all the value of his elective
account pursuant to Paragraph 10.4.
The Company and the Administrative Committee shall adopt
procedures necessary to implement the compensation reduction
elections provided for herein.
3.6 Compensation Reduction Limitations. To insure continued
qualification of the Plan, a test sometimes referred to as the
"actual deferral percentage test" must be met for each Plan year.
In order to meet the ADP test, it may be necessary to adjust
contributions made by the Company resulting from the compensation
reduction agreements entered into by certain of the participants.
In the event that the contribution ratios of the Plan do not
satisfy the test, the Administrative Committee shall adjust the
contributions resulting from the compensation reduction agreements
as follows effective January 1, 1997:
(a) Any distribution under this Paragraph shall be made on or
before the fifteenth (15th) day of the third (3rd) month
following the end of the Plan year, but in no event later
than the close of the following Plan year, which in this
case is a calendar year, and shall be determined in the
following manner:
(i) The dollar amount of excess contributions for
each highly compensated participant shall be
calculated.
(ii) The total of the dollar amounts in (i) shall
be determined.
(iii) The contributions resulting from the com-
pensation reduction agreement ("elective
contributions") of the highly compensated
participant with the highest dollar amount of
elective contributions shall be reduced by the
amount required to cause that highly com-
pensated participant's elective contributions
to equal the dollar amount of the elective
contributions of the highly compensated
participant with the next highest dollar
amount of elective contributions. This amount
shall be distributed to the highly compensated
participant with the highest dollar amount.
However, if a lesser reduction, when added to
the dollar amount already distributed under
this (iii) would equal the total excess
contributions, the lesser reduction amount
shall be distributed.
(iv) If the total amount distributed is less than
the total excess contributions, reductions
shall continue to be made in accordance with
(iii) until the total amount distributed
equals the total excess contributions.
(b) For purposes of this Paragraph, income means the gain or
loss allocable to excess contributions which shall equal
the sum of the allocable gain or loss for the Plan year
and the allocable gain or loss for the period between the
end of the Plan year and the date of distribution (gap
period). The income or loss allocable for the Plan year
and the gap period is calculated separately and is
determined by multiplying the income or loss for the Plan
year and gap period by a fraction. The numerator of the
fraction is the excess contributions made by the employee
for the Plan year, and the denominator is the total
account balance of the employee attributable to elective
contributions as of the end of the Plan year, reduced by
the gain allocable to such total amount for the Plan year
and increased by the loss allocable to such total amount
for the Plan year. The income allocable to excess
contributions for the period between the end of the Plan
year and the date of distribution shall be calculated in
the same manner by substituting "gap period" for "Plan
year" in the fraction.
3.7 Deferral Percentage Test.
(a) Maximum annual allocation: Effective January 1, 1997,
the actual deferral percentage for eligible highly
compensated employees for the Plan year bears a
relationship to the actual deferral percentage for all
other eligible employees for the preceding Plan year
which meets either of the following tests:
1. The actual deferral percentage for the highly
compensated participant group shall not be more
than the actual deferral percentage of the
nonhighly compensated participant group multiplied
by 1.25, or
2. The excess of the actual deferral percentage for
the highly compensated participant group over the
actual deferral percentage for the nonhighly
compensated participant group shall not be more
than two (2) percentage points or such lesser
amount determined pursuant to regulations to
prevent the multiple use of this alternative
limitation with respect to any highly compensated
participant. Additionally, the actual deferral
percentage for the highly compensated participant
group shall not exceed the actual deferral per-
centage for the nonhighly compensated participant
group multipled by two (2).
(b) For the purposes of this section, actual deferral
percentage means, with respect to the highly compensated
participant group and nonhighly compensated participant
group for a Plan year the average of the ratio, cal-
culated separately for each participant in such group, of
the amount of contribution allocated to each partici-
pant's account resulting from compensation reduction
agreements, unreduced by distributions made pursuant to
Paragraph 3.5 for such Plan year, to such participant's
compensation for such Plan year. In addition, for
purposes of this section, highly compensated participant
and non-highly compensated participant shall include any
employee eligible to enter into a compensation reduction
agreement whether or not such agreement was made, or
suspended under the provisions of this Plan.
(c) In the application of the tests referred to above, the
Plan shall take elective contributions into account for
the Plan year only if attributable to compensation that
would be received by the participant during the Plan
year, or earned during the Plan year and received within
two and one-half (2 1/2) months after the end of the Plan
year. Such contribution shall be taken into account for
a Plan year only if it is allocated to the participant's
account on a day within the Plan year.
3.8 Actual Contribution Percentage (ACP) Test. In addition
to the "actual deferred percentage test" referred to in Paragraph
3.6 above, the Plan must comply with the "actual contribution
percentage test" required by Section 401(m)(1) and (2) of the
Internal Revenue Code. Effective January 1, 1997, the actual
contribution percentage for eligible highly compensated employees
for the Plan year shall bear a relationship to the actual
contribution percentage for all other employees for the preceding
Plan year which meets either of the tests similar to those stated
in Paragraph 3.7(a). Rather than stating the test in this Plan,
the test is adopted by incorporating by reference herein the
provisions of said Section 401(m)(1) and (2) and the regulations
issued thereunder by the Internal Revenue Service.
(a) In the event the actual contribution ratios of the Plan
do not satisfy the test, the Administrative Committee
shall distribute any excess aggregate contributions in a
manner similar to that stated in Paragraph 3.6(a).
However, if the highly compensated participant is not
fully vested in the matching Company contribution and
income allocable to such contribution, the non-vested
amounts shall be forfeited pursuant to ARTICLE X and
applied pursuant to ARTICLE XI.
(b) For purposes of this Paragraph, income means the income
or loss allocable to excess aggregate contributions which
shall equal the sum of the allocable gain or loss for the
Plan year and the allocable gain or loss for the period
between the end of the Plan year and the date of distri-
bution (gap period). The income or loss allocable to
excess aggregate contributions for the Plan year and gap
period is calculated separately by multiplying the income
or loss allocable to matching contributions by a
fraction. The numerator of the fraction is the amount of
excess aggregate contributions made on behalf of the
employee for the Plan year or gap period. The denomi-
nator is the total account balance of the employee
attributable to matching contributions as of the end of
the Plan year or gap period reduced by the gain allocable
to such total amount for the Plan year or gap period and
increased by the loss allocable to such total amount for
the Plan year or gap period.
(c) All such distributions shall be made on or before the
fifteenth (15th) day of the third (3rd) month following
the end of the Plan year in which the excess aggregate
contributions were made, and no later than the end of the
following Plan year.
(d) Any distribution or forfeiture of excess aggregate
contributions for any Plan year shall be made on the
basis of the respective portions of such amounts
attributable to each highly compensated person.
(e) Matching contributions that are vested may not be
forfeited to correct excess aggregate contributions.
(f) Furthermore, with respect to the application of the
actual deferred percentage test and the actual
contribution percentage test, the multiple use of
alternative limitation rule may be applied. For this
purpose, proposed Regulation 1.401(m)-2 is hereby
incorporated by reference.
3.9 Combined Deferral Plans. For the purposes of this Plan,
a highly compensated participant and nonhighly compensated
participant shall include any employee eligible to participate in
this Plan whether or not such participation was elected, or any
eligible employee whose participation has been suspended pursuant
to Paragraphs 3.3 or 3.5.
For the purposes of this Plan, if two (2) or more plans which
include cash or deferred arrangements are considered one (1) plan
for the purposes of Internal Revenue Code Section 401(a)(4) or
Section 410(b), the cash or deferred arrangements included in such
plan shall be treated as one (1) arrangement.
For the purposes of this Plan, if a highly compensated
participant is a participant under two (2) or more cash or deferred
arrangements of the Company or an affiliated company, all such cash
or deferred arrangements shall be treated as one (1) cash or
deferred arrangement for the purpose of determining the deferral
percentage with respect to such highly compensated participant.
Notwithstanding the above, the determination and treatment of
elective contributions and "actual deferral percentage" of any
participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
3.10 Rollover Contributions.
A. Rollover of distribution from qualified plan. Effective
January 1, 1998, an employee of the Company may, in
accordance with procedures approved by the Administrative
Committee, contribute to the Plan, as a rollover con-
tribution, part or all of a cash distribution, or cash
proceeds from a sale of property included in a
distribution, that qualifies as an "eligible rollover
distribution", within the meaning of Code Section
402(c)(4), from a plan qualified under Code Section
401(a) in which the employee was a participant, provided,
however, that such amount shall be paid to the Trustees
on or before the sixtieth (60th) day after receipt by the
employee of the distribution from the other qualified
plan. An employee shall be entitled to make such a
rollover contribution regardless of whether the employee
has satisfied the service and age qualification require-
ments of Paragraph 2.1A(1) and (2).
Alternatively, the Trustee may receive such contribution
in a direct rollover from another qualified plan in which
the employee was a participant.
An employee shall not be permitted to make a rollover
contribution of any amount that is or has been in an
individual retirement account or an individual retirement
annuity, as defined in Code Section 408, regardless of
whether such amount originated in a qualified plan in
which the employee was a participant.
B. Accounting for and distribution of contributions. All
amounts received as rollover contributions pursuant to
Paragraph A of this section shall be credited to the
employee's "elective account" as if they were partici-
pant contributions pursuant to a compensation reduction
agreement. They shall be invested in the same way that
contributions under Paragraph 3.1 are invested, and they
shall be subject to the same rules as apply to contri-
butions under Paragraph 3.1 relating to withdrawal and
distributions. Rollover contributions shall be one
hundred percent (100%) vested at all times.
Nothwithstanding the preceding provisions of this section
(1) rollover contributions shall not be treated as
annual additions for purposes of Code Section 415;
and
(2) rollover contributions shall not be taken into
account for purposes of either the actual deferral
percentage test of Code Section 401(k)(3) or the
average compensation percentage test of Code
Section 401(m)(3).
ARTICLE IV
Matching Company Contributions
4.1 Rate of Contribution. The Company shall, with respect to
each participant, contribute to the Trustees as soon as practicable
after the end of each month, out of its current or accumulated
earnings and profits as shown on the books used in preparing its
annual reports, without regard to whether it has any current or
accumulated earnings and profits for federal income tax purposes,
a matching amount determined as follows:
(a) for employees for whom compensation reduction agreements
were in effect on December 31, 1997, and
(b) for employees hired by the Company in 1997 or earlier who
are not eligible to make compensation reduction agree-
ments as of December 31, 1997 but who choose to make
compensation reduction agreements when they first become
eligible to participate,
the Company shall match the participant's compensation reduction
$1.00 for each $1.00 deferred, with a maximum of six percent (6%)
of a participant's compensation.
(c) for all other employees, the matching amount contributed
by the Company shall vary depending on the employee's
years of employment [as defined in Paragraph 8.1], as
follows:
Matching Amount per
$1.00 Deferred
(Counting Deferrals
Years of Employment up to 6% of Compensation)
Less than 5 $0.50
5 - 9 0.75
10 or More 1.00
Company contributions with respect to a participant shall be
paid into the Trust and credited to such participant's account with
respect to Fund III.
4.2 Discretionary Profit Sharing Contribution. Beginning
with the Plan year ending December 31, 1998 and for each Plan year
thereafter, the Company may, at its discretion, make a contribution
to the Plan on behalf of each employee of the Company eligible to
participate in the Plan who is employed on the last day of the Plan
year based on profits regardless of whether the employee has
elected to make compensation reduction contributions. The profit
sharing contribution shall be in the form specified in Paragraph
4.3 and shall be accounted for in Fund III. The profit sharing
contribution shall be allocated to each employee in the proportion
that each employee's compensation (as defined in Paragraph 3.2) for
the Plan year bears to the total compensation for all employees for
the Plan year, but shall not exceed four percent (4%) of each
employee's compensation for the Plan year.
4.3 Form of Payment. The contributions of Kansas City Life
Insurance Company may be made in cash, in treasury stock or in
shares of authorized but unissued stock of Kansas City Life Insur-
ance Company. If the Company or any affiliated participating
company shall make its contribution in cash, the Trustees shall
have the authority to purchase shares, acting independently as to
when purchases are made, the number of shares to be purchased, the
prices to be paid, and the broker, if any employed, to effect the
purchases. The contributions of any participating affiliated
corporation shall be converted to stock in such manner as shall be
satisfactory to the Trustees and the respective companies from time
to time. For purposes of fixing the amount of contributions made
with shares of treasury stock, or shares of authorized but unissued
stock, and commencing with the valuation date of the Plan in June,
1982, such stock shall be valued at the average of its bid price on
the over-the-counter market for all business days following the
previous monthly valuation date. In the event the Company is
precluded from delivering such shares to the Trustees by law or
because of the unavailability of such shares, the Company's
contribution to the Trustees shall be in cash, and said cash shall
be invested until such time as shares of the Company stock shall be
available for purchase by the Trustees.
ARTICLE V
Investment of Contributions
5.1 Investment of Funds. Contributions to the Trust shall be
invested in accordance with the authority granted to the Trustees
pursuant to the provisions of this Plan and Trust. It is con-
templated that the contribution made by the Company from time to
time be in the form of shares of the Company stock, and that cash
contributions to the Trust, whether by the Company or the parti-
cipant, may be used for the purchase of Company stock.
5.2 Voting of Shares. The Trustees shall vote the shares of
stock of the Company for the respective accounts of the partici-
pants only in accordance with the directions of such participants,
which directions may be certified to the Trustees by the Committee,
or any agent designated thereby, provided such directions are
received by the Trustees at least five (5) days before the date set
for the meeting at which such shares are to be voted. Shares with
respect to which no such direction shall be received and the
fractional shares shall be voted by the Trustees in the same
proportions as are shares as to which voting instructions have been
received.
5.3 Tender Offer. Notwithstanding any language in this Plan
to the contrary, if the common capital stock of Kansas City Life
Insurance Company shall become the subject of a tender offer, the
Trustees may not take any action in response to such tender offer
except as otherwise provided herein.
Upon notice from the Trustees of the Plan, and subject to
their rules of procedure then issued, each participant may direct
the Trustees to sell, offer to sell, exchange or otherwise dispose
of the common capital stock of Kansas City Life Insurance Company
allocated to such participant in Fund II and Fund III. The
participant's direction may apply to either or both of said funds.
Any such action shall only be in accordance with the provisions,
conditions and terms of such tender offer and the provisions of
this Plan.
The Trustees shall sell, offer to sell, exchange or otherwise
dispose of the common stock allocated to Fund II and Fund III of
the participants with respect to which they have received
directions to do so pursuant to this ARTICLE.
To the extent to which participants do not instruct the
Trustees or do not issue valid directions to the Trustees to sell,
offer to sell, exchange or otherwise dispose of the common stock
allocated to their Fund II and/or Fund III, such participants shall
be deemed to have directed the Trustees that such shares shall
remain invested in said common capital stock.
If a participant's tender shall be accepted, the account or
accounts of the participant whose stock has been tendered shall be
reduced by the value of the stock so tendered. The date for
valuation shall be established by the Trustees, and in order to
facilitate such tender offers the Trustees may require special
valuation dates.
At such time as cash is received for the benefit of a
tendering participant, such cash shall be maintained in an escrow
account for the benefit of such participant until such time as the
Trustees shall determine that the reinvestment of the funds in the
accounts of Fund II and/or Fund III shall be appropriate. Interest
as earned by the Trustees in such escrow account shall be credited
to the accounts of those participants whose cash is held. The
availability of such cash for investment shall be the primary
objective of the Trustees in the selection of the escrow account.
ARTICLE VI
Allocation to and Evaluation of Participants' Accounts
6.1 Investment Funds. The value of all Trust assets shall be
determined on the basis of market values as of the last market
business day of each month, except that the Kansas City Life stock
shall be valued at the average of its bid price on the over-the-
counter market for all business days following the previous monthly
valuation date. Accounting procedures shall reflect the establish-
ment of at least four (4) separate funds, sometimes herein referred
to as Fund I, Fund II, Fund III and Fund IV, with the intent that
all participants' contributions, and any earnings thereon, will be
accounted for in Fund I, Fund II and Fund IV, and with the intent
that all Company contributions, and any earnings thereon, will be
accounted for in Fund III. Commencing January 1, 1988, the
Administrative Committee may elect to establish new or subaccounts
within the four (4) funds referred to herein for the purpose of
separately accounting for the participants' elective deferral
accounts and the Company's equivalent matching contributions.
Commencing September 1, 1993, five (5) additional Funds (and new or
subaccounts within them) shall be established, hereinafter called
Fund V, Fund VI, Fund VII, Fund VIII and Fund IX, for the purpose
of separately accounting for the participants' elective deferral
accounts and accounts attributable to the participants' contribu-
tions prior to January 1, 1988, and earnings thereon. Contributions
to Funds I, IV, V, VI, VII, VIII and IX shall be invested by the
Trustees in general investments pursuant to ARTICLE XIV. Contribu-
tions to Fund II shall be invested in shares of the Company stock
pursuant to Paragraph 6.5, and the contributions to Fund III shall
be in the form of shares of the Company stock pursuant to ARTICLE
IV. There shall be no guarantee regarding interest or gain, nor
shall there by an guarantee against loss of principal in any of
these Funds. It is intended that the Plan comply with Section
404(c) of the Employee Retirement Income Security Act of 1974.
6.2 Participants' Accounts. An account shall be established
for each participant with respect to Fund I, Fund II and with
respect to Fund III, Fund IV, Fund V, Fund VI, Fund VII, Fund VIII
and Fund IX or any other such fund that reasonable accounting
practices shall require be established. All Funds shall be main-
tained in United States dollars. A determination shall be made on
each monthly valuation date of the value with respect to each fund,
and shall reflect contributions made by both the participant and
the Company and any gains or losses of the funds. Each participant
shall be provided a statement of his accounts, reflecting the value
thereof, not less often than annually. Notwithstanding the
foregoing, the Company shall have the right to change the method of
accounting from time to time except that no participant's account
balances shall be reduced because of such change.
6.3 Selected Investments. Each participant shall have the
right to require the Trustees to invest all or a portion of his
monthly contribution in either the assets of Fund I, Fund II or
Fund IV. He shall initially indicate his choice at the time he
commences his participation, in accordance with the requirements of
the Committee, and he may subsequently request changes in accord-
ance with the provisions of Paragraph 6.4 herein. His
contributions shall so be invested under one of the following
options:
(a)One hundred percent (100%) in Fund I, one hundred percent
(100%) in Fund II or one hundred percent (100%) in Fund
IV.
(b) Thirty-three and one-third percent (33 1/3%) in each of
Funds I, II and IV.
(c) Fifty percent (50%) in each of any two (2) of Funds I, II
and IV.
Commencing September 1, 1993, a participant may require the
Trustees to invest all or a portion of his monthly contribution in
either the assets of Fund I, Fund II, Fund IV, Fund V, Fund VI,
Fund VII, Fund VIII or Fund IX. His contributions may be invested
one hundred percent (100%) in any one of these Funds, or, if he
wishes to invest in more than one (1) Fund, he shall specify the
percentage to be invested in each Fund. However, such percentage
must be a whole percentage, for example, one percent (1%), twenty-
six percent (26%) or eighty percent (80%), and no fractional
percentages will be permitted.
Each participant may make new investment choices for his
monthly contribution to be effective September 1, 1993 notwith-
standing any changes made in the prior twelve (12) months.
Thereafter, a participant may request changes not more often than
once a month. However, if a participant is investing all or a
portion of his monthly contribution in Fund II and transfers all or
a part of his Fund II account to another fund (as described in
Paragraph 6.4), monthly contributions to Fund II must cease until
at least six (6) months after the date of said transfer from Fund
II.
6.4 Investment Changes. Any participant shall have the right
from time to time, although not more often than once within a
twelve (12) month period, to require that the value of any one (1)
or more of his accounts be transferred for investment for his
account in any of Funds I, II or IV, provided that this right shall
not apply to Fund III, and, commencing January 1, 1977, no such
transfers shall be permitted from Fund IV to any other fund, and no
such transfers shall be permitted from Fund I to Fund II. Such
transfer shall also be governed by reasonable rules of the Adminis-
trative Committee regarding the timeliness of notice.
Commencing September 1, 1993, a participant shall have the
right, not more often than once a month and not withstanding any
transfers made in the twelve (12) months prior to September 1,
1993, to require that the value of any one (1) or more of his
accounts be transferred for investment for his account in any of
Funds I, II, IV, V, VI, VII, VIII or IX provided that such transfer
shall be made in whole percentages. This right shall not apply to
Fund III, and a participant that transferred the value of his
account from Fund II to another fund in the six (6) months prior to
September 1, 1993 may not transfer any amount into Fund II until at
least six (6) months after the date of said transfer from Fund II.
Thereafter, transfers to or from Fund II may occur only once in a
six (6) month period. All transfers shall be governed by reason-
able rules of the Administrative Committee regarding the timeliness
of notice.
6.5 Fund II Assets. A participant's contributions allocated
to Fund II pursuant to Paragraph 6.3 herein shall be invested in
shares of the Company stock subject to the limitations herein.
Such shares shall be purchased by the Trustees, acting indepen-
dently as to when purchases are made, the number of shares to be
purchased, the prices to be paid, and the broker, if any employed
to effect the purchases; provided however, that during any period
during which the Company or the Trustees are precluded from making
purchases of Kansas City Life Insurance Company shares by law, or
at any other time the Trustees may elect and the Company shall
agree, if permitted by law, the Trustees may purchase shares of the
Company's treasury stock or shares of its authorized but unissued
stock. Such stock shall be valued in accordance with Paragraph 4.2
herein. In the event the Company does not agree to sell its
treasury stock or authorized but unissued stock, and if the
Trustees are precluded from buying or are unable to buy such stock
on the market, the Trustees shall invest such contributions until
such time as shares of the Company stock shall be available for
purchase by the Trustees.
6.6 Dividend Reinvestment. Dividends and any other distri-
butions received by the Trustees with respect to the investments
allocated to Fund II and Fund III shall be invested in shares of
the Company stock subject to the provisions of Paragraphs 4.2 and
6.5 herein.
6.7 Fund IV Account and Additional Fund Accounts. Commencing
with the first (1st) valuation date in January, 1977, Fund IV shall
then and thereafter be placed on the unit valuation system, as
prescribed by Paragraph 6.2 herein, and the following amended
provisions of this Paragraph 6.7 shall also then apply. This fund
shall now be maintained in United States dollars. Commencing
January 1, 1988, Fund IV and commencing September 1, 1993, Fund V,
Fund VI, Fund VII, Fund VIII and Fund IX shall be invested by the
Trustees in general investments pursuant to ARTICLE XIV. There
shall be no guarantee regarding interest, nor shall there be any
guarantee against loss of principal. All gains or losses, if any,
shall be allocated to the accounts of the participants in the Funds
when realized.
ARTICLE VII
Allocation of Fiduciary Responsibility
7.1 Fiduciaries. The fiduciaries shall have only those
specific powers, duties, responsibilities and obligations as are
specifically given them under this Plan. The Company shall have
the sole responsibility for making the contributions required by
the provisions of ARTICLE IV, shall have the sole authority to
appoint and remove the Trustees, members of the Administrative
Committee, and to amend or terminate, in whole or in part, this
Plan and Trust.
7.2 Administration. The Administrative Committee shall have
the sole responsibility for the administration of this Plan, which
responsibility is specifically described in ARTICLE XII herein.
7.3 Trustees. The Trustees shall have the sole responsi-
bility for the administration and management of the assets held
pursuant to this Plan and Trust, all as specifically provided for
herein.
7.4 Duties. Each fiduciary warrants that any direction
given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan and Trust, authorizing
or providing for such direction, information, or action. Further-
more, each fiduciary may rely upon any such direction, information,
or action of another fiduciary as being proper under this Plan, and
is not required herein to inquire into the propriety of any such
direction, information, or action. It is intended under this Plan
that each fiduciary shall be responsible for the proper exercise of
its own powers, duties, responsibilities, and obligations pursuant
to the Plan and shall not be responsible for any act or failure to
act of another fiduciary. No fiduciary guarantees the Trust fund
in any manner against investment loss or depreciation in asset
value.
ARTICLE VIII
Vesting
8.1 Vesting of Company Contributions. Commencing January 1,
1988, the value of a participant's account with respect to Company
contributions made for his benefit shall be vested, to the extent
of the percentage applicable, upon the valuation date of the month
in which the participant completes the years of employment with the
Company in accordance with the following schedule:
Years of Percentage
Employment Vested
1 0
2 0
3 30
4 40
5 60
6 80
7 100
A "year of employment" shall be deemed to mean twelve (12) con-
secutive monthly periods of employment with the Company, dating
from the commencement of employment, during which he or she shall
complete at least one thousand (1,000) hours of employment.
Beginning January 1, 1998, a "year of employment" shall mean one
thousand (1,000) hours of employment during the calendar year. An
employee who completes one thousand (1,000) hours of employment in
the twelve (12) month period beginning with his date of employment
in 1997 (or an anniversary of his date of employment if he began
his employment before 1997) and also completes one thousand (1,000)
hours of employment in the 1998 calendar year will be credited with
two (2) years of employment for purposes of this Paragraph. How-
ever, years of employment of an employee of Old American Insurance
Company prior to November 1, 1991 shall not be taken into account
for purposes of this ARTICLE VIII. If an employee's employment
with either Kansas City Life Insurance Company or one of its
affiliated corporations shall be terminated, and he is immediately
employed by any other of such affiliated corporations, his
employment shall be regarded as continuous and treated as if under
one (1) employer for vesting purposes.
In the event a participant shall be terminated from employment
with the Company or any of its affiliated corporations, by reason
of death or retirement, the value of his or her account with
respect to Company contributions shall be one hundred percent
(100%) vested upon the valuation date of the month in which such
death or retirement occurs.
The value of a participant's account with respect to his or
her personal contributions, and accounted for in Fund I, Fund II,
Fund IV, Fund V, Fund VI, Fund VII, Fund VIII and Fund IX shall be
fully vested at all times.
8.2 Vesting of Company Contributions upon Termination of
Plan. Notwithstanding any other provision hereof, the full value
of a participant's account, including not only his own contribu-
tions and the earnings thereon, but the contributions of the
Company, and any earnings thereon, shall be fully vested in him
when and if the Plan shall at any time be terminated for any
reason, or upon the complete discontinuance of Company contribu-
tions hereunder, or upon termination of employment of a group of
participants constituting a partial termination of the Plan.
ARTICLE IX
Account Withdrawals
9.1 Optional Withdrawals. Commencing January 1, 1988, a
participant may elect to withdraw at any time all or any part of
the value of his accounts with respect to Fund I, Fund II and Fund
IV attributable to the participant's contributions made prior to
January 1, 1988, and, commencing September 1, 1993, a participant
may also elect to withdraw at any time all or any part of the value
of his accounts with respect to Fund V, Fund VI, Fund VII, Fund
VIII or Fund IX attributable to the participant's contributions
made prior to January 1, 1988. However, no withdrawal of any part
of Company matching contributions allocated to his account with
respect to Fund III shall be permitted except as provided in
Paragraph 9.2; and further provided that any withdrawal of a
participant's "elective account" referred to in Paragraph 3.1 shall
be subject to the restrictions of Paragraph 3.5. However, with-
drawals pursuant to this Paragraph may not be made by an individual
who is an alternate payee under a Qualified Domestic Relations
Order and for whom an account is being separately maintained. No
amounts attributable to the Company's profit sharing contributions
may be withdrawn under this ARTICLE IX.
9.2 Withdrawals for Financial Need. Commencing January 1,
1988, no withdrawal of funds for financial need shall be made
except as permitted pursuant to Paragraph 3.5 herein.
9.3 Penalty for Withdrawal. Commencing January 1, 1985, any
participant who withdraws funds under Paragraph 9.1 will not be
permitted to make contributions for a period of six (6) months from
the date of withdrawal. All amounts withdrawn may be replaced, but
not less than all, within five (5) years of the date of withdrawal.
No forfeiture from his account with respect to Fund III shall occur
as a result of any such withdrawals effected after January 1, 1976
if he shall be at least fifty percent (50%) vested. If the
participant who makes a withdrawal is less than fifty percent (50%)
vested at the time of such withdrawal, he shall he shall forfeit
the dollar amount from his account with respect to Fund III
equivalent to fifty percent (50%) of the dollar amount his accounts
with respect to Fund I, Fund II and Fund IV (and, commencing
September 1, 1993, Fund V, Fund VI, Fund VII, Fund VIII and Fund
IX) are reduced by virtue of said withdrawal, provided however, the
amount so forfeited from Fund III shall not exceed the total dollar
value of said participant's nonvested funds determined pursuant to
Paragraph 8.1 herein. The amount subject to such forfeiture shall
be set aside by the Trustees in an interest bearing account. If
the participant returns the full amount of his withdrawal to the
Trustees within five (5) years of the date of withdrawal, the full
value of the amount initially set aside in the interest account
shall thereupon be reinvested and restored to his account in Fund
III. The interest earned on such amount shall be treated as
interest earnings of Fund III for the benefit of all participants
in such Fund. In the event the amount withdrawn is not returned
within the time period referred to herein, the amount subject to
forfeiture shall be treated as a forfeiture in accordance with
Paragraph 11.1 of this Plan.
9.4 Time and Method of Payment. All payments under this
ARTICLE shall be made as soon as practicable after the next monthly
valuation following the giving of such written notice as shall be
prescribed by the Committee with respect to withdrawals pursuant to
Paragraph 9.1, or a decision of the Committee as provided with
respect to withdrawals pursuant to Paragraph 3.5, and shall be paid
either in cash or in shares of Kansas City Life Insurance Company
stock pursuant to this Plan. The funds shall reflect the value of
any withdrawal pursuant to the provisions of this ARTICLE IX.
9.5 Elective Account Loans. Commencing January 1, 1988, a
participant may request a loan to be made from his or her elective
account or accounts under such conditions and terms as shall be
approved from time to time by the Adminstrative Committee. Any
loan made pursuant to this Paragraph, when added to the outstanding
balance of all other loans made to the participant, shall be
limited to the lesser of:
(a) Fifty thousand dollars ($50,000.00) reduced by the excess
of the highest outstanding balance of loans to the parti-
cipant during the twelve (12) month period ending on the
day before the date on which such loan is made, over the
outstanding balance of loans to the participant on the
date on which such loan is made, or
(b) The greater of ten thousand dollars ($10,000.00) or one-
half (1/2) of the value of the participant's elective
accounts as of the valuation date coincident with or next
preceding the date as of which the loan is calculated.
Any such loan shall be made for a period not to exceed five
(5) years, and shall provide for a level amortization with payments
to be made not less often than quarterly. However, loans used to
acquire a primary residence of the participant may provide for
periodic repayments over a reasonable period of time that may
exceed five (5) years.
Any loan made pursuant to this Paragraph shall result in the
reduction of the participant's accounts reflecting the dollar
amount loaned based on the monthly valuation on which such loan is
effected. A reasonable rate of interest may be charged, as
established by the Administrative Committee, and such interest
payments shall be treated as earnings of the borrower's account.
Minimum loan repayments shall be made by payroll deduction or
deduction from disability payments received from the Kansas City
Life Disability Plan or Sunset Life Disability Plan. The
Administrative Committee shall have the right to deny a parti-
cipant's loan request. Loans shall become immediately due and
payable in full upon the occurrence of one of the distribution
events described in ARTICLE X. However, loans pursuant to this
Paragraph will not be made to an individual who is an alternate
payee under a Qualified Domestic Relations Order and for whom an
account is being separately maintained, or to a former employee who
was a participant and who has not withdrawn all the value of his
accounts pursuant to Paragraph 10.4 unless the former employee is
a party in interest as defined in ERISA Section 3(14) with respect
to the Plan.
ARTICLE X
Distributions
10.1 Distribution of Full Value of Accounts. A participant
shall be entitled to the full value of all of his accounts in all
Funds upon termination of his employment by reason of death or
retirement, in which event such accounts of such participant shall
be fully vested in him.
10.2 Termination. If prior to the termination of the Plan or
the complete discontinuance of Company contributions hereunder, in
either of which event a participant's accounts shall be fully
vested, an employee participant's termination of employment occurs
for any reason other than one of the events specified in Paragraph
10.1, and if such employee shall not thereafter be employed by any
affiliated corporation of the Company, such participant shall then
be entitled to receive his or her one hundred percent (100%) vested
interest in the full value of his account with respect to Fund I,
Fund II, Fund IV, Fund V, Fund VI, Fund VII, Fund VIII and Fund IX
and that percentage of his or her vested interest in the value of
his account with respect to Fund III as authorized by Paragraph 8.1
herein.
Any amount not vested at the time of such termination shall
immediately be forfeited. Such forfeited amount shall then be used
to reduce the amount of Company contributions in accordance with
Paragraph 11.1 herein. If the terminated participant returns to
his status of employment with the Company or any of its affiliated
corporations, and is otherwise fully qualified to participate, and
if the terminated participant repays, before the earlier of five
(5) years after the first date on which the participant is re-
employed or the close of the first period of five (5) consecutive
one (1) year breaks in service commencing after the withdrawal, the
amount of the distribution, if any, he received from his account
with respect to Fund III at the time of his termination of
employment, the Company shall restore the forfeited amount, without
any gain or loss, to his Fund III account on the valuation date of
the month in which such repayment occurs. The repaid amount shall
also be similarly restored to an accounted for in Fund III.
10.3 Method of Distribution. All distributions provided
under this ARTICLE upon termination of employment, unless elected
otherwise pursuant to the written request of the participant, or
the written request of said participant's beneficiary if said
participant shall not be living, shall be in the form of a lump sum
payment. If the payment is made as a result of the death of the
participant, the payment shall be made to the surviving spouse of
the participant, if any, unless the participant and the spouse have
requested a distribution in any other form as to any other benefi-
ciary. Any such request shall be written and on forms prescribed
by the Administrative Committee and made within sixty (60) days of
termination of employment. Requests may be made for distribution
in one (1) of the following methods:
(a) By the purchase of a nontransferable annuity providing
for retirement payments to be made in equal monthly
installments for a period of one hundred twenty (120)
months certain and for the remainder of his lifetime.
Any annuity contract must comply with the minimum
distribution incidental benefit requirements of Internal
Revenue Code Proposed Regulation 1.401(a)(9)-2 hereby
incorporated by reference. If the participant is
married, the annuity shall be a single premium non-
transferable annuity contract in the form of a fifty
percent (50%) contingent annuity under which the
participant's spouse is named as the contingent annuitant
unless the participant elects some other form in
accordance wth Subparagraph (c) below with the consent of
the spouse.
(b) In the event that a lump sum payment shall be requested,
the party entitled thereto shall have the further right
to require that shares of Kansas City Life Insurance
Company stock be issued to him as a part of said payment,
in accordance with the following formula: He shall have
the right to withdraw the number of said shares equal to
the value that is derived by multiplying the percentage
that his account in Fund III divided by the total of all
accounts in Fund III equals, by the value of all Kansas
City Life Insurance Company stock in Fund III. He shall
also be entitled to any such stock purchased for his
account in Fund II, the amount thereof to be determined
in accordance with the above formula as applied to Fund
II. He shall also be entitled to receive the number of
shares of such stock which can be purchased with the
value of his account with respect to Fund I Fund IV, Fund
V, Fund VI, Fund VII, Fund VIII and Fund IX.
(c) The Administrative Committee of the Plan, or its
delegate, shall provide a participant who is entitled to
receive a joint and survivor annuity, the information in
nontechnical language, which will inform him of the
availability of the election and a general description of
the joint and survivor annuity, as well as an explanation
of the circumstances in which it will be provided if a
contrary election is not made. The eligible participant
shall also be advised of the dollar difference resulting
from his election and that he may obtain additional
information upon request. The participant shall be
permitted to make his election during a period of at
least ninety (90) days after he is furnished with the
necessary information and which ends prior to the
commencement of benefits. The participant may waive this
requirement (with any applicable spousal consent) if the
distribution commences more than seven (7) days after
such explanation is provided. If the participant
requests additional information, the election period must
include at least ninety (90) days after such information
is furnished. The Committee, however, may provide that
the additional information must be requested within sixty
(60) days after the original information as to the
election is first furnished to the participant. The
election is to be witnessed by a plan representative or
notary public, acknowledging the effect of the election
and any specific non-spouse beneficiary, including any
class of beneficiary or any contingent beneficiary
designated under the form of benefit elected. Any
spousal consent shall be irrevocable unless revocation
shall be agreed to by the participant. It is intended
that no election period shall extend beyond the par-
ticipant's retirement date.
10.4 Commencement of Distribution. All distributions shall
be made or commenced to be made as soon as practicable after the
valuation date coincident with or next following the occurrence of
one of the distribution events described in this ARTICLE X. Upon
written notice to the Committee no later than the end of the
calendar month following the month in which termination occurs, a
participant (or, in case of death, his beneficiary), entitled to a
lump sum payment may make an irrevocable election to receive the
value of his distribution on January 31st of the next succeeding
calendar year. Alternatively, the participant may choose not to
withdraw any of his vested accounts when one of the distribution
events occurs, and later elect to have the distribution made upon
written notice before a subsequent valuation date. However, unless
the participant chooses to receive the distribution in the form of
an annuity pursuant to Paragraph 10.3(a), only a full and complete
distribution of the vested accounts will be allowed whether the
participant withdraws his vested accounts at the time a distribu-
tion event occurs or at some later date. No partial withdrawals
shall be permitted. Notwithstanding, no distribution of three
thousand five hundred dollars ($3,500.00) [five thousand dollars
($5,000.00) beginning January 1, 1998] or more shall be made to a
participant unless the participant shall have consented in writing
to such distribution, all in accordance with the provisions of
Internal Revenue Code Section 411 and related regulations.
10.5 Valuation. The value of a participant's accounts with
respect to Fund I, Fund II, Fund III, Fund IV, Fund V, Fund VI,
Fund VII, Fund VIII and Fund IX upon termination shall be the value
on the valuation date in January of the year elected pursuant to
Paragraph 10.4, except that the valuation of any shares of stock of
Kansas City Life Insurance Company shall be determined by the
provisions of Paragraph 4.2 herein. If such election is not so
made, such value shall be determined on the valuation date coin-
cident with or next following the date the participant (or, in case
of death, his beneficiary) elects to receive his distribution, or
the receipt by the Trustees of notice of said participant's ter-
mination, whichever shall occur later.
10.6 Facility of Payment. If the Committee shall receive
evidence satisfactory to it that a participant, retired participant
or beneficiary is physically or mentally incompetent to receive any
payment which shall be due hereunder and to give a valid release
therefor and that another person or an institution is then main-
taining or has custody of such participant, retired participant, or
beneficiary, and that no guardian, committee or other represen-
tative of the estate of such participant, retired participant or
beneficiary, shall have been duly appointed, the Committee may, at
its option, make payments otherwise payable to such participant,
retired participant or beneficiary, to such other person or
institution, and the release of such other person or institution
shall be valid and complete discharge for such payments.
10.7 Beneficial Designation. Any participant or retired
participant shall have the right to designate a new beneficiary at
any time by filing with the Committee a written request for such
change, but any such change shall become effective only upon
receipt of such request by the Committee, and provided that any
change of beneficiary to a person other than a surviving spouse
must be consented to in writing by said participant's spouse. Upon
receipt by the Committee of such request the change shall relate
back to and take effect as of the date such participant signs such
request whether or not such participant is living at the time the
Committee receives such request.
If there be no designated beneficiary living or in effect at
the death of such participant when any payment hereunder shall be
payable to the beneficiary, then such payment shall be made as
follows: To such participant's wife or husband, if living; if not
living, to such participant's then living lineal descendants, in
equal shares, per stirpes; if none survives, to such participant's
surviving parents, equally; if neither survives, to such partici-
pant's executors or administrators.
10.8 Fractional Shares. With respect to any distribution of
stock pursuant to the provisions of this Plan, a participant shall
be entitled to receive the number of whole shares which the value
of his account equals and the balance of said account value in
cash.
ARTICLE XI
Application of Forfeitures
11.1 Any of the assets attributable to Company contributions,
reflected in the value of Fund III, which shall be forfeited by a
participant with respect to his account in Fund III pursuant to the
provisions of Paragraphs 9.3 and 10.2 herein, shall be applied, as
soon as practicable, to reduce the amount of Company contributions
required by this Plan. Shares of Kansas City Life Insurance
Company stock applied to reduce the amount of any Company contri-
bution for any month shall be valued in accordance with the
procedures set forth hereinbefore on the date of such application.
ARTICLE XII
Administrative Committee
12.1 Membership. The Administrative Committee, sometimes
herein referred to as the "Committee", shall consist of a number of
persons, not less than three (3) nor more than five (5), designated
by the Executive Committee of the Company, who shall serve terms of
one (1) year or until their successors are designated, and said
Committee shall have the responsibility for the general adminis-
tration of the Plan and for carrying out the provisions of the Plan
in accordance with its terms. The Committee shall have absolute
discretion in carrying out its responsibilities.
12.2 The Committee may appoint from its members such com-
mittees with such powers as it shall determine; may authorize one
(1) or more of its number or any agent to execute or deliver any
instrument or make any payment on its behalf; and may utilize
counsel, employ agents and provide for such clerical and accounting
services as it may require in carrying out the provisions of the
Plan.
12.3 The Committee shall hold meetings upon such notice, at
such place or places, and at such time or times as it may from time
to time determine.
12.4 The action of a majority of the members expressed from
time to time by a vote in a meeting or in writing without a meeting
shall constitute the action of the Committee and shall have the
same effect for all purposes as if assented to by all members of
the Committee at the time in office.
12.5 No member of the Committee shall receive any compensa-
tion for his services as such, and, except as required by law, no
bond or other security shall be required of him in such capacity in
any jurisdiction.
12.6 Subject to the limitations of this Plan and Trust, the
Committee from time to time shall establish rules or regulations
for the administration of the Plan and the transaction of its
business. The Committee shall have full and complete discretionary
authority to construe and interpret the Plan and decide any and all
matters arising hereunder, except such matters which the Executive
Committee of the Company from time to time may reserve for itself,
including the right to remedy possible ambiguities, inconsistencies
or omissions. All interpretations, determinations and decisions of
the Committee or the Executive Committee of the Company in respect
of any matter hereunder shall be final, conclusive and binding on
all parties affected thereby. The Committee shall, when requested,
submit a report to the Executive Committee of the Company giving a
brief account of the operation of the Plan and the performance of
the various funds and accounts established pursuant to the Plan.
12.7 Claims Procedure. The Administrative Committee shall
have full and complete discretionary authority to make all
determinations as to the right of any person to a benefit. Any
denial by the Committee of a claim for benefits under this Plan by
a participant or a beneficiary shall be stated in writing by the
Committee and delivered or mailed to the participant or the
beneficiary, whichever is appropriate; and such notice shall set
forth the specific reason for the denial, written to the best of
the Committee's ability in a manner that may be understood without
legal or actuarial counsel. In addition, the Committee shall
provide a reasonable opportunity to any participant or beneficiary
whose claim for benefits has been denied for a review of the
decision denying the claim.
12.8 Any member of the Committee may resign by giving notice
to the Executive Committee at least fifteen (15) days before the
effective date of his resignation. Any Committee member shall
resign upon request of the Executive Committee. The Executive
Committee shall fill all vacancies on the Committee as soon as is
reasonably possible after a resignation takes place, and until a
new appointment takes place, the remaining members of the Committee
shall have authority to act, if approved by either a majority of
the remaining members or by two (2) members, whichever number is
lesser.
ARTICLE XIII
Amendment and Termination
13.1 Amendment. Kansas City Life Insurance Company reserves
the right at any time, and from time to time, and retroactively if
deemed necessary or appropriate to conform with governmental
regulations or other policies, to modify or amend, in whole or in
part, any or all of the provisions of this Plan and Trust by
adoption of a written resolution by the Board of Directors of
Kansas City Life Insurance Company, or the Executive Committee of
the Board of Directors; provided that no such modification or
amendment shall make it possible for any part of the contributions
of the Company, or any other funds of the Trust, to be used for, or
diverted to, purposes other than for the exclusive benefit of
participants, retired participants, or their beneficiaries. Except
as may be required to conform with governmental regulations, no
such amendment shall adversely affect the rights of any participant
with respect to contributions made by him prior to the date of such
amendment.
13.2 Termination. This Plan and Trust is purely voluntary on
the part of the Company, and Kansas City Life Insurance Company
reserves the right to terminate the Plan and the Trust provided
herein by adoption of a written resolution by the Board of
Directors of Kansas City Life Insurance Company, or the Executive
Committee of the Board of Directors. Upon termination of, or upon
the complete discontinuance of contributions within the meaning of
Section 411(d)(3) of the Internal Revenue Code, participant's
accounts shall become fully vested and nonforfeitable and distri-
bution shall be made as promptly as possible in accordance with the
directions of the Committee.
13.3 Merger. This Plan and Trust shall not be merged or
consolidated with, nor shall any assets or liabilities be trans-
ferred to any other Plan or Trust, unless the accrued benefit of
each participant, if the Plan and Trust were terminated immediately
after such action, would be equal to or greater than the accrued
benefit to which such participant would have been entitled if this
Plan and Trust had been terminated immediately before such action.
ARTICLE XIV
The Trust
14.1 Number of Trustees. There shall be three (3) Trustees
for this Trust with the Trustees hereinbefore named being the
original Trustees.
14.2 Trustees shall Receive Sums Paid. The Trustees shall
accept and receive all sums of money paid to them from time to time
by the Company, and shall hold, invest, reinvest, manage and admin-
ister such monies and the increment, increase, earnings and income
thereof as a Trust for the exclusive benefit of the employees and
agents participating in the Plan, and their beneficiaries. All
income and earnings of the Trust shall be accumulated by the
Trustees and by them held, invested and reinvested as a part of the
principal of the said Trust.
14.3 Investment of Funds.
(a) Except as hereinafter provided with respect to the cash
reserve, the Trustees shall invest and reinvest the prin-
cipal and income of the Trust in their discretion in such
securities, common and preferred stocks, real estate
mortgages, debentures, bonds, promissory notes, real
estate, real estate improvements, leaseholds or any other
income-producing properties or securities, real or
personal, within or without the State of Missouri, and
other investments as the Trustees shall, after investi-
gation, believe to be sound and suitable investments for
this Trust, although the same may not be of the character
permitted for Trustee's investments by the Laws of the
State of Missouri. The Trustees are specifically
empowered to invest the Trust assets in the capital stock
of Kansas City Life Insurance Company, including but not
limited to, its treasury stock.
(b) The Trustees may retain in cash so much of the Trust
assets as they may deem advisable.
(c) The Trustees may sell property held by the Trust at
either public or private sale, for cash or on credit, at
such times as they may deem appropriate; they may
exchange such property, and they may grant options for
the purchase or exchange thereof.
(d) The Trustees may consent to and participate in any plan
of reorganization, consolidation, merger, extension or
other similar plan affecting property held by the Trust;
they may consent to any contract, lease, mortgage,
purchase, sale or other action by any corporation
pursuant to any such plan; they may accept and retain
property issued under any such plan, even though it would
not be eligible as a new investment under the provisions
of this Section.
(e) The Trustees may deposit property held in the Trust with
any protective, reorganization or similar committee, and
may delegate discretionary power thereto to pay its
reasonable share of such committee's expenses and com-
pensation and any assessments levied with respect to any
property so deposited.
(f) The Trustees may exercise all conversion and subscription
rights pertaining to property held in the Trust.
(g) The Trustees may exercise all voting rights with respect
to property held in the Trust, and in connection there-
with grant proxies discretionary or otherwise, all in
accordance with the provisions of this Plan and Trust.
(h) The Trustees may cause securities and other property to
be registered and held in their names, the name of any
one (1) of them, or in the name of their nominee.
(i) The Trustees may borrow money for the purposes of the
Trust, and pledge or mortgage securities or other assets
owned by the Trust as security for the payment thereof.
(j) The Trustees may compromise, compound and settle any debt
or obligation due to or from them as Trustee; they may
reduce the rate of interest on any obligation due them as
Trustee; they may extend the time of payment of both
interest and principal, or otherwise modify the terms of
any obligation due them as Trustee; upon default of any
obligation due them as Trustee, they may foreclose or
otherwise enforce any obligation belonging to the Trust.
(k) The Trustees may generally do all such acts, execute all
such instruments, take all such proceedings and exercise
all such rights and privileges with relation to property
belonging to the Trust as if the Trustees were the
absolute owners thereof.
14.4 Approval of Investments. Before making any new invest-
ment or reinvestment of any funds of this Trust, the Trustees shall
submit to the Executive Committee of the Company, or its designated
subcommittee, a list of such securities in which it proposes to
invest such funds and the amount proposed to be invested in each
security, and the Trustees shall proceed to purchase, or refrain
from purchasing, such securities in accordance with the acceptance
or rejection, in whole or in part, of such proposals by the
Executive Committee of the Company, or its designated subcommittee.
Acceptance or rejection of such proposals, or any of them by the
said Committee, shall be signified in writing and delivered to the
Trustees within thirty (30) days of the submission of such
proposals by the Trustees, provided however, that if no written
acceptance or rejection of such proposals, or any of them, shall be
so delivered by the said Committee within the time herein limited
therefor, the Trustees shall be warranted and protected in assuming
that all of the proposed investments which have not been specifi-
cally rejected as aforesaid, meet with the complete approval of
said Executive Committee or its designated subcommittee.
14.5 Cash Reserve. The Trustees may maintain a cash reserve
in such amount as to provide for current distribution of benefits
under the Plan. Such cash reserve may consist of uninvested
contributions of the Company and participants in the Plan, or of
the proceeds of the sale of investments of the Trust. All of the
funds held in such cash reserve as well as all funds and securities
and assets belonging to the Trust shall be safely kept by the
Trustees on deposit or in the vaults of a bank or trust company
selected and designated by the Board of Directors or the Executive
Committee of the Company.
14.6 Disbursement of Funds. Disbursement of the funds of
this Trust shall be made by the Trustees only to or for the benefit
of the participants in the Plan or their beneficiaries, and only at
the time, in the amount and in the manner prescribed in written
instructions of the Administrative Committee delivered by such
Committee to the Trustees. The Trustees are empowered to sell
securities belonging to the Trust to meet said disbursements when
the cash reserve is sufficient.
14.7 Instructions to Trustees. The Trustees shall not be
obligated or required to determine whether any instructions issued
to them by the Administrative Committee are in fact so issued in
accordance with the terms of the Plan or the powers and duties
thereunder of said Committee.
14.8 Fiduciary Insurance. The Trustees or the Administrative
Committee shall have the right to purchase insurance on behalf of
themselves or anyone acting in a fiduciary capacity with respect to
the Plan and Trust, to cover liability or losses occurring by
reason of the act or omission of a fiduciary, if such insurance
permits recourse by the insurer against the fiduciary in the case
of a breach of a fiduciary obligation by such fiduciary.
14.9 Accounting by Trustees. Each year the Trustees shall
render to the Company an account of their administration of the
Trust for the year ending on the preceding 31st of December. The
written approval of said account by the Board of Directors or the
Executive Committee of the Company shall, as to all matters and
transactions stated therein or shown thereby, be final and binding
upon all persons who are then or who may thereafter become
interested in this Plan and Trust.
14.10 Compensation. No Trustee shall receive any compensa-
tion for his services as such Trustee. In the administration of
said Trust the Trustees, if they deem it advisable, may employ an
executive director, secretary or treasurer and fix reasonable
compensation therefor, and a Trustee may act as such executive
director, secretary or treasurer and receive the compensation so
fixed. The Trustees may in their discretion employ clerical help,
actuaries, accountants, attorneys or other necessary personal
services of a person or corporation as may be necessary to properly
administer, defend and protect the Trust, and reasonable compensa-
tion for said services may be paid by the Trustees from the Trust
in the event the Company does not elect to pay for such services.
Any taxes that may be levied against said Trust shall be paid by
the Trustees from the Trust assets after liability for said taxes,
if any, has been established, and in determining the liability for
taxes the Trustees are specifically authorized to use their own
discretion in contesting taxes claimed to be due against said
Trust, and said Trustees may employ counsel for such purposes and
pay said counsel fees from the Trust assets in the event the
Company does not elect to pay said costs and fees.
14.11 Trustees and Vacancies. The Trustees administering
this Trust shall at all times be Officers of the Company, and any
Trustee may at any time be removed from the office of Trustee, with
or without cause, by the Board of Directors or the Executive
Committee of the Company. The Trustees named herein shall serve as
such Trustees until their resignation, death or removal by the
Board of Directors or the Executive Committee of the Company. When
any Trustee ceases to be an Officer of the Company he automatically
ceases to be a Trustee. Resignation of a Trustee shall be by
written notice given to the Board of Directors or the Executive
Committee of the Company. Whenever a vacancy occurs by resigna-
tion, death or removal of one (1) or more of the Trustees, the
Board of Directors or the Executive Committee shall promptly fill
said vacancy or vacancies so created by naming a successor Trustee
or successor Trustees possessing the qualifications herein
prescribed. All successor Trustees shall have the same powers in
connection with said Trust as the initial Trustees have, and they
shall be subject to the same limitations and directions as
prescribed herein for the initial Trustees.
14.12 Rules. The Trustees may make proper rules for carrying
out the purposes of the Trust, and may amend said rules from time
to time. A majority of the Trustees shall constitute a quorum, and
the action taken by a quorum shall be controlling and shall be
deemed the act of the Trustees. The Trustees may designate any one
(1) of their number to act as chairman or presiding officer. Any
one (1) of the Trustees shall be and is hereby authorized to affix
his signature as the signature of all of the Trustees when such may
be desirable in the performance of their duties pursuant hereto.
This Plan and Trust shall be construed and enforced according to
the Laws of the State of Missouri, and all provisions thereof shall
be administered according to the laws of such state. Any suit at
law or in equity brought against the Trustees or the Company by any
person, firm or corporation, including the participants in the
Plan, must be first instituted in Jackson County, Missouri, which
County and State is the situs of the parties hereto and the only
jurisdiction within which this Plan and Trust is to be administered
or located.
ARTICLE XV
General Provisions
15.1 Expenses. The Company shall pay all expenses incurred
in administering the Plan and managing the Trust assets. The
Company shall not pay any brokerage fees, commissions, stock
transfer taxes and other charges and expenses in connection with
the purchase and sale of securities under the Plan.
15.2 Source of Payment. Benefits pursuant to the Plan shall
be payable only out of the assets of the Trust or pursuant to any
qualified nontransferable annuity purchased pursuant to the
provisions of ARTICLE X. No person shall have any right under the
Plan with respect to the assets of the Trust, or against any
Trustee, insurance company, or the Company, except as specifically
provided for herein.
15.3 Inalienability of Benefits. The interest hereunder of
any participant, retired participant or beneficiary, except as may
be required by a Qualified Domestic Relations Order defined in
Section 414(p) of the Internal Revenue Code, shall not be
alienable, either by assignment or by any other method, and to the
maximum extent permissible by law, shall not be subject to being
taken, by any process whatever, by the creditors of such partici-
pant, retired participant or beneficiary. Effective August 5,
1997,the Plan may offset a participant's benefits under the Plan
against an amount the participant is ordered or required to pay to
the Plan described in a judgment, order, decree or settlement
agreement relating to a breach of fiduciary duty or criminal act
against the Plan as further described in Section 401(a)(13) of the
Internal Revenue Code.
15.4 No Right to Employment. Nothing herein contained nor
any action taken under the provisions hereof shall be construed as
giving any employee the right to be retained in the employment of
the Company.
15.5 Unknown Heirs. If within four (4) years after any
distribution becomes due to a participant, retired participant or
his beneficiary, the same shall not have been claimed, provided due
care shall have been exercised in attempting to make such distri-
bution, the amount thereof shall be treated as forfeited and
applied as provided for in ARTICLE XI.
15.6 Accrued Benefit. The term "accrued benefit" shall mean
the value of a participant's account or accounts with respect to
all funds in this Plan.
15.7 Uniform Administration. Whenever in the administration
of the Plan any action is required by the Committee, such action
shall be uniform in nature as applied to all persons similarly
situated and no such action shall be taken which will discriminate
in favor of shareholders of the Company, highly compensated
participants or participants whose principal duties consist of
supervising the work of others.
15.8 Beneficiary. The word "beneficiary" shall be deemed to
include the estate of the participant, dependents of the partici-
pant, persons who are the natural objects of the participant's
bounty, and any person designated by the participant to share in
the benefits of the Plan and Trust after the death of the
participant. Wherever the rights of participants are stated or
limited herein, their beneficiaries shall be bound thereby.
15.9 Severability. In the event that any provision of this
Plan and Trust shall be held invalid or illegal for any reason,
such determination shall not affect the remaining provisions of
this Plan, but this Plan shall be construed and enforced as if such
invalid or illegal provision had never been included in the Plan.
This Plan shall be construed in accordance with the Laws of the
State of Missouri.
15.10 Articles. Titles of Articles are for general infor-
mation only and this Plan shall not be construed by reference to
such titles.
15.11 Gender. Words used in the masculine gender shall be
read and construed to include the feminine gender.
15.12 Plural. Wherever required, the singular of any word in
this Plan and Trust shall include the plural and the plural may be
read in the singular.
15.13 Disability. The term "disability" as used in this
Plan means a physical or mental condition of a participant which
results in the receipt of benefits by such participant pursuant to
the provisions of either the Kansas City Life Disability Plan or
the Sunset Life Disability Plan.
15.14 Initial Participation Date. The "initial participation
date" shall mean the first (1st) day of the first (1st) month
designated by either the Board of Directors or the Executive
Committee of the Company for the commencement of contributions and
the administration of this Plan.
15.15 Retirement Dates.
(a) Commencing January 1, 1988, the normal retirement date
for all employees participating in this Plan shall be the
earlier of the first (1st) day of the month following
attainment of sixty (60) years of age, or the first (1st)
day of the month following attainment of fifty-five (55)
years of age and completion of five (5) years of employ-
ment. For purposes of determining the completion of five
(5) years of employment, the years of employment of an
employee of Old American Insurance Company prior to
November 1, 1991 shall not be taken into account.
(b) For the purposes of this Plan, a participant who reaches
his normal retirement date shall be deemed to have
retired on such date and shall thereupon become entitled
to the retirement benefits herein, except as provided in
Subparagraph (c). The value of all contributions
allocated to his respective accounts shall be one hundred
percent (100%) vested.
(c) A participant may continue his employment for purposes
herein beyond his normal retirement date, and the
participant will commence receiving benefits on his
actual retirement date; provided, however, distributions
to a five percent (5%) owner of the Company as defined in
the Internal Revenue Code shall commence no later than
April 1st of the calendar year following the calendar
year in which he attains age seventy and one-half (70
1/2), and distributions to other participants shall
commence no later than April 1st of the year in which
such other participant attains the age of seventy and
one-half (70 1/2), unless such other participant shall
have attained age seventy and one-half (70 1/2) prior to
January 1, 1988 and was not a five percent (5%) owner at
any time during the period beginning with the Plan year
ending with the year in which he attained age sixty-six
and one-half (66 1/2) and any subsequent year. Contri-
butions may be continued until such actual retirement
date at the option of the participant. Effective January
1, 1989, the minimum distribution and the minimum dis-
tribution incidental benefit requirements of Internal
Revenue Code Proposed Regulations 1.401(a)(9)-1 and
1.401(a)(9)-2 are hereby incorporated by reference.
Effective January 1, 1997, for participants other than a
five percent (5%) owner of the Company, distributions
shall commence no later than April 1st of the calendar
year following the later of:
(i) the year in which the participant attains age
70 1/2, or
(ii) the year in which the participant retires.
15.16 Initial Qualification. The Company reserves the right
to have all its contributions returned to it free of this Trust,
and to terminate said Plan and Trust, if the Trust does not
initially meet the qualification requirements of the Internal
Revenue Code.
15.17 Company. The term "Company" means Kansas City Life
Insurance Company, a Missouri Corporation, Sunset Life Insurance
Company of America, a Washington Corporation, Old American Insur-
ance Company, a Missouri Corporation, and any other subsidiary
corporation of Kansas City Life Insurance Company required to be
treated as a single employer under Internal Revenue Code Section
414(b), (c), (m) and (o), any or all of which may sometimes be
referred to herein as affiliated corporations.
15.18 Employee. The term "employee" shall mean any person
employed by Kansas City Life Insurance Company or any subsidiary
corporation under the rules of common law, and shall not include
agents, general agents, consultants or other independent
contractors, or, effective January 1, 1989, leased employees as
defined in Section 414(n) or (o) of the Internal Revenue Code.
Effective January 1, 1997, "leased employee" shall mean any person
other than an employee of the Company who has performed services
for the Company under an agreement between the Company and a
leasing organization on a substantially full time basis for at
least one (1) year, provided such services are performed under the
primary direction or control by the Company.
Leased employees shall not participate in this Plan. Further-
more, a person who is not designated as an "employee" in the
Company's employment records during a particular period of time,
including a person designated as an "independent contractor", is
not considered to be an employee during that period of time. Such
a person shall not be considered to be an employee even if a
determination is made by the Internal Revenue Service, the Depart-
ment of Labor, or any other government agency, court, or other
tribunal, that such person is an employee for any purpose, unless
and until the Company in fact designates such person as an employee
for purposes of this Plan. If such a designation is made, the
designation shall be applied prospectively only unless the Company
specifically provides otherwise.
15.19 Agents. Commencing January 1, 1990, no life insurance
salesman of Kansas City Life Insurance Company, sometimes referred
to herein as "agent" shall be eligible to participate. Accounts of
all participating agents shall be finally valued on the last
business day of December, 1989, shall be one hundred percent (100%)
vested, and shall be paid to them in January, 1990 in such form as
permitted by the provisions of this Plan. No further deferral in
this Plan shall be permitted.
15.20 Company Stock. The term "Company stock" shall mean
shares of the common capital stock of Kansas City Life Insurance
Company.
15.21 Executive Committee. Wherever in the Plan and Trust
the term "Executive Committee" is used, it shall be taken to mean
only the Executive Committee of the Board of Directors of Kansas
City Life Insurance Company.
15.22 Board of Directors. Wherever in the Plan and Trust the
term "Board of Directors" is used, it shall be taken to mean only
the Board of Directors of Kansas City Life Insurance Company.
15.23 Maximum Limitation. Commencing January 1, 1983, in no
event shall the sum of the annual additions to a participant's
account for any Plan year exceed the lesser of:
(a) Thirty thousand dollars ($30,000.00) (subject to annual
adjustments pursuant to Internal Revenue Code Section
415(d) and regulations), or
(b)Twenty-five percent (25%) of such participant's compen-
sation.
15.24 Annual Additions. For the purposes of this Plan,
"annual addition" shall be the sum for any year of the Company
contributions plus the amount of any employee contributions, plus
the forfeitures.
15.25 Annual Additions Reduction. If any participant is a
participant under any other defined contribution plan maintained by
the Company, the total of the annual additions to such partici-
pant's account from all such defined contribution plans shall not
exceed the limitations set forth in Paragraph 15.23. If it is
determined that as a result of the limitation set forth in the
preceding sentence, the annual additions to the participant's
account in this Plan are excessive, a reduction of such shall be
effected by a return to the participant of a dollar amount (with
any earnings attributable to the dollar amount) from his elective
accounts, which with an equal amount of the Company's contributions
accounted for in accordance with the following formula, eliminates
such excess: The excess amounts in the participant's Company
account (Fund III) must be used to reduce Company contributions for
the next limitation year (and succeeding limitation years, as
necessary) for that participant if that participant is covered by
the Plan as of the end of the limitation year. However, if the
participant is not covered by the Plan as of the end of the
limitation year, then the excess amounts must be held in
unallocated in a suspense account for the limitation year and
allocated and reallocated in the next limitation year to all of the
remaining participants in the Plan in accordance with the rules set
forth in Subparagraph (6)(i) of Regulation Section 1.415-6(b).
Furthermore, the excess amounts must be used to reduce the Company
contributions for the next limitation year (and succeeding limi-
tation years, as necessary) for all of the remaining participants
in the Plan. For purposes of this Paragraph, excess amounts may
not be distributed to participants or former participants.
15.26 Annual Additions Reduction. If any participant is a
participant under a defined benefit plan maintained by the Company,
the sum of the defined benefit plan fraction for a Plan year and
the defined contribution plan fraction for that year shall be no
greater than one (1.00). If it is determined that the limitation
set forth in the preceding sentence has been exceeded, the
numerator of the defined benefit plan fraction shall be adjusted by
freezing or adjusting the rate of benefit authorized by the defined
benefit plan so that the sum of both fractions shall not exceed one
(1) for the respective participant. Effective January 1, 2000,
this Paragraph shall not apply.
15.27 Retirement Plan. As used in this section, the words
"retirement plan" shall mean:
(a) Any profit sharing, pension or stock bonus plan described
in Section 401(a) and 501(a) of the Internal Revenue
Code;
(b) Any annuity plan or annuity contract described in Section
403(a) or 403 (b) of the Internal Revenue Code;
(c) Any qualified bond purchase plan described in Section
405(a) of the Internal Revenue Code; and
(d) Any individual retirement account, individual retirement
annuity or retirement bond described in Section 408(a),
408(b) or 409 of the Internal Revenue Code.
15.28 Defined Contribution Plan. As used in this section,
the words "defined contribution plan" shall mean a retirement plan
which provides for an individual account for each participant and
for benefits based solely on the amount contributed to the par-
ticipant's account and any income, expenses, gains and losses, and
any forfeitures of accounts of other participants which may be
allocated to such participant's accounts.
15.29 Defined Benefit Plan. As used in this section, the
words "defined benefit plan" shall mean any retirement plan which
is not a defined contribution plan.
15.30 Defined Benefit Plan Fraction. As used in this
section, the words "defined benefit plan fraction" shall mean, for
any Plan year, a fraction,
(a) the numerator of which is the projected annual benefit of
the participant, that is, the annual benefit to which he
would be entitled under the terms of the defined benefit
plan on the assumptions that he continues employment
until his normal retirement date as determined under the
terms of the defined benefit plan, that his compensation
continues at the same rate as in effect in the Plan year
under consideration until his normal retirement date and
that all other relevant factors used to determine bene-
fits under such defined benefit plan remain constant as
of the current Plan year for all future Plan years, under
all defined benefit plans maintained by the Company,
determined as of the close of the Plan year; and,
(b) the denominator of which is the lesser of: (i) the
maximum dollar limit for such year (for example, ninety
thousand dollars ($90,000.00) for 1983) times 1.25, or
(ii) the percentage of compensation limit for such year
times 1.4.
15.31 Defined Contribution Plan Fraction. As used in this
section, the words "defined contribution plan fraction" shall mean,
for any Plan year, a fraction,
(a) the numerator of which is the sum of the annual additions
to the participant's account under all defined contribu-
tion plans maintained by the Company in that Plan year;
and,
(b) the denominator of which is the sum of the lesser of the
following amounts, determined for the year and for each
prior year of service with the Company: (i) the product
of 1.25 multiplied by the dollar limitation in effect for
the year, or (ii) the product of 1.4 multiplied by the
percentage of compensation limit (IRC 415(e)(3) as
amended).
(c) In computing the defined contribution plan fraction
above, for years ending after December 31, 1982, at the
election of the Company, the amount to be taken into
account for all years ending before January 1, 1983, may
be computed to be an amount equal to the denominator of
the fraction, as in effect for the year ending in 1982,
multiplied by a transition fraction,
1. the numerator of which is the lesser of (i) fifty-
one thousand eight hundred seventy-five dollars
($51,875.00), or (ii) 1.4 multiplied by twenty-five
percent (25%) of the participant's compensation for
the year ending in 1981; and,
2. the denominator of which is the lesser of (i)
forty-one thousand five hundred dollars
($41,500.00), or (ii) twenty-five percent (25%) of
the participant's compensation for the year ending
in 1981.
15.32 Affiliated Company Participation. Notwithstanding
anything in this Agreement to the contrary, no employee of any
subsidiary or affiliated corporation of Kansas City Life Insurance
Company shall have the right to make contributions to this Plan
unless such Plan shall have been adopted by the corporation for
which such employee is employed.
15.33 Highly Compensated Person. Prior to January 1, 1997,
the term "highly compensated person", for the purposes of this
Plan, shall mean any employee who at any time during the preceding
year, or the lookback year,
(a) was a five percent (5%) owner of the Company, or
(b) had compensation in excess of seventy-five thousand
dollars ($75,000.00) per year, or
(c) was in the highest paid twenty percent (20%) of the
employees of the Company (ranked on the basis of
compensation paid during such year) with compensation in
excess of fifty thousand dollars ($50,000.00) per year
(top-paid group), or
(d) was an officer with compensation in excess of fifty
percent (50%) of the amount in effect under IRC Section
415(b)(1)(A) for such year (counting at least one (1)
officer, regardless of compensation; but counting no more
than fifty (50), or if less, ten percent (10%) of all
employees or three (3) employees, whichever is greater).
In the case of the year for which the relevant determination
is being made, an employee not described in Subparagraph (b), (c)
or (d) for the preceding year (without regard to this Paragraph)
shall not be treated as described in Subparagraph (b), (c) or (d)
unless such employee is a member of the group consisting of the one
hundred (100) employees paid the greatest compensation during the
year for which such determination is being made.
For purposes of this Paragraph, "lookback year" shall be the
twelve (12) month period immediately preceding the year for which
the relevant determination is being made, and the term "compensa-
tion" shall be compensation defined in Paragraph 3.2 including
additional amounts described in Code Sections 125, 402(e)(3),
402(h) and 403(b).
If an employee is a "family member" of a five percent (5%)
owner or of a highly compensated employee who is one of the ten
(10) most highly compensated employees ranked on the basis of
compensation paid by the employer during such year, the employee
and the five percent (5%) owner or top ten (10) highly compensated
employees will be aggregated and treated as a single employee
receiving compensation and a Plan contribution that is based on the
compensation or Plan contribution of such employee and five percent
(5%) owner or top ten (10) highly compensated employee. For this
purpose, "family member" shall mean the employee's spouse and
lineal ascendants or descendants, and the spouses of the lineal
ascendants or descendants. Effective January 1, 1997, for purposes
of Subparagraph (e) below, an employee who is a "family member" of
a five percent (5%) owner at any time during the year shall be
considered a highly compensated person regardless of compensation.
For this purpose, "family member" shall mean the five percent (5%)
owner's spouse, child, parent or grandchild.
Effective January 1, 1997, "highly compensated person" shall
mean an employee who
(e) was a five percent (5%) owner of the Company at any time
during the year or preceding year, or
(f) for the preceding year
1. had compensation [as defined in Code Section
415(c)(3)] from the Company in excess of
$80,000.00, and
2. if the Company elects the application of this
clause for the preceding year, was in the group
consisting of the top twenty percent (20%) of the
employees ranked on the basis of compensation paid
during such preceding year.
The dollar amounts in Subparagraphs (b), (c) and (f)1 shall be
adjusted at the same time and in such manner as under Code Section
415(d) and Regulations thereunder.
In determining who is a highly compensated person, all
employers required to be aggregated under subsections (b), (c),
(m), (n) and (o) of Code Section 414 shall be taken into account as
a single employer. However, leased employees within the meaning of
Code Sections 414(n) and (o) shall not be considered employees if
the leased employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan
maintained by the employer.
If a former employee separated from service prior to the
calendar year and was an active highly compensated person in the
year of separation, or in any year after attaining fifty-five (55),
the former employee was counted as a highly compensated person, the
former employee shall be treated as an employee for purposes of
determining the number of highly compensated persons. However, if
such former employee separated from service prior to 1987, he will
be treated as a highly compensated person only if during the
separation year (or the year preceding the separation year) or any
year after the employee attained age fifty-five (55) [or the last
year ending before the employee's fifty-fifth (55th) birthday], he
received compensation in excess of fifty thousand dollars
($50,000.00) or was a five percent (5%) owner.
For purposes of determining the number of employees in Sub-
paragraphs (c) and (f)2, nonresident aliens shall not be treated as
employees. Employees who (1) have not completed six (6) months of
service, or (2) normally work less than seventeen and one-half (17
1/2) hours per week, or (3) normally work less than six (6) months
during any year, or (4) have not attained age twenty-one (21) shall
also be excluded (but these latter employees will still be con-
sidered for purposes of identifying the particular employees in the
top-paid group), and (5) to the extent allowable under regulations,
employees covered by a collective bargaining agreement between the
Company and employee representatives.
15.34 Direct Rollovers. The provisions of this Paragraph
shall be effective January 1, 1993 and apply to distributions after
January 1, 1993. Notwithstanding any provision of this Plan to the
contrary, a distributee may elect to have any portion of an
eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
The Administrative Committee may prescribe the time and manner in
which this election is made.
As used in this Paragraph, "eligible rollover distribution",
"eligible retirement plan", "distributee", and "direct rollover"
shall mean:
(a) "Eligible rollover distribution" is any distribution of
all or any portion of the balance to the credit of the
distributee. However, an eligible rollover distribution
shall not include:
(i) any distribution that is one of a series of
substantially equal periodic payments (not
less frequently than annually) made for the
life (or life expectancy) of the distributee
or the joint lives (or joint life expec-
tancies) of the distributee and the
distributee's designated beneficiary, or for a
specified period of ten (10) years or more;
(ii) any distribution required under Code Section
401(a)(9); or
(iii) the portion of any distribution that is not
includible in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to employer
securities.
(b) "Eligible retirement plan" is:
(i) an individual retirement account (described in
Code Section 408(a)) or individual retirement
annuity (described in Code Section 408(b)); or
(ii) an annuity plan (described in Code Section
403(a)); or
(iii) a qualified trust (described in Code Section
401(a)) that accepts the distributee's
eligible rollover distribution. However, in
the case of an eligible rollover distribution
to a surviving spouse, eligible retirement
plan shall mean only the items in (i) above.
(c) "Distributee" shall include an employee or former
employee. An employee's or former employee's surviving
spouse and the employee's or former employee's spouse or
former spouse who is an alternate payee under a qualified
domestic relations order (defined in Code Section 414(p))
are distributees with regard to the interest of the
spouse or former spouse.
(d) "Direct rollover" is a payment by the Plan to the
eligible retirement plan specified by the distributee.
15.35 Participants who Enter Armed Forces. Effective
December 12, 1994, notwithstanding any provision of this Plan to
the contrary, contributions, benefits, and service credit with
respect to qualified military service will be provided in
accordance with Code Section 414(u). Further, the repayment of any
elective account loan made under Paragraph 9.5 will be suspended as
permitted by Code Section 414(u)(4).
ARTICLE XVI
Top Heavy Provisions
16.1 Compensation Limits. With respect to compensation as
defined in this Plan, for any Top Heavy Plan year, compensation in
excess of two hundred thousand dollars ($200,000.00), or such other
amount as the Secretary of the Treasury may designate, shall be
disregarded. Beginning January 1, 1989, compensation to be dis-
regarded shall be the amount stated in Paragraph 3.2. Furthermore,
for the purposes of this ARTICLE XVI, compensation shall be as
defined in Paragraph 3.2.
16.2 Key Employee. "Key employee" means any employee or
former employee (and his beneficiaries) who, at any time during the
Plan year or any of the preceding four (4) Plan years, is:
(a) An officer of the Company, as that term is defined within
the meaning of the regulations under Internal Revenue
Code Section 416. For the years 1984 through 1987, an
officer is not treated as a key employee if the officer
has an annual compensation of forty-five thousand dollars
($45,000.00) or less.
(b) One of the ten (10) employees owning (or considered as
owning within the meaning of Code Section 318) the
largest interests in all employers required to be aggre-
gated under Code Sections 414(b), (c), and (m). However,
an employee will not be considered a top ten (10) owner
for a Plan year if the employee earns less than thirty
thousand dollars ($30,000.00), or such other amount
adjusted in accordance with Code Section 415(c)(1)(A) as
in effect for the calendar year in which the determi-
nation date falls.
(c) A five percent (5%) owner of the Company. "Five percent
(5%) owner" means any person who owns (or is considered
as owning within the meaning of Code Section 318) more
than five percent (5%) of the total combined voting power
of all stock of the Company.
(d) A one percent (1%) owner of the Company having an annual
compensation from the Company of more than one hundred
fifty thousand dollars ($150,000.00). "One percent (1%)
owner" means any person who owns (or is considered as
owning within the meaning of Code Section 318) more than
one percent (1%) of the outstanding stock of the Company
or stock possessing more than one percent (1%) of the
total combined voting power of all stock of the Company.
In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections
414(b), (c), and (m) shall be treated as separate
employers. However, in determining whether an individual
has compensation of more than one hundred fifty thousand
dollars ($150,000.00), compensation from each employer
required to be aggregated under Code Sections 414(b),
(c), and (m) shall be taken into account.
16.3 Non-Key Employee. "Non-key employee" means any employee
who is not a key employee.
16.4 Super Top Heavy Plan. "Super Top Heavy Plan" means, for
Plan years commencing after December 31, 1983, that, as of the
determination date, (1) the present value of accrued benefits of
key employees, or (2) the sum of the aggregate accounts of key
employees under this Plan and any Plan of the Company's aggregation
group, exceeds ninety percent (90%) of the present value of accrued
benefits or the aggregate accounts of all participants under this
Plan and any Plan of the Company's aggregation group.
16.5 Top Heavy Plan. "Top Heavy Plan" means, for Plan years
commencing after December 31, 1983, that, as of the determination
date, (1) the present value of accrued benefits of key employees,
or (2) the sum of the aggregate accounts of key employees under
this Plan and any Plan of the Company's aggregation group, exceeds
sixty percent (60%) of the present value of accrued benefits or the
aggregate accounts of all participants under this Plan and any Plan
of the Company's aggregation group.
16.6 Top Heavy Plan Year. "Top Heavy Plan year" means any
calendar year after December 31, 1983 in which the Plan is a top
heavy plan.
16.7 Top Heavy Plan Requirements.
(a) For any "Top Heavy Plan year", the following provisions
shall apply notwithstanding any other provision in this
Plan to the contrary:
1. Any person who is a participant in this Plan in any
year in which it shall be a "Top Heavy Plan" shall
have his or her benefits vested in accordance with
the following schedules: twenty percent (20%)
after two (2) years of service; forty percent (40%)
after three (3) years of service; sixty percent
(60%) after four (4) years of service; eighty
percent (80%) after five (5) years of service; and
one hundred percent (100%) after six (6) years of
service. Effective January 1, 1989, there shall be
no decrease in a participant's nonforfeitable
percentage in the event the Plan's status as top
heavy changes for any year. Further, if the
vesting schedule shifts in and out of the above
schedule for any year because the Plan's top heavy
status changes, such shift shall be considered an
amendment of the vesting schedule. If this occurs,
each participant with at least three (3) years of
service with the Company may elect to have his
nonforfeitable percentage determined without regard
to the shift. The election period will begin with
the date the deemed amendment is made and shall end
on the later of:
A. Sixty (60) days after the deemed amendment is
adopted;
B. Sixty (60) days after the deemed amendment is
effective; or
C. Sixty (60) days after the participant is
issued written notice of the deemed amendment
by the Administrative Committee.
2. Notwithstanding anything in this plan to the
contrary, for any Top Heavy Plan Year, the Company
shall make a minimum contribution for each non-key
employee equal to three percent (3%) of such non-
key employee's salary, which shall be invested and
accounted for in Fund III.
3. For any year in which this Plan is top heavy, each
non-key employee will receive a minimum contribu-
tion if the non-key employee has not separated from
service at the end of the top heavy year, regard-
less of whether the non-key employee has less than
one thousand (1,000) hours of service in such year.
Furthermore, such non-key employee shall receive
such minimum contribution regardless of his or her
level of compensation, and regardless of whether he
or she declines to make a mandatory personal
contribution. No such minimum contribution made by
the Company pursuant to these top heavy provisions
shall be subject to forfeiture if a non-key
employee withdraws his or her mandatory contri-
butions.
4.Notwithstanding the foregoing, so long as any non-
key employee is covered by both the Company's
Pension Plan and this Plan, the minimum contri-
bution required herein shall be satisfied by the
accrual of the defined benefit minimum by the
respective non-key employee for any top heavy year.
5. If the Company shall be maintaining both this Plan
and a defined benefit plan in any top heavy year, a
factor of 1.0 must be applied to the denominators
of the defined benefit and defined contribution
fractions.
16.8 Determination of Top Heavy Status.
(a) This Plan shall be a Top Heavy Plan for any Plan year
commencing after December 31, 1983, in which, as of the
determination date, (1) the present value of accrued
benefits of key employees, or (2) the sum of the
aggregate accounts of key employees under this Plan and
any Plan of an aggregation group, exceeds sixty percent
(60%) of the present value of accrued benefits or the
aggregate accounts of all participants under this Plan
and any Plan of an aggregation group.
If any participant is a non-key employee for any Plan
year, but such participant was a key employee for any
prior Plan year, such participant's present value of
accrued benefit and/or aggregate account balance shall
not be taken into account for purposes of determining
whether this Plan is a Top Heavy Plan (or whether any
aggregation group which includes this Plan is a Top Heavy
group).
(b) This Plan shall be a Super Top Heavy Plan for any Plan
year commencing after December 31, 1983, in which, as of
the determination date, (1) the present value of accrued
benefits of key employees, or (2) the sum of the aggre-
gate accounts of key employees under this Plan and any
Plan of an aggregation group, exceeds ninety percent
(90%) of the present value of accrued benefits or the
aggregate accounts of all participants under this Plan
and any Plan of an aggregation group.
(c) Aggregate account. A participant's aggregate account as
of the determination date is the sum of:
1. His participant's account balance as of the most
recent valuation occurring within a twelve (12)
month period ending on the determination date.
2. Contributions that would be allocated as of a date
not later than the determination date, even though
those amounts are not yet made or required to be
made.
3. Any Plan distributions made within the Plan year
that includes the determination date or within the
four (4) preceding Plan years. However, in the
case of distributions made after the valuation date
and prior to the determination date, such dis-
tributions are not included as distributions for
Top Heavy purposes to the extent that such
distributions are already included in the
participant's aggregate account balance as of the
valuation date. Notwithstanding anything herein to
the contrary, all distributions, including
distributions made prior to January 1, 1984, will
be counted.
4. Any employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax
deductible qualified employee contributions shall
not be considered to be a part of the participants
aggregate account balance.
(d) "Aggregation group" means either a required aggregation
group or a permissive aggregation group as hereinafter
determined.
1. Required aggregation group. In determining a
required aggregation group hereunder, each Plan of
the Company in which a key employee is a parti-
cipant, and each other Plan of the Company which
enables any Plan in which a key employee
participates to meet the requirements of Code
Sections 401(a)(4) and 410, will be required to be
aggregated. Such group shall be known as a
required aggregation group, and shall include any
terminated plan which if it had not been terminated
would have been required to be included in the
aggregation group.
In the case of a required aggregation group, each
Plan in the group will be considered a Top Heavy
Plan if the required aggregation group is a Top
Heavy group. No Plan in the required aggregation
group will be considered a Top Heavy Plan if the
required aggregation group is not a Top Heavy
group.
2. Permissive aggregation group. The Company may also
include any other Plan not required to be included
in the required aggregation group, provided the
resulting group, taken as a whole, would continue
to satisfy the provisions of Internal Revenue Code
Sections 401(a) or 410. Such group shall be known
as a permissive aggregation group.
In the case of a permissive aggregation group, only
a Plan that is part of the required aggregation
group will be considered a Top Heavy Plan if the
permissive aggregation group is a Top Heavy group.
No Plan in the permissive aggregation group will be
considered a Top Heavy Plan if the permissive
aggregation group is not a Top Heavy Plan group.
3. Only those Plans of the Company in which the
determination dates fall within the same calendar
year shall be aggregated in order to determine
whether such Plans are Top Heavy Plans.
4. For purposes of determining the present value of
the cumulative accrued benefit for any employee, or
the amount of the account of any employee, the
value or amount shall be increased by the aggregate
distributions made with respect to such employee
under the plan during the five year period ending
on the determination date. The preceding sentence
also applies to distributions under a terminated
plan which if it had not been terminated would have
been required to be included in an aggregation
group. If any individual is a non-key employee
with respect to any plan for any plan year, but
such individual was a key employee with respect to
such plan for any prior plan year, any accrued
benefit for such employee (and the account of such
employee) shall not be taken into account. The
accrued benefit of an employee who has performed no
services for the Company during the five (5) year
period ending on the determination date will not be
taken into account.
(e) "Determination date" means (1) the last day of the
preceding Plan year, or (2) in the case of the first Plan
year, the last day of such Plan year.
(f) Present value of accrued benefit. In the case of a
defined benefit plan, a participant's present value of
accrued benefit shall be as determined under the
provisions of the applicable defined benefit plan.
(g) "Top Heavy group" means an aggregation group in which, as
of the determination date, the sum of:
1. The present value of accrued benefits of key
employees under all defined benefit plans included
in the group; and
2. The aggregate accounts of key employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum
determined for all participants.
(h) Notwithstanding anything herein to the contrary, the
effective date otherwise provided for herein for the
application of Code Section 416 to this Plan (Plan years
beginning after December 31, 1983) shall be extended in
accordance with any legislative act of Congress.
ARTICLE XVII
Disabled Employee Participants
17.1 Contributions Cease on Disability. Notwithstanding
anything in this Plan to the contrary, when an employee-participant
commences to receive benefits because of disability as defined in
this Plan, he shall not be permitted to continue contributions, and
all Company contributions for his benefit shall cease until such
time as he again qualifies as a full time active employee.
17.2 Vesting at Disability. During any period of time in
which a participant shall qualify for benefits because of
disability as defined in this Plan, he shall be treated as if his
employment is continuous for purposes of vesting and shall continue
to vest at the rate provided by ARTICLE VIII herein.
17.3 Distribution. At such time as a disabled participant
attains eligibility for retirement pursuant to Paragraph 15.15
herein, his or her fully vested accounts may then be distributed in
accordance with Plan provisions.
IN WITNESS WHEREOF, the Company has caused this Twenty-second
Amendment to be executed by its authorized Officers and its Cor-
porate Seal to be hereunto affixed, and the Trustees have executed
this Trust, all on the day of ,
19 .
KANSAS CITY LIFE INSURANCE COMPANY
By:
Its: Vice President
ATTEST:
By:
Its: Assistant Secretary
TRUSTEES
Exhibit 10 (c), Form 10-K
Kansas City Life
Insurance Company
TENTH AMENDMENT
KANSAS CITY LIFE
EMPLOYEE STOCK PLAN
THIS TENTH AMENDMENT, comprising the restated Kansas City Life
Employee Stock Plan, is effective the 1st day of January, 1998, and
is entered into by and between Kansas City Life Insurance Company,
a Corporation organized and existing under the Laws of the State of
Missouri, hereinafter called the "Company", and Ronald E. Hiatt,
John K. Koetting and Robert C. Miller, hereinafter referred to as
the "Trustees".
ARTICLE I
Creation and Purpose of Trust
1.1 Name. The Company hereby creates this Plan and Trust to
be known as the "Kansas City Life Employee Tax Credit Stock Owner-
ship Plan", also sometimes referred to as the "Kansas City Life
Employee Stock Plan", or the "Kansas City Life ESOP", hereinafter
sometimes referred to as the "Plan" or "Trust".
1.2 Purpose. It is the purpose of this Plan to encourage the
contributions of its employees to the success of the Company and to
reward such contributions by providing the privileges of ownership
through stock acquisition, and it shall be qualified as an employee
stock ownership plan and as a payroll tax credit employee stock
ownership plan. It is designed to invest primarily in qualifying
Company stock.
1.3 Exclusive Benefit of Employees. This Agreement has been
made, and this Plan and Trust created, for the exclusive benefit of
the Company's full time employees and their beneficiaries. The
terms of this Plan are intended to comply with the present pro-
visions of Sections 401(a), 409A, 501(a) and 4975(d)(3) and (e)(7)
of the Internal Revenue Code, and as they may hereafter be amended,
and Treasury Department Regulations in connection therewith, in
order that the Plan and Trust may qualify for tax exemption. Under
no circumstances shall any part of the principal or income of the
Plan and Trust be used for, or revert to, the Company, or be used
for, or diverted to, any purposes other than for the exclusive
benefit of the employees and their beneficiaries. This Plan and
Trust shall not be construed, however, as giving any employee, or
any other person, any right, legal or equitable as against the
Company, the Trustees or the principal or income of the Trust,
except as specifically provided for herein, nor shall it be con-
strued as giving any employee the right to remain in the Company's
employment.
ARTICLE II
Eligibility
2.1 Commencing January 1, 1983, each present and future
employee shall be qualified as a participant in this Plan in
accordance with the following provisions:
(a) He shall have attained the age of twenty-one (21) years.
(b) Any employee whose employment commences prior to his
attainment of age twenty-one (21), shall become a
participant on the first (1st) day of the month following
his twenty-first (21st) birthday.
(c) Any employee whose employment commences after his
attainment of age twenty-one (21), shall become a par-
ticipant on the first (1st) day of the month following
his date of employment.
(d) Any employee of Old American Insurance Company who is age
twenty-one (21) on November 1, 1991 or becomes age
twenty-one (21) on or before December 31, 1991 shall
become a participant on January 1, 1992 in accordance
with the terms of the Adoption Agreement dated December
19, 1991. Thereafter, any employee of Old American
Insurance Company will become a participant in accordance
with subparagraphs (a), (b) and (c) of this section.
2.2 With respect to this Plan, an "hour of employment" shall
mean:
(a) Each hour for which an employee is directly or indirectly
paid, or entitled to payment, by the Company for the
performance of duties. These hours shall be credited to
the employee for the computation period or periods in
which the duties are performed; and
(b) Each hour for which back pay, irrespective of mitigation
of damages, has been either awarded or agreed to by the
Company. These hours shall be credited to the employee
for the computation period or periods to which the award
or agreement pertains rather than the computation period
in which the award, agreement or payment is made.
(c) Each hour for which an employee is directly or indirectly
paid, or entitled to payment, by the Company for reasons
such as vacation, holidays, illness, incapacity (includ-
ing disability), layoff, jury duty, military leave or
leave of absence in a period during which no duties are
performed (irrespective of whether the employment
relationship was terminated). These hours shall be
credited to the employee for the computation period or
periods during which the nonperformance of such duties
occurs and shall only be considered up to a maximum of
five hundred one (501) hours. Hours of service for
periods of time during which no duties are performed
under Subparagraphs (b) and (c) shall be calculated and
credited according to Department of Labor Regulations
2530.200b-2 (b) and (c).
(d) In computing an employee's hours of employment on a
weekly or monthly basis, when a record of hours of em-
ployment is not available to determine the hours of
employment under Subparagraphs (a), (b) and (c), the
employee shall be assumed to have worked forty-five (45)
hours for each week, or one hundred ninety (190) hours
for each month (as applicable), for which the employee
would be required to be credited with at least one (1)
hour of employment under Subparagraphs (a), (b) or (c)
above.
(e) An "hour of employment" shall also include time for which
an employee is absent from work either
(i) by reason of the pregnancy of such employee,
(ii) by reason of the birth of a child of the
employee,
(iii) by reason of the placement of a child in
connection with the adoption of the child by
the employee, or
(iv) for purposes of caring for the child during
the period immediately following the birth or
placement for adoption.
(v) a leave of absence covered under the Family
and Medical Leave Act of 1993.
However, the total number of hours of such service
counted for any one (1) period shall not exceed five
hundred one (501) hours.
2.3 Leaves of Absence.
(a) For the purpose of computing continuous employment,
leaves of absence may be included which have been
authorized by the Company for any of the following
reasons:
(i) Sickness.
(ii) Disability.
(iii) Service with the armed forces of the United
States during any war or national emergency
declared by the President or the Congress, or
undeclared.
(iv) Pregnancy, not to exceed twelve (12) months.
(v) Public service, whether elected or otherwise.
(vi) Obtaining additional education, involving
periods of time not to exceed twelve (12)
months for each leave of absence granted, but
only after completion of one (1) full year of
full time employment.
(b) Such leaves of absence may be counted in computing
continuous employment provided the employee returns to
active employment on or before the end of such leave of
absence, and, when because of service in the armed forces
as stated above, provided the employee returns to active
employment with the Company within ninety (90) days
following his discharge from such service, or such longer
period during which his re-employment rights are pro-
tected by law.
(c) Any such employee who is not qualified as a participant
prior to the commencement of such a leave of absence
shall not be so qualified until his return to active
employment. The provisions of this Section shall be
applied in a like manner to all employees under similar
circumstances.
ARTICLE III
Company Contributions
3.1 Rate of Contribution. Commencing January 1, 1983, in the
discretion of the Executive Committee of the Company, or its
designated subcommittee, the Company will annually contribute to
the Plan an amount of common capital stock of the Company equal to
one-half of one percent (.5%) of the aggregate compensation of
participants in the Plan for compensation paid or accrued during
calendar years 1983 and 1984, and equal to such other percentage as
shall be permissible by law, currently one-half of one percent
(.5%), for compensation paid or accrued during calendar years 1985
through 1987.
No contribution will be made for a year for which the payroll
tax credit is not available. Notwithstanding the provisions of the
preceding sentence, the Company may, but shall not be required, to
make a contribution to the Plan for a Plan year in which the
payroll tax credit is not available. Any contribution made for a
Plan year in which the payroll tax credit is not available shall be
accounted for separately and shall be in accordance with the rules
and regulations pertaining to ESOPs then in effect.
3.2 No Employee Contribution. No contribution shall be
required of a participant, nor will any participant be eligible to
make a contribution.
3.3 Investment Credit Recapture. Amounts contributed to the
Plan attributable to all or a portion of the qualified investment
credit claimed by the Company shall remain in the Plan (and, if
allocated pursuant to the Plan, shall remain so allocated) even
though part or all of such ESOP credit is recaptured or redeter-
mined.
3.4 Form of Payment. The stock contributions of Kansas City
Life Insurance Company shall be made in treasury stock or in shares
of authorized but unissued stock of Kansas City Life Insurance
Company. For purposes of fixing the amount of contributions made
with shares of treasury stock, or shares of authorized but unissued
stock, such stock shall be valued at its bid price on the over-the-
counter market on the valuation day of the month in which the
Company's contribution becomes due, or if the market is closed on
that day then on the last preceding day during which it was open.
Effective January 1, 1995, such stock shall be valued at the
average of its bid price on the over-the-counter market for all
business days in the month of the valuation day. In the event the
Company is precluded from delivering such shares to the Trustees by
law or because of the unavailability of such shares, the Company's
contribution to the Trustees shall be in cash, and said cash shall
be invested until such time as shares of the Company stock shall be
available for purchase by the Trustees.
ARTICLE IV
Investment of Contributions
4.1 Investment of Funds. Contributions to the Trust shall be
invested in accordance with the authority granted to the Trustees
pursuant to the provisions of this Plan and Trust. It is contem-
plated that the contribution made by the Company from time to time
be in shares of the Company stock, or in cash if necessary to
implement the provision of the Plan.
4.2 Voting of Shares. The Trustees shall vote the shares of
stock of the Company for the respective accounts of the partici-
pants only in accordance with the direction of such participants,
which directions may be certified to the Trustees by the Committee,
or any agent designated thereby, provided such directions are
received by the Trustees at least five (5) days before the date set
for the meeting at which such shares are to be voted. Shares with
respect to which no such direction shall be received and the
fractional shares shall be voted by the Trustees in the same pro-
portions as are shares as to which voting instructions have been
received.
ARTICLE V
Allocation to and Evaluation of Participants Accounts
5.1 Allocation and Evaluation. The value of all Trust assets
shall be determined on the basis of market values as of the last
market business day of each calendar quarter. Effective January 1,
1995, the value of the Kansas City Life stock shall be determined
on the basis of the average of its bid price on the over-the-
counter market for all business days in the last month of each
calendar quarter.
All stock transferred to or purchased by the Trust with
respect to a Plan year shall be allocated among the accounts of
persons who were participants on the last day of the Plan year and
who completed at least one thousand (1,000) hours of employment
during such Plan year. The allocation to each participant shall be
an amount which bears the same proportion to the amount of such
securities allocated to all participants in the Plan for that Plan
year as the amount of each participant's compensation during the
entire year bears to total compensation paid to all participants
during the entire year. (Compensation in excess of one hundred
thousand dollars ($100,000.00) per year with respect to any
participant will be disregarded for this purpose.)
5.2 Dividends. Except for amounts needed to cover cash
distributions in place of distributions of fractional shares,divi-
dends on shares shall be reinvested in shares of common stock of
the Company. Such shares and uninvested dividends shall be allo-
cated quarterly among participants' accounts in proportion to the
value of each participant's account as of the end of the quarter.
5.3 Stock Fund. The Trustees shall maintain a "Stock Fund"
which shall cover the aggregate shares of capital stock contributed
to and purchased by the Plan and any uninvested cash. The Stock
Fund shall be valued as of each valuation date, which shall be the
last business day of each quarter or such other dates as the
Committee may establish, on the basis of the then current fair
market value of the assets held therein, as determined by the
Trustees. Effective January 1, 1995, the value of the Kansas City
Life stock shall be determined on the basis of the average of its
bid price on the over-the-counter market for all the business days
in the last month of the calendar quarter or in the month of such
other date as the Committee may establish. The Administrative
Committee shall maintain records reflecting the account of each
participant in the Stock Fund.
5.4 Annual Account. The Administrative Committee shall
furnish to each participant at least once each year a statement of
shares and uninvested cash in the Stock Fund allocated to the
participant's account as of a specified date.
ARTICLE VI
Allocation of Fiduciary Responsibility
6.1 Fiduciaries. The fiduciaries shall have only those
specific powers, duties, responsibilities and obligations as are
specifically given them under this Plan. The Company shall have
the sole responsibility for making the contributions required by
the Plan, shall have the sole authority to appoint and remove the
Trustees, members of the Administrative Committee, and to amend or
terminate, in whole or in part, this Plan and Trust.
6.2 Administration. The Administrative Committee shall have
the sole responsibility for the administration of this Plan, which
responsibility is specifically described in ARTICLE IX herein.
6.3 Trustees. The Trustees shall have such responsibility
for the administration and management of the assets held pursuant
to this Plan and Trust, as is specifically provided for in the
Plan.
6.4 Duties. Each fiduciary warrants that any direction
given, information furnished or action taken by it shall be in
accordance with the provisions of the Plan and Trust, authorizing
or providing for such direction, information or action. Further-
more, each fiduciary may rely upon any such direction, information
or action of another fiduciary as being proper under this Plan, and
is not required herein to inquire into the propriety of any such
direction, information or action. It is intended under this Plan
that each fiduciary shall be responsible for the proper exercise of
its own powers, duties, responsibilities and obligations pursuant
to the Plan and shall not be responsible for any act or failure to
act of another fiduciary. No fiduciary guarantees the Trust fund in
any manner against investment loss or depreciation in asset value.
ARTICLE VII
Vesting
7.1 Vesting of Company Contributions. Each participant shall
be one hundred per cent (100%) vested and shall have a nonfor-
feitable right to the full value of his or her account and to any
stock and uninvested cash allocated thereto.
ARTICLE VIII
Distributions
8.1 Seven (7) Year Retention. No stock or uninvested cash
allocated to a participant's account may be distributed from that
account before the end of eighty-four (84) months beginning after
the month in which the stock and uninvested cash is allocated to
the account, except in the case of separation from employment for
death or any other reason, or except in the case of a participant
who has become disabled and is receiving benefits from the Kansas
City Life or Sunset Life Disability Plans. Notwithstanding the
foregoing, commencing January 1, 1988, if an employee shall
continue in the Company's employment after his or her sixty-fifth
(65th) birthday, and commencing January 1, 1998, after his or her
sixtieth (60th) birthday (normal retirement date), such employee
shall commence to receive distributions as defined in the Internal
Revenue Code on the earlier of his termination of employment with
the Company or April 1st of the year following the calendar year in
which he or she attains the age of seventy and one-half (70 1/2).
Effective January 1, 1989, the minimum distribution and the minimum
distribution incidental benefit requirements of Internal Revenue
Proposed Regulations 1.401(a)(9)-1 and 1.401(a)(9)-2 are hereby
incorporated by reference. Effective January 1, 1997, for par-
ticipants other than a five percent (5%) owner of the Company,
distributions shall commence no later than April 1st of the
calendar year following the later of:
(a) The year in which the participant attains age seventy and
one-half (70 1/2), or
(b) The year in which the participant retires.
8.2 Separation from Employment. In the case of separation
from employment, whether by death or for any other reason, or in
the event a disabled participant so elects, the account of the
participant in the Stock Fund shall be determined as of the end of
the quarter in which such event occurs and shall be distributed to
the participant or beneficiary (in case of death) as soon there-
after as practicable. If separation from service, or if the
disabled participant's election occurs on or after the last day of
a Plan year, but prior to the date on which the Company makes its
contribution for the Plan year just ended, and if the participant
is entitled to share in such contribution, then such participant's
share shall be determined as of the end of the quarter in which the
Company's contribution is made and shall be distributed thereafter
as soon as practicable.
8.3 Pre-retirement Distribution. Any participant who remains
in the employ of the Company may request a distribution of stock
allocated to his or her account as of the end of any quarter next
following the expiration of eighty-four (84) months following the
month in which the stock was allocated to the account, but not more
often than once within any twelve (12) month period. Requests for
distribution must be in writing, filed with the Administrative
Committee at least fifteen (15) days prior to the end of any such
quarter. Distribution shall be made to such participant as soon as
practicable following the end of the quarter in which the request
is made. However, distributions pursuant to this Paragraph may not
be made to an individual who is an alternate payee under a Quali-
fied Domestic Relations Order and for whom an account is being
separately maintained.
8.4 Right to Stock. Any participant who shall be entitled to
a distribution from the Plan shall have the right to demand that
his benefits be distributed in the form of capital stock of the
Company. Notwithstanding the foregoing, any fractional share will
be converted to cash, at the valuation date as of which the
distribution is made based on the fair market value at that time as
determined by the Trustees.
8.5 Method of Distribution. All distributions provided pur-
suant to this Plan shall be by a lump sum payment.
8.6 Commencement of Distributions. All distributions shall
be made or commenced to be made as soon as practicable after the
valuation date coincident with or next following the occurrence of
one of the distribution events described in this ARTICLE VIII.
Upon written notice to the Committee no later than the end of the
calendar month following the month in which termination occurs, a
participant (or, in the case of death, his beneficiary) entitled to
a lump sum payment may make an irrevocable election to receive the
value of his distribution on January 31st of the next succeeding
calendar year. Alternatively, the participant may choose not to
withdraw his benefits when one of the distribution events
occurs,and later elect to have the distribution made upon written
notice before a subsequent valuation date. However, only a full
and complete distribution of his benefits will be allowed whether
the participant withdraws his benefits at the time a distribution
event occurs or at some later date. No partial withdrawals shall
be permitted.
8.7 Valuation. The value of a participant's account upon
termination shall be the value on the most recent valuation date
preceding January of the year elected pursuant to Paragraph 8.6. If
such election is not so made, such value shall be determined on the
valuation date coincident with or next following the date the par-
ticipant (or, in case of death, his beneficiary) elects within the
election period specified in Paragraph 8.6 above, to receive his
distribution, or the receipt by the Trustees of notice of said
participant's termination, whichever shall occur later.
8.8 Facility of Payment. If the Committee shall receive
evidence satisfactory to it that a participant or beneficiary is
physically or mentally incompetent to receive any payment which
shall be due hereunder and to give a valid release therefor and
that another person or an institution is then maintaining or has
custody of such participant or beneficiary, and that no guardian,
committee or other representative of the estate of such participant
or beneficiary, shall have been duly appointed, the Committee may,
at its option, make payments otherwise payable to such participant
or beneficiary, to such other person or institution, and the
release of such other person or institution shall be a valid and
complete discharge for such payments.
8.9 Beneficial Designation. Any participant shall have the
right to designate a new beneficiary at any time by filing with the
Committee a written request for such change, but any such change
shall become effective only upon receipt of such request by the
Committee. If the payment is made as a result of the death of the
participant, the payment shall be made to the surviving spouse of
the participant, if any, unless the participant and the spouse have
requested a distribution to any other beneficiary. Any such
request shall be written and on forms prescribed by the Adminis-
trative Committee. Upon receipt by the Committee of such request,
the change shall relate back to and take effect as of the date such
participant signs such request whether or not such participant is
living at the time the Committee receives such request.
If there be no designated beneficiary living at the death of
such participant when any payment hereunder shall be payable to the
beneficiary, then such payment shall be made as follows: To such
participant's wife or husband, if living; if not living, to such
participant's then living lineal descendants, in equal shares, per
stirpes; if none survives, to such participant's surviving parents,
equally; if neither survives, to such participant's executors or
administrators.
8.10 Diversification of Investments.
(i) Each qualified participant in the plan may
elect within (90) ninety days after the close
of each calendar year in the qualified
election period to direct the Trustees as to
the investment of at least twenty-five percent
(25%) of his or her account in the plan (to
the extent such portion exceeds the amount to
which a prior election under this paragraph
applies). In the case of the election year in
which the participant can make his or her last
election, the preceeding sentence shall be
applied by substituting "fifty percent (50%)"
for "twenty-five percent (25%)".
(ii) If a participant makes an election, the
Trustees may either (a) distribute the portion
of the participant's account covered by the
election to him or her within ninety (90) days
after the period during which the election may
be made, or (b) offer at least three invest-
ment options (not inconsistent with
regulations prescribed by the Secretary of the
Treasury) to each participant making an
election.
(iii) For purposes of this paragraph, the term
"qualified participant" means any employee who
has completed at least ten (10) years of
participation under the plan and has attained
age fifty-five (55).
(iv) For purposes of this paragraph, the term
"qualified election period" means the five-
plan-year period beginning with the plan year
after the plan year in which the participant
attains age fifty-five (55) (or, if later,
beginning with the plan year after the first
plan year in which the individual first became
a qualified participant).
ARTICLE IX
Administrative Committee
9.1 Membership. The Administrative Committee, sometimes
herein referred to as the "Committee", shall consist of a number of
persons, not less than three (3) nor more than five (5), designated
by the Executive Committee of the Company, who shall serve terms of
one (1) year or until their successors are designated, and said
Committee shall have the responsibility for the general administra-
tion of the Plan and for carrying out the provisions of the Plan in
accordance with its terms. The Committee shall have absolute
discretion in carrying out its responsibilities.
9.2 Subcommittees. The Committee may appoint from its
members such committees with such powers as it shall determine; may
authorize one (1) or more of its number or any agent to execute or
deliver any instrument or make any payment on its behalf; and may
utilize counsel, employ agents and provide for such clerical and
accounting services as it may require in carrying out the pro-
visions of the Plan.
9.3 Meetings. The Committee shall hold meetings upon such
notice, at such place or places, and at such time or times as it
may from time to time determine.
9.4 Majority Action. The action of a majority of the members
expressed from time to time by a vote in a meeting or in writing
without a meeting shall constitute the action of the Committee and
shall have the same effect for all purposes as if assented to by
all members of the Committee at the time in office.
9.5 No Compensation. No member of the Committee shall
receive any compensation for his services as such, and, except as
required by law, no bond or other security shall be required of him
in such capacity in any jurisdiction.
9.6 Committee Rules. Subject to the limitations of this Plan
and Trust, the Committee from time to time shall establish rules or
regulations for the administration of the Plan and the transaction
of its business. The Committee shall have full and complete
discretionary authority to construe and interpret the Plan and
decide any and all matters rising hereunder, except such matters
which the Executive Committee of the Company from time to time may
reserve for itself, including the right to remedy possible
ambiguities, inconsistencies or omissions. All interpretations,
determinations and decisions of the Committee or the Executive
Committee of the Company in respect of any matter hereunder shall
be final, conclusive and binding on all parties affected thereby.
The Committee shall, when requested, submit a report to the
Executive Committee of the Company giving a brief account of the
operation of the Plan and the performance of the various accounts
established pursuant to the Plan.
9.7 Claims Procedure. The Administrative Committee shall
have full and complete discretionary authority to make all
determinations as to the right of any person to a benefit. Any
denial by the Committee of a claim for benefits under this Plan by
a participant or a beneficiary shall be stated in writing by the
Committee and delivered or mailed to the participant or the
beneficiary, whichever is appropriate; and such notice shall set
forth the specific reason for the denial, written to the best of
the Committee's ability in a manner that may be understood without
legal or actuarial counsel. In addition, the Committee shall
provide a reasonable opportunity to any participant or beneficiary
whose claim for benefits has been denied for a review of the
decision denying the claim.
9.8 Resignation of Member. Any member of the Committee may
resign by giving notice to the Executive Committee at least fifteen
(15) days before the effective date of his resignation. Any Com-
mittee member shall resign upon request of the Executive Committee.
The Executive Committee shall fill all vacancies on the Committee
as soon as is reasonably possible after a resignation takes place,
and until a new appointment takes place, the remaining members of
the Committee shall have authority to act, if approved by either a
majority of the remaining members or by two (2) members, whichever
number is lesser.
ARTICLE X
Amendment and Termination
10.1 Amendment. Kansas City Life Insurance Company reserves
the right at any time and from time to time, and retroactively if
deemed necessary or appropriate to conform with governmental regu-
lations or other policies, to modify or amend, in whole or in part,
any or all of the provisions of this Plan and Trust by adoption of
a written resolution by the Board of Directors of Kansas City Life
Insurance Company or the Executive Committee of the Board of
Directors; provided that no such modification or amendment shall
make it possible for any part of the contributions of the Company,
or any other funds of the Trust, to be used for, or diverted to,
purposes other than for the exclusive benefit of participants or
their beneficiaries.
10.2 Termination. This Plan and Trust is purely voluntary on
the part of the Company, and Kansas City Life Insurance Company
reserves the right to terminate the Plan and the Trust provided
herein by adoption of a written resolution by the Board of
Directors of Kansas City Life Insurance Company or the Executive
Committee of the Board of Directors. Upon termination of, or upon
the complete discontinuance of contributions within the meaning of
Section 411(d)(3)(B) of the Internal Revenue Code, participants'
accounts shall become fully vested and nonforfeitable and
distribution shall be made as promptly as possible in accordance
with the directions of the Committee.
10.3 Merger. This Plan and Trust shall not be merged or
consolidated with, nor shall any assets or liabilities be
transferred to any other Plan or Trust, unless the accrued benefit
of each participant, if the Plan and Trust were terminated
immediately after such action, would be equal to or greater than
the accrued benefit to which such participant would have been
entitled if this Plan and Trust had been terminated immediately
before such action.
ARTICLE XI
The Trust
11.1 Number of Trustees. There shall be three (3) Trustees
for this Trust with the Trustees hereinbefore named being the
original Trustees.
11.2 Trustees shall Receive Sums Paid. The Trustees shall
accept and receive all sums of money paid to them from time to time
by the Company, and shall hold, invest, reinvest, manage and
administer such monies and the increment, increase, earnings and
income thereof as a Trust for the exclusive benefit of the
employees participating in the Plan, and their beneficiaries. All
income and earnings of the Trust shall be accumulated by the
Trustees and by them held, invested and reinvested as a part of the
principal of the said Trust.
11.3 Investment of Funds.
(a) Except as hereinafter provided with respect to the cash
reserve, the Trustees shall invest and reinvest the
principal and income of the Trust in the capital stock of
the Company. Income from investments and proceeds of the
sale of securities shall be reinvested in the same manner
as contributions received for investment. Any funds held
by the Trustees pending investment in the capital stock
of the Company may be invested temporarily in short-term
corporate or governmental debt securities, or in such
other investments as the Trustees shall, after investi-
gation, believe to be sound and suitable investments for
this Trust, although the same may not be of the character
permitted for Trustee's investments by the Laws of the
State of Missouri, all subject to the approval of the
Executive Committee, or its designated subcommittee, as
hereinafter provided.
(b) The Trustees may retain in cash so much of the Trust
assets as they may deem advisable.
(c) The Trustees may sell property held by the Trust at
either public or private sale, for cash or on credit, at
such times as they may deem appropriate; they may ex-
change such property, and they may grant options for the
purchase or exchange thereof.
(d) The Trustees may consent to and participate in any plan
of reorganization, consolidation, merger, extension or
other similar plan affecting property held by the Trust;
they may consent to any contract, lease, mortgage, pur-
chase, sale or other action by any corporation pursuant
to any such plan; they may accept and retain property
issued under any such plan, even though it would not be
eligible as a new investment under the provisions of this
Section.
(e) The Trustees may deposit property held in the Trust with
any protective, reorganization or similar committee, and
may delegate discretionary power thereto to pay its
reasonable share of such committee's expenses and com-
pensation and any assessments levied with respect to any
property so deposited.
(f) The Trustees may exercise all conversion and subscription
rights pertaining to property held in the Trust.
(g) The Trustees may exercise all voting rights with respect
to property held in the Trust, and in connection there-
with grant proxies discretionary or otherwise, all in
accordance with the provisions of this Plan and Trust.
(h) The Trustees may cause securities and other property to
be registered and held in their names, the name of any
one (1) of them, or in the name of their nominee.
(i) The Trustees may borrow money from others, including the
Company, for the purposes of the Trust, and issue their
promissory note or notes for the same, and pledge or
mortgage securities or other assets owned by the Trust as
security for the payment thereof. Any such loan shall be
subject to approval as required of investments herein,
and also to the provisions of Paragraph 11.4 herein.
(j) The Trustees may compromise, compound and settle any debt
or obligation due to or from them as Trustee; they may
reduce the rate of interest on any obligation due them as
Trustee; they may extend the time of payment of both
interest and principal, or otherwise modify the terms of
any obligation due them as Trustee; upon default of any
obligation due them as Trustee, they may foreclose or
otherwise enforce any obligation belonging to the Trust.
(k) The Trustees may generally do all such acts, execute all
such instruments, take all such proceedings and exercise
all such rights and privileges with relation to property
belonging to the Trust as if the Trustees were the
absolute owners thereof.
11.4 Loan Provisions. The following provisions shall apply
to any loan made to the Trust fund:
(a) The loan must be at a reasonable rate of interest, for a
specific period of time, and shall not be payable on
demand;
(b) Any collateral pledged to the creditor by the Trust shall
consist only of the assets purchased with the borrowed
funds (although in addition to such collateral, the
Company may guarantee repayment of the loan);
(c) Under the terms of the loan, the creditor shall have no
recourse against the Trust except with respect to such
collateral;
(d) The loan shall be repaid only from those amounts con-
tributed by the Company to the Trust and from amounts
earned on Trust investments;
(e) The Company must contribute to the Trust amounts suf-
ficient to enable the Trust to pay each installment of
principal and interest on the loan on or before the date
such installment is due, even if no tax benefit results
from such contribution; and
(f) Upon the repayment of any portion of the balance due on
the loan, the assets originally pledged as collateral for
such portion shall be released from encumbrance.
Released shares shall be allocated to the accounts of
participants during the fiscal year such portion is paid
off. Such allocation shall be made in the same manner
provided under the Plan for allocating shares when no
loan is involved.
(g) Any such loans shall be effected primarily in the
interest of participants and their beneficiaries.
(h) Notwithstanding the foregoing, in the event an exempt
loan is effected it shall be subject to the following
additional provisions and the proceeds thereof must be
used within a reasonable time after their receipt only
for any or all of the following purposes:
(i) To acquire qualifying Company securities.
(ii) To repay such loan.
(iii) To repay a prior exempt loan. A new loan, the
proceeds of which are so used, must satisfy
the provisions of this Subparagraph (h).
(i) Except as provided hereinafter or as otherwise required
by applicable law, no security acquired with the proceeds
of an exempt loan may be subject to a put, call or other
option, or buy-sell or similar arrangement while held by
and distributed from the Plan, whether or not the Plan is
then an ESOP.
(j) A qualifying Company security acquired with the proceeds
of an exempt loan by the Plan, must be subject to a put
option if it is not publicly traded when distributed or
if it is subject to a trading limitation when distrib-
uted. For purposes of this Subparagraph, a "trading
limitation" on a security is a restriction under any
federal or state securities law, any regulation there-
under or an agreement, not prohibited herein, affecting
the security which would make the security not as freely
tradable as one not subject to such restriction. The put
option must be exercisable only by a participant, by the
participant's donees or by a person (including an estate
or its distributee) to whom the security passes by reason
of a participant's death. (Under this Subparagraph (j),
"participant" means a participant and beneficiaries of
the participant under the ESOP.) The put option must
permit a participant to put the security to the Company.
Under no circumstances may the put option bind the Plan.
However, it may grant the Plan an option to assume the
rights and obligations of the Company at the time that
the put option is exercised. If it is known at the time
a loan is made that federal or state law will be violated
by the Company's honoring such put option, the put option
must permit the security to be put, in a manner con-
sistent with such law, to a third party (e.g., an
affiliate of the Company or a shareholder other than the
Plan) that has substantial net worth at the time the loan
is made and whose net worth is reasonably expected to
remain substantial.
(k) General rule:
(i) A put option must last for a period of at
least sixty (60) days following the date of
distribution to the participant. If the put
option is not exercised during that period, it
must be available to the participant for a
period of at least sixty (60) days in the
following Plan year as provided in regulations
prescribed by the Internal Revenue Service.
(l) Other put option provisions:
(i) Manner of exercise. A put option is exercised
by the holder notifying the Company in writing
that the put option is being exercised.
(ii) Time excluded from duration of put option.
The period during which a put option is
exercisable does not include any time when a
distributee is unable to exercise it because
the party bound by the put option is
prohibited from honoring it by applicable
federal or state law.
(iii) Price. The price at which a put option must
be exercisable is the value of the security,
at its bid price on the over-the-counter
market on the day in which such put option may
and shall be exercised.
(iv) Payment terms. The provisions for payment
under a put option must be reasonable. The
deferral of payment is reasonable if adequate
security and a reasonable interest rate are
provided for any credit extended and if the
cumulative payments at any time are no less
than the aggregate of reasonable periodic
payments as of such time. Periodic payments
are reasonable if annual installments, be-
ginning with thirty (30) days after the date
the put option is exercised, are substantially
equal. Generally, the payment period may not
end more than five (5) years after the date
the put option is exercised. However, it may
be extended to a date no later than the
earlier of ten (10) years from the date the
put option is exercised or the date the
proceeds of the loan used by the Plan to
acquire the security subject to the put option
are entirely repaid.
(v) Payments restrictions. Payment under a put
option may be restricted by the terms of a
loan. Otherwise, payment under a put option
must not be restricted by the provisions of a
loan or any other arrangement, including the
terms of the Company's Articles of Incorpo-
ration, unless so required by applicable state
law.
(m) The provisions of Subparagraphs (j), (k) and (l)
hereinabove are nonterminable. If the Plan holds or has
distributed securities acquired with the proceeds of an
exempt loan and either the loan is repaid or the Plan
ceases to be an ESOP, these protections and rights shall
continue to exist. However, the protections and rights
will not fail to be nonterminable merely because they are
not exercisable under Subparagraphs (k) and (l).
(n) All assets acquired by the Plan with the proceeds of an
exempt loan referred to hereinabove must be added to and
maintained in a suspense account. Such assets are to be
withdrawn from the suspense account only in accordance
with rules and regulations of the Internal Revenue Ser-
vice and as if all securities in the suspense account
were encumbered. Assets in such suspense account are
assets of this ESOP Plan.
11.5 Approval of Investments. Before obtaining any loan or
making any new investment or reinvestment of any funds of this
Trust, the Trustees shall submit to the Executive Committee of the
Company, or its designated subcommittee, a proposal of the terms of
any such loan, or a list of any such securities in which it pro-
poses to invest such funds and the amount proposed to be invested
in each security, the Trustees shall proceed to act on such loan,
to purchase, or refrain from purchasing, such securities in
accordance with the acceptance or rejection, in whole or in part,
of such proposals by the Executive Committee of the Company, or its
designated subcommittee. Acceptance or rejection of such pro-
posals, or any modification thereof, or any of them by the said
Committee, shall be signified in writing and delivered to the
Trustees within thirty (30) days of the submission of such
proposals by the Trustees, provided however, that if no written
modification, acceptance or rejection of such proposals, or any of
them, shall be so delivered by the said Committee within the time
herein limited therefor, the Trustees shall be warranted and
protected in assuming that all of the proposed loans or investments
which have not been specifically modified or rejected as aforesaid,
meet with the complete approval of said Executive Committee, or its
designated subcommittee.
11.6 Cash Reserve. The Trustees may maintain a cash reserve
in such amount as to provide for current distribution of benefits
under the Plan. Such cash reserve may consist of uninvested con-
tributions of the Company, or of the proceeds of the sale of
investments of the Trust. All of the funds held in such cash
reserve as well as all funds and securities and assets belonging to
the Trust shall be safely kept by the Trustees on deposit or in the
vaults of a bank or trust company selected and designated by the
Board of Directors or the Executive Committee of the Company.
11.7 Disbursement of Funds. Disbursement of the assets of
this Trust shall be made by the Trustees only to or for the benefit
of the participants in the Plan or their beneficiaries, and only at
the time, in the amount and in the manner prescribed in written
instructions of the Administrative Committee delivered by such
Committee to the Trustees.
11.8 Instructions to Trustees. The Trustees shall not be
obligated or required to determine whether any instructions issued
to them by the Administrative Committee are in fact so issued in
accordance with the terms of the Plan or the powers and duties
thereunder of said Committee.
11.9 Fiduciary Insurance. The Trustees or the Administrative
Committee shall have the right to purchase insurance on behalf of
themselves or anyone acting in a fiduciary capacity with respect to
the Plan and Trust, to cover liability or losses occurring by
reason of the act or omission of a fiduciary, if such insurance
permits recourse by the insurer against the fiduciary in the case
of a breach of a fiduciary obligation by such fiduciary.
11.10 Accounting by Trustees. Each year the Trustees shall
render to the Company an account of their administration of the
Trust for the year ending on the preceding 31st of December. The
written approval of said account by the Board of Directors or the
Executive Committee of the Company shall, as to all matters and
transactions stated therein or shown thereby, be final and binding
upon all persons who are then or who may thereafter become
interested in this Plan and Trust.
11.11 Compensation. No Trustee shall receive any compensa-
tion for his services as such Trustee. In the administration of
said Trust, the Trustees, if they deem it advisable, may employ an
executive director, secretary or treasurer and fix reasonable
compensation therefor, and a Trustee may act as such executive
director, secretary or treasurer and receive the compensation so
fixed. The Trustees may in their discretion employ clerical help,
actuaries, accountants, attorneys or other necessary personal
services of a person or corporation as may be necessary to properly
administer, defend and protect the Trust, and reasonable compensa-
tion for said services may be paid by the Trustees from the Trust
in the event the Company does not elect to pay for such services.
Any taxes that may be levied against said Trust shall be paid by
the Trustees from the Trust assets after liability for said taxes,
if any, has been established, and in determining the liability for
taxes the Trustees are specifically authorized to use their own
discretion in contesting taxes claimed to be due against said
Trust, and said Trustees may employ counsel for such purposes and
pay said counsel fees from the Trust assets in the event the
Company does not elect to pay said costs and fees.
11.12 Trustees and Vacancies. The Trustees administering
this Trust shall at all times be Officers of the Company, and any
Trustee may at any time be removed from the office of Trustee, with
or without cause, by the Board of Directors or the Executive Com-
mittee of the Company. The Trustees named herein shall serve as
such Trustees until their resignation, death or removal by the
Board of Directors or the Executive Committee of the Company. When
any Trustee ceases to be an Officer of the Company, he automati-
cally ceases to be a Trustee. Resignation of a Trustee shall be by
written notice given to the Board of Directors or the Executive
Committee of the Company. Whenever a vacancy occurs by resigna-
tion, death or removal of one (1) or more of the Trustees, the
Board of Directors or the Executive Committee shall promptly fill
said vacancy or vacancies so created by naming a successor Trustee
or successor Trustees possessing the qualifications herein
prescribed. All successor Trustees shall have the same powers in
connection with said Trust as the initial Trustees have, and they
shall be subject to the same limitations and directions as
prescribed herein for the initial Trustees.
11.13 Rules. The Trustees may make proper rules for carrying
out the purposes of the Trust, and may amend said rules from time
to time. A majority of the Trustees shall constitute a quorum, and
the action taken by a quorum shall be controlling and shall be
deemed the act of the Trustees. The Trustees may designate any one
(1) of their number to act as chairman or presiding officer. Any
one (1) of the Trustees shall be and is hereby authorized to affix
his signature as the signature of all the Trustees when such may be
desirable in the performance of their duties pursuant hereto. This
Plan and Trust shall be construed and enforced according to the
Laws of the State of Missouri, and all provisions thereof shall be
administered according to the laws of such state. Any suit at law
or in equity brought against the Trustees or the Company by any
person, firm or corporation, including the participants in the
Plan, must be first instituted in Jackson County, Missouri, which
County and State is the situs of the parties hereto and the only
jurisdiction within which this Plan and Trust is to be administered
or located.
ARTICLE XII
Allocations Limitations
12.1 Maximum Limitation. Commencing January 1, 1983, in no
event shall the sum of the annual additions to a participant's
account for any Plan year exceed the lesser of:
(a) (i) Thirty thousand dollars ($30,000.00) or such higher
amount as may be prescribed by regulations issued pur-
suant to Section 415(d) of the Internal Revenue Code to
reflect increases in the cost of living; plus (ii) the
lesser of thirty thousand dollars ($30,000.00) (as
adjusted for cost of living increases) or the amount of
Company stock contributed to the Plan; [Effective January
1, 1989, Subparagraph (ii) is deleted] or
(b) Twenty-five percent (25%) of such participant's compen-
sation for the Plan year.
No more than one-third (1/3) of the Company contributions for a
year shall be allocated to the group of "highly compensated
employees" defined as follows:
Prior to January 1, 1997, an employee who, during the year or
the preceding year:
(1) Was at any time a five percent (5%) owner of the company,
(2) Received compensation from the company in excess of
seventy-five thousand dollars ($75,000.00),
(3) Received compensation from the company in excess of fifty
thousand dollars ($50,000.00) and was in the top-paid
group of employees for such year, or
(4) Was at any time an officer and received compensation
greater than fifty percent (50%) of the amount in effect
under Section 415(b)(1)(A) of the Internal Revenue Code
for such year.
Beginning January 1, 1997, an employee who:
(5) Was a five percent (5%) owner of the Company at any time
during the year or preceding year, or
(6) For the preceding year
A. had compensation [as defined in Code Section
415(c)(3)] from the Company in excess of $80,000.00
and
B. if the Company elects the application of this
clause for the preceding year, was in the group
consisting of the top twenty percent (20%) of the
employees ranked on the basis of compensation paid
during the preceding year.
Annual additions to a participant's account for a Plan year shall
be the sum for any year of the Company's contributions plus the
amount of any employee contributions plus the forfeitures.
12.2 Reallocation. If, but for the limitations set forth in
Paragraph 12.1, the annual additions to a participant's account for
any Plan year would exceed the limitation set forth in that Para-
graph, such annual additions shall be reduced to the extent
necessary to comply with the requirements of Paragraph 12.1. Any
portion of the Company's contribution which must be reallocated as
a result of the requirements of Paragraph 12.1 shall be reallocated
among the accounts of the remaining active participants in the same
manner as the initial allocation was made.
12.3 Annual Additions Reduction. If any participant is a
participant under any other Defined Contribution Plan maintained by
the Company, the total of the annual additions to such partici-
pant's account from all such Defined Contribution Plans shall not
exceed the limitations set forth in Paragraph 12.1. If it is
determined that as a result of the limitation set forth in the
preceding sentence, the annual additions to the participant's
account in this Plan must be reduced, such reduction shall be
accomplished in accordance with the provisions of Paragraph 12.2.
12.4 Annual Additions Reduction. If any participant is a
participant under a Defined Benefit Plan maintained by the Company,
the sum of the Defined Benefit Plan fraction for a Plan year and
the Defined Contribution Plan fraction for that year shall be no
greater than one (1.00). If it is determined that the limitation
set forth in the preceding sentence has been exceeded, the
numerator of the defined benefit plan fraction shall be adjusted by
freezing or adjusting the rate of benefit authorized by the defined
benefit plan so that the sum of both fractions shall not exceed one
(1) for the respective participant. Effective January 1, 2000,
this paragraph shall not apply.
12.5 Retirement Plan. As used in this Section, the words
"retirement plan" shall mean:
(a) Any profit sharing, pension or stock bonus plan described
in Section 401(a) and 501(a) of the Internal Revenue
Code;
(b) Any annuity plan or annuity contract described in Section
403(a) or 403(b) of the Internal Revenue Code;
(c) Any qualified bond purchase plan described in Section
405(a) of the Internal Revenue Code; and
(d) Any individual retirement account, individual retirement
annuity or retirement bond described in Section 408(a),
408(b) or 409 of the Internal Revenue Code.
12.6 Defined Contribution Plan. As used in this Section, the
words "Defined Contribution Plan" shall mean a retirement plan
which provides for an individual account for each participant and
for benefits based solely on the amount contributed to the par-
ticipant's account and any income, expenses, gains and losses, and
any forfeitures of accounts of other participants which may be
allocated to such participant's accounts.
12.7 Defined Benefit Plan. As used in this Section, the
words "Defined Benefit Plan" shall mean any retirement plan which
is not a Defined Contribution Plan.
12.8 Defined Benefit Plan Fraction. As used in this Section,
the words "Defined Benefit Plan fraction" shall mean, for any Plan
year, a fraction,
(a) the numerator of which is the projected annual benefit of
the participant, that is, the annual benefit to which he
would be entitled under the terms of the Defined Benefit
Plan on the assumptions that he continues employment
until his normal retirement date as determined under the
terms of the Defined Benefit Plan, that his compensation
continues at the same rate as in effect in the Plan year
under consideration until his normal retirement date and
that all other relevant factors used to determine bene-
fits under such Defined Benefit Plan remain constant as
of the current Plan year for all future Plan years, under
all Defined Benefit Plans maintained by the Company
determined as of the close of the Plan year, and
(b) the denominator of which is the lesser of: (i) the
maximum dollar limit for such year (for example, ninety
thousand dollars ($90,000.00) for 1983) times 1.25, or
(ii) the percentage of compensation limit for such year
times 1.4.
12.9 Defined Contribution Plan Fraction. As used in this
Section, the words "Defined Contribution Plan fraction" shall mean,
for any Plan year, a fraction,
(a) the numerator of which is the sum of the annual additions
to the participant's account under all Defined Contri-
bution Plans maintained by the Company in that Plan year,
and
(b) the denominator of which is the sum of the lesser of the
following amounts, determined for the year and for each
prior year of service with the Company: (i) the product
of 1.25 multiplied by the dollar limitation in effect for
the year, or (ii) the product of 1.4 multiplied by the
percentage of compensation limit (IRC 415 (e)(3) as
amended).
(c) In computing the defined contribution plan fraction
above, for years ending after December 31, 1982, at the
election of the Company, the amount to be taken into
account for all years ending before January 1, 1983, may
be computed to be an amount equal to the denominator of
the fraction, as in effect for the year ending in 1982,
multiplied by a transition fraction,
1. the numerator of which is the lesser of (i) fifty-
one thousand eight hundred seventy-five dollars
($51,875.00), or (ii) 1.4 multiplied by twenty-five
per cent (25%) of the participant's compensation
for the year ending in 1981, and
2. the denominator of which is the lesser of (i)
forty-one thousand five hundred dollars
($41,500.00), or (ii) twenty-five per cent (25%) of
the participant's compensation for the year ending
in 1981.
ARTICLE XIII
General Provisions
13.1 Expenses. The Company shall pay all expenses incurred
in administering the Plan and managing the Trust assets. The
Company shall not pay any brokerage fees, commissions, stock
transfer taxes and other charges and expenses in connection with
the purchase and sale of securities under the Plan, unless
specifically approved by the Executive Committee, or its designated
subcommittee.
13.2 Source of Payment. Benefits pursuant to the Plan shall
be payable only out of the assets of the Trust. No person shall
have any right under the Plan with respect to the assets of the
Trust, or against any Trustee, insurance company or the Company,
except as specifically provided for herein.
13.3 Inalienability of Benefits. The interest hereunder of
any participant or beneficiary except as may be required by a
Qualified Domestic Relations Order defined in Section 414(p) of the
Internal Revenue Code, shall not be alienable, either by assignment
or by any other method, and to the maximum extent permissible by
law, shall not be subject to being taken, by any process whatever,
by the creditors of such participant or beneficiary. Effective
August 5, 1997, the Plan may offset a participant's benefits under
the Plan against an amount the participant is ordered or required
to pay to the Plan described in a judgment, order, decree or
settlement agreement relating to a breach of fiduciary duty or
criminal act against the Plan as further described in Section
401(a)(13) of the Internal Revenue Code.
13.4 No Right to Employment. Nothing herein contained nor
any action taken under the provisions hereof shall be construed as
giving any employee the right to be retained in the employment of
the Company.
13.5 Accrued Benefit. The term "accrued benefit" shall mean
the value of a participant's account or accounts with respect to
all funds in this Plan.
13.6 Uniform Administration. Whenever in the administration
of the Plan any action is required by the Committee, such action
shall be uniform in nature as applied to all persons similarly
situated and no such action shall be taken which will discriminate
in favor of shareholders of the Company, highly compensated par-
ticipants or participants whose principal duties consist of
supervising the work of others.
13.7 Beneficiary. The word "beneficiary" shall be deemed to
include the estate of the participant, dependents of the partici-
pant, persons who are the natural objects of the participant's
bounty, and any person designated by the participant to share in
the benefits of the Plan and Trust after the death of the
participant. Wherever the rights of participants are stated or
limited herein, their beneficiaries shall be bound thereby.
13.8 Severability. In the event that any provision of this
Plan and Trust shall be held invalid or illegal for any reason,
such determination shall not affect the remaining provisions of
this Plan, but this Plan shall be construed and enforced as if such
invalid or illegal provision had never been included in the Plan.
This Plan shall be construed in accordance with the Laws of the
State of Missouri.
13.9 Articles. Titles of Articles are for general
information only and this Plan shall not be construed by reference
to such titles.
13.10 Gender. Words used in the masculine gender shall be
read and construed to include the feminine gender.
13.11 Plural. Wherever required, the singular of any word in
this Plan and Trust shall include the plural and the plural may be
read in the singular.
13.12 Disability. The term "disability" as used in this Plan
means a physical or mental condition of a participant which results
in the receipt of benefits by such participant pursuant to the
provisions of either the Kansas City Life Disability Plan or the
Sunset Life Disability Plan.
13.13 Compensation. For the purposes herein, the term "com-
pensation" shall include all compensation, as defined in Regulation
1.415-2(d)(11)(i) of the Internal Revenue Code, due and payable to
an employee by the Company, including any amount not includable in
the gross income of an employee under Internal Revenue Code
Sections 125, 402(e)(3), 402(h) and 403(b).
13.14 Initial Qualifications. The Company reserves the right
to have all its contributions returned to it free of this Trust,
and to terminate said Plan and Trust, if the Trust does not
initially meet the qualification requirements of the Internal
Revenue Code for an employee stock option plan.
13.15 Company. The term "Company" means Kansas City Life
Insurance Company, a Missouri Corporation, Sunset Life Insurance
Company of America, a Washington Corporation, and Old American
Insurance Company, a Missouri Corporation, and any other subsidiary
corporation of Kansas City Life Insurance Company required to be
treated as a single employer under Internal Revenue Code Section
414(b), (c), (m) and (o), any or all of which may sometimes be
referred to herein as affiliated corporations.
13.16 Employee. The term "employee" shall mean any person
employed by Kansas City Life Insurance Company or any subsidiary
corporation under the rules of common law, and shall not include
agents, general agents, consultants or other independent con-
tractors, or, effective January 1, 1989, leased employees as
defined in Section 414(n) and (o) of the Internal Revenue Code.
Effective January 1, 1997, "leased employee" shall mean any person
other than an employee of the Company who has performed services
for the Company under an agreement between the Company and a
leasing organization on a substantially full time basis for at
least one (1) year, provided such services are performed under the
primary direction or control by the Company.
Leased employees shall not participate in this Plan. Further-
more, a person who is not designated as an "employee" in the
Company's employment records during a particular period of time,
including a person designated as an "independent contractor", is
not to be considered to be an employee during that period of time.
Such a person shall not be considered to be an employee even if a
determination is made by the Internal Revenue Service, the Depart-
ment of Labor, or any other government agency, court, or other
tribunal, that such person is an employee for any purpose, unless
and until the Company in fact designates such person as an employee
for purposes of this Plan. If such a designation is made, the
designation shall be applied prospectively only unless the Company
specifically provides otherwise.
13.17 Company Stock. The term "Company stock" shall mean
shares of the common capital stock of Kansas City Life Insurance
Company.
13.18 Executive Committee. Wherever in the Plan and Trust
the term "Executive Committee" is used, it shall be taken to mean
only the Executive Committee of the Board of Directors of Kansas
City Life Insurance Company.
13.19 Board of Directors. Wherever in the Plan and Trust the
term "Board of Directors" is used, it shall be taken to mean only
the Board of Directors of Kansas City Life Insurance Company.
13.20 Affiliated Company Participation. Notwithstanding any-
thing in this Agreement to the contrary, no employee of any
subsidiary or affiliated corporation of Kansas City Life Insurance
Company shall have the right to participate in this Plan unless
such Plan shall have been adopted by the corporation for which such
employee is employed.
13.21 Direct Rollovers. The provisions of this Paragraph
shall be effective January 1, 1993 and apply to distributions after
January 1, 1993. Notwithstanding any provision of this Plan to the
contrary, a distributee may elect to have any portion of an
eligible rollover distribution paid directly to an eligible retire-
ment plan specified by the distributee in a direct rollover. The
Administrative Committee may prescribe the time and manner in which
this election is made.
As used in this Paragraph, "eligible rollover distribution",
"eligible retirement plan", "distributee" and "direct rollover"
shall mean:
(a) "Eligible rollover distribution" is any distribution of
all or any portion of the balance to the credit of the
distributee. However, an eligible rollover distribution
shall not include:
(i) Any distribution that is one of a series of
substantially equal periodic payments (not
less frequently than annually) made for the
life (or life expectancy) of the distributee
or the joint lives (or joint life expec-
tancies) of the distributee and the
distributee's designated beneficiary, or for a
specified period of ten (10) years or more;
(ii) Any distribution required under Code Section
401(a)(9); or
(iii) The portion of any distribution that is not
includible in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to employer
securities.
(b) "Eligible retirement plan" is:
(i) An individual retirement account (described in
Code Section 408(a)) or individual retirement
annuity (described in Code Section 408(b)); or
(ii) An annuity plan (described in Code Section
403(a)); or
(iii) A qualified trust (described in Code Section
401(a)) that accepts the distributee's
eligible rollover distribution. However, in
the case of an eligible rollover distribution
to a surviving spouse, eligible retirement
plan shall mean only the items in (i) above.
(c) "Distributee" shall include an employee or former em-
ployee. An employee's or former employee's surviving
spouse and the employee's or former employee's spouse or
former spouse who is an alternate payee under a Qualified
Domestic Relations Order (defined in Code Section 414(p))
are distributees with regard to the interest of the
spouse or former spouse.
(d) "Direct rollover" is a payment by the Plan to the
eligible retirement plan specified by the distributee.
The Plan shall withhold twenty percent (20%) of an
eligible rollover distribution which is not paid to an
eligible retirement plan.
13.22 Participants who Enter Armed Forces. Effective
December 12, 1994, notwithstanding any provision of this Plan to
the contrary, contributions, benefits and service credit with
respect to qualified military service will be provided in accord-
ance with Code Section 414(v).
ARTICLE XIV
Top Heavy Provisions
14.1 Compensation Limits. With respect to compensation as
defined in this Plan, for any Top Heavy Plan year, compensation in
excess of two hundred thousand dollars ($200,000.00), or such
otheramount as the Secretary of the Treasury may designate, shall
be disregarded. Effective January 1, 1994, one hundred fifty
thousand dollars ($150,000.00) is the maximum compensation. This
amount will be adjusted in accordance with Internal Revenue Code
Section 401(a)(17)(B).
14.2 Key Employee. "Key employee" means any employee or
former employee (and his beneficiaries) who, at any time during the
Plan year or any of the preceding four (4) Plan years, is:
(a) An officer of the Company, as that term is defined within
the meaning of the regulations under Internal Revenue
Code Section 416. For the years 1984 through 1987, an
officer is not treated as a key employee if the officer
has an annual compensation of forty-five thousand dollars
($45,000.00) or less.
(b) One of the ten (10) employees owning (or considered as
owning within the meaning of Code Section 318) the
largest interests in all employers required to be
aggregated under Code Sections 414(b), (c), and (m).
However, an employee will not be considered a top ten
(10) owner for a Plan year if the employee earns less
than thirty thousand dollars ($30,000.00), or such other
amount adjusted in accordance with Code Section
415(c)(1)(A) as in effect for the calendar year in which
the determination date falls.
(c) A five percent (5%) owner of the Company. "Five percent
(5%) owner" means any person who owns (or is considered
as owning within the meaning of Code Section 318) more
than five percent (5%) of the outstanding stock of the
Company or stock possessing more than five percent (5%)
of the total combined voting power of all stock of the
Company.
(d) A one percent (1%) owner of the Company having an annual
compensation from the Company of more than one hundred
fifty thousand dollars ($150,000.00). "One percent (1%)
owner" means any person who owns (or is considered as
owning within the meaning of Code Section 318) more than
one percent (1%) of the outstanding stock of the Company
or stock possessing more than one percent (1%) of the
total combined voting power of all stock of the Company.
In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections
414(b), (c), and (m) shall be treated as separate em-
ployers. However, in determining whether an individual
has compensation of more than one hundred fifty thousand
dollars ($150,000.00) compensation from each employer
required to be aggregated under Code Sections 414(b),
(c), and (m) shall be taken into account.
14.3 Non-Key Employee. "Non-key employee" means any employee
who is not a key employee.
14.4 Super Top Heavy Plan. "Super Top Heavy Plan" means, for
Plan years commencing after December 31, 1983, that, as of the
determination date, (1) the present value of accrued benefits of
key employees, or (2) the sum of the aggregate accounts of key
employees under this Plan and any Plan of the Company's aggregation
group, exceeds ninety percent (90%) of the present value of accrued
benefits or the aggregate accounts of all participants under this
Plan and any Plan of the Company's aggregation group.
14.5 Top Heavy Plan. "Top Heavy Plan" means, for Plan years
commencing after December 31, 1983, that, as of the determination
date, (1) the present value of accrued benefits of key employees,
or (2) the sum of the aggregate accounts of key employees under
this Plan and any Plan of the Company's aggregation group, exceeds
sixty percent (60%) of the present value of accrued benefits or the
aggregate accounts of all participants under this Plan and any Plan
of the Company's aggregation group.
14.6 Top Heavy Plan Year. "Top Heavy Plan Year" means any
calendar year after December 31, 1983 in which the Plan is a top
heavy plan.
14.7 Top Heavy Plan Requirements.
(a) For any "Top Heavy Plan Year", the following provisions
shall apply notwithstanding any other provision in this
Plan to the contrary:
1. Any person who is a participant in this Plan in any
year in which it shall be a "Top Heavy Plan" shall
have his or her benefits vested in accordance with
the following schedules: Twenty Percent (20%) after
two (2) years of service; Forty percent (40%) after
three (3) years of service; Sixty percent (60%)
after four (4) years of service; Eighty per-cent
(80%) after five (5) years of service; One hundred
percent (100%) after six (6) years of service.
Effective January 1, 1989, there shall be no
decrease in a participant's nonforfeitable
percentage in the event the Plan's status as top
heavy changes for any year. Further, if the
vesting schedule shifts in and out of the above
schedule for any year because the Plan's top heavy
status changes, such shift shall be considered an
amendment of the vesting schedule. If this occurs,
each participant with at least three (3) years of
service with the Company may elect to have his
nonforfeitable percentage determined without regard
to the shift. The election period will begin with
the date the deemed amendment is made and shall end
on the later of:
A. Sixty (60) days after the deemed amendment is
adopted;
B. Sixty (60) days after the deemed amendment is
effective; or
C. Sixty (60) days after the participant is
issued written notice of the deemed amendment
by the Administrative Committee.
2. Notwithstanding anything in this Plan to the
contrary for any Top Heavy Plan Year, the Company
shall make a minimum contribution for each non-key
employee equal to three percent (3%) of such non-
key employee's salary.
3. For any year in which this Plan is top heavy, each
non-key employee will receive a minimum contribu-
tion if the non-key employee has not separated from
service at the end of the top heavy year, regard-
less of whether the non-key employee has less than
one thousand (1,000) hours of service in such year.
Furthermore, such non-key employee shall receive
such minimum contribution regardless of his or her
level of compensation, and regardless of whether he
or she declines to make a mandatory personal con-
tribution.
4. Notwithstanding the foregoing, so long as any non-
key employee is covered by both the Company's
Pension Plan and this Plan, the minimum contribu-
tion required herein shall be satisfied by the
accrual of the defined benefit by the respective
non-key employee for any top heavy year.
5. If the Company shall be maintaining both this Plan
and a defined benefit plan in any top heavy year, a
factor of 1.0 must be applied to the dollar limits
when the top heavy ratio exceeds ninety percent
(90%).
14.8 Determination of Top Heavy Status.
(a) This Plan shall be a Top Heavy Plan for any Plan year
commencing after December 31, 1983, in which, as of the
determination date, (1) the present value of accrued
benefits of key employees, or (2) the sum of the
aggregate accounts of key employees under this Plan and
any Plan of an aggregation group exceeds sixty percent
(60%) of the present value of accrued benefits or the
aggregate accounts of all participants under this Plan
and any Plan of an aggregation group.
If any participant is a non-key employee for any Plan
year, but such participant was a key employee for any
prior Plan year, such participant's present value of
accrued benefit and/or aggregate account balance shall
not be taken into account for purposes of determining
whether this Plan is a Top Heavy Plan (or whether any
aggregation group which includes this Plan is a Top Heavy
group).
(b) This Plan shall be a Super Top Heavy Plan for any Plan
year commencing after December 31, 1983, in which, as of
the determination date, (1) the present value of accrued
benefits of key employees, or (2) the sum of the
aggregate accounts of key employees under this Plan and
any Plan of an aggregation group, exceeds ninety percent
(90%) of the present value of accrued benefits or the
aggregate accounts of all participants under this Plan
and any Plan of an aggregation group.
(c) Aggregate account. A participant's aggregate account as
of the determination date is the sum of:
1. His participant's account balance as of the most
recent valuation occurring within a twelve (12)
month period ending on the determination date.
2. Contributions that would be allocated as of a date
not later than the determination date, even though
those amounts are not yet made or required to be
made.
3. Any Plan distributions made within the Plan year
that includes the determination date or within the
four (4) preceding Plan years. However, in the
case of distributions made after the valuation date
and prior to the determination date, such distri-
butions are not included as distributions for Top
Heavy purposes to the extent that such distribu-
tions are already included in the participant's
aggregate account balance as of the valuation date.
Notwithstanding anything herein to the contrary,
all distributions, including distributions made
prior to January 1, 1984, will be counted.
4. Any employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax
deductible qualified employee contributions shall
not be considered to be a part of the participant's
aggregate account balance.
(d) "Aggregation group" means either a required aggregation
group or a permissive aggregation group as hereinafter
determined.
1. Required aggregation group. In determining a re-
quired aggregation group hereunder, each Plan of
the Company in which a key employee is a parti-
cipant, and each other Plan of the Company which
enables any Plan in which a key employee
participates to meet the requirements of Code
Sections 401(a)(4) and 410, will be required to be
aggregated. Such group shall be known as a
required aggregation group.
In the case of a required aggregation group, each
Plan in the group will be considered a Top Heavy
Plan if the required aggregation group is a Top
Heavy group. No Plan in the required aggregation
group will be considered a Top Heavy Plan if the
required aggregation group is not a Top Heavy
group.
2. Permissive aggregation group. The Company may also
include any other Plan not required to be included
in the required aggregation group, provided the
resulting group, taken as whole, would continue to
satisfy the provisions of Internal Revenue Code
Sections 401(a) or 410. Such group shall be known
as a permissive aggregation group.
In the case of a permissive aggregation group, only
a Plan that is part of the required aggregation
group will be considered a Top Heavy Plan if the
permissive aggregation group is a Top Heavy group.
No Plan in the permissive aggregation group will be
considered a Top Heavy Plan if the permissive
aggregation group is not a Top Heavy Plan group.
3. Only those Plans of the Company in which the
determination dates fall within the same calendar
year shall be aggregated in order to determine
whether such Plans are Top Heavy Plans.
(e) "Determination date" means (1) the last day of the
preceding Plan year, or (2) in the case of the first Plan
year, the last day of such Plan year.
(f) Present value of accrued benefit. In the case of a
defined benefit plan, a participant's present value of
accrued benefit shall be as determined under the
provisions of the applicable defined benefit plan.
(g) "Top Heavy group" means an aggregation group in which, as
of the determination date, the sum of:
1. The present value of accrued benefits of key
employees under all defined benefit plans included
in the group; and
2. The aggregate accounts of key employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum
determined for all participants.
(h) "Top Heavy Plan year" means that, for a particular Plan
year commencing after December 31, 1983, the Plan is a
Top Heavy Plan.
(i) Notwithstanding anything herein to the contrary, the
effective date otherwise provided for herein for the
application of Code Section 416 to this Plan (Plan years
beginning after December 31, 1983) shall be extended in
accordance with any legislative act of Congress.
IN WITNESS WHEREOF, the Company has caused this Tenth Amend-
ment to be executed by its authorized Officers and its Corporate
Seal to be hereunto affixed, and the Trustees have executed this
Trust, all on the day of , 19 .
KANSAS CITY LIFE INSURANCE COMPANY
By:
Its: Vice President
ATTEST:
By:
Its: Assistant Secretary
TRUSTEES
Exhibit 10 (d), Form 10-K
Kansas City Life
Insurance Company
FIRST AMENDMENT
KANSAS CITY LIFE
EXCESS BENEFIT PLAN
ARTICLE I
Definitions
1.01 "Act" shall mean the Employee Retirement Income Security
Act of 1974 (ERISA), as from time to time amended.
1.02 "Pension Plan" shall mean the Kansas City Life Insurance
Company Cash Balance Pension Plan, as amended from time to time.
1.03 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
1.04 "Company" shall mean Kansas City Life Insurance Company
and any of its subsidiaries or affiliated business entities parti-
cipating in the Pension Plan.
1.05 "Effective date" shall mean January 1, 1998.
1.06 "Maximum benefit" shall mean the maximum benefit
permitted by Sections 415 and 401(a)(17) of the Code to be paid a
participant of a defined benefit plan qualified under Sections
401(a) and 501(a).
1.07 "Participant" shall mean any employee of the Company who
is an active participant in the Pension Plan on or after the
effective date and whose pension benefits determined on the basis
of the provisions of such Pension Plan, without regard to the
limitations of the Code, would exceed the maximum benefit limited
under Sections 415 and 401(a)(17) of the Code.
1.08 "Plan" shall mean the Kansas City Life Excess Benefit
Plan, as from time to time amended or restated, which shall be an
unfunded plan as defined in Act Section 3(36) and Department of
Labor Regulation 2520.104-23.
1.09 "Unrestricted benefit" shall mean the maximum normal,
early, or deferred vested retirement benefit, payable pursuant to
provisions of the Pension Plan, whichever is applicable, determined
without regard to the limitations of the Code imposed under
Sections 415 and 401(a)(17).
ARTICLE II
Benefits
2.01 Normal retirement benefit: Upon the retirement of a
participant, as provided under the Pension Plan, such participant
shall be entitled to a benefit equal in amount to his unrestricted
benefit less the maximum benefit.
2.02 Deferred vested retirement benefit: If a participant
terminates employment with the Company and is entitled to a
deferred vested retirement benefit provided under the Pension Plan,
such a participant shall be entitled to a benefit equal to his
unrestricted benefit less the maximum benefit.
2.03 Spouse's pension benefit: Subject to Section 2.04
below, upon the death of a participant whose spouse is eligible for
a pre- or post-retirement surviving spouse benefit under the
Pension Plan, the participant's surviving spouse shall be entitled
to a benefit equal to the surviving spouse benefit determined in
accordance with the provisions of the Pension Plan without regard
to the limitation under Code Sections 415 and 401(a)(17) less the
maximum benefit.
2.04 Optional forms of benefit payment: A retirement benefit
payable under this ARTICLE II shall be paid at such time or times
in such form as the participant may have elected pursuant to the
provisions of the Pension Plan. The election to receive a lump sum
payment must be filed with the Administrative Committee at least
six (6) months prior to payment being received. However, a
participant entitled to a benefit from the Pension Plan in 1998 may
elect to receive a lump sum payment in 1998 without regard to this
six (6) month requirement. Participants who are receiving monthly
benefits on January 1, 1998 from this Plan are not eligible to
elect a lump sum payment. The lump sum shall be determined in the
same manner as it is determined under the Pension Plan.
ARTICLE III
Administration of the Plan
3.01 Administrator: The Plan shall be administered by the
Administrative Committee elected by the Company pursuant to the
Pension Plan, and subject to such authority detailed therein. The
Administrator shall have the sole duty and responsibility of main-
taining records, making the requisite calculations, and disbursing
the payments hereunder. The Administrator shall have full and
complete discretionary authority in performing its duties. The
Administrator's interpretations, determinations, regulations, and
calculations shall be final and binding on all persons and parties
concerned.
3.02 Amendment and termination: Kansas City Life Insurance
Company may amend or terminate the Plan at any time, provided,
however, that no such amendment or termination shall adversely
affect a benefit to which a terminated or retired participant or
his beneficiary is entitled under ARTICLE II prior to the date of
such amendment or termination unless the participant becomes
entitled to an amount equal to such benefit under another plan
or practice adopted by the Company.
3.03 Payments: The Company will pay all benefits arising
under this Plan and all costs, charges, and expenses relating
thereto.
3.04 Non-assignability of benefits: The benefits payable
hereunder or the right to receive future benefits under the Plan
may not be anticipated, alienated, pledged, encumbered, or sub-
jected to any charge or legal process, and if any attempt is made
to do so, or a person eligible for any benefits becomes bankrupt,
the interest under the Plan of the person affected may be termi-
nated by the Administrator which, in its sole discretion, may cause
the same to be held or applied for the benefit of one or more of
the dependents of such person or make any other disposition of such
benefits that it deems appropriate.
3.05 Status of Plan: The benefits under this Plan shall not
be funded, but shall constitute liabilities by the Company payable
when due.
3.06 Non-guarantee of employment: Nothing contained in this
Plan shall be construed as a contract of employment between the
Company and any participant, or as a right of any participant to be
continued in employment of the Company, or as a limitation on the
right of the Company to discharge any of its employees, with or
without cause.
3.07 Applicable law: All questions pertaining to the con-
struction, validity and effect of the Plan shall be determined in
accordance with the laws of the United States and to the extent not
pre-empted by such laws, by the laws of the State of Missouri.
IN WITNESS WHEREOF, Kansas City Life Insurance Company has
caused this Agreement to be executed by its duly authorized
officers.
KANSAS CITY LIFE INSURANCE COMPANY
By:
Its: Senior Vice President
ATTEST:
Assistant Secretary
Exhibit 13, Form 10-K
Kansas City Life
Insurance Company
MANAGEMENT'S DISCUSSION
and analysis of financial condition and results of operations
OPERATING RESULTS
Operating earnings per share reached a then record level of $6.52 in 1996
but declined 12 percent in 1997 to $5.72, and then rose 16 percent to a new
record level of $6.63 in 1998. Realized investment gains varied over the three
years: $3.0 million in 1996, $14.5 million in 1997 and $11.4 million in 1998.
Including these gains, net income rose from $6.84 a share in 1996 to $7.25 in
1997 to $7.83 in 1998, an average growth rate of 7 percent a year. Pretax
operating margins averaged 12.1 percent over the three years while return on
equity averaged 9.46 percent.
The Company acquired a block of traditional and interest sensitive life
insurance during the third quarter of 1997 for $51.4 million, net of related
income tax benefits. The block initially added 100,000 policies generating
annual insurance revenues of $27.0 million, and the Company received $216.6
million in cash.
Investment results are reviewed more meaningfully by excluding the effects
of the acquisition above. On this basis, investment income increased 2 percent
in 1997 and declined 3 percent in 1998. Investment assets were unchanged from
1996 to 1997 and grew 2 percent in 1998 on an amortized cost basis. The
investment portfolio's overall yield declined from 7.68 percent in 1996 to 7.20
percent in 1998 as yields on new investments fell below yields on investments
lost through maturity and repayment. Generally all of 1998's new money, $44.7
million, was invested in mortgage loans. The Company invested $74.2 million in
hedge funds and high yield securities. While it is anticipated that these
investments will return higher yields over time commensurate with their added
risk, their earnings pattern will be volatile year to year. These investments'
percentage return was one-third that of the portfolio in 1998 and thus
negatively impacted the overall yield. Approximately 92 percent of the
securities portfolio is investment grade compared to 96 percent in 1997.
Securities defaults have been insignificant. Just 0.3 percent of the mortgage
portfolio is in foreclosure, half the industry average. Restructured mortgage
loans represent 1.7 percent of the portfolio at year end 1998.
Considerable progress was made over the past three years in improving
efficiency. Home office operating expenses rose 7 percent in 1997 as investments
were made in the marketing effort. This contributed to the strong sales growth
in 1997 and 1998 which helped to lower unit costs. Home office costs declined 2
percent in 1998 despite the added administrative work associated with the
acquisition of 100,000 life policies noted previously. These efforts increased
efficiency by improving unit costs. For example, premium revenues per employee
rose 33 percent over the past three years and the number of policies per
employee increased 4 percent. The integration of Sunset Life's operations into
the Kansas City home office in 1999 will provide additional cost savings and
unit cost improvements. These benefits will be fully realized beginning in 2000.
The Company's effective Federal income tax rate was fairly constant at 29
percent in 1996 and 1998, and 28 percent in 1997. This reduced tax rate
reflected investments in real estate ventures which generate affordable housing
tax credits.
The following comments address the financial performance of each of the
Company's four reportable operating segments: the Parent Company, divided
between its individual and group insurance operations, and each of its two
insurance affiliates. Refer also to the Segment Information Note to the
Consolidated Financial Statements.
Kansas City Life - Individual
Sales, in terms of new annualized premiums, increased 41 percent in 1997
and 44 percent in 1998. Variable universal life and annuities generated this
growth and comprised two-thirds of 1998 sales. Assets supporting the variable
products equaled $143.0 million at year end 1998. Sales of interest sensitive
products, which comprised one-third of total sales, decreased 4 percent in 1997
and were level in 1998. Total insurance revenues, including renewal receipts,
increased by double-digit rates in 1997 and 1998. However, excluding the block
purchase, these revenues were level in 1997 and grew 14 percent in 1998.
Mortality experience for all life business improved slightly each of the
three years. Mortality margins for the interest sensitive and variable lines,
combined, improved considerably in 1997 and declined slightly in 1998.
Investment spreads on the interest sensitive products were maintained through
1997 but narrowed somewhat in 1998. Surrender experience was fairly constant
over the three years for the various lines of business except for flexible
annuities. These withdrawals continued to rise in line with industry experience.
Overall, benefits relative to operating revenues improved from 62 percent of
revenues in 1996 to 61 percent in 1997, and the ratio was unchanged in 1998.
Due to the factors discussed above, operating earnings declined 2 percent
in 1997 but rose 13 percent in 1998 as Kansas City Life's individual business
generated 68 percent of consolidated operating income.
Kansas City Life - Group
Group sales declined 7 percent in 1997 and 10 percent in 1998. However,
sales gained momentum leading into 1999. Much of the decline occurred in dental
as steps were taken to improve its claims ratios. Double-digit growth in stop
loss sales the past two years partially offset this decline. The group segment
generated 9 percent of consolidated sales in 1998. Total group insurance
revenues, including renewal premiums, rose 26 percent in 1997 and declined 2
percent in 1998. The growth in 1997 resulted from dental and the purchase of two
blocks of administrative services only (ASO) business. The purchases doubled
ASO's annual revenues to $4.7 million. Overall, group provided 19 percent of
consolidated insurance revenues.
Claims ratios were above historical norms the past three years due to
dental in 1996 and 1997 and stop loss and long-term disability in 1998. The
dental claims ratio improved considerably in 1998.
The group segment experienced operating losses the past three years due to
the claims experience discussed above. The group segment is being analyzed and
actively managed in order to return it to profitability.
Sunset Life
Sunset's sales declined 4 percent in 1997 but then rose 31 percent in 1998.
Flexible annuity sales rose 7 percent in 1997 and 28 percent in 1998. Universal
life sales dipped in 1997 but then rebounded in 1998 to a slightly higher level
than in 1996. These interest sensitive products accounted for 91 percent of
Sunset's sales. Sunset provided one-eighth of consolidated sales in 1998.
Including renewal receipts, the segment's total insurance revenues rose 4
percent in 1997 and 2 percent in 1998, and equaled 10 percent of consolidated
insurance revenues.
Benefits, as a percent of operating revenues, steadily improved from 50
percent of revenues in 1996 to 48 percent in 1998. Universal life surrenders
remained constant as a percent of accumulated values, but flexible annuity
withdrawals increased steadily on this basis, in line with industry experience.
Operating revenues, which include investment earnings as well as insurance
receipts, were largely unchanged over the three years. Profit margins narrowed
in 1997 due to increased amortization of deferred acquisition costs. Margins
widened in 1998 reflecting improved benefits ratios and a 4 percent decline in
operating expenses. Therefore Sunset's operating earnings declined 12 percent in
1997 but rose 8 percent in 1998. The segment provided 22 percent of the
consolidated group's operating income. Sunset's future earnings should benefit
from improved efficiencies due to the integration of its operations into the
Kansas City home office.
Old American
New annualized premiums declined 5 percent and 23 percent in 1997 and 1998,
respectively. Old American generates sales leads for its agents. However,
declining response rates in direct mail programs in past years resulted in
reductions in the sales force which contributed to the sales decline. Changes in
underwriting requirements discussed below also negatively impacted sales. In
order to reverse the recent sales trend, Old American is aggressively recruiting
new agents and seeks to increase its agent sales force by 18 percent in 1999.
The Company provided 7 percent of consolidated sales. The segment's total
insurance revenues, including renewal premiums, were level in 1997 and declined
2 percent in 1998. Old American generated 29 percent of consolidated insurance
revenues.
Benefits rose from 62 percent of operating revenues in 1996 to 64 percent
in 1997, and then returned to 62 percent in 1998. Two steps taken during 1998
should benefit future claims experience: underwriting policies and procedures
were expanded and the home health care block was sold. The sale had little
impact on 1998 earnings but reserve strengthening in the line lowered 1996 and
1997 pretax earnings a total of $4.1 million.
Old American's operating expenses declined both years and are considerably
below expense goals established when the Company was purchased. Operating
revenues were level over the three-year period. Profit margins narrowed in 1997
and then widened in 1998 due to the claims experience noted above. Thus,
operating earnings equaled $6.3 million in 1996, dropped to $3.1 million in
1997, and then recovered to $5.8 million in 1998. The segment accounted for 13
percent of consolidated operating income.
Changes in Reporting Regulations
Financial Accounting Standard No. 130, "Reporting Comprehensive Income,"
requires all components of comprehensive income be displayed prominently in the
financial statements as well as report total comprehensive income for each
period. This standard, adopted in the first quarter of 1998, had no impact on
net earnings or stockholders' equity and comparative financial statements were
reclassified.
The Company adopted Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information," at year end 1998. This standard establishes
requirements for annual and interim reporting of segment information including
products and services, geographic areas and major customers. The Company now
reports four segments rather than the one segment reported previously.
Standard No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," enhances disclosure requirements from previously
adopted Standards No. 87 and 106. Standard No. 132 had no financial impact and
was adopted at year end 1998.
Standard No. 133, "Accounting for Derivative Instruments and for Hedging
Activities," provides comprehensive, consistent standards for the recognition
and measurement of derivatives and hedging activities. It is effective for our
fiscal year 2000 and it is being evaluated to determine whether it will affect
the Company.
Market and Interest Rate Risk Analysis
The majority of the investments are debt instruments and are considered
fixed income investments. Thus, the primary market risk affecting Kansas City
Life is interest rate risk. Interest and dividend income represent the greatest
portion of most fixed income investments' total return. As interest rates fall,
the interest and dividend streams of older, higher-yielding investments become
relatively more valuable than newer, lower-yielding securities and thus the
market value of the higher-yielding investments increases. The opposite occurs
as rates rise. The market value of such investments is therefore inversely
proportional to interest rates.
As interest rates have fallen, Kansas City Life's investments have
generally increased in value. At year end 1998, the market value of the
marketable securities exceeded their book value $91.6 million. Assuming that
changes occur equally over the entire yield curve, it is estimated that a
100-basis-point change in interest rates would translate to a $70.2 million
change in market value, after tax, for the securities portfolio, or 3 percent of
its value. This represents 13 percent of stockholders' equity. This sensitivity
reflects the portfolio's duration of 4.9 years.
There- Total Fair
1999 2000 2001 2002 2003 after Principal Value
(millions)
Corporate bonds
currently callable $ 79 1 - 10 12 59 161 156
Average interest rate 7.57% 9.34 - 8.14 7.36 7.32 7.49
Mortgage backed
securities and CMO's 54 57 43 31 21 65 271 289
Average interest rate 7.11% 7.18 6.97 7.18 7.20 7.21 7.14
All other securities 102 106 99 124 233 1 118 1 782 1 773
Average interest rate 6.75% 7.16 6.97 7.10 7.19 7.56 7.38
Total $235 164 142 165 266 1 242 2 214 2 218
The table above sets forth expected cash flows from principal repayments of
fixed maturity investments in the form of maturities, calls, sinking funds and
prepayments.
Kansas City Life owns $86.9 million of foreign bonds, all denominated in
U.S. dollars, and consequently is not exposed to direct foreign currency risk.
There is an indirect exposure to exchange markets to the extent that the issuers
of these securities can obtain dollars to fund their obligations.
Investments are managed using an asset liability matching program.
Obligations to policyholders in terms of benefits payments influence the nature
and structure of the portfolio. The matching program attempts to match assets
and liabilities in terms of durations and yields.
As interest rates rise, policyholders become more likely to surrender
policies or to borrow against their cash values, often to invest in higher
yielding opportunities elsewhere. This may force the liquidation of part of the
portfolio as the market value of fixed income investments falls. Due to the
strength of its normal cash flow, the Company usually can adapt to small sudden
changes in interest rates, or even larger changes that occur over longer periods
of time. Extreme, sudden market volatility, however, poses the greatest risk. A
number of steps have been taken to quantify and mitigate this risk under asset
liability matching.
For liquidity, the Company maintains a number of short-term credit lines
with the capacity to borrow additional capital, and has agreements with
corresponding investment banks to borrow, under reverse repurchase agreements,
additional funds in excess of $150.0 million. Finally, the Company is in the
process of obtaining additional borrowing capacity through the Federal Home Loan
Bank. At year end, there were no outstanding balances under any of these
agreements.
Y2K Readiness
Kansas City Life is closely monitoring its ability, and that of its primary
vendors and business partners, to be fully operational in the year 2000. This
assessment extends to both information technology (IT) systems and
non-information technology systems. The Company has addressed 80 percent of its
IT issues and expects to have these fully resolved and all required changes
implemented by mid-1999. Non-IT systems are largely compliant, with one minor
system yet to be converted during 1999. The Company conducts business with
various third parties. These parties will be monitored until full compliance is
achieved. Contingency plans are being developed and will be completed by early
1999. The incremental cost of the Company's compliance effort has been estimated
at less than $700,000 thus far, and is not expected to be significant in the
future. Forecasts of costs and compliance are necessarily based upon estimates
and numerous assumptions of future events, including third-party modification
and compliance plans, continued availability of resources and other factors.
While the Company feels these are valid assumptions and estimates, Kansas City
Life cannot be sure these estimates will be achieved or that the assumptions are
accurate, and actual results could differ materially from those anticipated.
LIQUIDITY AND CAPITAL RESOURCES
Kansas City Life, as other life insurers, provides investment capital to
our economy. Given this role, liquidity is generally of little concern. Cash
provided by operations averaged $46.4 million a year over the past three years.
Over this same period the Company invested $2.1 billion, including proceeds from
sales and maturities of investments and net of cash received due to the purchase
of a block of insurance in 1997. Investable cash generated by the variable
products is generally segregated in separate accounts and is not available for
general investing by the Company. Borrowing was minor and undertaken solely to
support investment strategies. Forward investment commitments were minor as
well. As noted previously, cash flow testing and asset liability matching were
performed to ensure future cash flows will be sufficient to meet future benefits
payments.
Kansas City Life's statutory equity exceeds six times the minimum capital
required to support its book of business, as determined by the risk based
capital calculations and guidelines established by the National Association of
Insurance Commissioners.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Thousands, except per share data)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Revenues:
Insurance $ 259 559 244 695 219 593 205 458 203 827
Investment income, net 198 181 193 696 186 743 188 087 173 388
Other 14 671 9 998 9 768 8 882 9 066
Operating revenues $ 472 411 448 389 416 104 402 427 386 281
Realized investment gains 11 426 14 505 3 013 4 950 6 060
$ 483 837 462 894 419 117 407 377 392 341
Operating income $ 41 085 35 433 40 357 38 521 34 919
Realized investment gains, net 7 427 9 428 1 958 3 217 3 939
Income before
nonrecurring items $ 48 512 44 861 42 315 41 738 38 858
Nonrecurring expenses, net $ - - - - 1 481
Net income $ 48 512 44 861 42 315 41 738 37 377
Per common share:
Operating income $ 6.63 5.72 6.52 6.24 5.68
Realized investment gains, net 1.20 1.53 .32 .52 .64
Income before
nonrecurring items $ 7.83 7.25 6.84 6.76 6.32
Nonrecurring expenses, net - - - - .24
Net income $ 7.83 7.25 6.84 6.76 6.08
Cash dividends $ 1.80 1.76 1.68 1.63 1.40
Stockholders' equity:
As reported $ 93.15 85.68 74.79 73.99 55.78
Excluding accumulated
other comprehensive income 85.83 79.79 74.31 69.18 64.11
Assets $13 577 414 3 439 452 2 954 710 2 903 768 2 663 753
Net return on invested assets 7.20 % 7.40 7.68 8.03 7.71
Life insurance in force $26 641 664 26 595 709 22 148 738 21 023 702 20 023 820
The above is not covered by the report of independent auditors.
Per common share earnings information represents both basic and diluted earnings
per common share.
</TABLE>
CONSOLIDATED INCOME STATEMENT
(Thousands, except per share data)
1998 1997 1996
REVENUE
Insurance revenues:
Premiums:
Life insurance $108 510 106 051 103 263
Accident and health 42 441 44 931 37 575
Contract charges 108 608 93 713 78 755
Investment revenues:
Investment income, net 198 181 193 696 186 743
Realized investment gains, net 11 426 14 505 3 013
Other 14 671 9 998 9 768
TOTAL REVENUES 483 837 462 894 419 117
BENEFITS AND EXPENSES
Policy benefits:
Death benefits 107 355 100 037 87 940
Surrenders of life insurance 19 368 14 999 15 488
Other benefits 72 190 71 338 65 437
Increase in benefit and contract reserves 84 427 86 804 85 614
Amortization of deferred acquisition costs 36 201 35 712 30 086
Insurance operating expenses 96 347 91 381 75 227
TOTAL BENEFITS AND EXPENSES 415 888 400 271 359 792
Income before Federal income taxes 67 949 62 623 59 325
Federal income taxes:
Current 20 471 15 073 26 073
Deferred (1 034) 2 689 (9 063)
19 437 17 762 17 010
NET INCOME $ 48 512 44 861 42 315
Basic and diluted earnings per share $7.83 7.25 6.84
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEET
1998 1997
ASSETS
Investments:
Fixed maturities:
Available for sale, at fair value (amortized cost $2,012,975,000;
$1,952,741,000 - 1997) $2 094 362 2 004 516
Held to maturity, at amortized cost (fair value $123,515,000;
$151,495,000 - 1997) 115 504 145 661
Equity securities available for sale, at fair value
(cost $98,509,000; $107,034,000 - 1997) 100 749 114 986
Mortgage loans on real estate, net 315 705 270 054
Real estate, net 43 840 36 764
Real estate joint ventures 39 388 43 347
Policy loans 122 860 123 186
Short-term 59 160 74 341
Other - 7 500
TOTAL INVESTMENTS 2 891 568 2 820 355
Cash 16 763 50 927
Accrued investment income 42 515 42 385
Receivables, net 12 997 10 204
Property and equipment, net 22 436 23 628
Deferred acquisition costs 218 957 209 826
Value of purchased insurance in force 104 331 108 458
Reinsurance assets 117 772 99 593
Other 7 067 16 096
Separate account assets 143 008 57 980
$3 577 414 3 439 452
LIABILITIES AND STOCKHOLDERS' EQUITY Future policy benefits:
Life insurance $ 774 701 766 583
Accident and health 47 641 37 155
Accumulated contract values 1 731 262 1 755 133
Policy and contract claims 34 347 37 569
Other policyholders' funds:
Dividend and coupon accumulations 62 726 62 056
Other 75 033 68 861
Income taxes:
Current 4 582 16 113
Deferred 43 739 39 917
Other 82 442 67 491
Separate account liabilities 143 008 57 980
TOTAL LIABILITIES 2 999 481 2 908 858
Stockholders' equity:
Common stock, par value $2.50 per share
Authorized 18,000,000 shares, issued 9,248,340 shares 23 121 23 121
Paid in capital 17 633 16 256
Retained earnings 581 074 543 715
Accumulated other comprehensive income 45 466 36 448
Less treasury stock, at cost (3,043,947 shares;
3,055,275 shares - 1997) (89 361) (88 946)
TOTAL STOCKHOLDERS' EQUITY 577 933 530 594
$3 577 414 3 439 452
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
1998 1997 1996
COMMON STOCK, beginning and end of year $ 23 121 23 121 23 121
PAID IN CAPITAL:
Beginning of year 16 256 14 761 13 039
Excess of proceeds over cost of treasury stock sold1 377 1 495 1 722
End of year 17 633 16 256 14 761
RETAINED EARNINGS:
Beginning of year 543 715 509 748 477 826
Net income 48 512 44 861 42 315
Other comprehensive income:
Unrealized gains (losses) on securities 15 094 33 485 (26 777)
Increase in unfunded pension liability (6 076) - -
Comprehensive income 57 530 78 346 15 538
Transfer other comprehensive (income) loss to
accumulated other comprehensive income (9 018) (33 485) 26 777
Stockholder dividends of $1.80 per share
($1.76 - 1997 and $1.68 - 1996) (11 153) (10 894) (10 393)
End of year 581 074 543 715 509 748
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Beginning of year 36 448 2 963 29 740
Other comprehensive income (loss) 9 018 33 485 (26 777)
End of year 45 466 36 448 2 963
TREASURY STOCK, at cost:
Beginning of year (88 946) (87 729) (86 599)
Cost of 12,320 shares acquired
(20,090 shares - 1997 and 27,876 shares - 1996) (1 063) (1 440) (1 501)
Cost of 23,648 shares sold
(23,686 shares - 1997 and 39,440 shares - 1996) 648 223 371
End of year (89 361) (88 946) (87 729)
TOTAL STOCKHOLDERS' EQUITY $577 933 530 594 462 864
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
1998 1997 1996
OPERATING ACTIVITIES
Net income $ 48 512 44 861 42 315
Adjustments to reconcile net income to
net cash from operating activities:
Amortization of investment premium (discount),
net 2 398 (1 290) (4 071)
Depreciation 5 153 5 379 4 995
Policy acquisition costs capitalized (46 011) (42 170) (38 639)
Amortization of deferred acquisition costs 36 201 35 712 30 086
Realized investment gains (11 426) (14 505) (3 013)
Changes in assets and liabilities:
Future policy benefits 25 855 16 227 15 831
Accumulated contract values (12 264) (9 933) 3 183
Other policy liabilities 6 842 7 137 5 294
Income taxes payable and deferred (11 399) 4 768 (8 322)
Other, net (718) (3 685) 5 886
NET CASH PROVIDED 43 143 42 501 53 545
INVESTING ACTIVITIES
Purchases of available for sale investments:
Fixed maturities (644 087) (855 980) (431 916)
Equity securities (28 047) (69 434) (18 071)
Sales of fixed maturities available for sale 372 930 503 351 140 372
Maturities and principal paydowns
of security investments:
Fixed maturities available for sale 216 247 163 867 131 545
Fixed maturities held to maturity 30 453 106 188 79 017
Equity securities available for sale 28 043 31 473 8 899
Purchases of other investments (78 298) (152 045) (46 021)
Sales, maturities and principal
paydowns of other investments 60 500 67 295 64 833
Acquisitions and dispositions of insurance
blocks - net cash received (paid) (13 250) 213 092 -
NET CASH PROVIDED (USED) (55 509) 7 807 (71 342)
FINANCING ACTIVITIES
Proceeds from borrowings 1 100 245 050 1 650
Repayment of borrowings (1 100) (245 050) (1 650)
Policyowner contract deposits 175 421 169 699 164 677
Withdrawals of policyowner contract deposits (187 028) (163 041) (142 114)
Cash dividends to stockholders (11 153) (10 894) (10 393)
Disposition of treasury stock, net 962 278 592
NET CASH PROVIDED (USED) (21 798) (3 958) 12 762
Increase (decrease) in cash (34 164) 46 350 (5 035)
Cash at beginning of year 50 927 4 577 9 612
CASH AT END OF YEAR $ 16 763 50 927 4 577
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables are generally stated in thousands, except per share data)
SIGNIFICANT ACCOUNTING POLICIES
Organization
Kansas City Life Insurance Company is a Missouri domiciled stock life insurance
company which, with its affiliates, is licensed to sell insurance products in 49
states and the District of Columbia. The Company offers a diversified portfolio
of individual insurance, annuity and group products distributed through numerous
general agencies. In recent years, the Company's new business activities have
been concentrated in interest sensitive and variable products.
Basis of Presentation
The accompanying consolidated financial statements have been prepared on the
basis of generally accepted accounting principles (GAAP) and include the
accounts of Kansas City Life Insurance Company and its subsidiaries, principally
Sunset Life Insurance Company of America (Sunset Life) and Old American
Insurance Company (Old American). Significant intercompany transactions have
been eliminated in consolidation. Certain reclassifications have been made to
prior year results to conform with the current year's presentation. GAAP
requires management to make certain estimates and assumptions which affect
amounts reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.
Recognition of Revenues
Traditional life insurance products include whole life insurance, term life
insurance and certain annuities. Premiums for these products are recognized as
revenues when due. Accident and health insurance premiums are recognized as
revenues over the terms of the policies. Revenues for universal life and
flexible annuity products are amounts assessed against contract values for cost
of insurance, policy administration and surrenders, as well as amortization of
deferred front-end contract charges.
Future Policy Benefits
For traditional life insurance products, reserves have been computed by a net
level premium method based upon estimates at the time of issue for investment
yields, mortality and withdrawals. These estimates include provisions for
experience less favorable than actually expected. Investment yield assumptions
for new issues are graded down and range from 5.00 to 7.00 percent. Mortality
assumptions are based on standard mortality tables. The 1965-70 Select and
Ultimate Basic Table is used for business issued since 1977.
Reserves and claim liabilities for accident and health insurance include
estimated unpaid claims and claims incurred but not reported. For traditional
life and accident and health insurance, benefits and claims are charged to
expense in the period incurred.
Liabilities for universal life and flexible annuity products represent
accumulated contract values, without reduction for potential surrender charges,
and deferred front-end contract charges which are amortized over the term of the
policies. Benefits and claims are charged to expense in the period incurred net
of related accumulated contract values. Interest on accumulated contract values
is credited to contracts as earned. Crediting rates for universal life insurance
and flexible annuity products ranged from 3.85 percent to 7.25 percent during
1998 (4.75 percent to 6.50 percent during 1997 and 4.75 percent to 6.75 percent
during 1996).
Withdrawal assumptions for all products are based on corporate experience.
Policy Acquisition Costs
The costs of acquiring new business, principally commissions, certain policy
issue and underwriting expenses and certain variable agency expenses, are
deferred. For traditional life products, deferred acquisition costs are
amortized in proportion to premium revenues over the premium-paying period of
related policies, using assumptions consistent with those used in computing
benefit reserves. Acquisition costs for universal life and flexible annuity
products are amortized over a period not exceeding 30 years in proportion to
estimated gross profits arising from interest spreads and mortality, expense and
surrender charges expected to be realized over the term of the contracts.
Value of Purchased Insurance in Force
The value of purchased insurance in force arising from the acquisition of a life
insurance subsidiary and, in 1997, the acquisition of a life insurance block of
business is being amortized in proportion to projected future gross profits or
premium revenues. This asset was increased $76,533,000 in 1997 for the
acquisition of a life insurance block of business and $8,683,000 ($8,856,000 -
1997 and $5,030,000 - 1996) for accrual of interest and reduced $16,375,000
($14,962,000 - 1997 and $6,082,000 - 1996) for amortization. The increase for
accrual of interest was calculated using a 7.4 percent interest rate for the
life insurance subsidiary and, on the acquired block, a 7.0 percent interest
rate on the traditional life portion and a 5.4 percent rate on the interest
sensitive portion. Through 1998, total accumulated accrual of interest and
amortization equal $43,455,000 and $62,721,000, respectively. The percentage of
the asset's current carrying amount which will be amortized in each of the next
five years is 7.9 percent - 1999, 7.6 percent - 2000, 7.3 percent - 2001, 6.9
percent - 2002 and 6.3 percent - 2003.
Separate Accounts
These accounts arise from the sale of variable life insurance and annuity
products. Their assets are legally segregated and are not subject to the claims
which may arise from any other business of the Company. These assets are
reported at fair value since the underlying investment risks are assumed by the
policyholders. Therefore the related liabilities are recorded at amounts equal
to the underlying assets. Investment income and gains or losses arising from
separate accounts accrue directly to the policyholders and are, therefore, not
included in investment earnings in the accompanying consolidated income
statement. Revenues to the Company from separate accounts consist principally of
contract maintenance charges, administrative fees and mortality and risk
charges.
Participating Policies
Participating business at year end approximates 16 percent of the consolidated
life insurance in force. The amount of dividends to be paid is determined
annually by the Board of Directors. Provision has been made in the liability for
future policy benefits to allocate amounts to participating policyholders on the
basis of dividend scales contemplated at the time the policies were issued.
Additional provisions have been made for policyholder dividends in excess of the
original scale which have been declared by the Board of Directors.
Investments
Securities held to maturity and short-term investments are stated at cost
adjusted for amortization of premium and accrual of discount. Securities
available for sale are stated at fair value. Unrealized gains and losses on
securities available for sale are reduced by deferred income taxes and related
adjustments in deferred acquisition costs, and are included in accumulated other
comprehensive income.
Mortgage loans are stated at cost adjusted for amortization of premium and
accrual of discount less an allowance for possible losses. Foreclosed real
estate is stated at fair value at the date of foreclosure (cost) or net
realizable value, whichever is lower. Other real estate investments are carried
at depreciated cost. Real estate joint ventures are valued at cost adjusted for
the Company's equity in earnings since acquisition. Policy loans are carried at
cost less payments received. Realized gains and losses on disposals of
investments, determined by the specific identification method, are included in
investment revenues.
Federal Income Taxes
Income taxes have been provided using the liability method. Under that method,
deferred tax assets and liabilities are determined based on the differences
between their financial reporting and their tax bases and are measured using the
enacted tax rates.
Income Per Share
Due to the Company's capital structure and lack of other potentially dilutive
securities, there is no difference between basic and diluted earnings per common
share for any of the years or periods reported. The weighted average number of
shares outstanding during the year was 6,197,052 shares (6,190,793 shares - 1997
and 6,188,489 shares - 1996).
Statutory Information and
Stockholder Dividends Restriction
The Company's earnings, unassigned surplus (retained earnings) and stockholders'
equity, on the statutory basis used to report to regulatory authorities, follow.
1998 1997 1996
Net gain (loss) from operations
for the year $ 35 185 (21 214) 27 345
Net income (loss) for the year 36 152 (18 681) 25 574
Unassigned surplus
at December 31 257 853 246 717 284 417
Stockholders' equity
at December 31 209 246 197 147 234 570
The statutory loss reported in 1997 arose from the acquisition of a block of
business as discussed in a following Note. In accordance with statutory
accounting guidelines for coinsurance transactions, the acquisition reduced
statutory earnings and stockholders' equity at the date of acquisition $51.4
million, the purchase price paid less related tax benefits.
Stockholder dividends may not exceed statutory unassigned surplus. Additionally,
under Missouri law, the Company must have the prior approval of the Missouri
Director of Insurance in order to pay a dividend exceeding the greater of
statutory net gain from operations for the preceding year or 10 percent of
statutory stockholders' equity at the end of the preceding year. The maximum
payable in 1999 without prior approval is $35,185,000. The Company believes
these statutory limitations impose no practical restrictions on its dividend
payment plans.
The Company is required to deposit a defined amount of assets with state
regulatory authorities. Such assets had an aggregate carrying value of
$18,000,000 ($36,000,000 - 1997 and $36,000,000 - 1996).
Comprehensive Income
As of January 1, 1998, the Company adopted Financial Accounting Standard No.
130, "Reporting Comprehensive Income." This standard governs the reporting and
display of comprehensive income and its components; however, the adoption of
this new standard had no impact on net income or stockholders' equity. Standard
No. 130 requires unrealized gains or losses on securities available for sale and
unfunded pension liabilities, which prior to adoption were reported separately
in stockholders' equity, to be included in other comprehensive income, as shown
below. Prior year financial statements have been reclassified to conform to the
requirements of this standard.
Unrealized
Gains on Unfunded
Available-for- Pension
Sale Securities Liability Total
1998:
Unrealized holding gains
arising during the year $33 261 33 261
Less: Realized gains included
in net income 9 360 9 360
Net unrealized gains 23 901 23 901
Increase in unfunded
pension liability - (9 348) (9 348)
Effect on deferred
acquisition costs (680) (680)
Deferred income taxes (8 127) 3 272 (4 855)
Other comprehensive income $15 094 (6 076) 9 018
1997:
Unrealized holding gains
arising during the year $63 486 63 486
Less: Realized gains included
in net income 8 318 8 318
Net unrealized gains 55 168 55 168
Effect on deferred
acquisition costs (3 652) (3 652)
Deferred income taxes (18 031) (18 031)
Other comprehensive income $33 485 33 485
INVESTMENTS
Investment Revenues
Major categories of investment revenues are summarized as follows.
1998 1997 1996
Investment income:
Fixed maturities $154 213 154 393 150 421
Equity securities 6 583 7 288 5 503
Mortgage loans 26 024 23 984 23 127
Real estate 9 587 10 350 13 237
Policy loans 8 098 7 296 6 372
Short-term 4 832 3 612 2 353
Other 3 948 3 132 2 222
213 285 210 055 203 235
Less investment expenses (15 104) (16 359) (16 492)
$198 181 193 696 186 743
1998 1997 1996
Realized gains (losses):
Fixed maturities $ 8 052 4 778 (1 862)
Equity securities 1 360 3 702 961
Mortgage loans - - 2 000
Real estate 2 014 6 025 1 894
Other - - 20
$ 11 426 14 505 3 013
Unrealized Gains and Losses
Unrealized gains (losses) on the Company's securities follow.
1998 1997 1996
Available for sale:
End of year $ 83 627 59 726 4 558
Effect on deferred
acquisition costs (4 332) (3 652) -
Deferred income taxes (27 753) (19 626) (1 595)
$ 51 542 36 448 2 963
Increase (decrease) in net unrealized gains during the year:
Fixed maturities $ 18 701 33 209 (26 216)
Equity securities (3 607) 276 (561)
$ 15 094 33 485 (26 777)
Held to maturity:
End of year $ 8 011 5 834 7 609
Increase (decrease) in
net unrealized gains
during the year $ 2 177 (1 775) (11 908)
Securities
The amortized cost and fair value of investments in securities at December 31,
1998, follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
U.S.government bonds $ 45 079 1 747 381 46 445
Public utility bonds 294 016 15 850 1 946 307 920
Corporate bonds 1 321 368 66 176 13 151 1 374 393
Mortgage-backed bonds 278 657 10 942 618 288 981
Other bonds 70 224 3 216 441 72 999
Redeemable preferred
stocks 3 631 121 128 3 624
Total fixed maturities 2 012 975 98 052 16 665 2 094 362
Equity securities 98 509 6 184 3 944 100 749
$2 111 484 104 236 20 609 2 195 111
Held to maturity:
Public utility bonds $ 25 325 1 934 7 27 252
Corporate bonds 87 302 6 267 511 93 058
Other bonds 2 877 328 - 3 205
115 504 8 529 518 123 515
$2 226 988 112 765 21 127 2 318 626
The amortized cost and fair value of investments in securities at December 31,
1997, follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
U.S. government bonds $ 135 182 3 166 297 138 051
Public utility bonds 281 781 6 956 662 288 075
Corporate bonds 1 130 938 34 827 3 315 1 162 450
Mortgage-backed bonds 315 621 9 416 375 324 662
Other bonds 81 469 2 260 425 83 304
Redeemable preferred
stocks 7 750 261 38 7 974
Total fixed maturities 1 952 741 56 886 5 112 2 004 516
Equity securities 107 034 8 709 757 114 986
2 059 775 65 595 5 869 2 119 502
Held to maturity:
Public utility bonds $ 50 291 2 494 56 52 729
Corporate bonds 92 350 3 727 641 95 436
Other bonds 3 020 310 - 3 330
145 661 6 531 697 151 495
$2 205 436 72 126 6 566 2 270 997
The Company holds one non-income producing fixed maturity with a par value of
$5,000,000.
The distribution of the fixed maturity securities' contractual maturities at
December 31, 1998, follows. However, expected maturities may differ from these
contractual maturities since borrowers may have the right to call or prepay
obligations.
Amortized Fair
Cost Value
Available for sale:
Due in one year or less $ 63 900 64 657
Due after one year through five years 450 887 461 883
Due after five years through ten years 471 322 487 598
Due after ten years 748 209 791 243
Mortgage-backed bonds 278 657 288 981
$2 012 975 2 094 362
Held to maturity:
Due in one year or less $ 8 528 8 700
Due after one year through five years 50 820 53 615
Due after five years through ten years 36 202 39 556
Due after ten years 19 954 21 644
$ 115 504 123 515
Sales of investments in securities available for sale, excluding normal
maturities and calls, follow.
1998 1997 1996
Proceeds $422 241 509 502 141 335
Gross realized gains 12 512 11 597 1 400
Gross realized losses 5 234 2 349 1 420
At December 31, 1998, the Company did not hold securities of any corporation and
its affiliates which exceeded 10 percent of stockholders' equity.
Kansas City Life employs no derivative financial instruments.
The Company maintains a $60 million bank line of credit which may be used to
support investment strategies. This line is unused at December 31, 1998, and
will expire in April 1999.
Mortgage Loans
The Company holds non-income producing mortgage loans equaling $1,004,000
($327,000 - 1997). Mortgage loans are carried net of a valuation reserve of
$8,500,000 ($8,500,000 - 1997).
At December 31, 1998 and 1997, the mortgage portfolio is diversified
geographically and by property type as follows.
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Geographic region:
East north central $ 31 068 32 373 26 937 27 421
Mountain 67 530 71 397 64 602 66 321
Pacific 106 982 112 461 91 963 94 366
West south central 33 044 34 813 32 997 33 961
West north central 69 594 73 157 55 320 56 485
Other 15 987 16 718 6 735 7 017
Valuation reserve (8 500) (8 500) (8 500) (8 500)
$315 705 332 419 270 054 277 071
Property type:
Industrial $209 752 220 474 170 199 174 278
Retail 22 847 24 301 29 532 30 531
Office 74 633 78 291 58 658 60 267
Other 16 973 17 853 20 165 20 495
Valuation reserve (8 500) (8 500) (8 500) (8 500)
$315 705 332 419 270 054 277 071
As of December 31, 1998, the Company has commitments which expire in 1999 to
originate mortgage loans of $13,982,000.
Mortgage loans foreclosed upon and transferred to real estate investments during
the year equaled $1,181,000 ($3,189,000 - 1997 and $2,977,000 - 1996).
Mortgage loans acquired in the sale of real estate assets during the year
totaled $2,025,000 ($4,299,000 - 1997 and $6,579,000 - 1996).
Real Estate
Detail concerning the Company's real estate investments follows.
1998 1997
Penntower office building, at cost:
Land $ 1 106 1 106
Building 18 244 18 068
Less accumulated depreciation (10 340) (9 809)
Foreclosed real estate, at lower of
cost or net realizable value 10 946 13 362
Other investment properties, at cost:
Land 4 493 3 214
Buildings 32 848 24 216
Less accumulated depreciation (13 457) (13 393)
$ 43 840 36 764
Investment real estate, other than foreclosed properties, is depreciated on a
straight-line basis. Penntower office building is depreciated over 60 years and
all other properties from 10 to 35 years. Foreclosed real estate is carried net
of a valuation allowance of $2,877,000 ($3,686,000 - 1997) to reflect net
realizable value.
The Company held non-income producing real estate equaling $6,099,000 ($820,000
- - 1997).
PROPERTY AND EQUIPMENT
1998 1997
Land $ 1 029 1 029
Home office buildings 22 995 23 149
Furniture and equipment 30 238 27 502
54 262 51 680
Less accumulated depreciation (31 826) (28 052)
$22 436 23 628
Property and equipment are stated at cost and depreciated using the
straight-line method. Home office buildings are depreciated over 25 to 50 years
and furniture and equipment over 3 to 10 years, their estimated useful lives.
PENSIONS AND OTHER
POSTRETIREMENT BENEFITS
The Company has pension and other postretirement benefit plans covering
substantially all its employees. The defined benefits pension plan covers
employees who were age 55 or over with at least 15 years of vested service at
December 31, 1997. This plan's benefits are based on years of service and the
employee's compensation during the last five years of employment. All other
employees have a cash balance account consisting of credits to the account based
upon an employee's years of service and compensation, and interest credits of
7.00 percent for 1998. As disclosed in the tables at right, the amendment to
change the plan to a cash balance plan in 1998 decreased the projected benefit
obligation $10,038,000. The postretirement medical plans for the employees,
full-time agents, and their dependents are contributory with contributions
adjusted annually. The Company pays these medical costs as incurred and the plan
incorporates cost-sharing features. The postretirement life insurance plan is
noncontributory with level annual payments over the participants' expected
service periods. The plan covers only those employees with at least one year of
service as of December 31, 1997. The benefits in this plan are frozen using the
employees' years of service and compensation as of December 31, 1997. The tables
at right outline the plans' funded status and their impact on the Company's
financial statements.
Pension Benefits Other Benefits
1998 1997 1998 1997
Accumulated benefit obligation $107 488 102 846 - -
Change in plan assets:
Fair value of plan assets at
beginning of year $ 95 899 85 241 1 634 1 501
Return on plan assets 10 988 9 752 86 83
Company contributions 3 000 4 967 - 104
Benefits paid (7 018) (4 061) (106) (54)
Fair value of plan assets at end of year$102 869 95 899 1 614 1 634
Change in projected benefit obligation:
Benefit obligation at beginning of year $119 651 100 572 15 485 13 379
Service cost 2 746 3 150 615 560
Interest cost 7 650 7 823 1 193 1 014
Plan amendments (10 038) - - -
Net loss from past experience 637 12 276 1 991 1 083
Benefits paid (10 099) (4 170) (476) (551)
Benefit obligation at end of year $110 547 119 651 18 808 15 485
Plan underfunding $ (7 678) (23 752) (17 194) (13 851)
Unrecognized net loss 22 488 25 452 3 653 1 734
Unrecognized prior service cost (9 257) 12 - -
Unrecognized net transition asset (824) (1 030) - -
Prepaid (accrued) benefit cost $ 4 729 682 (13 541) (12 117)
Amounts recognized in the consolidated balance sheet:
Prepaid (accrued) benefit cost $ 4 729 682 (13 541) (12 117)
Minimum pension liability (9 348) - - -
Net amount recognized $ (4 619) 682 (13 541) (12 117)
Weighted average assumptions:
Discount rate 7.00% 7.25 7.00 7.25
Expected return on plan assets 9.00 9.00 5.50 5.50
Rate of compensation increase 4.50 4.50 - -
The assumed growth rate of health care costs has a significant effect on the
amounts reported as the table below demonstrates.
One Percentage Point
Change in the Growth Rate
Increase Decrease
Service and interest cost components $ 401 (326)
Postretirement benefit obligation 3 172 (2 684)
The components of the net periodic benefits cost follow.
Pension Benefits Other Benefits
1998 1997 1996 1998 1997 1996
Service cost $ 2 746 3 150 3 369 615 560 536
Interest cost 7 650 7 823 6 647 1 194 1 014 869
Expected return on plan assets (8 539) (7 776) (7 557) (90) (85) (75)
Amortization of:
Unrecognized net (gain) loss 1 152 582 263 76 (5) -
Unrecognized prior service cost (769) 2 2 - - -
Unrecognized net transition asset (206) (206) (206) - - -
Net periodic benefits cost $ 2 034 3 575 2 518 1 795 1 484 1 330
Non-contributory defined contribution retirement plans for general agents and
eligible sales agents provide supplemental payments based upon earned agency
first-year individual life and annuity commissions. Contributions to these plans
were $134,000 ($133,000 - 1997 and $174,000 - 1996). A non-contributory deferred
compensation plan for eligible agents based upon earned first-year commissions
is also offered. Contributions to this plan were $724,000 ($265,000 - 1997 and
$318,000 - 1996).
Savings plans for eligible employees and agents match employee contributions up
to 6 percent of salary and agent contributions up to 2.5 percent of prior year
paid commissions. Contributions to the plan were $1,485,000 ($2,102,000 - 1997
and $2,082,000 - 1996). Effective in 1998, the Company may contribute an
additional profit sharing amount up to 4 percent of salary depending upon
corporate profits. No profit sharing contribution was made in 1998.
A non-contributory trusteed employee stock ownership plan covers substantially
all salaried employees. The Company has made no contributions to this plan since
1992.
SEGMENT INFORMATION
Kansas City Life Sunset Old
Individual Group Life American Total
1998:
Revenues from external customers $ 112 898 52 537 28 794 80 001 274 230
Investment revenues 151 045 1 146 32 040 13 950 198 181
Segment income (loss) 27 918 (985) 8 954 5 198 41 085
Other significant noncash items:
Increase in policy reserves 57 581 535 16 269 10 042 84 427
Amortization of deferred
acquisition costs 16 861 - 8 323 11 017 36 201
Amortization of the value of
purchased insurance in force 4 660 - - 2 925 7 585
Income tax expense 12 997 (422) 4 314 2 548 19 437
Segment assets 2 627 568 16 215 538 254 395 377 3 577 414
Expenditures for other long-lived assets2 658 259 97 69 3 083
1997:
Revenues from external customers $ 90 759 53 698 28 269 81 967 254 693
Investment revenues 147 125 1 216 32 288 13 067 193 696
Segment income (loss) 24 704 (493) 8 259 2 963 35 433
Other significant noncash items:
Increase in policy reserves 55 924 202 16 768 13 910 86 804
Amortization of deferred
acquisition costs 15 138 - 8 026 12 548 35 712
Amortization of the value of
purchased insurance in force 2 211 - - 2 683 4 894
Income tax expense 12 735 (212) 3 904 1 335 17 762
Segment assets 2 533 546 16 828 517 423 371 655 3 439 452
Expenditures for other long-lived assets2 326 473 60 13 2 872
1996:
Revenues from external customers $ 77 861 42 547 27 260 81 693 229 361
Investment revenues 141 333 1 215 32 483 11 712 186 743
Segment income (loss) 25 330 (806) 9 440 6 395 40 359
Other significant noncash items:
Increase in policy reserves 51 670 678 17 819 15 447 85 614
Amortization of deferred
acquisition costs 14 618 - 6 292 9 176 30 086
Amortization of the value of
purchased insurance in force - - - 946 946
Income tax expense 10 330 (434) 3 903 3 211 17 010
Expenditures for other long-lived assets 175 148 171 33 527
Enterprise-Wide Disclosures
1998 1997 1996
Revenues from external customers by line of business:
Variable life insurance and annuities $ 6 928 2 062 312
Interest sensitive products 101 680 91 651 78 443
Traditional individual insurance products 103 171 101 332 100 298
Group life and disability products 47 780 49 650 40 540
Group ASO services 4 716 4 048 2 007
Other 9 955 5 950 7 761
Total $274 230 254 693 229 361
In 1998 the Company adopted Financial Accounting Standard No. 131, "Disclosures
about Segments of an Enterprise and Related Information." Company operations
have been classified and summarized into the four reportable segments at left.
The segments, while generally classified along Company lines, are based upon
distribution method, product portfolio and target market. The Parent Company was
divided into two segments. The Kansas City Life-Individual segment consists of
sales of variable life and annuities, interest sensitive products and
traditional life insurance products by a career general agency sales force. The
block acquired in 1997 is included in this segment. The Kansas City Life-Group
segment consists of sales of group life and disability products and
administrative services only (ASO) by the Company's career general agency sales
force and appointed group agents. The Sunset Life segment consists of sales of
interest sensitive and traditional products by personal producing general
agents. The Old American segment markets whole life final expense products to
seniors through a general agency sales force.
Separate investment portfolios are maintained for each of the companies.
However, investments are allocated to the group segment based upon its cash
flows and its investment revenue is modeled using the year of investment method.
Operating expenses are allocated to the segments based upon internal cost
studies which are consistent with industry cost methodologies. The totals at
left agree to the consolidated financial statements. Intersegment revenues are
not material and there is no interest expense. The Company operates solely in
the United States and no individual customer accounts for 10 percent or more of
the Company's revenue.
REINSURANCE
1998 1997 1996
Life insurance in force (in millions):
Direct $ 23 261 22 800 22 121
Ceded (4 488) (3 375) (2 742)
Assumed 3 380 3 796 28
Net $ 22 153 23 221 19 407
Premiums:
Life insurance:
Direct $128 584 128 491 127 150
Ceded (26 748) (26 262) (24 380)
Assumed 6 674 3 822 493
Net $108 510 106 051 103 263
Accident and health:
Direct $ 54 022 55 022 48 694
Ceded (11 581) (10 091) (11 370)
Assumed - - 251
Net $ 42 441 44 931 37 575
Contract charges arise generally from directly issued business. However contract
charges also arise from a block of business assumed during 1997 as described
below. Ceded benefit recoveries were $57,048,000 ($39,483,000 - 1997 and
$37,829,000 - 1996).
Old American has two coinsurance agreements. One agreement reinsures certain
whole life policies issued by Old American prior to December 1, 1986. As of
December 31, 1998, these policies had a face value of $125,017,000. The reserve
for future policy benefits ceded under this agreement was $49,041,000
($51,003,000 - 1997). The other agreement, entered into in 1998, reinsures the
home health care policies.
In 1997, the Company acquired a block of traditional life and universal
life-type products. At December 31, 1998, the block had $3.4 billion of life
insurance in force ($3.8 billion - 1997). During 1998, the block generated life
insurance premiums of $6,656,000 ($3,096,000 - 1997).
The maximum retention on any one life is $350,000 for ordinary life plans and
$100,000 for group coverage. A contingent liability exists with respect to
reinsurance, which may become a liability of the Company in the unlikely event
that the reinsurers should be unable to meet obligations assumed under
reinsurance contracts.
FAIR VALUE OF
FINANCIAL INSTRUMENTS
The carrying amounts for cash, short-term investments and policy loans as
reported in the accompanying balance sheet approximate their fair values. The
fair values for securities are based on quoted market prices, where available.
For those securities not actively traded, fair values are estimated using values
obtained from independent pricing services or, in the case of private
placements, are estimated by discounting expected future cash flows using a
current market rate applicable to the yield, credit quality and maturity of the
investments. Fair values for mortgage loans are based upon discounted cash flow
analyses using an interest rate assumption 2 percent above the comparable U.S.
Treasury rate.
Fair values for the Company's liabilities under investment-type insurance
contracts, included with accumulated contract values for flexible annuities and
with other policyholder funds for supplementary contracts without life
contingencies, are estimated to be their cash surrender values.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
The carrying amounts and fair values of the financial instruments follow.
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Investments:
Securities available
for sale $2 195 111 2 195 111 2 119 502 2 119 502
Securities held
to maturity 115 504 123 515 145 661 151 495
Mortgage loans 315 705 332 419 270 054 277 071
Liabilities:
Individual and
group annuities $793 068 767 537 830 495 802 461
Supplementary
contracts without
life contingencies 21 899 21 899 21 526 21 526
The Investments Note provides further details regarding the investments above.
FEDERAL INCOME TAXES
A reconciliation of the Federal income tax rate and the actual tax rate
experienced is shown below.
1998 1997 1996
Federal income tax rate 35 % 35 35
Special tax credits (6) (6) (5)
Other permanent differences - (1) (1)
Actual income tax rate 29 % 28 29
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities are presented below.
1998 1997
Deferred tax assets:
Future policy benefits $ 51 205 53 923
Employee retirement benefits 18 271 13 104
Other 3 036 2 882
Gross deferred tax assets 72 512 69 909
Deferred tax liabilities:
Capitalization of policy acquisition
costs, net of amortization 42 487 40 844
Basis differences between tax and
GAAP accounting for investments 35 104 28 080
Property and equipment, net 1 792 1 704
Value of insurance in force 36 070 36 551
Other 798 2 647
Gross deferred tax liabilities 116 251 109 826
Net deferred tax liability $ 43 739 39 917
Federal income taxes paid for the year were $20,164,000 ($14,335,000 - 1997 and
$25,332,000 - 1996).
Policyholders' surplus, which is frozen under the Deficit Reduction Act of 1984,
is $40,500,000 for Kansas City Life, $2,800,000 for Sunset Life and $13,700,000
for Old American. The Companies do not plan to distribute their policyholders'
surplus. Consequently, the possibility of such surplus becoming subject to tax
is remote, and no provision has been made in the financial statements for taxes
thereon. Should the balance in policyholders' surplus become taxable, the tax
computed at current rates would approximate $20,000,000.
Income taxed on a current basis is accumulated in "shareholders' surplus" and
can be distributed to stockholders without tax to the Company. At December 31,
1998, this shareholders' surplus was $373,841,000 for Kansas City Life,
$80,914,000 for Sunset Life and $49,116,000 for Old American.
QUARTERLY CONSOLIDATED
FINANCIAL DATA (unaudited)
First Second Third Fourth
1998:
Total revenues $117 651 124 846 125 706 115 634
Operating income $ 8 098 11 492 12 930 8 565
Realized gains, net 1 643 1 582 2 679 1 523
Net income $ 9 741 13 074 15 609 10 088
Per common share:
Operating income $ 1.31 1.85 2.09 1.38
Realized gains, net .26 .26 .43 .25
Net income $ 1.57 2.11 2.52 1.63
1997:
Total revenues $108 379 108 836 124 932 120 747
Operating income $ 10 299 8 548 7 639 8 946
Realized gains net 1 835 957 4 119 2 517
Net income $ 12 134 9 505 11 758 11 463
Per common share:
Operating income $ 1.66 1.39 1.23 1.44
Realized gains net .30 .15 .67 .41
Net income $ 1.96 1.54 1.90 1.85
CONTINGENT LIABILITIES
The Company and certain of its subsidiaries are defendants in lawsuits involving
claims and disputes with policyholders that may include claims seeking punitive
damages. Some of these lawsuits arise in jurisdictions that permit punitive
damages disproportionate to the actual damages alleged. Although no assurances
can be given and no determinations can be made at this time as to the outcome of
any particular lawsuit or proceeding, the Company and its subsidiaries believe
that there are meritorious defenses for these claims and are defending them
vigorously. Management believes that the amounts that would ultimately be paid,
if any, would have no material effect on the Company's consolidated results of
operations and financial position.
SUBSEQUENT EVENT
The Board authorized a two-for-one stock split in January 1999. However, the
stock split must be approved by the stockholders at their annual meeting on
April 22, 1999.
MANAGEMENT'S REPORT
To Our Stockholders
Management prepared the preceding consolidated financial statements and all
other financial information included in this Annual Report and is responsible
for its integrity, consistency and objectivity. In preparing these statements,
management necessarily made certain estimates and judgments and selected
accounting principles in conformity with generally accepted accounting
principles appropriate in the circumstances.
The Company maintains a system of internal accounting controls and
procedures to provide reasonable assurance, at an appropriate cost, that its
assets are protected and that its financial transactions are properly authorized
and recorded. Qualified personnel in the Company maintain and monitor these
internal controls on an ongoing basis.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets annually and, as required, with the independent auditors,
management and the internal auditors. Each has free and separate access to the
committee. The committee reviews audit procedures, scope and findings, and the
adequacy of the Company's financial reporting.
The independent auditors, Ernst & Young LLP, are elected by the Board of
Directors to audit the financial statements and render an opinion thereon.
/s/Richard L. Finn
Richard L. Finn
Senior Vice President, Finance
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Kansas City Life Insurance Company
We have audited the accompanying consolidated balance sheet of Kansas City
Life Insurance Company (the Company) as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Kansas City Life Insurance Company at December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
January 25, 1999
STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
Kansas City Life Insurance Company
3520 Broadway
Post Office Box 419139
Kansas City, Missouri 64141-6139
Telephone: (816) 753-7000
Fax: (816) 753-4902
Internet: http://www.kclife.com
E-Mail: Kclife @ Kclife.com
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders will be held at 9 a.m. Thursday, April
22, 1999, at Kansas City Life's corporate headquarters.
TRANSFER AGENT
Cheryl Keefer, Assistant Secretary
Kansas City Life Insurance Company
Post Office Box 419139
Kansas City, Missouri 64141-6139
10-K REQUEST
Stockholders may request a free copy of Kansas City Life's Form 10-K, as
filed with the Securities and Exchange Commission, by writing to Secretary,
Kansas City Life Insurance Company.
SECURITY HOLDERS
As of February 8, 1999, Kansas City Life had approximately 738 security
holders, including individual participants in security position listings.
STOCK AND DIVIDEND INFORMATION
Stock Quotation Symbol
Over-the-Counter--KCLI
Bid Dividend
High Low Paid
(per share)
1998:
First Quarter $97.50 82.00 $ .45
Second Quarter 94.88 83.25 .45
Third Quarter 95.50 69.00 .45
Fourth Quarter 85.50 78.00 .45
$1.80
1997:
First Quarter $68.25 63.50 $ .44
Second Quarter 79.75 66.00 .44
Third Quarter 84.00 74.00 .44
Fourth Quarter 96.50 80.25 .44
$1.76
A quarterly dividend of $.48 per share was paid February 22, 1999.
Over-the-counter market quotations are compiled according to Company
records and may reflect inter-dealer prices, without markup, markdown or
commission and may not necessarily represent actual transactions.
Exhibit 21, Form 10-K
Kansas City Life
Insurance Company
SUBSIDIARIES
Kansas City Life Insurance Company's significant insurance
subsidiaries are:
1. Sunset Life Insurance Company of America, a corporation
organized under the laws of the State of Washington.
2. Old American Insurance Company, a corporation organized
under the laws of the State of Missouri.
The Company's non-insurance subsidiaries are not significant
individually or in the aggregate.
Exhibit 23 (a), Form 10-K
Kansas City Life
Insurance Company
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Kansas City Life Insurance Company (the Company) of our report dated January
25, 1999 included in the 1998 Annual Report to Shareholders of Kansas City Life
Insurance Company.
Our audits also included the financial statement schedules of Kansas City Life
Insurance Company listed in Item 14(a). These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 2-97351) pertaining to the Savings and Profit Sharing Plan of
Kansas City Life Insurance Company of our report dated January 25, 1999 with
respect to the consolidated financial statements incorporated by reference and
schedules of Kansas City Life Insurance Company included in the Annual Report
(Form 10-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
Kansas City, Missouri
March 26, 1999
Exhibit 23(b), Form 10-K
Kansas City Life
Insurance Company
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 2-97351) pertaining to the Savings and Profit Sharing Plan of Kansas
City Life Insurance Company of our report dated February 24, 1999 with respect
to the financial statements and schedules of the Kansas City Life Insurance
Company Savings and Profit Sharing Plan included in the Annual Report (Form
11-K) for the year ended December 31, 1998.
/s/Ernst & Young LLP
Kansas City, Missouri
March 26, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27, Form 10-K
Kansas City Life
Insurance Company
<ARTICLE> 7
<CIK> 0000054473
<NAME> Kansas City Life Insurance Company
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<DEBT-HELD-FOR-SALE> 2,004,516<F1>
<DEBT-CARRYING-VALUE> 115,504<F2>
<DEBT-MARKET-VALUE> 123,515<F2>
<EQUITIES> 100,749<F3>
<MORTGAGE> 315,705
<REAL-ESTATE> 83,228<F4>
<TOTAL-INVEST> 2,832,408
<CASH> 75,923
<RECOVER-REINSURE> 117,772
<DEFERRED-ACQUISITION> 218,957
<TOTAL-ASSETS> 3,577,414
<POLICY-LOSSES> 822,342
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 34,347
<POLICY-HOLDER-FUNDS> 1,869,021<F5>
<NOTES-PAYABLE> 0
0
0
<COMMON> 23,121
<OTHER-SE> 554,812
<TOTAL-LIABILITY-AND-EQUITY> 3,577,414
150,951
<INVESTMENT-INCOME> 198,181
<INVESTMENT-GAINS> 11,426
<OTHER-INCOME> 123,279
<BENEFITS> 283,340
<UNDERWRITING-AMORTIZATION> 36,201
<UNDERWRITING-OTHER> 7,585<F6>
<INCOME-PRETAX> 67,949
<INCOME-TAX> 19,437
<INCOME-CONTINUING> 48,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,512
<EPS-PRIMARY> 7.83
<EPS-DILUTED> 7.83
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
Footnotes:
<F1> Debt securities held for sale represent FASB 115 available for sale fixed
maturity securities reported on a current value basis, and do not include
trading securities or securities held to maturity.
<F2> Debt securities represent FASB 115 held to maturity fixed maturity
securities, and do not include trading securities or securities available
for sale.
<F3> Equity securities include equity securities that are available for sale
under FASB 115.
<F4> Real Estate includes real estate joint ventures.
<F5> Policyholder funds include accumulated contract values as defined by FASB
97, dividend and coupon accumulations and other policyowner funds.
<F6> Underwriting expenses - other represent amortization of the value of
purchased insurance in force.
</FN>
</TABLE>
Exhibit 99(a), Form 10-K
Kansas City Life
Insurance Company
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
[ ] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ___________
Commission File Number 2-40764
A. Kansas City Life Insurance Company Savings and Profit Sharing Plan
3520 Broadway
Kansas City, Missouri 64111-2565
B. Kansas City Life Insurance Company
3520 Broadway
Kansas City, Missouri 64111-2565
Kansas City Life
Insurance Company
Savings and Profit Sharing Plan
(formerly the Kansas City Life
Insurance Company Savings
and Investment Plan)
Financial Statements
1998
Statement of Net Assets
Available for Plan Benefits 1-2
Statement of Changes in Net Assets
Available for Plan Benefits 3-4
Notes to Financial Statements 5-8
Supplemental Schedules
Assets Held for Investment 9
Transactions in Excess of Five
Percent of the Current Value
of the Plan Assets 10
Report of Independent Auditors
<TABLE>
<CAPTION>
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Statement of Net Assets Available for Plan Benefits
December 31, 1998
(in thousands)
Fund Fund Fund Fund Fund Fund Fund Fund Fund Loan
I II III IV V VI VII VIII IX Fund Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Twentieth Century Growth 5,295 - - - - - - - - - 5,295
Kansas City Life common stock - 4,182 31,390 - - - - - - - 35,572
Met Life Guar. Interest Contract - - - 5,258 - - - - - - 5,258
Vanguard Bond Index Fund - - - - 748 - - - - - 748
Templeton Foreign Fund - - - - - 2,511 - - - - 2,511
Vanguard Balanced Index Fund - - - - - - 1,119 - - - 1,119
Fidelity Value Fund - - - - - - - 3,358 - - 3,358
Vanguard Extended Market Fund - - - - - - - - 1,416 - 1,416
Loans to participants - - - - - - - - - 1,269 1,269
Total investments 5,295 4,182 31,390 5,258 748 2,511 1,119 3,358 1,416 1,269 56,546
Cash 39 -5 81 23 5 -3 9 39 7 - 195
Net assets available
for plan benefits 5,334 4,177 31,471 5,281 753 2,508 1,128 3,397 1,423 1,269 56,741
</TABLE>
See accompanying Notes to Financial Statements.
1
<TABLE>
<CAPTION>
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Statement of Net Assets Available for Plan Benefits
December 31, 1997
(in thousands)
Fund Fund Fund Fund Fund Fund Fund Fund Fund Loan
I II III IV V VI VII VIII IX Fund Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Twentieth Century Growth 3,560 - - - - - - - - - 3,560
Kansas City Life common stock - 5,508 33,151 - - - - - - - 38,659
Met Life Guar. Interest Contract - - - 5,258 - - - - - - 5,258
Vanguard Bond Index Fund - - - - 676 - - - - - 676
Templeton Foreign Fund - - - - - 2,610 - - - - 2,610
Vanguard Balanced Index Fund - - - - - - 632 - - - 632
Fidelity Value Fund - - - - - - - 3,168 - - 3,168
Vanguard Extended Market Fund - - - - - - - - 1,065 - 1,065
Loans to participants - - - - - - - - - 1,159 1,159
Total investments 3,560 5,508 33,151 5,258 676 2,610 632 3,168 1,065 1,159 56,787
Cash 15 13 86 22 4 (68) 26 8 51 - 157
Net assets available
for plan benefits 3,575 5,521 33,237 5,280 680 2,542 658 3,176 1,116 1,159 56,944
</TABLE>
See accompanying Notes to Financial Statements.
2
<TABLE>
<CAPTION>
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1998
(in thousands)
Fund Fund Fund Fund Fund Fund Fund Fund Fund Loan
I II III IV V VI VII VIII IX Fund Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Employer - - 1,448 - - - - - - - 1,448
Employee 486 226 - 314 71 288 120 443 201 - 2,149
Rollover 7 - - - 10 - - 24 17 - 58
493 226 1,448 314 81 288 120 467 218 - 3,655
Investment income, net:
Interest - - 8 329 - - - - - - 337
Interest on participant loans 27 8 - 17 3 11 5 21 10 - 102
Dividends 869 103 681 - 44 266 38 463 108 - 2,572
Net appreciation (depreciation)
on investments 488 (170) (1,490) - 13 (378) 109 (473) 1 - (1,900)
Net investment income 1,384 (59) (801) 346 60 (101) 152 11 119 - 1,111
Employee withdrawals (118) (1,739) (2,374) (420) (43) (77) (9) (136) (14) - (4,930)
Forfeitures - - (39) - - - - - - - (39)
Participant loans: Made (201) (54) - (192) (31) (69) (20) (95) (35) 697 -
Repaid 153 39 - 114 17 66 22 128 48 (587) -
Transfer from (to) other funds 48 243 - (161) (11) (141) 205 (154) (29) - -
Net assets available for
plan benefits:
Net increase (decrease) 1,759 (1,344) (1,766) 1 73 (34) 470 221 307 110 (203)
Beginning of year 3,575 (5,521) 33,237 5,280 680 2,542 658 3,176 1,116 1,159 56,944
End of year 5,334 4,177 31,471 5,281 753 2,508 1,128 3,397 1,423 1,269 56,741
</TABLE>
See accompanying Notes to Financial Statements.
3
<TABLE>
<CAPTION>
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1997
(in thousands)
Fund Fund Fund Fund Fund Fund Fund Fund Fund Loan
I II III IV V VI VII VIII IX Fund Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Employer - - 1,809 - - - - - - - 1,809
Employee 343 193 - 300 71 288 78 402 134 - 1,809
343 193 1,809 300 71 288 78 402 134 - 3,618
Investment income, net:
Interest - - 11 314 - - - - - - 325
Interest on participant loans 21 8 - 16 2 12 4 20 6 - 89
Dividends 524 115 663 - 43 277 24 426 72 - 2,144
Net appreciation (depreciation)
on investments 228 1,693 9,721 - 17 (106) 78 100 120 - 11,851
Net investment income 773 1,816 10,395 330 62 183 106 546 198 - 14,409
Employee withdrawals (111) (206) (1,483) (525) (25) (116) (12) (144) (44) - (2,666)
Forfeitures - - (62) - - - - - - - (62)
Participant loans: Made (133) (64) - (185) (12) (76) (4) (130) (8) 612 -
Repaid 111 72 - 90 10 60 12 98 30 (483) -
Transfer from (to) other funds 40 (517) - 555 (70) (105) 91 (101) 107 - -
Net assets available for
plan benefits:
Net increase (decrease) 1,023 1,294 10,659 565 36 234 271 671 417 129 15,299
Beginning of year 2,552 4,227 22,578 4,715 644 2,308 387 2,505 699 1,030 41,645
End of year 3,575 5,521 33,237 5,280 680 2,542 658 3,176 1,116 1,159 56,944
</TABLE>
See accompanying Notes to Financial Statements.
4
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Notes To Financial Statements
ORGANIZATION
The Kansas City Life Insurance Company Savings and Profit Sharing Plan (the
Plan), formerly the Kansas City Life Insurance Company Savings and Investment
Plan, is a defined contribution benefit plan sponsored by Kansas City Life
Insurance Company (the Company) and is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). The Plan is administered by a
committee appointed by the Executive Committee of the Company. On January 1,
1988, the original plan was revised to incorporate the provisions of Section
401(k) of the Internal Revenue Code. The cash and investments of the Plan are in
the custody of three trustees who are also officers of the Company. The Plan
consists of nine funds. Fund I invests in a growth stock fund. Funds II and III
invest in the Company's common stock. All Company contributions and earnings
thereon are included in Fund III. Fund IV invests in a guaranteed interest
contract. Fund V invests in an investment grade bond fund. Fund VI invests in a
managed global common stock fund. Fund VII invests in a balanced index fund.
Fund VIII invests in a capital appreciation stock fund. Fund IX invests in a
small capitalization stock index fund.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements of the Plan have been prepared on the
basis of generally accepted accounting principles.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Valuation of Investments
The investments of the Plan in Funds I and V through IX are reported at fair
value based upon net asset value of the mutual fund shares held. The investments
in Funds II and III are reported at fair value based upon December's average bid
price. Investments in Fund IV are reported at the contract value as stated in
the guaranteed interest contract, which approximates fair value. The cost of
investments sold is determined on the average cost basis.
5
NOTES TO fINANCIAL STATEMENTS (continued)
Expenses
With the exception of mutual fund administrative fees, costs associated with the
administration of the Plan are borne by the Company.
Reclassification
Certain 1997 amounts have been reclassified to conform with 1998 presentation.
ELIGIBILITY
Each employee, who is at least 21 years of age and has completed one year of
employment, with a minimum of 1,000 hours of employment from date of hire is
qualified to participate in the Plan.
CONTRIBUTIONS
Participants may elect to contribute a percentage of their unreduced monthly
base salary to the Plan. In 1997, participants could contribute from one to ten
percent of their salary. Effective January 1, 1998, the Plan was amended to
increase the maximum contribution to 15 percent. Contribution percentages can
only be changed once in any six-month period. The maximum contribution for any
participant who is classified as highly compensated is six percent. The maximum
contribution for an individual participant was $10,000 in 1998 and $9,500 in
1997.
The Company matches participant contributions using current or accumulated
earnings and profits. Matching contributions are made to the Plan as soon as
practical after the end of each month. The Company's contributions are made in
common stock of the Company, which is valued at the average of its bid price on
the over-the-counter market for all business days following the previous monthly
valuation date. In 1997, the Company matched 100 percent of each participant's
contribution to the Plan. Effective January 1, 1998, the Plan was amended to
reduce the match to up to 6 percent of salary. The Plan was also amended in that
the Company may contribute a profit sharing amount of up to 4 percent of salary
depending upon the Company's profit performance. No profit sharing contributions
were made in 1998.
WITHDRAWALS AND LOANS
The Plan allows a participant to withdraw all or a part of the value of his
or her account which was contributed prior to January 1, 1988. The value of
a participant account attributable to contributions after that date may not be
withdrawn except in cases of extreme financial hardship. Hardship withdrawals
are subject to the approval of the Administrative Committee, and any such
withdrawal will be limited to the amount of actual contributions made to the
Plan. Gains associated with the contributions or any of the matching Fund III
amounts may not be withdrawn for any reason.
Participants may request a loan from the 401(k) portion of their elective
accounts under the terms and conditions established by the Administrative
Committee. The amount that may be borrowed is limited in accordance with the
Internal Revenue Code Section 72(p). Loans will be made for a period no
longer than five years, except for a loan used to acquire a primary residence,
which may be for up to ten years.
6
NOTES TO FINANCIAL STATEMENTS (continued)
INVESTMENTS
The guaranteed interest contract held by the Plan provided an average yield of
6.52 percent and 6.34 percent during 1998 and 1997, respectively. Crediting
rates were 6.55 percent and 6.35 percent at December 31, 1998 and 1997,
respectively. These rates are reset every three months.
The fair value of individual investments that represent 5 percent or more of
the Plan's participating employees' net assets available for plan benefits
follows.
1998 1997
(in thousands)
Twentieth Century Growth Stock Fund,
194,970 shares - 1998 and 148,251 shares - 1997. 5,295 3,560
Kansas City Life Insurance Company common stock,
430,265 shares - 1998 and 445,954 shares - 1997. 35,572 38,659
Met Life Managed Guaranteed Interest Contract 5,258 5,258
Fidelity Value Fund
72,449 shares - 1998 and 58,613 shares - 1997. 3,358 3,168
The fair value of the Plan's investments has changed as follows.
1998 1997
Net Net
Appreciation Appreciation
(Depreciation) (Depreciation)
Fair Value In Fair Value Fair Value In Fair Value
(in thousands) (in thousands)
Fund I $5,295 488 $3,560 228
II 4,182 (170) 5,508 1,693
III 31,390 (1,490) 33,151 9,721
IV 5,258 - 5,258 -
V 748 13 676 17
VI 2,511 (378) 2,610 (106)
VII 1,119 109 632 78
VIII 3,358 (473) 3,168 100
IX 1,416 1 1,065 120
Total $55,277 (1,900) $55,628 11,851
7
NOTES TO FINANCIAL STATEMENTS (continued)
VESTING
Company contributions vest to the participant 30 percent after three years of
employment, 40 percent after four years and an additional 20 percent each year
thereafter until the participant is fully vested in Company contributions after
seven years.
PLAN DOCUMENT
The Plan document is available upon request. Participants should refer to this
document for a more complete description of the Plan's provisions.
TAX STATUS
The Internal Revenue Service has issued a determination letter dated October 3,
1995 that, in form, the Plan and Trust forming a part thereof, meet the
requirements of the Internal Revenue Code Section 401(a) as a qualified plan and
trust. If the Plan qualifies in operation, the Trust's earnings will be exempt
from taxation, the Company's contributions will be deductible, and each
participant will incur no current tax liability on either the Company's
contributions or any earnings of the trust credited to the participant's account
prior to the time that such contributions or earnings are withdrawn or made
available to the participant. At the time a distribution occurs, whether because
of retirement, termination, death, disability or voluntary withdrawal of funds,
any amounts distributed comprised of Company contributions, employee pretax
contributions, and earnings on contributions of the Company or the participant
shall be taxed to the participant at the tax rate then in effect. The Plan
administrator believes the Plan is being operated in compliance with the
applicable requirements of the Internal Revenue Code and, therefore, believes
that the Plan is qualified and the related trust is tax-exempt.
PLAN TERMINATION
Although the Company has not expressed any intent to terminate the Plan, it may
do so at any time by adoption of a written resolution by the Company's Board of
Directors or the Executive Committee of the Board of Directors. Upon termination
of the Plan, participants' accounts would become fully vested and nonforfeitable
and distributions would be made as promptly as possible.
IMPACT OF YEAR 2000 (unaudited)
The Company is currently converting to a new administrative system which will be
year 2000 compliant. It is anticipated that this conversion will be completed by
September 1999. The costs related to becoming year 2000 ready are minor and will
be borne by the Company and therefore will not have an effect on the Plan's
financial statements.
8
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Assets Held for Investment
December 31, 1998
(in thousands, except shares)
Number of
Shares or
Description of Investments Par Value Cost Fair Value
Common stock:
Kansas City Life Insurance Company * 430,265 shares 16,389 35,572
Mutual funds:
Twentieth Century Growth Stock Fund 194,970 shares 3,726 5,295
Met Life Managed Guar. Interest Contract $5,258 par value 5,258 5,258
Vanguard Bond Index Fund 72,856 shares 722 748
Templeton Foreign Fund 299,258 shares 2,670 2,511
Vanguard Balanced Index Fund 60,528 shares 889 1,119
Fidelity Value Fund 72,449 shares 3,369 3,358
Vanguard Index Trust-Extended Market Fund 46,248 shares 1,235 1,416
Total mutual funds 17,869 19,705
Loans:
Loans to participants (interest rates range from
6.5% to 10.0%) - 1,269 1,269
35,527 56,546
* Party-in-interest to the Plan.
9
Kansas City Life Insurance Company
Savings and Investment Plan
Transactions in Excess of
Five Percent of the Current Value of the Plan Assets
Year ended December 31, 1998
(in thousands, except shares)
Party Involved and
Description of Asset Transactions Shares Cost Consideration Net Gain
Category (iii)--series of transactions in excess of 5 percent of plan assets:
Kansas City Life
common stock * 14 buys 21,979 $1,883 - -
Kansas City Life
common stock * 8 sells 37,668 1,344 3,310 1,966
There were no category (i), (ii), or (iv) reportable transactions during 1998.
* Party-in-interest to the Plan.
10
Report of Independent Auditors
The Board of Trustees
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
We have audited the accompanying statements of net assets available for plan
benefits of the Kansas City Life Insurance Company Savings and Profit Sharing
Plan (formerly the Kansas City Life Insurance Company Savings and Investment
Plan) (the Plan) as of December 31, 1998 and 1997, and the related statements of
changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan at
December 31, 1998 and 1997, and the changes in its net assets available for plan
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment as of December 31, 1998 and transactions in excess
of 5% of the current value of plan assets for the year then ended are presented
for purposes of complying with the Department of Labor's Rules and Regulations
for Reporting and Disclosure under the Employee Retirement Income Security Act
of 1974 and are not a required part of the basic financial statements. The Fund
Information in the statements of net assets available for plan benefits and the
statements of changes in net assets available for plan benefits is presented for
purposes of additional analysis rather than to present the net assets available
for plan benefits and changes in net assets available for plan benefits of each
fund. The supplemental schedules and Fund Information have been subjected to the
auditing procedures applied in our audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/Ernst & Young LLP
Kansas City, Missouri
February 24, 1999
