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, 1999
[ ] 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 29, 2000, 12,023,990 shares of the Company's capital stock
par value $1.25 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
$119,970,160.
Part II
Documents Incorporated by Reference
Item 5: Market for Registrant's Common Page 44 of Annual Report to
Equity and Related Stockholder Shareholders for the year
Matters. ended December 31, 1999.
Item 6: Selected Financial Data. Page 24 of Annual Report to
Shareholders for the year
ended December 31, 1999.
Item 7: Management's Discussion Pages 22 through 27 of Annual
and Analysis of Financial Report to Shareholders for
Condition and Results of the year ended December 31,
Operations. 1999.
Item 7A: Quantitative and Qualitative Pages 25 through 27 of Annual
Disclosures about Market Risk Report to Shareholders for
the year ended December 31,
1999.
Item 8: Financial Statements and Pages 28 through 43 of Annual
Supplementary Data. Report to Shareholders for the
year ended December 31, 1999.
Part IV
Index to Exhibits Page 19
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 48
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 57% of new
statutory premiums in 1999. 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 20% of insurance
revenues. Sunset markets interest sensitive and traditional products to
individuals through a personal pro-ducing general agency system. Sunset operates
in 34 states 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 28% 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 were 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 its subsidiaries have 648 full time employees located in the home
office.
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.
The Company owns various other properties held for investment.
Item 3. LEGAL PROCEEDINGS
In recent years, the life insurance industry, including the Company, has
been subject to an increase in litigation, pursued on behalf of purported
classes of insurance purchasers, questioning the conduct of insurers in the
marketing of their products. The Company believes that the actions described
below are part of this trend. The Company denies all allegations of wrongdoing
in these lawsuits, and has been defending them vigorously.
Adams, et al, v. Kansas City Life Insurance Company; United States District
Court for the Western District of Missouri; Case No. 98-1053-CV-W-9. This
liti-gation was originally brought by three Company policyholders in the Middle
District of Florida in December, 1997, but was subsequently transferred to the
Western District of Missouri. The policyholders allege the Company marketed the
life insurance policies as policies that would pay for themselves after a
certain period of time, i.e., that the premiums would "vanish" and/or that the
policies were inappropriately marketed as "retirement plans". According to the
policy-holders, the policies would not pay for themselves, but, rather, require
additional premium payments each year to remain in effect. Plaintiffs charge the
Company with fraudulent concealment, fraudulent inducement, breach of fiduciary
duty, breach of contract, breach of the duty of good faith and fair dealing,
negligent supervision, negligent misrepresentation, and seek unspecified
compensatory and punitive damages, declaratory and injunctive relief, reaffirma-
tion of the party's contract, and imposition of a constructive trust.
Plaintiffs' petition seeks to certify a class comprised of all persons and/or
entities who have or had an ownership interest in one or more permanent life
insurance policies issued from January 1, 1985 to the present. The trial court
has granted the Company's motion to dismiss counts alleging fraud/fraudulent
concealment and deceit, and negligent misreprepresentation, but denied the
motion in all other respects. Discovery has been completed on the issue of class
certification and a class certification hearing was held February 16-17, 2000,
but no decision has been issued. Management denies the allegations of the
complaint including the existence of a certifiable class and intends to defend
this case vigorously.
Stewart, et al, v. Security Benefit Life Insurance Company and Bank Market
Service, Inc.; Filed in November, 1998 in the Tenth Judicial District Court of
Kansas, Johnson County, Kansas; Case No. 98-C04036. The Company is defending
this case pursuant to the terms of a coinsurance agreement with Security Benefit
Life (SBL). This litigation 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 monetary damages in an amount of alleged 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." Previously, the trial court
granted in part the Company's motion for summary judgment dismissing all fraud
and fiduciary claims and leaving only a claim for breach of contract to be
litigated. Following a hearing on class certification that was held on March
20-21, 2000, in a bench ruling the trial court denied plaintiffs motion for
class certification. Management intends to continue to defend this matter
vigorously and denies the allegations including the existence of a certifiable
class.
Wilner v. Sunset Life Insurance Company, Dean Delevie, et al; California
Superior Court; Case No. SC051573. The original complaint was filed on March 9,
1998 in Los Angeles Superior Court. In her first complaint, plaintiff sued
Sunset Life Insurance Company (Sunset), a subsidiary, and one of its agents for
unspecified compensatory and punitive damages alleging various forms of deceit,
breach of fiduciary duty, and negligence in connection with the sale of a
universal life insurance policy as a replacement for an existing policy.
Sub-sequently, the plaintiff amended her complaint to seek class action status
and to add a claim under California's Business and Professions Code 17200 which
authorizes individual plaintiffs to sue on behalf of the public to remedy
specific delineated alleged unfair business practices, and to seek declaratory
and injunctive relief. Sunset obtained a dismissal of the breach of fiduciary
duty claim and the class action allegations, but the trial court refused to
dismiss the 17200 allegations. All parties appealed and the court of appeals
refused to overrule the trial court's failure to dismiss the 17200 claims and
remanded the case for further discovery and proof regarding the class action
allegations in the complaint. Sunset denies the allegations and management
believes that this case does not fit the requirements for either class treatment
and/or litigation under 17200 and intends to defend this matter vigorously.
Wright, etc., v. Sunset Life Insurance Company; Circuit Court of Clarke
County, Alabama; Case No. CV98-0220-M. Originally filed in June, 1998, plaintiff
alleged that Sunset is liable for breach of contract and unjust enrichment, and
seeks unspecified compensatory damages. Plaintiff alleges the Company breached
her universal life contract when it sent her a letter advising that her
universal life policy was being underfunded and she needed to pay additional
premiums in order to maintain the current level of death benefit. In addition,
plaintiff alleged a putative class action in which she seeks to represent
herself and others similarly situated nationwide. Sunset's initial motion to
dismiss was overruled by the trial court. Subsequently, plaintiff surrendered
her policy and plaintiff's attorneys dismissed her as a plaintiff and filed an
amended complaint substituting plaintiff's husband, beneficiary of the policy,
as plaintiff. Sunset has filed a motion to strike or dismiss the plaintiff's
amended complaint. Plaintiff has not filed a motion seeking class certification,
nor has there been a class certification hearing and none is scheduled at this
time. The policy in issue was not sold in the State of Alabama, nor has Sunset
applied for authority to conduct business in Alabama. Sunset denies that the
Alabama court has jurisdiction over this matter, and further denies the
allegations in the complaint including the existence of a certifiable class and
intends to defend this case vigorously.
In addition to the above, the Company and certain of its subsidiaries are
defendants in litigation seeking punitive damages. Some of these lawsuits are in
jurisdictions where juries sometime award punitive damages grossly dispro-
portionate 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 relief ultimately granted to plaintiffs in these lawsuits, if
any, would have no material effect on the Company's business, results of opera-
tions 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, 1999.
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, 1999, 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
J. R. Bixby (1)(2)(3) 74 2000 Chairman of the Board 1957
R. Philip Bixby 46 2000 President, CEO and Vice 1985
(1)(2)(3) Chairman of the Board
Richard L. Finn 58 2000 Senior Vice President, 1983
(1)(2)(3) Finance
Warren J. Hunzicker, M.D. 79 2000 None 1989
(3)(6)
Larry Winn, Jr. 80 2000 None 1985
(2)(3)(4)(5)(6)
Jack D. Hayes (1) 59 2001 Senior Vice President, 1995
Marketing
Michael J. Ross 58 2001 None 1972
(2)(4)(5)(6)
Elizabeth T. Solberg 60 2001 None 1997
(6)
W. E. Bixby, III (6) 41 2002 None 1996
Term as
Director Served as
Expires Other Positions Director
Name of Director Age in April with the Company From
Webb R. Gilmore 55 2002 None 1990
(2)(4)(5)(6)
Nancy Bixby Hudson (6) 47 2002 None 1996
Daryl D. Jensen (6) 60 2002 None 1978
C. John Malacarne 58 2002 Vice President, 1991
(1)(2) General Counsel
and Secretary
W. E. Bixby served as a Director from 1966 until his death on September 27,
1999. Francis P. Lemery served as a Director from 1985 until he retired on
November 30, 1999.
(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 20, 2000, will be elected for a three
year term ending in 2003.
(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 served as President of
Sunset Life Insurance Company of America, a subsidiary of Registrant, from
1973 until his retirement in 1999. 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, 74 Chairman since 1972; President from 1964 until he
Chairman of the Board retired in April, 1990. Responsible for overall
corporate policy. Chairman of the Board of Sunset
Life and Old American, subsidiaries.
W. E. Bixby, 66 Vice Chairman of the Board since 1974; elected
Executive Vice President in January, 1987;
President and CEO from 1990 until he retired in
April, 1998. Chairman of the Board of Sunset Life
and Old American, subsidiaries, until his death on
September 27, 1999.
Name, Age and Business Experience
Position During Past 5 Years
R. Philip Bixby, 46 Elected Assistant Secretary in 1979; Assistant Vice
President, CEO and Vice President in 1982; Vice President in 1984; Senior
Chairman of the Board Vice President, Operations in 1990; Executive Vice
President in 1996; President and CEO in April, 1998;
and Vice Chairman of the Board in January, 2000.
Director and President of Sunset Life and Director
of Old American, subsidiaries.
Richard L. Finn, 58 Elected Vice President in 1976; Financial Vice Presi-
Senior Vice President, dent in 1983; and to present position in 1984. Chief
Finance 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, 59 Elected Senior Vice President, Marketing in February,
Senior Vice President, 1994. Responsible for Marketing, Marketing Adminis-
Marketing tration, 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, 60 Elected Vice President in 1979; Vice President and
Senior Vice President Actuary in 1980; and to present position in 1984.
and Actuary Responsible for Group Insurance Department, Actuarial
Services, State Compliance, New Business and Under-
writing. Director of Sunset Life and Old American,
subsidiaries. Retired November 30, 1999.
Mark A. Milton, 41 Elected Assistant Actuary in 1984; Assistant Vice
Vice President President/Associate Actuary in 1987; Vice President/
and Actuary Associate Actuary in 1989; and to present position
in January, 2000. Responsible for Actuarial Services
and State Compliance. Director, Vice President and
Actuary of Sunset Life, a subsidiary.
Michael P. Horton, 57 Elected Director, Group Life/Sales in 1977; Assistant
Vice President, Group Vice President, Group in 1981; and to present
position in 1984. Responsible for group sales and
products.
Robert C. Miller, 53 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., 52 Elected Vice President, Computer Information Services
Senior Vice President, in 1989; Vice President, Insurance Administration in
Operations 1992; and to present position in 1996. Responsible
for the Company's Computer Operations, Customer
Services, Claims, Premium Collection, Agency Adminis-
tration, New Business and Underwriting. Director of
Sunset Life and Old American, subsidiaries.
John K. Koetting, 54 Elected Assistant Controller in 1975; and to present
Vice President and position in 1980. Chief accounting officer
Controller responsible for all corporate accounting reports.
Director of Old American, a subsidiary.
Name, Age and Business Experience
Position During Past 5 Years
C. John Malacarne, 58 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, were 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, 1999 for the fiscal years ending December 31, 1999, 1998 and 1997.
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- 1999 405,180 41,931 0 7,000 26,853
dent, CEO and Vice 1998 348,692 77,971 0 7,000 22,857
Chairman of the Board, 1997 284,700 400 132,660 4,750 29,820
Kansas City Life;
Director of Sunset
Life and Old American,
subsidiaries.
R. L. Finn, Senior 1999 231,720 22,680 0 7,000 17,650
Vice President, 1998 221,712 33,748 0 7,000 17,842
Finance and Director, 1997 212,160 400 151,560 7,000 25,540
Kansas City Life;
Director of Sunset
Life and Old American,
subsidiaries. _______________________________________________________
F. P. Lemery, Senior 1999 212,410 12,258 0 7,000 18,206
Vice President and 1998 221,712 33,748 0 7,000 17,842
Actuary and Director, 1997 212,160 400 151,560 7,000 25,540
Kansas City Life;
Director of Sunset
Life and Old American,
subsidiaries. Retired
November 30, 1999.
Long Term Other All
Annual Compensation Incentive Annual Other
Compensa- Compen- Compen-
Name and Salary Bonus tion Payouts sation sation
Principal Position Year $ $ $ $ $
J. D. Hayes, Senior 1999 201,300 39,973 0 4,000 15,275
Vice President, Mar- 1998 192,624 71,211 0 4,000 15,621
keting, and Director, 1997 184,320 400 132,930 4,000 22,309
Kansas City Life.
D. D. Jensen, Direc- 1999 193,418 35,088 0 6,000 16,533
tor, Kansas City Life; 1998 201,900 400 0 6,000 16,207
Vice Chairman of the 1997 193,200 18,097 138,000 6,000 23,217
Board, President and
Manager of Western
Operations, Sunset Life
a subsidiary. Retired
as an officer of Sunset
Life November 30, 1999. _______________________________________________________
C. R. Duffy, Jr., 1999 188,760 18,349 0 3,000 12,483
Senior Vice President, 1998 175,572 31,400 0 0 12,699
Operations, Kansas City 1997 163,320 160 0 0 11,956
Life; Director of Sunset
Life and Old American,
subsidiaries. _______________________________________________________
C. J. Malacarne, Vice 1999 193,980 20,403 0 7,000 14,718
President, General 1998 185,592 23,244 0 7,000 14,861
Counsel and Secretary 1997 177,600 400 126,855 7,000 21,306
and Director, Kansas
City Life; Director
and Secretary of Sunset
Life and Old American,
subsidiaries. _______________________________________________________
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
amount contributed to the plan in 1999 for the accounts of the named individuals
are as follows: R. P. Bixby, $9,210; R. L. Finn, $9,219; F. P. Lemery, $9,219;
J. D. Hayes, $9,193; D. D. Jensen, $9,198; C. R. Duffy, Jr.,$9,199; C. J.
Malacarne, $9,199.
The Company has adopted a nonqualified deferred compensation plan for
approximately 43 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 1999 for the accounts of the named
indi-viduals are as follows: R. P. Bixby, $15,101; R. L. Finn, $4,684; F. P.
Lemery, $3,525; J. D. Hayes, $2,885; D. D. Jensen, $2,407; C. R. Duffy, Jr.,
$2,126; C. J. Malacarne, $2,440.
The Company provides yearly renewable term insurance to its employees in the
amount of 2 1/2 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 1999 are as follows: R.
P. Bixby, $2,542; R. L. Finn, $3,747; F. P. Lemery, $5,462; J. D. Hayes, $3,197;
D. D. Jensen, $4,928; C. R. Duffy, Jr., $1,158; C. J. Malacarne, $3,079.
(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. 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 $ 51,743* $ 51,753* $16,495
100,000 25,000 50,000 70,000 71,753* 16,495
125,000 31,250 62,500 87,500 91,753* 16,495
150,000 37,500 75,000 105,000 111,753* 16,495
200,000 50,000 100,000 140,000 151,753* 16,495
250,000 62,500 125,000 175,000 191,753* 16,495
300,000 75,000 150,000 210,000 231,753* 16,495
350,000 87,500 175,000 245,000 271,753* 16,495
400,000 100,000 200,000 280,000 311,753* 16,495
450,000 112,500 225,000 315,000 351,753* 16,495
500,000 125,000 250,000 350,000 391,753* 16,495
*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, 1999, were: R. P. Bixby, 22 years; R. L. Finn, 26 years; J. D.
Hayes, 6 years; C. R. Duffy, Jr., 10 years; C. J. Malacarne, 33 years.
The estimated annual annuity benefit payable starting at normal retirement
age (age 65) as accrued through December 31, 1999 under the cash balance plan
for each of the named individuals are as follows: R. P. Bixby, $170,058; R. L.
Finn, $131,209; J. D. Hayes, $20,609; C. R. Duffy, Jr., $30,196; C. J.
Malacarne, $128,788. At their retirement on November 30, 1999, F. P. Lemery and
D. D. Jensen elected a lump sum distribution and are not entitled to any other
benefits under the plan.
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. Outside Directors of Sunset Life, a
subsidiary, are paid $1,000 quarterly, inside Directors are paid $500 quarterly.
Directors of Old American are paid $250 quarterly. 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 table sets forth information as of February 29, 2000,
con-cerning certain beneficial owners of voting securities of the Company's
$1.25 par value capital stock ("Common Stock"). The Common Stock is the
Company's only class of voting securities. As described in the notes to the
table set forth below, certain named persons share the power of voting and
disposition with respect to certain shares of Common Stock. Consequently,
such shares are shown as being beneficially owned by more than one person.
Name and Address Percent of Class
John K. Koetting, Robert C. Miller
and Anne C. Moberg, Trustees of the
Kansas City Life Insurance Company
Savings and Profit Sharing Plan and
the Kansas City Life Employee Stock Plan
3520 Broadway
Kansas City, MO 64111-2565
Amount and Nature of Ownership(1)
817,591 Shares 6.8
WEB Interests, Ltd.
3520 Broadway
Kansas City, MO 64111-2565
Amount and Nature of Ownership(2)
2,358,340 Shares 19.6
Angeline I. O'Connor
12501 Granada Lane
Leawood, KS 66209
Amount and Nature of Ownership(2)(3)
3,068,028 Shares 25.5
JRB Interests, Ltd.
3520 Broadway
Kansas City, MO 64111-2565
Amount and Nature of Ownership(4)
2,966,312 Shares 24.7
Margie Morris Bixby
3530 Pennsylvania
Kansas City, MO 64111
Amount and Nature of Ownership(4)(5)
2,968,112 Shares 24.7
Lee M. Vogel
4701 NW 59th Court
Kansas City, MO 64151
Amount and Nature of Ownership(4)(6)
2,973,410 Shares 24.7
(1) Trustees have the power to sell plan assets. Participants may instruct the
Trustees how to vote their shares.
(2) The WEB Interests, Ltd., a Texas limited partnership (the "WEB
Partnership") shares with its general partners and co-managing partners the
power to dis-pose of these shares. The general partners of the WEB
Partnership are R. Philip Bixby, W. E. Bixby, III, Angeline I. O'Connor
("Ms. O'Connor") and the co-trustees of the Walter E. Bixby, Jr. Revocable
Trust ("WEB Trust"). R. Philip Bixby, W. E. Bixby, III and Ms. O'Connor are
the co-managing partners of the WEB Partnership and the co-trustees of the
WEB Trust. Each partner of the WEB Partnership has the power to vote that
number of shares of Common Stock owned by the WEB Partnership which are
equal to such partner's proportionate interest in the WEB Partnership.
(3) Includes 2,358,340 shares for which Ms. O'Connor shares the power of
disposition, as a co-managing partner and a general partner of the WEB
Partnership. Of these shares, Ms. O'Connor: (i) as a co-trustee of the WEB
Trust, shares the power to vote 2,151,562 shares; (ii) as the sole trustee
of the Angeline I. O'Connor GST Trust and the Issue Trust for Angeline I.
O'Connor, which trusts are limited partners of the WEB Partnership, has the
power to vote 61,362 shares; and (iii) as a general partner of the WEB
Partnership, has the sole power to vote 217 shares. Also includes: (i)
356,000 shares for which Ms. O'Connor, as a co-trustee with R. Philip Bixby
and W. E. Bixby, III of the Walter E. Bixby Descendants Trust, shares the
power to vote and the power of disposition; and (ii) 353,688 shares which
Ms. O'Connor owns directly and has the sole power to vote and the sole
power of disposition.
(4) The JRB Interests, Ltd., a Texas limited partnership (the "JRB
Partnership"), shares with its general partners and its managing partner,
J. R. Bixby, the power to dispose,or direct the disposition of these
shares. The general partners of the JRB Partnership are the trustees of the
Joseph R. Bixby Revocable Trust (the "JRB Trust"), the trustee of the
Margie Morris Bixby Revocable Trust (the "MMB Trust"), Nancy Bixby Hudson
and Lee M. Vogel ("Mr. Vogel"). Each partner of the JRB Partnership has the
power to vote that number of shares of Common Stock owned by the JRB
Partnership which are equal to such partner's proportionate interest in the
JRB Partnership.
(5) Includes 2,966,312 shares for which Margie Morris Bixby ("MM Bixby"), as
trustee of the MMB Trust, a general partner and limited partner of the JRB
Partnership, shares the power of disposition. Of these shares, MM Bixby:
(i) as sole trustee of MMB Trust, a general partner and a limited partner
of the JRB Partnership,has the sole power to vote 27,474 shares; and (ii)
as a limited partner of the JRB Partnership, has sole power to vote 322
shares. Also includes 1,800 shares for which MM Bixby, as a joint tenant
with right of survivorship with Mr. Vogel, shares the power to vote and the
power of disposition.
(6) Includes 2,966,312 shares for which Lee M. Vogel, as a general partner of
the JRB Partnership, shares the power of disposition. Of these shares, Mr.
Vogel: (i) as a general partner of the JRB Partnership, has the sole power
to vote 272 shares; and (ii) as a co-trustee with Richard L. Finn and C.
John Malacarne of the Issue Trust for Lee M. Vogel, a limited partner of
the JRB Partnership, shares the power to vote 89,877 shares. Also includes:
(i) 1,800 shares for which Mr. Vogel, as a joint tenant with right of
survivorship with MM Bixby, shares the power to vote and the power of
disposition; and (ii) 5,298 shares which Mr. Vogel owns directly and has
the sole power to vote and the sole power of disposition.
(b) Security Ownership of Management
As described in the notes to the table set forth below, certain named
persons share the power of voting and disposition with respect to certain
shares of Common Stock. Consequently, such shares are shown as being
beneficially owned by more than one person.
The following persons are currently Directors whose terms expire on
April 20, 2000. They are also nominees of management for election to three
year terms at the annual meeting to be held April 20, 2000:
Served Shares of
as a Record and
Name and Principal Director Beneficially Percent
Address Occupation Since Owned of Class
J. R. Bixby Chairman of the 1957 2,966,312(1) 24.7
3520 Broadway Board
Kansas City, MO
R. Philip Bixby President, CEO 1985 2,358,340(2)(3) 25.7
3520 Broadway and Vice Chairman 14,387(4)
Kansas City, MO of the Board 356,000(5)
363,782(6)
Richard L. Finn Senior Vice Presi- 1983 24 2.0
3520 Broadway dent, Finance 14,388(4)
Kansas City, MO 245,454(7)
Warren J. Hunzicker, M.D. Director 1989 300 *
1248 Stratford Rd.
Kansas City, MO
Larry Winn, Jr. Retired Represent- 1985 332 *
8420 Roe Ave. ative, U.S. Congress
Prairie Village, KS
The following Directors were elected April 23, 1998 for a three year term:
Jack D. Hayes Senior Vice Presi- 1995 500 *
3520 Broadway dent, Marketing 1,602(4)
Kansas City, MO
Michael J. Ross Chairman of the 1972 600 *
12826 Dubon Lane Board, Jefferson
St. Louis, MO Bank and Trust
Company,
St. Louis, MO
Elizabeth T. Solberg Regional President 1997 200 *
850 W. 52nd St. and Senior Partner,
Kansas City, MO Fleishman-Hillard, Inc.,
St. Louis, MO
W. E. Bixby, former Vice Chairman of the Board, served as a Director until his
death on September 27, 1999. Francis P. Lemery, former Senior Vice President and
Actuary, served as a Director until his retirement November 30, 1999. The Board
of Directors have not yet elected replacement Directors to serve the balance of
Mr. Bixby's or Mr. Lemery's unexpired terms.
The following Directors were elected April 22, 1999 for a three year term:
W. E. Bixby, III President, Old 1996 2,358,340(2)(8) 25.6
3520 Broadway American Insur- 364,096(9)
Kansas City, MO ance Company, 5,496(4)
Kansas City, MO 356,000(5)
Webb R. Gilmore Chairman, CEO 1990 1,000 *
833 Westover Rd. and Shareholder,
Kansas City, MO Gilmore & Bell,
Kansas City, MO
Nancy Bixby Hudson Investor 1996 2,966,312(10) 27.4
425 Baldwin Creek Rd. 331,566(11)
Lander, WY
Served Shares of
as a Record and
Name and Principal Director Beneficially Percent
Address Occupation Since Owned of Class
Daryl D. Jensen Vice Chairman of 1978 939 *
2143 Old Port Dr. the Board, Sunset
Olympia, WA Life Insurance
Company of America,
Kansas City, MO
C. John Malacarne Vice President, 1991 20 2.0
3520 Broadway General Counsel 13,172(4)
Kansas City, MO and Secretary 245,454(7)
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) 8,318,348 69.2
*Less than 1%.
(1) J. R. Bixby, as sole managing partner of the JRB Partnership, shares the
power of disposition of these shares with the JRB Partnership and the
general partners of the JRB Partnership. He has the sole power to vote (i)
2,692,194 of these shares, as sole trustee of the JRB Revocable Trust, a
general partner and a limited partner of the JRB Partnership, and (ii) 322
of these shares, as a limited partner of the JRB Partnership.
(2) As co-managing partners and general partners of the WEB Partnership, W. E.
Bixby, III and R. Philip Bixby, along with Ms. O'Connor and the WEB Part-
nership, share the power to dispose of these shares. As co-trustees of the
WEB Trust, W. E. Bixby, III and R. Philip Bixby, along with Ms. O'Connor,
share the power to vote 2,151,562 of these shares.
(3) Includes (i) 518 shares for which R. Philip Bixby, as a general partner and
a limited partner of the WEB Partnership, has the sole power to vote; and
(ii) 61,362 shares for which R. Philip Bixby, as sole trustee of the R.
Philip Bixby GST Trust and the Issue Trust for R. Philip Bixby, which
trusts are limited partners of the WEB Partnership, has the sole power to
vote.
(4) Approximate beneficial interest in shares held by the trustees of Kansas
City Life Insurance Company employee benefit plans. Participants have the
power to vote the shares held in their account.
(5) These shares are held in the Walter E. Bixby Descendants Trust. R. Philip
Bixby, W. E. Bixby, III and Angeline I. O'Connor are the co-trustees of
this trust and share the power to vote and the power to dispose of these
shares. The terms of the trust restrict transferring shares.
(6) Includes (i) 346,234 shares which R. Philip Bixby owns directly and has the
sole power to vote and the sole power of disposition; and (ii) 17,548
shares for which R. Philip Bixby, as custodian for certain of his minor
nieces and nephews, has the sole power to vote and the sole power of
disposition.
(7) Richard L. Finn and C. John Malacarne share the power to vote: (i) 155,577
shares with Ms. Hudson, as co-trustees of the Nancy Bixby Hudson GST Trust
and the Issue Trust for Nancy Bixby Hudson, which trusts are limited
partners of the JRB Partnership; and (ii) 89,877 shares with Mr. Vogel, as
co-trustees of the Issue Trust for Lee M. Vogel, a limited partner of the
JRB Partnership.
(8) Includes (i) 217 shares for which W. E. Bixby, III, as a general partner of
the WEB Partnership, has the sole power to vote; and (ii) 61,362 shares for
which W. E. Bixby, III, as the sole trustee of the Walter E. Bixby, III GST
Trust and the Issue Trust for Walter E. Bixby, III, which trusts are
limited partners of the WEB Partnership, has the sole power to vote.
(9) Includes (i) 351,420 shares which W. E. Bixby, III owns directly and has
the sole power to vote and the sole power of disposition; and (ii) 12,676
shares for which W. E. Bixby, III, as custodian for certain of his minor
nieces and nephews, has the sole power to vote and the sole power of
disposition.
(10) Ms. Hudson, as a general partner of the JRB Partnership, shares the power
of disposition of these shares with the JRB Partnership, the managing
partner and other general partners of the JRB Partnership. Ms. Hudson, as a
general partner of the JRB Partnership, also has sole power to vote 272 of
these shares and shares the power to vote 155,577 of these shares with
Richard L. Finn and C. John Malacarne as co-trustees of the Nancy Bixby
Hudson GST Trust and the Issue Trust for Nancy Bixby Hudson, which trusts
are limited partners of the JRB Partnership.
(11) Ms. Hudson, as sole trustee of the Nancy Bixby Hudson Trust dated December
11, 1997, has the sole power to vote and the sole power to dispose of these
shares.
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, 1999 at the following pages:
Page
Consolidated Income Statement - Years ended
December 31, 1999, 1998 and 1997 . . . . . . . . . . . . . . . 28
Consolidated Balance Sheet -
December 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . 29
Consolidated Statement of Stockholders' Equity -
Years ended December 31, 1999, 1998 and 1997 . . . . . . . . . 30
Consolidated Statement of Cash Flows -
Years ended December 31, 1999, 1998 and 1997 . . . . . . . . . 31
Notes to Consolidated Financial Statements . . . . . . . . . . . 32-42
Report of Independent Auditors . . . . . . . . . . . . . . . . . 43
(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, 1999 . . . . . . . . . 21
II - Condensed Financial Information of Registrant,
Years ended December 31, 1999, 1998 and 1997 . . . . . . 22-24
III - Supplementary Insurance Information, Years ended
December 31, 1999, 1998 and 1997 . . . . . . . . . . . . 25
IV - Reinsurance Information, Years ended
December 31, 1999, 1998 and 1997 . . . . . . . . . . . . 26
V - Valuation and Qualifying Accounts, Years ended
December 31, 1999, 1998 and 1997 . . . . . . . . . . . . 27
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) Articles of Incorporation (as Restated in 1986 and Amended in
1999). [Filed as Exhibit 3(a) to the Company's 10-Q Report for
the quarter ended September 30, 1999 and incor- porated 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]
4(a) Specimen copy of Stock Certificate. [Filed as Exhibit 4(a) to the
Company's 10-Q Report for the quarter ended September 30, 1999
and incorporated herein by reference]
10(a)Seventh Amendment, Kansas City Life Deferred Compensation Plan.
[Filed as Exhibit 10(a) to the Company's 10-K Report for 1998 and
incorporated herein by reference]
10(b)Twenty-third Amendment, Kansas City Life Insurance Company
Savings and Profit Sharing Plan.
10(c)Eleventh Amendment, Kansas City Life Employee Stock Plan.
10(d)Second Amendment, Kansas City Life Excess Benefit Plan.
13 Annual Report to Shareholders for the year ended December 31,
1999.
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 1999 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 28, 2000
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, Chief Director; Senior Vice
Executive Officer and Vice President, Finance
Chairman of the Board (Principal Financial Officer)
(Principal Executive Officer) Date: March 28, 2000
Date: March 28, 2000
By: /s/ J. R. Bixby By: /s/ C. John Malacarne
J. R. Bixby C. John Malacarne
Director; Chairman of Director; Vice President,
the Board General Counsel and Secretary
Date: March 28, 2000 Date: March 28, 2000
By: /s/ W. E. Bixby, III By: /s/ Daryl D. Jensen
W. E. Bixby, III Daryl D. Jensen
Director Director
Date: March 28, 2000 Date: March 28, 2000
By: /s/ Jack D. Hayes By: /s/ Warren J. Hunzicker, M.D.
Jack D. Hayes Warren J. Hunzicker, M.D.
Director; Senior Vice Director
President, Marketing Date: March 28, 2000
Date: March 28, 2000
Schedule I
KANSAS CITY LIFE INSURANCE COMPANY
SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
December 31, 1999
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 $ 47,264 46,827 46,827
Mortgage-backed securities 299,933 301,975 301,975
States, municipalities and political
subdivisions 24,482 24,047 24,047
Public utilities 270,618 261,458 261,458
All other bonds 1,436,296 1,364,043 1,364,043
Redeemable preferred stocks 865 865 865
Total 2,079,458 1,999,215 1,999,215
Equity securities, available for sale:
Common stocks 47,580 47,441 47,441
Perpetual preferred stocks 74,791 68,527 68,527
Total 122,371 115,968 115,968
Fixed maturity securities,
held to maturity:
Bonds:
United States government and government
agencies and authorities 4,528 4,585 4,528
States, municipalities and political
subdivisions 1,548 1,602 1,548
Public utilities 18,101 18,799 18,101
All other bonds 83,429 82,584 83,429
Total 107,606 107,570 107,606
Mortgage loans on real estate, net 340,704 340,704
Real estate, net 42,011 42,011
Real estate joint ventures 37,336 37,336
Policy loans 118,521 118,521
Short-term 19,380 19,380
Total investments $2,867,387 2,780,741
Schedule II
KANSAS CITY LIFE INSURANCE COMPANY
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
December 31
1999 1998
(in thousands)
Assets
Investments:
Fixed maturity securities:
Available for sale, at fair value $1,516,472 1,614,849
Held to maturity, at amortized cost 64,608 68,354
Equity securities available for sale, at fair value:
Investments in affiliates 227,007 237,340
Other 89,376 72,314
Mortgage loans on real estate, net 262,380 254,987
Real estate, net 41,390 43,227
Real estate joint ventures 29,169 30,758
Policy loans 97,386 101,620
Short-term 12,956 36,235
Total investments 2,340,744 2,459,684
Deferred acquisition costs 116,696 102,850
Value of purchased insurance in force 63,429 68,557
Cash 18,537 10,138
Deferred income tax asset 14,717 -
Other 108,889 95,658
Separate account assets 259,899 143,008
Total assets $2,922,911 2,879,895
Liabilities and stockholders' equity
Future policy benefits $ 541,126 539,767
Accumulated contract values 1,355,404 1,397,507
Other 272,677 221,680
Separate account liabilities 259,899 143,008
Total liabilities 2,429,106 2,301,962
Stockholders' equity:
Common stock 23,121 23,121
Paid in capital 18,498 17,633
Accumulated other comprehensive income (loss) (59,095) 45,466
Retained earnings including $136,800,000 undis-
tributed earnings of affiliates ($122,535,000 - 1998) 614,278 581,074
Less treasury stock, at cost (102,997) (89,361)
Total stockholders' equity 493,805 577,933
Total liabilities and stockholders' equity $2,922,911 2,879,895
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
1999 1998 1997
(in thousands)
Revenues
Insurance revenues:
Premiums:
Life insurance $ 30,684 31,899 28,145
Accident and health 40,524 37,963 39,435
Contract charges 82,065 82,273 68,431
Investment revenues:
Investment income, net 153,348 151,401 147,776
Dividends from affiliates 0 100 150
Realized investment gains, net 1,208 9,198 13,175
Other 9,690 10,359 5,786
Total revenues 317,519 323,193 302,898
Benefits and expenses
Policy benefits:
Death benefits 60,372 58,929 51,762
Surrenders of life insurance 10,177 14,589 11,280
Other benefits 65,838 64,404 62,997
Increase in benefit and contract reserves 60,753 58,118 56,126
Amortization of deferred policy
acquisition costs 12,443 16,861 15,138
Insurance operating expenses 73,551 70,443 66,376
Management fees from affiliates (8,940) (5,923) (6,291)
Total benefits and expenses 274,194 277,421 257,388
Income before federal income taxes and
equity in undistributed net income
of affiliates 43,325 45,772 45,510
Federal income taxes 12,545 12,538 12,602
Income before equity in undistributed
net income of affiliates 30,780 33,234 32,908
Equity in undistributed net income
of affiliates 14,265 15,278 11,953
Net income $ 45,045 48,512 44,861
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
1999 1998 1997
(in thousands)
Net cash from operating activities $ 38,924 40,286 14,081
Investing activities
Investments called, matured or repaid 145,574 218,805 215,239
Decrease (increase) in short-term
investments, net 23,279 9,968 (35,291)
Investments sold 382,401 364,541 492,920
Investments purchased or originated (576,854) (620,514) (840,802)
Other 4,346 3,403 3,685
Acquisitions and dispositions of insur-
ance blocks - net cash received (paid) (5,162) (13,250) 213,092
Net cash from (used in)
investing activities (26,416) (37,047) 48,843
Financing activities
Proceeds from borrowings 89,950 - 245,050
Repayment of borrowings (25,950) - (245,050)
Policyowner contract deposits 105,018 126,743 119,639
Withdrawals of policyowner
contract deposits (148,515) (154,172) (127,341)
Cash dividends to stockholders (11,841) (11,153) (10,894)
Other (12,771) 962 278
Net cash used in financing activities (4,109) (37,620) (18,318)
Increase (decrease) in cash 8,399 (34,381) 44,606
Cash at beginning of year 10,138 44,519 (87)
Cash at end of year $ 18,537 10,138 44,519
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, 1999:
KCL - Individual $116,696 1,902,425 505 133,458
KCL - Group - 16,094 54 -
Sunset 49,606 380,615 124 10,611
Old American 70,068 253,849 405 7,468
Total $236,370 2,552,983 1,088 151,537
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
Insurance Accident and
Policy Operating Health Written
Benefits Expenses@ Premiums
(in thousands)
1999: @Allocations
KCL - Individual $162,336 47,828 362 of Insurance
KCL - Group 34,804 20,872 41,411 Operating
Sunset 30,242 10,867 27 Expenses are
Old American 53,790 18,351 2,085 based on a
Total $281,172 97,918 43,885 number of
assumptions
1998: and esti-
KCL - Individual $161,236 47,517 385 mates, and
KCL - Group 34,801 20,289 38,820 the results
Sunset 29,255 10,290 28 would change
Old American 58,048 17,372 4,354 if different
Total $283,340 95,468 43,587 methods were
applied.
1997:
KCL - Individual $145,561 43,794 402
KCL - Group 36,603 19,065 40,065
Sunset 29,756 10,896 31
Old American 61,258 16,994 5,419
Total $273,178 90,749 45,917
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
1999 1998 1997 1999 1998 1997
(in thousands)
Direct
KCL - Individual $ 29,725 26,836 25,105 413 440 467
KCL - Group 11,567 12,537 12,974 50,113 46,736 46,710
Sunset 5,491 5,656 5,049 29 31 34
Old American 81,022 83,555 85,363 6,168 6,815 7,811
Total $127,805 128,584 128,491 56,723 54,022 55,022
Ceded
KCL - Individual (13,811) (11,967) (11,528) (51) (55) (62)
KCL - Group (2,333) (2,181) (2,229) (9,951) (9,158) (7,680)
Sunset (5,879) (4,584) (3,642) (2) (3) (3)
Old American (7,232) (8,016) (8,863) (4,083) (2,365) (2,346)
Total (29,255) (26,748) (26,262) (14,087) (11,581) (10,091)
Assumed
KCL - Individual 5,536 6,674 3,822 - - -
KCL - Group - - - - - -
Sunset - - - - - -
Old American - - - - - -
Total 5,536 6,674 3,822 - - -
Net $104,086 108,510 106,051 42,636 42,441 44,931
% of Assumed to Net 5 6 4 - - -
Life Insurance in Force
1999 1998 1997
(in millions)
Direct
KCL - Individual $ 13,386 12,569 11,768
KCL - Group 3,351 3,823 4,278
Sunset 5,807 5,768 5,615
Old American 1,072 1,101 1,139
Total 23,616 23,261 22,800
Ceded
KCL - Individual (3,726) (2,832) (2,111)
KCL - Group (270) (256) (295)
Sunset (1,371) (1,274) (830)
Old American (116) (126) (139)
Total (5,483) (4,488) (3,375)
Assumed
KCL - Individual 3,131 3,380 3,796
KCL - Group - - -
Sunset - - -
Old American - - -
Total 3,131 3,380 3,796
Net $ 21,264 22,153 23,221
% of Assumed to Net 15 15 16
All other information required by this Schedule is shown in the accompanying
Reinsurance Note to the Consolidated Financial Statements.
Schedule V
KANSAS CITY LIFE INSURANCE COMPANY
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31
1999 1998 1997
(in thousands)
Real estate valuation account
Beginning of year $ 2,877 3,686 5,227
Deductions (1,358) (809) (1,541)
End of year $ 1,519 2,877 3,686
Mortgage loan valuation account
Beginning of year $ 8,500 8,500 8,500
Deductions (1,500) - -
End of year $ 7,000 8,500 8,500
Allowance for uncollectible accounts
Beginning of year $ 1,337 1,209 1,160
Additions 491 449 230
Deductions (273) (321) (181)
End of year $ 1,555 1,337 1,209
Exhibit 10 (b), Form 10-K
Kansas City Life
Insurance Company
TWENTY-THIRD AMENDMENT
KANSAS CITY LIFE INSURANCE COMPANY
SAVINGS AND PROFIT SHARING PLAN
THIS TWENTY-THIRD 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 John K. Koetting, Robert C. Miller and Anne C. Moberg,
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, with no duplica-tion of
credit for hours under Subparagraphs (a), (b) and (c). 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. With respect to periods described in
Subparagraph (c) below, crediting of back pay hours shall be subject to the
limitations set forth in that Subparagraph.
(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. No hour
shall be credited based on any payment under a plan maintained solely to
comply with applicable workers' compensation, unemployment compensation, or
disability insurance laws, or which solely reimburses an employee for
medical or medically-related expenses incurred by the employee. No more
than five hundred one (501) hours shall be credited under this Subparagraph
for any con-tinuous period during which the employee did not or would not
have performed duties. 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.
Aftera 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.
Aftera 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 Insurance
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 Years of Percentage
Employment Vested Employment Vested
1 0 5 60
2 0 6 80
3 30 7 100
4 40
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, or as otherwise provided in Section 401(a)(13) 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, retired participant or beneficiary.
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, and adjusted annually for increases in the
cost of living as permitted under Section 415(d) of the Internal
Revenue Code) 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.
15.32Affiliated 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).
15.36 Contribution Under Mistake of Fact. If a contribution is made by the
Company by a mistake of fact, such contribution may be returned to the
Company within one (1) year after the payment of the contribution. Any
contribution returned to the Company shall not include any investment
earnings thereon, but shall be net of any investment losses thereon.
15.37 Contributions Conditioned on Deductibility. Company contributions are
expressly conditioned upon deductibility of contributions under Section 404
of the Internal Revenue Code. If any part or all of a contribution is
disallowed as a deduction under Section 404, then to the extent a
contribution is disallowed as a deduction, it may be returned to the
Company within one (1) year after the later of the date of payment of the
contribution or the date the deduction for the contribution was disallowed.
Any con-tributions returned shall not include any investment earnings
thereon, but shall be net of any investment losses thereon.
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 contributions.
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-third
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
ELEVENTH AMENDMENT
KANSAS CITY LIFE
EMPLOYEE STOCK PLAN
THIS ELEVENTH 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
John K. Koetting, Robert C. Miller and Anne C. Moberg, 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, with no
duplication of credit for hours under Subparagraphs (a), (b) and (c).
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. With respect to periods described in Subparagraph (c)
below,crediting of back pay hours shall be subject to the limitations
set forth in that Subpara-graph.
(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. No hour shall be credited based
on any payment under a plan maintained solely to comply with
applicable workers' compensation, unemployment compensation, or
disability insurance laws, or which solely reimburses an employee for
medical or medically-related expenses incurred by the employee. No
more than five hundred one (501) hours shall be credited under this
Subparagraph for any continuous period during which the employee did
not or would not have performed duties. 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:
Priorto 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 and adjusted annually for increases in the cost of living as
permitted under Section 415(d) of the Internal Revenue Code) 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, or as otherwise provided
in Section 401(a)(13) 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.
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.
13.22Participants 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).
13.23 Contribution Under Mistake of Fact. If a contribution is made by the
Company by a mistake of fact, such contribution may be returned to the Company
within one (1) year after the payment of the contribution. Any contribution
returned to the Company shall not include any investment earnings thereon, but
shall be net of any investment losses thereon.
13.24 Contributions Conditioned on Deductibility. Company contributions are
expressly conditioned upon deductibility of contributions under Section 404 of
the Internal Revenue Code. If any part or all of a contribution is disallowed as
a deduction under Section 404, then to the extent a contribution is disallowed
as a deduction, it may be returned to the Company within one (1) year after the
later of the date of payment of the contribution or the date the deduction for
the contribution was disallowed. Any contributions returned shall not include
any investment earnings thereon, but shall be net of any investment losses
thereon.
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 Eleventh Amendment 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
SECOND 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, 1999.
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 in a form and at a time available pursuant to the
provisions of the Pension Plan. The election of the form of payment must be
filed with the Adminis-trative Committee at least six (6) months prior to the
payment being started or received, and once made, the election is irrevocable.
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. Partici-pants who are receiving monthly benefits on January 1, 1998
from this Plan are not eligible to elect a lump sum payment. A 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
To Our Stockholders
Management prepared the following 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
MANAGEMENT'S DISCUSSION and analysis of financial condition and results of
operations
Operating Results
Operating income per share climbed steadily over the past three years, from
$2.86 a share in 1997 to $3.32 in 1998 to $3.51 in 1999. However, 1997's
earnings were below trend due to less favorable mortality experience at the
affiliates and adverse claims experience in the home health care block of
business which was sold in 1998. Thus 1996's operating earnings of $3.26 a share
offers a more comparable base year. Net income per share varied over the three
year period as realized investment gains fluctuated. Net income per share rose
from $3.63 a share in 1997 to $3.92 in 1998 and then declined to $3.66 in 1999.
Return on equity averaged 9.05 percent over the three years while the pretax
operating profit margin averaged 11.9 percent.
Kansas City Life's performance is best analyzed by reviewing each of the
Company's operating segments. However, corporate-wide factors are discussed
first, namely, investments, operating expenses and income taxes.
Investment earnings increased 2 percent each of the past two years. Over this
period the net return on the investment portfolio declined slightly from 7.40
percent to 7.31 percent as yields lost through maturities, repayments and sales
exceeded those acquired through new investments. However, investment margins on
the interest sensitive products improved this year after narrowing significantly
in 1998. Rising interest rates in 1999 lowered the securities' market value thus
contributing to the substantial reduction in realized investment gains and a
significant unrealized loss on those securities valued at market in the
financial statements. Investments, on an amortized cost basis, grew 2 percent
each of the past two years. This year's net new investments, totaling $63.7
million, focused primarily on bonds. The new money available for investment was
provided by $69.5 million of borrowed funds. The average yield on new
investments equaled 7.86 percent, contrasted with 7.53 percent the previous
year. Approximately 90 percent of the securities portfolio is investment grade
compared to 96 percent in 1997. The Company has assumed added risk as management
seeks to improve yields while being adequately compensated for the additional
risk. Securities delinquencies and defaults represent just 0.3 percent of the
securities portfolio. The mortgage portfolio consists of loans on commercial
properties, largely industrial warehouses, dispersed throughout the nation,
except in the Northeast. A third of the properties are situated on the West
Coast. Currently 0.4 percent of the mortgage portfolio is in foreclosure,
slightly above the industry average. Restructured mortgage loans comprise 0.5
percent of the mortgage portfolio. Five properties acquired through foreclosure
were sold during the year for a $1.1 million gain, net of tax. The Company
currently holds five such properties valued at $4.7 million, the lower of cost
or net realizable value. The estimated fair value of the real estate and joint
venture investments currently exceed their carrying value by over $40 million.
Also refer to the analysis of market and interest rate risk later in this
discussion.
As chronicled in past reports, Kansas City Life improved efficiency considerably
over the past several years. This trend slowed during 1999 as home office
operating expenses rose 6 percent in the face of declining consolidated
statutory premiums, sales and overall insurance revenues. Expenses rose
primarily for two reasons. First, added costs were incurred, such as consulting,
moving and dual processing, in order to integrate Sunset Life's operations into
the home office. Second, considerable lump sum pension payments were incurred
due to closing Sunset's office and retirements in the home office. Expenses in
the coming year will benefit fully from the $2.0 to $3.0 million annual savings
generated by the Sunset integration effort. The Company plans to open a Federal
savings bank, Generations Bank, in mid-2000 in order to expand financial
services available to its policyholders and sales agents. Additionally, new
technologies will be developed to improve the management of customer
relationships and to facilitate cross-marketing of financial products. These new
endeavors are expected to enhance future revenue growth. Overall home office
expenses are anticipated to decline slightly in the coming year.
The effective income tax rate was essentially unchanged from 1997 to 1998. The
rate rose one percentage point to 29.7 percent in 1999 due to declining
affordable housing tax credits. The Company has $37.1 million invested in real
estate joint ventures generating such credits, which provide much of Kansas City
Life's rate reduction from the 35.0 percent Federal income tax rate.
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 life
insurance affiliates. Refer also to the Segment Information Note to the
Consolidated Financial Statements.
Kansas City Life - Individual
The Company's individual business includes variable, interest sensitive and
traditional products marketed through a general agency system. Universal life
and annuity products are offered in both the variable and interest sensitive
lines.
The segment's sales, in terms of new annualized premiums, increased 44 percent
to a record level in 1998 and then declined 3 percent in 1999. Despite the
decline, this year's sales remain double those of three years ago. Sales in the
segment have been increasingly dominated by variable products. Variable sales,
both universal life and annuity, nearly doubled in 1998 and rose 10 percent
further this year. Variable products increased from 47 percent of segment sales
in 1997 to 70 percent in 1999, and provided 41 percent of the segment's total
statutory premiums. The variable line has generated $260 million in assets thus
far, an 82 percent increase from a year ago. Sales of non-variable products,
principally universal life and flexible annuities, improved 3 percent in 1998
but declined 23 percent this year.
Total insurance revenues, including renewal receipts, rose 24 percent in 1998
and 1 percent in 1999. However, nearly half of 1998's growth was due to
comparing against a partial year's revenues for the acquired block in the
previous year. Life insurance in force increased 2 percent in 1998 and 4 percent
in 1999. This segment generated three-fourths of consolidated sales and 42
percent of consolidated insurance revenues this year.
Interest and mortality margins widened in the interest sensitive and variable
blocks of business this year. This improvement offset considerably more adverse
mortality and persistency in the block of life insurance acquired two years ago.
Benefits ratios in the traditional line deteriorated somewhat as well due to
less favorable mortality. Earnings in 1998 were impacted by narrowed investment
margins in the interest sensitive lines. This was offset by favorable mortality
experience in the acquired block of business and in the traditional line.
Surrenders, as a percent of cash values available to be surrendered, remained
largely constant over the three year period. Total benefits, including changes
in policy reserves, equaled 62 percent of operating revenues for each of the
three years.
Deferred acquisition cost assumptions were unlocked, or changed, this year
largely in recognition of improving mortality in the interest sensitive lines.
This reduced amortization $4.0 million, thus benefiting earnings.
Insurance operating expenses in the segment declined 3 percent in 1998 before
rising 2 percent this year. Over the past two years insurance revenues rose 25
percent while insurance operating expenses decreased 1 percent, generating
improved efficiencies.
Reflecting the factors above, operating earnings rose 13 percent and 10 percent
in 1998 and 1999, respectively. Kansas City Life's individual business generated
nearly three-quarters of consolidated operating income this year.
Kansas City Life - Group
Kansas City Life offers group life, disability and dental coverage and
administrative services only (ASO). New annualized group premiums and ASO fees
declined 10 percent in 1998 but rose 1 percent in 1999. This year's growth was
restrained by the discontinuation of the stop loss line as discussed below.
Total group insurance revenues, including renewal premiums and ASO fees,
declined 2 percent in 1998 but rose 1 percent in 1999. Dental premiums account
for 59 percent of group revenues while group life provides 16 percent, stop loss
10 percent and ASO 8 percent. Group provided one-fifth of consolidated insurance
revenues.
Claims ratios, after remaining unchanged in 1998, improved slightly in 1999
primarily due to the dental line. While the overall group claims ratio remains
historically high, two steps were taken this year to improve future profit
performance. First, all existing long-term disability business was reinsured
late in the year. Kansas City Life will continue to offer these products with
the business 80 percent reinsured and claims processed by the reinsurer. Second,
also late in the year, the stop loss line was discontinued. Where possible the
business will be placed with a new insurer over the course of 2000 with
placement fees accruing to Kansas City Life. The discontinuation negatively
impacted group sales, so a more representative view of group sales progress in
1999 should exclude stop loss. On this basis, group sales rose 12 percent. While
exiting the stop loss market will benefit earnings, group sales and revenue
comparisons next year will be difficult since the line represented 12 percent of
1999 group sales and 10 percent of its insurance revenues.
Group operating expenses increased 11 percent and 3 percent in 1998 and 1999,
respectively. The increase in 1998 largely reflected added ASO processing costs.
Profit margins expanded slightly this year after deteriorating in 1998. Although
the bottom line improved during 1999, group continued to generate an operating
loss. However, actions taken this year are expected to benefit future earnings.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Thousands, except per share data)
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Revenues:
Insurance $ 255 595 259 559 244 695 219 593 205 458
Investment income, net 202 003 197 302 193 064 186 601 187 981
Other 13 956 14 671 9 998 9 768 8 882
Operating revenues $ 471 554 471 532 447 757 415 962 402 321
Realized investment gains 2 860 11 426 14 505 3 013 4 950
$ 474 414 482 958 462 262 418 975 407 271
Operating income $ 43 186 41 085 35 433 40 357 38 521
Realized investment gains, net 1 859 7 427 9 428 1 958 3 217
Net income $ 45 045 48 512 44 861 42 315 41 738
Per common share:
Operating income $ 3.51 3.32 2.86 3.26 3.12
Realized investment gains, net .15 .60 .77 .16 .26
Net income $ 3.66 3.92 3.63 3.42 3.38
Cash dividends $ .960 .900 .880 .840 .815
Stockholders' equity:
As reported $ 40.86 46.58 42.84 37.40 37.00
Excluding unrealized
gains and losses 45.28 42.42 39.90 37.16 34.59
Assets $ 3 621 284 3 577 414 3 439 452 2 954 710 2 903 768
Net return on invested assets 7.31% 7.20 7.40 7.68 8.03
Life insurance in force $26 747 316 26 641 664 26 595 709 22 148 738 21 023 702
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.
Per share data has been adjusted for a two-for-one stock split in June 1999.
</TABLE>
Sunset Life
Sunset Life is primarily a marketer of interest sensitive products, consisting
of universal life and flexible annuities, to individuals through personal
producing general agents. Sunset's sales climbed 31 percent in 1998 due to
strong flexible annuity sales. However, this year's sales fell by half as the
marketing effort was disrupted by the integration project and the transition to
a new senior marketing officer. Sales are anticipated to improve in 2000 without
these disruptions. As would be expected with the decline in sales, total
insurance revenues declined 7 percent this year after rising 2 percent in 1998.
The segment provided one-tenth of consolidated insurance revenues.
Benefits as a percentage of operating revenues improved from 49.1 percent in
1997 to 48.2 percent last year. However, the ratio deteriorated this year to
50.1 percent due to less favorable mortality experience. Universal life
surrenders remained constant over the three years as a percent of accumulated
values available to be surrendered. Flexible annuity withdrawals, on this basis,
improved from 16.6 percent of accumulated values last year to 13.7 percent this
year.
As mentioned previously, Sunset's operations were successfully integrated into
Kansas City Life's home office this year and the targeted expense reductions
were achieved. However, the requisite duplication of staff in Kansas City and
Olympia for a few months, moving costs, training and added consulting costs
associated with the integration effort caused Sunset's expenses to rise during
the first nine months of the year. Operating expenses rose 10 percent for the
year, but fell 4 percent in the fourth quarter after the integration was largely
complete. Sunset's 2000 earnings will benefit from a full year's expense
reduction from the integration effort. Additionally, Sunset's home office
building in Olympia was sold for a $1.3 million pretax profit.
Thus decreased operating revenues and narrowed profit margins caused Sunset's
operating income to decline 10 percent this year. The opposite results caused
last year's operating income to rise 8 percent. It is anticipated that improved
sales and revenues in 2000, combined with a full year of expense savings, will
increase the segment's profitability. As it was, Sunset provided 19 percent of
consolidated operating income.
Old American
Old American offers whole life final expense coverage in the senior market
through a general agency sales force. Integral to its marketing approach, the
Company seeks to generate reasonably priced, productive sales leads for its
agents. Sales, in terms of annualized premiums, declined 23 percent in 1998.
More rigorous underwriting procedures initiated last year dampened sales but
should improve earnings as an ever greater portion of the insurance in force
benefits from these improved underwriting procedures. Sales were little changed
this year. In order to rejuvenate its marketing results, the Company strove to
enhance its lead generation capability, lower its cost per lead and expand the
sales force. The segment's insurance revenues declined 5 percent this year and 2
percent last year. Old American accounts for one-fourth of consolidated
insurance revenues.
Operating expenses declined in 1998 but rose 7 percent in 1999. However,
operating expenses remain below expense goals established when the Company was
purchased. Old American's administrative systems are fully integrated with those
of Kansas City Life and Sunset Life in order to maximize economies of scale. The
Companies also share staff functions in order to spread overhead over as large a
book of business as possible.
Old American's operating earnings improved 75 percent last year since the prior
year's results were depressed by adverse claims experience, particularly in the
home health care block which was sold during 1998. As a result of the sale,
improved earnings in the accident and health line in 1999 caused a 4 percent
increase in Old American's operating earnings. The segment generated one-eighth
of this year's consolidated operating income.
Market and Interest Rate Risk Analysis
The Kansas City Life Corporate Group holds a diversified portfolio of
investments which includes cash, bonds, preferred stocks, mortgage-backed
securities, commercial mortgages and real estate. Each of these investments is
subject, in varying degree, to market risks which can affect its ability to earn
a competitive return, which, in turn, affects its fair value. The majority of
these assets are debt instruments and are considered fixed income investments.
Thus the primary market risk affecting the Company is interest rate risk.
Generally the coupon or dividend income represents the greatest portion of fixed
income instruments' overall total return. When interest rates fall, as they have
for most of the past decade, the coupon and dividend streams of older,
higher-paying investments become relatively more valuable than newer,
lower-yielding opportunities. Thus the market value of the older, higher-paying
investments increases. The opposite effect occurs when interest rates rise. The
market value of such investments varies inversely to market interest rates.
As interest rates fell in 1998, the Kansas City Life's investments increased in
value, and the securities' market value exceeded their book value by $91.7
million. In 1999 the Federal Reserve Open Market Committee began raising
interest rates to reduce the risks of increasing inflation, thus pushing all
interest rates higher and reducing the value of bonds. At year end the book
value of our securities exceeded market value by $86.7 million, a reversal from
the previous year end.
Due to the complex nature of interest rate movements and their uneven effects on
the value of fixed income investments, the Company uses sophisticated computer
programs to help predict changes in the value of the portfolio. Assuming that
changes occur equally over the entire term structure of interest rates (the
"yield curve"), it is estimated that a one percent (or 100 basis point) change
in rates would translate to a $97.0 million ($70.2 million - 1998) change in
market value for the $2.3 billion securities portfolio. Most financial market
professionals quantify this relationship with the term duration, a mathematical
measurement of the sensitivity of investment cash flow to small changes in
market rates. Additionally, the larger potential gain compared to the potential
loss indicates the portfolio has positive convexity, a term which applies to the
skew in the securities' value changes.
Market changes rarely follow a linear pattern in one direction for any length of
time. Within any diversified portfolio, an investor will likely find embedded
options, puts and calls, that change the structure of the cash flow stream.
Mortgage-backed securities are particularly sensitive to interest rate changes.
As long-term interest rates fall, homeowners become more likely to refinance
their mortgages or move up to a larger home, causing a prepayment of the
outstanding mortgage principal which must then be reinvested at a lower rate.
Should interest rates rise suddenly, prepayments expected by investors may
cease, extending the maturity of a mortgage pool by many years. This represents
a further interest rate risk to investors.
Kansas City Life currently owns $66 million of foreign bonds, all denominated in
dollars, and consequently is not exposed to any direct foreign currency risk.
The Company has an indirect exposure to exchange markets to the extent that the
issuers of these securities can obtain dollars to fully fund their obligations.
The Company has no material foreign exposure in its mortgage or real estate
holdings.
Kansas City Life manages its investments under the constraints imposed by an
Asset/Liability Management (ALM) program. The firm's obligation to
policyholders, mainly represented by the anticipated cash flows paid out under
insurance and annuity contracts, dictates the nature and construction of the
portfolio. The ALM program attempts to balance the investment opportunities
available in the market place with future cash obligations while optimizing
policyholder returns.
As interest rates rise, policyholders become more likely to surrender policies
or to borrow against the cash value in order to meet cash needs in an
inflationary environment or to invest in higher yielding opportunities. This
disintermediation may force liquidation of parts of the portfolio at a time when
the market value of the fixed income investments is falling. Due to the strength
of the Company's cash flow, it can adapt to small sudden changes in interest
rates and large changes over longer periods of time. Extreme sudden market
volatility, however, poses the greatest risk to the Company. Kansas City Life
quantifies and mitigates this risk under ALM. The Company also maintains a
number of credit lines with the capacity to borrow funds for added liquidity.
The Company may hedge this risk with the purchase or sale of certain derivative
contracts, mainly in the form of caps, floors, swaps or swaptions. These
contracts work mainly as volatility insurance, to provide value in periods of
extreme interest rate movement. Thus their value is largely a function of the
likelihood of a rapid, dramatic market change. Kansas City Life conducts
numerous probability-based computer simulations to test the effect on our
profitability of these market shifts, and to determine the value of derivative
hedging. To date, the Company has not used derivatives due to a number of
factors including pricing, liquidity, and the net value to the Company's
business position. As a policy, the Company will never engage in the trading of
such instruments for speculative purposes, and will only enter into derivative
markets to hedge a specific, identifiable risk for a specific period of time
under specific conditions.
EXPECTED CASH FLOWS
There- Total Fair
2000 2001 2002 2003 2004 after Principal Value
(dollars in millions)
Corporate bonds currently
callable $15 38 49 40 12 79 233 230
Average interest rate 9.38% 10.69 12.16 11.11 10.67 9.14 10.46
Mortgage backed securities
and CMO's - - 1 2 1 328 332 324
Average interest rate -% - 7.03 7.11 7.29 6.99 7.00
All other securities 78 75 84 198 102 1 113 1 650 1 645
Average interest rate 8.66% 9.37 7.49 7.52 8.03 8.08 8.06
Total $93 113 134 240 115 1 520 2 215 2 199
. The table shows expected cashflows from principal repayments of bonds in the
form of maturities, calls, sinking funds and prepayments
Changes in Reporting Regulations
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and for Hedging Activities," provides comprehensive, consistent standards for
the recognition and measurement of derivative and hedging activities. The
standard is effective January 1, 2001, and is being evaluated for its effect on
Kansas City Life and to ensure its implementation in a timely manner. It is
currently anticipated that the guideline will not have a significant impact on
the Company's reported results.
The National Association of Insurance Commissioners (NAIC) has issued a
comprehensive new guide to statutory accounting principles for the life
insurance industry which will be effective January 1, 2001. These revised
guidelines have generally been referred to as "codification." Each state must
ratify these guidelines. Missouri, the Company's state of domicile, has not yet
adopted codification, but it is anticipated that it will. While such guidelines
do not impact stockholder reporting, which is based on generally accepted
accounting principles (GAAP), they govern accounting practice and procedures
required for reporting to state regulators. Assuming Missouri adopts
codification, Kansas City Life will implement the guidelines as required and, it
is believed, with little impact to statutory surplus.
Y2K Postmortem
Kansas City Life's Y2K efforts were successful and it is estimated that the
incremental cost of the Company's compliance effort was $1.0 million. While this
effort obviously was necessary to allow Kansas City Life to continue to function
effectively in 2000 and beyond, it also benefited the Company by upgrading
systems and better standardizing administrative systems throughout the
organization.
Liquidity and Capital Resources
Life insurers function as generators of investment capital for our economy.
Given this role, liquidity is generally of little concern, as was the case the
past three years. The Company generated, on average, $36.8 million annually in
funds from operations, net of receipts and withdrawals of contract deposits. In
1999 this source of funds equaled $29.6 million. Redemptions, sales and
maturities of investments averaged $751.4 million each year. Kansas City Life
invested an average of $855.2 million a year in the form of securities,
commercial mortgages and real estate ventures.
The above information excludes proceeds from variable products which were
invested in various mutual funds assigned to separate accounts and segregated
from the general investments. Such funds totaled $260 million this year end.
The Company borrowed $69.5 million during 1999 to support investment strategies.
No borrowing was required for operating needs. Forward investment commitments
are minor. Cash flow testing and matching of assets and liabilities are
performed regularly to ensure future cash flows meet the level and timing of
future cash obligations.
Kansas City Life's statutory equity exceeds the minimum capital deemed to be
required to support its book of business, as determined by the risk based
capital calculations and guidelines established by the NAIC.
Book value per share, excluding unrealized gains and losses, equaled $45.28 at
this year end and averaged 7 percent annual growth over the three years. In
January 2000, the Board of Directors raised the dividend to an indicated annual
rate of $1.00 a share, a $.04 a share increase. The Board also extended the
stock repurchase program through 2000. An additional one million shares may be
purchased, which would represent 8 percent of the shares outstanding. Under this
program in 1999 the Company purchased 260,500 of its shares for $10.2 million.
CONSOLIDATED INCOME STATEMENT
(Thousands, except per share data)
1999 1998 1997
REVENUES
Insurance revenues:
Premiums:
Life insurance $104 086 108 510 106 051
Accident and health 42 636 42 441 44 931
Contract charges 108 873 108 608 93 713
Investment revenues:
Investment income, net 202 003 197 302 193 064
Realized investment gains, net 2 860 11 426 14 505
Other 13 956 14 671 9 998
TOTAL REVENUES 474 414 482 958 462 262
BENEFITS AND EXPENSES
Policy benefits:
Death benefits 110 672 107 355 100 037
Surrenders of life insurance 14 592 19 368 14 999
Other benefits 70 702 72 190 71 338
Increase in benefit and contract reserves 85 206 84 427 86 804
Amortization of deferred acquisition costs 31 261 36 201 35 712
Insurance operating expenses 97 918 95 468 90 749
TOTAL BENEFITS AND EXPENSES 410 351 415 009 399 639
Income before Federal income taxes 64 063 67 949 62 623
Federal income taxes:
Current 21 172 20 471 15 073
Deferred (2 154) (1 034) 2 689
19 018 19 437 17 762
NET INCOME $ 45 045 48 512 44 861
Basic and diluted earnings per share $3.66 3.92 3.63
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEET
1999 1998
ASSETS
Investments:
Fixed maturities:
Available for sale, at fair value (amortized
cost $2,079,458,000; $2,012,975,000 - 1998) $1 999 215 2 094 362
Held to maturity, at amortized cost
(fair value $107,570,000; $123,515,000 - 1998) 107 606 115 504
Equity securities available for sale, at fair value
(cost $122,371,000; $98,509,000 - 1998) 115 968 100 749
Mortgage loans on real estate, net 340 704 315 705
Real estate, net 42 011 43 840
Real estate joint ventures 37 336 39 388
Policy loans 118 521 122 860
Short-term 19 380 59 160
TOTAL INVESTMENTS 2 780 741 2 891 568
Cash 22 355 16 763
Accrued investment income 43 907 42 515
Receivables, net 15 823 12 997
Property and equipment, net 22 010 22 436
Deferred acquisition costs 236 370 218 957
Value of purchased insurance in force 95 636 104 331
Reinsurance assets 123 724 117 772
Deferred income tax asset 14 716 -
Other 6 103 7 067
Separate account assets 259 899 143 008
$3 621 284 3 577 414
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits:
Life insurance $ 782 341 774 701
Accident and health 47 215 47 641
Accumulated contract values 1 688 706 1 731 262
Policy and contract claims 34 721 34 347
Other policyholders' funds:
Dividend and coupon accumulations 61 740 62 726
Other 90 885 75 033
Notes payable 69 500 -
Income taxes:
Current 7 870 4 582
Deferred - 43 739
Other 84 602 82 442
Separate account liabilities 259 899 143 008
TOTAL LIABILITIES 3 127 479 2 999 481
Stockholders' equity:
Common stock, par value $1.25 per share
Authorized 36,000,000 shares,
issued 18,496,680 shares 23 121 23 121
Paid in capital 18 498 17 633
Retained earnings 614 278 581 074
Accumulated other comprehensive income (loss) (59 095) 45 466
Less treasury stock, at cost
(6,411,738 shares; 6,087,894 shares - 1998) (102 997) (89 361)
TOTAL STOCKHOLDERS EQUITY 493 805 577 933
$3 621 284 3 577 414
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF STOCKHOLDERS'EQUITY
1999 1998 1997
COMMON STOCK, beginning and end of year $ 23 121 23 121 23 121
PAID IN CAPITAL:
Beginning of year 17 633 16 256 14 761
Excess of proceeds over cost of treasury stock sold 865 1 377 1 495
End of year 18 498 17 633 16 256
RETAINED EARNINGS:
Beginning of year 581 074 543 715 509 748
Net income 45 045 48 512 44 861
Other comprehensive income:
Unrealized gains (losses) on securities (104 921) 15 094 33 485
Decrease (increase) in unfunded pension liability 360 (6 076) -
Comprehensive income (loss) (59 516) 57 530 78 346
Transfer other comprehensive (income) loss to
accumulated other comprehensive income 104 561 (9 018) (33 485)
Stockholder dividends of $.96 per share
($.90 - 1998 and $.88 - 1997) (11 841) (11 153) (10 894)
End of year 614 278 581 074 543 715
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Beginning of year 45 466 36 448 2 963
Other comprehensive income (loss) (104 561) 9 018 33 485
End of year (59 095) 45 466 36 448
TREASURY STOCK, at cost:
Beginning of year (89 361) (88 946) (87 729)
Cost of 349,087 shares acquired (24,640
shares - 1998 and 40,180 shares - 1997) (14 094) (1 063) (1 440)
Cost of 32,243 shares sold (47,296
shares - 1998 and 47,372 shares - 1997) 458 648 223
End of year (102 997) (89 361) (88 946)
TOTAL STOCKHOLDERS' EQUITY $493 805 577 933 530 594
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
1999 1998 1997
OPERATING ACTIVITIES
Net income $ 45 045 48 512 44 861
Adjustments to reconcile net income to
net cash from operating activities:
Amortization of investment premium
(discount), net 2 061 2 398 (1 290)
Depreciation 5 265 5 153 5 379
Policy acquisition costs capitalized (39 553) (46 011) (42 170)
Amortization of deferred acquisition costs 31 261 36 201 35 712
Realized investment gains (2 860) (11 426) (14 505)
Changes in assets and liabilities:
Future policy benefits 12 375 25 855 16 227
Accumulated contract values (10 182) (12 264) (9 933)
Other policy liabilities 14 867 6 842 7 137
Income taxes payable and deferred (14 748) (11 399) 4 768
Other, net 18 449 (718) (3 685)
NET CASH PROVIDED 61 980 43 143 42 501
INVESTING ACTIVITIES
Purchases of investments:
Fixed maturities available for sale (654 943) (644 087) (855 980)
Fixed maturities held to maturity (3 354) - -
Equity securities available for sale (43 130) (28 047) (69 434)
Sales of fixed maturities available for sale 406 785 372 930 503 351
Maturities and principal paydowns
of security investments:
Fixed maturities available for sale 173 990 216 247 163 867
Fixed maturities held to maturity 10 913 30 453 106 188
Equity securities available for sale 22 644 28 043 31 473
Purchases of other investments (36 300) (78 298) (152 045)
Sales, maturities and principal
paydowns of other investments 59 655 60 500 67 295
Acquisitions and dispositions of insurance
blocks - net cash received (paid) (5 162) (13 250) 213 092
NET CASH PROVIDED (USED) (68 902) (55 509) 7 807
FINANCING ACTIVITIES
Proceeds from borrowings 95 850 1 100 245 050
Repayment of borrowings (26 350) (1 100) (245 050)
Policyowner contract deposits 148 993 175 421 169 699
Withdrawals of policyowner contract deposits (181 367) (187 028) (163 041)
Cash dividends to stockholders (11 841) (11 153) (10 894)
Disposition (acquisition) of treasury stock, net (12 771) 962 278
NET CASH PROVIDED (USED) 12 514 (21 798) (3 958)
Increase (decrease) in cash 5 592 (34 164) 46 350
Cash at beginning of year 16 763 50 927 4 577
CASH AT END OF YEAR $ 22 355 16 763 50 927
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 domicled 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 accounting principles generally accepted in the United States (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 7.00 to 5.00 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 6.50 percent (3.85
percent to 7.25 percent during 1998 and 4.75 percent to 6.50 percent during
1997).
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 interest sensitive and variable products
are amortized over a period not exceeding 30 years in proportion to estimated
gross profits arising from interest spreads and charges for mortality, expenses
and surrenders that are expected to be realized over the term of the contracts.
The amortization is adjusted retrospectively when estimates of current or future
gross profits to be realized from a block of business are revised.
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 block of life insurance
business, is being amortized in proportion to projected future premium revenues
or gross profits. Such amortization is included in insurance operating expenses.
If these projections should change, the amortization is adjusted prospectively.
This asset was increased $76,533,000 in 1997 for the acquisition of a life
insurance block of business and $9,313,000 ($9,609,000 - 1998 and $8,856,000 -
1997) for accrual of interest and reduced $18,008,000 ($17,194,000 - 1998 and
$14,962,000 - 1997) for amortization. The increase for accrual of interest for
the life insurance subsidiary was calculated using a 13.0 percent interest rate
for the life block and a 7.0 percent rate for the accident and health block 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. Total
accumulated accrual of interest and amortization equal $54,419,000 and
$81,615,000, respectively. Based upon current conditions and assumptions as to
future events, the Company expects that the amortization will be between 6 and 8
percent of the asset's current carrying amount in each of the next five years.
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 12 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 12,316,220 shares (12,394,104 shares -
1998 and 12,381,586 shares - 1997).
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.
1999 1998 1997
Net gain (loss) from operations
for the year $ 41 902 35 185 (21 214)
Net income (loss) for the year 42 012 36 152 (18 681)
Unassigned surplus
at December 31 281 254 257 853 246 717
Stockholders' equity
at December 31 219 875 209 246 197 147
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 2000 without prior approval is $41,902,000.
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
$21,000,000 ($18,000,000 - 1998 and $36,000,000 - 1997).
Comprehensive Income
Comprehensive income is comprised of net income and other comprehensive income
which includes unrealized gains or losses on securities available for sale and
unfunded pension liabilities as shown below.
Unrealized Unfunded
Gain (Loss) Pension
on Securities Liability Total
1999:
Unrealized holding losses
arising during the year $(172 801) (172 801)
Less: Realized losses included
in net income (2 527) (2 527)
Net unrealized losses (170 274) (170 274)
Decrease in unfunded
pension liability - 554 554
Effect on deferred
acquisition costs 8 858 8 858
Deferred income taxes 56 495 (194) 56 301
Other comprehensive income $(104 921) 360 (104 561)
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
The accumulated balances related to each component of accumulated other
comprehensive income follow.
Change in
Unrealized Unfunded
Gain (Loss) Pension
on Securities Liability Total
End of 1997 $ 36 448 - 36 448
Other comprehensive income
(loss) for 1998 15 094 (6 076) 9 018
End of 1998 51 542 (6 076) 45 466
Other comprehensive income
(loss) for 1999 (104 921) 360 (104 561)
End of 1999 $ (53 379) (5 716) (59 095)
REINSURANCE
1999 1998 1997
Life insurance in force (in millions):
Direct $ 23 616 23 261 22 800
Ceded (5 483) (4 488) (3 375)
Assumed 3 131 3 380 3 796
Net $ 21 264 22 153 23 221
Premiums:
Life insurance:
Direct $127 805 128 584 128 491
Ceded (29 255) (26 748) (26 262)
Assumed 5 536 6 674 3 822
Net $104 086 108 510 106 051
Accident and health:
Direct $ 56 723 54 022 55 022
Ceded (14 087) (11 581) (10 091)
Assumed - - -
Net $ 42 636 42 441 44 931
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 $49,687,000 ($57,048,000 - 1998 and
$39,483,000 - 1997).
Old American has two coinsurance agreements. One agreement reinsures certain
whole life policies issued by Old American prior to December 1, 1986. These
policies had a face value of $114,062,000 as of this year end. The reserve for
future policy benefits ceded under this agreement was $46,741,000 ($49,041,000 -
1998). The second agreement ceded $10.4 million of home health care reserves in
October 1998.
In 1997, Kansas City Life acquired a block of traditional life and universal
life-type products. As of this year end, the block had $3.1 billion of life
insurance in force ($3.4 billion - 1998). The block generated life insurance
premiums of $5,788,000 ($6,656,000 - 1998). Additionally, in November 1999, the
Company ceded its group long-term disability reserves, totaling $5.2 million.
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.
PROPERTY AND EQUIPMENT
1999 1998
Land $ 766 1 029
Home office complex 21 404 22 995
Furniture and equipment 32 258 30 238
54 428 54 262
Less accumulated depreciation (32 418) (31 826)
$22 010 22 436
Property and equipment are stated at cost and depreciated using the
straight-line method. The home office is depreciated over 25 to 50 years and
furniture and equipment over 3 to 10 years, their estimated useful lives.
NOTES PAYABLE
1999 1998
Federal Home Loan Bank loan with
various maturities and a weighted
average variable interest rate,
currently 5.62 percent, secured
by specified securities $55 000 -
Commerce Bank unsecured revolving
credit loan agreement providing a
$20,000,000 line of credit with a
variable interest rate, currently
4.755 percent 2 500 -
UMB Bank unsecured revolving credit
loan agreements providing a
$40,000,000 line of credit with a
variable interest rate, currently
4.95 percent 12 000 -
$69 500 -
As a member of the Federal Home Loan Bank with a capital investment of
$23,400,000, the Company has the ability to borrow up to $55,000,000 from the
bank. The Company earns 6.35 percent on the capital investment in the bank. All
borrowing is used to enhance investment strategies. Interest paid on all
borrowings equaled $1,135,000 ($717,000 - 1998 and $515,000 - 1997).
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.
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Investments:
Securities available
for sale $2 115 183 2 115 183 2 195 111 2 195 111
Securities held
to maturity 107 606 107 570 115 504 123 515
Mortgage loans 340 704 328 973 315 705 332 419
Liabilities:
Individual and
group annuities $743 438 724 908 793 068 767 537
Supplementary
contracts without
life contingencies 21 216 21 216 21 899 21 899
The following Investments Note provides further details regarding the
investments above.
INVESTMENTS
Investment Revenues
Major categories of investment revenues are summarized as follows.
1999 1998 1997
Investment income:
Fixed maturities $157 766 154 213 154 393
Equity securities 9 378 6 583 7 288
Mortgage loans 27 608 26 024 23 984
Real estate 9 907 9 587 10 350
Policy loans 7 959 8 098 7 296
Short-term 3 639 4 832 3 612
Other 3 709 3 948 3 132
219 966 213 285 210 055
Less investment expenses (17 963) (15 983) (16 991)
$202 003 197 302 193 064
Realized gains (losses):
Fixed maturities $ (2 714) 8 052 4 778
Equity securities 126 1 360 3 702
Mortgage loans 1 500 - -
Real estate 3 684 2 014 6 025
Other 264 - -
$ 2 860 11 426 14 505
Unrealized Gains and Losses
Unrealized gains (losses) on the Company's securities
follow.
1999 1998 1997
Available for sale:
End of year $ (86 647) 83 627 59 726
Effect on deferred
acquisition costs 4 526 (4 332) (3 652)
Deferred income taxes 28 742 (27 753) (19 626)
$ (53 379) 51 542 36 448
Increase (decrease) in
net unrealized gains
during the year:
Fixed maturities $ (99 595) 18 701 33 209
Equity securities (5 326) (3 607) 276
$(104 921) 15 094 33 485
Held to maturity:
End of year $ (36) 8 011 5 834
Increase (decrease) in
net unrealized gains
during the year $ (8 047) 2 177 (1 775)
Securities
The amortized cost and fair value of investments in securities at this year end
follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
Bonds:
U.S.government $ 47 264 170 607 46 827
Public utility 270 618 1 938 11 098 261 458
Corporate 1 405 241 7 119 78 468 1 333 892
Mortgage-backed 299 933 5 522 3 480 301 975
Other 55 537 217 1 556 54 198
Redeemable
preferred stocks 865 12 12 865
Fixed maturities 2 079 458 14 978 95 221 1 999 215
Equity securities 122 371 1 916 8 319 115 968
$2 201 829 16 894 103 540 2 115 183
Bonds held to maturity:
Public utility $ 18 101 743 45 18 799
Corporate 83 429 1 282 2 127 82 584
Other 6 076 117 6 6 187
107 606 2 142 2 178 107 570
$2 309 435 19 036 105 718 2 222 753
The amortized cost and fair value of investments in securities at last year end
follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
Bonds:
U.S. government $ 45 079 1 747 381 46 445
Public utility 294 016 15 850 1 946 307 920
Corporate 1 321 368 66 176 13 151 1 374 393
Mortgage-backed 278 657 10 942 618 288 981
Other 70 224 3 216 441 72 999
Redeemable
preferred stocks 3 631 121 128 3 624
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
Bonds held to maturity:
Public utility $ 25 325 1 934 7 27 252
Corporate 87 302 6 267 511 93 058
Other 2 877 328 - 3 205
115 504 8 529 518 123 515
$2 226 988 112 765 21 127 2 318 626
The Company does not hold any non-income producing fixed maturity securities.
The distribution of the fixed maturity securities' contractual maturities at
this year end 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 $ 54 611 53 865
Due after one year through five years 439 949 426 273
Due after five years through ten years 516 096 497 165
Due after ten years 768 869 719 937
Mortgage-backed bonds 299 933 301 975
$2 079 458 1 999 215
Held to maturity:
Due in one year or less $ 13 053 13 143
Due after one year through five years 41 025 42 071
Due after five years through ten years 44 057 42 584
Due after ten years 9 471 9 772
$ 107 606 107 570
Sales of investments in securities available for sale, excluding normal
maturities and calls, follow.
1999 1998 1997
Proceeds $428 425 422 241 509 502
Gross realized gains 9 455 12 512 11 597
Gross realized losses 10 371 5 234 2 349
The Company does not hold securities of any corporation and its affiliates which
exceeded 10 percent of stockholders' equity.
No derivative financial instruments are employed.
Mortgage Loans
The Company holds non-income producing mortgage loans equaling $1,528,000
($1,004,000 - 1998). Mortgage loans are carried net of a valuation reserve of
$7,000,000 ($8,500,000 - 1998).
The mortgage portfolio is diversified geographically and by property type as
follows.
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Geographic region:
East north central $ 29 470 28 250 31 068 32 373
Mountain 69 522 67 325 67 530 71 397
Pacific 123 581 119 375 106 982 112 461
West south central 30 708 30 071 33 044 34 813
West north central 71 030 68 703 69 594 73 157
Other 23 393 22 249 15 987 16 718
Valuation reserve (7 000) (7 000) (8 500) (8 500)
$340 704 328 973 315 705 332 419
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Property type:
Industrial $229 103 221 036 209 752 220 474
Retail 19 510 19 515 22 847 24 301
Office 81 540 78 310 74 633 78 291
Other 17 551 17 112 16 973 17 853
Valuation reserve (7 000) (7 000) (8 500) (8 500)
$340 704 328 973 315 705 332 419
The Company has commitments which expire in 2000 to originate mortgage loans of
$3,440,000.
No mortgage loans were foreclosed upon and transferred to real estate
investments during the year ($1,181,000 - 1998 and $3,189,000 - 1997).
No mortgage loans were acquired in the sale of real estate assets during the
year ($2,025,000 - 1998 and $4,299,000 - 1997).
Real Estate
Detail concerning the Company's real estate investments follows.
1999 1998
Penntower office building, at cost:
Land $ 1 106 1 106
Building 18 582 18 244
Less accumulated depreciation (10 881) (10 340)
Foreclosed real estate, at lower of
cost or net realizable value 4 655 10 946
Other investment properties, at cost:
Land 6 110 4 493
Buildings 36 710 32 848
Less accumulated depreciation (14 271) (13 457)
$ 42 011 43 840
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 $1,519,000 ($2,877,000 - 1998) to reflect net
realizable value.
The Company held non-income producing real estate equaling $3,483,000
($6,099,000 - 1998).
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. 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. 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 closure of
Sunset Life's office in 1999 and significant retirements at Kansas City Life
resulted in the recognition of settlement and curtailment costs of $3,562,000.
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 due 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 the right outline the plans'
funded status and their impact on the Company's financial statements.
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 $143,000 ($134,000 - 1998 and $133,000 - 1997). A non-contributory deferred
compensation plan for eligible agents based upon earned first-year commissions
is also offered. Contributions to this plan were $609,000 ($724,000 - 1998 and
$265,000 - 1997).
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 $1,468,000 ($1,485,000 - 1998
and $2,102,000 - 1997). 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 or 1999.
A non-contributory trusteed employee stock ownership plan covers substantially
all salaried employees. The Company has made no contributions to this plan since
1992.
Pension Benefits Other Benefits
1999 1998 1999 1998
Accumulated benefit obligation $ 88 405 107 488 - -
Change in plan assets:
Fair value of plan assets
at beginning of year $102 869 95 899 1 614 1 634
Return on plan assets 934 10 988 82 86
Company contributions 2 400 3 000 - -
Benefits paid (20 963) (7 018) (293) (106)
Fair value of plan assets
at end of year $ 85 240 102 869 1 403 1 614
Change in projected benefit obligation:
Benefit obligation
at beginning of year $110 547 119 651 18 808 15 485
Service cost 2 760 2 746 626 615
Interest cost 7 673 7 650 1 200 1 193
Plan amendments - (10 038) - -
Curtailment 469 - (1 043) -
Settlement 5 375 - - -
Net (gain) loss from past experience (3 921) 637 (2 008) 1 991
Benefits paid (24 552) (10 099) (641) (476)
Benefit obligation
at end of year $ 98 351 110 547 16 942 18 808
Plan underfunding $(13 111) (7 678) (15 539) (17 194)
Unrecognized net loss 26 404 22 488 557 3 653
Unrecognized prior service cost (7 147) (9 257) - -
Unrecognized net transition asset (517) (824) - -
Prepaid (accrued) benefit cost $ 5 629 4 729 (14 982) (13 541)
Amounts recognized in the
consolidated balance sheet:
Accrued benefit liability $ (3 165) (4 619) (14 982) (13 541)
Accumulated other
comprehensive income 8 794 9 348 - -
Net amount recognized $ 5 629 4 729 (14 982) (13 541)
Weighted average assumptions:
Discount rate 7.75 % 7.00 7.75 7.00
Expected return on plan assets 8.75 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 $ 367 (301)
Postretirement benefit obligation 2 845 (2 429)
The components of the net periodic benefits cost follow.
Pension Benefits Other Benefits
1999 1998 1997 1999 1998 1997
Service cost $ 2 760 2 746 3 150 626 615 560
Interest cost 7 673 7 650 7 823 1 200 1 194 1 014
Expected return on plan assets (9 067) (8 539) (7 776) (88) (90) (85)
Amortization of:
Unrecognized net (gain) loss 1 014 1 152 582 52 76 (5)
Unrecognized prior service cost (647) (769) 2 - - -
Unrecognized net transition asset (206) (206) (206) - - -
Net periodic benefits cost $ 1 527 2 034 3 575 1 790 1 795 1 484
For measurement purposes, a 10 percent annual increase in the per capita cost of
covered health care benefits was assumed to decrease gradually to 6 percent in
2004.
SEGMENT INFORMATION
Kansas City Life Sunset Old
Individual Group Life American Total
1999:
Revenues from external customers $ 113 399 53 311 26 750 76 091 269 551
Investment revenues 152 338 1 083 33 617 14 965 202 003
Segment income (loss) 30 622 (898) 8 049 5 413 43 186
Other significant noncash items:
Increase in policy reserves 60 072 681 16 411 8 042 85 206
Amortization of deferred
acquisition costs 12 443 - 7 765 11 053 31 261
Amortization of the value of
purchased insurance in force 5 128 - - 3 567 8 695
Interest expense 1 148 - - - 1 148
Income tax expense 12 931 (385) 3 898 2 574 19 018
Segment assets 2 679 521 16 107 528 708 396 948 3 621 284
Expenditures for other
long-lived assets 3 742 214 3 298 4 257
1998:
Revenues from external customers $ 112 898 52 537 28 794 80 001 274 230
Investment revenues 150 328 1 146 31 878 13 950 197 302
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
Interest expense 717 - - - 717
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 assets 2 658 259 97 69 3 083
1997:
Revenues from external customers $ 90 759 53 698 28 269 81 967 254 693
Investment revenues 146 610 1 216 32 171 13 067 193 064
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
Interest expense 515 - - - 515
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 assets 2 326 473 60 13 2 872
Enterprise-Wide Disclosures
1999 1998 1997
Revenues from external customers by line of business:
Variable life insurance and annuities $ 11 153 6 928 2 062
Interest sensitive products 97 720 101 680 91 651
Traditional individual insurance products 97 616 103 171 101 332
Group life and disability products 49 106 47 780 49 650
Group ASO services 4 205 4 716 4 048
Other 9 751 9 955 5 950
Total $269 551 274 230 254 693
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 of universal life and traditional life insurance acquired
in 1997 is included in this segment. The Kansas City Life - Group segment
consists of sales of group life, disability and dental 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. Its investment revenue is modeled using the year of investment method.
Home office functions are fully integrated for the three companies in order to
maximize economies of scale. Therefore, 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 selected financial data which reconciles to the
consolidated financial statements. Intersegment revenues are not material. The
Company operates solely in the United States and no individual customer accounts
for 10 percent or more of the Company's revenue.
FEDERAL INCOME TAXES
A reconciliation of the Federal income tax rate and the actual tax rate
experienced is shown below.
1999 1998 1997
Federal income tax rate 35 % 35 35
Special tax credits (5) (6) (6)
Other permanent differences - - (1)
Actual income tax rate 30 % 29 28
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities are presented below.
1999 1998
Deferred tax assets:
Basis differences between tax and
GAAP accounting for investments $26 774 -
Future policy benefits 49 133 51 205
Employee retirement benefits 11 990 14 999
Other 9 413 6 308
Gross deferred tax assets 97 310 72 512
Deferred tax liabilities:
Capitalization of policy acquisition
costs, net of amortization 44 809 42 487
Basis differences between tax and
GAAP accounting for investments - 35 104
Property and equipment, net 3 841 1 792
Value of insurance in force 33 102 36 070
Other 841 798
Gross deferred tax liabilities 82 593 116 251
Net deferred tax asset (liability) $14 717 (43 739)
A "valuation allowance" must be established for any portion of the deferred tax
asset which is believed not to be realizable. In management's opinion, it is
more likely than not that the Company will realize the benefit of the net
deferred tax asset and, therefore, no valuation allowance has been established.
Federal income taxes paid for the year were $17,884,000 ($20,164,000 - 1998 and
$14,335,000 - 1997).
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. Shareholders'
surplus equals $388,267,000 for Kansas City Life, $85,411,000 for Sunset Life
and $57,668,000 for Old American.
QUARTERLY CONSOLIDATED
FINANCIAL DATA (unaudited)
First Second Third Fourth
1999:
Total revenues $118 777 115 690 122 137 117 810
Operating income $ 12 241 7 256 12 225 11 464
Realized gains, net 201 239 1 197 222
Net income $ 12 442 7 495 13 422 11 686
Per common share:
Operating income $ .99 .58 .99 .95
Realized gains, net .01 .03 .10 .01
Net income $ 1.00 .61 1.09 .96
1998:
Total revenues $117 615 124 799 125 667 114 877
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 $ .66 .93 1.04 .68
Realized gains net .13 .13 .22 .13
Net income $ .79 1.06 1.26 .81
CONTINGENT LIABILITIES
The Company and certain of its subsidiaries are defendants in lawsuits involving
claims and disputes with policyholders. It has become increasingly common for
plaintiffs in these cases to seek class action status and 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. In management's opinion the amounts ultimately paid, if any, would
have no material effect on the Company's consolidated results of operations and
financial position.
REPORT OF
INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Kansas City Life Insurance Company
We have audited the accompanying consolidated balance sheets of Kansas City Life
Insurance Company and subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 consolidated financial position of Kansas City Life
Insurance Company and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Kansas City, Missouri January 24, 2000
STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
Kansas City Life Insurance Company
3520 Broadway
Post Office Box 219139
Kansas City, Missouri 64121-9139
Telephone: (816) 753-7000
Fax: (816) 753-4902
Internet: http://www.kclife.com
E-Mail: [email protected]
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders will be held at
9 a.m. Thursday, April 20, 2000,
at Kansas City Life's corporate headquarters.
TRANSFER AGENT
Cheryl Keefer, Assistant Secretary
Kansas City Life Insurance Company
Post Office Box 219139
Kansas City, Missouri 64121-9139
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 2, 2000, Kansas City Life had approximately 725 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)
1999:
First Quarter $43.82 39.25 $ .240
Second Quarter 42.75 43.00 .240
Third Quarter 52.25 34.50 .240
Fourth Quarter 40.00 32.75 .240
$ .960
1998:
First Quarter $48.75 41.00 $.225
Second Quarter 47.44 41.63 .225
Third Quarter 47.75 34.50 .225
Fourth Quarter 42.75 39.00 .225
$.900
The above has been restated to reflect a two-for-one stock split in June 1999.
A quarterly dividend of $.25 per share was paid February 22, 2000.
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 and
redomesticated to the State of Missouri.
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
24, 2000 included in the 1999 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 24, 2000 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, 1999.
/s/ Ernst & Young LLP
Kansas City, Missouri
March 24, 2000
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 Kansas City Life Insurance Company Savings
and Profit Sharing Plan of our report dated February 18, 2000 with respect to
the financial statements and schedules of the Kansas City Life Insurance Company
Savings and Profit Sharing Plan included in this Annual Report (Form 11-K) for
the year ended December 31, 1999.
/s/Ernst & Young LLP
Kansas City, Missouri
March 24, 2000
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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<DEBT-HELD-FOR-SALE> 1,999,215<F1>
<DEBT-CARRYING-VALUE> 107,606<F2>
<DEBT-MARKET-VALUE> 107,570<F2>
<EQUITIES> 115,968<F3>
<MORTGAGE> 340,704
<REAL-ESTATE> 79,347<F4>
<TOTAL-INVEST> 2,761,361
<CASH> 41,735
<RECOVER-REINSURE> 123,724
<DEFERRED-ACQUISITION> 236,370
<TOTAL-ASSETS> 3,621,284
<POLICY-LOSSES> 829,556
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 34,721
<POLICY-HOLDER-FUNDS> 1,841,331<F5>
<NOTES-PAYABLE> 69,500
0
0
<COMMON> 23,121
<OTHER-SE> 470,684
<TOTAL-LIABILITY-AND-EQUITY> 3,621,284
146,722
<INVESTMENT-INCOME> 202,003
<INVESTMENT-GAINS> 2,860
<OTHER-INCOME> 122,829
<BENEFITS> 281,172
<UNDERWRITING-AMORTIZATION> 31,261
<UNDERWRITING-OTHER> 8,695<F6>
<INCOME-PRETAX> 64,063
<INCOME-TAX> 19,018
<INCOME-CONTINUING> 45,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,045
<EPS-BASIC> 3.66
<EPS-DILUTED> 3.66
<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, 1999
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
Financial Statements
1999
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
Reportable Transactions 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, 1999
(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 6,968 - - - - - - - - - 6,968
Kansas City Life common stock - 3,175 22,744 - - - - - - - 25,919
MetLife Guaranteed Interest Contract - - - 3,850 - - - - - - 3,850
Vanguard Bond Index Fund - - - - 757 - - - - - 757
Templeton Foreign Fund - - - - - 3,231 - - - - 3,231
Vanguard Balanced Index Fund - - - - - - 1,258 - - - 1,258
Fidelity Value Fund - - - - - - - 3,371 - - 3,371
Vanguard Extended Market Fund - - - - - - - - 2,119 - 2,119
Loans to participants - - - - - - - - - 1,229 1,229
Total investments 6,968 3,175 22,744 3,850 757 3,231 1,258 3,371 2,119 1,229 48,702
Cash (144) 154 8 13 20 (73) 88 (29) (24) - 13
Interest receivable - - - - - - - - - - -
Net assets available
for plan benefits 6,824 3,329 22,752 3,863 777 3,158 1,346 3,342 2,095 1,229 48,715
See accompanying Notes to Financial Statements.
</TABLE>
1
<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
MetLife Guaranteed 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
See accompanying Notes to Financial Statements.
</TABLE>
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, 1999
(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 - - 1,431 - - - - - - - 1,431
Employee 577 182 - 294 78 231 150 386 222 - 2,120
Rollover 33 - - 1 3 1 8 15 10 - 71
610 182 1,431 295 81 232 158 401 232 - 3,622
Investment income, net:
Interest - - 13 301 - - - - - - 314
Interest on participant loans 30 8 - 17 3 8 6 17 12 - 101
Dividends 785 95 713 - 52 119 46 421 203 - 2,434
Net appreciation (depreciation)
on investments 1,066 (671) (4,819) - (55) 845 108 (139) 357 - (3,308)
Net investment income 1,881 (568) (4,093) 318 - 972 160 299 572 - (459)
Employee withdrawals (890) (1,215) (6,005) (1,576) (93) (424) (258) (484) (192) - (11,137)
Forfeitures - - (52) - - - - - - - (52)
Participant loans: Made (185) (12) - (126) (12) (42) (18) (96) (40) 531 -
Repaid 164 42 - 112 18 51 29 91 64 (571) -
Transfer from (to) other funds (90) 723 - (441) 30 (139) 147 (266) 36 - -
Net assets available for
plan benefits:
Net increase (decrease) 1,490 (848) (8,719) (1,418) 24 650 218 (55) 672 (40) (8,026)
Beginning of year 5,334 4,177 31,471 5,281 753 2,508 1,128 3,397 1,423 1,269 56,741
End of year 6,824 3,329 22,752 3,863 777 3,158 1,346 3,342 2,095 1,229 48,715
See accompanying Notes to Financial Statements.
</TABLE>
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, 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
See accompanying Notes to Financial Statements.
</TABLE>
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), 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. The Plan has
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. Participant loans are
valued at cost, which approximates fair value.
Expenses
With the exception of mutual fund administrative fees, costs associated with the
administration of the Plan are borne by the Company.
NOTES TO FINANCIAL STATEMENTS (continued)
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 from 1 to 15 percent of their unreduced
monthly base salary to the Plan. 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 6 percent. The maximum contribution for
an individual participant was $10,000 in both years.
The Company matches participant contributions, up to 6 percent of the
participant's salary, 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. The Company may also 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 either year.
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
6.16 percent (6.51 percent - 1998). The December 31 crediting rates was 6.05
percent (6.55 percent - 1998). 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.
1999 1998
(in thousands)
Twentieth Century Growth Stock Fund,
215,871 shares (194,970 shares - 1998) $6,968 5,295
Kansas City Life Insurance Company common stock,
753,695 shares (430,265 shares - 1998) 25,919 35,572
Met Life Managed
Guaranteed Interest Contract 3,850 5,258
Templeton Foreign Fund, 287,936 shares
(299,258 shares - 1998) 3,231 2,511
Fidelity Value Fund 76,941 shares (72,449
shares - 1998) 3,371 3,358
The fair value of the Plan's investments has changed as follows.
1999 1998
Net Net
Appreciation Appreciation
(Depreciation) (Depreciation)
Fair Value In Fair Value Fair Value In Fair Value
(in thousands) (in thousands)
Fund I $6,968 1,066 $5,295 488
II 3,175 (671) 4,182 (170)
III 22,744 (4,819) 31,390 (1,490)
IV 3,850 - 5,258 -
V 757 (55) 748 13
VI 3,231 845 2,511 (378)
VII 1,258 108 1,119 109
VIII 3,371 (139) 3,358 (473)
IX 2,119 357 1,416 1
Total $47,473 (3,308) $55,277 (1,900)
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. Non-vested balances of terminated participants are used to reduce
the Company's contributions.
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 January 20,
2000 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 converted its administrative system in order to be year 2000
compliant. The costs related to this conversion were minor and were borne by the
Company and therefore did not have an effect on the Plan's financial statements.
The year 2000 issue did not have any further impact on the Plan.
8
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Assets Held for Investment
December 31, 1999
(in thousands, except shares)
Number of
Shares or Fair
Description of Investments Par Value Cost Value
Common stock:
Kansas City Life Insurance Company * 753,695 shares 14,989 25,919
Managed funds:
Twentieth Century Growth Stock Fund 215,871 shares 4,580 6,968
MetLife Managed Guaranteed Interest Contract $3,850 par value 3,850 3,850
Vanguard Bond Index Fund 79,221 shares 785 757
Templeton Foreign Fund 287,936 shares 2,593 3,231
Vanguard Balanced Index Fund 62,209 shares 957 1,258
Fidelity Value Fund 76,941 shares 3,556 3,371
Vanguard Index Trust-Extended Market Fund 57,152 shares 1,593 2,119
Total managed funds 17,914 21,554
Loans:
Loans to participants (interest rates range from
6.5% to 10.0%) - 1,229 1,229
34,132 48,702
* Party-in-interest to the Plan.
9
Kansas City Life Insurance Company
Savings and Profit Sharing Plan
Reportable Transactions
Year ended December 31, 1999
(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 * 11 purchases 451,356 $1,351 - -
Kansas City Life
common stock * 15 sales 127,926 2,751 5,514 2,763
There were no category (i), (ii), or (iv) reportable transactions during 1999.
* 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 (the Plan) as of December 31, 1999 and 1998, 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the changes in its net assets available for plan
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment as of December 31, 1999 and reportable transactions for the
year then ended are presented for purpose of additional analysis and are not a
required part of the financial statements but are supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. These
supplemental schedules are the responsibility of the Plan's management. The
supplemental schedules have been subjected to the auditing procedures applied in
our audits of the financial statements and, in our opinion, are fairly stated in
all material respects in relation to the financial statements taken as a whole.
Ernst & Young LLP
Kansas City, Missouri
February 18, 2000
