Registration No. 33-13481
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 17 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
(Exact Name of Depositor)
The Principal Financial Group
Des Moines, Iowa 50392-0100
(Address of Depositor's Principal Executive Offices)
David J. Brown
Principal Mutual Life Insurance Company
The Principal Financial Group
Des Moines, Iowa 50392-0300
(Name and address of agent for service)
Telephone Number, Including Area Code: (515) 247-5111
Please send copies of all communications to
J. SUMNER JONES
Jones & Blouch
2100 Pennsylvania Ave., N.W.
Washington, DC 20037
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
__X__ on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
This post-effective amendment designates a new effective date for a
_____ previously filed post-effective amendment.
Title of Securities: Flexible Premium Variable Life Insurance Policy.
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
Registration Statement on Form S-6
Cross Reference Sheet
Items of
Form N-8B-2 Captions in Prospectus
1.............. Cover Page
2.............. Cover Page
3.............. Not Applicable
4.............. Distribution of the Policy
5.............. Principal Mutual Life Insurance Company Variable Life
Separate Account
6(a)........... Not Applicable
6(b)........... Not Applicable
7.............. Not Required
8.............. Not Required
9.............. Legal Proceedings
10(a).......... Ownership, Beneficiaries, Assignment
10(b).......... Calculation of Accumulated Value; Unit Values; Net
Investment Factor; Valuations in Connection with a
Policy; Participating Policy
10(c), 10(d)... Summary (Transfers; Policy Loans; Surrender,
Termination and Reinstatement; Policy Cancellation);
Death Benefits and Rights; Policy Values (Transfers;
Policy Loans; Surrender); Charges and Deductions
(Surrender Charge)
10(e).......... Summary (Surrender, Termination and Reinstatement);
Premiums (Policy Termination; Reinstatement);
Registration Statement
10(f).......... Other Matters (Voting Rights)
10(g)(1),
10(g)(2),
10(h)(1),
10(h)(2)....... Principal Mutual Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion, or Substitution of Investments)
10(g)(3),
10(g)(4),
10(h)(3),
10(h)(4)....... Not Applicable
10(i).......... Principal Mutual Life Insurance Company Variable Life
Separate Account, Policy Values; General Provisions
(Addition, Deletion, or Substitution of Investments;
Optional Insurance Benefits; Policy Proceeds);
Federal Tax Matters
11............. Principal Mutual Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion, or Substitution of Investments)
12(a).......... Cover page
12(b).......... Not Applicable
12(c).......... Principal Mutual Life Insurance Company Variable Life
Separate Account (Principal Balanced Fund, Inc.;
Principal Bond Fund, Inc.; Principal Capital
Accumulation Fund, Inc.; Principal Emerging Growth
Fund, Inc.; Principal High Yield Fund, Inc.; Principal
Money Market Fund, Inc.)
12(d).......... Distribution of the Policy
12(e).......... Not Applicable
13(a).......... Principal Mutual Life Insurance Company Variable Life
Separate Account; Charges and Deductions
13(b), 13(c),
13(d), 13(e),
13(f), 13(g)... Not Applicable
14............. Distribution of the Policy
15............. Summary (Premiums); Preimums
16............. Summary (Principal Mutual Life Insurance
Company Variable Life Separate Account); Principal
Mutual Life Insurance Company Variable Life Separate
Account; Policy Values; General Provisions (Addition,
Deletion, or Substitution of Investments)
17(a), 17(b),
17(c).......... Captions referenced under Items 10(c), 10(d), 10(e),
and 10(i) above
18(a).......... Summary (Policy Value); Policy Values (Calculation of
Accumulated Value; Unit Values; Net Investment Factor;
Valuations in Connection with a Policy)
18(b).......... Not Applicable
18(c).......... Summary (Policy Loans); Policy Values (Policy Loans)
18(d).......... Not Applicable
19............. Other Matters (Voting Rights; Statement of Values)
20(a), 20(b)... Principal Mutual Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion, or Substitution of Investments); Other
Matters (Voting Rights)
20(c), 20(d),
20(e), 20(f)... Not Applicable
21(a), 21(b)... Summary (Policy Loans); Policy Values
21(c).......... Not Applicable
22............. General Provisions (The Contract; Incontestability)
23............. Not Applicable
24............. Summary; Special Plans
25............. Description of Principal Mutual Life Insurance Company
26............. Not Applicable
27............. Description of Principal Mutual Life Insurance Company
28............. Officers and Directors of Principal Mutual Life
Insurance Company
29............. Description of Principal Mutual Life Insurance Company
30............. Not Applicable
31............. Not Applicable
32............. Not Applicable
33............. Not Applicable
34............. Not Applicable
35............. Description of Principal Mutual Life Insurance Company
36............. Not Applicable
37............. Not Applicable
38(a).......... Summary (Principal Mutual Life Insurance Company
Variable Life Separate Account); Principal Mutual Life
Insurance Company Variable Life Separate Account;
Distribution of the Policy
38(b), 38(c)... Distribution of the Policy
39(a), 39(b)... Distribution of the Policy
40............. Not Applicable
41(a).......... Description of Principal Mutual Life Insurance Company;
Distribution of the Policy
41(b), 41(c)... Not Applicable
42............. Not Applicable
43............. Not Applicable
44(a), 44(b),
44(c).......... Summary (Principal Mutual Life Insurance Company
Variable Life Separate Account; Transfers; Policy
Loans; Surrender, Termination, and Reinstatement;
Policy "Free Look"); Principal Mutual Life Insurance
Company Variable Life Separate Account; Policy Values;
Charges and Deductions
45............. Not Applicable
46(a).......... Captions referenced under items 44(a) above
46(b).......... Not Applicable
47............. Not Applicable
48............. Not Applicable
49............. Not Applicable
50............. Not Applicable
51(a) - (j).... Summary; Description of Principal Mutual Life
Insurance Company; Principal Mutual Life Insurance
Company Variable Life Separate Account; General
Provisions; Distribution of the Policy
52(a).......... Principal Mutual Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion, or Substitution of Investments)
52(b).......... Not Applicable
52(c).......... Captions referenced in 10(g) and 10(h) above
52(d).......... Not Applicable
53(a).......... Summary (Tax Consequences of the Policy); Federal Tax
Matters
53(b).......... Not Applicable
54............. Not Applicable
55............. Not Applicable
56............. Not Applicable
57............. Not Applicable
58............. Not Applicable
59............. Not Applicable
<PAGE>
Prospectus Dated __________________________
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
FLEX VARIABLE LIFE -- FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
"Flex Variable Life," the flexible premium variable life insurance policy
(the "Policy" or the "Policies") offered by Principal Mutual Life Insurance
Company ("Company") and described in this Prospectus is designed to provide
lifetime insurance protection and maximum flexibility in connection with premium
payments and death benefits. A policyowner may, within limits, vary the
frequency and amount of premium payments and increase or decrease the face
amount of the life insurance benefit under the Policy. This flexibility allows a
policyowner to provide for changing life insurance needs within a single
insurance policy.
Neither premium payments nor death benefits are deposits or obligations of,
or guaranteed by or endorsed by any bank. Premium payments and death benefits
are not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency.
A schedule of premium payments is established for a Policy in accordance
with policyowner preference. A minimum premium is required during the first
twelve policy months. At other times, failure to pay premiums will not cause a
Policy to terminate so long as its accumulated value, less the surrender charge
and unpaid policy loans and loan interest, is sufficient on a Policy processing
day to allow deduction of the cost of insurance and other charges.
Premium payments, less a 2% premium tax charge and a 5% sales load, are
allocated according to policyowner direction to one or more Divisions of the
Principal Mutual Life Insurance Company Variable Life Separate Account
("Separate Account"), except for premiums received during the first 45 days from
the policy date, which are allocated for that period to the Money Market
Division of the Separate Account. Each Division invests exclusively in shares
representing an interest in a corresponding account of the Principal Variable
Contracts Fund, Inc. organized by the Company. The accompanying prospectus
describes the investment objectives and the attendant risks of the accounts
currently offered as investment choices under the Policy: Balanced Account, Bond
Account, Capital Value Account, High Yield Account, MidCap Account and Money
Market Account.
Accumulated value and duration of coverage under the Policy will, and the
death benefit may, increase or decrease based upon the investment experience of
the Divisions of the Separate Account. The accumulated value will also reflect
the amount and frequency of premium payments, surrenders of accumulated value,
policy loans and loan interest, interest earned on loaned amounts, and the
charges and deductions connected with the Policy. The policyowner bears the
entire investment risk as to the Policy's accumulated value, which is not
guaranteed.
The Policy provides a death benefit upon the insured's death. The
policyowner chooses one of two death benefit options. Under Option 1, the death
benefit is the greater of the face amount of the Policy or the accumulated value
on the date of death multiplied by an applicable percentage based upon the
insured's attained age. Under Option 2, the death benefit is the greater of the
face amount of the Policy plus the accumulated value on the date of the
insured's death or the Policy's accumulated value multiplied by the applicable
percentage. The policyowner may, under certain conditions, change from one death
benefit option to the other.
The policyowner generally may obtain policy loans at any time the Policy
has loan value prior to the Policy's maturity date. In addition, subject to
certain restrictions, the Policy's accumulated value may be partially or totally
surrendered. Surrender charges consisting of a contingent deferred sales load
and a contingent deferred administration charge may be imposed upon total
surrender of a Policy. The amount of surrender charge assessed per $1,000 of
face amount is based upon the issue age and sex (where allowed by law) of the
insured and the policy year at the time of surrender.
Prospective purchasers of this Policy are advised that replacement of
existing insurance coverage may not be financially advantageous. It may also be
disadvantageous to purchase a Policy as a means to obtain additional insurance
protection if the purchaser already owns a flexible premium variable life
insurance policy.
This Prospectus is valid only if accompanied or preceded by the current
prospectus for Principal Variable Contracts Fund, Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Please Read This Prospectus Carefully And Retain It For Future Reference.
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS ................................. 4
SUMMARY ................................................... 5
The Policy............................................ 5
Principal Mutual Life Insurance Company
Variable Life Separate Account ....................... 5
Premiums.............................................. 5
Charges and Deductions ............................... 6
Maturity Proceeds..................................... 6
Death Benefit and Proceeds............................ 6
Adjustment Options.................................... 7
Policy Values......................................... 7
Transfers............................................. 7
Policy Loans.......................................... 7
Surrender, Termination and Reinstatement.............. 8
Policy "Free Look".................................... 9
Distribution of the Policy............................ 9
Tax Consequences of the Policy........................ 9
DESCRIPTION OF PRINCIPAL MUTUAL
LIFE INSURANCE COMPANY .....................................9
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY VARIABLE LIFE SEPARATE
ACCOUNT....................................................10
Balanced Account......................................11
Bond Account..........................................11
Capital Value Account.................................11
High Yield Account....................................11
MidCap Account........................................12
Money Market Account..................................12
PREMIUMS...................................................12
Purchase Procedures...................................12
Payment of Premiums...................................13
Premium Limitations...................................13
Allocation of Premiums................................14
Policy "Free Look"....................................14
Policy Termination....................................15
Reinstatement.........................................15
DEATH BENEFITS AND RIGHTS..................................16
Death Proceeds........................................16
Death Benefit.........................................16
Applicable Percentage.................................16
Change in Death Benefit Option........................17
Adjustment Options....................................17
POLICY VALUES..............................................18
Calculation of Accumulated Value......................18
Units.................................................19
Unit Values...........................................19
Net Investment Factor.................................19
Valuations in Connection with a Policy................20
Transfers.............................................20
Policy Loans..........................................20
Surrender.............................................21
CHARGES AND DEDUCTIONS.....................................21
Premium Expense Charge................................21
Monthly Deduction.....................................22
Mortality and Expense Risks Charge....................22
Transaction Charge....................................22
Surrender Charge......................................23
Other Charges.........................................27
Special Plans.........................................27
OTHER MATTERS..............................................27
Voting Rights.........................................27
Statement of Value....................................28
Service Available by Telephone........................28
GENERAL PROVISIONS.........................................29
Addition, Deletion, or Substitution of
Investments...........................................29
Optional Insurance Benefits...........................29
Death Benefit Guarantee Rider.........................29
The Contract..........................................30
Incontestability......................................30
Misstatements.........................................30
Suicide...............................................30
Ownership.............................................30
Beneficiaries.........................................30
Benefit Instructions..................................30
Postponement of Payments..............................31
Assignment............................................31
Policy Proceeds.......................................31
Participating Policy..................................32
Right to Exchange Policy..............................32
DISTRIBUTION OF THE POLICY.................................32
OFFICERS AND DIRECTORS OF PRINCIPAL
MANAGEMENT CORPORATION.....................................33
OFFICERS AND DIRECTORS OF PRINCIPAL
MUTUAL LIFE INSURANCE COMPANY..............................33
STATE REGULATION OF PRINCIPAL
MUTUAL LIFE INSURANCE COMPANY..............................35
FEDERAL TAX MATTERS........................................35
Tax Status of the Company
and the Separate Account..............................35
Charges for Taxes.....................................35
Diversification Standards.............................35
Life Insurance Status of Policy.......................35
Modified Endowment Contract Status....................36
Policy Surrenders and Partial Surrenders..............37
Policy Loans and Interest Deductions..................37
Corporate Alternative Minimum Tax.....................37
Exchange or Assignment of Policies....................37
Withholding...........................................37
Taxation of Accelerated Death Benefits................37
Other Tax Issues......................................37
EMPLOYEE BENEFIT PLANS.....................................38
LEGAL PROCEEDINGS..........................................38
LEGAL OPINION..............................................38
INDEPENDENT AUDITORS.......................................38
REGISTRATION STATEMENT.....................................38
FINANCIAL STATEMENTS.......................................38
Variable Life Separate Account Financial Statement ...39
The Principal Financial Group Financial Statement.....43
Report of Independent Auditors........................48
Variable Life Separate Account
Financial Statements..................................49
Report of Independent Auditors........................61
The Principal Financial Group(R)
Financial Statements..................................62
APPENDIX - ILLUSTRATIONS OF POLICY
VALUES AND DEATH BENEFITS..................................96
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
DOES NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING
DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, THE
PROSPECTUS OF PRINCIPAL VARIABLE CONTRACTS FUND, INC. OR THE STATEMENT OF
ADDITIONAL INFORMATION OF THAT FUND.
GLOSSARY OF SPECIAL TERMS
Attained Age - The age last birthday on the prior policy anniversary.
Division - A part of the Principal Mutual Life Insurance Company Variable
Life Separate Account which is invested in shares of an account of a mutual
fund.
Face Amount - The minimum death benefit of a Policy so long as the Policy
remains in force.
General Account - The assets of Principal Mutual Life Insurance Company
other than those allocated to any of the separate accounts of Principal Mutual
Life Insurance Company.
Guideline Annual Premium - The level annual payment necessary to provide
the future benefit under a Policy, through maturity, based on the 1980
Commissioners Standard Ordinary Mortality Table, a 5% assumed interest rate, and
the fees and charges specified for a Policy.
Internal Revenue Code - The Internal Revenue Code of 1954, as amended, and
regulations promulgated thereunder. Reference to the Internal Revenue Code means
such Internal Revenue Code or the corresponding provisions of any subsequent
revenue code and any regulations thereunder.
Investment Account - An account established under a Policy for a
policyowner with respect to a Division of the Principal Mutual Life Insurance
Company Variable Life Separate Account.
Maturity Date - The policy anniversary following the insured's 95th
birthday.
Monthly Date - The day of the month which is the same as the policy date.
For example, if the policy date is June 10, 1998, the first monthly date is July
10, 1998.
Mutual Fund - Principal Variable Contracts Fund, Inc., or other registered
open-end investment companies substituted therefor or added for investment by a
Division of the Principal Mutual Life Insurance Company Variable Life Separate
Account.
Policy date - The policy date is the date by which both the application and
a premium payment in an amount at least equal to the required minimum initial
premium for the Policy have been received in the home office of the Company.
Policy Years and Anniversaries - The policy years and anniversaries
computed from the policy date. Example: If the policy date is May 5, 1998, the
first policy year ends on May 4, 1999 and the first policy anniversary falls on
May 5, 1999.
Principal Mutual Life Insurance Company Variable Life Separate Account - A
separate account established by Principal Mutual Life Insurance Company under
Iowa law to receive premiums under the Policies offered by this Prospectus and
other variable life insurance contracts issued by Principal Mutual Life
Insurance Company.
Prorated Basis - In the same proportion as the value of a particular
investment account for a Policy bears to the total value of all investment
accounts for that Policy.
Valuation Date - The date as of which the net asset value of an account of
a mutual fund is determined.
Valuation Period - The period between the time as of which the net asset
value of an account of a mutual fund is determined on one valuation date and the
time as of which such value is determined on the next following valuation date.
Written Request - Actual delivery to Principal Mutual Life Insurance
Company at its home office in Des Moines, Iowa, of a written notice or request
on a form supplied or approved by Principal Mutual Life Insurance Company.
SUMMARY
THE FOLLOWING SUMMARY INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
The Policy
The Policy is designed to provide a policyowner with lifetime insurance
protection and flexibility in connection with the amount and frequency of
premium payments and the amount of life insurance proceeds payable under the
Policy. A policyowner may, subject to certain limitations, vary the frequency
and amount of premium payments. The Policy allows a policyowner to adjust the
amount of life insurance payable, without having to purchase a new Policy, by
increasing or decreasing the face amount. Thus, as insurance needs or financial
conditions change, a policyowner has the flexibility to adjust life insurance
proceeds and vary the premium payments. The Policy is a life insurance contract
with a death benefit, accumulated value, and other features traditionally
associated with whole life insurance. It is called "flexible premium" because
unlike traditional insurance contracts, there is no fixed schedule of premium
payments, although a minimum premium is required during the first twelve policy
months. Each policyowner establishes a preferred schedule of premium payments
(planned periodic premiums).
The Policy is called "variable" because the accumulated value, duration of
coverage and, under certain circumstances, the death benefit may increase or
decrease depending upon the investment experience of the Division or Divisions
of the Separate Account to which premium payments, less a premium tax charge of
2% and a 5% sales load, have been allocated. Generally, favorable investment
experience will increase a Policy's accumulated value and unfavorable investment
experience will reduce its accumulated value. Prospective purchasers of a Policy
should be aware that there is no guarantee of accumulated value in a Policy.
Principal Mutual Life Insurance Company Variable Life Separate Account
The Separate Account is a separate account established by the Company
pursuant to the insurance laws of the State of Iowa and is organized as a unit
investment trust under the Investment Company Act of 1940. Policyowners may
select from six Divisions of the Separate Account ("Account"). Each Division
invests exclusively in shares representing interests in a corresponding Account
of the Principal Variable Contracts Fund, Inc. (the "Fund"). (The Company may
form other Divisions of the Separate Account or other separate accounts in the
future, thereby creating additional investment choices under a Policy.) Each
Account has a different investment objective. The Separate Account is
administered and accounted for as part of the general business of the Company,
but the income, gains, or losses of the Separate Account are credited to or
charged against the assets held in the Separate Account in accordance with the
terms of the Policy, without regard to other income or gains or losses arising
out of any other business that the Company conducts. The assets of the Separate
Account will be available to cover the liabilities of the Company's general
account only to the extent that the assets of the Separate Account exceed the
liabilities of the Separate Account arising under the Policies.
Premiums
An initial payment is required as the first premium. This required initial
premium payment is three times the minimum monthly premium shown on the Policy's
data pages. The minimum monthly premium is the amount that, if paid, will keep
the Policy in force for one month, taking into account the current monthly
deduction and surrender charge. Payment of a minimum premium is required during
the first twelve policy months (the "Minimum Required Premium"). The Company
allows payments in accordance with the planned periodic premium schedule
established by the policyowner in the application (annual, semi-annual,
quarterly, or pre-authorized withdrawal payments of premium on a monthly basis).
However, if the minimum monthly premium is less than $30 ($15 if the insured is
ages 0-14), only a planned periodic premium schedule that would result in a
payment of $30 or more ($15 or more if the insured is ages 0-14) will be made
available to the policyowner. The Company also allows unscheduled premium
payments of $30 or more. The planned periodic premium schedule indicates the
preference of the policyowner only, and other than payment of the Minimum
Required Premium, payment of premiums is not required. (However, the death
benefit guarantee premium must be paid to maintain the death benefit guarantee
rider. See "Death Benefit Guarantee Rider.") Changes in frequency, as well as
increases or decreases in the amount of planned periodic premiums, may be made.
However, the total of all premiums, planned and otherwise, cannot exceed the
current maximum premium limitations set forth in the Internal Revenue Code to
qualify a Policy as a life insurance contract. At any time there is an
outstanding policy loan, if a payment cannot be identified as a premium payment,
it will be considered a loan repayment.
The initial premium payment and all other premium payments received during
the first 45 days from the policy date, after deduction of the premium tax
charge of 2% and the 5% sales load, are allocated to the Money Market Division
of the Separate Account. On the 46th day from the policy date, the accumulated
value held in the Money Market Division is transferred to the Divisions in
accordance with the policyowner's direction for allocation of premium payments.
Premium payments received after the first 45 days from the policy date are
allocated among the Divisions in accordance with the directions in the
application for the Policy.
Charges and Deductions
There is a premium expense charge deducted from each premium payment. The
amount remaining after deduction of the premium expense charge is the "net
premium." The premium expense charge includes a sales load of 5% to partially
compensate the Company for sales expenses incurred with respect to the Policy.
In addition, a sales load of up to a maximum of 25% of the minimum first year
premium may be imposed as a part of a surrender charge upon total surrender or
termination of a Policy for insufficient value. Also included in the premium
expense charge is a charge of 2% for premium taxes. The premium tax charge,
which cannot be changed, is not expected to exceed the premium taxes charged to
the Company.
There is a monthly deduction from the Policy's accumulated value in the
Divisions equal to the cost of insurance, the cost of additional benefits
provided by riders attached to the Policy and a monthly administration charge
which is guaranteed never to exceed $5.00 per month. The current monthly
administration charge for a Policy is $4.75 per month.
The cost of insurance charge is calculated on each monthly date. The cost
of insurance rate is based on the sex (where allowed by law), attained age, and
risk classification of the insured. Current monthly cost of insurance rates will
be determined by the Company based upon its expectations as to future mortality
experience. Cost of insurance rates are guaranteed not to exceed the maximum
rates based upon the 1980 Smoker and Nonsmoker Commissioners Standard Ordinary
Mortality Tables, age last birthday. Where allowed by law, the table used will
be male or female according to the sex of the insured. Additionally, the
guaranteed maximum cost of insurance rates will reflect the insured's risk
classification.
A mortality and expense risks charge will be imposed on a daily basis on
the assets of each Division. The current mortality and expense risks charge is
.0020548% on a daily basis (.75% on an annual basis) and is guaranteed to not
exceed .0024658% on a daily basis (.90% on an annual basis).
A charge consisting of a contingent deferred sales load and a contingent
deferred administration charge may be imposed for total surrender of a Policy or
termination of a Policy for insufficient value. The amount of surrender charge
assessed per $1,000 of face amount is based upon the issue age and sex (where
allowed by law) of the insured and the policy year at the time of surrender.
There is no surrender charge imposed upon partial surrenders of accumulated
value.
A transaction charge of $25 is imposed on transfers of accumulated value
between Divisions exceeding four per policy year. A transaction charge of the
lesser of $25 or two percent of the amount surrendered is imposed upon partial
surrenders of accumulated value.
An investment advisory fee is charged against the assets of each Account to
compensate the Fund's investment advisor. In addition, each Account incurs other
normal expenses of corporate operation.
Maturity Proceeds
If the insured under a Policy is living on the Policy's maturity date,
which is the Policy anniversary following the birthday on which the insured
reaches age 95, the Company will pay the Policy's maturity proceeds to the
policyowner. A Policy's maturity proceeds are the Policy's accumulated value
less any Policy loans and unpaid loan interest on the maturity date. If maturity
proceeds are paid under a Policy, the Policy terminates with no further benefits
payable. On the Policy's maturity date, the Company will pay the excess of the
Policy's face amount over the maturity proceeds, provided certain conditions are
met. (See "Death Benefit Guarantee Rider.")
Death Benefit and Proceeds
The death proceeds under a Policy are payable to the beneficiary when the
insured dies, subject to all provisions and conditions of the Policy. The death
proceeds, determined as of the date of the insured's death, are: the death
benefit described below, plus proceeds from any benefit riders on the insured's
life, less any Policy loans and loan interest, and less any overdue monthly
deductions if the insured dies during a grace period. All or part of the death
proceeds may be paid in cash or applied under one or more of the benefit options
available under the Policy, subject to certain restrictions. The Company pays
interest on the death proceeds from the date of death until the date of payment
or until applied under a benefit option. Interest is at a rate the Company
determines, but not less than required by state law.
There are two options available for the death benefit under a Policy. If a
policyowner selects Option 1, the death benefit will be equal to the greater of
the face amount of the Policy or the accumulated value on the date of death
multiplied by an applicable percentage specified in the Internal Revenue Code.
If a policyowner selects Option 2, the death benefit will be the greater of the
face amount of the Policy plus the accumulated value on the date of death or the
accumulated value on the date of death multiplied by the applicable percentage.
A policyowner may make a written request to change the death benefit option
on or after the first Policy anniversary. Any change must be approved by the
Company before it takes effect. Changes in death benefit option are limited to
two per policy year. If the request is to change from Option 1 to Option 2, the
face amount will be reduced by the amount of the accumulated value of the Policy
on the effective date of the change. A request to change from Option 1 to Option
2 will not be approved if the face amount in effect after the change would be
less than $25,000. Evidence of insurability satisfactory to the Company under
its underwriting rules then in effect may be required on a change from Option 1
to Option 2. If the request is to change from Option 2 to Option 1, the face
amount will be increased by the amount of the accumulated value of the Policy on
the effective date of the change. No evidence of insurability is required for a
change from Option 2 to Option 1. The effective date of any change will be the
monthly date that coincides with or next follows the day the request for change
is approved by the Company.
Adjustment Options
Subject to certain conditions, the face amount of a Policy may be adjusted
upon the written request of the policyowner. Any written request to adjust the
face amount of a Policy must be approved by the Company. No request to adjust
the face amount of a Policy will be approved if a Policy is in a grace period or
if monthly deductions are being waived under a rider. In addition, a decrease in
face amount may be requested only after the first Policy anniversary and may not
reduce the face amount of a Policy below $25,000. A requested face amount
increase must be at least $5,000 and is subject to evidence of insurability
satisfactory to the Company under its underwriting rules then in effect. Any
adjustment in face amount of a Policy will be effective on the monthly date that
coincides with or next follows the date the Company approves the request,
subject to a payment by the policyowner in an amount not less than the new
minimum monthly premium for the Policy after any such increase in face amount.
The new minimum monthly premium will take into account the Policy's surrender
value. There are no charges assessed in connection with adjustments of a Policy,
although an increase in face amount will result in surrender charges applicable
to the increase.
Policy Values
The Policy provides for accumulated value. The Policy's accumulated value
will reflect the amount and frequency of premium payments, the investment
experience of the chosen Division or Divisions, surrenders of accumulated value,
Policy loans and loan interest, interest earned on amounts in the loan account,
transaction charges, and other charges and deductions imposed in connection with
the Policy and the Separate Account. A Policy has no minimum guaranteed
accumulated value. A Policy's "surrender value" is its accumulated value less
the amount of the surrender charge, if any. A Policy's "net surrender value" is
its surrender value less Policy loans and loan interest. The net surrender value
of a Policy is the amount available to a policyowner upon total surrender.
An investment account is established for each Division of the Separate
Account, representing the interest of the Policy for such Division. When amounts
are allocated or transferred to a Division, units are credited to the applicable
investment account. When amounts are deducted or transferred from a Division,
units of the applicable investment account are cancelled. The number of units
credited or cancelled is equal to the dollar amount of the transaction divided
by the unit value of the Division for the valuation period when the transaction
occurs.
The unit value of a Division is determined on each valuation date. The unit
value of each Division was established at $10.00 at the time the Division was
formed. Thereafter, the unit value of a Division on any valuation date is
calculated by multiplying the unit value on the previous valuation date by the
net investment factor for the current valuation period. The net investment
factor of a Division measures the investment performance of the Division and
determines changes in unit value from one valuation period to the next valuation
period. The investment account value for each Division of the Separate Account
is equal to the number of units in that investment account multiplied by that
Division's unit value. A Policy's accumulated value is equal to the total of the
Policy's investment account values and any amounts in the Policy's loan account.
Transfers
Transfers of accumulated value between Divisions may be made by a
policyowner four times per policy year without charge. All transfers with the
same effective date count as one transfer. Transfers in excess of four per
policy year are subject to a transaction charge of $25. The Company has reserved
the right to revoke or modify transfer privileges and charges.
Policy Loans
A policyowner may borrow against the accumulated value of the Policy at any
time the Policy has loan value. A Policy's loan value, which is the maximum
amount that may be borrowed, is (1) minus (2) where: (1) is 90% of the Policy's
surrender value and (2) is any outstanding policy loans and unpaid loan
interest. A Policy's loan value is determined as of the loan date. The loan date
is the date a written request for a policy loan is processed by the Company. Any
loan must be in at least the minimum amount of $500. At the time the policy loan
is made, a portion of the Policy's accumulated value equal to the loan amount is
transferred from the Separate Account to the loan account maintained for the
Policy in the Company's general account. Loan interest is payable at the end of
each policy year. All policy loans and loan interest will be deducted from
proceeds payable at the insured's death, upon maturity, or upon total surrender.
A policyowner may choose how much of the loan amount is withdrawn from each
of the Divisions. If no choice is made, the amount will be withdrawn from the
Divisions in the same proportion as the most recent monthly deduction.
Accumulated value held in the loan account earns interest daily at an
effective annual rate of six percent. Interest earned on the loaned portion of
the accumulated value is allocated on the Policy anniversary to the Divisions in
the proportion currently designated by a policyowner for the allocation of
premium payments.
Interest is charged on policy loans at an effective annual rate of eight
percent during any period the loan is outstanding. Interest accrues on a daily
basis from the date of the loan and is compounded annually. If loan interest is
not paid when due, it becomes loan principal. An amount equal to the unpaid loan
interest will be transferred from the Divisions to the loan account in the
proportion directed by the policyowner. If no direction is made by the
policyowner, the amount will be withdrawn from the Divisions in the same
proportion as the most recent monthly deduction.
A Policy loan and unpaid loan interest may be repaid in whole or in part at
any time while the Policy is in force. The minimum loan repayment amount is
$30.00 or the outstanding loan amount, if less. When a loan repayment is made,
accumulated value in the loan account equal to the loan repayment will be
allocated among the Divisions in the proportion currently designated by a
policyowner for allocation of premium payments.
Surrender, Termination and Reinstatement
A policyowner may elect to make a total surrender of the Policy and receive
its net surrender value determined as of the date the Company receives the
policyowner's written request. A surrender charge is imposed upon total
surrender of a Policy at any time within the first ten years after the policy
date. The surrender charge will be waived if the Policy is surrendered in
connection with an exchange offer for another policy issued by the Company. In
addition, any increase in face amount is subject to a surrender charge at any
time within ten years after the effective date of the adjustment. After the
first policy year, the policyowner may request a partial surrender of the
accumulated value of the Policy, but no more than two times per policy year. A
partial surrender must be in at least the minimum amount of $500 and cannot
exceed 50% of the Policy's net surrender value at the time partial surrender is
requested. A transaction charge of the lesser of $25 or two percent of the
amount of the partial surrender is imposed on each partial surrender. The
Policy's accumulated value is reduced by the amount of any partial surrender
plus the transaction charge. If the Option 1 death benefit is in effect at the
time of a partial surrender, then the Policy's face amount is also reduced by
the amount of the partial surrender plus the transaction charge.
Failure to make a planned periodic premium or additional premium payments
may cause termination of a Policy. A notice of impending termination of a policy
will be sent if:
1. The net surrender value of a Policy on any monthly date is less than
the monthly deduction and the death benefit guarantee premium
requirement has not been satisfied; or
2. During the 12 months following the policy date, the sum of the premiums
paid is less than the Minimum Required Premium on a monthly date.
The Minimum Required Premium on a monthly date is equal to (1) times (2)
where:
1. Is the minimum monthly premium shown on the data page; and
2. Is one plus the number of complete months since the policy date.
The notice of impending termination will show the 61-day grace period
during which the Company will accept payment required to keep the Policy in
force. If a grace period begins because the net surrender value is less than the
current monthly deduction, the minimum payment is three times the monthly
deduction which was due and unpaid. If a grace period begins because the sum of
the premiums paid is less than the Minimum Required Premium, the minimum payment
is the past due Minimum Required Premium, which is:
1. The Minimum Required Premium due on the next following monthly date;
LESS
2. The sum of the premiums paid since the policy date.
If the grace period ends before the Company receives the past due Minimum
Required Premium, the Company will pay to the policyowner any remaining value in
the Policy, which would be the excess of (1) over (2) where:
1. Is the net surrender value on the monthly date at the start of the grace
period; and
2. Is the two monthly deductions applicable during the grace period.
In the event the 61-day grace period expires without a payment by the
policyowner at least equal to the minimum payment, the Policy will terminate.
Once a Policy has terminated as a result of insufficient value, the
policyowner may make a written request to reinstate the Policy at any time
within three years after the date of termination, so long as the insured is
alive and it is prior to the Policy's maturity date. Satisfactory proof of
insurability and payment of a reinstatement premium of at least the greater of
(1) an amount that, after deduction of premium expense charges, is sufficient to
allow at least three monthly deductions or (2) the past due Minimum Required
Premium are required for reinstatement. Repayment or reinstatement of policy
loans and loan interest which remained unpaid on the date the Policy terminated
is also required.
Policy "Free Look"
A policyowner has the limited right to return a Policy for cancellation and
receive a refund of all premiums paid (Accumulated Value for policies applied
for in the state of California by Policyowners). The Written Request for
cancellation, along with return of the Policy, must be made within 10 days (30
days if the Policy is applied for in the state of California by a policyowner
age 60 or over) after the Policy is received by the policyowner, within 10 days
(30 days if the Policy is applied for in the state of California by a
policyowner age 60 or over) after written notice of this right is provided to
the policyowner, or within 45 days after the policyowner completes the Policy
application, whichever is later. For Policies applied for in the state of
California, the amount refunded is equal to (1) plus (2) plus (3) where:
1. Is the Policy Value as of the date the Company receives the
policyowner's Written Request for cancellation; and
2. Is the Premium Expense Charge(s) deducted from gross premiums; and
3. Is the Monthly Policy Charge(s) deducted from the Policy Value.
Distribution of the Policy
The Company may offer the Policy in states and jurisdictions where it is
licensed to sell this type of insurance product. The Policy will be sold by
agents and brokers who represent the Company and are registered representatives
of Princor Financial Services Corporation, the principal underwriter of the
Policies, or registered representatives of other broker-dealers which Princor
Financial Services Corporation selects and the Company approves.
Tax Consequences of the Policy
The Policies will be treated as life insurance contracts under provisions
of the Internal Revenue Code so long as certain definitional tests of Section
7702 of the Internal Revenue Code are met and so long as the investments of the
Separate Account meet the diversification requirements of Section 817(h) of the
Internal Revenue Code. The Company has designed the Policy to meet these
criteria. Thus, the death benefit under a Policy should be fully excludable from
the gross income of the beneficiary. In addition, the policyowner should not be
taxed on any part of the accumulated value, unless in the first 15 years of a
Policy a cash distribution is made as a result of a change in the benefits under
(or in other terms of) the Policy, such as a partial or total surrender of
accumulated value which causes a reduction in the face amount. Such a
distribution will be taxable to the extent of income in the Policy, as limited
by the applicable recapture ceiling as set out in Section 7702(f)(7)(C) or (D)
of the Internal Revenue Code. Also, partial surrender may result in taxable
income to the policyowner to the extent distributions (or deemed distributions)
exceed total investments (generally premiums paid) in the Policy to the date of
surrender. If, however, the Policy is considered a modified endowment contract
under the terms of the Technical and Miscellaneous Revenue Act of 1988, all
distributions under the Policy would be taxed on an "income first" basis. Most
distributions received by a policyowner directly or indirectly (including policy
loans, total or partial surrenders or the assignment or pledge of any portion of
the accumulated value of the Policy) would be includable in gross income to the
extent that the accumulated value of the Policy exceeds the policyowner's
investment in the contract. (See "Tax Status of the Company and the Separate
Account.") Policyowners are advised to consult with their own tax advisors
regarding tax treatment of the Policies.
DESCRIPTION OF PRINCIPAL MUTUAL LIFE INSURANCE COMPANY (The "Company")
Principal Mutual Life Insurance Company is a mutual life insurance company
with its home office at The Principal Financial Group, Des Moines, Iowa 50392,
telephone number 515-247-5111. It was originally incorporated under the laws of
the State of Iowa in 1879 as Bankers Life Association, changed its name to
Bankers Life Company in 1911 and changed its name to Principal Mutual Life
Insurance Company in 1986. It is a member of The Principal Financial Group, a
diversified family of insurance and financial services corporations.
The Board of Directors of the Company has approved a Plan of Reorganization
(the "Plan") pursuant to which the Company will adopt a mutual insurance holding
company structure. The Plan was approved by the owners of annuity contracts and
life insurance policies issued by the Company and has been submitted to the
Commissioner of Insurance of the State of Iowa (the "Iowa Commissioner") for
approval.
Under the Plan, the Company will form a mutual insurance holding company
named "Principal Mutual Holding Company" and will convert to a stock life
insurance company. As part of such conversion, the Company will change its name
to "Principal Life Insurance Company" ("Principal Life"). Principal Mutual
Holding Company will be the ultimate parent company in the family of companies
known as the Principal Financial Group(R).
Because the Company currently is a mutual life insurance company,
policyowners have, in addition to contract rights related to the Policy, certain
membership interests in the Company, consisting principally of the right to vote
on the election of directors of the Company and on other matters and the right
to receive distributions of the Company's surplus upon liquidation or
dissolution of the Company. The Plan will preserve but separate these contract
rights and membership interests. Contract rights will remain with Principal
Life, and policyowners on the date the Plan becomes effective (the "Effective
Date") will automatically become members of Principal Mutual Holding Company and
such policyowner's membership interests in the Company will be extinguished.
Under the terms of the Plan, the membership interests of members of Principal
Mutual Holding Company will consist principally of the right to vote on the
election of directors of Principal Mutual Holding Company and on other matters
and to receive distributions of Principal Mutual Holding Company's assets upon
liquidation or dissolution of Principal Mutual Holding Company. Owners of
Policies issued by Principal Life after the Effective Date also will
automatically become members of Principal Mutual Holding Company. The Plan will
not, in any way, increase premium payments or reduce Policy benefits, values,
guarantees or other Policy obligations owed to policyowners.
The Company believes that adoption of the Plan will result in a corporate
structure that, among other things, will provide the Company with flexibility in
raising capital through various means that are not currently available to it,
including stock offerings. Any initial offering of voting stock to third parties
will be subject to the approval of the Iowa Commissioner. Although there are no
current plans to offer voting stock, in the event voting stock was sold to third
parties, it is possible that the interests of such third party shareholders and
policyowners could diverge on certain issues. The Company, however, believes
that such shareholders and policyowners will generally have a greater
commonality of interests than the potential for conflict and will endeavor to
minimize the occurrence of such conflicts and to operate the companies in the
best interests of all constituencies.
The Effective Date is scheduled to be July 1, 1998, but the Iowa
Commissioner must first approve the Plan. In addition, insurance regulatory
authorities in each state must issue an amendment to the Company's Certificate
of Authority (to reflect the name change from Principal Mutual Life Insurance
Company to Principal Life Insurance Company) and must approve the forms which
support the Policy. Should the Effective Date be other than July 1, 1998 or if
states other than Iowa have not completed action by that date, the Company will
notify existing policyowners and others by supplementing this prospectus.
Policies issued on or after the Effective Date will be issued by Principal Life,
will not be participating and will not be eligible to participate in any
distribution of divisible surplus (see "Surplus Distribution at Sole Discretion
of the Company"). As a policyowner of a Policy issued after the Effective Date,
you will be a member of Principal Mutual Holding Company as described above.
Principal Mutual Life Insurance Company is authorized to do business in the
50 states of the United States, the District of Columbia, the Commonwealth of
Puerto Rico, and the Canadian Provinces of Alberta, British Columbia, Manitoba,
Ontario and Quebec. The Company offers a full range of products and services for
businesses, groups and individuals including individual insurance, pension plans
and group/employee benefits. The Company has ranked in the upper one percent of
life insurers in assets and premium income and has consistently received
excellent ratings from the major rating firms based upon the Company's claims
paying ability. The Company has $_______ billion in assets under management and
serves more than _________ million individuals and their families.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
The Separate Account was established on November 2, 1987, pursuant to a
resolution of the Executive Committee of the Board of Directors of the Company.
Under Iowa insurance law and regulation the income, gains or losses of the
Separate Account are credited to or charged against the assets of the Separate
Account without regard to the other income, gains or losses of the Company. The
assets of the Separate Account, equal to the reserves and other liabilities
arising under the Policies, are not chargeable with liabilities arising out of
any other business conducted by the Company. In addition, all income, gains or
losses, whether or not realized, and expenses with respect to a Division shall
be credited to or charged against such Division without regard to income, gains
or losses, or expenses of any other Division. The assets of the Separate Account
are held with relation to the Policies described in this Prospectus. The assets
of the Separate Account may also, in the future, be derived from other flexible
premium and scheduled premium variable life insurance contracts. Also, although
the assets maintained in the Separate Account attributable to the Policies will
not be charged with any liabilities arising out of any other business conducted
by the Company, the reverse is not true. Hence, all obligations arising under
Policies, including the promise to make benefit payments, are general corporate
obligations of the Company. The Separate Account is organized as a unit
investment trust under the Investment Company Act of 1940.
The Company is taxed as a life insurance company under the Tax Reform Act
of 1984, as amended. The operations of the Separate Account are part of the
total operations of the Company, but are treated separately for accounting and
financial statement purposes and are considered separately in computing the
Company's tax liability.
The Separate Account is not affected by federal income taxes paid by the
Company with respect to its other operations and, under existing federal income
tax law, investment income and capital gains attributable to the Separate
Account are not taxed. The Company reserves the right to charge the Separate
Account with, and create a reserve for, any tax liability which the Company
determines may result from maintenance of the Separate Account. To the best of
the Company's knowledge there is no current prospect of such liability.
A policyowner directs the Company to allocate premium payments, less
premium expense charges, among the Divisions which invest exclusively in shares
of corresponding Accounts ("Account" or "Accounts") of the Fund. These Accounts
also offer their shares to separate accounts of the Company to fund variable
annuity contracts. See "Eligible Purchases and Purchase of Shares" in the Fund's
Prospectus for a discussion of the potential risks associated with "mixed
funding." The Balanced Division invests only in shares of the Balanced Account,
the Bond Division invests only in shares of the Bond Account, the Capital Value
Division invests only in shares of the Capital Value Division, the High Yield
Division invests only in the High Yield Account, the MidCap Division invests
only in the MidCap Account and the Money Market Division invests only in the
Money Market Account.
Balanced Account -- The investment objective of the Balanced Account is to
generate a total return consisting of current income and capital appreciation
while assuming reasonable risks in furtherance of the investment objective. The
term "reasonable risks" refers to investment decisions that in the investment
advisor's judgment do not present a greater than normal risk of loss in light of
current or anticipated future market and economic conditions, trends in yields
and interest rates, and fiscal and monetary policies. In seeking to achieve the
investment objective, this Account invests primarily in growth and
income-oriented common stocks (including securities convertible into common
stocks), corporate bonds and debentures and short-term money market instruments.
This Account may also invest in other equity securities and debt securities
issued or guaranteed by the United States government and its agencies or
instrumentalities. This Account seeks to generate real (inflation plus) growth
during favorable investment periods and may emphasize income and capital
preservation strategies during uncertain investment periods. Principal
Management Corporation (the "Manager") will seek to minimize declines in the net
asset value per share. However, there is no guarantee that the Manager will be
successful in achieving this goal. The portions of the Account's total assets
invested in equity securities, debt securities and short-term money market
instruments are not fixed, although ordinarily 40% to 70% of the Account's
portfolio will be invested in equity securities with the balance of the
portfolio invested in debt securities. The investment mix will vary from time to
time depending upon the judgment of the Manager as to general market and
economic conditions, trends in investment yields and interest rates and changes
in fiscal or monetary policies.
Bond Account -- The investment objective of the Bond Account is to provide
as high a level of income as is consistent with preservation of capital and
prudent investment risk. In seeking to achieve the investment objective, this
Account will predominantly invest in marketable fixed-income debt securities.
Investments will be made generally on a long-term basis, but this Account may
make short-term investments from time to time as deemed prudent by the
investment advisor. Longer maturities typically provide better yields but will
subject this Account to a greater possibility of substantial changes in the
values of its portfolio securities as interest rates change. The market price of
fixed-income securities such as those purchased by this Account is affected by
changes in interest rates generally. As interest rates rise, the market value of
fixed-income securities will fall, adversely affecting the net asset value of
this Account. The value of fixed-income securities may also be affected by
changes in the credit rating or financial condition of the issuer.
Capital Value Account -- The principal objective of the Capital Value
Account is long-term capital appreciation and growth of future investment
income. The assets of this Account consist principally of a portfolio of common
stocks. The value of the investments held by this Account fluctuates daily and
is subject to the risks of changing economic conditions as well as the risks
inherent in the ability of this Account's management to anticipate changes in
such investments necessary to meet changes in economic conditions. Historically,
the value of a diversified portfolio of common stocks such as invested in by the
Capital Value Account, held for an extended period of time, has tended to rise
during periods of inflation. There has, however, been no exact correlation, and
for some periods the values of such common stocks have declined while the cost
of living was rising.
High Yield Account -- The primary investment objective of High Yield
Account is high current income. Capital growth is a secondary objective when
consistent with the objective of high current income. This Account invests
primarily in high yielding (high risk), lower or non-rated fixed-income
securities, commonly known as junk bonds, constituting a diversified portfolio
which the investment advisor believes does not involve undue risk to income or
principal. The market value of this Account's investments will change in
response to changes in interest rates and other factors. Changes by recognized
rating agencies in their ratings of any fixed-income security and in the ability
of an issuer to make payments of interest and principal may also affect the
value of these investments. The Fund's prospectus provides a thorough
description of the risks associated with junk bonds which should be read before
allocating premium contributions to the High Yield Division.
MidCap Account -- The objective of the MidCap Account is to achieve capital
appreciation by investing primarily in the common stocks and securities
convertible into common stocks of emerging and other growth-oriented companies
that, in the judgment of the investment advisor, are responsive to changes
within the marketplace and have the fundamental characteristics to support
growth. This Account will seek to be relatively fully invested at all times in
equity securities. From time to time, this Account may, for defensive purposes
and without limit as to the proportion of assets invested, hold varying
proportions of cash, United States government securities, nonconvertible
securities and straight debt securities.
Money Market Account -- The Money Market Account has an investment
objective of obtaining maximum current income available from short-term
securities consistent with preservation of principal and maintenance of
liquidity by investing all of its assets in a portfolio of money market
instruments. This Account invests in United States dollar denominated
instruments having a maturity of 397 days or less that the Account's Manager,
subject to the oversight of the Fund's board of directors, determines present
minimal credit risks and which at the time of acquisition are "Eligible
Securities" as that term is defined in regulations issued under the Investment
Company Act of 1940. See the Fund's prospectus for details. The value of the
investments held by this Account may fluctuate, although the net asset value per
share is normally expected to remain at $1. However, its yield will vary with
changes in short-term interest rates. Over the last two decades there has been a
general correlation between short-term interest rates and the cost of living,
but there has been no exact correlation and for some periods such rates have
declined while the cost of living was rising.
Policyowners make their own decisions on the allocations to and between the
Divisions, based upon their unique circumstances and perceptions of economic
conditions. Additional information concerning these Accounts, including their
investment policies and restrictions, investment management fees and expenses,
is given in the prospectus which accompany this Prospectus. It should be read in
conjunction with this Prospectus.
The investment advisor to the mutual funds is Principal Management
Corporation which is a wholly-owned subsidiary of Princor Financial Services
Corporation, which is a wholly-owned subsidiary of Principal Financial Group,
Inc., which is a wholly-owned subsidiary of the Company. The current investment
management fee at an annual rate of .50% of the first $100 million of each
fund's average daily net assets and .45% of the next $100 million of each
Account's daily average net assets is charged monthly against Bond Account,
Capital Value Account and Money Market Account. The current investment
management fee at an annual rate of .60% of the average daily net assets is
charged monthly against Balanced Account and High Yield Account. The current
investment management fee at an annual rate of .65% of the first $100 million of
the fund's average daily net assets and .60% of the next $100 million of the
fund's average daily net assets is charged monthly against MidCap Account.
PREMIUMS
Purchase Procedures
To apply for a Policy, a completed application, including any required
supplements, must be submitted to the Company through the agent or broker
selling the Policy. If interim coverage is desired, a payment in at least the
required minimum initial premium amount must be submitted with the completed
application. The required minimum initial premium amount for any Policy
(including a Policy issued on an application submitted without an accompanying
payment) is three times the minimum monthly premium shown on the Policy's data
pages. The minimum monthly premium is the amount that, if paid, will keep the
Policy in force for one month, taking into account the Policy's current monthly
deduction and surrender charges. The Company will not issue policies to insure
persons over age 75. Applicants for insurance must furnish satisfactory evidence
of insurability. Acceptance is subject to the Company's insurance underwriting
guidelines and suitability rules and procedures. The Company reserves the right
to reject any application or related premium if in the view of the Company, the
Company's insurance underwriting guidelines and suitability and procedures are
not satisfied. The minimum face amount for a Policy at issue is $25,000. The
Company reserves the right to revise its rules from time to time to specify
either a higher or a lower minimum face amount.
If a payment in at least the required minimum initial premium amount is
submitted with the completed application, then a conditional receipt is given to
the applicant, reflecting receipt of the initial payment and outlining any
interim coverage in effect until the Company either issues or declines to issue
a Policy. Subject to variations by state based on differing state requirements,
the terms of the conditional receipt are described in this paragraph. If all of
the conditions precedent set forth in the conditional receipt are fulfilled
exactly, interim coverage under the conditional receipt will take effect on the
date upon which all initial application requirements have been completed. The
initial application requirements consist of full completion and signing of the
application and all necessary supplements, and any medical exams and tests
required by the Company's published rules. The amount of the interim coverage
is: the lesser of $1,000,000 or the amount applied for, if the proposed insured
is insurable on a standard or more favorable basis; or, the lesser of $100,000
or the amount applied for, if the proposed insured is insurable only on a basis
less favorable than standard. Interim coverage provided under the conditional
receipt ends on the earliest of: (1) 75 days after the date coverage commenced
under the conditional receipt, (2) the date the Company mails the proposed owner
a premium refund and notice that the Company will not consider the application
on a prepaid basis, (3) the date the Company mails the proposed owner a premium
refund and a notice that no Policy will be issued on the application, or (4) the
date a Policy is presented to the proposed owner (whether or not accepted by the
proposed owner).
Pending receipt of approval by New York of the conditional receipt
described above, a different conditional receipt will continue to be used in
that state. Under the conditional receipt in use in New York, interim coverage
starts on the later of: (1) the date of completion of the application and
supplements thereto or (2) the date any required medical exam or other medical
tests are completed. However, if all the conditions of the receipt are met
except any required medical exam or test, insurance is provided under the
conditional receipt not to exceed the maximum amount available based on the
Company's underwriting rules without the medical exam or test. The amount of the
interim coverage is: the lesser of $1,000,000 or the amount applied for, if the
proposed insured is insurable at the Company's Standard rate or at the rate
applied for or at a better rate; or, the lesser of $100,000 or the amount
applied for, if the proposed insured is insurable only at a higher premium rate
than the Company's standard premium rate and the premium rate applied for.
Interim coverage provided under the conditional receipt ends on the earlier of:
(1) five days after a nonacceptance notice is mailed by the Company to the
applicant, (2) the day before the policy date when the Policy is issued as
applied for, (3) the date a Policy issued other than as applied for is presented
to the applicant for acceptance, or (4) 75 days after the date coverage
commenced under the conditional receipt.
Another conditional receipt is used in the state of Kansas. It provides
that interim coverage starts on the date on which all initial application
requirements are completed. The amount of interim coverage is the lesser of
$1,000,000 or the amount applied for, if the proposed insured is insurable on a
standard or more favorable basis; or, the lesser of $100,000 or the amount
applied for, if the proposed insured is insurable only on a basis less favorable
than standard. Interim coverage provided under the conditional receipt ends on
the earliest of: (1) the date the Company mails the proposed owner a premium
refund and notice that the Company will not consider the application on a
prepaid basis, (2) the date the Company mails the proposed owner a premium
refund and notice that no policy will be issued on the application, or (3) the
date a policy is presented to the proposed owner (whether or not accepted by the
proposed owner).
If the Company determines to issue a Policy and has received the required
minimum initial premium, the Policy will be given a policy date. The policy date
is the date by which both the application and a premium payment in an amount at
least equal to the required minimum initial premium for the Policy have been
received in the home office of the Company. The Company does not date Policies
on the 29th, 30th or 31st day of any month of the year. Policies which would
otherwise be dated on these days except for this rule will be dated on the 28th
day of the month. The policy date is shown on the Policy's data pages.
Payment Of Premiums
Premiums must be paid to the Company at its home office. There is no fixed
schedule of premium payments on a Policy, either as to the amount or timing of
the payments, although a minimum premium is required during the first twelve
policy months (the "Minimum Required Premium"). A policyowner may determine,
within specified limits, the planned periodic premium schedule for the Policy.
These limits will be set forth by the Company and will include a minimum initial
premium payment. Planned periodic premium schedules may provide for annual,
semi-annual, quarterly or monthly withdrawal payments. A "pre-authorized
withdrawal" allows the Company to deduct premiums, on a monthly basis, from the
policyowner's checking or other financial institution account. The policyowner
is not required to pay planned periodic premiums. Failure to make any premium
payment will not necessarily result in termination of a Policy provided that (1)
any Minimum Required Premium is paid and the Policy's net surrender value equals
or exceeds the monthly deduction on the current monthly date or (2) the death
benefit guarantee rider is in effect. Likewise, payment of premiums in
accordance with the planned periodic premium schedule does not guarantee that
the Policy will stay in force if the Policy's net surrender value is not at
least equal to the current monthly deduction on the monthly date, unless such
premiums meet the death benefit guarantee premium requirement.
The Company will send premium reminder notices in accordance with planned
periodic premium schedules. Premium payments may also be made by unscheduled
premium payment made to the Company at its home office or by payroll deduction
where allowed by law and approved by the Company. During the year ended December
31, 1997 the Company received premium payments totaling $___________.
Premium Limitations
In no event can the total of all premiums paid exceed the current maximum
premium limitations required by the Internal Revenue Code in order to qualify a
Policy as a life insurance contract. The premium limitations are imposed in
order to assure favorable federal income tax treatment of the Policy and its
death benefit. If at any time a premium is paid which would result in total
premiums exceeding the current maximum premium limitation, the Company will only
accept that portion of the premium which will make total premiums equal the
maximum. Any part of the premium in excess of that amount will be returned and
no further premiums will be accepted until allowed by the maximum premium
limitations specified in the Internal Revenue Code. No premium payment may be
less than $30, except the minimum monthly premium for Policies issued to insure
persons ages 0 to 14 may be no less than $15. Premium payments less than the
minimum amount will be returned to the policyowner.
It is possible a premium payment could increase a Policy's death benefit by
more than it increases the Policy's accumulated value because of the manner in
which the Policy's death benefit is calculated. In order to qualify a Policy as
a life insurance contract under provisions of the Internal Revenue Code, the
death benefit must be at least equal to an applicable percentage of the
accumulated value. This percentage starts at 250% for insureds age 40 and under
and grades down to 100% for insureds age 95. For example, a hypothetical Policy
insuring the life of a 35-year old with an accumulated value of $20,000 must
have a death benefit in at least the amount of $50,000 ($20,000 x 250%, the
applicable percentage). Suppose a premium is paid that, after deduction of the
premium expense charge, increases this hypothetical Policy's accumulated value
by $1,000. The Internal Revenue Code test requires that the death benefit for
the hypothetical Policy be at least $52,500 ($21,000 x 250%). Hence, if the
death benefit before the premium were $50,000, the $1,000 increase in
accumulated value would produce a $2,500 increase in the death benefit of this
hypothetical Policy. In such a situation where a premium payment increases a
Policy's death benefit by more than it increases the Policy's accumulated value,
the Company reserves the right to refund the premium payment. Evidence of
insurability under the Company's current underwriting rules then in effect may
be required before acceptance of any such premium.
Allocation Of Premiums
The initial premium payment, less the premium expense charge, is allocated
to the Money Market Division of the Separate Account on the later of the policy
date or the end of the valuation period during which the first premium is
received. Any additional premiums received at the home office of the Company
during the first 45 days from the policy date, less premium expense charges,
will be allocated to the Money Market Division. On the 46th day from the policy
date, accumulated value held in the Money Market Division is automatically
transferred to the Divisions of the Separate Account in accordance with the
policyowner's direction for allocation of premium payments.
Premium payments received after expiration of the initial 45-day period
described above are allocated among the Divisions in accordance with the
directions in the application for the Policy. For each Division, the allocation
percentage must be zero or a whole number not less than ten. The sum of the
percentages for all the Divisions must equal 100. The policyowner may change the
allocation of future premium payments among the Divisions without payment of any
fee or penalty, at any time, by written request to the Company. Allocation
percentages must be approved by the Company. New allocation percentages, once
approved by the Company, will be effective as of the date written request was
received at the home office of the Company.
Policy "Free Look"
The policyowner has a limited right to return the Policy for cancellation
and receive a refund in an amount equal to the premiums paid (For policies
applied for in the state of California, the amount refunded is determined as set
forth below). The request to cancel a Policy must be in writing. The Written
Request and the Policy must be personally delivered or mailed (as determined by
its postmark) to the home office of the Company or to the agent or broker who
sold the Policy before the later of:
o 10 days (30 days for Policies applied for in the state of California by
policyowners age 60 or over) after the Policy is received by the policyowner;
o 10 days (30 days for Policies applied for in the state of California by
policyowners age 60 or over) after a written notice is delivered or mailed (as
determined by its postmark) to the policyowner which tells about the
cancellation right; or
o 45 days after the policyowner completes the application.
For Policies applied for in the state of California by persons age 60 or
over, the amount refunded is equal to (1) plus (2) plus (3) where:
1. Is the Policy Value as of the date the Company receives the
policyowner's Written Request for cancellation; and
2. Is the Premium Expense Charge(s) deducted from gross premiums; and
3. Is the Monthly Policy Charge(s) deducted from the Policy Value.
Any increase in face amount will carry its own free look period. If the
Company does not approve a requested face amount increase or the policyowner
cancels a request for face amount increase that has not yet become effective,
the Company will refund to the policyowner any payment submitted with the
proposed face amount increase. If on or after the effective date of the increase
the policyowner exercises the limited right to cancel the face amount increase,
then the Company will refund to the policyowner only that portion of the
premiums paid with the adjustment application and during the free look period
attributable to the face amount increase, unless directed otherwise by the
policyowner. The portion of the premiums paid attributable to the face amount
increase is determined by use of the ratio guideline annual premiums for the
increase to guideline annual premiums for the Policy. The Company will also
reverse the amount of any monthly deduction attributable to the face amount
increase and return it to the Policy's accumulated value, unless the policyowner
and the Company agree on another method of refund.
The refunded amount will ordinarily be disbursed by the Company to the
policyowner within seven days after the request for cancellation is received in
the Company's home office. (See "Postponement of Payments.")
Policy Termination
An initial minimum premium payment is required to commence coverage under a
Policy. A minimum premium is required during the first twelve policy months (the
"Minimum Required Premium"). A notice of impending termination of a Policy will
be sent if, during the 12 months following the policy date, the sum of the
premiums paid is less than the Minimum Required Premium on a monthly date.
The Minimum Required Premium on a monthly date is equal to (1) times (2) where:
1. Is the minimum monthly premium shown on the data page; and
2. Is one plus the number of completed months since the policy date.
Further, a notice of impending termination of a Policy will be sent if the
net surrender value of the Policy is not at least equal to the monthly deduction
on the current monthly date, and the death benefit guarantee premium requirement
has not been satisfied. (See "Death Benefit Guarantee Rider.")
The grace period begins when a notice of impending termination is mailed to
a policyowner. The notice will be sent to the last post office address of the
policyowner known to the Company. It will show the minimum payment required to
keep the Policy in force. The notice will also show the 61-day period during
which the Company will accept the required payment.
If the grace period begins because the sum of the premiums paid is less
than the Minimum Required Premium, the minimum payment is the past due Minimum
Required Premium, which is:
1. The Minimum Required Premium due on the next following monthly date.
LESS
2. The sum of the premiums paid since the policy date.
If the grace period ends before receipt by the Company of the past due
Minimum Required Premium, the Company will pay to the policyowner any remaining
value in the Policy which would be the excess of (1) over (2) where:
1. Is the net surrender value on the monthly date at the start of the grace
period; and
2. Is the two monthly deductions applicable during the grace period.
The refunded amount will ordinarily be disbursed by the Company to the
policyowner within seven days after the request for cancellation is received in
the Company's home office. (See "Postponement of Payments.")
If the grace period begins because the net surrender value is less than the
current monthly deduction, the minimum payment is three times the monthly
deduction which was due and unpaid. This payment is intended to reimburse the
Company for the monthly deductions during the 61-day grace period and provide
sufficient accumulated value to pay the monthly deduction for the first monthly
date following the grace period. There is no guarantee the amount requested at
the beginning of the grace period will be sufficient to actually meet the three
monthly deductions as they are processed. Should the Policy's net surrender
value not at least equal the monthly deduction on any monthly date, a new 61-day
grace period will commence.
The Policy will continue in force through a grace period; but, if the
required payment is not received by the Company during the 61-day period, the
Policy will terminate as of the monthly date on or immediately preceding the
start of the grace period. If the insured dies during a grace period, the policy
proceeds will be reduced by the amount of the monthly deduction or deductions
due and unpaid at the insured's death, as well as by loans and unpaid loan
interest.
A Policy will also terminate if the policyowner makes a total surrender of
the Policy, the death proceeds under the Policy are paid or the maturity
proceeds under the Policy are paid. When a Policy terminates for any reason, all
policy privileges and rights of the policyowner under the Policy end.
Reinstatement
A policyowner may, however, reinstate a Policy which terminated as a result
of insufficient premium payment, subject to certain conditions. A Policy may be
reinstated only prior to the maturity date and while the insured is alive. The
application for reinstatement must be personally delivered or mailed to the
Company at its home office within three years of a Policy's termination. (In
some states, the Company is required by law to provide a longer period of time
within which a Policy may be reinstated.) Satisfactory proof of insurability
based upon the Company's underwriting rules then in effect and payment of a
reinstatement premium of at least the greater of (1) an amount that, after
deduction of premium expense charges, is sufficient to allow at least three
monthly deductions or (2) the past due Minimum Required Premium are required.
Payment of monthly deductions for the period of termination is not required. If
a policy loan or loan interest was unpaid at the time of termination, the
Company will require repayment or reinstatement of the loan and any loan
interest before permitting reinstatement of the Policy. Loan interest will not
be charged for the period the Policy was terminated. Reinstatement will be
effective on the next monthly date following the Company's approval of the
reinstatement application. The policy date of the Policy will remain the
original policy date and will not be changed at reinstatement, although
surrender charges for total surrender following reinstatement will resume at the
rate charged at the time of the Policy's termination, as adjusted for the
payment of past due premiums, if any. Upon reinstatement of a Policy, all the
rights and privileges of the owner are restored.
DEATH BENEFITS AND RIGHTS
Death Proceeds
As long as a Policy remains in force, the Company will, upon proof of the
insured's death, pay the death proceeds under the Policy to the named
beneficiary in accordance with the designated death benefit option. The death
proceeds, determined as of the date of the insured's death, are: the death
benefit described below, plus the proceeds from any benefit rider on the
insured's life, less any loan and loan interest on the Policy, and less any
overdue monthly deductions if the insured died during a grace period. All or
part of the death proceeds may be paid in cash or applied under one or more of
the benefit options available under the Policy. The Company pays interest on the
death proceeds from the date of death until date of payment or until applied
under a benefit option. Interest on death proceeds is at a rate the Company
determines, but not less than required by state law.
Death Benefit
The Policy provides two death benefit options: Option 1 and Option 2. The
policyowner designates the death benefit option in the application. Both Option
1 and Option 2 provide insurance protection combined with the opportunity for
increasing accumulated value. Under Option 1, the amount of death benefit
remains level (until the accumulated value exceeds certain limits). Under Option
2, the total death benefit increases as the accumulated value increases. Thus,
Option 1 emphasizes the growth of accumulated value while Option 2 emphasizes
the total available death benefit.
Option 1
The death benefit is the greater of the Policy's current face amount or
the Policy's accumulated value on the date of death multiplied by the
applicable percentage.
Option 2
The death benefit is the greater of the Policy's current face amount
plus its accumulated value on the date of death or the Policy's
accumulated value on that date multiplied by the applicable percentage.
Applicable Percentage
The Policy provides that the death benefit is at least equal to the amount
of insurance proceeds required by the Internal Revenue Code to qualify the
Policy as a life insurance contract. That death benefit amount is calculated by
multiplying the Policy's accumulated value by an applicable percentage set forth
in the Internal Revenue Code based on the insured's age. The applicable
percentages are:
TABLE OF APPLICABLE PERCENTAGES*
(For ages not shown, the applicable percentages
shall decrease by a pro rata portion for each full year.)
Insured's Attained Age %
---------------------- ---
40 and under 250
45 215
50 185
55 150
60 130
65 120
70 115
75 through 90 105
95 100
*The Company has reserved the right, where allowed by law, to change or delete
the applicable percentages as required by amendments to the Internal Revenue
Code.
Illustration of Option 1. Assume that the insured's attained age at the
time of death is between 20 and 40, that there are no policy loans or loan
interest unpaid at the time of death, and that the face amount of the Policy is
$25,000.
Under Option 1, because the death benefit will be equal to or greater than
250% of the accumulated value under this illustrative Policy, any time the
accumulated value of the Policy exceeds $10,000, the death benefit will exceed
the Policy's $25,000 face amount. Each additional dollar added to accumulated
value above $10,000 will increase the death benefit by $2.50. Similarly, any
time accumulated value exceeds $10,000, each dollar taken out of accumulated
value will reduce the death benefit by $2.50. If, for example, the accumulated
value is reduced from $12,000 to $10,000 because of charges or negative
investment performance, the death benefit will be reduced from $30,000 to
$25,000. If, however, at any time in this illustration 250% of the accumulated
value is less than $25,000 and no partial surrenders have been made, the death
benefit will equal $25,000. A partial surrender causes the face amount to
decrease by the amount of the partial surrender and the transaction charge.
Illustration of Option 2. Assume that the insured's attained age at the
time of death is between 20 and 40, that there are no policy loans or loan
interest unpaid at the time of death, and that the face amount of the Policy is
$25,000.
Under Option 2, a Policy with an accumulated value of $5,000 will have a
death benefit of $30,000 ($25,000 + $5,000); an accumulated value of $15,000
will yield a death benefit of $40,000 ($25,000 + $15,000). The death benefit
under this illustrative Policy, however, must be at least equal to 250% of
accumulated value (accumulated value plus 150% of accumulated value). As a
result, if the accumulated value of the Policy exceeds $16,667, the death
benefit will be greater than the face amount plus accumulated value. Each
additional dollar of accumulated value above $16,667 will increase the death
benefit by $2.50. A contract on a 40-year old insured that has an accumulated
value of $20,000 will provide a death benefit of $50,000 (250% x $20,000).
Similarly, any time accumulated value exceeds $16,667, each dollar taken out of
accumulated value reduces the death benefit by $2.50. If, for example, the
accumulated value is reduced from $20,000 to $17,000 because of partial
surrenders, charges, or negative investment performance, the death benefit will
be reduced from $50,000 to $42,500. If, however, at any time in this
illustration 250% of the accumulated value were less than $25,000 plus
accumulated value, the death benefit would be $25,000 plus the accumulated value
of the Policy.
The Company guarantees that, so long as the Policy remains in force, the
death benefit under either death benefit option will never be less than the
current face amount of the Policy. However, the death proceeds payable may be
less than the death benefit in the event of policy loans, unpaid loan interest
or overdue monthly deductions.
Change in Death Benefit Option
A policyowner may make a written request to change the death benefit option
on or after the first anniversary of a Policy. Only two changes in death benefit
option are allowed per policy year. There are no charges or fees for changing
the death benefit option. Any written request for change in death benefit option
must be approved by the Company. The effective date of any change will be the
monthly date that coincides with or next follows the day the request for change
is approved by the Company. A change in death benefit option will affect future
cost of insurance charges.
If the death benefit option is changed from Option 1 to Option 2, the new
face amount will be the old face amount decreased by the Policy's accumulated
value as determined on the effective date of the change. This change will not be
allowed if it will result in a face amount less than the minimum face amount of
$25,000. Changing from Option 1 to Option 2 may require evidence of insurability
satisfactory to the Company that the insured is insurable for the new death
benefit under its underwriting rules then in effect.
If the death benefit option is changed from Option 2 to Option 1, the new
face amount will be the old face amount increased by the Policy's accumulated
value as determined on the effective date of the change. Changing from Option 2
to Option 1 does not require evidence of insurability.
Adjustment Options
A policyowner may make a written request to increase the face amount of a
Policy at any time, so long as the Policy is not in a grace period or monthly
deductions are not being waived under a rider. A policyowner may make a written
request to decrease the face amount at any time on or after the first Policy
anniversary so long as the Policy is not in a grace period or monthly deductions
are not being waived under a rider. Any written request for adjustment of face
amount must be approved by the Company and is subject to these additional
conditions:
1. Any request for an increase in face amount must be applied for by a
supplemental application, signed by the insured, and shall be subject to
evidence of insurability satisfactory to the Company under its insurance
underwriting guidelines and suitability rules and procedures then in
effect. The minimum increase in face amount is $5,000. The age of the
insured must be 75 or less at the time of the request.
2. A request for a decrease in face amount must be applied for by a
supplemental application, signed by the insured, and may not reduce the
face amount of the Policy below $25,000.
3. Any increase in face amount will be in a risk classification the Company
determines.
4. Any adjustment approved by the Company will become effective on the
monthly date that coincides with or next follows the Company's approval
of the request.
Any payment submitted with a proposed face amount increase is held
initially in the General Account without interest. If the Company approves the
adjustment, then on the effective date of the adjustment the amount of the
premium payment so held, less the Premium Expense Charge, is allocated among the
Divisions in accordance with the policyowner's existing directions for
allocation of premium payments. Net premiums paid after an increase in face
amount also are allocated among the Divisions in accordance with the
policyowner's existing directions for allocation of premium payments.
Any increase in face amount will carry its own free look period and
exchange right, which apply only to the increase in face amount, not the entire
Policy. The policyowner has a limited right to cancel the face amount increase.
The request to cancel a face amount increase must be in writing. The written
request and the Policy data pages reflecting the increase must be personally
delivered or mailed to the home office of the Company or to the agent or broker
who sold the face amount increase before the later of:
o 10 days after Policy data pages reflecting the increase are received by
the policyowner;
o 10 days after a written notice is delivered to the policyowner which
tells about the cancellation of face amount increase right; or
o 45 days after the policyowner completes the application for the face
amount increase.
If the Company does not approve a requested face amount increase or the
policyowner cancels a request for face amount increase that has not yet become
effective, the Company will refund to the policyowner any payment submitted with
the proposed face amount increase. If on or after the effective date of the
increase the policyowner exercises the limited right to cancel the face amount
increase, then the Company will refund to the policyowner only that portion of
the premiums paid with the adjustment application and during the free look
period attributable to the face amount increase, unless directed otherwise by
the policyowner. Any amount to be refunded will ordinarily be disbursed by the
Company to the policyowner within seven days after the request for cancellation
of the face amount increase is received in the Company's home office or the
request for face amount is disapproved by the Company. (See "Postponement of
Payments.") The Company will also reverse the amount of any monthly deduction
attributable to the face amount increase and return it to the Policy's
accumulated value unless the policyowner and the Company agree on another method
of refund.
During the first 24 policy months following issuance of Policy data pages
reflecting an increased face amount, but not while the Policy is in a grace
period, the policyowner may exchange the increased face amount for any other
form of fixed benefit individual life insurance policy (other than term
insurance) currently made available by the Company for this purpose on the
insured's life. On the date of exchange, a portion of the Policy's accumulated
value attributable to the increase will be transferred to the fixed benefit
policy. The portion of the Policy's accumulated value attributable to the
increase in face amount is determined by use of the ratio of guideline annual
premiums for the increase to guideline annual premiums for the Policy,
determined at the adjustment date for the face amount increase.
Premium payments made under the Policy after exercise of this exchange
right will be credited only to the Policy. A new Policy will be issued upon
exercise of the exchange right which will require payment of its own premiums. A
portion of any policy loan and loan interest may be required to be repaid prior
to the exchange or transferred to the new Policy. In all other respects, this
exchange right for face amount increases is the same as that available for the
purchase of the Policy (See "Right to Exchange Policy.")
POLICY VALUES
Calculation of Accumulated Value
The Policy's accumulated value is equal to the total of its investment
account values and any amounts in the Policy's loan account. An investment
account is established for each Division of the Separate Account, representing
the interest of the Policy for such Division. A Policy's investment account
value for each Division is equal to the number of units in that investment
account multiplied by the Division's unit value.
When an amount is allocated or transferred to a Division, units are
credited to the appropriate investment account. When an amount is deducted or
transferred from a Division, units of the appropriate investment account are
cancelled. The number of units and fractional units credited or cancelled is
equal to the dollar amount of the transaction divided by the unit value of the
Division for the valuation period when the transaction occurs. The unit value of
each Division is determined on each valuation date. The number of units credited
or cancelled will not change because of subsequent changes in unit value. The
dollar value of each Division's units will vary depending upon the investment
performance of the corresponding mutual fund.
Units
On the later of the policy date or the end of the valuation period during
which the first premium is received, the number of units in an investment
account equals: (1) the first net premium allocated to that Division; less (2)
the monthly deduction withdrawn from that Division for the first policy month;
divided by (3) the unit value for that Division on that valuation date. At the
end of each valuation period thereafter, the number of units in an investment
account equals (1) plus (2) plus (3) less (4) less (5) less (6) where:
(1) is units in the investment account on the previous valuation date;
(2)is units credited to the investment account when any additional net
premium is allocated to the Division during the current valuation
period;
(3)is units credited for transfers from another Division or from the loan
account during the current valuation period;
(4)is units cancelled for transfers to another Division, transaction
charges, or transfers to the loan account to secure a policy loan during
the current valuation period;
(5)is units cancelled for partial surrenders and transaction charges
during the current valuation period; and
(6)is units cancelled to pay the monthly deduction from the Division
whenever a valuation period includes a monthly date.
Unit Values
The unit value of each Division's units was initially established at
$10.00. Thereafter, the unit value of a Division on any valuation date is
calculated by multiplying (1) by (2) where:
(1) is the Division's unit value on the previous valuation date; and
(2) is the net investment factor for the current valuation period.
The unit value of each Division's units on any day other than a valuation
date is the unit value as of the next valuation date.
Net Investment Factor
The net investment factor measures the investment performance of each
Division and is used to determine changes in unit value from one valuation
period to the next valuation period. The net investment factor for a valuation
period is equal to:
1. The quotient obtained by dividing:
a. the net asset value of a share of the underlying Account as of the
end of such valuation period, plus the per share amount of any
dividend or other distribution made by that Account during such
valuation period (less any amount charged against the Division for
taxes or any amount set aside during the valuation period by the
Company to provide for taxes attributable to the operation or
maintenance of that Division); by
b. the net asset value of a share of that Account as of the end of the
immediately preceding valuation period;
LESS
2. a current mortality and expense risks charge of .0020548% on a daily
basis (.75% on an annual basis) for the number of days within such
valuation period. The mortality and expense risks charge is guaranteed
not to exceed .0024658% on a daily basis (.90% on an annual basis).
The amount of any taxes charged against a Division or set aside and the
amount derived from the mortality and expense risks charge will be accrued daily
and will be transferred from the Separate Account to the general account of the
Company at the discretion of the Company.
Valuations in Connection with a Policy
All valuations in connection with a Policy, i.e., determining units to be
credited or cancelled with respect to investment accounts, determining net
surrender value, and calculation of the death benefit on the insured's death,
will be made on the date of the transaction or on the date of the insured's
death, if applicable, if such date is a valuation date. Otherwise, such
determination will be made on the next succeeding day which is a valuation date
for the Policy.
Transfers
Accumulated value may be transferred among the Divisions. The total amount
transferred each time must be at least $250 unless a lesser amount constitutes
the Policy's entire accumulated value in a Division. The effective date of a
transfer is the date the request is received at the home office of the Company.
All transfers with the same effective date count as one transfer. Four transfers
may be made in any one year without charge to the policyowner. Thereafter, a
transaction charge of $25 is imposed to cover administrative costs for each
transfer. The transaction charge is deducted on a prorated basis from the
Divisions from which accumulated value is transferred, unless the policyowner
directs the Company to deduct the transaction charge from only one Division. The
transaction charge is deducted from the affected Divisions before accumulated
value held in those Divisions is transferred. If the transfer of a Policy's
entire accumulated value in a Division is requested, the amount transferred will
be the Policy's accumulated value in the Division, less any transaction charge.
Policy Loans
So long as a Policy remains in effect and the Policy has loan value, a
policyowner may borrow money from the Company using the Policy as the only
security for the loan. A Policy's loan value, which is the maximum amount that
may be borrowed, is (1) minus (2) where: (1) is 90% of the Policy's surrender
value and (2) is any outstanding policy loans and unpaid loan interest. The loan
value is determined as of the loan date. The loan date is the date a loan
request is processed at the home office of the Company.
The minimum amount of any policy loan is $500. Proceeds of policy loans
ordinarily will be disbursed within seven days from the date of receipt of a
written request at the Company's home office. (See "Postponement of Payments.")
When a policy loan is made, a portion of the Policy's accumulated value
equal to the amount of the loan is transferred to the loan account from the
Divisions in the proportion requested by the policyowner. If no request for
allocation of the loaned amount is made by the policyowner, the loan amount will
be withdrawn from the Divisions in the same proportion as was the most recent
monthly deduction. Any loan interest that is due and unpaid will be transferred
in the same manner. Accumulated value in the loan account will accrue interest
daily at an effective annual rate of six percent. Such interest will be
transferred to the Separate Account and allocated on the policy anniversary to
the Divisions in the proportion currently designated by a policyowner for the
allocation of premium payments. A Policy's loan account is part of the Company's
general account.
The Company charges interest on policy loans. Interest accrues daily at an
effective annual rate of eight percent. Interest is due and payable at the end
of the policy year. Any interest not paid when due is added to the loan
principal and bears interest at the rate of eight percent. Adding unpaid
interest to the loan principal will cause additional amounts to be withdrawn
from the Divisions in the same manner as described above for loans. Amounts
withdrawn from the Divisions for unpaid loan interest will be transferred to the
loan account.
Unpaid policy loans and loan interest reduce the Policy's net surrender
value and may cause it to be less than the monthly deduction on a monthly date.
If on any monthly date the net surrender value is not sufficient to pay the
monthly deduction, the 61-day grace period provision will apply. (See "Policy
Termination.")
So long as a Policy remains in force, policy loans and loan interest may be
repaid in whole or in part at any time during the insured's life. The minimum
loan repayment amount is $30. If the policyowner does not designate a payment as
a premium payment or if the Company cannot identify it as a premium payment, the
Company will apply the payment received as a loan repayment. Accumulated value
in the loan account equal to the loan repayment will be transferred to the
Divisions in the proportion currently designated by a policyowner for the
allocation of premium payments. Any policy loan, whether repaid or not, is
likely to have a permanent effect on the Policy's accumulated value. Accumulated
value held in the Policy's loan account will earn interest at an effective
annual fixed rate of six percent. If the policy loan had not been made, that
accumulated value would have reflected the investment experience of the chosen
Division or Divisions. Any policy loans and loan interest are subtracted from
life insurance proceeds payable at the insured's death, from surrender value
upon total surrender or termination of a Policy when a grace period expires
without sufficient premium payment, and from accumulated value payable at
maturity.
Surrender
A Policy has a surrender value and a net surrender value. The surrender
value of a Policy is its accumulated value less the surrender charge. The net
surrender value of a Policy is its surrender value less any loans and loan
interest.
So long as the Policy is in effect, a policyowner may elect to surrender
the Policy and receive its net surrender value as of the date the Company
receives the policyowner's written request at its home office. After the first
policy anniversary and so long as a Policy is in effect, a policyowner may
request a partial surrender of the accumulated value of the Policy, but no more
than two times per policy year. The minimum amount of a partial surrender is
$500 and the maximum amount of any one partial surrender is 50% of the Policy's
net surrender value at the time written request for partial surrender is
received at the Company's home office. A transaction charge of the lesser of $25
or two percent of the amount surrendered is imposed on each partial surrender,
which is intended to cover the administrative costs of processing the partial
surrender. There is no surrender charge assessed upon a partial surrender. The
Policy's accumulated value reduces by the amount of the partial surrender plus
the amount of the transaction charge. If the Option 1 death benefit is in effect
at the time of a partial surrender, then the Policy's face amount also reduces
by the amount of the partial surrender and the transaction charge.
A policyowner may designate the amount of the partial surrender to be
withdrawn from each of the Divisions. If no designation is made, the amount of
the partial surrender will be withdrawn from the Divisions in the same
proportion as the most recent monthly deduction. The transaction charge is
deducted on a prorated basis from the Divisions from which accumulated value is
surrendered unless the policyowner directs the Company to deduct the transaction
charge from only one Division.
A surrender charge is imposed upon total surrender of a Policy which occurs
at any time within the first ten years after the policy date. In addition, if
total surrender of a Policy occurs at any time within the first ten years after
the adjustment date of a face amount increase, a surrender charge attributable
to the face amount increase will be imposed. (See "Surrender Charge." ) The
surrender charge will be waived if the Policy is surrendered in connection with
an exchange offer for another policy issued by the Company. Proceeds from
partial or total surrender of a Policy will ordinarily be disbursed within seven
days from the date of receipt of a written request at the Company's home office.
(See "Postponement of Payments.")
CHARGES AND DEDUCTIONS
The Company will make certain charges and deductions to support the
operation of the Policy and the Separate Account. Some charges will be deducted
from premium payments as received, some charges will be deducted from the
Policy's accumulated value on a monthly basis, some charges will be deducted on
a daily basis from the value of the Separate Account, and other charges will be
deducted from the Policy's accumulated value upon total surrender or termination
of a Policy. In addition, there are fees for the administrative costs involved
in processing certain transfers and all partial surrenders of accumulated value.
Premium Expense Charge
Upon receipt of each premium payment, the Company deducts a premium expense
charge. The premium expense charge includes a 5% of premium sales load and a
premium tax charge of 2%. For the year ended December 31, 1997, the Company
collected $__________ in premium expense charges and $___________ in premium tax
charges. In addition, a sales load of up to a maximum of 25% of the minimum
first year premium may be imposed as a part of a surrender charge upon total
surrender or termination of a Policy for insufficient value. Sales loads,
including the sales load portion of the surrender charge more fully described
below, are intended to compensate the Company for distribution expenses
including registered representatives' commissions, the printing of prospectuses
and sales literature, and advertising. The sales loads imposed in any policy
year are not necessarily related to actual distribution expenses incurred in
that year. Instead, the Company expects to incur the majority of distribution
expenses in the early years of a Policy and to recover any deficiency over the
life of a Policy. To the extent distribution expenses exceed sales loads
(including the sales load portion of surrender charges, if any) in any year, the
Company will pay them from its other assets or surplus in its general account,
which includes amounts derived from mortality and expense risks charges and from
mortality gains.
The premium tax charge portion of the premium expense charge is deducted to
cover premium taxes imposed against the Company by governmental entities. The
premium tax charge, which cannot be changed, is not expected to exceed the
premium taxes charged to the Company.
No reduction in the charge is made to reflect the fact that in some states
the Company may pay state income taxes in lieu of a portion of the premium tax
liability for that state.
Monthly Deduction
On each monthly date, the Company will deduct from the accumulated value of
a Policy an amount to cover certain charges and expenses incurred in connection
with the Policy. The monthly deduction consists of a monthly administration
charge, a charge for the cost of insurance and a charge for any optional
benefits added by rider. During the year ended December 31, 1997 administrative
and cost of insurance charges totaled $_______________.
The current monthly administration charge for a Policy is $4.75 per month
and is guaranteed never to exceed $5.00 per month. The Policy also provides for
a contingent deferred administration charge which is a part of the surrender
charge imposed upon total surrender or termination of a Policy when a grace
period expires without sufficient premium payment. The monthly administration
charge and the deferred administration charge reimburse the Company for the
recurring administrative expenses related to the Policy and the Separate
Account. These expenses are expenses other than sales expenses and include, for
example, the cost of processing applications, conducting medical examinations,
determining insurability, establishing policy records, premium reminders and
collection, record keeping, processing death benefit claims and policy changes,
reporting, and overhead costs. The Company does not expect to recover from the
administration charges any amount above its accumulated expenses associated with
the Policies and the Separate Account.
The monthly cost of insurance charge is calculated as (1) multiplied by the
result of (2) minus (3) where:
(1) is the cost of insurance rate as described below divided by 1,000;
(2) is the death benefit at the beginning of the policy month; and
(3) is the accumulated value at the beginning of the policy month.
The cost of insurance rate is based on the sex, attained age and risk
classification of the insured under the Policy. (For Policies issued in states
which require unisex pricing or in connection with employment related insurance
and benefit plans, the cost of insurance is not based on the sex of the
insured.) The rate will be determined by the Company based upon its expectations
as to future mortality experience, but the rate will never exceed the rate shown
in the Table of Monthly Guaranteed Cost of Insurance Rates set forth in the
Policy. These guaranteed maximum rates are based on the 1980 Smoker and
Nonsmoker Commissioners Standard Ordinary Mortality Tables. The table used will
be male or female according to the sex of the insured (where allowed by law).
Any change in current cost of insurance rates will apply to all individuals of
the same age, sex and risk classification of the insured. However, different
maximum cost of insurance rates may apply to any face amount increases under a
Policy.
The monthly deduction is made only from the Policy's accumulated value held
in the Divisions of the Separate Account. No deduction is made from any
accumulated value of the Policy held in the Company's general account for the
purpose of securing policy loans. The amount deducted from each Division will be
in accordance with policyowner instruction on the application for the Policy.
The policyowner's choice of monthly deduction allocation percentages may be: (1)
the same as the allocation percentages for premiums, (2) on a prorated basis or
(3) any other method of allocation agreed upon by the policyowner and the
Company. For each Division, the allocation percentages must be zero or a whole
number not less than ten nor greater than 100. The allocation percentages chosen
by the policyowner must total 100. Requests for changes in allocation
percentages are effective on the next monthly date following approval by the
Company. If following the policyowner's instruction as to allocation of monthly
deductions would not be possible on any monthly date due to insufficient
accumulated value of the Policy in an affected Division, deductions will be
allocated on a prorated basis.
Mortality and Expense Risks Charge
The Company will assess a charge on a daily basis against each Division
equal to .75% (on an annual basis) of the value of the Division to compensate
the Company for its assumption of certain mortality and expense risks in
connection with the Policy. Specifically, the Company bears the risk that the
costs of death benefits under the Policies will be greater than anticipated. The
Company also assumes the risk that the actual cost incurred by it to administer
the Policies will not be covered by charges assessed under the Policies. This
charge is guaranteed never to exceed .90% on an annual basis of the assets of
each Division. During the year ended December 31, 1997 mortality and expense
risk charges totaled $______________.
Transaction Charge
A transaction charge of the lesser of $25 or 2% of the amount being
surrendered is imposed on each partial surrender of accumulated value. A
transaction charge of $25 is imposed on each transfer of accumulated value among
Divisions exceeding four per policy year. All transfers with the same effective
date count as one transfer.
Surrender Charge
During the first ten policy years, the Company will assess a surrender
charge upon total surrender of a Policy or termination of a Policy when a grace
period expires without sufficient premium payment. The amount of the charge
assessed per $1,000 of face amount depends upon the sex (where allowed by law)
and attained age of the insured on the policy date and how long the Policy has
been in force. In addition, the Company will assess a surrender charge upon
surrender or termination of a Policy for insufficient premium payment which
occurs during the first ten policy years after the adjustment date for a face
amount increase. The amount of the surrender charge assessed per $1,000 of net
increase in face amount depends upon the sex (where allowed by law) and attained
age of the insured on the adjustment date and how long the increase has been in
force. (For Policies issued in states requiring unisex pricing or in connection
with employment related insurance and benefit plans, the surrender charge is not
based on the sex of the insured.) Thus, surrender of a Policy or termination of
a Policy for insufficient value within the first ten policy years and within ten
years after the adjustment date of a face amount increase will result in
assessment of a composite surrender charge representing the charge imposed on
the initial face amount and the charge imposed on the face amount increase. The
surrender charge builds up on a monthly basis during the first policy year (and
during the first year after a face amount increase), remains level to the end of
the third policy year (and to the end of the third year after a face amount
increase) and grades down gradually each year thereafter to zero in the tenth
policy year (and in the tenth year after a face amount increase). Surrender
charges do not decrease when the face amount of a Policy is decreased. No
additional surrender charges apply when the death benefit under a Policy is
changed from Option 2 to Option 1.
The surrender charge is comprised of two parts: A contingent deferred sales
charge and a contingent deferred administration charge. The contingent deferred
sales charge portion of the surrender charge is assessed to recover sales
expenses and is in addition to the 5% sales charge which is deducted when
premium payments are made. The contingent deferred sales charge will not exceed
25% of this minimum first year premium.
The contingent deferred administration charge portion of the surrender
charge is intended to reimburse the Company for administrative expenses
associated with the Policy and the Separate Account and is in addition to the
monthly administration charge for a Policy. The surrender charge is a contingent
charge and will never be assessed if total surrender of a Policy or termination
of a Policy for insufficient value does not occur within the first ten policy
years or within ten years of the adjustment date for a face amount increase.
During the year ended December 31, 1997 the Company received surrender
charges totaling $_____________.
FIRST YEAR CONTINGENT DEFERRED SURRENDER CHARGES
per $1000 of Face Amount
Male Lives
Issue Adm. Sales Total Issue Adm. Sales Total
Age Charge Load Charge Age Charge Load Charge
0 0.43 0.89 1.32 40 2.31 1.71 4.02
1 0.69 0.63 1.32 41 2.38 1.81 4.19
2 0.72 0.62 1.34 42 2.47 1.91 4.38
3 0.74 0.62 1.36 43 2.56 2.02 4.58
4 0.77 0.62 1.39 44 2.65 2.14 4.79
5 0.80 0.61 1.41 45 2.74 2.27 5.01
6 0.84 0.60 1.44 46 2.86 2.39 5.25
7 0.87 0.60 1.47 47 3.00 2.50 5.50
8 0.91 0.60 1.51 48 3.14 2.63 5.77
9 0.93 0.61 1.54 49 3.30 2.76 6.06
10 0.96 0.62 1.58 50 3.46 2.90 6.36
11 0.97 0.65 1.62 51 3.63 3.06 6.69
12 0.97 0.69 1.66 52 3.81 3.23 7.04
13 0.96 0.74 1.70 53 4.01 3.40 7.41
14 0.95 0.80 1.75 54 4.22 3.58 7.80
15 0.93 0.86 1.79 55 4.44 3.78 8.22
16 0.92 0.91 1.83 56 4.69 3.98 8.67
17 0.91 0.96 1.87 57 4.97 4.18 9.15
18 0.92 1.00 1.92 58 5.26 4.40 9.66
19 0.93 1.03 1.96 59 5.55 4.66 10.21
20 1.02 0.99 2.01 60 5.82 4.98 10.80
21 1.07 0.99 2.06 61 6.05 5.37 11.42
22 1.11 1.00 2.11 62 6.27 5.83 12.10
23 1.16 1.01 2.17 63 6.48 6.34 12.82
24 1.22 1.01 2.23 64 6.70 6.89 13.59
25 1.28 1.02 2.30 65 6.95 7.47 14.42
26 1.34 1.03 2.37 66 7.24 8.07 15.31
27 1.41 1.04 2.45 67 7.55 8.71 16.26
28 1.47 1.06 2.53 68 7.88 9.40 17.28
29 1.53 1.09 2.62 69 8.22 10.16 18.38
30 1.60 1.11 2.71 70 8.59 10.98 19.57
31 1.66 1.15 2.81 71 8.98 11.87 20.85
32 1.73 1.19 2.92 72 9.41 12.83 22.24
33 1.80 1.23 3.03 73 9.83 13.88 23.71
34 1.87 1.28 3.15 74 10.23 15.06 25.29
35 1.93 1.34 3.27 75 10.58 16.38 26.96
36 2.01 1.40 3.41
37 2.08 1.47 3.55
38 2.15 1.54 3.69
39 2.23 1.62 3.85
FIRST YEAR CONTINGENT DEFERRED SURRENDER CHARGES
per $1000 of Face Amount
Female Lives
Issue Adm. Sales Total Issue Adm. Sales Total
Age Charge Load Charge Age Charge Load Charge
0 0.44 0.76 1.20 40 1.97 1.52 3.49
1 0.66 0.54 1.20 41 2.03 1.60 3.63
2 0.68 0.54 1.22 42 2.09 1.69 3.78
3 0.70 0.54 1.24 43 2.15 1.78 3.93
4 0.72 0.54 1.26 44 2.23 1.87 4.10
5 0.74 0.54 1.28 45 2.30 1.98 4.28
6 0.77 0.54 1.31 46 2.40 2.06 4.46
7 0.79 0.54 1.33 47 2.51 2.15 4.66
8 0.82 0.54 1.36 48 2.63 2.23 4.86
9 0.84 0.54 1.38 49 2.74 2.34 5.08
10 0.85 0.56 1.41 50 2.87 2.44 5.31
11 0.88 0.57 1.45 51 3.00 2.56 5.56
12 0.89 0.59 1.48 52 3.15 2.67 5.82
13 0.90 0.61 1.51 53 3.32 2.78 6.10
14 0.92 0.63 1.55 54 3.50 2.90 6.40
15 0.93 0.66 1.59 55 3.67 3.04 6.71
16 0.94 0.68 1.62 56 3.88 3.17 7.05
17 0.96 0.70 1.66 57 4.10 3.30 7.40
18 0.99 0.72 1.71 58 4.33 3.46 7.79
19 1.01 0.74 1.75 59 4.62 3.58 8.20
20 1.05 0.75 1.80 60 4.90 3.74 8.64
21 1.07 0.77 1.84 61 5.16 3.97 9.13
22 1.11 0.78 1.89 62 5.41 4.23 9.64
23 1.15 0.80 1.95 63 5.64 4.56 10.20
24 1.18 0.82 2.00 64 5.86 4.94 10.80
25 1.22 0.84 2.06 65 6.11 5.32 11.43
26 1.26 0.87 2.13 66 6.39 5.73 12.12
27 1.30 0.90 2.20 67 6.70 6.16 12.86
28 1.35 0.92 2.27 68 7.06 6.61 13.67
29 1.39 0.95 2.34 69 7.47 7.07 14.54
30 1.44 0.98 2.42 70 7.97 7.53 15.50
31 1.49 1.01 2.50 71 8.45 8.10 16.55
32 1.54 1.05 2.59 72 8.93 8.77 17.70
33 1.59 1.09 2.68 73 9.44 9.50 18.94
34 1.65 1.13 2.78 74 9.94 10.35 20.29
35 1.71 1.17 2.88 75 10.33 11.42 21.75
36 1.76 1.23 2.99
37 1.81 1.30 3.11
38 1.87 1.36 3.23
39 1.92 1.44 3.36
FIRST YEAR CONTINGENT DEFERRED SURRENDER CHARGES
per $1000 of Face Amount
Unisex Lives
Issue Adm. Sales Total Issue Adm. Sales Total
Age Charge Load Charge Age Charge Load Charge
0 0.43 0.87 1.30 40 2.26 1.69 3.95
1 0.69 0.61 1.30 41 2.34 1.78 4.12
2 0.72 0.60 1.32 42 2.42 1.88 4.30
3 0.74 0.60 1.34 43 2.51 1.99 4.50
4 0.77 0.60 1.37 44 2.60 2.10 4.70
5 0.79 0.60 1.39 45 2.69 2.23 4.92
6 0.83 0.59 1.42 46 2.80 2.35 5.15
7 0.86 0.59 1.45 47 2.93 2.46 5.39
8 0.90 0.59 1.49 48 3.07 2.58 5.65
9 0.92 0.60 1.52 49 3.22 2.71 5.93
10 0.95 0.61 1.56 50 3.38 2.84 6.22
11 0.96 0.64 1.60 51 3.55 2.99 6.54
12 0.97 0.67 1.64 52 3.73 3.15 6.88
13 0.96 0.72 1.68 53 3.92 3.32 7.24
14 0.95 0.77 1.72 54 4.12 3.50 7.62
15 0.94 0.82 1.76 55 4.33 3.69 8.02
16 0.93 0.87 1.80 56 4.58 3.88 8.46
17 0.93 0.91 1.84 57 4.85 4.07 8.92
18 0.94 0.95 1.89 58 5.14 4.28 9.42
19 0.96 0.97 1.93 59 5.43 4.52 9.95
20 1.04 0.94 1.98 60 5.70 4.82 10.52
21 1.08 0.95 2.03 61 5.93 5.19 11.12
22 1.12 0.96 2.08 62 6.16 5.62 11.78
23 1.17 0.97 2.14 63 6.37 6.11 12.48
24 1.22 0.98 2.20 64 6.59 6.64 13.23
25 1.28 0.99 2.27 65 6.84 7.19 14.03
26 1.34 1.00 2.34 66 7.13 7.77 14.90
27 1.40 1.02 2.42 67 7.44 8.38 15.82
28 1.46 1.04 2.50 68 7.77 9.04 16.81
29 1.52 1.06 2.58 69 8.13 9.75 17.88
30 1.58 1.09 2.67 70 8.51 10.53 19.04
31 1.64 1.13 2.77 71 8.91 11.38 20.29
32 1.71 1.17 2.88 72 9.34 12.31 21.65
33 1.77 1.21 2.98 73 9.78 13.31 23.09
34 1.84 1.26 3.10 74 10.20 14.44 24.64
35 1.91 1.31 3.22 75 10.55 15.73 26.28
36 1.98 1.38 3.36
37 2.05 1.44 3.49
38 2.11 1.52 3.63
39 2.19 1.60 3.79
The percentage of the first year surrender charges shown above remaining in
each policy year thereafter is:
Percentage of First Year
Policy Year Surrender Charges Remaining
----------- ---------------------------
2 100.0%
3 100.0%
4 87.5%
5 75.0%
6 62.5%
7 50.0%
8 37.5%
9 25.0%
10 12.5%
11+ 0.0%
If the face amount of a Policy is increased, surrender charges apply to the
net increase in face amount as though a new Policy had been issued for an amount
equal to net increase, based on the tables set out above. The net increase in
face amount is equal to the increase in face amount less earlier decreases in
face amount not offset against an earlier increase in face amount. The Minimum
Required Premium following a requested face amount increase will be shown on the
Policy data pages issued to reflect the adjustment.
Surrender charges following a Policy's reinstatement commence at the rate
in effect at the time of the Policy's termination.
Other Charges
Shares of the Accounts are purchased by the corresponding Divisions at the
shares' net asset values. The net asset value of Account shares reflects the
investment management fees and corporate operating expenses already deducted
from the assets of the Account. The current investment management fee at an
annual rate of .50% of the first $100 million of each fund's average daily net
assets and .45% of the next $100 million of each Account's daily average net
assets is charged monthly against Bond Account, Capital Value Account and Money
Market Account. The current investment management fee at an annual rate of .60%
of the average daily net asset value is charged monthly against Balanced Account
and High Yield Account. The current investment management fee at an annual rate
of .65% of the first $100 million of the fund's average daily net assets and 60%
of the next $100 million of the fund's daily average net assets is charged
monthly against MidCap Account.
The Company reserves the right to charge the assets of each Division of the
Separate Account to provide for any income taxes payable by the Company on the
assets of such Divisions.
Special Plans
Where allowed by law, the Company may reduce or eliminate certain charges
for Policies issued under special circumstances that result in lower expenses to
the Company. For example, special circumstances may exist in connection with
group arrangements, including employer or employee organization sponsored plans,
and with regard to Policies issued to persons owning other policies issued by
the Company or its subsidiaries. The amount of any reduction, the charges to be
reduced, and the criteria for applying a reduction will reflect the reduced
sales effort, costs and differing mortality experience appropriate to the
circumstances giving rise to the reduction. The charges will be reduced in
accordance with the Company's practice in effect when the Policy is issued.
Reductions will not be unfairly discriminatory against any person, including the
purchasers to whom the reduction applies and all other owners of the Policies.
OTHER MATTERS
Voting Rights
The Company shall vote Account shares held in the Separate Account at
regular and special meetings of shareholders of each Account, but will follow
voting instructions received from persons having the voting interest in such
Account shares.
The policyowner has the voting interest under a Policy. The policyowner
shall have one vote for each $100 of accumulated value in the Divisions, with
fractional votes allocated for amounts less than $100. The number of votes on
which the policyowner has the right to instruct will be determined as of the
date coincident with the date established by the Account for determining
shareholders eligible to vote at the meeting of the Account. Voting instructions
will be solicited by written communications prior to such meetings in accordance
with procedures established by the Mutual Fund. The Company will vote other
Account shares held in the Separate Account, including those for which no
instructions are received in the same proportion as it votes shares for which it
has received instructions. All Account shares held in the general account of the
Company will be voted in proportion to instructions that are received with
respect to participating contracts.
If the Company determines pursuant to applicable law that Account shares
held in the Separate Account need not be voted pursuant to instructions received
from persons otherwise having the voting interest as provided above, then the
Company may vote Account shares held in the Separate Account in its own right.
The Company may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that shares be voted
so as to cause a change in subclassification or investment objective of the
Account, or disapprove an investment advisory contract of the Account. In
addition, the Company may disregard voting instructions in favor of changes
initiated by a policyowner in the investment policy or the investment advisor of
the Account 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 determines that the
change would be inconsistent with the investment objectives of the Account or
would result in the purchase of securities for the Account which vary from the
general quality and nature of investments and investment techniques utilized by
other separate accounts created by the Company or any affiliates of the Company
which have similar investment objectives. In the event that the Company does
disregard voting instructions, a summary of that action and the reason for such
actions will be included in the next semi-annual report to policyowners.
Statement of Value
The Company will mail an annual statement to the policyowner after the end
of each policy year until the policy terminates. The statement will show:
1. the current death benefit;
2. the current accumulated and surrender values;
3. all premiums paid since the last statement;
4. all charges since the last statement;
5. any policy loans and loan interest;
6. any partial surrenders since the last statement;
7. the number of units and unit value;
8. the total value of each of the policyowner's investment accounts; and
9. any investment gain or loss since the last statement.
Any policyowner may request at any time a current statement of account
values, transactions and activities by telephoning 1-800-247-9988.
The Company will also send to the policyowner the reports required by the
Investment Company Act of 1940.
Service Available by Telephone
Policyowners may preauthorize the following telephone transactions: 1)
transfers between divisions; 2) change in premium allocation percentages; 3)
change in monthly deduction percentages; and 4) policy loans (Policy loan
proceeds will be mailed only to the policyowner's address of record.) The
policyowner may preauthorize the above transactions by submitting a form
provided by the Company. Policyowners may exercise the telephone transactions
privilege by telephoning 1-800-247-9988. Telephone transfer requests must be
received by the close of the New York Stock Exchange on a day when the Separate
Account is open for business to be effective that day. Requests made after that
time or on a day when the Separate Account is not open for business will be
effective the next business day.
Although neither the Separate Account nor the Company is responsible for
the authenticity of telephone transaction requests, the right is reserved to
refuse to accept telephone requests when in the opinion of the Company it seems
prudent to do so. The policyowner bears the risk of loss caused by fraudulent
telephone instructions the Company reasonably believes to be genuine. The
Company will employ reasonable procedures to assure telephone instructions are
genuine and if such procedures are not followed, the Company may be liable for
losses due to unauthorized or fraudulent transactions. Such identification
information includes recording all telephone instructions, requesting personal
information such as the caller's name, daytime telephone number, social security
number and/or birthdate and sending a written confirmation of the transaction to
the policyowner's address of record. Policyowners may obtain additional
information and assistance by telephoning the toll free number. The Company may
modify or terminate telephone transfer procedures at any time.
You may obtain contract information from our Direct Dial system between
7:00 a.m. and 9:00 p.m., Central Time, Monday through Saturday. Through this
automated telephone system, you can obtain information about unit values and
contract values, initiate certain changes to your contract, change your Personal
Identification Number (PIN), or speak directly to a customer service
representative. The telephone number is 1-800-247-9988. As with other telephone
services, instructions received via our Direct Dial system will be binding on
all contractowners.
GENERAL PROVISIONS
Addition, Deletion or Substitution of Investments
The Company reserves the right, subject to compliance with applicable law,
to make additions to, deletions from, or substitutions for the shares held by
any Division or which any Division may purchase. If shares of any Account should
no longer be available for investment or if, in the judgment of the Company's
management, further investment in shares of any Account should become
inappropriate in view of the purposes of the Policy, the Company may substitute
shares of any other investment company for shares already purchased, or to be
purchased in the near future under the Policies. No substitution of securities
will take place without notice to policyowners and without prior approval of the
Securities and Exchange Commission, to the extent required by the Investment
Company Act of 1940.
The investment policy of the Separate Account will not be materially
changed unless a statement of the change is filed with and not disapproved by
the Insurance Commissioner of the State of Iowa and the Superintendent of
Insurance of the State of New York, if required. Whether a change in investment
policy is material will be determined in conjunction with the appropriate state
insurance commissioner(s). The policyowner will be notified of any material
investment policy change. The policyowner may then change allocation percentages
and transfer any value in an affected Division to another Division without
charge. In the alternative, the policyowner may exchange the Policy for a
fixed-benefit, flexible premium life insurance policy offered by the Company for
this purpose. The policyowner may exercise this exchange privilege until the
later of 60 days after (i) the effective date of such change, or (ii) the
receipt of a notice of the options available. The face amount of the new policy
will be the death benefit of the Policy on the date of exchange.
Each Account is subject to certain investment restrictions which may not be
changed without the approval of the majority of the outstanding voting
securities of such fund. See the accompanying prospectuses for the Accounts.
Optional Insurance Benefits
Subject to certain requirements and approval by state insurance
departments, one or more supplementary benefits may be added to a Policy,
including those providing term insurance options, providing accidental death
coverage, waiving monthly deductions upon disability, accelerating benefits in
the event of terminal illness, providing cost of living increases in benefits,
providing a death benefit guarantee described below, providing a guaranteed
increase option and, in the case of business-owned Policies, permitting a change
of the life insured and providing enhanced policy values in the early years of a
Policy. More detailed information concerning supplementary benefits may be
obtained from an authorized agent of the Company. The cost, if any, of any
optional insurance benefits will be deducted as part of the monthly deduction.
Death Benefit Guarantee Rider
The death benefit guarantee rider provides that if the death benefit
guarantee premium requirement is satisfied the Policy will not enter its grace
period even if the net surrender value is insufficient to cover the monthly
deduction on a monthly date. This rider is automatically made a part of all
Policies at no premium. The death benefit guarantee premium requirement is
satisfied if the sum of all premiums paid less any partial surrenders and any
policy loans and unpaid loan interest equals or exceeds the sum of the monthly
death benefit guarantee premiums applicable to date plus the next monthly death
benefit guarantee premium. The death benefit guarantee premium is based on the
issue age, sex (where permitted by law), death benefit option, and risk class of
the insured. The monthly death benefit guarantee premium will be considered to
be zero for any month that deductions are being paid by the Waiver of Monthly
Deductions Rider. The death benefit guarantee premium may change if the Policy
face amount is changed, the death benefit option is changed, or a rider is added
or deleted. As a result of a change, an additional premium may be required on
the date of the change in order to satisfy the new death benefit guarantee
premium requirement. If on any monthly date the death benefit guarantee premium
requirement is not met, the policyowner will be sent a notice of the premium
required to maintain the guarantee. If the premium is not received at the
Company's home office prior to the expiration of 61 days after the date the
notice is mailed, the death benefit guarantee will no longer be in effect and
the rider will terminate. If the rider terminates, it may not be reinstated.
If this rider is in force, the death benefit guarantee premium requirement
is satisfied and the insured is alive on the policy maturity date, the Company
will pay the policyowner the excess, if any, of the face amount over the
maturity proceeds.
This rider is available only in those states where it has been approved.
The Contract
The Policy, the application attached to it, any adjustment applications,
any amendments to the application, the current data pages, and any written
notification showing change make up the entire contract between the Company and
the policyowner. Any statements made in the application or an adjustment
application will be considered representations and not warranties. No statement,
unless made in an application, will be used to void a Policy (or void an
adjustment in case of an adjustment application) or to defend against a claim. A
Policy may be modified by mutual agreement between the policyowner and the
Company. Any alteration of the Policy must be in writing and signed by one of
the Company's corporate officers. No one else, including the agent, may change
the contract or waive any provisions.
Incontestability
The Company will not contest the insurance coverage provided under a
Policy, except for any subsequent increase in face amount, after the Policy has
been in force during the lifetime of the insured for a period of two years from
the policy date. This provision does not apply to claims for total disability or
to accidental death benefits which may be provided by a rider to a Policy. Any
face amount increase made under the adjustment options has its own two-year
contestable period which begins on the effective date of the adjustment.
Misstatements
If the age or sex of the insured has been misstated in an application,
including a reinstatement application, the death benefit under the Policy will
be the Policy's accumulated value plus the amount which would be purchased by
the most recent mortality charge at the correct age and sex.
Suicide
A Policy does not cover the risk of suicide within two years from the
policy date or two years from the date of any increase in face amount with
respect to such increase, whether the insured is sane or insane. In the event of
suicide within two years of the policy date, the only liability of the Company
will be a refund of premiums paid, without interest, less any policy loans and
loan interest and any partial surrenders. In the event of suicide within two
years of an increase in face amount, the only liability of the Company in
respect to that increase in face amount will be a refund of the cost of
insurance for such increase.
Ownership
The owner of the Policy is as named in the application. The owner may
exercise every right and enjoy every privilege provided by the Policy, subject
to the rights of any irrevocable beneficiary. All privileges and rights of the
owner under a Policy end when the owner surrenders the Policy for cash, the
death proceeds of the Policy are paid, or the maturity proceeds of the Policy
are paid. Also, if the grace period ends without receipt by the Company at its
home office of the payment required to keep the Policy in force, the privileges
and rights of the owner terminate as of the monthly date on or immediately
preceding the start of the grace period. If the owner is not the insured and
dies before the insured, the insured becomes the owner unless the owner has
provided for a successor owner. The owner may be changed by filing a written
request with the Company. The Company's approval is needed and no change is
effective until the Company approves the written request for change of owner.
Once approved, the change is effective as of the date the owner signed the
written request. The Company reserves the right to require that the Policy be
sent to the Company so that the change may be recorded.
Beneficiaries
The original beneficiaries and contingent beneficiaries are designated by
the policyowner on the application. A primary and/or contingent beneficiary or
beneficiaries may be changed by written request to the Company. The Company's
approval is needed and no change is effective until the Company approves the
written request for change of beneficiary. Once approved, the change is
effective as of the date the owner signed the written request. If changed, the
primary beneficiary or contingent beneficiary is as shown in the latest written
change filed with the Company. One or more primary or contingent beneficiaries
may be named in the application or a later change request.
Benefit Instructions
While the insured is alive, the owner may file instructions for the payment
of death proceeds under one of the benefit options under the Policy. Such
instructions, or a change of instructions, must be made by written request to
the Company. If the owner changes the beneficiary, that change will revoke any
prior benefit instructions.
Postponement of Payments
Payment of any amount upon total or partial surrender, policy loan, or
proceeds payable at death or maturity and the right to transfer accumulated
value between Divisions may be postponed or suspended whenever: (1) 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; (2) the Securities and Exchange Commission
by order permits postponement for the protection of policyowners; or (3) the
Securities and Exchange Commission requires that trading be restricted or
declares an emergency, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to determine the net
asset value of the Accounts.
Assignment
The Policy can be assigned as collateral for a loan. The Company must be
notified in writing if the Policy has been assigned. Each assignment will be
subject to any payments made or action taken by the Company prior to its
notification of such assignment. The Company is not responsible for the validity
of an assignment. An assignment as collateral does not change the owner but the
rights of beneficiaries, whenever named, become subordinate to those of the
assignee.
Policy Proceeds
Death proceeds under a Policy will ordinarily be paid within seven days
after the Company receives due proof of death. Payments may be postponed in
certain circumstances. (See "Postponement of Payments.) During the insured's
lifetime, the policyowner may arrange for the death proceeds to be paid in a
lump sum or under one or more of the settlement options described below. These
choices are also available if the Policy is surrendered or matures.
When death proceeds are payable in a lump sum, the beneficiary may select
one or more of the settlement options.
The following options are available:
Option A
Special Benefit Arrangement - A specially designed benefit option may be
arranged with the Company's approval.
Option B
Proceeds Left at Interest - The Company will hold the amount applied on
deposit. Interest payments will be made annually, semi-annually, quarterly or
monthly, as elected.
Option C
Fixed Income - The Company will pay an income of a fixed amount or an
income for a fixed period not exceeding 30 years.
Option D
Life Income - The Company will pay an income during a person's lifetime. A
minimum guaranteed period may be used.
Option E
Joint and Survivor Life Income - The Company will pay an income during the
lifetime of two persons, and continuing until the death of the survivor. This
option includes a minimum guaranteed period of 10 years.
Option F
Joint and Two-Thirds Survivor Life Income - The Company will pay an income
during the time two persons both remain alive, and two-thirds of the original
amount during the remaining lifetime of the survivor.
Interest at a rate set by the Company, but never less than required by
state law, will be applied to determine the payment under Option B, and any such
interest in excess of the guaranteed minimum will be added to payments under
Option C.
Participating Policy
The Policies share in any divisible surplus of the Company. The Company
will determine each Policy's share of the surplus and will credit it as a
dividend at the end of each contract year. The Company does not expect to pay
any dividends under the Policy.
Dividends, if any, will be paid in cash.
Right To Exchange Policy
During the first 24 policy months following issuance of a Policy, except
during a grace period, the policyowner may exchange the Policy for any other
form of fixed benefit individual life insurance policy (other than term
insurance) currently made available by the Company for this purpose on the
insured's life. At present, the Company makes a universal life insurance policy
available for exercise of this exchange right. Such request must be postmarked
or delivered to the home office of the Company before the expiration of 24
months after the policy date. At the option of the policyowner, the new policy
will provide either the same death benefit or the same amount at risk as the
Policy did at the time of the exchange request. Premiums for the new policy will
be based on the same issue age, sex and risk classification of the insured under
the Policy. An equitable adjustment in the new policy's payments and cash or
accumulated values will be made to reflect variances, if any, in the payments
and accumulated values under the Policy and the new policy. Minimum benefits of
the new policy will be fixed and guaranteed and the new policy will not
participate in the experience of the Separate Account. Policy values will be
determined as of the date the written request for exchange is received at the
Company's home office. Evidence of insurability will not be required for the
exchange. No charge will be imposed on the exercise of this exchange privilege.
Any policy loan and loan interest must be repaid prior to the exchange or
transferred to the new policy. Any benefit riders included as a part of a Policy
may be exchanged, without evidence of insurability, for similar benefit riders
on the new policy if both these conditions are met:
1. The policyowner, in the written request for exchange, indicates that the
rider or riders should be a part of the new policy; and
2. The similar benefit rider or riders were available for the new policy on
the effective date of the benefit rider for the Policy based on the same
issue age, sex and risk classification of the insured under the Policy.
The exchange will be effective upon proper receipt by the Company of the
written request, any amount required as an adjustment and surrender of the
Policy.
The policyowner may also exchange the Policy for a fixed-benefit, flexible
premium policy in the event of a material change in investment policy of a
Division (see "Addition, Deletion or Substitution of Investments.")
In addition, the policyowner has the right to exchange a face amount
increase for a fixed-benefit, flexible premium policy at any time during the
first 24 months following issuance of Policy data pages reflecting a face amount
increase, but not while the policy is in a grace period (see "Adjustment
Options.")
DISTRIBUTION OF THE POLICY
The Policy will be sold by individuals who, in addition to being licensed
and appointed as life insurance agents or brokers for the Company, are also
registered representatives of the principal underwriter of the Policies, Princor
Financial Services Corporation, or of other broker-dealers which Princor
Financial Services Corporation selects and the Company approves. Princor
Financial Services Corporation 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. For contracts
distributed by the principal underwriter commissions will range between 0% and
50% of premium received in the first year of a Policy (and between 0% and 50% of
premium received in the first year following an adjustment date), up to a target
premium determined by a rate per $1,000 of face amount which varies by the age
and sex of the insured. In addition, commissions will include 0% to 4% of
premium received in the first year of the Policy, above the target premium. For
years two and later of a Policy, commissions will range from 0% to 2% of
premiums received. A service fee of 0% to 2% is paid on all premiums received
after the first policy year. In addition, a persistency renewal commission may
be paid which ranges from 1.25% to 5.25% of premiums received in the first three
policy years, depending upon the agent's or broker's total life insurance sales
for the Company. Expense allowances may also be payable to agents and brokers
based upon premiums received. Commission amounts for contracts distributed by
broker-dealers other than the principal underwriter will vary.
For the year ended December 31, 1997, the Company paid Princor Financial
Services Corporation $_________________ to compensate registered representatives
of the principal underwriter.
The Company has entered into a distribution agreement with Princor
Financial Services Corporation. Princor Financial Services Corporation is the
principal underwriter for Principal Variable Contracts Fund, Inc., a registered
investment company organized by the Company. Princor Financial Services
Corporation is a wholly-owned subsidiary of Principal Holding Company. Principal
Holding Company is a holding company and a wholly-owned subsidiary of the
Company.
OFFICERS AND DIRECTORS OF PRINCIPAL MANAGEMENT CORPORATION
A complete list of the officers and directors of the investment adviser,
Principal Management Corporation, is provided below. The principal business
address for each officer and director is The Principal Financial Group, Des
Moines, Iowa 50392.
CRAIG R. BARNES Vice President
CRAIG L. BASSETT Treasurer
MICHAEL J. BEER Senior Vice President and Chief Operating Officer
MARY L. BRICKER Assistant Corporate Secretary
DAVID J. DRURY Director
ARTHUR S. FILEAN Vice President
PAUL N. GERMAIN Assistant Vice President - Operations
ERNEST H. GILLUM Assistant Vice President - Registered Products
THOMAS J. GRAF Director
J. BARRY GRISWELL Chairman of the Board and Director
JOYCE N. HOFFMAN Vice President and Corporate Secretary
STEPHAN L. JONES Director and President
RONALD E. KELLER Director
GREGG R. NARBER Director
LAYNE A. RASMUSSEN Controller - Mutual Funds
ELIZABETH R. RING Controller
MICHAEL J. ROUGHTON Counsel
JEAN B. SCHUSTEK Product Compliance Officer - Registered Products
DEWAIN A. SPARRGROVE Vice President
OFFICERS AND DIRECTORS OF PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
Principal Mutual Life Insurance Company is managed by a Board of Directors
which is elected by its policyowners. The directors and executive officers of
the Company, their positions with the Company, including Board Committee
memberships, and their principal occupation during the last five years, are as
follows:
DIRECTORS:
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS):
JOHN EDWARD ASCHENBRENNER Senior Vice President
THOMAS JEFFERSON GAARD Senior Vice President
MICHAEL HARRY GERSIE Senior Vice President
THOMAS JOHN GRAF Senior Vice President
JOHN BARRY GRISWELL Executive Vice President
RONALD EUGENE KELLER Executive Vice President
GREGG ROSS NARBER Senior Vice President and General Counsel
RICHARD LEO PREY Senior Vice President
CARL CHANSON WILLIAMS Senior Vice President and Chief Information Officer
Principal Occupation
Name, Positions and Offices During Last 5 Years
- --------------------------- -------------------
MARY VERMEER ANDRINGA President and Chief Operating Officer,
Director Vermeer Manufacturing Company.
Member, Nominating Committee
RUTH MARGARET DAVIS President and Chief Executive Officer,
Director The Pymatuning Group, Inc.
Member, Nominating Committee
DAVID JAMES DRURY Chairman and Chief Executive Officer,
Director Principal Mutual Life Insurance Company since
Chairman of the Board January 1995. President and Chief Executive
Chair, Executive Committee Officer from 1994 - 1995; President from
1993-1994; Executive Vice President from
1992 - 1993; Executive Vice President and
Chief Actuary 1992.
Principal Occupation
Name, Positions and Offices During Last 5 Years
- --------------------------- -------------------
CHARLES DANIEL GELATT, JR. President, NMT Corporation.
Director
Chair, Human Resources Committee
Member, Executive Committee
GERALD DAVID HURD Retired. Chairman and Chief Executive
Director Officer, Principal Mutual Life Insurance
Member, Executive and Company 1989 - 1994.
Nominating Committees
THEODORE MURTAGH HUTCHISON Retired. Vice Chairman, Principal Mutual Life
Director Insurance Company August 1994-May 1997. Prior
Member, Nominating Committee thereto, Executive Vice President.
CHARLES SAMUEL JOHNSON Chairman, President and Chief Executive
Director Officer, Pioneer Hi-Bred International, Inc.
Member, Audit Committee since December 1996. President and Chief
Executive Officer September 1995 - December
1996. President and Chief Operating Officer
March 1995 - September 1995. Executive Vice
President 1993 - March 1995. Prior thereto,
Senior Vice President.
WILLIAM TURNBALL KERR President & Chief Executive Officer, Meredith
Director Corporation since 1997. President and Chief
Chair, Nominating Committee Operating Officer 1994 - 1997. Prior thereto,
Member, Executive Committee Executive Vice President.
LEE LIU Chairman and Chief Executive Officer, IES
Director Industries, Inc., since November 1996. Prior
Member, Executive and Human thereto, Chairman, President and Chief
Resources Committees Executive Officer.
VICTOR HENDRIK LOEWENSTEIN Managing Partner, Egon Zehnder International
Director
Member, Audit Committee
RONALD DALE PEARSON Chairman, President and Chief Executive
Director Officer, Hy-Vee, Inc.
Member, Human Resources Committee
JOHN ROY PRICE Managing Director, The Chase Manhattan
Director Corporation since April, 1996. Prior thereto,
Member, Nominating Committee Managing Director, Chemical Banking
Corporation.
DONALD MITCHELL STEWART President, The College Board.
Director
Member, Human Resources Committee
ELIZABETH EDITH TALLETT President & CEO of Dioscor, Inc. & Serex,
Director Inc. since 1996. President and Chief
Chair, Audit Committee Executive Officer, Transcell Technologies,
Inc. 1992 - 1996.
DEAN DICKSON THORNTON Retired since 1993. Prior thereto President,
Director Boeing Commercial Airplane Group.
Member, Audit Committee
FRED WILLIAM WEITZ President, Chairman of the Board and Chief
Director Executive Officer, Essex Meadows, Inc. since
Member, Human Resources 1995. Prior thereto, President, Chairman of
Committee the Board, and Chief Executive Officer, The
Weitz Corporation and its subsidiaries.
STATE REGULATION OF PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
The Company is organized under the laws of the State of Iowa and is subject
to regulation by the Commissioner of Insurance of Iowa. An annual statement is
filed with the Iowa Division of Insurance on or before March 1 of each year
covering the operations and reporting on the financial condition of the Company
as of December 31 of the preceding year. Periodically, the Commissioner examines
the assets
and liabilities of the Company and the Separate Account and verifies their
adequacy. A full examination of the Company's operations is conducted by the
National Association of Insurance Commissioners at least every five years.
FEDERAL TAX MATTERS
The discussion contained herein is general in nature, is not an exhaustive
discussion of all tax questions that might arise under the policies, and is not
intended as tax advice. No attempt is made to consider any applicable state or
other tax laws and no representation is made as to the likelihood of
continuation of current federal income tax laws and treasury regulations or of
current interpretations of the Internal Revenue Service.
While the Company reserves the right to make changes in the Policy to
assure that it continues to qualify as life insurance for tax purposes, the
Company cannot make any guarantee regarding the future tax treatment of any
Policy. For complete information on the impact of changes with respect to the
Policy and federal and state considerations, a qualified tax advisor should be
consulted.
The ultimate effect of federal income taxes on values under the Policy and
on the economic benefit to the policyowner or beneficiary depends upon the
Company's tax status, upon the terms of the Policy and upon the tax status of
the individual concerned.
Tax Status of the Company and the Separate Account
The Company is taxed as an insurance Company under Subchapter L of the
Internal Revenue Code of 1986 (the "Code"). The Separate Account is not a
separate taxable entity and its operations are taken into account by the Company
in determining its income tax liability. All investment income and realized net
capital gains on the assets of the separate account are reinvested and taken
into account in determining Policy Values and are automatically applied to
increase the book reserves associated with the policies. Under existing federal
income tax law, neither the investment income nor any net capital gains of the
Separate Account, are taxed to the Company to the extent those items are applied
to increase reserves associated with the policies.
Charges for Taxes
The Company imposes a federal tax charge equal to 1.25% of premiums
received under the Policy to compensate for the federal income tax liability it
incurs under Section 848 of the Code by reason of its receipt of premiums under
the Policy. The Company believes that this charge is reasonable in relation to
the increased tax burden it incurs as a result of Section 848. No other charge
is currently made on the Separate Account for federal income taxes of the
Company that may be attributable to the Separate Account. Periodically, the
Company reviews the appropriateness of charges to the Separate Account for the
Company's federal income taxes, and in the future, a charge may be made for
federal income taxes incurred by the Company that are attributable to the
Separate Account. In addition, depending on the method of calculating interest
on Policy Values allocated to the Fixed Account, a charge may also be imposed
for the Policy's share of the Company's federal income taxes attributable to the
Fixed Account.
Under current laws, the Company may incur state or local taxes (in addition
to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, the Company reserves the right to charge the Separate Account for the
portion of such taxes, if any, attributable to the Separate Account.
Diversification Standards
In addition to other requirements imposed by the Code, a Policy will
qualify as life insurance under the Code only if the diversification
requirements of Code Section 817(h) are satisfied by each Separate Account in
which any of the Policy Values are held. To assure that each Policy continues to
qualify as life insurance for federal income tax purposes, the Company intends
to comply with Code Section 817(h) and the regulations thereunder.
Life Insurance Status of Policy
The Company believes that the Policy meets the statutory definition of life
insurance under Code Section 7702 and that the policyowner and beneficiary of
any Policy will receive the same federal income tax treatment as that accorded
to owners and beneficiaries of fixed benefit life insurance policies.
Specifically, the death benefit under the Policy will be excludable from the
gross income of the beneficiary subject to the terms and conditions of Section
101(a)(1) of the Code. (Death benefits under a "modified endowment contract" as
discussed below are treated in the same manner as death benefits under life
insurance contracts that are not so classified.)
In addition, unless the Policy is a "modified endowment contract," in which
case the receipt of any loan under the Policy may result in recognition of
income to the policyowner, the policyowner will not be deemed to be in
constructive receipt of the Policy Values, including increments thereon, under
the Policy until proceeds of the Policy are received upon a total or partial
surrender of the Policy.
Modified Endowment Contract Status
A Policy will be a modified endowment contract if it satisfies the
definition of life insurance set out in the Internal Revenue Code, but it either
fails the additional "7-pay test" set forth in Code Section 7702A or was
received in exchange for a modified endowment contract. A Policy will fail the
7-pay test if the accumulated amount paid under the contract at any time during
the first seven contract years exceeds the total premiums that would have been
payable under a Policy providing for guaranteed benefits upon the payment of
seven level annual premiums. A Policy received in exchange for a modified
endowment contract will be taxed as a modified endowment contract even if it
would otherwise satisfy the 7-pay test.
While the 7-pay test is generally applied as of the time the Policy is
issued, certain changes in the contractual terms of a Policy will require a
Policy to be retested to determine whether the change has caused the Policy to
become a modified endowment contract. For example, a reduction in death benefits
during the first seven contract years will cause the Policy to be retested as if
it had originally been issued with the reduced death benefit.
In addition, if a "material change" occurs at any time while the Policy is
in force, a new 7-pay test period will start and the Policy will need to be
retested to determine whether it continues to meet the 7-pay test. The term"
material change" generally includes increases in death benefits, but does not
include an increase in death benefits which is attributable to the payment of
premiums necessary to fund the lowest level of death benefits payable during the
first seven contract years, or which is attributable to the crediting of
interest with respect to such premiums.
Because the Policy provides for flexible premium payments, the Company has
instituted procedures to monitor whether increases in death benefits or
additional premium payments cause either the start of a new seven-year test
period or the taxation of distributions and loans. All additional premium
payments will be considered in these determinations.
If a Policy fails the 7-pay test, all distributions (including loans)
occurring in the year of failure and thereafter will be subject to the rules for
modified endowment contracts. A recapture provision also applies to loans and
distributions that are received in anticipation of failing the 7-pay test. Under
the Code, any distribution or loan made within two years prior to the date that
a Policy fails the 7-pay test is considered to have been made in anticipation of
the failure.
Policy Surrenders and Partial Surrenders
Upon a total surrender of a Policy, the policyowner will recognize ordinary
income for federal tax purposes to the extent that the net surrender value
exceeds the investment in the contract (the total of all premiums paid but not
previously recovered plus any other consideration paid for the Policy). The tax
consequences of a partial surrender from a Policy will depend upon whether the
partial surrender results in a reduction of future benefits under the Policy and
whether the Policy is a modified endowment contract.
If the Policy is not a modified endowment contract, the general rule is
that a partial surrender from a Policy is taxable only to the extent that it
exceeds the total investment in the contract. An exception to this general rule
applies, however, if a reduction of future benefits occurs during the first 15
years after a Policy is issued and there is a cash distribution associated with
that reduction. In such a case, the Code prescribes a formula under which the
policyowner may be taxed on all or a part of the amount distributed. After 15
years, cash distributions from a Policy that is not a modified endowment
contract will not be subject to federal income tax, except to the extent they
exceed the total investment in the contract. The Company suggests that a
policyowner consult with a tax advisor in advance of a proposed decrease in face
amount or a partial surrender. In addition, any amounts distributed under a
"modified endowment contract" (including proceeds of any loan) are taxable to
the extent of any accumulated income in the Policy. In general, the amount which
may be subject to tax is the excess of the Policy Value (both loaned and
unloaned) over the previously unrecovered premiums paid.
Under certain circumstances, a distribution under a modified endowment
contract (including a loan) may be taxable even though it exceeds the amount of
accumulated income in the Policy. This can occur because for purposes of
determining the amount of income received upon a distribution (or loan) from a
modified endowment contract, the Code requires the aggregation of all modified
endowment contracts issued to the same policyowner by an insurer and its
affiliates within the same calendar year. Therefore, loans and distributions
from any one such Policy are taxable to the extent of the income accumulated in
all the modified endowment contracts required to be so aggregated.
If any amount is taxable as a distribution of income under a modified
endowment contract (as a result of a total surrender, a partial surrender or a
loan), it may also be subject to a 10% penalty tax under Code Section 72(v).
Limited exceptions from the additional penalty tax are available for certain
distributions to individual policyowners. The penalty tax will not apply to
distributions: (i) that are made on or after the date the taxpayer attains age
59 1/2; or (ii) that are attributable to the taxpayer's becoming disabled; or
(iii) that are part of a series of substantial equal periodic payments (made not
less frequently than annually) made for the life or life expectancy of the
taxpayer.
Policy Loans and Interest Deductions
The Company also believes that under current law any loan received under
the Policy will be treated as a Policy debt of a policyowner and that, unless
the Policy is a modified endowment contract, no part of any loan under a Policy
will constitute income to the policyowner. If the Policy is a modified endowment
contract (see discussion above) loans will be fully taxable to the extent of the
income in the Policy (and in any other contracts with which it must be
aggregated) and could be subject to the additional 10 percent tax.
Code Section 264 imposes stringent limitations on the deduction of interest
paid or accrued on loans in connection with a Policy. In addition, under the
"personal" interest limitation provisions of Code Section 163, no deduction is
allowed for interest on any Policy loan if the proceeds are used for personal
purposes, even if the Policy and loan otherwise meet the requirements of Code
Section 264. The limitations on deductibility of personal interest may not apply
to disallow all or part of the interest expense as a deduction if the loan
proceeds are used for "trade or business" or "investment" purposes. The Company
suggests consultation with a tax advisor for further guidance.
Corporate Alternative Minimum Tax
Ownership of a Policy by a corporation may affect the policyowner's
exposure to the corporate alternative maximum tax. In determining whether it is
subject to alternative minimum tax a corporate policyowner must make two
computations. First, the corporation must take into account a portion of the
current year's increase in the built-in gain in its corporate-owned policies.
Second, the corporation must take into account a portion of the amount by which
the death benefits received under any Policy exceed the sum of (i) the premiums
paid on that Policy in the year of death, and (ii) the corporation's basis in
the Policy (as measured for alternative minimum tax purposes) as of the end of
the corporation's tax year immediately preceding the year of death.
Exchange or Assignment of Policies
A change of the policyowner or the insured or an exchange or assignment of
a Policy may have significant tax consequences depending on the circumstances.
For example, an assignment or exchange of a Policy may result in taxable income
to the transferring policyowner. Further, Code Section 101(a) provides, subject
to certain exceptions, that where a Policy has been transferred for value, only
the portion of the death benefit which is equal to the total consideration paid
for the Policy may be excluded from gross income. For complete information with
respect to Policy assignments and exchanges, a qualified tax advisor should be
consulted.
Withholding
Under Section 3405 of the Code, withholding is generally required with
respect to certain taxable distributions under insurance contracts. In the case
of periodic payments (payments made as an annuity or on a similar basis), the
withholding is at graduated rates (as though the payments were employee wages).
With respect to non-periodic distributions, the withholding is at a flat rate of
10%. A Policyholder can elect to have either non-periodic or periodic payments
made without withholding except where the policyowner's tax identification
number has not been furnished to the Company or the Internal Revenue Service has
notified the Company that the tax identification number furnished by the
policyowner is incorrect.
Taxation of Accelerated Death Benefits
The Company provides accelerated death benefits based upon a lien method.
It is unclear whether benefits paid under this rider are taxable. For
information regarding taxation of accelerated death benefits, a qualified tax
advisor should be consulted.
Other Tax Issues
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each policyowner or beneficiary.
EMPLOYEE BENEFIT PLANS
Employers and employee organizations should consider, in consultation with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on the purchase
of a Policy in connection with an employment-related insurance or benefit plan.
The United States Supreme Court held, in the 1983 decision of Arizona Governing
Committee v. Norris, that, under Title VII, optional annuity benefits under a
deferred compensation plan could not vary on the basis of sex. Policies are
available for use in connection with such employment-related insurance and
benefit plans which do not vary in any respect between male and female insureds
of a particular age and underwriting classification.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
to which the assets of any of the Divisions thereof are subject. The Company is
not involved in any litigation that is of material importance in relation to its
total assets or that relate to the Separate Account.
LEGAL OPINION
Legal matters applicable to the issue and sale of the Policies, including
the right of the Company to issue Policies under Iowa insurance law, have been
passed upon by G. R. Narber, Senior Vice President and General Counsel of the
Company.
INDEPENDENT AUDITORS
The financial statements of Principal Mutual Life Insurance Company
Variable Life Separate Account and the consolidated financial statements of The
Principal Financial Group(R) (comprised of Principal Mutual Life Insurance
Company and its subsidiaries) which are included in this registration statement
have been audited by Ernst & Young LLP, independent auditors, for the periods
indicated in their reports thereon which appear elsewhere in the registration
statement.
REGISTRATION STATEMENT
A registration statement has been filed with the Commission under the
Securities Act of 1933, as amended, with respect to the Policies 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 Separate 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 consolidated financial statements of The Principal Financial Group(R)
(comprised of the Company and its subsidiaries) which are included in this
Prospectus should be considered only as bearing on the ability of the Company to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
<PAGE>
APPENDIX
ILLUSTRATIONS OF POLICY VALUES AND DEATH BENEFITS
The following illustrations have been prepared to help show how values
under the Policies change with investment performance and differing death
benefit options. The illustrations show how death benefits and values would vary
over time if the return on assets held by the Mutual Funds were uniform, gross,
after tax, annual rates of 0%, 4%, 8% and 12%. The death benefits and values
would be different from those shown if the return averaged 0%, 4%, 8% and 12%,
but fluctuated above and below those averages during individual years. Both
Death Benefit Option 1 and Death Benefit Option 2 are illustrated.
The four illustrations set out show hypothetical policies issued to males
age 35 in the non-smoker rating classification. The Policies are illustrated on
the basis of $1,000 planned periodic annual premium and a face amount at issue
of $100,000. The first and third illustrations show the selection of Death
Benefit Option 1; the second and fourth, Death Benefit Option 2.
The illustrations reflect all of the contract charges. Each illustration
reflects the surrender charges and the premium expense charge which consists of
a 5% sales load and a charge for state premium taxes of 2%. The first two
illustrations reflect the Company's current administration charge of $4.75 per
month and current cost of insurance charges which are lower than the guaranteed
maximum cost of insurance charges based on the 1980 CS0 Mortality Table. The
third and fourth illustrations reflect the guaranteed maximum administration
charge of $5 per month and the guaranteed maximum cost of insurance charges.
The amounts shown for death benefits and values in all four illustrations
reflect the fact that the net investment return on the assets held by the
Divisions of the Separate Account is lower than the gross return. This is
because deductions are made from the gross return to reflect the daily charge
made to the Separate Account for assuming mortality and expense risks; the daily
investment advisory fees incurred by the Mutual Funds; and the direct operating
expenses of the Mutual Funds. The charge for mortality and expense risks
reflected in the first two illustrations is the Company's current charge which
is at an annual rate of 0.75% of the average daily assets of the Divisions. The
third and fourth illustrations reflect the guaranteed mortality and expense risk
charge which is at an annual rate of 0.90%. The investment advisory fee is
assumed to be an annual rate of .55% of the average daily net assets of the
Mutual Funds, but the maximum investment advisory fee for Principal Capital
Accumulation Fund, Inc. is 0.48%, for Principal Money Market Fund, Inc., and
Principal Bond Fund, Inc. , 0.50%, for Principal High Yield Fund, Inc., and
Principal Balanced Fund, Inc., 0.60%, and for Principal Emerging Growth Fund,
Inc., 0.60%. The charge for Mutual Fund direct operating expenses is estimated
to be an annual rate of .04% of the average daily net assets of the Mutual
Funds. This illustrated .04% charge is based on the assumption that the direct
operating expenses of the Mutual Funds will continue at levels historically
experienced. The direct operating expense of the Mutual Funds may decrease or
increase in the future making operating expenses actually incurred by the Mutual
Funds differ from the .04% assumed rate shown in the illustrations. Deducting
these charges from the gross returns of 0%, 4%, 8% and 12% results in net
investment returns in the first two illustrations of -1.35%, 2.65%, 6.65%, and
10.65% and in the third and fourth illustrations of -1.50%, 2.50%, 6.50%, and
10.50%.
The four illustrations are based on the assumption that payments are made
in accordance with a $1,000 annual planned periodic premium schedule, that no
changes in death benefit option or face amount are made, and that no policy
loans or surrenders occur. Upon request, the Company will prepare a comparable
illustration reflecting the proposed insured's actual age, sex, risk
classification and desired policy features.
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING CURRENT CHARGES
Death Benefit Option 1
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Year Accumulated
Policy Premiums (1) 0% 4% 8% 12% 0% 4% 8% 12% 0%
(-1.35% Net) (2.65% Net) (6.65% Net)(10.65% Net) (-1.35% Net) (2.65% Net) (6.65% Net)(10.65% Net)(-1.35% Net)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000 $100,000 $ 693 $ 725 $ 756 $ 788 $ 366
2 2,153 100,000 100,000 100,000 100,000 1,368 1,460 1,555 1,652 1,041
3 3,310 100,000 100,000 100,000 100,000 2,024 2,205 2,394 2,595 1,697
4 4,526 100,000 100,000 100,000 100,000 2,660 2,957 3,278 3,626 2,374
5 5,802 100,000 100,000 100,000 100,000 3,276 3,717 4,208 4,754 3,031
6 7,142 100,000 100,000 100,000 100,000 3,868 4,482 5,183 5,986 3,664
7 8,549 100,000 100,000 100,000 100,000 4,437 5,252 6,208 7,333 4,273
8 10,027 100,000 100,000 100,000 100,000 4,981 6,025 7,284 8,807 4,859
9 11,578 100,000 100,000 100,000 100,000 5,500 6,802 8,414 10,419 5,419
10 13,207 100,000 100,000 100,000 100,000 5,996 7,582 9,604 12,189 5,955
11 14,917 100,000 100,000 100,000 100,000 6,472 8,371 10,861 14,136 6,472
12 16,713 100,000 100,000 100,000 100,000 6,927 9,167 12,188 16,279 6,927
13 18,599 100,000 100,000 100,000 100,000 7,360 9,970 13,591 18,639 7,360
14 20,579 100,000 100,000 100,000 100,000 7,771 10,778 15,073 21,239 7,771
15 22,657 100,000 100,000 100,000 100,000 8,160 11,593 16,641 24,107 8,160
16 24,840 100,000 100,000 100,000 100,000 8,524 12,412 18,299 27,272 8,524
17 27,132 100,000 100,000 100,000 100,000 8,863 13,235 20,054 30,766 8,863
18 29,539 100,000 100,000 100,000 100,000 9,175 14,060 21,910 34,625 9,175
19 32,066 100,000 100,000 100,000 100,000 9,459 14,886 23,874 38,890 9,459
20 34,719 100,000 100,000 100,000 100,000 9,715 15,713 25,955 43,610 9,715
30(Age 65) 69,761 100,000 100,000 100,000 158,252 9,783 23,223 55,067 129,714 9,783
</TABLE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING CURRENT CHARGES
Death Benefit Option 1
Surrender Value (2)
Assuming Hypothetical Gross
End of Annual Investment Return of
Year
Policy 4% 8% 12%
(2.65% Net) (6.65% Net)(10.65% Net)
1 $ 398 $ 429 $ 461
2 1,133 1,228 1,325
3 1,878 2,067 2,268
4 2,671 2,992 3,340
5 3,472 3,962 4,509
6 4,278 4,979 5,782
7 5,088 6,045 7,169
8 5,903 7,162 8,684
9 6,720 8,333 10,338
10 7,542 9,563 12,148
11 8,371 10,861 14,136
12 9,167 12,188 16,279
13 9,970 13,591 18,639
14 10,778 15,073 21,239
15 11,593 16,641 24,107
16 12,412 18,299 27,272
17 13,235 20,054 30,766
18 14,060 21,910 34,625
19 14,886 23,874 38,890
20 15,713 25,955 43,610
30(Age 65) 23,223 55,067 129,714
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed a
representation of past or future investment results. Actual investment results
may be more or less than those shown. The death benefit, accumulated value and
surrender value for a policy would be different from those shown if actual rates
of investment return applicable to the policy averaged 0%, 4%, 8% or 12% over a
period of years, but also fluctuated above or below that average for individual
policy years. The death benefit, accumulated value and surrender value for a
policy would also be different from those shown, depending on the investment
allocations made to the investment divisions of the separate account and the
different rates of return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 4%, 8% or 12%, but
varied above or below that average for individual divisions. No representations
can be made that these hypothetical rates of return can be achieved for any one
year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING CURRENT CHARGES
Death Benefit Option 2
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Year Accumulated
Policy Premiums (1) 0% 4% 8% 12% 0% 4% 8% 12% 0%
(-1.35% Net) (2.65% Net) (6.65% Net)(10.65% Net) (-1.35% Net) (2.65% Net) (6.65% Net)(10.65% Net)(-1.35% Net)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000 $100,000 $ 693 $ 725 $ 756 $ 788 $ 366
2 2,153 100,000 100,000 100,000 100,000 1,368 1,460 1,555 1,652 1,041
3 3,310 100,000 100,000 100,000 100,000 2,024 2,205 2,394 2,595 1,697
4 4,526 100,000 100,000 100,000 100,000 2,660 2,957 3,278 3,626 2,374
5 5,802 100,000 100,000 100,000 100,000 3,276 3,717 4,208 4,754 3,031
6 7,142 100,000 100,000 100,000 100,000 3,868 4,482 5,183 5,986 3,664
7 8,549 100,000 100,000 100,000 100,000 4,437 5,252 6,208 7,333 4,273
8 10,027 100,000 100,000 100,000 100,000 4,981 6,025 7,284 8,807 4,859
9 11,578 100,000 100,000 100,000 100,000 5,500 6,802 8,414 10,419 5,419
10 13,207 100,000 100,000 100,000 100,000 5,996 7,582 9,604 12,189 5,955
11 14,917 100,000 100,000 100,000 100,000 6,472 8,371 10,861 14,136 6,472
12 16,713 100,000 100,000 100,000 100,000 6,927 9,167 12,188 16,279 6,927
13 18,599 100,000 100,000 100,000 100,000 7,360 9,970 13,591 18,639 7,360
14 20,579 100,000 100,000 100,000 100,000 7,771 10,778 15,073 21,239 7,771
15 22,657 100,000 100,000 100,000 100,000 8,160 11,593 16,641 24,107 8,160
16 24,840 100,000 100,000 100,000 100,000 8,524 12,412 18,299 27,272 8,524
17 27,132 100,000 100,000 100,000 100,000 8,863 13,235 20,054 30,766 8,863
18 29,539 100,000 100,000 100,000 100,000 9,175 14,060 21,910 34,625 9,175
19 32,066 100,000 100,000 100,000 100,000 9,459 14,886 23,874 38,890 9,459
20 34,719 100,000 100,000 100,000 100,000 9,715 15,713 25,955 43,610 9,715
30(Age 65) 69,761 100,000 100,000 100,000 158,252 9,783 23,223 55,067 129,714 9,783
</TABLE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING CURRENT CHARGES
Death Benefit Option 2
Surrender Value (2)
Assuming Hypothetical Gross
End of Annual Investment Return of
Year
Policy 4% 8% 12%
(2.65% Net) (6.65% Net)(10.65% Net)
1 $ 398 $ 429 $ 461
2 1,133 1,228 1,325
3 1,878 2,067 2,268
4 2,671 2,992 3,340
5 3,472 3,962 4,509
6 4,278 4,979 5,782
7 5,088 6,045 7,169
8 5,903 7,162 8,684
9 6,720 8,333 10,338
10 7,542 9,563 12,148
11 8,371 10,861 14,136
12 9,167 12,188 16,279
13 9,970 13,591 18,639
14 10,778 15,073 21,239
15 11,593 16,641 24,107
16 12,412 18,299 27,272
17 13,235 20,054 30,766
18 14,060 21,910 34,625
19 14,886 23,874 38,890
20 15,713 25,955 43,610
30(Age 65) 23,223 55,067 129,714
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed a
representation of past or future investment results. Actual investment results
may be more or less than those shown. The death benefit, accumulated value and
surrender value for a policy would be different from those shown if actual rates
of investment return applicable to the policy averaged 0%, 4%, 8% or 12% over a
period of years, but also fluctuated above or below that average for individual
policy years. The death benefit, accumulated value and surrender value for a
policy would also be different from those shown, depending on the investment
allocations made to the investment divisions of the separate account and the
different rates of return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 4%, 8% or 12%, but
varied above or below that average for individual divisions. No representations
can be made that these hypothetical rates of return can be achieved for any one
year or sustained over any period of time.
<TABLE>
<CAPTION>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING GUARANTEED CHARGES
Death Benefit Option 1
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Year Accumulated
Policy Premiums (1) 0% 4% 8% 12% 0% 4% 8% 12% 0%
(-1.50% Net) (2.50% Net) (6.50% Net)(10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net)(10.50% Net)(-1.50% Net)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,050 $100,000 $100,000 $100,000 $100,000 $ 686 $ 718 $ 750 $ 782 $ 359
2 2,153 100,000 100,000 100,000 100,000 1,355 1,446 1,540 1,637 1,028
3 3,310 100,000 100,000 100,000 100,000 2,003 2,182 2,370 2,569 1,676
4 4,526 100,000 100,000 100,000 100,000 2,630 2,924 3,242 3,586 2,344
5 5,802 100,000 100,000 100,000 100,000 3,236 3,672 4,157 4,697 2,991
6 7,142 100,000 100,000 100,000 100,000 3,818 4,423 5,117 5,908 3,613
7 8,549 100,000 100,000 100,000 100,000 4,375 5,178 6,122 7,230 4,212
8 10,027 100,000 100,000 100,000 100,000 4,908 5,935 7,177 8,674 4,785
9 11,578 100,000 100,000 100,000 100,000 5,414 6,693 8,281 10,252 5,333
10 13,207 100,000 100,000 100,000 100,000 5,893 7,450 9,439 11,976 5,852
11 14,917 100,000 100,000 100,000 100,000 6,342 8,204 10,650 13,860 6,342
12 16,713 100,000 100,000 100,000 100,000 6,761 8,953 11,917 15,921 6,761
13 18,599 100,000 100,000 100,000 100,000 7,147 9,696 13,244 18,177 7,147
14 20,579 100,000 100,000 100,000 100,000 7,498 10,431 14,631 20,649 7,498
15 22,657 100,000 100,000 100,000 100,000 7,813 11,154 16,082 23,358 7,813
16 24,840 100,000 100,000 100,000 100,000 8,087 11,862 17,599 26,329 8,087
17 27,132 100,000 100,000 100,000 100,000 8,316 12,549 19,180 29,587 8,316
18 29,539 100,000 100,000 100,000 100,000 8,494 13,209 20,828 33,164 8,494
19 32,066 100,000 100,000 100,000 100,000 8,614 13,836 22,542 37,092 8,614
20 34,719 100,000 100,000 100,000 100,000 8,671 14,422 24,323 41,411 8,671
30(Age 65) 69,761 100,000 100,000 100,000 145,191 3,935 16,069 46,382 119,009 3,935
</TABLE>
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING GUARANTEED CHARGES
Death Benefit Option 1
Surrender Value (2)
Assuming Hypothetical Gross
End of Annual Investment Return of
Year
Policy 4% 8% 12%
(2.50% Net) (6.50% Net)(10.50% Net)
1 $ 391 $ 423 $ 455
2 1,119 1,213 1,310
3 1,855 2,043 2,242
4 2,637 2,956 3,300
5 3,426 3,912 4,452
6 4,219 4,912 5,704
7 5,015 5,959 7,067
8 5,812 7,054 8,552
9 6,611 8,200 10,170
10 7,409 9,398 11,935
11 8,204 10,650 13,860
12 8,953 11,917 15,921
13 9,696 13,244 18,177
14 10,431 14,631 20,649
15 11,154 16,082 23,358
16 11,862 17,599 26,329
17 12,549 19,180 29,587
18 13,209 20,828 33,164
19 13,836 22,542 37,092
20 14,422 24,323 41,411
30(Age 65) 16,069 46,382 119,009
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed a
representation of past or future investment results. Actual investment results
may be more or less than those shown. The death benefit, accumulated value and
surrender value for a policy would be different from those shown if actual rates
of investment return applicable to the policy averaged 0%, 4%, 8% or 12% over a
period of years, but also fluctuated above or below that average for individual
policy years. The death benefit, accumulated value and surrender value for a
policy would also be different from those shown, depending on the investment
allocations made to the investment divisions of the separate account and the
different rates of return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 4%, 8% or 12%, but
varied above or below that average for individual divisions. No representations
can be made that these hypothetical rates of return can be achieved for any one
year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING GUARANTEED CHARGES
Death Benefit Option 2
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Year Accumulated
Policy Premiums (1) 0% 4% 8% 12% 0% 4% 8% 12% 0%
(-1.50% Net) (2.50% Net) (6.50% Net)(10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net)(10.50% Net)(-1.50% Net)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 $100,000 $100,000 $100,000 $100,000 $ 359 $ 391 $ 423 $ 455 $ 686
2 2,153 100,000 100,000 100,000 100,000 1,028 1,119 1,213 1,310 1,355
3 3,310 100,000 100,000 100,000 100,000 1,676 1,855 2,043 2,242 2,003
4 4,526 100,000 100,000 100,000 100,000 2,344 2,637 2,956 3,300 2,630
5 5,802 100,000 100,000 100,000 100,000 2,991 3,426 3,912 4,452 3,236
6 7,142 100,000 100,000 100,000 100,000 3,613 4,219 4,912 5,704 3,818
7 8,549 100,000 100,000 100,000 100,000 4,212 5,015 5,959 7,067 4,375
8 10,027 100,000 100,000 100,000 100,000 4,785 5,812 7,054 8,552 4,908
9 11,578 100,000 100,000 100,000 100,000 5,333 6,611 8,200 10,170 5,414
10 13,207 100,000 100,000 100,000 100,000 5,852 7,409 9,398 11,935 5,893
11 14,917 100,000 100,000 100,000 100,000 6,342 8,204 10,650 13,860 6,342
12 16,713 100,000 100,000 100,000 100,000 6,761 8,953 11,917 15,921 6,761
13 18,599 100,000 100,000 100,000 100,000 7,147 9,696 13,244 18,177 7,147
14 20,579 100,000 100,000 100,000 100,000 7,498 10,431 14,631 20,649 7,498
15 22,657 100,000 100,000 100,000 100,000 7,813 11,154 16,082 23,358 7,813
16 24,840 100,000 100,000 100,000 100,000 8,087 11,862 17,599 26,329 8,087
17 27,132 100,000 100,000 100,000 100,000 8,316 12,549 19,180 29,587 8,316
18 29,539 100,000 100,000 100,000 100,000 8,494 13,209 20,828 33,164 8,494
19 32,066 100,000 100,000 100,000 100,000 8,614 13,836 22,542 37,092 8,614
20 34,719 100,000 100,000 100,000 100,000 8,671 14,422 24,323 41,411 8,671
30(Age 65) 69,761 100,000 100,000 100,000 145,191 3,935 16,069 46,382 119,009 3,935
</TABLE>
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
FLEX VARIABLE LIFE
PLANNED PREMIUM $1,000
MALE AGE 35 NON-SMOKER
Initial Face Amount $100,000
ASSUMING GUARANTEED CHARGES
Death Benefit Option 2
Surrender Value (2)
Assuming Hypothetical Gross
End of Annual Investment Return of
Year
Policy 4% 8% 12%
(2.50% Net) (6.50% Net)(10.50% Net)
1 $ 718 $ 750 $ 782
2 1,446 1,540 1,637
3 2,182 2,370 2,569
4 2,924 3,242 3,586
5 3,672 4,157 4,697
6 4,423 5,117 5,908
7 5,178 6,122 7,230
8 5,935 7,177 8,674
9 6,693 8,281 10,252
10 7,450 9,439 11,976
11 8,204 10,650 13,860
12 8,953 11,917 15,921
13 9,696 13,244 18,177
14 10,431 14,631 20,649
15 11,154 16,082 23,358
16 11,862 17,599 26,329
17 12,549 19,180 29,587
18 13,209 20,828 33,164
19 13,836 22,542 37,092
20 14,422 24,323 41,411
30(Age 65 16,069 46,382 119,009
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed a
representation of past or future investment results. Actual investment results
may be more or less than those shown. The death benefit, accumulated value and
surrender value for a policy would be different from those shown if actual rates
of investment return applicable to the policy averaged 0%, 4%, 8% or 12% over a
period of years, but also fluctuated above or below that average for individual
policy years. The death benefit, accumulated value and surrender value for a
policy would also be different from those shown, depending on the investment
allocations made to the investment divisions of the separate account and the
different rates of return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 4%, 8% or 12%, but
varied above or below that average for individual divisions. No representations
can be made that these hypothetical rates of return can be achieved for any one
year or sustained over any period of time.
PART II. OTHER INFORMATION
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 adopted under the authority conferred in that
section.
UNDERTAKING PURSUANT TO RULE 484
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, 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 had 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 OF THE INVESTMENT COMPANY ACT OF 1940
Principal Mutual Life Insurance Company represents the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
<PAGE>
REPRESENTATIONS PURSUANT TO RULE 6e-3(T) This filing is made
pursuant to Rules 6c-3 and 6e-3(T) under the Investment Company Act of 1940.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940, with respect to the Policies described in the
prospectus. Registrant makes the following representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The level of the mortality and expense risks charge is within
the range of industry practice for comparable contracts.
(3) The Registrant has concluded that there is a reasonable
likelihood that the distribution financing arrangement for the
Variable Life Separate Account will benefit the separate account
and policyowners, and it will keep and make available to the
Commission on request a memorandum setting forth the basis for
this representation.
(4) The Variable Life Separate Account will invest only in
management investment companies which have undertaken to have a
board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
The methodology used to support the representation made in paragraph (2) above
is based upon an analysis of the mortality and expense risks charges contained
in other variable life insurance policies, including scheduled and flexible
premium products. Registrant undertakes to keep and make available to the
Commission on request the documents used to support the representation in
paragraph (2) above.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The prospectus, consisting of 100 pages;
The undertaking to file reports;
The undertaking pursuant to Rule 484;
Representations pursuant to Rule 6e-3(T);
The signatures;
Written consents of the following persons:
Ernst & Young LLP
The following exhibits
1. Copies of all exhibits required by paragraph A of the
instructions as to exhibits in Form N-8B-2 are set forth
below under designations based on such instructions
1.A1 Resolution of Executive Committee of Board of Directors of
Principal Mutual Life Insurance Company establishing the
Variable Life Separate Account (Filed 4/12/96)
1.A3A.a Distribution Agreement between Princor Financial Services
Corporation and Principal Mutual Life Insurance Company
(Filed 4/12/96)
1.A3B.a Form of Selling Agreement (Filed 4/12/96)
1.A3B.b Registered Representative Agreement (Filed 4/12/96)
1.A3C Schedule of sales commissions (Filed 4/12/96)
1.A5.a Form of Flex Variable Life Policy (Filed 4/12/96)
1.A5.a.i Cost of Living Increase Rider (Filed 4/12/96)
1.A5.a.ii Waiver of Monthly Deductions Rider (Filed 4/12/96)
1.A5.a.iii Guaranteed Increase Option Rider (Filed 4/12/96)
1.A5.a.iv Accidental Death Benefit Rider (Filed 4/12/96)
1.A5.a.v Children Term Insurance Rider (Filed 4/12/96)
1.A5.a.vi Spouse Term Insurance Rider (Filed 4/12/96)
1.A5.a.vii Change of Insured Rider (Filed 4/12/96)
1.A5.a.viii Death Benefit Guarantee Rider (Filed 4/12/96)
1.A5.a.ix Accounting Benefit Rider (Filed 4/12/96)
1.A5.a.x Accelerated Benefits Rider (Filed 4/12/96)
1.A5.b Form of Flex Variable Life Policy - Unisex Version (Filed
4/12/96)
1.A5.b.i Cost of Living Increase Rider (Filed 4/12/96)
1.A5.b.ii Waiver of Monthly Deductions Rider (Filed 4/12/96)
1.A5.b.iii Guaranteed Increase Option Rider (Filed 4/12/96)
1.A5.b.iv Accidental Death Benefit Rider (Filed 4/12/96)
1.A5.b.v Children Term Insurance Rider (Filed 4/12/96)
1.A5.b.vi Spouse Term Insurance Rider (Filed 4/12/96)
1.A5.b.vii Change of Insured Rider (Filed 4/12/96)
1.A5.b.viii Death Benefit Guarantee Rider (Filed 4/12/96)
1.A5.b.ix Accounting Benefit Rider (Filed 4/12/96)
1.A5.b.x Accelerated Benefits Rider (Filed 4/12/96)
1.A6.a Articles of Incorporation, as Amended of Principal Mutual
Life Insurance Company (Filed 4/12/96)
1.A6.b By-laws of Principal Mutual Life Insurance Company (Filed
4/12/96)
1.A10.a Form of Application for Flex Variable Life Policy (Filed
4/12/96)
1.A10.b Form of Supplemental Application for Flex Variable
Life Policy (Filed 4/12/96)
2. Opinion of consent of T. M. Hutchison, Senior Vice President
and General Counsel (Filed 4/12/96)
3. No financial statements will be omitted from the prospectus
pursuant to Instruction 1(b) or (c) or Part I
4. Not applicable
5. Not applicable
6. Consent of Ernst & Young LLP (Filed 12/19/97)
7. Description of Issuance, Transfer and Redemption Procedures
Pursuant to Rule 6e-3(T)(b)(12)(iii) (Filed 2/28/97)
8. Powers of Attorney of Directors of Principal Mutual Life
Insurance Company (Filed 4/12/96 & 2/28/97)
9. Opinion of Consent of Lisa Ford, Assistant Actuary
(Filed 12/19/97)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Principal Mutual Life Insurance Company Variable Life Separate Account,
certifies that it meets the requirements of Securities Act Rule 485(a) for
effectiveness of the Registration Statement and has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned
thereto duly authorized in the city of Des Moines and State of Iowa, on the 24th
day of February, 1998.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
(Depositor)
D. J. DRURY
By ______________________________________________
D. J. Drury
Chairman and Chief Executive Officer
Attest:
JOYCE N. HOFFMAN
- -----------------------------------
Joyce N. Hoffman
Vice President and
Corporate Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statment has been signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
/s/ D. J. Drury Chairman and February 24, 1998
- -------------------- Chief Executive Officer
D. J. Drury
/s/ D. C. Cunningham Vice President and February 24, 1998
- -------------------- Controller (Principal
D. C. Cunningham Accounting Officer)
/s/ M. H. Gersie Senior Vice President February 24, 1998
- -------------------- (Principal Financial
M. H. Gersie Officer)
(M. V. Andringa)* Director February 24, 1998
- --------------------
M. V. Andringa
(R. M. Davis)* Director February 24, 1998
- --------------------
R. M. Davis
(C. D. Gelatt, Jr.)* Director February 24, 1998
- --------------------
C. D. Gelatt, Jr.
(G. D. Hurd)* Director February 24, 1998
- --------------------
G. D. Hurd
(T. M. Hutchison)* Director February 24, 1998
- --------------------
T. M. Hutchison
(C. S. Johnson)* Director February 24, 1998
- --------------------
C. S. Johnson
(W. T. Kerr)* Director February 24, 1998
- --------------------
W. T. Kerr
(L. Liu)* Director February 24, 1998
- --------------------
L. Liu
(V. H. Loewenstein)* Director February 24, 1998
- --------------------
V. H. Loewenstein
(R. D. Pearson)* Director February 24, 1998
- --------------------
R. D. Pearson
(J. R. Price)* Director February 24, 1998
- --------------------
J. R. Price
(D. M. Stewart)* Director February 24, 1998
- --------------------
D. M. Stewart
(E. E. Tallett)* Director February 24, 1998
- --------------------
E. E. Tallett
(D. D. Thornton)* Director February 24, 1998
- --------------------
D. D. Thornton
(F. W. Weitz)* Director February 24, 1998
- --------------------
F. W. Weitz
*By /s/ David J. Druy
------------------------------------
David J. Drury
Chairman and Chief Executive Officer
Pursuant to Powers of Attorney
Previously Filed or Included Herein
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT INDEX
Page Number in
Sequential Numbering
Exhibit No. Description Where Exhibit Can Be Found
<S> <C> <C>
1.A1 Resolution of Executive Committee *
of Board of Directors of Depositor
establishing Variable Life Separate
Account
1.A3A.a Distribution Agreement Between *
Depositor and Principal Underwriter
1.A3B.a Form of Selling Agreement *
1.A3B.b Registered Representative Agreement *
1.A3C Schedule of Sales Commissions *
1.A5.a Flex Variable Life Policy *
1.A5.a.i Cost of Living Increase Rider *
1.A5.a.ii Waiver of Monthly Deductions Rider *
1.A5.a.iii Guaranteed Increase Option Rider *
1.A5.a.iv Accidental Death Benefit Rider *
1.A5.a.v Children Term Insurance Rider *
1.A5.a.vi Spouse Term Insurance Rider *
1.A5.a.vii Change of Insured Rider *
1.A5.a.viii Death Benefit Guarantee Rider *
1.A5.a.ix Accounting Benefit Rider *
1.A5.a.x Accelerated Benefits Rider *
1.A5.b Flex Variable Life Policy - Unisex Version *
1.A5.b.i Cost of Living Increase Rider. *
1.A5.b.ii Waiver of Monthly Deductions Rider *
1.A5.b.iii Guaranteed Increase Option Rider *
1.A5.b.iv Accidental Death Benefit Rider *
1.A5.b.v Children Term Insurance Rider *
1.A5.b.vi Spouse Term Insurance Rider *
1.A5.b.vii Change of Insured Rider *
1.A5.b.viii Death Benefit Guarantee Rider *
1.A5.b.ix Accounting Benefit Rider *
1.A5.b.x Accelerated Benefit Rider *
1.A6.a Articles of Incorporation, as Amended, *
of Depositor
1.A6.b By-laws of Depositor *
1.A10.a Form of Application for the Flex *
Variable Life Policy
1.A10.b Form of Supplemental Application *
For the Flex Variable Life Policy
2 Opinion and consent of T. M. Hutchison *
Senior Vice President and General Counsel
6 Consent of Ernst & Young LLP *
7 Description of Issuance, Transfer and Redemption *
Procedures Pursuant to Rule 6e-3(T)(b)(12)(iii)
8 Powers of Attorney of Directors of *
Principal Mutual Life Insurance
Company.
9 Opinion and consent of Lisa Ford, *
Assistant Actuary
27 Financial Data Schedules *
* Previously Filed.
</TABLE>
