<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1999
REGISTRATION NO. 33-12789
811-05068
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 13 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2 /X/
FARM BUREAU LIFE VARIABLE ACCOUNT
(Exact Name of Registrant)
FARM BUREAU LIFE INSURANCE COMPANY
(Name of Depositor)
5400 University Avenue
West Des Moines, Iowa 50266
(Address of Principal Executive Office)
------------------------
STEPHEN M. MORAIN, ESQUIRE
5400 University Avenue
West Des Moines, Iowa 50266
(Name and Address of Agent for Service of Process)
------------------------
COPY TO:
STEPHEN E. ROTH, ESQUIRE
Sutherland, Asbill & Brennan, LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
------------------------
Approximate date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b) of
Rule 485;
/ / on May 1, 1999 pursuant to paragraph (b) of Rule 485;
/X/ 80 days after filing pursuant to paragraph (a) of
Rule 485;
/ / on (date) pursuant to paragraph (a) of Rule 485.
Title of Securities Being Registered: Flexible Premium Variable Life
Insurance Policies
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<PAGE>
Prospectus May 1, 1999
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Farm Bureau Life Variable Account
Flexible Premium Variable Life Insurance Policy
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Farm Bureau Life Insurance Company is offering a flexible premium variable life
insurance policy described in this prospectus. Farm Bureau designed the policy:
(1) to provide lifetime insurance protection to age 95; and (2) to permit the
purchaser of a policy ("you," or "your") to vary premium payments and adjust the
death proceeds payable under the policy.
Under the policy, we will pay:
- death proceeds upon the insured's death, and
- a net cash value upon complete or partial surrender of the policy.
You may allocate net premiums under a policy to one or more of the subaccounts
of Farm Bureau Life Variable Account (the "Variable Account"). Death proceeds
may, and cash value will, vary with the investment experience of the Variable
Account. Each subaccount invests exclusively in shares of the investment
options listed below. Current prospectuses that describe the investment
objectives and risks of each investment option must accompany or precede this
prospectus.
- EquiTrust Variable Insurance - T. Rowe Price Equity Series, Inc.:
Series Fund: - Mid-Cap Growth Portfolio
- Value Growth Portfolio - New America Growth Portfolio
- High Grade Bond Portfolio - Personal Strategy Balanced
- High Yield Bond Portfolio Portfolio
- Managed Portfolio
- Money Market Portfolio - T. Rowe Price International
- Blue Chip Portfolio Series, Inc.:
- International Stock Portfolio
- Fidelity Variable Insurance - Fidelity Variable Insurance
Products Fund: Products Fund II:
- Growth Portfolio - Contrafund Portfolio
- Overseas Portfolio - Index 500 Portfolio
- Fidelity Variable Insurance Products Fund III:
- Growth & Income Portfolio
You may also allocate net premiums to the Declared Interest Option, which is
supported by our General Account. We credit amounts allocated to the Declared
Interest Option with at least a 4.5% annual interest rate.
Please carefully consider replacing any existing insurance with the policy.
Farm Bureau does not claim that investing in the policy is similar or comparable
to investing in a mutual fund.
The Securities and Exchange Commission has not approved these securities or
determined that this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
Please read this prospectus carefully and retain it for future reference.
Issued By: Farm Bureau Life Insurance Company, 5400 University Avenue, West Des
Moines, Iowa 50266, 1-800-247-4170
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Summary and Diagram of the Policy. . . . . . . . . . . . . . . . . . . . . . . . . .6
Farm Bureau Life Insurance Company and the Variable Account. . . . . . . . . . . . 13
Farm Bureau Life Insurance Company. . . . . . . . . . . . . . . . . . . . . . 13
Iowa Farm Bureau Federation . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Variable Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Investment Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Addition, Deletion or Substitution of Investments . . . . . . . . . . . . . . 17
The Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Purchasing the Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Premiums. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Examination of POLICY (Cancellation Privilege). . . . . . . . . . . . . . . . 21
Policy Lapse and Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . 21
Special Transfer Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Exchange Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Policy Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Cash Value Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Loan Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Death Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Death Benefit Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Accelerated Payments of Death Proceeds. . . . . . . . . . . . . . . . . . . . 34
Benefits at Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Payment Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Charges and Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Premium Expense Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Monthly Deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Transfer Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Surrender Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Variable Account Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
The Declared Interest Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Distribution of the Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Federal Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
The Policy is not available in all States.
This prospectus constitutes an offering only in those jurisdictions where such
offering may lawfully be made.
Farm Bureau has not authorized any dealer, salesman or other person to give any
information or make any representations in connection with this offering other
than those contained in this prospectus. Do not rely on any such other
information or representations.
2
<PAGE>
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DEFINITIONS
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Attained Age . . . . . . . The Insured's age on his or her last birthday on
the Policy Date plus the number of Policy Years
since the Policy Date.
Beneficiary . . . . . . . . The person or entity the Policyowner named in the
application or by later designation to receive
the death proceeds upon the Insured's death.
Business Day . . . . . . . Each day that the New York Stock Exchange is open
for trading, except the day after Thanksgiving,
the day before Christmas (in 1999) and any day on
which the Home Office is closed because of a
weather-related or comparable type of emergency
and is unable to segregate orders and redemption
requests received on that day.
Cash Value . . . . . . . . The total amount invested under the Policy. It
is the sum of the values of the Policy in each
subaccount of the Variable Account, the value of
the Policy in the Declared Interest Option and
any outstanding Policy Debt.
Company, we, us, our . . . Farm Bureau Life Insurance Company.
Declared Interest Option . A part of the Company's General Account.
Policyowners may allocate Net Premiums and
transfer Cash Value to the Declared Interest
Option. The Company credits Cash Value in the
Declared Interest Option with interest at an
annual rate guaranteed to be at least 4.5%.
Delivery Date . . . . . . . The date when the Company issues the Policy and
mails it to the Policyowner.
Due Proof of Death . . . . Proof of death that is satisfactory to the
Company. Such proof may consist of the following
if acceptable to the Company:
(a) A certified copy of the death certificate;
(b) A certified copy of a court decree
reciting a finding of death; or
(c) Any other proof satisfactory to the
Company.
Fund . . . . . . . . . . . An open-end, diversified management investment
company in which the Variable Account invests.
General Account . . . . . . The assets of the Company other than those
allocated to the Variable Account or any other
separate account.
Grace Period . . . . . . . The 61-day period beginning on the date the
Company sends notice to the Policyowner that Net
Cash Value is insufficient to cover the monthly
deduction.
Home Office . . . . . . . . The Company's principal offices at 5400
University Avenue, West Des Moines, Iowa 50266.
3
<PAGE>
Insured . . . . . . . . . . The person upon whose life the Company issues a
Policy.
Investment Option . . . . . A separate investment portfolio of a Fund.
Maturity Date . . . . . . . The Policy Anniversary nearest the Insured's 95th
birthday. It is the date when the Policy
terminates and the Policy's Cash Value less
Policy Debt becomes payable to the Policyowner or
the Policyowner's estate.
Monthly Deduction Day . . . The same date in each month as the Policy Date.
The Company makes the monthly deduction on the
Business Day coinciding with or immediately
following the Monthly Deduction Day. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction.")
Net Asset Value . . . . . . The total current value of each Subaccount's
securities, cash, receivables and other assets
less liabilities.
Net Cash Value . . . . . . The Cash Value of the Policy reduced by any
outstanding Policy Debt and increased by any
unearned loan interest.
Net Premium . . . . . . . . The amount of premium remaining after we deduct
the premium expense charge (see "CHARGES AND
DEDUCTIONS--Premium Expense Charge"). The
Company will allocate this amount, according to
the Policyowner's instructions, among the
Subaccounts of the Variable Account and the
Declared Interest Option.
Policy . . . . . . . . . . The flexible premium variable life insurance
policy we offer and describe in this Prospectus,
which term includes the Policy described in this
Prospectus, the Policy application, and any
supplemental applications and any endorsements.
Policy Anniversary . . . . The same date in each year as the Policy Date.
Policy Date . . . . . . . . The date set forth on the Policy data page which
we use to determine Policy Years, Policy Months
and Policy Anniversaries. The Policy Date may,
but will not always, coincide with the effective
date of insurance coverage under the Policy. (See
"THE POLICY--Purchasing the Policy.")
Policy Debt . . . . . . . . The sum of all outstanding Policy Loans and any
due and unpaid Policy Loan interest.
Policy Loan . . . . . . . . An amount the Policyowner borrows from the
Company using the Policy as the sole security.
Interest on Policy Loans is payable in advance
(for the remainder of the Policy Year) upon
taking a Policy Loan and upon each Policy
Anniversary thereafter (for the following Policy
Year) until the Policy Loan is repaid.
Policy Month . . . . . . . A one-month period beginning on a Monthly
Deduction Day and ending on the day immediately
preceding the next Monthly Deduction Day.
4
<PAGE>
Policyowner, you, your . . The person who owns a Policy. The original
Policyowner is named in the application.
Policy Year . . . . . . . . A twelve-month period that starts on the Policy
Date or on a Policy Anniversary.
Specified Amount . . . . . The minimum death benefit payable under a Policy
so long as the Policy remains in force. The
Specified Amount as of the Policy Date is set
forth on the data age in each Policy.
Subaccount . . . . . . . . A subdivision of the Variable Account which
invests exclusively in shares of a designated
Investment Option of a Fund.
Surrender Charge . . . . . A charge we assess at the time of any partial or
complete surrender equal to the lesser of (1) $25
or (2) 2.0% of the amount surrendered.
Unit Value . . . . . . . . The value determined by dividing each
Subaccount's Net Asset Value by the number of
units outstanding at the time of calculation.
Valuation Period . . . . . The period between the close of business (3:00
p.m. central time) on a Business Day and the
close of business on the next Business Day.
Variable Account . . . . . Farm Bureau Life Variable Account, a separate
investment account the Company established to
receive and invest the Net Premiums paid under
the Policies.
5
<PAGE>
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Summary and Diagram of the Policy
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The following is a summary of the Policy's features. Please read the entire
Prospectus and the Policy for more detailed information. Unless otherwise
indicated, the description of the Policy contained in this Prospectus assumes
that the Policy is in force and that there is no outstanding Policy Debt.
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The Policy - The Policy is a flexible premium variable life insurance
policy providing for:
- death proceeds payable to the Beneficiary upon the
Insured's death,
- the accumulation of Cash Value,
- surrender rights, and
- loan privileges.
- We normally issue a Policy for a minimum Specified Amount of
$25,000, but we may issue Policies for lower Specified
Amounts.
- You have flexibility in determining the frequency and amount
of premiums. (See "THE POLICY -- Premiums").
- We do not guarantee the amount and/or duration of the life
insurance coverage.
- Cash Value may increase or decrease, depending upon the
investment experience of the assets supporting the Policy.
You bear the investment risk of any depreciation of, and reap
the benefit of any appreciation in, the value of the
underlying assets.
- If the Insured is alive and the Policy is in force on the
Maturity Date, we will pay you the Cash Value as of the end of
the Business Day coinciding with or immediately following the
Maturity Date, reduced by any outstanding Policy Debt.
- CANCELLATION PRIVILEGE. You may examine and cancel the Policy
by returning the Policy to us before midnight of the 20th day
after you received the Policy. We will refund you the Cash
Value on the Business Day we receive the Policy plus any
charges we deducted. Certain states may require us to refund
a different amount. (See "THE POLICY - Examination of Policy
(Cancellation Privilege)").
6
<PAGE>
The Variable - The Variable Account has 15 Subaccounts, each of which
Account invests exclusively in one of the following Investment Options
offered by the Funds:
- Value Growth Portfolio - International Stock Portfolio
- High Grade Bond Portfolio - Growth Portfolio
- High Yield Bond Portfolio - Overseas Portfolio
- Managed Portfolio - Contrafund Portfolio
- Money Market Portfolio - Index 500 Portfolio
- Blue Chip Portfolio - Growth & Income Portfolio
- Mid-Cap Growth Portfolio - New America Growth Portfolio
- Personal Strategy Balanced Portfolio
- You may instruct us to allocate Net Premiums and transfer Cash
Values to any of the Subaccounts.
The Declared - You may allocate or transfer all or a portion of the Cash
Interest Value to the Declared Interest Option, which guarantees a
Option specified minimum rate of return. (See "THE DECLARED INTEREST
OPTION").
Premiums - You choose when to pay and how much to pay.
- You must pay an initial premium equal to the greater of $100,
or an amount (when reduced by the premium expense charge) that
is enough to pay the first monthly deduction (for monthly
premium payment mode Policies), or the first two monthly
deductions (for quarterly, semi-annual or annual premium
payment mode Policies).
- We deduct a premium expense charge (7% of each premium
payment) and credit the remaining premium (the Net Premium)
according to your instructions. (See "CHARGES and
DEDUCTIONS - Premium Expense Charge").
7
<PAGE>
Policy Cash Value Benefits (See "POLICY BENEFITS - Cash Value
Benefits Benefits").
- Your Policy provides for a Cash Value. A Policy's Cash Value
varies to reflect
- the amount and frequency of premium payments
- the investment experience of the Subaccounts
- interest earned on Cash Value in the Declared Interest
Option
- Policy Loans
- partial surrenders
- charges we assess under the Policy
- You may fully surrender your Policy and receive the Net
Cash Value.
- You may obtain a partial surrender of your Net Cash Value
(minimum $500) at any time before the Maturity Date.
Transfers (See "POLICY BENEFITS -- Transfers").
- You may transfer amounts (minimum $100) among the Subaccounts
an unlimited number of times in a Policy Year.
- You may make one transfer per Policy Year between the
Subaccounts and the Declared Interest Option.
- The first transfer in a Policy Year is free. We deduct a $25
charge from the amount transferred on subsequent transfers in
that Policy Year.
- We do not count certain transfers for purposes of the one free
transfer limit. (See "THE POLICY -- Special Transfer
Privilege"; and "THE POLICY -- Premiums -- Allocation of Net
Premiums").
Loans (See POLICY BENEFITS -- "Loan Benefits").
- You may borrow up to 90% of the Policy's Cash Value, less any
previously outstanding Policy Debt.
- We charge you a maximum annual interest rate of 7.4%.
- We secure your loan by segregating in the Declared Interest
Option an amount equal to the Policy Loan. We credit this
amount with an effective annual rate of interest between 4.5%
and 6.0%.
- Policy Loans may have federal income tax consequences.
(See "FEDERAL TAX MATTERS -- Policy Proceeds").
8
<PAGE>
Death Proceeds (See "POLICY BENEFITS -- Death Proceeds").
- The Policy contains two death benefit options:
- Option A -- the death benefit is the greater of the sum
of the Specified Amount and the Policy's Cash Value, or
the Cash Value multiplied by the specified amount factor
for the Insured's Attained Age, as set forth in the
Policy.
- Option B -- the death benefit is the greater of the
Specified Amount, or the Cash Value multiplied by the
specified amount factor for the Insured's Attained Age,
as set forth in the Policy.
- Under either death benefit option, so long as the Policy
remains in force, the death benefit will not be less than the
Specified Amount of the Policy on the date of death.
- To determine the death proceeds, we reduce the death benefit
by any outstanding Policy Debt and increase the death benefit
by any unearned loan interest and any premiums paid after the
date of death. We may pay the proceeds in a lump sum or in
accordance with a payment option.
- You may change the Specified Amount or the death benefit
option.
9
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Charges (See Premium Expense Charge
"Charges and
Deductions") - We deduct a Premium Expense Charge equal to 7% of each
premium. The remaining amount is the Net Premium.
Cash Value Charges
- Each month, we make a monthly deduction (that varies from
month to month) equal to the sum of:
- a cost of insurance charge,
- the cost of any additional insurance benefits added by
rider, and
- a $3 administrative charge.
- During the first 12 Policy Months and during the 12 Policy
Months immediately following an increase in Specified Amount,
the monthly deduction will include a first year monthly
administrative charge ranging from $0.05 to $0.50 per $1,000
of Specified Amount. This charge varies depending upon the
Attained Age of the Insured and the Policy's total Specified
Amount.
- Upon partial or complete surrender of a Policy, we assess a
charge equal to the lesser of $25 or 2.0% of the amount
surrendered.
- We may deduct a $25 charge from the amount transferred on the
second and subsequent transfers in a Policy Year.
Charges Against the Variable Account
- We deduct a daily mortality and expense risk charge from the
average daily net assets of each Subaccount. The charge
equals an effective annual rate of .90%.
- We may assess a charge against the Variable Account for
federal income taxes that may be attributable to the Variable
Account.
- Because the Variable Account purchases shares of the
Investment Options, the value of the net assets of the
Variable Account will reflect the investment advisory fee and
other expenses incurred by each Investment Option. The
following table indicates the Investment Options' fees and
expenses for 1998.
[Insert Table]
10
<PAGE>
<TABLE>
<CAPTION>
OTHER TOTAL
EXPENSES EXPENSES
(AFTER (AFTER
WAIVER OR WAIVER OR
INVESTMENT OPTION ADVISORY FEE REIMBURSEMENT) REIMBURSEMENT)
- ----------------- ------------ ------------- -------------
<S> <C> <C> <C>
EquiTrust Variable Insurance
Series Fund*
Value Growth -% -% -%
High Grade Bond -% -% -%
High Yield Bond -% -% -%
Managed
Money Market -% -% -%
Blue Chip -% -% -%
T. Rowe Price Equity Series, Inc.
Mid-Cap Growth -% -% -%(1)
New America Growth -% -% -%(1)
Personal Strategy Balanced -% -% -%(1)
T. Rowe Price International Series, Inc.
International Stock -% -% -%(1)
Fidelity VIP
Growth -% -% -%(2)
Overseas -% -% -%(2)
Fidelity VIP II
Contrafund -% -% -%(2)
Index 500 -%(3) -% -%(3)
Fidelity VIP III
Growth & Income -% -% -%
</TABLE>
* The annual investment option expenses for each Investment Option of the
Fund are net of certain reimbursements by the Fund's investment adviser.
Operating expenses (including the investment advisory fee but excluding
brokerage, interest, taxes and extraordinary expenses) of an Investment
Option that exceed 1.50% of the Investment Option's average daily net
assets for any fiscal year are reimbursed by the Fund's investment adviser
up to the amount of the advisory fee. In addition, the investment adviser
has voluntarily agreed to reimburse each Portfolio for expenses that exceed
0.65%. Absent the reimbursements, the total expenses for the Investment
Options for the 1998 fiscal year would have been:
(1) Total annual investment option expenses are an all-inclusive fee and pay
for investment management services and other operating costs.
(2) A portion of the brokerage commissions that certain Investment Options pay
is used to reduce Fund expenses. In addition, certain Investment Options
have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances are used to reduce
custodian expenses. Including these reductions, the total Investment Option
operating expenses presented in the preceding table would have been:
(3) The investment advisor has voluntarily agreed to reimburse the Index 500
Investment Option to the extent that total operating expenses (with the
exceptions noted in the prospectus for the Investment
11
<PAGE>
Option) as a percentage of its average net assets exceed 0.28%. If this
agreement had not been in effect, total operating expenses for the fiscal
year ended December 31, 1998, as a percentage of the Index 500 Investment
Option's average net assets would have been %.
(See "CHARGES AND DEDUCTIONS -- Variable Account Charges -- Investment Option
Expenses.")
[cad 157]Investment Option expenses to be provided by amendment.[cad 179]
OTHER - We offer other variable life insurance policies that
POLICIES invest in the same Investment Options of the Funds. These
policies may have different charges that could affect
Subaccount performance, and may offer different benefits.
You may contact us to obtain more information about these
policies.
TAX - If we issue a Policy on the basis of a standard premium class,
TREATMENT we believe that the Policy should qualify as a life insurance
(See "FEDERAL contract for federal income tax purposes.
TAX MATTERS")
- If we issue a Policy on a substandard basis, it is not clear
whether or not the Policy would qualify as a life insurance
contract for federal income tax purposes.
- If a Policy qualifies as a life insurance contract for federal
income tax purposes, the Cash Value under a Policy should be
subject to the same federal income tax treatment as cash value
under a conventional fixed-benefit Policy -- the Policyowner
is not deemed to be in constructive receipt of Cash Values
under a Policy until there is a distribution from the Policy.
- Death proceeds payable under a Policy should be completely
excludable from the gross income of the Beneficiary. As a
result, the Beneficiary generally will not be taxed on these
proceeds.
Diagram
The diagram below illustrates how premium payments are distributed in the
Policy.
[Graphic to come]
12
<PAGE>
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FARM BUREAU LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
Farm Bureau Life Insurance Company
Farm Bureau Life Insurance Company is a stock life insurance company
which was incorporated in the State of Iowa on October 30, 1944. At
December 31, 1998, Iowa Farm Bureau Federation owned 54.30% of the
outstanding voting shares of FBL Financial Group, Inc., which owns
100% of our outstanding voting shares.
Our principal business is offering life insurance policies, disability
income insurance policies and annuity contracts. Our principal
offices are at 5400 University Avenue, West Des Moines, Iowa 50266.
We are admitted to do business in 15 states--Arizona, Colorado, Idaho,
Iowa, Kansas, Minnesota, Montana, Nebraska, New Mexico, North Dakota,
Oklahoma, South Dakota, Utah, Wisconsin and Wyoming.
- --------------------------------------------------------------------------------
IOWA FARM BUREAU FEDERATION
Iowa Farm Bureau Federation is an Iowa not-for-profit corporation
located at 5400 University Avenue, West Des Moines, Iowa 50266, the
members of which are county Farm Bureau organizations and their
individual members. Through various divisions and subsidiaries, Iowa
Farm Bureau Federation engages in the formulation, analysis and
promotion of programs designed to foster the educational, social and
economic advancement of its members.
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
We established the Variable Account as a separate account on
March 3, 1987. The Variable Account receives and invests the Net
Premiums under the Policy, and may receive and invest net premiums for
any other variable life insurance policies we issue.
The Variable Account's assets are our property, and they are available
to cover our general liabilities only to the extent that the Variable
Account's assets exceed its liabilities arising under the Policies and
any other policies it supports. The portion or the Variable Account's
assets attributable to the Policies generally are not chargeable with
liabilities arising out of any other business that we may conduct. We
may transfer to the General Account any Variable Account assets which
are in excess of such reserves and other Policy liabilities.
The Variable Account currently has 15 Subaccounts but may, in the
future, include additional subaccounts. Each Subaccount invests
exclusively in shares of a single corresponding Investment Option.
Income and realized and unrealized gains or losses from the assets of
each Subaccount are credited to or charged against, that Subaccount
without regard to income, gains or losses from any other Subaccount.
We registered the Variable Account as a unit investment trust under
the Investment Company Act of 1940. The Variable Account meets the
definition of a separate account under the federal securities laws.
Registration with the Securities and Exchange Commission does not mean
that the Commission supervises the management or investment practices
or policies of the Variable Account or the
13
<PAGE>
Company. The Variable Account is also subject to the laws of the
State of Iowa which regulate the operations of insurance companies
domiciled in Iowa.
- --------------------------------------------------------------------------------
INVESTMENT OPTIONS
The Variable Account invests in shares of the Investment Options
described below. Each of these Investment Options was formed as an
investment vehicle for insurance company separate accounts. Each
Investment Option has its own investment objectives and separately
determines the income and losses for that Investment Option.
The investment objectives and policies of certain Investment Options
are similar to the investment objectives and policies of other
portfolios that the same investment adviser, investment sub-adviser or
manager may manage. The investment results of the Investment Options,
however, may be higher or lower than the results of such other
portfolios. There can be no assurance, and no representation is made,
that the investment results of any of the Investment Options will be
comparable to the investment results of any other portfolio, even if
the other portfolio has the same investment adviser, investment sub-
adviser or manager.
The paragraphs below summarize each Investment Option's investment
objectives and policies. There is no assurance that any Investment
Option will achieve its stated objectives. Please refer to the
prospectus for each Investment Option for more detailed information,
including a description of risks, for each Investment Option. The
Investment Option prospectuses must accompany or precede this
Prospectus and you should read them carefully and retain them for
future reference.
EQUITRUST VARIABLE INSURANCE SERIES FUND. EQUITRUST INVESTMENT MANAGEMENT
SERIES, INC. IS THIS FUND'S INVESTMENT ADVISER.
Portfolio Investment Objective
VALUE GROWTH - Portfolio seeks long-term capital appreciation. Portfolio
PORTFOLIO pursues its objective by investing primarily in equity
securities of companies that the investment adviser believes
have a potential to earn a high return on equity, and/or in
equity securities that the investment adviser believes are
undervalued by the market place. Such equity securities may
include common stock, preferred stock and securities
convertible or exchangeable into common stock.
HIGH GRADE - Portfolio seeks as high a level of current income as is
BOND consistent with a high grade portfolio of debt securities.
PORTFOLIO Portfolio pursues this objective by investing primarily in
debt securities rated AAA, AA or A by Standard & Poor's,
and/or Aaa, Aa or A by Moody's Investors Service, Inc., and in
securities issued or guaranteed by the United States
government or its agencies or instrumentalities.
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Portfolio Investment Objective
HIGH YIELD - Portfolio seeks, as a primary objective, as high a level of
BOND current income as is consistent with investment in a portfolio
PORTFOLIO of fixed-income securities rated in the lower categories of
established rating services. As a secondary objective, the
Portfolio seeks capital appreciation when consistent with its
primary objective. The Portfolio pursues these objectives by
investing primarily in fixed-income securities rated Baa or
lower by Moody's Investors Service, Inc., and/or BBB or lower
by Standard & Poor's, or in unrated securities of comparable
quality. An investment in this Portfolio may entail greater
than ordinary financial risk. (See the Fund Prospectus
"HIGHER RISK SECURITIES AND INVESTMENT STRATEGIES--Lower
Rated Debt Securities.")
MANAGED - Portfolio seeks the highest total investment return of income
PORTFOLIO and capital appreciation. Portfolio pursues this objective
through a fully managed investment policy consisting of
investments in the following three market sectors: (1) growth
common stocks and securities convertible or exchangeable into
growth common stocks, including warrants and rights; (2) high
grade debt securities and preferred stocks of the type in
which the High Grade Bond Portfolio may invest; and (3) high
quality short-term money market instruments of the type in
which the Money Market Portfolio may invest.
MONEY MARKET - Portfolio seeks maximum current income consistent with
PORTFOLIO liquidity and stability of principal. Portfolio pursues this
objective by investing in high quality short-term money market
instruments. The United States Government does not insure or
guarantee an investment in the Money Market Portfolio. There
is no assurance that the Money Market portfolio will be able
to maintain a stable net asset value of $1.00 per share.
BLUE CHIP - Portfolio seeks growth of capital and income. Portfolio
PORTFOLIO pursues this objective by investing primarily in common stocks
of well-capitalized, established companies. Because this
Portfolio may be invested heavily in particular stocks or
industries, an investment in this Portfolio may entail
relatively greater risk of loss.
T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Associates, Inc. is the
investment adviser to the Fund. The following three portfolios are available
under the Policy:
Portfolio Investment Objective
MID-CAP - Portfolio seeks long-term capital appreciation by investing
GROWTH primarily in common stocks of medium-sized (mid-cap) growth
PORTFOLIO companies which offer the potential for above-average earnings
growth.
NEW AMERICA - Portfolio seeks long-term capital growth by investing
GROWTH primarily in common stocks of U.S. growth companies operating
PORTFOLIO in service industries.
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Portfolio Investment Objective
PERSONAL - Portfolio seeks the highest total return over time consistent
STRATEGY with an emphasis on both capital appreciation and income.
BALANCED
PORTFOLIO
T. ROWE PRICE INTERNATIONAL SERIES, INC. Rowe Price-Fleming International, Inc.
is the investment adviser to the Fund.
Portfolio Investment Objective
INTERNATIONAL - Portfolio seeks to provide capital appreciation through
STOCK investments primarily in established companies based outside
PORTFOLIO the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS. Fidelity Management & Research
Company serves as the investment adviser to these Funds. Bankers Trust Company
serves as sub-investment adviser to the Index 500 Portfolio. The following
portfolios are available under the Policy.
Portfolio Investment Objective
FIDELITY VIP - Portfolio seeks capital appreciation by investing primarily in
GROWTH common stocks. The Portfolio, however, is not restricted to
PORTFOLIO any one type of security and may pursue capital appreciation
through the purchase of bonds and preferred stocks. The
Portfolio does not place any emphasis on dividend income from
its investments, except when the adviser believes this income
will have a favorable influence on the market value of the
security. Growth may be measured by factors such as earnings
or gross sales.
FIDELITY VIP - Portfolio seeks long-term growth of capital by investing
OVERSEAS primarily in foreign securities. The Portfolio defines
PORTFOLIO foreign securities as securities of issuers whose principal
activities are located outside the United States. Normally,
at least 65% of the Portfolio's total assets will be invested
in foreign securities. The Portfolio may also invest in U.S.
issuers.
FIDELITY - Portfolio seeks capital appreciation by investing in
VIP II securities of companies whose value the adviser believes is
CONTRAFUND not fully recognized by the public. The Portfolio normally
PORTFOLIO invests primarily in common stocks and securities convertible
into common stock, but it has the flexibility to invest in
other types of securities.
FIDELITY - Portfolio seeks to provide investment results that correspond
VIP II to the total return of a broad range of common stocks publicly
INDEX 500 traded in the United States. To achieve this objective, the
PORTFOLIO Portfolio attempts to duplicate the composition and total
return of the S&P 500.
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<PAGE>
Portfolio Investment Objective
FIDELITY - Portfolio seeks high total return through a combination of
VIP III current income and capital appreciation by investing mainly in
GROWTH & equity securities. The Portfolio expects to invest the
INCOME majority of its assets in domestic and foreign equity
PORTFOLIO securities, with a focus on those that pay current dividends
and show potential earnings growth. However, the Portfolio
may buy debt securities as well as equity securities that are
not currently paying dividends, but offer prospects for
capital appreciation or future income.
The Funds currently sell shares: (1) to the Variable Account as well
as to separate accounts of insurance companies that may or may not be
affiliated with the Company or each other; and (2) to separate
accounts to serve as the underlying investment for both variable life
insurance policies and variable annuity contracts. We currently do
not foresee any disadvantages to Policyowners arising from the sale of
shares to support variable life insurance policies and variable
annuity contracts, or from shares being sold to separate accounts of
insurance companies that may or may not be affiliated with the
Company. However, we will monitor events in order to identify any
material irreconcilable conflicts that might possibly arise. In that
event, we would determine what action, if any, should be taken in
response to those events or conflicts. In addition, if we believe
that a Fund's response to any of those events or conflicts
insufficiently protects Policyowners, we will take appropriate action
on our own, including withdrawing the Variable Account's investment in
that Fund. (See the Fund prospectuses for more detail.)
[Graphic to come]
We may receive compensation from an affiliate(s) of one or more of the
Funds based upon an annual percentage of the average assets we hold in
the Investment Options. These amounts are intended to compensate us
for administrative and other services we provide to the Funds and/or
affiliate(s).
Each Fund is registered with the Securities and Exchange Commission as
an open-end, diversified management investment company. Such
registration does not involve supervision of the management or
investment practices or policies of the Fund by the Securities and
Exchange Commission.
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ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to
make additions to, deletions from or substitutions for the shares of
the Investment Options that the Variable Account holds or that the
Variable Account may purchase. If the shares of an Investment Option
are no longer available for investment or if, in our judgment, further
investment in any Investment Option should become inappropriate in
view of the purposes of the Variable Account, we reserve the right to
dispose of the shares of any Investment Option and to substitute
shares of another Investment Option. We will not substitute any
shares attributable to a Policyowner's Cash Value in the Variable
Account without notice to and prior approval of the Securities and
Exchange Commission, to the extent required by the Investment Company
Act of 1940 or other
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<PAGE>
applicable law. In the event of any such substitution or change, we
may, by appropriate endorsement, make such changes in these and other
policies as may be necessary or appropriate to reflect such
substitution or change. Nothing contained in this Prospectus shall
prevent the Variable Account from purchasing other securities for
other series or classes of policies, or from permitting a conversion
between series or classes of policies on the basis of requests made by
Policyowners.
We also reserve the right to establish additional subaccounts of the
Variable Account, each of which would invest in shares of a new
Investment Option, with a specified investment objective. We may
establish new subaccounts when, in our sole discretion, marketing, tax
or investment conditions warrant, and we may make any new subaccounts
available to existing Policyowners on a basis we determine. Subject
to obtaining any approvals or consents required by applicable law, we
may transfer the assets of one or more Subaccounts to any other
Subaccount(s), or one or more Subaccounts may be eliminated or
combined with any other Subaccount(s) if, in our sole discretion,
marketing, tax or investment conditions warrant.
If we deem it to be in the best interests of persons having voting
rights under the Policies, we may
operate the Variable Account as a management company under the
Investment Company Act of 1940,
deregister the Variable Account under that Act in the event such
registration is no longer required, or,
subject to obtaining any approvals or consents required by
applicable law, combine the Variable Account with other Company
separate accounts.
To the extent permitted by applicable law, we may also transfer the
Variable Account's assets associated with the Policies to another
separate account. In addition, we may, when permitted by law,
restrict or eliminate any voting rights of Policyowners or other
persons who have voting rights as to the Variable Account. (See
"ADDITIONAL INFORMATION -- Voting Rights.")
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THE POLICY
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Purchasing the Policy
In order to issue a Policy, we must receive a completed application,
including payment of the initial premium, at our Home Office. We
ordinarily will issue a Policy only for Insureds who are 0 to 80 years
of age at their last birthday and who supply satisfactory evidence of
insurability to the Company. Acceptance is subject to our
underwriting rules and we may, in our sole discretion, reject any
application or premium for any lawful reason. The minimum Specified
Amount for which we will issue a Policy is normally $25,000, although
we may, in our discretion, issue Policies with Specified Amounts of
less than $25,000.
The effective date of insurance coverage under the Policy will be the
later of (1) the Policy Date, (2) the date the Insured signs the last
of any amendments to the initial application required by our
underwriting rules, or (3) the date when we receive the full initial
premium at the Home Office.
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<PAGE>
The Policy Date will be the later of (1) the date of the initial
application, or (2) the date we receive any additional information at
the Home Office if our underwriting rules require additional medical
or other information. The Policy Date may also be any other date
mutually agreed to by you and the Company. If the later of (1) and
(2) above is the 29th, 30th or 31st of any month, the Policy Date will
be the 28th of such month. We use the Policy Date to determine Policy
Years, Policy Months and Policy Anniversaries. The Policy Date may,
but will not always, coincide with the effective date of insurance
coverage under the Policy.
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PREMIUMS
Subject to certain limitations, a Policyowner has flexibility in
determining the frequency and amount of premiums.
PREMIUM FLEXIBILITY. We do not require you to pay premiums in
accordance with a rigid and inflexible premium schedule. We may
require you to pay an initial premium equal to the greater of $100, or
an amount that, when reduced by the premium expense charge, will be
sufficient to pay the monthly deduction for the first Policy Month
(for Policies established through a monthly premium payment mode), or
an initial premium that, when reduced by the premium expense charge,
will be sufficient to pay the monthly deductions for the first two
Policy months (for Policies established through a quarterly,
semi-annual or annual premium payment mode). Thereafter, subject to
the minimum and maximum premium limitations described below, you may
also make unscheduled premium payments at any time prior to the
Maturity Date.
The Company offers a conversion program for its term insurance or
Executive Term policies. Under the program, owners of one of our term
policies can elect to convert their term insurance policy to a
permanent insurance policy, including the Policy, at any time between
the first and sixth policy anniversaries of their term policy. Upon
conversion, we will credit to the initial premium for the Policy an
amount equal to the annual premium paid on the term policy, up to a
limit of $5.00 per $1,000 of the term insurance face amount. Custom
Term II contains a Premium Credit Benefit that allows the policy owner
credit towards the purchase of a Policy at any time between the first
and sixth policy anniversaries on their term policy. Upon exercise of
this benefit, we will credit to the initial premium for the Policy an
amount equal to the annual premium paid on the term policy, up to a
limit of $5.00 per $1,000 of the term insurance face amount. The
existing Custom Term II policy need not be canceled to use this
benefit. We will treat these credits as a premium for purposes of
Policy provisions applicable to premiums, such as deduction of the
premium expense charge. Please see your registered representative for
more information. Registered representatives receive a commission
upon a conversion.
PLANNED PERIODIC PREMIUMS. Each Policyowner will determine a planned
periodic premium schedule that provides for the payment of a level
premium over a specified period of time on a quarterly, semi-annual or
annual basis. We may, at our discretion, permit you to make planned
periodic premium payments on a monthly basis. We ordinarily will send
periodic reminder notices to the Policyowner for each planned periodic
premium. Depending on the duration of the planned periodic premium
schedule, the timing of planned payments could affect the tax status
of the Policy. (See "FEDERAL TAX MATTERS.")
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<PAGE>
You are not required to pay premiums in accordance with the planned
periodic premium schedule. Furthermore, you have considerable
flexibility to alter the amount, frequency and the time period over
which you pay planned periodic premiums; however, we must consent to
any planned periodic payment less than $100. Changes in the planned
premium schedule may have federal income tax consequences. (See
"FEDERAL TAX MATTERS").
Paying a planned periodic premium will not guarantee that the Policy
remains in force. Instead, the duration of the Policy depends upon
the Policy's Cash Value. Thus, even if you do pay planned periodic
premiums, the Policy will nevertheless lapse if Net Cash Value is
insufficient on a Monthly Deduction Day to cover the monthly deduction
(see "CHARGES AND DEDUCTIONS -- Monthly Deduction") and a Grace Period
expires without a sufficient payment (see "THE POLICY -- Policy Lapse
and Reinstatement -- Lapse").
UNSCHEDULED PREMIUMS. Each unscheduled premium payment must be at
least $100; however, we may, in our discretion, waive this minimum
requirement. We reserve the right to limit the number and amount of
unscheduled premium payments. An unscheduled premium payment may have
federal income tax consequences. (See "FEDERAL TAX MATTERS.")
PREMIUM LIMITATIONS. In no event may the total of all premiums paid,
both planned periodic and unscheduled, exceed the applicable maximum
premium limitation imposed by federal tax laws. Because the maximum
premium limitation is in part dependent upon the Specified Amount for
each Policy, changes in the Specified Amount may affect this
limitation. If at any time you pay a premium that would result in
total premiums exceeding the applicable maximum premium limitation, we
will accept only that portion of the premium which will make total
premiums equal the maximum. We will return any part of the premium in
excess of that amount and we will not accept further premiums until
allowed by the applicable maximum premium limitation.
PAYMENT OF PREMIUMS. We will treat any payments you make first as
payment of any outstanding Policy Debt unless you indicate that the
payment should be treated otherwise. Where you make no indication, we
will treat any portion of a payment that exceeds the amount of any
outstanding Policy Debt as a premium payment.
NET PREMIUMS. The Net Premium is the amount available for investment.
The Net Premium equals the premium paid less the premium expense
charge. (See "CHARGES AND DEDUCTIONS -- Premium Expense Charge.")
ALLOCATING NET PREMIUMS. In the application for a Policy, you can
allocate Net Premiums or portions thereof to the Subaccounts, to the
Declared Interest Option, or both. We will allocate Net Premiums to
the Declared Interest Option if we receive them either
(1) before the date we obtain a signed notice from you that you
have received the Policy, or
(2) before the end of 25 days after the Delivery Date (the date
we issue and mail the Policy to you).
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<PAGE>
Upon the earlier of (1) or (2) above, we will automatically allocate
the Cash Value in the Declared Interest Option, without charge, among
the Subaccounts and Declared Interest Option in accordance with your
allocation instructions.
We allocate Net Premiums received on or after (1) or (2) above in
accordance with your instructions, to the Variable Account, the
Declared Interest Option, or both. You do not waive your cancellation
privilege by sending us the signed notice of receipt of the Policy
(see "THE POLICY -- Examination of Policy (Cancellation Privilege)").
The following additional rules apply to Net Premium allocations:
- You must allocate at least 10% of each premium to any
subaccount of the Variable Account or to the Declared
Interest Option.
- Your allocation percentages must be in whole numbers (we do
not permit fractional percentages).
- You may change the allocation percentages for future Net
Premiums without charge, at any time while the Policy is in
force, by providing us with a written notice signed by you
on a form we accept. The change will take effect on the
date we receive the written notice at the Home Office and
will have no effect on prior cash values.
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EXAMINATION OF POLICY (CANCELLATION PRIVILEGE)
You may cancel the Policy by delivering or mailing written notice or
sending a telegram to us at the Home Office, and returning the Policy
to us at the Home Office before midnight of the 20th day you receive
the Policy. Notice given by mail and return of the Policy by mail are
effective on being postmarked, properly addressed and postage prepaid.
With respect to all Policies, we will refund, within seven days after
receipt of satisfactory notice of cancellation and the returned Policy
at our Home Office, an amount equal to the sum of
- the Cash Value on the Business Day on or next following the
date we receive the Policy at the Home Office,
- any premium expense charges we deducted,
- monthly deductions made on the Policy Date and any Monthly
Deduction Day, and
- amounts approximating the daily mortality and expense risk
charges against the Variable Account.
(Owners in the state of Utah will receive the greater of (1) the
Policy's Cash Value plus an amount approximately equal to any charges
we deducted from premiums, Cash Value and the Variable Account, or (2)
premiums paid.)
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POLICY LAPSE AND REINSTATEMENT
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<PAGE>
LAPSE. Your Policy may lapse (terminate without value) if the Net
Cash Value is insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "CHARGES AND DEDUCTIONS -- Monthly Deduction")
AND a Grace Period expires without a sufficient payment. Insurance
coverage will continue during the Grace Period, but we will deem the
Policy to have no Cash Value for purposes of Policy Loans and
surrenders during such Grace Period. The death proceeds payable
during the Grace Period will equal the amount of the death proceeds
payable immediately prior to the commencement of the Grace Period,
reduced by any due and unpaid monthly deductions.
To avoid lapse and termination of the Policy without value, we must
receive from you during the Grace Period a premium payment that, when
reduced by the premium expense charge (see "CHARGES AND DEDUCTIONS --
Premium Expense Charge"), will be at least equal to three times the
monthly deduction due on the Monthly Deduction Day immediately
preceding the Grace Period (see "CHARGES AND DEDUCTIONS -- Monthly
Deduction"). A Grace Period of 61 days will commence on the date we
send you a notice of any insufficiency.
REINSTATEMENT. Prior to the Maturity Date, you may reinstate a lapsed
Policy at any time within five years of the Monthly Deduction Day
immediately preceding the Grace Period which expired without payment
of the required premium. You must submit the following items to us:
- A written application for reinstatement signed by the
Policyowner and the Insured;
- Evidence of insurability we deem satisfactory;
- A premium that, after the deduction of the premium expense
charge, is at least sufficient to keep the Policy in force
for three months; and
- An amount equal to the monthly cost of insurance for the two
Policy Months prior to lapse.
State law may limit the premium to be paid on reinstatement to an
amount less than that described. To the extent that we did not
deduct the first year monthly administrative charge for a total of
twelve Policy Months prior to lapse, we will continue to deduct such
charge following reinstatement of the Policy until we have assessed
such charge, both before and after the lapse, for a total of 12 Policy
Months. (See "CHARGES AND DEDUCTIONS -- Monthly Deduction"). We will
not reinstate a Policy surrendered for its Cash Value. The lapse of a
Policy with loans outstanding may have adverse tax consequences (see
"FEDERAL TAX MATTERS -- Policy Proceeds").
The effective date of the reinstated Policy will be the Monthly
Deduction Day coinciding with or next following the date we approve
the application for reinstatement.
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SPECIAL TRANSFER PRIVILEGE
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<PAGE>
A Policyowner may, at any time prior to the Maturity Date while the
Policy is in force, convert the Policy to a flexible premium
fixed-benefit life insurance policy by requesting that we transfer all
of the Cash Value in the Variable Account to the Declared Interest
Option. You may exercise this special transfer privilege once each
Policy Year. Once you exercise the special transfer privilege, we
automatically will credit all future premium payments to the Declared
Interest Option, until you request a change in allocation. The
Company will not impose any charge for transfers resulting from the
exercise of the special transfer privilege.
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EXCHANGE PRIVILEGE
The Company will permit the owner of a flexible premium fixed-benefit
life insurance policy ("fixed-benefit policy") issued by the Company
or Western Farm Bureau Life Insurance Company (a company held by the
same holding company as the Company), within 12 months of the policy
date shown in such policy, to exchange his fixed-benefit policy (forms
#434-112 and #834-112 only) for a Policy on the life of the Insured.
After the first 12 months following the policy date shown in these
fixed-benefit policies (as well as certain other fixed-benefit
policies issued by the Company or Western Farm Bureau Life Insurance
Company), the Company will permit the owner of such policy to exchange
his fixed-benefit policy for a Policy when the owner applies for an
increase of $25,000 or more in Specified Amount.
The Policy Date will be the date you sign the application for the
Policy. If an exchange occurs in the first 12 months, the Policy will
have a Specified Amount equal to the specified amount of the
fixed-benefit policy and will require no evidence of insurability to
exercise the exchange privilege. We will place the Insured in the
premium class applicable to the initial specified amount under the
fixed-benefit policy, unless there has been an underwritten increase
in specified amount, in which event we will place the Insured, with
respect to the entire Specified Amount under the Policy, in the
premium class applicable to such increase in specified amount.
If an exchange occurs after the first 12 months, the Policy will have
a Specified Amount equal to the specified amount of the fixed-benefit
policy plus the increase to purchase a Policy, and the increase will
require underwriting to exercise the exchange privilege. We will
place the Insured in the premium class applicable to the initial
specified amount under the fixed-benefit policy, unless there has been
an underwritten increase in specified amount, in which event we will
place the Insured, with respect to the entire amount exchanged, in the
premium class applicable to such increase in specified amount. With
regard to the increase in Specified Amount, we will place the Insured
in the premium class applicable to the increase.
The Company will initially allocate the net cash value of the
fixed-benefit policy to the Declared Interest Option. When the
Company receives, at its Home Office, a notice signed by the
Policyowner that the Policy has been received, the Company will
automatically allocate the Policy's cash value in the Declared
Interest Option, without charge, among the Subaccounts and the
Declared Interest Option pursuant to the allocation instructions set
forth in the application for the Policy.
The Company will waive the premium expense charge (see "CHARGES AND
DEDUCTIONS -- Premium Expense Charge--Sales Charge and Premium Taxes")
on the net cash value of the fixed-benefit policy applied to the
Policy pursuant to an exchange. In addition, the Company will assess
the First Year Monthly Administrative Charge (see "CHARGES AND
DEDUCTIONS -- Monthly Deduction -- First Year
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<PAGE>
Monthly Administrative Charge") only to the extent that the Company
has not assessed 12 monthly per $1,000 charges under the fixed-benefit
policy. We will assess the First Year Monthly Administrative Charge
on an increase in Specified Amount related to a fixed-benefit policy
exchanged after the first 12 months. Otherwise, we will make charges
and deductions in the manner and amounts described elsewhere in the
Prospectus.
With regard to an exchange after the first 12 months of the
fixed-benefit policy, the incontestable and suicide provisions of the
Policy will apply only to the increased amount of coverage, except for
any period remaining on the fixed-benefit policy.
We will not permit an exchanging owner to carry over an outstanding
loan under his fixed-benefit policy. Any outstanding loan and loan
interest must be repaid prior to the date of exchange. If not repaid
prior to the date of exchange, the Company will reflect the amount of
the outstanding loan and interest thereon in the net cash value of the
fixed-benefit policy. To the extent a fixed-benefit policy with an
outstanding loan is exchanged for an unencumbered Policy, the
exchanging owner could recognize income at the time of the exchange up
to the amount of such loan (including any due and unpaid interest on
such loan). (See "FEDERAL TAX MATTERS -- Tax Treatment of Policy
Benefits").
Riders issued on the original fixed-benefit policy which are not
offered in the Policy will not be available on the new Policy. Riders
which are available may be exchanged to the new Policy.
Registered representatives will receive commissions on the increase in
Specified Amount only.
The Policy differs from a fixed-benefit policy in many significant
respects. Most importantly, the Cash Value under this Policy may
consist, entirely on in part, of Subaccount value which fluctuates in
response to the net investment return of the Variable Account. In
contrast, the cash values under a fixed-benefit policy always reflect
interest credited by the Company. While we guarantee a minimum rate
of interest, we have previously credited interest at higher rates.
Accordingly, cash values under a fixed-benefit policy reflect changing
current interest rates and do not vary with the investment performance
of a Variable Account.
Other significant differences between the Policy and a fixed-benefit
policy include:
- additional charges applicable under the Policy not found in
a fixed-benefit policy;
- different surrender charges;
- different death benefits; and
- differences in federal and state laws and regulations
applicable to each of the types of policies.
Owners of a fixed-benefit policy should carefully consider whether it
will be advantageous to replace a fixed-benefit policy with a Policy.
It may not be advantageous to exchange a fixed-benefit policy for a
Policy (or to surrender in full or
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in part a fixed-benefit policy and use the surrender or partial
surrender proceeds to purchase a Policy.)
The Company believes that an exchange of a fixed-benefit policy for a
Policy generally should be treated as a nontaxable exchange within the
meaning of Section 1035 of the Internal Revenue Code of 1986, as
amended. A Policy purchased in exchange will generally be treated as
a newly issued contract as of the effective date of the Policy. This
could have various tax consequences. (See "FEDERAL TAX MATTERS -- Tax
Treatment of Policy Benefits.")
If you surrender your fixed-benefit policy in whole or in part, and
after receipt of the proceeds you use the surrender proceeds or
partial surrender proceeds to purchase a Policy, it will not be
treated as a non-taxable exchange. The surrender proceeds will
generally be includible in income.
Owners of a fixed-benefit policy should consult their tax advisers
before exchanging a fixed-benefit policy for this Policy, or before
surrendering in whole or in part their fixed-benefit policy and using
the proceeds to purchase a Policy.
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POLICY BENEFITS
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While a Policy is in force, it provides for certain benefits prior to
the Maturity Date. Subject to certain limitations, the Policyowner
may at any time obtain all or a portion of the Net Cash Value by
completely or partially surrendering the Policy. (See "POLICY
BENEFITS -- Cash Value Benefits -- Surrender Privileges"). In
addition, the Policyowner has certain policy loan privileges under the
Policies. (See "POLICY BENEFITS -- Loan Benefits -- Policy Loans").
The Policy also provides for the payment of death proceeds upon the
death of the Insured under one of two death benefit options selected
by the Policyowner (see "POLICY BENEFITS -- Death Proceeds -- Death
Benefit Options"), and benefits upon the maturity of a Policy (see
"POLICY BENEFITS -- Benefits at Maturity").
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CASH VALUE BENEFITS
SURRENDER PRIVILEGES. At any time prior to the Maturity Date while
the Policy is in force, you may surrender the Policy in whole or in
part by sending a written request to the Company at its Home Office.
A Surrender Charge to cover the cost of processing the surrender will
be payable upon complete surrender and upon each partial surrender.
The charge is equal to the lesser of $25 or 2.0% of the amount
requested. (See "CHARGES AND DEDUCTIONS -- Surrender Charge"). We
ordinarily mail surrender proceeds ordinarily to the Policyowner
within seven days after we receive a signed request for a surrender at
our Home Office, although we may postpone payments under certain
circumstances. (See "GENERAL PROVISIONS -- Postponement of
Payments").
COMPLETE SURRENDERS. The amount payable on complete surrender of the
Policy is the Net Cash Value at the end of the Valuation Period when
we receive the request, less the Surrender Charge. We may pay this
amount in a lump sum or under one
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of the payment options specified in the Policy, as requested by the
Policyowner. (See "POLICY BENEFITS -- Payment Options"). If you
surrender the entire Net Cash Value, all insurance in force will
terminate. See "FEDERAL TAX MATTERS" for a discussion of the tax
consequences associated with complete surrenders.
PARTIAL SURRENDERS. A Policyowner may obtain a portion of the
Policy's Net Cash Value upon partial surrender of the Policy.
- A partial surrender must be at least $500
- A partial surrender cannot exceed the lesser of (1) the Net
Cash Value less $500 or (2) 90% of the Net Cash Value.
We deduct the surrender charge from the remaining Cash Value. The
Policyowner may request that we pay the proceeds of a partial
surrender in a lump sum or under one of the payment options specified
in the Policy. (See "POLICY BENEFITS -- Payment Options").
We will allocate a partial surrender (together with the surrender
charge) among the Subaccounts and the Declared Interest Option in
accordance with the Policyowner's written instructions. If we do not
receive any such instructions with the request for partial surrender,
we will allocate the partial surrender among the Subaccounts and the
Declared Interest Option in the same proportion that the Cash Value in
each of the Subaccounts and the Cash Value in the Declared Interest
Option, reduced by any outstanding Policy Debt, bears to the total
Cash Value on the date we receive the request at the Home Office.
Partial surrenders will affect both the Policy's Cash Value and the
death proceeds payable under the Policy:
- The Policy's Cash Value will be reduced by the amount of the
partial surrender.
- If the death benefit payable under either death benefit
option both before and after the partial surrender is equal
to the Cash Value multiplied by the specified amount factor
set forth in the Policy, a partial surrender will result in
a reduction in death proceeds equal to the amount of the
partial surrender, multiplied by the specified amount factor
then in effect.
- If the death benefit is not so affected by the specified
amount factor, the reduction in death proceeds will be equal
to the partial surrender. (See "POLICY BENEFITS -- Death
Proceeds").
Partial surrenders will reduce the Policy's Specified Amount by the
amount of Cash Value surrendered if Option B is in effect at the time
of the surrender. If Option A is in effect at the time of the
surrender, there will be no effect on Specified Amount. (See "POLICY
BENEFITS -- Death Proceeds -- Death Benefit Options"). The Specified
Amount remaining in force after a partial surrender may not be less
than the minimum Specified Amount for the Policy in effect on the date
of the partial surrender, as published by the Company. As a result,
the Company will not process any partial surrender that would reduce
the Specified Amount below this minimum.
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If increases in the Specified Amount previously have occurred, a
partial surrender will first reduce the Specified Amount of the most
recent increase, then the next most recent increases successively,
then the coverage under the original application. Thus, a partial
surrender may either increase or decrease the amount of the cost of
insurance charge, depending upon the particular circumstances. (See
"CHARGES AND DEDUCTIONS -- Monthly Deduction -- Cost of Insurance").
For a discussion of the tax consequences associated with partial
surrenders, see "FEDERAL TAX MATTERS".
NET CASH VALUE. Net Cash Value equals the Policy's Cash Value reduced
by any outstanding Policy Debt and increased by any unearned loan
interest.
CALCULATING CASH VALUE. The Policy provides for the accumulation of
Cash Value. The Cash Value of the Policy is equal to the sum of the
Cash Values in each Subaccount, plus the Cash Value in the Declared
Interest Option, including amounts transferred to the Declared
Interest Option to secure outstanding Policy Debt. We determine Cash
Value on each Business Day, and there is no guaranteed minimum Cash
Value.
- Cash Value will reflect a number of factors, including
- Net Premiums paid
- partial surrenders
- Policy Loans
- charges assessed in connection with the Policy
- interest earned on the Cash Value in the Declared
Interest Option
- investment performance of the Subaccounts to which the
Cash Value is allocated.
As of the Policy Date, the Cash Value equals the initial Net Premium
less the monthly deduction made on the Policy Date.
On the Business Day coinciding with or immediately following the date
we receive notice that the Policyowner has received the Policy, but no
later than 25 days after the Delivery Date, we will automatically
transfer the Cash Value (all of which is in the Declared Interest
Option) among the Subaccounts and the Declared Interest Option in
accordance with your percentage allocation instructions. At the end
of each Valuation Period thereafter, the Cash Value in a Subaccount
will equal:
- The total Subaccount units represented by the Cash Value at
the end of the preceding Valuation Period, multiplied by the
Subaccount's unit value for the current Valuation Period;
PLUS
- Any Net Premiums received during the current Valuation
Period which are allocated to the Subaccount; PLUS
- All Cash Values transferred to the Subaccount from the
Declared Interest Option or from another Subaccount during
the current Valuation Period; MINUS
- All Cash Values transferred from the Subaccount to another
Subaccount or to the Declared Interest Option during the
current
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Valuation Period, including amounts transferred to the
Declared Interest Option to secure Policy Debt; MINUS
- All partial surrenders (and any portion of the Surrender
charge) from the Subaccount during the current Valuation
Period; MINUS
- The portion of any monthly deduction charged to the
Subaccount during the current Valuation Period to cover the
Policy Month following the Monthly Deduction Day.
The Policy's total Cash Value in the Variable Account equals the sum
of the Policy's Cash Value in each Subaccount.
UNIT VALUE. Each Subaccount has a Unit Value. When you allocate Net
Premiums or transfer other amounts into a Subaccount, we purchase a
number of units based on the Unit Value of the Subaccount as of the
end of the Valuation Period during which the allocation or transfer is
made. Likewise, when amounts are transferred out of a Subaccount,
units are redeemed on the same basis. On any day, a Policy's Cash
Value in a Subaccount is equal to the number of units held in such
Subaccount, multiplied by the Unit Value of such Subaccount on that
date.
For each Subaccount, we initially set the Unit Value set at $10 when
the Subaccount first purchased shares of the designated Investment
Option. We calculate the Unit Value for each subsequent valuation
period by dividing (a) by (b) where:
(a) is (1) the Net Asset Value of the net assets of the
Subaccount at the end of the preceding Valuation Period,
plus
(2) the investment income and capital gains, realized or
unrealized, credited to the net assets of that Subaccount
during the Valuation Period for which the Unit Value is
being determined, minus
(3) the capital losses, realized or unrealized, charged
against those assets during the Valuation Period, minus
(4) any amount charged against the Subaccount for taxes, or
any amount we set aside during the Valuation Period as a
provision for taxes attributable to the operation or
maintenance of that Subaccount, and minus
(5) a charge no greater than 0.0024548% of the average daily
net assets of the Subaccount for each day in the Valuation
Period. This corresponds to an effective annual rate of .90%
of the average daily net assets of the Subaccount for
mortality and expense risks incurred in connection with the
Policies.
(b) is the number of units outstanding at the end of the
preceding Valuation Period.
The Unit Value for a Valuation Period applies for each day in the
period. We value the assets in the Variable Account at their fair
market value in accordance with accepted accounting practices and
applicable laws and regulations.
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TRANSFERS
The following features apply to transfers under the Policy:
- You may transfer amounts among the Subaccounts an unlimited
number of times in a Policy Year; however, you may only make
one transfer per Policy Year between the Declared Interest
Option and the Variable Account.
- You may make transfers by written request to the Home Office
or, if you elected the "Telephone Transfer Authorization" on
the supplemental application, by calling the Home Office
toll-free at (800) 247-4170.
- The amount of the transfer must be at least $100 or the
total Cash Value in the Subaccount or in the Declared
Interest Option (reduced, in the case of the Declared
Interest Option, by any outstanding Policy Debt), if less
than $100. The Company may, at its discretion, waive the
$100 minimum requirement.
- The transfer will be effective as of the end of the
Valuation Period during which we receive the request at the
Home Office.
- The first transfer in each Policy Year is free. Each time
you subsequently transfer amounts in that Policy Year, we
may assess a transfer charge of $25. Unless paid in cash,
we will deduct the transfer charge from the amount
transferred. Once we issue a Policy, we guarantee the
amount of the transfer charge for the life of the Policy.
(See "CHARGES AND DEDUCTIONS--Transfer Charge.")
- For purposes of these limitations and charges, we consider
all transfers effected on the same day as a single transfer.
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LOAN BENEFITS
POLICY LOANS. So long as the Policy remains in force and has a
positive Net Cash Value, you may borrow money from the Company at any
time using the Policy as the sole security for the Policy Loan. A
loan taken from, or secured by, a Policy may have federal income tax
consequences. (See "FEDERAL TAX MATTERS.")
The maximum amount that you may borrow at any time is 90% of the Cash
Value as of the end of the Valuation Period during which we receive
the request for the Policy Loan at the Home Office, less any
previously outstanding Policy Debt. The Company's claim for repayment
of Policy Debt has priority over the claims of any assignee or other
person.
During any time that there is outstanding Policy Debt, we will treat
payments you make first as payment of outstanding Policy Debt, unless
you indicate that we should treat the payment otherwise. Where no
indication is made, we will treat as a premium payment any portion of
a payment that exceeds the amount of any outstanding Policy Debt.
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<PAGE>
ALLOCATION OF POLICY LOAN. When you take a Policy Loan, we segregate
an amount equal to the Policy Loan within the Declared Interest Option
as security for the Policy Loan. If, immediately prior to the Policy
Loan, the Cash Value in the Declared Interest Option less Policy Debt
outstanding is less than the amount of such Policy Loan, we will
transfer the difference from the subaccounts of the Variable Account,
which have Cash Value, in the same proportions that the Policy's Cash
Value in each Subaccount bears to the Policy's total Cash Value in the
Variable Account. We will determine Cash Values as of the end of the
Valuation Period during which we receive the request for the Policy
Loan at the Home Office.
We normally will mail loan proceeds to you within seven days after
receipt of a written request. Postponement of a Policy Loan may take
place under certain circumstances. (See "GENERAL PROVISIONS --
Postponement of Payments.")
Amounts segregated within the Declared Interest Option as security for
Policy Debt will bear interest at an effective annual rate set by the
Company. (See "POLICY BENEFITS -- Loan Benefits -- Effect on
Investment Performance.")
LOAN INTEREST CHARGED. The interest rate charged on Policy Loans is
not fixed. Initially, it will be the rate shown in the Policy on the
policy data page. The Company may at any time elect to change the
interest rate, subject to the following conditions:
(1) the rate may not exceed 7.4% per year in advance (which is
equal to an effective rate of 8.0%);
(2) any increase in the interest rate may not exceed 1.0% per
calendar year; and
(3) changes in the interest rate may not occur more often than
once in any twelve-month period. The Company will send you
notice of any change in rate. The new rate will take effect
on the Policy Anniversary coinciding with or next following
the date we change the rate.
Interest is payable in advance at the time you make any Policy Loan
(for the remainder of the Policy Year) and on each Policy Anniversary
thereafter (for the entire Policy Year) so long as there is Policy
Debt outstanding. We will subtract interest payable at the time you
make a Policy Loan from the loan proceeds. Thereafter, we will add
interest not paid when due to the existing Policy Debt and it will
bear interest at the same rate charged for Policy Loans. We will
segregate the amount equal to unpaid interest within the Declared
Interest Option in the same manner that amounts for Policy Loans are
segregated within the Declared Interest Option. (See "POLICY BENEFITS
-- Loan Benefits -- Allocation of Policy Loan.")
Because we charge interest in advance, we will add any interest that
has not been earned to the death benefit payable at the Insured's
death and to the Cash Value upon complete surrender, and we will
credit it to the Cash Value in the Declared Interest Option upon
repayment of Policy Debt.
EFFECT ON INVESTMENT PERFORMANCE. Amounts transferred from the
Variable Account as security for Policy Debt will no longer
participate in the investment performance of the Variable Account. We
will credit all amounts held in the Declared Interest
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Option as security for Policy Debt with interest on each Monthly
Deduction Day at an effective annual rate of between 4.5% and 6.0%, as
determined and declared by the Company. We will not credit additional
interest to these amounts. The interest credited will remain in the
Declared Interest Option unless and until transferred by the
Policyowner to the Variable Account, but will not be segregated within
the Declared Interest Option as security for Policy Debt.
Even though you may repay Policy Debt in whole or in part at any time
prior to the Maturity Date if the Policy is still in force, Policy
Loans will affect the Cash Value of a Policy and may affect the death
proceeds payable. The effect could be favorable or unfavorable
depending upon whether the investment performance of the Subaccount(s)
from which the Cash Value was transferred is less than or greater than
the interest rates actually credited to the Cash Value segregated
within the Declared Interest Option as security for Policy Debt while
Policy Debt is outstanding. In comparison to a Policy under which no
Policy Loan was made, Cash Value will be lower where such interest
rates credited were less than the investment performance of the
Subaccount(s), but will be greater where such interest rates were
greater than the performance of the Subaccount(s). In addition, death
proceeds will reflect a reduction of the death benefit by any
outstanding Policy Debt.
POLICY DEBT. Policy Debt equals the sum of all unpaid Policy Loans
and any due and unpaid policy loan interest. Policy Debt is not
included in Net Cash Value, which is equal to Cash Value less Policy
Debt. If Net Cash Value is insufficient on a Monthly Deduction Day to
cover the monthly deduction (see "CHARGES AND DEDUCTIONS -- Monthly
Deduction"), the Company will notify the Policyowner. To avoid lapse
and termination of the Policy without value (see "THE POLICY -- Policy
Lapse and Reinstatement -- Lapse"), the Policyowner must, during the
Grace Period, make a premium payment that, when reduced by the premium
expense charge (see "CHARGES AND DEDUCTIONS -- Premium Expense
Charge"), will be at least equal to three times the monthly deduction
due on the Monthly Deduction Day immediately preceding the Grace
Period (see "CHARGES AND DEDUCTIONS -- Monthly Deduction"). Therefore
the greater the Policy Debt under a Policy, the more likely it would
be to lapse.
REPAYMENT OF POLICY DEBT. You may repay Policy Debt in whole or in
part any time during the Insured's life and before the Maturity Date
so long as the Policy is in force. We subtract any Policy Debt not
repaid from the death benefit payable at the Insured's death, from
Cash Value upon complete surrender or from the maturity benefit. Any
payments made by a Policyowner will be treated first as the repayment
of any outstanding Policy Debt, unless the Policyowner indicates
otherwise. Upon repayment of Policy Debt, we will no longer segregate
within the Declared Interest Option the portion of the Cash Value in
the Declared Interest Option securing the repaid portion of the Policy
Debt, but that amount will remain in the Declared Interest Option
unless and until transferred to the Variable Account by the
Policyowner.
For a discussion of the tax consequences associated with Policy Loans
and lapses, see "FEDERAL TAX MATTERS."
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DEATH PROCEEDS
So long as the Policy remains in force, the Policy provides for the
payment of death proceeds upon the death of the Insured.
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<PAGE>
- You may name one or more primary Beneficiaries or contingent
Beneficiaries and we will pay proceeds to the primary
Beneficiary or a contingent Beneficiary.
- If no Beneficiary survives the Insured, we will pay the
death proceeds to the Policyowner or his estate. We may pay
death proceeds in a lump sum or under a payment option.
(See "POLICY BENEFITS -- Payment Options.")
To determine the death proceeds, we will reduce the death benefit by
any outstanding Policy Debt and increase it by any unearned loan
interest and any premiums paid after the date of death. We will
ordinarily mail proceeds within seven days after receipt by the
Company of Due Proof of Death. We may postpone payment, however,
under certain circumstances. (See "GENERAL PROVISIONS -- Postponement
of Payments.") We pay interest on those proceeds, at an annual rate
of no less than 3.0% or any rate required by law, from the date of
death to the date payment is made.
DEATH BENEFIT OPTIONS. Policyowners designate in the initial
application one of two death benefit options offered under the Policy.
The amount of the death benefit payable under a Policy will depend
upon the option in effect at the time of the Insured's death.
Under Option A, the death benefit will be equal to the greater of
(1) the sum of the current Specified Amount and the Cash Value,
or
(2) the Cash Value multiplied by the specified amount factor.
We will determine Cash Value as of the end of the Business Day
coinciding with or immediately following the date of death. The
specified amount factor is 2.50 for an Insured Attained Age 40 or
below on the date of death. For Insureds with an Attained Age over 40
on the date of death, the factor declines with age as shown in the
Specified Amount Factor Table in Appendix B. Accordingly, under
Option A, the death proceeds will always vary as the Cash Value varies
(but will never be less than the Specified Amount). Policyowners who
prefer to have favorable investment performance and additional
premiums reflected in increased death benefits generally should select
Option A.
Under Option B, the death benefit will be equal to the greater of the
current Specified Amount or the Cash Value (determined as of the end
of the Business Day coinciding with or immediately following the date
of death) multiplied by the specified amount factor. The specified
amount factor is the same as under Option A. Accordingly, under
Option B the death benefit will remain level at the Specified Amount
unless the Cash Value multiplied by the specified amount factor
exceeds the current Specified Amount, in which case the amount of the
death benefit will vary as the Cash Value varies. Policyowners who are
satisfied with the amount of their insurance coverage under the Policy
and who prefer to have favorable investment performance and additional
premiums reflected in higher Cash Value, rather than increased death
benefits, generally should select Option B.
Appendix B shows examples illustrating Option A and Option B.
CHANGING THE DEATH BENEFIT OPTION. You may change the death benefit
option in effect at any time by sending a written request for the
change to the Company at its
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<PAGE>
Home Office. The effective date of such a change will be the Monthly
Deduction Day coinciding with or immediately following the date we
approve the change. A change in death benefit options may have
federal income tax consequences. (See "FEDERAL TAX MATTERS.")
If you change the death benefit option from Option A to Option B, the
current Specified Amount will not change. If you change the death
benefit option from Option B to Option A, we will reduce the current
Specified Amount by an amount equal to the Cash Value on the effective
date of the change. You may not make a change in the death benefit
option if it would result in a Specified Amount which is less than the
minimum Specified Amount in effect on the effective date of the
change, or if after the change the Policy would no longer qualify as
life insurance under federal tax law.
We impose no charges in connection with a change in death benefit
option; however, a change in death benefit option will affect the cost
of insurance charges. (See "CHARGES AND DEDUCTIONS -- Monthly
Deduction -- Cost of Insurance.")
CHANGE IN EXISTING COVERAGE. After a Policy has been in force for one
Policy Year, you may adjust the existing insurance coverage by
increasing or decreasing the Specified Amount. To make a change, you
must send us a written request at our Home Office. Any change in the
Specified Amount may affect the cost of insurance rate and the net
amount at risk, both of which will affect a Policyowner's cost of
insurance charge. (See "CHARGES AND DEDUCTIONS -- Monthly Deduction
-- Cost of Insurance Rate, and -- Net Amount at Risk.") If decreases
in the Specified Amount cause the premiums paid to exceed the maximum
premium limitations imposed by federal tax law (see "THE POLICY --
Premiums -- Premium Limitations"), the decrease will be limited to the
extent necessary to meet these requirements. A change in existing
coverage may have federal income tax consequences. (See "FEDERAL TAX
MATTERS -- Tax Treatment of Policy Benefits.")
Any decrease in the Specified Amount will become effective on the
Monthly Deduction Day coinciding with or immediately following the
date we approve the request. The decrease will first reduce the
Specified Amount provided by the most recent increase, then the next
most recent increases successively, then the Specified Amount under
the original application. The Specified Amount following a decrease
can never be less than the minimum Specified Amount for the Policy in
effect on the date of the decrease. A Specified Amount decrease will
not reduce the Surrender Charge.
To apply for an increase, you must provide us with evidence of
insurability we deem satisfactory. Any approved increase will become
effective on the Monthly Deduction Day coinciding with or immediately
following the date we approve the request. An increase will not
become effective, however, if the Policy's Cash Value on the effective
date would not be sufficient to cover the deduction for the increased
cost of the insurance for the next Policy Month.
CHANGES IN INSURANCE PROTECTION. A Policyowner may increase or
decrease the pure insurance protection provided by a Policy -- the
difference between the death benefit and the Cash Value -- in one of
several ways as insurance needs change. These ways include increasing
or decreasing the Specified Amount of insurance, changing the level of
premium payments and, to a lesser extent, partially surrendering Cash
Value.
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Although the consequences of each of these methods will depend upon
the individual circumstances, they may be summarized as follows:
- A decrease in the Specified Amount will, subject to the
applicable specified amount factor limitations (see "POLICY
BENEFITS -- Death Proceeds -- Death Benefit Options"),
decrease the pure insurance protection and the cost of
insurance charges under the Policy without generally
reducing the Cash Value.
- An increase in the Specified Amount may increase the amount
of pure insurance protection, depending on the amount of
Cash Value and the resultant applicable specified amount
factor. If the insurance protection is increased, the cost
of insurance charge generally will increase as well.
- If you elect Option B, an increased level of premium
payments will increase the Cash Value and reduce the pure
insurance protection, until the Cash Value multiplied by the
applicable specified amount factor exceeds the Specified
Amount. Increased premiums should also increase the amount
of funds available to keep the Policy in force.
- If you elect Option B, a reduced level of premium payments
generally will increase the amount of pure insurance
protection, depending on the applicable specified amount
factor. It also will result in a reduced amount of Cash
Value and will increase the possibility that the Policy will
lapse.
- A partial surrender will reduce the death benefit. (See
"POLICY BENEFITS -- Cash Value Benefits -- Surrender
Privileges.") However, it only affects the amount of pure
insurance protection if the death benefit payable is based
on the specified amount factor, because otherwise the
decrease in the benefit is offset by the amount of Cash
Value withdrawn. The primary use of a partial surrender is
to withdraw cash and reduce Cash Value.
In comparison, an increase in the death benefit due to the operation
of the specified amount factor occurs automatically and is intended to
help assure that the Policy remains qualified as life insurance under
federal tax law. The calculation of the death benefit based upon the
specified amount factor occurs only when the Cash Value of a Policy
reaches a certain proportion of the Specified Amount (which may or may
not occur). Additional premium payments, favorable investment
performance and large initial premiums tend to increase the likelihood
of the specified amount factor becoming operational after the first
few Policy Years. Such increases will be temporary, however, if the
investment performance becomes unfavorable and/or premium payments are
stopped or decreased.
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ACCELERATED PAYMENTS OF DEATH PROCEEDS
In the event that the Insured becomes terminally ill (as defined
below), the Policyowner (if residing in a state that has approved such
an endorsement) may, by written request and subject to the conditions
stated below, have the Company pay all or a portion of the accelerated
death benefit immediately to the Policyowner. If not
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<PAGE>
attached to the Policy beforehand, the Company will issue an
accelerated death benefit endorsement (the "Endorsement") providing
for this right.
For this purpose, an Insured is terminally ill when a physician (as
defined by the Endorsement) certifies that he or she has a life
expectancy of 12 months or less.
The accelerated death benefit is equal to the Policy's death benefit
as described on page 6, up to a maximum of $250,000 (the $250,000
maximum applies in aggregate to all policies issued by the Company on
the Insured), less an amount representing a discount for 12 months at
the interest rate charged for loans under the Policy. The accelerated
death benefit does not include the amount of any death benefit payable
under a rider that covers the life of someone other than the Insured.
In the event that there is a loan outstanding under the Policy on the
date that the Policyowner requests a payment under the Endorsement, we
reduce the accelerated death benefit by a portion of the outstanding
loan in the same proportion that the requested payment under the
Endorsement bears to the total death benefit under the Policy. If the
amount you request to be paid under the Endorsement is less than the
total death benefit under the Policy and the Specified Amount of the
Policy is equal to or greater than the minimum Specified Amount, the
Policy will remain in force with all values and benefits under the
Policy being reduced in the same proportion that the new Policy
benefit bears to the Policy benefit before exercise of the
Endorsement.
There are several other restrictions associated with the Endorsement.
These are:
(1) the Endorsement is not valid if the Policy is within five
years of being matured,
(2) the consent of any irrevocable beneficiary or assignee is
required to exercise the Endorsement,
(3) the Company reserves the right, in its sole discretion, to
require the consent of the Insured or of any beneficiary,
assignee, spouse or other party of interest before
permitting the exercise of the Endorsement,
(4) the Company reserves the right to obtain the concurrence of
a second medical opinion as to whether any Insured is
terminally ill and
(5) the Endorsement is not effective where
(a) the Insured or the Policyowner would be otherwise
required by law to use the Endorsement to meet the
claims of creditors, or
(b) the Insured would be otherwise required by any
government agency to exercise the Endorsement in order
to apply for, obtain or keep a government benefit or
entitlement.
The Endorsement will terminate at the earlier of the end of the grace
period for which any premium is unpaid, upon receipt in the Home
Office of a written request from the Policyowner to cancel the
Endorsement or upon termination of the Policy.
The Company believes that for federal income tax purposes, an
accelerated death benefit payment received under an accelerated death
benefit endorsement should be
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<PAGE>
fully excludable from the gross income of the beneficiary, as long as
the beneficiary is the insured under the Policy. However, the
Policyowner should consult a qualified tax adviser about the
consequences of adding this Endorsement to a Policy or requesting an
accelerated death benefit payment under this Endorsement.
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BENEFITS AT MATURITY
If the Insured is alive and the Policy is in force on the Maturity
Date, the Company will pay to the Policyowner the Policy's Cash Value
as of the end of the Business Day coinciding with or immediately
following the Maturity Date, reduced by any outstanding Policy Debt.
(See "POLICY BENEFITS -- Loan Benefits -- Repayment of Policy Debt.")
We may pay benefits at maturity in a lump sum or under a payment
option. The Maturity Date is Attained Age 95.
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PAYMENT OPTIONS
We may pay death proceeds and Cash Value due at maturity, or upon
complete or partial surrender of a Policy, in whole or in part under a
payment option. There are currently five payment options available.
We also may make payments under any new payment option available at
the time proceeds become payable. In addition, we may pay proceeds in
any other manner acceptable to us.
You may designate an option in the application or notify us in writing
at our Home Office. During the life of the Insured, the Policyowner
may select a payment option; in addition, during that time the
Policyowner may change a previously selected option by sending written
notice to the Company requesting the cancellation of the prior option
and the designation of a new option. If the Policyowner has not
chosen an option prior to the Insured's death, the Beneficiary may
choose an option. The Beneficiary may change a payment option by
sending a written request to the Company, provided that a prior option
chosen by the Policyowner is not in effect.
If no option is chosen, the Company will pay the proceeds of the
Policy in one sum. The Company will also pay the proceeds in one sum
if,
(1) the proceeds are less than $2,000;
(2) periodic payments would be less than $20; or
(3) the payee is an assignee, estate, trustee, partnership,
corporation or association.
Amounts paid under a payment option are paid pursuant to a payment
contract and will not depend upon the investment performance of the
Variable Account. Proceeds applied under a payment option earn
interest at a rate guaranteed to be no less than 3.0% compounded
yearly. The Company may be crediting higher interest rates on the
effective date of the payment contract. The Company may, but is not
obligated to, declare additional interest to be applied to such funds.
If a payee dies, any remaining payments will be paid to a contingent
payee. At the death of the last payee, the commuted value of any
remaining payments will be paid to the last payee's estate. A payee
may not withdraw funds under a payment option unless the Company has
agreed to such withdrawal in the payment contract. The
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<PAGE>
Company reserves the right to defer a withdrawal for up to six months
and to refuse to allow partial withdrawals of less than $250.
Payments under Options 2, 3, 4 or 5 will begin as of the date of the
Insured's death, on surrender or on the Maturity Date. Payments under
Option 1 will begin at the end of the first interest period after the
date proceeds are otherwise payable.
Option 1 -- Interest Income. Periodic payments of interest
earned from the proceeds will be paid. Payments can be annual,
semi-annual, quarterly or monthly, as selected by the payee, and
will begin at the end of the first period chosen. Proceeds left
under this plan will earn interest at a rate determined by the
Company, in no event less than 3.0% compounded yearly. The payee
may withdraw all or part of the proceeds at any time.
Option 2 -- Income for a Fixed Period. Periodic payments will be
made for a fixed period not longer than 30 years. Payments can be
annual, semi-annual, quarterly or monthly. Guaranteed amounts
payable under the plan will earn interest at a rate determined by
the Company, in no event less than 3.0% compounded yearly.
Option 3 -- Life Income with Term Certain. Equal periodic
payments will be made for a guaranteed minimum period elected. If
the payee lives longer than the minimum period, payments will
continue for his or her life. The minimum period can be 0, 5,
10, 15 or 20 years. Guaranteed amounts payable under this plan
will earn interest at a rate determined by the Company, in no
event less than 3.0% compounded yearly.
Option 4 -- Income of a Fixed Amount. Equal periodic payments of
a definite amount will be paid. Payments can be annual,
semi-annual, quarterly or monthly. The amount paid each period
must be at least $20 for each $1,000 of proceeds. Payments will
continue until the proceeds are exhausted. The last payment will
equal the amount of any unpaid proceeds. Unpaid proceeds will
earn interest at a rate determined by the Company, in no event
less than 3.0% compounded yearly.
Option 5 -- Joint and Two-Thirds Survivor Monthly Life Income.
Equal monthly payments will be made for as long as two payees
live. The guaranteed amount payable under this plan will earn
interest at a minimum rate of 3.0% compounded yearly. When one
payee dies, payments of two-thirds of the original monthly
payment will be made to the surviving payee. Payments will stop
when the surviving payee dies.
ALTERNATE PAYMENT OPTION. In lieu of one of the above options, we may
settle the cash value, cash surrender value or death benefit, as
applicable, under any other payment option we make available or under
any other payment option you request and we agree to.
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CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
37
<PAGE>
We deduct certain charges in connection with the Policy to compensate
us for (1) the services and benefits we provide; (2) the costs and
expenses we incur; and (3) the risks we assume, some of which are
described below.
<TABLE>
<S> <C> <C>
SERVICES AND BENEFITS WE - the death benefit, cash and loan benefits under the Policy
PROVIDE: - investment options, including premium allocations
- administration of elective options
- the distribution of reports to Policyowners
COSTS AND EXPENSES WE INCUR: - costs associated with processing and underwriting applications,
issuing and administering the Policy (including any Policy riders)
- overhead and other expenses for providing services and benefits
- sales and marketing expenses
- other costs of doing business, such as collecting premiums,
maintaining records, processing claims, effecting transactions,
and paying Federal, state and local premium and other taxes and fees
RISKS WE ASSUME: - that the cost of insurance charges we may deduct are insufficient
to meet our actual claims because Insureds die sooner than we estimate
- that the costs of providing the services and benefits under the
Policies exceed the charges we deduct
</TABLE>
The nature and amount of these charges are described more fully below.
- --------------------------------------------------------------------------------
PREMIUM EXPENSE CHARGE
Before allocating Net Premiums among the Subaccounts and the Declared
Interest Option, we reduce premiums paid by a premium expense charge
consisting of a sales charge and a charge for premium taxes. The
premium less the premium expense charge equals the Net Premium.
SALES CHARGE. We deduct a sales charge equal to 5.0% of the premium
from each premium to compensate us for expenses incurred in
distributing the Policy. The sales charge in any Policy Year is not
necessarily related to actual distribution expenses incurred in that
year. Instead, we expect to incur the majority of distribution
expenses in the early Policy Years and to recover any deficiency over
the life of the Policy and from our general assets, including amounts
derived from the mortality and expense risk charge.
PREMIUM TAXES. Various states and subdivisions thereof impose a tax
on premiums received by insurance companies. Therefore, the premium
expense charge currently includes a deduction of 2.0% of every premium
for these taxes. Premium taxes vary from state to state. The
deduction represents an amount we consider necessary to pay all
premium taxes imposed by the states and any subdivisions thereof. We
reserve the right to change the amount of this premium tax charge.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTION
We deduct certain charges monthly from the Cash Value of each Policy
("monthly deduction") to compensate us for the cost of insurance
coverage and any additional
38
<PAGE>
benefits added by rider (See "GENERAL PROVISIONS -- Additional
Insurance Benefits"), for underwriting and start-up expenses in
connection with issuing a Policy and for certain administrative costs.
We deduct the monthly deduction on the Policy Date and on each Monthly
Deduction Day. We deduct it from the Declared Interest Option and
each Subaccount in the same proportion that the Policy's Net Cash
Value in the Declared Interest Option and the Policy's Cash Value in
each Subaccount bear to the total Net Cash Value of the Policy. For
purposes of making deductions from the Declared Interest Option and
the Subaccounts, we determine Cash Values as of the end of the
Business Day coinciding with or immediately following the Monthly
Deduction Day. Because portions of the monthly deduction, such as the
cost of insurance, can vary from month to month, the monthly deduction
itself will vary in amount from month to month.
During the first 12 Policy Months and during the 12 Policy Months
immediately following an increase in Specified Amount, the monthly
deduction will include a first year monthly administrative charge.
We make the monthly deduction on the Business Day coinciding with or
immediately following each Monthly Deduction Day and it will equal:
(1) the cost of insurance for the Policy; plus
(2) the cost of any optional insurance benefits added by rider;
plus
(3) the monthly administrative charge.
COST OF INSURANCE. This charge is designed to compensate us for the
anticipated cost of paying death proceeds to Beneficiaries of those
Insureds who die prior to the Maturity Date. We determine the cost of
insurance on a monthly basis, and we determine it separately for the
initial Specified Amount and for any subsequent increases in Specified
Amount. We will determine the monthly cost of insurance charge by
dividing the applicable cost of insurance rate, or rates, by 1,000 and
multiplying the result by the net amount at risk for each Policy
Month.
NET AMOUNT AT RISK. Under Option A the net amount at risk for a
Policy Month is equal to (a) divided by (b); and under Option B the
net amount at risk for a Policy Month is equal to (a) divided by (b),
minus (c), where:
(a) is the Specified Amount;
(b) is 1.0036748;(1) and
(c) is the Cash Value.
We determine the Specified Amount and the Cash Value as of the end of
the Business Day coinciding with or immediately following the Monthly
Deduction Day.
- ----------------------
(1) Dividing by this number reduces the net amount at risk, solely for the
purposes of computing the cost of insurance, by taking into account assumed
monthly earnings at an annual rate of 4.5%.
39
<PAGE>
We determine the net amount at risk separately for the initial
Specified Amount and any increases in Specified Amount. In
determining the net amount at risk for each Specified Amount, we first
consider the Cash Value a part of the initial Specified Amount. If
the Cash Value exceeds the initial Specified Amount, we will consider
it to be a part of any increase in the Specified Amount in the same
order as the increases occurred.
COST OF INSURANCE RATE. We base the cost of insurance rate for the
initial Specified Amount on the Insured's sex, premium class and
Attained Age. For any increase in Specified Amount, we base the cost
of insurance rate on the Insured's sex, premium class and age at last
birthday on the effective date of the increase. Actual cost of
insurance rates may change and we will determine the actual monthly
cost of insurance rates by the Company based on its expectations as to
future mortality experience. However, the actual cost of insurance
rates will never be greater than the guaranteed maximum cost of
insurance rates set forth in the Policy. These guaranteed rates are
based on the 1980 Commissioners' Standard Ordinary Non-Smoker and
Smoker Mortality Table. Current cost of insurance rates are generally
less than the guaranteed maximum rates. Any change in the cost of
insurance rates will apply to all persons of the same age, sex and
premium class whose Policies have been in force the same length of
time.
The cost of insurance rates generally increase as the Insured's
Attained Age increases. The premium class of an Insured also will
affect the cost of insurance rate. The Company currently places
Insureds into a standard premium class or into premium classes
involving a higher mortality risk. In an otherwise identical Policy,
Insureds in the standard premium class will have a lower cost of
insurance rate than those in premium classes involving higher
mortality risk. The standard premium class is also divided into two
categories: tobacco and non-tobacco. (The Company may offer
preferred classes in addition to the standard tobacco and non-tobacco
classes.) Non-tobacco-using Insureds will generally have a lower cost
of insurance rate than similarly situated Insureds who use tobacco,
and preferred plus Insureds will generally have a lower cost of
insurance rate than similarly situated non-tobacco-using Insureds.
We determine the cost of insurance rate separately for the initial
Specified Amount and for the amount of any increase in Specified
Amount. In calculating the cost of insurance charge, we apply the
rate for the premium class on the Policy Date to the net amount at
risk for the initial Specified Amount; for each increase in Specified
Amount, we use the rate for the premium class applicable to the
increase. However, if we calculate the death benefit as the Cash
Value times the specified amount factor, we will use the rate for the
premium class for the most recent increase that required evidence of
insurability for the amount of death benefit in excess of the total
Specified Amount.
ADDITIONAL INSURANCE BENEFITS. The monthly deduction will include
charges for any additional benefits provided by rider. (See "GENERAL
PROVISIONS -- Additional Insurance Benefits.")
MONTHLY ADMINISTRATIVE CHARGE. We have primary responsibility for the
administration of the Policy and the Variable Account. Administrative
expenses include premium billing and collection, recordkeeping,
processing death benefit claims, cash surrenders and Policy changes,
and reporting and overhead costs. As reimbursement for administrative
expenses related to the maintenance of each Policy and the Variable
Account, we assess a $3 monthly administrative charge against each
40
<PAGE>
Policy. Once we issue a Policy, we guarantee the amount of this
charge for the life of the Policy.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. We deduct monthly
administrative charges from Cash Value as part of the monthly
deduction during the first twelve Policy Months and during the twelve
Policy Months immediately following an increase in Specified Amount.
The charge will compensate us for first year underwriting, processing
and start-up expenses incurred in connection with the Policy and the
Variable Account. These expenses include the cost of processing
applications, conducting medical examinations, determining
insurability and the Insured's premium class, and establishing policy
records. We base the charges deducted during the first 12 Policy
Months on the Insured's Attained Age. We base the charges deducted
during the 12 Policy Months following any increase in Specified Amount
on the Insured's age at last birthday on the effective date of the
increase.
The first year monthly administrative charge per $1,000 of Specified
Amount depends on the Specified Amount of the Policy and the age of
the Insured, as shown in the following table:
<TABLE>
<CAPTION>
$25,000 $50,000 $100,000
AGE TO 49,999 TO 99,999 TO 249,000 $250,000+
--- --------- --------- ---------- ---------
<S> <C> <C> <C> <C>
0-25 $0.20 $0.15 $0.10 $0.05
26 0.21 0.16 0.11 0.06
27 0.22 0.17 0.12 0.06
28 0.23 0.18 0.13 0.07
29 0.24 0.19 0.14 0.07
30 0.25 0.20 0.15 0.08
31 0.26 0.21 0.16 0.08
32 0.27 0.22 0.17 0.09
33 0.28 0.23 0.18 0.09
34 0.29 0.24 0.19 0.10
35 0.30 0.25 0.20 0.10
36 0.31 0.26 0.21 0.11
37 0.32 0.27 0.22 0.11
38 0.33 0.28 0.23 0.12
39 0.34 0.29 0.24 0.12
40 0.35 0.30 0.25 0.13
41 0.36 0.31 0.26 0.13
42 0.37 0.32 0.27 0.14
43 0.38 0.33 0.28 0.14
44 0.39 0.34 0.29 0.15
45 0.40 0.35 0.30 0.15
46 0.41 0.36 0.31 0.16
47 0.42 0.37 0.32 0.16
48 0.43 0.38 0.33 0.17
49 0.44 0.39 0.34 0.17
50 0.45 0.40 0.35 0.18
51 0.46 0.41 0.36 0.18
52 0.47 0.42 0.37 0.19
53 0.48 0.43 0.38 0.19
54 0.49 0.44 0.39 0.20
55 & up 0.50 0.45 0.40 0.20
</TABLE>
41
<PAGE>
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TRANSFER CHARGE
- We will impose a transfer charge of $25 for the second and each
subsequent transfer during a Policy Year to compensate us for the
costs in making the transfer.
- Unless paid in cash, we will deduct the transfer charge from the
amount transferred.
- Once we issue a Policy, we guarantee the amount of this charge
for the life of the Policy.
- We will not impose a transfer charge on transfers that occur as a
result of Policy Loans, the exercise of the special transfer
privilege or the initial allocation of Cash Value among the
Subaccounts and the Declared Interest Option following acceptance
of the Policy by the Policyowner.
Currently there is no charge for changing the net premium allocation
instructions.
- --------------------------------------------------------------------------------
SURRENDER CHARGE
Upon partial or complete surrender of a Policy, we assess a charge
equal to the lesser of $25 or 2.0% of the amount surrendered to
compensate us for costs incurred in accomplishing the surrender. We
deduct the surrender charge from the remaining Cash Value.
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VARIABLE ACCOUNT CHARGES
MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily mortality and
expense risk charge from each Subaccount at an effective annual rate
of .90% of the average daily net assets of the Subaccounts. We
guarantee not to increase this charge for the duration of the Policy.
We may realize a profit from this charge and may use such profit for
any lawful purpose, including payment of our distribution expenses.
The mortality risk we assume Company is that Insureds may die sooner
than anticipated and therefore, we may pay an aggregate amount of life
insurance proceeds greater than anticipated. The expense risk assumed
is that expenses incurred in issuing and administering the Policies
will exceed the amounts realized from the administrative charges
assessed against the Policies.
FEDERAL TAXES. Currently no charge is made to the Variable Account
for federal income taxes that may be attributable to the Variable
Account. We may, however, make such a charge in the future. Charges
for other taxes, if any, attributable to the Account may also be made.
(See "FEDERAL TAX MATTERS -- Taxation of the Company.")
INVESTMENT OPTION EXPENSES. The value of net assets of the Variable
Account will reflect the investment advisory fee and other expenses
incurred by each Investment Option. The investment advisory fee and
other expenses applicable to each Investment Option are listed in the
"SUMMARY OF THE POLICY" and described in the prospectus for each
Fund's Investment Option.
42
<PAGE>
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION
Policyowners may allocate Net Premiums and transfer Cash Value to the
Declared Interest Option. Because of exemptive and exclusionary
provisions, we have not registered interests in the Declared Interest
Option under the Securities Act of 1933 and we have not registered the
Declared Interest Option as an investment company under the Investment
Company Act of 1940. Accordingly, neither the Declared Interest Option nor
any interests therein are subject to the provisions of these Acts and, as a
result, the staff of the Securities and Exchange Commission has not
reviewed the disclosures in this Prospectus relating to the Declared
Interest Option. Disclosures regarding the Declared Interest Option may,
however, be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of
statements made in prospectuses. Please refer to the Policy for complete
details regarding the Declared Interest Option.
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
Our General Account supports the Declared Interest Option. The
General Account consists of all assets we own other than those in the
Variable Account and other separate accounts. Subject to applicable
law, we have sole discretion over the investment of the General
Account's assets.
A Policyowner may elect to allocate Net Premiums to the Declared
Interest Option, the Variable Account, or both. The Policyowner may
also transfer Cash Value from the Subaccounts to the Declared Interest
Option, or from the Declared Interest Option to the Subaccounts.
Allocating or transferring funds to the Declared Interest Option does
not entitle a Policyowner to share in the investment experience of the
General Account. Instead, we guarantee that Cash Value in the
Declared Interest Option will accrue interest at an effective annual
rate of at least 4.5%, independent of the actual investment experience
of the General Account.
- --------------------------------------------------------------------------------
DECLARED INTEREST OPTION CASH VALUE
Net premiums allocated to the Declared Interest Option are credited to
the Policy. The Company bears the full investment risk for these
amounts. The Company guarantees that interest credited to each
Policyowner's Cash Value in the Declared Interest Option will not be
less than an effective annual rate of 4.5%. The Company may, in its
sole discretion, credit a higher rate of interest, although it is not
obligated to credit interest in excess of 4.5% per year, and might not
do so. Any interest credited on the Policy's Cash Value in the
Declared Interest Option in excess of the guaranteed rate of 4.5% per
year will be determined in the sole discretion of the Company and may
be changed at any time by the Company, in its sole discretion. The
Policyowner assumes the risk that the interest credited may not exceed
the guaranteed minimum rate of 4.5% per year. The interest credited
to the Policy's Cash Value in the Declared Interest Option that equals
Policy Debt may be greater than 4.5%, but will in no event be greater
than
43
<PAGE>
6.0%. The Cash Value in the Declared Interest Option will be
calculated no less frequently than each Monthly Deduction Day.
The Company guarantees that, at any time prior to the Maturity Date,
the Cash Value in the Declared Interest Option will not be less than
the amount of the Net Premiums allocated or Cash Value transferred to
the Declared Interest Option, plus interest at the rate of 4.5% per
year, plus any excess interest which the Company credits, less the sum
of all policy charges allocable to the Declared Interest Option and
any amounts deducted from the Declared Interest Option in connection
with partial surrenders or transfers to the Variable Account.
- --------------------------------------------------------------------------------
TRANSFERS, SURRENDERS AND POLICY LOANS
You may transfer amounts between the Subaccounts and the Declared
Interest Option. We will impose a transfer charge of $25 in
connection with the transfer unless such transfer is the first
transfer requested by the Policyowner during such Policy Year.
Unless you pay the transfer in cash, we will deduct the transfer
charge from the amount transferred. You may make only one transfer
between the Variable Account and the Declared Interest Option in each
Policy Year. No more than 50% of the Net Cash Value in the Declared
Interest Option may be transferred from the Declared Interest Option
unless the balance in the Declared Interest Option immediately after
the transfer will be less than $1,000. If the balance in the
Declared Interest Option after a transfer would be less than $1,000,
the full Net Cash Value in the Declared Interest Option may be
transferred. A Policyowner may also make surrenders and obtain
Policy Loans from the Declared Interest Option at any time prior to
the Policy's Maturity Date.
We may delay transfers and surrenders from, and payments of Policy
Loans allocated to, the Declared Interest Option for up to six months.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
We issue the Policy in consideration of the statements in the application
and the payment of the initial premium. The Policy, the application, and
any supplemental applications and endorsements make up the entire contract.
In the absence of fraud, we will treat the statements made in an
application or supplemental application as representations and not as
warranties. We will not use any statement to void the Policy or in defense
of a claim unless the statement is contained in the application or any
supplemental application.
- --------------------------------------------------------------------------------
INCONTESTABILITY
The Policy is incontestable, except for fraudulent statements made in the
application or supplemental applications, after it has been in force during
the lifetime of the Insured for two years from the Policy Date or date of
reinstatement. Any increase in Specified Amount will be incontestable only
after it has been in force during the lifetime of the Insured for two years
from the effective date of the increase.
- --------------------------------------------------------------------------------
CHANGE OF PROVISIONS
44
<PAGE>
The Company reserves the right to change the Policy, in the event of future
changes in the federal tax law, to the extent required to maintain the
Policy's qualification as life insurance under federal tax law.
Except as provided in the foregoing paragraph, no one can change any part
of the Policy except the Policyowner and the President, a Vice President,
the Secretary or an Assistant Secretary of the Company. Both must agree to
any change and such change must be in writing. No agent may change the
Policy or waive any of its provisions.
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex was misstated in the application, we will
adjust each benefit and any amount to be paid under the Policy to reflect
the correct age and sex.
- --------------------------------------------------------------------------------
SUICIDE EXCLUSION
If the Policy is in force and the Insured commits suicide, while sane or
insane, within one year from the Policy Date, we will limit life insurance
proceeds payable under the Policy to all premiums paid, reduced by any
outstanding Policy Debt and any partial surrenders, and increased by any
unearned loan interest. If the Policy is in force and the Insured commits
suicide, while sane or insane, within one year from the effective date of
any increase in Specified Amount, we will not pay any increase in the death
benefit resulting from the requested increase in Specified Amount.
Instead, we will refund to the Policyowner an amount equal to the total
cost of insurance applied to the increase.
- --------------------------------------------------------------------------------
ANNUAL REPORT
At least once each year, we will send an annual report to each
Policyowner. The report will show
- the current death benefit,
- the Cash Value in each Subaccount and in the Declared
Interest Option,
- outstanding Policy Debt, and
- premiums paid, partial surrenders made and charges assessed
since the last report.
The report will also include any other information required by state
law or regulation. Further, the Company will send the Policyowner the
reports required by the Investment Company Act of 1940.
- --------------------------------------------------------------------------------
NON-PARTICIPATION
The Policy does not participate in the Company's profits or surplus
earnings. No dividends are payable.
- --------------------------------------------------------------------------------
OWNERSHIP OF ASSETS
The Company shall have the exclusive and absolute ownership and
control over assets, including the assets of the Variable Account.
- --------------------------------------------------------------------------------
WRITTEN NOTICE
45
<PAGE>
You should send any written notice to the Company at our Home Office.
The notice should include the policy number and the Insured's full
name. Any notice we send to a Policyowner will be sent to the address
shown in the application unless you filed an appropriate address
change form with the Company.
- --------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
The Company will usually mail the proceeds of complete surrenders,
partial surrenders and Policy Loans within seven days after we receive
the Policyowner's signed request at the Home Office. The Company will
usually mail death proceeds within seven days after receipt of Due
Proof of Death and maturity benefits within seven days of the Maturity
Date. However, we may postpone payment of any amount upon complete or
partial surrender, payment of any Policy Loan, and payment of death
proceeds or benefits at maturity whenever:
a) the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the New York
Stock Exchange is restricted as determined by the Securities
and Exchange Commission;
b) the Securities and Exchange Commission by order permits
postponement for the protection of Policyowners; or
c) an emergency exists, as determined by the Securities and
Exchange Commission, as a result of which disposal of the
securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the net
assets of the Variable Account.
We also may postpone transfers under these circumstances.
Payments under the Policy which are derived from any amount paid to
the Company by check or draft may be postponed until such time as the
Company is satisfied that the check or draft has cleared the bank upon
which it is drawn.
- --------------------------------------------------------------------------------
CONTINUANCE OF INSURANCE
The insurance under a Policy will continue until the earlier of:
a) the end of the Grace Period following the Monthly Deduction
Day on which the Net Cash Value is less than the monthly
deduction for the following Policy Month;
b) the date the Policyowner surrenders the Policy for its
entire Net Cash Value;
c) the death of the Insured; or
d) the Maturity Date.
Any rider to a Policy will terminate on the date specified in the
rider.
- --------------------------------------------------------------------------------
OWNERSHIP
46
<PAGE>
The Policy belongs to the Policyowner. The original Policyowner is
the person named as owner in the application. Ownership of the Policy
may change according to the ownership option selected as part of the
original application or by a subsequent endorsement to the Policy.
During the Insured's lifetime, all rights granted by the Policy belong
to the Policyowner, except as otherwise provided for in the Policy.
Special ownership rules may apply if the Insured is under legal age
(as defined by state law in the state in which the Policy is
delivered) on the Policy Date.
The Policyowner may assign the Policy as collateral security. The
Company assumes no responsibility for the validity or effect of any
collateral assignment of the Policy. No assignment will bind us
unless in writing and until we receive notice of the assignment at the
Home Office. The assignment is subject to any payment or action we
may have taken before we received notice of the assignment at the Home
Office.
- --------------------------------------------------------------------------------
THE BENEFICIARY
The Policyowner designates the primary Beneficiaries and contingent
Beneficiaries in the application. If changed, the primary Beneficiary
or contingent Beneficiary is as shown in the latest change filed with
the Company. One or more primary or contingent Beneficiaries may be
named in the application. In such case, the proceeds will be paid in
equal shares to the survivors in the appropriate beneficiary class,
unless requested otherwise by the Policyowner.
Unless a payment option is chosen, we will pay the proceeds payable at
the Insured's death in a lump sum to the primary Beneficiary. If the
primary Beneficiary dies before the Insured, we will pay the proceeds
to the contingent Beneficiary. If no Beneficiary survives the
Insured, we will pay the proceeds to the Policyowner or the
Policyowner's estate.
- --------------------------------------------------------------------------------
CHANGING THE POLICYOWNER OR BENEFICIARY
During the Insured's life, the Policyowner and the Beneficiary may be
changed. To make a change, you must send a written request to the
Company at its Home Office. The request and the change must be in a
form satisfactory to the Company and we must actually receive and
record the request. The change will take effect as of the date you
sign the request. The change will be subject to any payment made
before the Company recorded the change. The Company may require
return of the Policy for endorsement.
- --------------------------------------------------------------------------------
ADDITIONAL INSURANCE BENEFITS
Subject to certain requirements, you may add one or more of the
following additional insurance benefits to a Policy by rider:
(1) Universal Cost of Living Increase;
(2) Universal Waiver of Charges;
(3) Universal Adult Term Insurance;
(4) Universal Children's Term Insurance; and
47
<PAGE>
(5) Universal Guaranteed Insurability Option.
We will deduct the cost of any additional insurance benefits as part
of the monthly deduction. (See "CHARGES AND DEDUCTIONS -- Monthly
Deduction.") You may obtain detailed information concerning available
riders from the agent selling the Policy.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who in addition to being
licensed as life insurance agents for the Company, are also registered
representatives of the principal underwriter of the Policies,
EquiTrust Marketing Services, LLC. ("EquiTrust Marketing"). EquiTrust
Marketing, a corporation organized on May 7, 1970, under the laws of
the State of Delaware, is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of
Securities Dealers, Inc. EquiTrust Marketing currently receives
annual compensation of $100 per registered representative for acting
as principal underwriter.
For Policies sold in states other than Kansas, writing agents will
receive commissions based on a commission schedule and rules. The
Company may pay agents first year commissions at a rate not exceeding
50% of minimum initial premiums and 4% of unscheduled premiums paid in
the first Policy Year. Agents will be paid renewal commissions at a
rate equal to 5% of planned periodic premiums and 4% of unscheduled
premiums paid after the first Policy Year. Additional commissions at
a rate not exceeding 50% of the increase in planned periodic premiums
may be paid during the first year following an increase in Specified
Amount.
For Policies sold in Kansas, writing agents will receive commissions
based on a commission schedule and rules. The Company may pay agents
first year commissions at a rate not exceeding 60% of minimum initial
premiums and 3% of unscheduled premiums paid in the first Policy Year.
Agents will be paid renewal commissions at a rate equal to 4% of
planned periodic premiums and 3% of unscheduled premiums paid after
the first Policy Year. Additional commissions at a rate not exceeding
60% of the increase in planned periodic premiums may be paid during
the first year following an increase in Specified Amount.
These commissions (and other distribution expenses, such as production
incentive bonuses, agent's insurance and pensions benefits, agency
management compensation and bonuses and expense allowances) are paid
by the Company. They do not result in any additional charges against
the Policy that are not described above under "CHARGES AND
DEDUCTIONS."
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
INTRODUCTION
48
<PAGE>
The following discussion is general and is not intended as tax advice.
Any person concerned about these tax considerations should consult a
competent tax adviser. This discussion is based on the Company's
understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these
current laws and interpretations, and various changes have been
proposed that would alter these laws in ways that would have
significant adverse impacts. It should be further understood that the
following discussion is not exhaustive and does not purport to be
complete or to cover all situations and that special rules not
described in this Prospectus may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state or
other tax laws.
- --------------------------------------------------------------------------------
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code of 1986, as amended (the
"Code") includes a definition of a life insurance contract for federal
tax purposes. The Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations interpreting and implementing
section 7702 and has issued proposed regulations on certain aspects of
section 7702. If a Policy were determined not to be a life insurance
contract for purposes of section 7702, such Policy would not provide
most of the tax advantages normally provided by a life insurance
policy.
With respect to a Policy issued exclusively on the basis of a standard
premium class, while there is some uncertainty due to the limited
guidance on section 7702, the Company believes that in light of the
proposed regulations such a Policy should meet the section 7702
definition of a life insurance contract. However, with respect to a
Policy issued in whole or in part on a substandard basis (i.e., a
premium class involving higher than standard mortality risk), it is
not clear whether or not such a Policy would satisfy section 7702,
particularly if the Policyowner pays the full amount of premiums
permitted under the Policy. If it is subsequently determined that a
Policy does not satisfy section 7702, the Company will take whatever
steps are appropriate and necessary to attempt to cause such a Policy
to comply with section 7702, including possibly refunding any premiums
paid that exceed the limitations allowable under section 7702
(together with interest or other earnings on any such premiums
refunded as required by law). For these reasons, the Company reserves
the right to modify the Policy as necessary to attempt to qualify it
as a life insurance contract under section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Account to be
"adequately diversified" in order for the Policy to be treated as a
life insurance contract for federal tax purposes. The Variable
Account, through the Fund, intends to comply with the diversification
requirements prescribed in Regulations section 1.817-5, which affect
how each Fund's assets may be invested. Although the investment
adviser of Equitrust Variable Insurance Series Fund is an affiliate of
the Company, the Company does not have control over the Fund or its
investments. Nonetheless, the Company believes that each Investment
Option in which the Variable Account owns shares will be operated in
compliance with the requirements prescribed by the Treasury.
In certain circumstances, owners of variable life insurance contracts
may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In
those circumstances, income and gains from the separate account assets
would be includable in the variable contract owner's gross income.
The
49
<PAGE>
IRS has stated in published rulings that a variable contract owner
will be considered the owner of separate account assets if the
contract owner possesses incidents of ownership in those assets, such
as the ability to exercise investment control over the assets. The
Treasury Department also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not
provide guidance concerning the circumstances in which investor
control of the investments of a segregated asset account may cause the
investor (i.e., the Policyowner), rather than the insurance company,
to be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may
direct their investments to particular subaccounts without being
treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which
it was determined that policy owners were not owners of separate
account assets. For example, a Policyowner has additional flexibility
in allocating premium payments and policy values. These differences
could result in a Policyowner being treated as the owner of a pro rata
portion of the assets of the Variable Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it
expects to issue. The Company therefore reserves the right to modify
the Policy as necessary to attempt to prevent a Policyowner from being
considered the owner of a pro rata share of the assets of the Variable
Account.
The following discussion assumes that the Policy will qualify as a
life insurance contract for federal income tax purposes.
- --------------------------------------------------------------------------------
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the proceeds and cash value
increases of a Policy should be treated in a manner consistent with a
fixed-benefit life insurance policy for federal income tax purposes.
Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary under section 101(a)(l) of the Code.
A change in a Policy's Specified Amount, the payment of an unscheduled
premium, a Policy loan, a partial surrender, a surrender, a lapse with
outstanding indebtedness, a change in death benefit options, the
exchange of a Policy for a fixed-benefit policy (see "THE POLICY --
Special Transfer Privilege") and the assignment of a Policy or the
exercise of the right to change Policyowners (see "GENERAL PROVISIONS
-- Changing the Policyowner or Beneficiary") may have tax consequences
depending upon the circumstances. In addition, federal estate and
state and local estate, inheritance, and other tax consequences of
ownership or receipt of Policy proceeds depend upon the circumstances
of each Policyowner or Beneficiary. Consult a competent tax adviser
for further information.
The Company believes that for federal income tax purposes, an
accelerated death benefit payment received under an accelerated death
benefit endorsement should be fully excludable from the gross income
of the beneficiary, as long as the beneficiary is the insured under
the Policy. However, the Policyowner should consult a qualified tax
adviser about the consequences of adding this Endorsement to a Policy
or requesting an accelerated death benefit payment under this
Endorsement.
50
<PAGE>
The Company further believes that an exchange of a fixed-benefit
policy issued by the Company for a Policy as provided under "THE
POLICY -- Exchange Privilege" generally should be treated as a
non-taxable exchange of life insurance policies within the meaning of
section 1035 of the Code. However, in certain circumstances, the
exchanging owner may receive a cash distribution that might have to be
recognized as income to the extent there was gain in the fixed-benefit
policy. Moreover, to the extent a fixed-benefit policy with an
outstanding loan is exchanged for an unencumbered Policy, the
exchanging owner could recognize income at the time of the exchange up
to the amount of such loan (including any due and unpaid interest on
such loan). An exchanging owner should consult a tax adviser as to
whether an exchange of a fixed-benefit policy for the Policy will have
tax consequences to such owner.
The Policies may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split
dollar insurance plans, executive bonus plans, retiree medical benefit
plans and others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of each individual
arrangement. Therefore, if it is contemplated that a Policy may be
used in any arrangement the value of which depends in part on its tax
consequences, a qualified tax adviser should be consulted regarding
the tax attributes of the particular arrangement.
Generally, the Policyowner will not be deemed to be in constructive
receipt of the cash value, including increments thereof, under the
Policy until there is a distribution. The tax consequences of
distributions from, and loans taken from or secured by, a Policy
depend on whether the Policy is classified as a "modified endowment
contract."
Whether a Policy is or is not a modified endowment contract, upon a
complete surrender or lapse of a Policy, or when benefits are paid at
such Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to tax.
MODIFIED ENDOWMENT CONTRACTS. A Policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in
relation to the death benefit provided under such Policy. The premium
limitation rules for determining whether a Policy is a modified
endowment contract are extremely complex. In general, however, a
Policy will be a modified endowment contract if the accumulated
premiums paid at any time during the first seven policy years exceeds
the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. In addition, if a
Policy is "materially changed," it may cause such Policy to be treated
as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination whether a
Policy will be a modified endowment contract after a material change
generally depends upon the relationship among the death benefit at the
time of such change, the cash value at the time of such change and the
additional premiums paid in the seven policy years starting with the
date on which the material change occurs.
Due to the Policy's flexibility, classification of a Policy as a
modified endowment contract will depend upon the circumstances of each
Policy. Accordingly, a prospective Policyowner should contact a
competent tax adviser before purchasing a
51
<PAGE>
Policy to determine the circumstances under which the Policy would be
a modified endowment contract. In addition, a Policyowner should
contact a competent tax adviser before paying any unscheduled premiums
or changing the planned premium schedule or making any other change
to, including an exchange of, a Policy to determine whether such
premium or change would cause the Policy (or the new Policy in the
case of an exchange) to be treated as a modified endowment contract.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACTS. Policies classified as modified endowment contracts are
subject to the following tax rules:
First, all distributions, including distributions upon surrender
and benefits paid at maturity, from such a Policy are treated as
ordinary income subject to tax up to the amount equal to the
excess (if any) of the cash value immediately before the
distribution over the investment in the Policy (described below)
at such time.
Second, loans taken from, or secured by, such a Policy are
treated as distributions from such a Policy and taxed
accordingly. In this regard, the Internal Revenue Service could
take the position that capitalized interest on such loans will
likely be treated as a taxable distribution.
Third, a 10 percent additional tax is imposed on the portion of
any distribution from, or loan taken from or secured by, such a
Policy that is included in income except where the distribution
or loan is made on or after the Policyowner attains age 59 1/2,
is attributable to the Policyowner's becoming disabled, or is
part of a series of substantially equal periodic payments for the
life (or life expectancy) of the Policyowner or the joint lives
(or joint life expectancies) of the Policyowner and the
Policyowner's Beneficiary.
If a Policy becomes a modified endowment contract after it is issued,
distributions made during the policy year in which it becomes a
modified endowment contract, distributions in any subsequent policy
year and distributions within two years before the Policy becomes a
modified endowment contract will be subject to the tax treatment
described above. This means that a distribution from a Policy that is
not a modified endowment contract could later become taxable as a
distribution from a modified endowment contract.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACTS. Distributions from a Policy that is not classified as a
modified endowment contract are generally treated as first recovering
the investment in the policy (described below) and then, only after
the return of all such investment in the policy, as distributing
taxable income. An exception to this general rule occurs in the case
of a partial surrender, a decrease in the Specified Amount, or any
other change that reduces benefits under the Policy in the first 15
years after the Policy is issued and that results in a cash
distribution to the Policyowner in order for the Policy to continue
complying with the section 7702 definitional limits. In that case,
such distribution will be taxed in whole or in part as ordinary income
(to the extent of any gain in the Policy) under rules prescribed in
section 7702.
Loans from, or secured by, a Policy that is not a modified endowment
contract are not treated as distributions. Instead, such loans are
treated as indebtedness of the Policyowner.
52
<PAGE>
Finally, neither distributions (including distributions upon surrender
or lapse) nor loans from, or secured by, a Policy that is not a
modified endowment contract are subject to the 10 percent additional
tax.
POLICY LOAN INTEREST. Interest paid on any loan under a Policy may
not be deductible. Therefore, a Policyowner should consult a competent
tax adviser before deducting any Policy loan interest.
INVESTMENT IN THE POLICY. Investment in the Policy means
(1) the aggregate amount of any premiums or other consideration
paid for a Policy, minus
(2) the aggregate amount received under the Policy which is
excluded from the gross income of the Policyowner (except that
the amount of any loan from, or secured by, a Policy that is a
modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus
(3) the amount of any loan from, or secured by, a Policy that is
a modified endowment contract to the extent that such amount is
included in the gross income of the Policyowner.
MULTIPLE POLICIES. All modified endowment contracts that are issued
by the Company (or its affiliates) to the same Policyowner during any
calendar year are treated as one modified endowment contract for
purposes of determining the amount includable in gross income under
section 72(e).
- --------------------------------------------------------------------------------
TAXATION OF THE COMPANY
At the present time, the Company makes no charge to the Variable
Account, or to the Policy for any Federal, state or local taxes (other
than state premium taxes) that it incurs that may be attributable to
such Account or to the Policies. The Company, however, reserves the
right in the future to make a charge for any such tax or other
economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Variable Account or to
the Policies.
- --------------------------------------------------------------------------------
EMPLOYMENT-RELATED BENEFIT PLANS
The Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act
of 1964, vary between men and women on the basis of sex. In addition,
legislative, regulatory or decisional authority of some states may
prohibit use of sex-distinct mortality tables under certain
circumstances. The Policy described in this Prospectus contains
guaranteed cost of insurance rates and guaranteed purchase rates for
certain payment options that distinguish between men and women.
Accordingly, employers and employee organizations should consider, in
consultation with legal counsel, the impact of Norris, and Title VII
generally, on any employment-related insurance or benefit program for
which a Policy may be purchased.
- --------------------------------------------------------------------------------
53
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds the assets of the Variable Account. The assets are
kept physically segregated and held separate and apart from the
General Account. The Company maintains records of all purchases and
redemptions of shares by each Investment Option for each corresponding
Subaccount. Additional protection for the assets of the Variable
Account is afforded by a blanket fidelity bond issued by Chubb
Insurance Group in the amount of $5,000,000 covering all the officers
and employees of the Company.
- --------------------------------------------------------------------------------
VOTING RIGHTS
To the extent required by law, the Company will vote the Fund shares
held in the Variable Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from
persons having voting interests in the corresponding Subaccounts. If,
however, the Investment Company Act of 1940 or any regulation
thereunder should be amended or if the present interpretation thereof
should change, and, as a result, the Company determines that it is
permitted to vote the Fund shares in its own right, it may elect to do
so.
The number of votes which a Policyowner has the right to instruct are
calculated separately for each Subaccount and are determined by
dividing a Policy's Cash Value in a Subaccount by the net asset value
per share of the corresponding Investment Option in which the
Subaccount invests. Fractional shares will be counted. The number of
votes of the Investment Option which the Policyowner has the right to
instruct will be determined as of the date coincident with the date
established by that Investment Option for determining shareholders
eligible to vote at such meeting of the Fund. Voting instructions
will be solicited by written communications prior to such meeting in
accordance with procedures established by each Fund. Each person
having a voting interest in a Subaccount will receive proxy materials,
reports and other materials relating to the appropriate Investment
Option.
The Company will vote Fund shares attributable to Policies as to which
no timely instructions are received (as well as any Fund shares held
in the Variable Account which are not attributable to Policies) in
proportion to the voting instructions which are received with respect
to all Policies participating in each Investment Option. Voting
instructions to abstain on any item to be voted upon will be applied
on a pro rata basis to reduce the votes eligible to be cast on a
matter.
Fund shares may also be held by separate accounts of other affiliated
and unaffiliated insurance companies. The Company expects that those
shares will be voted in accordance with instructions of the owners of
insurance policies and contracts issued by those other insurance
companies. Voting instructions given by owners of other insurance
policies will dilute the effect of voting instructions of
Policyowners.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by
state insurance regulatory authorities, disregard voting instructions
if the instructions require that the shares be voted so as to cause a
change in the sub-classification or investment objective of an
Investment Option or to approve or disapprove an investment advisory
contract for an Investment Option. In addition, the Company itself
may disregard voting instructions in favor of changes initiated by a
Policyowner in the investment
54
<PAGE>
policy or the investment adviser of an Investment Option if the
Company reasonably disapproves of such changes. A change would be
disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined
that the change would have an adverse effect on the General Account
in that the proposed investment policy for an Investment Option may
result in overly speculative or unsound investments. In the event the
Company does disregard voting instructions, a summary of that action
and the reasons for such action will be included in the next annual
report to Policyowners.
- --------------------------------------------------------------------------------
STATE REGULATION OF THE COMPANY
The Company, a stock life insurance company organized under the laws
of Iowa, is subject to regulation by the Iowa Insurance Department.
An annual statement is filed with the Iowa Insurance Department on or
before March lst of each year covering the operations and reporting on
the financial condition of the Company as of December 31st of the
preceding year. Periodically, the Iowa Insurance Department examines
the liabilities and reserves of the Company and the Variable Account
and certifies their adequacy, and a full examination of operations is
conducted periodically by the National Association of Insurance
Commissioners.
In addition, the Company is subject to the insurance laws and
regulations of other states within which it is licensed or may become
licensed to operate. Generally, the insurance department of any other
state applies the laws of the state of domicile in determining
permissible investments.
- --------------------------------------------------------------------------------
55
<PAGE>
OFFICERS AND DIRECTORS OF FARM BUREAU LIFE INSURANCE COMPANY
The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West Des Moines, Iowa 50266.
The principal occupation shown reflects the principal employment of
each individual during the past five years.
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY LAST FIVE YEARS
---------------- ---------------
Kenneth R. Ashby, Director Farmer; President, Utah Farm Bureau
Federation and affiliated companies
and Ashby's Valley View Farms; Vice
President and Director, Utah Farm
Bureau Insurance Co.; Director,
Millard County Water Conservancy
District, American Farm Bureau
Federation and affiliated companies,
Multi States Farmers Service Co., FBL
Financial Group, Inc. and Universal
Assurors Life Insurance Company
Al Christopherson, Director Farmer; President, Minnesota Farm
Bureau Federation; Director, FBL
Financial Group, Inc., Universal
Assurors Life Insurance Company, Farm
Bureau Mutual Insurance Company and
FBL Insurance Brokerage, Inc.
Ernest A. Glienke, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance
Brokerage, Inc., Utah Farm Bureau
Insurance Company and FBL Financial
Services, Inc.
Philip A. Hemesath, Director Farmer
Craig D. Hill, Director Farmer; President, CAPA Hill, Inc.;
Director, Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage,
Inc., Utah Farm Bureau Insurance
Company and FBL Financial Services,
Inc.
Daniel L. Johnson, Director Farmer; Farm Bureau Mutual Insurance
Company, FBL Insurance Brokerage, Inc.
and FBL Financial Services, Inc.
Richard G. Kjerstad, Director Farmer; President and Director, South
Dakota Farm Bureau Federation and
South Dakota Farm Bureau Mutual
Insurance Company; Director, FBL
Financial Group, Inc. and Universal
Assurors Life Insurance Company
Lindsey D. Larsen, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance
Brokerage, Inc., Utah Farm Bureau
Insurance Company and FBL Financial
Services, Inc.
David R. Machacek, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance
Brokerage, Inc., and FBL Financial
Services, Inc.
Donald O. Narigon, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance
Brokerage, Inc., and FBL Financial
Services, Inc.
56
<PAGE>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY LAST FIVE YEARS
---------------- ---------------
Bryce P. Neidig, Director Farmer; President, Nebraska Farm
Bureau Federation, Nebraska Farm
Bureau Services, Inc., Farm Bureau
Insurance Company of Nebraska,
Nebraska Farm Bureau Insurance Agency,
Inc.; Director, American Agriculture
Insurance Company, American
Agriculture Insurance Agency, Inc.,
American Farm Bureau Service Company,
American Farm Bureau Federation,
American Agricultural Communications
Systems, Inc., Western Agricultural
Insurance Co., Western Agricultural
Management Corp., FBL Financial Group,
Inc., Blue Cross/Blue Shield of
Nebraska and Universal Assurors Life
Insurance Company
Charles E. Norris, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance
Brokerage, Inc. and FBL Financial
Services, Inc.
Keith R. Olsen, Director Farmer
Bennett M. Osmonson, Director Farmer
Howard D. Poulson, Director Farmer; President, Wisconsin Farm
Bureau Federation, Rural Mutual
Insurance Company and Midwest
Livestock Producers; Director, FBL
Financial Group, Inc. and Universal
Assurors Life Insurance Company
Sally A. Puttmann, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance
Brokerage, Inc. and FBL Financial
Services, Inc.
Beverly L. Schnepel, Director Farmer; Director, Farm Bureau Mutual
Insurance Company, FBL Insurance
Brokerage, Inc. and FBL Financial
Services, Inc.
F. Gary Steiner, Director Farmer; Director, Wisconsin Farm
Bureau Insurance Company and Bank of
Alma (Alma, WI)
Edward M. Wiederstein, Farmer; Chairman and Director, FBL
President and Director Financial Group, Inc.; President and
Director, Iowa Farm Bureau Federation,
FBL Insurance Brokerage, Inc., Farm
Bureau Mutual Insurance Company, Utah
Farm Bureau Insurance Company, FBL
Financial Services, Inc., Universal
Assurors Life Insurance Company and
Farm Bureau Agricultural Business
Corporation; Director, Multi-Pig
Corporation, Western Agricultural
Insurance Company, Western Ag
Insurance Agency, Inc., Western Farm
Bureau Life Insurance Company and
American Ag Insurance Company
Craig A. Lang, Vice President Farmer; Director, Growmark, Inc.,
and Director Western Farm Bureau Life Insurance
Company, Utah Farm Bureau Insurance
Company, Vice President and Director,
Farm Bureau Mutual Insurance Company,
FBL Insurance Brokerage, Inc. and FBL
Financial Services, Inc., Vice
President, Universal Assurors Life
Insurance Company
57
<PAGE>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY LAST FIVE YEARS
---------------- ---------------
Richard D. Harris, Senior Senior Vice President and
Vice President and Secretary-Treasurer, Farm Bureau
Secretary - Treasurer Mutual Insurance Company, FBL
Insurance Brokerage, Inc., Universal
Assurors Life Insurance Company, Utah
Farm Bureau Insurance Company, Western
Farm Bureau Life Insurance Company,
FBL Financial Services, Inc. and FBL
Financial Group, Inc.; Senior Vice
President and Assistant
Secretary-Treasurer, South Dakota Farm
Bureau Mutual Insurance Company
Stephen M. Morain, Senior Senior Vice President and General
Vice President and Counsel, FBL Financial Group, Inc.
General Counsel
Thomas R. Gibson, Chief Chief Executive Officer, FBL Financial
Executive Officer Group, Inc.
William J. Oddy, Executive Chief Operating Officer, FBL Financial
Vice President and Group, Inc.
General Manager
Timothy J. Hoffman, Vice Vice President, Chief
President Property/Casualty Officer, FBL
Financial Group, Inc.
James W. Noyce, Chief Chief Financial Officer, FBL Financial
Financial Officer Group, Inc.
Barbara J. Moore, Vice Vice President-Property/Casualty
President Operations, FBL Financial Group, Inc.
JoAnn W. Rumelhart, Vice Vice President-Life Operations, FBL
President-Life Financial Group, Inc.
Operations
John M. Paule, Vice President Vice President-Corporate
- Corporate Administration, FBL Financial Group,
Administration Inc.
Lynn E. Wilson, Vice Vice President-Life Sales, FBL
President- Financial Group, Inc.
Life Sales
F. Walter Tomenga, Vice Vice President-Corporate Affairs and
President - Corporate Marketing Services, FBL Financial
Affairs and Marketing Group, Inc.
Services
Robert L. Tatge, Vice Vice President-Property/Casualty
President Operations, FBL Financial Group, Inc.
LouAnn Sandburg, Vice Vice President-Investments and
President - Investments Assistant Treasurer, FBL Financial
and Assistant Treasurer Group, Inc.
Thomas E. Burlingame, Vice Vice President-Associate General
President - Associate Counsel, FBL Financial Group, Inc.
General Counsel
Kathryn Coleson Horner, Accounting Vice President, FBL
Accounting Vice Financial Group, Inc.
President
Dennis M. Marker, Investment Investment Vice President,
Vice President, Administration, FBL Financial Group,
Administration Inc.
58
<PAGE>
NAME AND POSITION PRINCIPAL OCCUPATION
WITH THE COMPANY LAST FIVE YEARS
---------------- ---------------
Paul Grinvalds, Variable Variable Operations Vice President,
Operations Vice Appointed Actuary, FBL Financial
President Group, Inc.
James P. Brannen, Tax and Tax and Investment Accounting Vice
Investment Accounting President, FBL Financial Group, Inc.
Vice President
Ronald J. Palmer, Agency Agency Services Vice President, FBL
Services Vice President Financial Group, Inc.
Christopher G. Daniels, Life Life Product Development and Pricing
Product Development and Vice President, FBL Financial Group,
Pricing Vice President Inc.
James M. Mincks, Human Human Resources Vice President, FBL
Resources Vice President Financial Group, Inc.
Don Seibel, GAAP Accounting GAAP Accounting Vice President, FBL
Vice President Financial Group, Inc.
Scott Shuck, Marketing Marketing Services Vice President, FBL
Services Vice President Financial Group, Inc.
Jim Streck, Traditional Traditional Operations Vice President,
Operations Vice FBL Financial Group, Inc.
President
Blake D. Weber, Sales Sales Services Vice President, FBL
Services Vice President Financial Group, Inc.
Kermit J. Larson, Agency Vice Agency Vice President, Farm Bureau
President Life Insurance Company
Larry W. Riley, Agency Vice Agency Vice President, Farm Bureau
President Life Insurance Company
John F. Mottet, Agency Vice Agency Vice President, Farm Bureau
President Life Insurance Company
Richard J. January, Senior Senior Agency Vice President, Farm
Agency Vice President Bureau Life Insurance Company
Cyrus S. Winters, Senior Senior Agency Vice President, Farm
Agency Vice President Bureau Life Insurance Company
Michael J. Tousley, Senior Senior Agency Vice President, Farm
Agency Vice President Bureau Life Insurance Company
Ronnie G. Lee, Agency Vice Agency Vice President, Farm Bureau
President Life Insurance Company
Art Sieler, Agency Vice Agency Vice President, Farm Bureau
President Life Insurance Company
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided
advice on certain legal matters relating to federal securities laws
applicable to the issuance of the flexible premium variable life
insurance policy described in this Prospectus. All matters of Iowa
law pertaining to the Policy, including the validity of the Policy and
the Company's right to issue the Policy under Iowa Insurance Law, have
been passed
59
<PAGE>
upon by Stephen M. Morain, Senior Vice President and General Counsel
of the Company.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
The Company, like other insurance companies, is involved in lawsuits.
Currently, there are no class action lawsuits naming the Company as a
defendant or involving the Variable Account. In some lawsuits
involving other insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of
any litigation cannot be predicted with certainty, the Company
believes that at the present time, there are no pending or threatened
lawsuits that are reasonably likely to have a material adverse impact
on the Variable Account or the Company.
- --------------------------------------------------------------------------------
EXPERTS
The financial statements of the Variable Account at December 31, 1998
and for each of the three years in the period ended December 31, 1998,
and of the Company at December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998, appearing herein,
have been audited by Ernst & Young LLP, independent auditors, as set
forth in their respective reports thereon appearing elsewhere herein
and are included in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
[Financial Statements to be provided by amendment.]
Actuarial matters included in this Prospectus have been examined by
Christopher G. Daniels, FSA, MAAA, Life Product Development and
Pricing Vice President, as stated in the opinion filed as an exhibit
to the registration statement.
- --------------------------------------------------------------------------------
YEAR 2000
Like other investment funds, financial and business organizations and
individuals around the world, the Variable Account could be adversely
affected if the computer systems used by the Company and other service
providers do not properly process and calculate date-related
information and data from and after January 1, 2000. The Company has
completed a comprehensive assessment of the Year 2000 issue and
developed a plan to address the issue in a timely manner. The Company
has and will utilize both internal and external resources to
reprogram, or replace, and test the software for Year 2000
modifications. The Company anticipates completing the Year 2000
project prior to any anticipated impact on its operating systems.
The date on which the Company believes it will complete the Year 2000
modifications is based on management's best estimates, which were
derived utilizing numerous assumptions of future events. The Company
also recognizes there are outside influences and dependencies relative
to its Year 2000 effort, over which it has little or no control.
However, the Company is putting effort into ensuring these
considerations will have minimal impact. These would include the
continued availability of certain resources, third-party modification
plans and many other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ from
those anticipated.
- --------------------------------------------------------------------------------
60
<PAGE>
OTHER INFORMATION
A registration statement has been filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, with
respect to the Policy offered hereby. This Prospectus does not
contain all the information set forth in the registration statement
and the amendments and exhibits to the registration statement, to all
of which reference is made for further information concerning the
Variable Account, the Company and the Policy offered hereby.
Statements contained in this Prospectus as to the contents of the
Policy and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments
as filed.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
The Variable Account's statement of net assets as of December 31, 1998
and the related statements of operations and changes in net assets for
each of the three years in the period ended December 31, 1998, and the
consolidated balance sheets of the Company at December 31, 1998 and
1997 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1998, appearing herein, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their
respective reports thereon appearing elsewhere herein.
[Financial Statements to be provided by amendment.]
61
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS AND CASH VALUES
The following tables illustrate how the death benefits, Cash Values
and Surrender Values of a Policy may vary over an extended period
of time at certain ages, assuming hypothetical gross rates of
investment return for the Investment Options equivalent to constant
gross annual rates of 0%, 4%, 8% and 12%. The hypothetical rates of
investment return are for purposes of illustration only and should
not be deemed a representation of past or future rates of
investment return. Actual rates of return for a particular Policy
may be more or less than the hypothetical investment rates of
return and will depend on a number of factors including the
investment allocations made by a Policyowner. Also, values would
be different from those shown if the gross annual investment
returns averaged 0%, 4%, 8% and 12% over a period of years but
fluctuated above and below those averages for individual Policy
Years.
The amounts shown are as of the end of each Policy Year. The tables
assume that the assets in the Investment Options are subject to an
annual expense ratio of 0.___% of the average daily net assets. This
annual expense ratio is based on the average of the expense ratios of
each of the Investment Options available under the Policy for the last
fiscal year and takes into account current expense reimbursement
arrangements. The fees and expenses of each Investment Option vary,
and in 1998 the total fees and expenses ranged from an annual rate of
0.___% to an annual rate of _____% of average daily net assets. For
information on Investment Option expenses, see the prospectuses for
the Investment Options.
The tables reflect deduction of the premium expense charge, the
monthly Policy expenses charge, the first-year monthly administrative
charge, the first-year monthly expense charge, the daily charge for
the Company's assumption of mortality and expense risks, and cost of
insurance charges for the hypothetical Insured. The surrender values
illustrated in the tables also reflect deduction of applicable
surrender charges. The current charges and the higher guaranteed
maximum charges the Company may charge are reflected in separate
tables on each of the following pages.
Applying the current charges and the average Investment Option fees
and expenses of 0.___% of average net assets, the gross annual rates
of investment return of 0%, 4%, 8% and 12% would produce net annual
rates of return of ____%, ____%, ____% and _____%, respectively, on a
guaranteed basis, and ____%, ____%, ____% and _____%, respectively, on
a current basis.
The hypothetical values shown in the tables do not reflect any charges
for federal income taxes against the Variable Account since the
Company is not currently making such charges. However, such charges
may be made in the future and, in that event, the gross annual
investment rate of return would have to exceed 0%, 4%, 8% or 12% by an
amount sufficient to cover tax charges in order to produce the death
benefits and Cash Values illustrated. (See "FEDERAL TAX MATTERS --
Taxation of the Company.")
The tables illustrate the Policy values that would result based upon
the hypothetical investment rates of return if premiums are paid as
indicated, if all Net Premiums are allocated to the Variable Account
and if no Policy Loans have been made. The tables are also based on
the assumptions that the Policyowner has not requested an increase
62
<PAGE>
or decrease in Specified Amount, and that no partial surrenders or
transfers have been made.
For comparative purposes, the second column of each table shows the
amount to which the premiums would accumulate if an amount equal to
those premiums were invested to earn interest at 5% compounded
annually.
* * *
Upon request, the Company will provide a comparable illustration based
upon the proposed insured's age, sex and premium class, the Specified
Amount or premium requested, and the proposed frequency of premium
payments.
[Illustrations to be provided by amendment.]
63
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS
OPTION A EXAMPLE. For purposes of this example, assume that the
Insured's Attained Age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option A, a Policy with a Specified
Amount of $50,000 will generally provide a death benefit of $50,000
plus Cash Value. Thus, for example, a Policy with a Cash Value of
$5,000 will have a death benefit of $55,000 ($50,000 + $5,000); a Cash
Value of $10,000 will provide a death benefit of $60,000 ($50,000 +
$10,000). The death benefit, however, must be at least 2.50
multiplied by the Cash Value. As a result, if the Cash Value of the
Policy exceeds $33,333, the death benefit will be greater than the
Specified Amount plus Cash Value. Each additional dollar of Cash
Value above $33,333 will increase the death benefit by $2.50. A
Policy with a Specified Amount of $50,000 and a Cash Value of $40,000
will provide a death benefit of $100,000 ($40,000 x 2.50); a Cash
Value of $60,000 will provide a death benefit of $150,000 ($60,000 x
2.50).
Similarly, any time Cash Value exceeds $33,333, each dollar taken out
of Cash Value will reduce the death benefit by $2.50. If, for
example, the Cash Value is reduced from $40,000 to $35,000 because of
partial surrenders, charges, or negative investment performance, the
death benefit will be reduced from $100,000 to $87,500. If at any
time, however, Cash Value multiplied by the specified amount factor is
less than the Specified Amount plus the Cash Value, then the death
benefit will be the current Specified Amount plus Cash Value of the
Policy.
The specified amount factor becomes lower as the Insured's Attained
Age increases. If the Attained Age of the Insured in the example above
were, for example, 50 (rather than under 40), the specified amount
factor would be 1.85. The amount of the death benefit would be the sum
of the Cash Value plus $50,000 unless the Cash Value exceeded $58,824
(rather than $33,333), and each dollar then added to or taken from the
Cash Value would change the death benefit by $1.85 (rather than
$2.50).
OPTION B EXAMPLE. For purposes of this example, assume that the
Insured's Attained Age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option B, a Policy with a $50,000
Specified Amount will generally pay $50,000 in death benefits.
However, because the death benefit must be equal to or be greater than
2.50 multiplied by the Cash Value, any time the Cash Value of the
Policy exceeds $20,000, the death benefit will exceed the $50,000
Specified Amount. Each additional dollar added to Cash Value above
$20,000 will increase the death benefit by $2.50. A Policy with a
$50,000 Specified Amount and a Cash Value of $30,000 will provide
death proceeds of $75,000 ($30,000 x 2.50); a Cash Value of $40,000
will provide a death benefit of $100,000 ($40,000 x 2.50); a Cash
Value of $50,000 will provide a death benefit of $125,000 ($50,000 x
2.50).
Similarly, so long as Cash Value exceeds $20,000, each dollar taken
out of Cash Value will reduce the death benefit by $2.50. If, for
example, the Cash Value is reduced from $25,000 to $20,000 because of
partial surrenders, charges, or negative investment performance, the
death benefit will be reduced from $62,500 to $50,000. If at any
time, however, the Cash Value multiplied by the specified amount
factor is
64
<PAGE>
less than the Specified Amount, the death benefit will equal the
current Specified Amount of the Policy.
The specified amount factor becomes lower as the Insured's Attained
Age increases. If the Attained Age of the Insured in the example
above were, for example, 50 (rather than between 0 and 40), the
specified amount factor would be 1.85. The death proceeds would not
exceed the $50,000 Specified Amount unless the Cash Value exceeded
approximately $27,028 (rather than $20,000), and each dollar then
added to or taken from the Cash Value would change the life insurance
proceeds by $1.85 (rather than $2.50).
<TABLE>
<CAPTION>
ATTAINED AGE SPECIFIED AMOUNT FACTOR
Specified Amount Factor Table
<S> <C>
40 or younger 2.50
41 2.43
42 2.36
43 2.29
44 2.22
45 2.15
46 2.09
47 2.03
48 1.97
49 1.91
50 1.85
51 1.78
52 1.71
53 1.64
54 1.57
55 1.50
56 1.46
57 1.42
58 1.38
59 1.34
60 1.30
61 1.28
62 1.26
63 1.24
64 1.22
65 1.20
66 1.19
67 1.18
68 1.17
69 1.16
70 1.15
71 1.13
72 1.11
73 1.09
74 1.07
75 to 90 1.05
91 1.04
92 1.03
93 1.02
94 1.01
95 or older 1.00
</TABLE>
65
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Article XII of the Company's By-Laws provides for the indemnification by the
Company of any person who is a party or who is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Article
XII also provides for the indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its factor by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
offer, employee or agent of another corporation, partnership, joint venture,
trust or another enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification will be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)A
The Company represents that the aggregate charges under the Contracts are
reasonable in relation to the services rendered, the expenses to be incurred and
the risks assumed by the Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
The Prospectus consisting of 65 pages.
The undertaking to file reports.
1
<PAGE>
The undertaking pursuant to Rule 484.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons:
Stephen M. Morain, Esquire
Messrs. Sutherland, Asbill & Brennan LLP
Ernst & Young LLP, Independent Auditors
Christopher G. Daniels, FSA, MSAA, Life Product Development and Pricing
Vice President
The following exhibits:
<TABLE>
<S> <C> <C> <C>
1.A. 1. Certified Resolution of the Board of Directors of the Company
establishing the Variable Account. (5)
2. None.
3. (a) Form of Principal Underwriting Agreement. (5)
(b) Forms of Career Agent's Contract. (5)
(c) Commission schedules. (See Exhibit 3(b)(I) above.) (5)
4. None.
5. (a) Form of Policy. (1)
(b) State variation of Form of Policy. (1)
(c) Form of Application. (1)
(d) Revised Policy Form. (2)
(e) 1995 Revised Policy Form. (3)
(f) Accelerated Death Benefit Rider. (3)
(g) 1996 Revised Policy Form (4)
(h) 1996 Revised Application Form (4)
6. (a) Certificate of Incorporation of the Company. (5)
(b) By-Laws of the Company. (5)
7. None.
8. None.
9. Form of Participation Agreement. (5)
10. Form of Application (see Exhibit 1.A.(5)(b) above.)
2. See Exhibit 1.A.(5) above.
3. (a) Opinion and Consent of Stephen M. Morain, Esquire.
(b) Consent of Messrs. Sutherland, Asbill & Brennan LLP (filed by
amendment.)
4. None.
5. Not applicable.
6. Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Life Product
Development and Pricing Vice President.
7. Consent of Ernst & Young LLP (filed by amendment.)
8. Memorandum describing the Company's conversion procedure (included in
Exhibit 9 hereto).
9. Memorandum describing the Company's issuance, transfer and redemption
procedures for the Policy. (5)
</TABLE>
*Attached as an exhibit.
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on September 4, 1987.
(2) Incorporated herein by reference to Post-Effective Amendment No. 6 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on April 6, 1993.
(3) Incorporated herein by reference to Post-Effective Amendment No. 9 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on May 1, 1995.
(4) Incorporated herein by reference to Post-Effective Amendment No. 11 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on May 1, 1997.
(5) Incorporated herein by reference to Post-Effective Amendment No. 12 to the
Registration Statement on Form S-6 (File No. 33-12789) filed with the
Securities and Exchange Commission on May 1, 1998.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, Farm
Bureau Life Variable Account, has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized in the City of
West Des Moines, State of Iowa, on the 8th day of February, 1999.
<TABLE>
<S> <C> <C>
Farm Bureau Life Insurance Company
Farm Bureau Life Variable Account
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------------
Edward M. Wiederstein
President
Farm Bureau Life Insurance Company
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the dates set forth below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ EDWARD M. WIEDERSTEIN President and Director
- ------------------------------ [Principal Executive February 8, 1999
Edward M. Wiederstein Officer]
Senior Vice President and
/s/ RICHARD D. HARRIS Secretary-Treasurer
- ------------------------------ [Principal Financial February 8, 1999
Richard D. Harris Officer]
/s/ JAMES W. NOYCE Chief Financial Officer
- ------------------------------ [Principal Accounting February 8, 1999
James W. Noyce Officer]
- ------------------------------ Vice President and
Craig A. Lang* Director February 8, 1999
- ------------------------------
Kenneth R. Ashby* Director February 8, 1999
- ------------------------------
Al Christopherson* Director February 8, 1999
- ------------------------------
Ernest A. Glienke* Director February 8, 1999
- ------------------------------
Philip A. Hemesath* Director February 8, 1999
- ------------------------------
Craig D. Hill* Director February 8, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
- ------------------------------
Daniel L. Johnson* Director February 8, 1999
- ------------------------------
Richard G. Kjerstad* Director February 8, 1999
- ------------------------------
Lindsey D. Larsen* Director February 8, 1999
- ------------------------------
David R. Machacek* Director February 8, 1999
- ------------------------------
Donald O. Narigon* Director February 8, 1999
- ------------------------------
Bryce P. Neidig* Director February 8, 1999
- ------------------------------
Charles E. Norris* Director February 8, 1999
- ------------------------------
Keith R. Olsen* Director February 8, 1999
- ------------------------------
Bennett M. Osmonson* Director February 8, 1999
- ------------------------------
Howard D. Poulson* Director February 8, 1999
- ------------------------------
Sally A. Puttmann* Director February 8, 1999
- ------------------------------
Beverly L. Schnepel* Director February 8, 1999
- ------------------------------
F. Gary Steiner* Director February 8, 1999
</TABLE>
<PAGE>
SIGNATURES
*By /s/ STEPHEN M. MORAIN
-------------------------
Stephen M. Morain
ATTORNEY-IN-FACT,
PURSUANT TO POWER OF
ATTORNEY.
