Registration No. 333-00101
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 4 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 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
W. Randolph Thompson
Jorden, Burt, Berenson & Johnson LLP
Suite 400 East
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007-0805
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 and Amount of Securities: PrinFlex 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).......... Policy Values; Participating Policy
10(c), 10(d)... Summary (Transfers; Policy Loans; Total and Partial
Surrenders, Charges and Deductions; Maturity Proceeds;
Death Benefits and Proceeds, Termination and
Reinstatement; Policy "Free Look"); Policy "Free Look,"
Values Transfers; Policy Loans; Total and Partial
Surrenders); Death Benefits and Rights; Charges and
Deductions (Transaction Charge, Surrender Charge)
Policy Termination and Reinstatement
10(e).......... Summary (Termination and Reinstatement); Policy
Termination and 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; The
Contract)
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, Values and Policy Features While the
Policy is in Force; Death Benefits and Rights;
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 (Separate Account Divisions); 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 (Separate Account Divisions)
12(d).......... Distribution of the Policy
12(e).......... Not Applicable
13(a).......... Summary (Charges and Deductions); Principal Mutual Life
Insurance Company Variable Life Separate Account;
Charges and Deductions; Distribution of the Policy
13(b), 13(c),
13(d), 13(e),
13(f), 13(g)... Not Applicable
14............. Distribution of the Policy
15............. Summary (Premiums); Purchasing a Policy
16............. Summary (The Policy); Principal Mutual Life Insurance
Company Variable Life Separate Account; Purchasing a
Policy (Allocation of Premiums);
Values and Policy Features While the Policy is in
Force; 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); Values and Policy Features
While the Policy is in Force
18(b).......... Not Applicable
18(c).......... Values and Policy Features While the Policy is in Force
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); Values and Policy Features
While the Policy is in Force (Policy Loans)
21(c).......... Not Applicable
22............. General Provisions (The Contract; Incontestability)
23............. Not Applicable
24............. Charges and Deductions (Special Provisions for Group or
Sponsored Arrangements)
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), 38(b),
38(c).......... Distribution of the Policy
39(a), 39(b)... Distribution of the Policy
40............. Not Applicable
41(a).......... Distribution of the Policy
41(b), 41(c)... Not Applicable
42............. Not Applicable
43............. Not Applicable
44(a), 44(b),
44(c).......... Summary (Policy Value; Transfers; Policy Loans; Total
and Partial Surrenders, Termination and Reinstatement;
Policy "Free-Look"); Principal Mutual Life Insurance
Company Variable Life Separate Account; Values
and Policy Features while the Policy is in Force
(Policy Values; Transfers; Policy Loans; Total and
Partial Surrender) 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).... Description of Principal Mutual Life Insurance Company;
Principal Mutual Life Insurance Company Variable Life
Separate Account; Purchasing a Policy; Policy
Termination and Reinstatement; 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
PrinFlex LIFE(R) -- FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
"PrinFlex Life(R) ," the flexible premium variable universal 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. As policyowner you 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
you 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.
The Policy provides : (1) a death benefit upon the insured's death; (2)
policy loans; and (3) a net surrender value accessible by a partial or total
surrender of the Policy.
Policy values may be accumulated on a fixed basis or vary with the
investment performance of the division of the Principal Mutual Life Insurance
Company Variable Life Separate Account to which the policyowner allocates policy
values. Each division invests in an investment portfolio of an open-end,
management investment company ("Mutual Fund"). The accompanying prospectuses
describe the investment objectives and risks of the Mutual Funds currently
offered as investment choices under the Policy: Principal Variable Contracts
Fund, Inc. - Aggressive Growth Account, Asset Allocation Account, Balanced
Account, Bond Account, Capital Value Account, Government Securities Account,
Growth Account, International Account, International SmallCap Account, MicroCap
Account, MidCap Account, MidCap Growth Account, Money Market Account, Real
Estate Account, SmallCap Account, SmallCap Growth Account, SmallCap Value
Account and Utilities Account; Fidelity Variable Insurance Products Fund II:
Contrafund Portfolio ("Fidelity VIP Contrafund Portfolio"); Fidelity Variable
Insurance Products Fund: Equity-Income Portfolio ("Fidelity VIP Equity-Income
Portfolio"); Fidelity Variable Insurance Products Fund: High Income Portfolio
("Fidelity VIP High Income Portfolio); Putnam Variable Trust Global Asset
Allocation Fund ("Putnam VT Global Asset Allocation Fund"); Putnam Variable
Trust Vista Fund ("Putnam VT Vista Fund") and Putnam Variable Trust Voyager Fund
("Putnam VT Voyager Fund").
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 universal variable
life insurance policy.
Please read this prospectus carefully and retain it for future reference.
This Prospectus is valid only if accompanied or preceded by the current
prospectuses for the Fidelity Variable Insurance Products Fund, Fidelity
Variable Insurance Products Fund II, Principal Variable Contracts Fund, Inc. and
Putnam Variable Trust.
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.
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS ................................. 4
SUMMARY ................................................... 5
The Policy............................................ 5
Premiums.............................................. 6
Policy Value.......................................... 6
Transfers............................................. 6
Policy Loans.......................................... 6
Total and Partial Surrenders...........................7
Charges and Deductions ............................... 7
Maturity Proceeds..................................... 8
Death Benefit and Proceeds............................ 8
Adjustment Options.................................... 8
Termination and Reinstatement......................... 8
Policy "Free Look".................................... 10
Distribution of the Policy............................ 10
Tax Consequences of the Policy........................ 10
DESCRIPTION OF PRINCIPAL MUTUAL
LIFE INSURANCE COMPANY .................................... 10
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY VARIABLE LIFE SEPARATE
ACCOUNT.................................................... 10
Separate Account Divisions............................ 11
PURCHASING A POLICY........................................ 14
Purchase Procedures................................... 14
Payment of Premiums................................... 15
Premium Limitations................................... 15
Allocation of Premiums................................ 16
Policy "Free Look".................................... 16
VALUES AND POLICY FEATURES WHILE
THE POLICY IS IN FORCE..................................... 16
Policy Values......................................... 16
Transfers............................................. 17
Automatic Portfolio Balancing......................... 18
Policy Loans.......................................... 19
Total and Partial Surrenders.......................... 19
DEATH BENEFITS AND RIGHTS.................................. 20
Death Proceeds........................................ 20
Death Benefit......................................... 20
Applicable Percentage................................. 20
Change in Death Benefit Option........................ 21
Adjustment Options.................................... 21
CHARGES AND DEDUCTIONS..................................... 22
Premium Expense Charge................................ 22
Monthly Policy Charge................................. 22
Cost of Insurance Charge.............................. 23
Administration Charge................................. 23
Mortality and Expense Risks Charge.................... 23
Transaction Charge.................................... 23
Surrender Charge...................................... 24
Contingent Deferred Sales Charge...................... 24
Contingent Deferred Administration Charge............. 24
Surrender Charge Percentage........................... 24
Sales Charge Limitations.............................. 25
Other Charges......................................... 25
Special Provisions for Group or Sponsored
Arrangements.......................................... 25
THE FIXED ACCOUNT.......................................... 26
POLICY TERMINATION AND REINSTATEMENT....................... 26
Policy Termination.................................... 26
Reinstatement......................................... 27
OTHER MATTERS.............................................. 28
Voting Rights......................................... 28
Statement of Values................................... 28
Service Available by Telephone........................ 28
GENERAL PROVISIONS......................................... 29
Addition, Deletion, or Substitution of
Investments........................................... 29
Optional Insurance Benefits........................... 29
The Contract.......................................... 30
Incontestability...................................... 30
Misstatements......................................... 30
Suicide............................................... 30
Ownership............................................. 30
Beneficiaries......................................... 31
Benefit Instructions.................................. 31
Postponement of Payments.............................. 31
Assignment............................................ 31
Policy Proceeds....................................... 31
Participating Policy.................................. 32
Right to Exchange Policy.............................. 32
Term Conversion Bonus Program......................... 33
Policy Split Option Exchange.......................... 33
DISTRIBUTION OF THE POLICY................................. 33
OFFICERS AND DIRECTORS OF PRINCIPAL
MANAGEMENT CORPORATION..................................... 34
OFFICERS AND DIRECTORS OF
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY.................................................... 34
STATE REGULATION OF PRINCIPAL
MUTUAL LIFE INSURANCE COMPANY.............................. 35
FEDERAL TAX MATTERS........................................ 36
Tax Status of the Company and the Separate
Account............................................... 36
Charges for Taxes..................................... 36
Diversification Standards............................. 36
Life Insurance Status of Policy....................... 36
Modified Endowment Contract Status.................... 37
Policy Surrenders and Partial Surrenders.............. 37
Policy Loans and Interest Deductions.................. 38
Corporate Alternative Minimum Tax..................... 38
Exchange or Assignments of Policies................... 38
Withholding........................................... 38
Taxation of Accelerated Death Benefits................ 38
Other Tax Issues...................................... 38
EMPLOYEE BENEFIT PLANS..................................... 38
LEGAL PROCEEDINGS.......................................... 39
LEGAL OPINION.............................................. 39
INDEPENDENT AUDITORS....................................... 39
REGISTRATION STATEMENT..................................... 39
FINANCIAL STATEMENTS....................................... 39
Report of Independent Auditors........................ 40
Variable Life Separate Account
Financial Statements.................................. 41
Report of Independent Auditors........................ 61
The Principal Financial Group
Financial Statements.................................. 62
APPENDIX A - SAMPLE ILLUSTRATIONS OF
POLICY VALUES, SURRENDER VALUES AND
DEATH BENEFITS............................................. 95
APPENDIX B - TARGET PREMIUM................................102
APPENDIX C - EXCHANGE OFFER ...............................103
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 FOR THE UNDERLYING MUTUAL FUND OR THE STATEMENT OF ADDITIONAL
INFORMATION OF THIS FUND.
GLOSSARY OF SPECIAL TERMS
Account - Series or portfolio of a Mutual Fund in which a Separate Account
Division invests.
Attained Age - The insured's age on the birthday preceding the last Policy
Anniversary.
Business Day - Any day that the New York Stock Exchange is open for
trading, and trading is not restricted.
Division - A part of the Separate Account to which Net Premiums may be
allocated which invests in an Account or Portfolio of a Mutual Fund. The value
of an investment in a Division is variable and is not guaranteed.
Effective Date - The date on which all requirements for issuance of a
Policy have been satisfied.
Face Amount - The minimum death benefit of a Policy so long as the Policy
remains in force.
Fixed Account - That part of Policy Value that reflects the value in the
general account of the Company.
General Account - The assets of the Company other than those allocated to
any of the Separate Accounts of the Company.
Guideline Annual Premium - The level annual payment necessary to provide
the death 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 1986, 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 - That part of the Policy Value that reflects the value
in one of the Divisions of the Separate Account.
Loan Account - That part of the Policy Value that reflects the value
transferred from the Fixed Account or Separate Account as collateral for a
policy loan.
Maturity Date - The Policy Anniversary following the insured's 95th
birthday.
Monthly Date - The day of the month which is the same as the day of the
Policy Date. For example, if the Policy Date is June 10, 1997, the first Monthly
Date is July 10, 1997.
Monthly Policy Charge - The amount subtracted from the Policy Value on each
Monthly Date equal to the sum of the cost of insurance and additional benefits
provided by any rider plus the monthly administration charge and mortality and
expense risks charge in effect on the Monthly Date.
Mutual Fund - A registered, open-end, management investment company, or a
separate investment account or portfolio thereof, in which a Division of the
Separate Account invests.
Net Premium - The gross premium less the deductions for the Premium Expense
Charge. It is the amount of premium allocated to the Fixed Account or Investment
Accounts.
Net Surrender Value - The Surrender Value of the Policy reduced by any
unpaid loans and loan interest.
Notice - Any form of communication received in the Company's home office
providing the information needed by the Company, either in writing or another
manner approved in advance by the Company.
Policy Date - The Policy Date is the date from which Monthly Dates and
Policy Years and Anniversaries are determined.
Policy Value - The sum of the values in the Loan Account, Fixed Account and
Investment Accounts.
Policy Years and Anniversaries - The Policy Years and Anniversaries
computed from the Policy Date. Example: If the Policy Date is May 5, 1997, the
first Policy Year ends on May 4, 1998 and the first Policy Anniversary falls on
May 5, 1998.
Premium Expense Charge - The charge deducted from premium payments to cover
a sales charge, state and local premium taxes and federal taxes.
Prorated Basis - The proportion that the value of a particular Investment
Account or Fixed Account for a Policy bears to the total value of all Investment
Accounts and the Fixed Account for that Policy.
Related Policies - Policies which have a common Effective Date pursuant to
a Written Request from applicant(s).
Separate Account - Principal Mutual Life Insurance Company Variable Life
Separate Account, a registered unit investment trust with Divisions and
segregated assets, to which Net Premiums may be allocated.
Surrender Charge - A charge assessed upon total surrender of a Policy or
termination of a Policy when a grace period expires without sufficient premium
payment.
Surrender Value - The Policy Value reduced by the Surrender Charge.
Target Premium - A premium amount used to determine the maximum sales
charge that is included as part of the Premium Expense Charge and any applicable
contingent deferred sales charge under a Policy. Target Premiums are set forth
in Appendix B. The policyowner will be advised of the Target Premium for any
increase in face amount.
Unit - The accounting measure used to calculate Division values.
Valuation Period - The period between the time as of which the net asset
value of a Mutual Fund is determined on one business day and the time as of
which that value is determined on the next following business day.
Written Request - Actual delivery to the Company at its home office in Des
Moines, Iowa, of a written notice or request, signed and dated, on a form
supplied or approved by the Company.
SUMMARY
THE FOLLOWING SUMMARY IS INTENDED TO PROVIDE A GENERAL DESCRIPTION OF THE
MOST IMPORTANT POLICY FEATURES. IT IS NOT COMPREHENSIVE AND SHOULD BE READ IN
CONJUNCTION WITH THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS.
The Policy
The Policy is designed to provide you 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. You may,
subject to certain limitations, vary the frequency and amount of premium
payments. The Policy is a life insurance contract with a death benefit, Policy
Value, and other features traditionally associated with life insurance.
You may allocate Net Premium Payments to the Fixed Account and/or the
Divisions of the Principal Mutual Life Insurance Company Variable Life Separate
Account. Allocations to the Divisions of the Separate Account are invested in
shares of a particular Account. Allocation instructions may be changed at any
time and transfers may be made subject to certain conditions.
The Accounts in which the Divisions currently invest are as follows:
Account in which
Division the Division Invests
-------- ---------------------
Aggressive Growth Division Aggressive Growth Account
Asset Allocation Division Asset Allocation Account
Balanced Division Balanced Account
Bond Division Bond Account
Capital Value Division Capital Value Account
Government Securities Division Government Securities Account
Growth Division Growth Account
International Division International Account
International SmallCap Division International SmallCap Account
MicroCap Division MicroCap Account
MidCap Division MidCap Account
MidCap Growth Division MidCap Growth Account
Money Market Division Money Market Account
Real Estate Division Real Estate Account
SmallCap Division SmallCap Account
SmallCap Growth Division SmallCap Growth Account
SmallCap Value Division SmallCap Value Account
Utilities Division Utilities Account
Fidelity Contrafund Division Fidelity VIP II Contrafund Portfolio
Fidelity Equity-Income Division Fidelity VIP Equity-Income Portfolio
Fidelity High Income Division Fidelity VIP High Income Portfolio
Putnam Global Asset Allocation Division Putnam VT Global Asset Allocation Fund
Putnam Vista Division Putnam VT Vista Fund
Putnam Voyager Division Putnam VT Voyager Fund
Premiums
The required initial premium payment is equal to the minimum monthly
premium shown on the Policy's current data pages. Payment of a minimum premium
is required during the first twenty-four policy months (except where prohibited
by state law) (the "Minimum Required Premium"). If the face amount of the Policy
is increased during the first twenty-four policy months, the Minimum Required
Premium will increase for the remainder of the twenty-four month period
following the date of the face amount increase. Payment of the Minimum Required
Premium ensures that the Policy will not enter a grace period during the first
twenty-four Policy months, unless a policy loan is taken. See "Termination and
Reinstatement" and "Policy Loans". The Company allows payments in accordance
with the planned periodic premium schedule established by the policyowner in the
application (annual, semiannual, quarterly, or preauthorized withdrawal payments
of premium on a monthly basis). However, if the minimum monthly premium is less
than $30, only a planned periodic premium schedule that would result in a
payment of $30 or more 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 "Optional Insurance Benefits.") 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.
All Net Premium payments received prior to the Effective Date and during
the first 20 days from the Effective Date are allocated to the Money Market
Division of the Separate Account. On the 21st day from the Effective Date, the
Policy Value held in the Money Market Division is transferred to the Divisions
and the Fixed Account in accordance with the policyowner's direction for
allocation of premium payments. (If the 21st day from the Effective Date is not
a Business Day, the transfer will occur on the first Business Day thereafter).
Net Premium payments received after the Policy Value in the Money Market
Division is transferred to the Divisions and the Fixed Account are allocated
among the Divisions and the Fixed Account in accordance with the directions in
the application for the Policy.
Policy Value
The Policy Value reflects the following: premium payments made; investment
performance of the Divisions to which amounts have been allocated; interest
credited by the Company to amounts allocated to the Fixed Account; partial
withdrawals; loans taken; repayment of loans; and deduction of charges described
below under "Charges And Deductions." The Policy Value is the sum of the values
in the Investment Accounts, the Fixed Account and the Loan Account.
Investment Account. An Investment Account is established under the Policy
for each Division of the Separate Account to which Net Premiums or transfer
amounts have been allocated. An Investment Account measures the interest of the
Policy in the corresponding Division. The value of each Investment Account under
the Policy varies each Business Day and reflects the investment performance of
the Account shares held in the corresponding Division. See "Policy Value".
Fixed Account. The Fixed Account consists of that portion of the Policy
Value based on Net Premiums allocated to, and amounts transferred to, the
general account of the Company. The Company credits interest on amounts in the
Fixed Account at an effective annual rate guaranteed to be at least 3%. See
"Fixed Account."
Loan Account. When a policy loan is taken, the Company will establish a
Loan Account under the Policy and will transfer an amount equal to the amount of
the loan from the Investment Accounts and/or the Fixed Account to the Loan
Account. The Company will credit interest to amounts in the Loan Account at an
effective annual rate of at least 6% through Policy Year ten at which point
interest is credited at 7.75%. See "Policy Loans."
Transfers
Scheduled and unscheduled transfers of Policy Value among Divisions and the
Fixed Account may be made by a policyowner, subject to certain conditions and
charges. The Company has reserved the right to revoke or modify transfer
privileges and charges, except where prohibited by state law. See "Transfers."
Policy Loans
A policyowner may borrow against the Policy Value at any time the Policy
has Net Surrender Value. The minimum amount for a loan is $500. Interest is
charged on policy loans at an annual rate of eight percent during any period the
loan is outstanding. 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. See "Policy Loans."
Total and Partial Surrenders
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. In addition, any increase in face amount is subject to a Surrender Charge
upon total surrender of the Policy at any time within ten years after the
effective date of the adjustment. After the second Policy Year, the policyowner
may request a partial surrender of the Policy Value, but no more than two times
per Policy Year. The minimum amount for a partial surrender is $500 and
aggregate partial surrenders during a Policy Year cannot exceed 75% of the
Policy's Net Surrender Value at the time the first 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
Value is reduced by the amount of any partial surrender plus the transaction
charge. The amount surrendered will be withdrawn from the Policy on a last-in
first-out basis. 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.
Charges and Deductions
Charges under the Policy are assessed as:
(1) deductions from premiums
o sales load of 2.75% of premiums less than or equal to Target
Premium and .75% of premiums in excess of Target Premium, made
during each of the first ten Policy Years and, with respect to
premiums attributable to any face amount increase, made during
each of the first ten years following the increase
o 2.20% state and local taxes
o 1.25% federal taxes
(2) Surrender Charges upon termination or total surrender made during
the first ten Policy Years (and ten years after an increase in the Policy face
amount) equal to a percentage (described in the table below) of the sum of the
following:
o deferred administrative charge of $3 for each $1,000 of face
amount (but no greater than $1,500 per Policy), and
o deferred sales charge of 47.25% of premiums paid up to a
maximum of two Target Premiums. (See "Contingent Deferred Sales
Charge")
Surrender Surrender Charge
Year Percentage
--------- ----------------
1-5 100.00%
6 95.24%
7 85.71%
8 71.43%
9 52.38%
10 28.57%
11+ 0.00%
(3) Monthly Policy Charges
o administration charge:
During the first Policy Year: 1/12 x ($.40 for each $1,000 of
face amount), but no less than $6.00/month and no
greater than $16.67/month;
During each Policy Year thereafter: 1/12 x ($.60 for each
$1,000 of face amount)
o cost of insurance charge
o mortality and expense risks charge of .90% per annum against
the value of the policyowner's Investment Accounts (After the
ninth Policy Year the mortality and expense risks charge will
not exceed .27% per annum)
o supplemental benefit(s) charge(s)
(4) Other Charges
o investment management fees and other operating expenses for the
underlying Accounts
o transfer fee of $25 will be imposed on each unscheduled
transfer of Policy Value among the Investment Accounts in
excess of twelve during a Policy Year
o transaction charge of the lesser of $25 or 2% of the amount
surrendered on each partial surrender of Policy Value
For complete discussion of charges and deductions see "Charges and
Deductions".
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 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.
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
Policy Charges 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 Policy 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 Policy Value on the date of death or the
Policy 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 second 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 Policy Value on the effective
date of the change. The Company reserves the right to disapprove a request to
change from Option 1 to Option 2 if the face amount in effect after the change
would be less than $50,000. Evidence of insurability satisfactory to the Company
under its underwriting guidelines 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 Policy Value 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 Written Request to the Company. If a payment in an amount greater than or
equal to the adjustment conditional receipt premium deposit is submitted with
the adjustment application, then a conditional receipt is given to the
policyowner reflecting receipt of the payment and outlining any interim
insurance coverage provided by the conditional receipt. The adjustment
conditional receipt premium deposit is that amount calculated by the Company and
provided to the policyowner in connection with the policyowner's request for a
face amount increase. No request to adjust the face amount of a Policy will be
approved if a Policy is in a grace period or if Monthly Policy Charges are being
waived under a rider. In addition, a decrease in face amount may be requested
only after the second Policy Anniversary and may not reduce the face amount of a
Policy below $50,000. A requested face amount increase must be at least $50,000
and is subject to evidence of insurability satisfactory to the Company under its
underwriting guidelines then in effect. Any adjustment in face amount of a
Policy approved by the Company will be effective on the Monthly Date that
coincides with or next follows the Company's approval of the request. No
processing charges are assessed in connection with adjustments of a Policy,
although an increase in face amount will result in Premium Expense Charges and
Surrender Charges applicable to the increase. Additionally, if the face amount
of the Policy is increased during the first twenty-four policy months, the
Minimum Required Premium will increase for the remainder of the twenty-four
month period following the date of the face amount increase. Increases in face
amount made pursuant to a Cost of Living Rider, Salary Increase Rider or Extra
Protection Increase Rider are not subject to the minimum increase amount or to
evidence of insurability. More information regarding these supplementary
benefits may be obtained from an authorized agent of the Company.
Termination and Reinstatement
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. Twenty-four months or later following the Policy Date, or at any time
after a policy loan is taken, the Net Surrender Value of a Policy on
any Monthly Date is less than the Monthly Policy Charge and, if the
Policy has a death benefit guarantee rider, the death benefit guarantee
premium requirement has not been satisfied; or
2. During the 24 months following the Policy Date, the sum of the premiums
paid is less than the Minimum Required Premium on a Monthly Date (this
provision does not apply where prohibited by state laws; a notice of
impending termination will be sent as permitted therein).
The Minimum Required Premium on a Monthly Date is equal to (1) times (2)
where:
1. Is the minimum monthly premium shown on the current data pages; and
2. Is the number of completed months since the Policy Date.
The notice of impending termination will show the 61-day grace period
during which the Company will accept a payment required to keep the Policy in
force.
If a grace period begins 24 months or more after the Policy Date because
the Net Surrender Value is less than the current Monthly Policy Charge, the
minimum payment is equal to (1) plus (2) divided by (3) where:
1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of the
grace period;
2. Is three Monthly Policy Charges; and
3. Is 1 minus the maximum Premium Expense Charge.
If the grace period ends before we receive the minimum payment, the Company
will keep any remaining value in the Policy.
If a grace period begins because the sum of the premiums paid is less than
the Minimum Required Premium, the minimum payment is (1) minus (2) where:
1. Is the Minimum Required Premium due on the second Monthly Date following
the beginning of the grace period; and;
2. Is 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 difference of (1) minus (2) where:
1. Is the Net Surrender Value on the Monthly Date on or immediately
preceding the start of the grace period; and
2. Is the two Monthly Policy Charges 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,
and the Company will retain the remaining value in the policy.
Once a Policy has terminated as a result of failure to pay the Minimum
Required Premium on a Monthly Date during the 24 months following the Policy
Date, or 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 is required. The reinstatement premium must be at least the greater of
((1) plus (2) divided by (3)) or ((4) minus (5)) where:
1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of the
grace period;
2. Is three Monthly Policy Charges;
3. Is 1. minus the maximum Premium Expense Charge;
4. Is the Minimum Required Premium due on the second Monthly Date following
the beginning of the grace period; and
5. Is the sum of the premiums paid since the Policy Date.
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 the return of the Policy, must be made within: 10 days
after the Policy or written notice of this right is received by the policyowner
(30 days if the Policy is applied for in California by a policyowner age 60 or
over; 15 days if the Policy is applied for in Colorado; or 20 days if the Policy
is applied for in Idaho or North Dakota) or 45 days after the policyowner
completes the Policy application, whichever is later. 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.
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 Policy 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 Policy 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 surrenders 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 Policy Value) would
be includable in gross income to the extent that the Policy Value of the Policy
exceeds the policyowner's investment in the contract. (See "Federal Tax
Matters.") Death proceeds may also be subject to estate taxes. 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 companies.
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. During the year ended December 31, 1997, the
Company ranked in the upper one percent of life insurers in assets and premium
income. The Company has consistently received excellent ratings from the major
rating firms based upon the Company's claims paying ability. As of December 31,
1997, the Company had $___ billion in assets under management and served 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 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 that 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 and other policies issued
by the Company. 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 an 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. 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.
Separate Account Divisions
A policyowner may direct the Company to allocate Net Premium Payments among
the Divisions which invest exclusively in shares of a corresponding Account.
Some of these Accounts also offer their shares to variable annuity separate
accounts of the Company ("Mixed Funding") and to variable annuity and variable
life separate accounts of unaffiliated insurance companies ("Shared Funding").
The potential risks associated with "Mixed and Shared Funding" are disclosed in
the Mutual Fund prospectuses. The Accounts in which the Divisions invest, and
the investment adviser of each Account, are provided in the following table. Not
all Accounts are available in all states. A current list of which Accounts are
available in your state may be obtained from an authorized agent of the Company.
<TABLE>
<CAPTION>
ACCOUNT IN WHICH
DIVISION INVESTS AND ACCOUNT
DIVISION INVESTMENT ADVISER INVESTMENT OBJECTIVE
<S> <C> <C>
Aggressive Growth Division Aggressive Growth Account; Seeks long-term capital appreciation by
Morgan Stanley Asset Management, Inc. investing primarily in growth-oriented common
through a sub-advisory agreement stocks of medium and large capitalization
U.S. corporations and, to a limited extent,
foreign corporations.
Asset Allocation Division Asset Allocation Account; Seeks a total investment return consistent with
Morgan Stanley Asset Management, Inc. the preservation of capital.
through a sub-advisory agreement
Balanced Division Balanced Account; Seeks a total return consisting of current income
Invista Capital Management, Inc. and capital appreciation while assuming reasonable
through a sub-advisory agreement risks in furtherance of the investment objective.
Bond Division Bond Account; Seeks to provide as high a level of income as is
Principal Management Corporation consistent with preservation of capital and prudent
investment risk.
Capital Value Division Capital Value Account; Seeks to achieve primarily long-term capital
Invista Capital Management, Inc. appreciation and secondarily growth of investment
through a sub-advisory agreement income through the purchase primarily of common
stocks, but the Account may invest in other
securities.
Government Securities Division Government Securities Account; Seeks a high level of income, liquidity and safety
Invista Capital Management, Inc. of principal through the purchase of obligations
through a sub-advisory agreement issued or guaranteed by the United States Government
or its agencies, with emphasis on Government
National Mortgage Association Certificates ("GNMA
Certificates"). Account shares are not guaranteed
by the United States Government.
Growth Division Growth Account; Seeks growth of capital through the purchase
Invista Capital Management, Inc. primarily of common stocks, but the Account may
through a sub-advisory agreement invest in other securities.
</TABLE>
<TABLE>
<CAPTION>
ACCOUNT IN WHICH
DIVISION INVESTS AND ACCOUNT
DIVISION INVESTMENT ADVISER INVESTMENT OBJECTIVE
<S> <C> <C>
International Division International Account; Seeks long-term growth of capital by investing in a
Invista Capital Management, Inc. portfolio of equity securities of companies
through a sub-advisory agreement domiciled in any of the nations of the world.
International SmallCap Division International SmallCap Account; Seeks long-term growth of capital. The Account will
Invista Capital Management, Inc. attempt to achieve its objective by investing
through a sub-advisory agreement primarily in equity securities of non-United States
companies with comparatively smaller market
capitalizations.
MicroCap Division MicroCap Account; Seeks long-term growth of capital. The Account will
Goldman Sachs Asset Management attempt to achieve its objective by investing
through a sub-advisory agreement primarily in value and growth oriented
companies with small market capitalizations,
generally less than $700 million.
MidCap Division MidCap Account; Seeks growth of capital through the purchase
Invista Capital Management, Inc. primarily of common stocks, but the Fund may
through a sub-advisory agreement invest in other securities.
MidCap Growth Division MidCap Growth Account; Seeks long-term growth of capital. The Account will
Dreyfus Corporation attempt to achieve its objective by
through a sub-advisory agreement investing primarily in growth stocks of companies
with market capitalization in the $1 billion to $10
billion range.
Money Market Division Money Market Account; Seeks as high a level of income available from
Principal Management Corporation. short-term securities as is considered consistent
with preservation of principal and maintenance of
liquidity by investing all of its assets in a
portfolio of money market instruments.
Real Estate Division Real Estate Account; Seeks to generate a high total return. The Account
Principal Management Corporation. will attempt to achieve its objective by investing
primarily in equity securities of companies
principally engaged in the real estate industry.
SmallCap Division SmallCap Account; Seeks long-term growth of capital. The Account will
Invista Capital Management, Inc. attempt to achieve its objective by investing
through a sub-advisory agreement primarily in equity securities of growth and value
oriented companies with comparatively small market
capitalizations.
SmallCap Growth Division SmallCap Growth Account; Seeks long-term growth of capital. The Account will
Berger Associates, Inc. attempt to achieve its objective by investing
through a sub-advisory agreement primarily in equity securities of small growth
companies with market capitalization of less than
$1 billion.
SmallCap Value Division SmallCap Value Account; Seeks long-term growth of capital. The Account will
JP Morgan Asset Management, Inc. attempt to achieve its objective by investing
through a sub-advisory agreement primarily in equity securities of small growth
companies with value characteristics and market
capitalizations of less than $1 billion.
Utilities Division Utilities Account; Seeks to provide current income and long-term
Invista Capital Management, Inc. growth of income and capital. The Account will
through a sub-advisory agreement attempt to achieve its objective by investing
primarily in equity and fix-income securities of
companies in the public utilities industry.
Fidelity Contrafund Division Fidelity VIP II Contrafund Portfolio; Seeks long-term capital appreciation.
Fidelity Management and
Research Company
Fidelity Equity-Income Division Fidelity VIP Equity-Income Portfolio; Seeks reasonable income by investing primarily in
Fidelity Management and income-producing equity securities.
Research Company
Fidelity High Income Division Fidelity VIP High Income Portfolio; Seeks a high level of current income by investing
Fidelity Management and primarily in high yielding, lower quality, fixed
Research Company income securities, while also considering growth of
capital.
Putnam Global Asset Putnam VT Global Asset Seeks a high level of long-term total return
Allocation Division Allocation Fund consistent with preservation of capital.
Putnam Vista Division Putnam VT Vista Fund Seeks capital appreciation.
Putnam Voyager Division Putnam VT Voyager Fund Seeks capital appreciation.
</TABLE>
Principal Management Corportion (the "Manager") has executed agreements
with various Sub-Advisors. Under those Sub-Advisory agreements, the Sub-Advisor
agrees to assume the obligations of the Manager to provide investment advisory
services for a specific Account. For these services, each Sub-Advisor is paid a
fee by the Manager.
Accounts: Balanced, Capital Value, Government Securities, Growth,
International, International SmallCap, MidCap, SmallCap and
Utilities
Sub-Advisor: Invista Capital Management, Inc. Invista, an indirectly
wholly-owned subsidiary of Principal Mutual Life Insurance
Company and an affiliate of the Manager, was founded in 1985.
It manages investments for institutional investors, including
Principal Mutual Life Insurance Company. Assets under
management as of December 31, 1997 were approximately $____
billion. Invista's address is 1800 Hub Tower, 699 Walnut, Des
Moines, Iowa 50309.
Accounts: Aggressive Growth and Asset Allocation
Sub-Advisor: Morgan Stanley Asset Management Inc. MSAM, with principal
offices at 1221 Avenue of the Americas, New York, NY 10020,
provides a broad range of portfolio management services to
customers in the U.S. and abroad. At December 31, 1997, MSAM
managed investments totaling approximately $____ billion,
including approximately $___ billion under active management
and $____ billion as Named Fiduciary or Fiduciary Adviser.
Account: MicroCap
Sub-Advisor: Goldman Sachs Asset Management ("GSAM"), One New York
Plaza, New York, New York 10004, is a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"). Goldman
Sachs provides a wide range of fully discretionary investment
advisory services quantitatively driven and actively managed
U.S. and international equity portfolios, U.S. and global
fixed income portfolios, commodity and currency products, and
money markets.
Account: MidCap Growth
Sub-Advisor: The Dreyfus Corporation, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. The Dreyfus Corporation is
a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of September 30, 1997, The Dreyfus Corporation managed or
administered approximately $93 billion in assets for
approximately 1.7 million investor accounts nationwide.
Account: SmallCap Growth
Sub-Advisor: Berger Associates. Berger's address is 210 University
Boulevard, Suite 900, Denver, CO 80206. It serves as
investment advisor, sub-advisor, administrator or
sub-administrator to mutual funds and institutional investors.
Berger is a wholly-owned subsidiary of Kansas City Southern
Industries, Inc. ("KCSI"). KCSI is a publicly traded holding
company with principal operations in rail transportation,
through its subsidiary The Kansas City Southern Railway
Company, and financial asset management businesses.
Account: SmallCap Value
Sub-Advisor: JP Morgan Investment Management, Inc. J.P. Morgan Investment,
with principal offices at 522 Fifth Avenue, New York, NY 10036
is a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P.Morgan") a bank holding company. J.P.Morgan, through
J.P. Morgan Investment and other subsidiaries, offers a wide
range of services to governmental, institutional, corporate
and individual customers and acts as investment adviser to
individual and institutional clients. As of December 31, 1997,
J.P.Morgan and its subsidiaries had total combined assets
under management of approximately $250 billion.
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 prospectuses which accompany, and should be read in conjunction
with, this Prospectus.
Underlying Account shares are purchased at net asset value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each underlying Account's investment adviser for
managing the underlying Account and selecting its portfolio of securities. Other
underlying Account expenses can include such items as interest expense on loans
and contracts with transfer agents, custodians, and other companies that provide
services to the underlying Account. The management fees and other expenses for
each underlying Account for its most recently completed fiscal year, expressed
as a percentage of the underlying Account's average assets, are as follows:
Management Other Total Annual
Account Fees Expenses Expenses
------- ---------- -------- ------------
Aggressive Growth Account 0.80% 0.02% 0.82%
Asset Allocation Account 0.80 0.09 0.89
Balanced Account 0.59 0.02 0.61
Bond Account 0.50 0.02 0.52
Capital Value Account 0.46 0.01 0.47
Government Securities Account 0.50 0.02 0.52
Growth Account 0.49 0.01 0.50
International Account 0.74 0.13 0.87
MidCap Account 0.62 0.02 0.64
Money Market Account 0.50 0.05 0.55
Fidelity VIP II Contrafund Portfolio 0.60 0.11 0.71
Fidelity VIP Equity-Income Portfolio 0.50 0.08 0.58
Fidelity VIP High-Income Portfolio 0.59 0.12 0.71
PURCHASING A POLICY
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 of 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 equal to the minimum monthly premium shown on the Policy's current
data pages. The Company generally will not issue policies to insure persons over
age 85 for regularly underwritten Policies and age 70 for guaranteed issue,
expanded nonmedical and batch underwriting Policies. Applicants for insurance
must furnish satisfactory evidence of insurability. Acceptance is subject to the
Company's insurance underwriting guidelines and suitability rules. 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
rules and procedures are not satisfied. The minimum face amount for a Policy at
issue is $50,000 ($25,000 for guaranteed issue, batch underwriting and expanded
nonmedical Policies). 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 conditional insurance coverage provided by the conditional receipt.
If the Company determines to issue a Policy then a Policy Date will be
established. Policy Years and Anniversaries will be determined from the Policy
Date regardless of when the Policy is delivered. The Company does not date
Policies on the 29th, 30th, or 31st day of any month. Policies which otherwise
would be dated on these days except for this rule will be dated on the 28th of
the month. The Policy Date is shown on the Policy's current data pages. Upon
specific Written Request of the applicant(s) in the case of Related Policies,
subject to the Company's approval, issuance of Related Policies may be delayed
to have a common Policy Date. The Written Request must accompany the
applications. The common Policy Date will be established by the Company
following the last underwriting decision on all applications.
Upon specific Written Request of the applicant in the application and
subject to the Company's approval, a Policy may be issued with a backdated
Policy Date. The Policy Date may not be more than three months prior to the date
of the application or such shorter maximum backdating period as required by
state law. Payment of the Minimum Required Premium is required for the period
the Policy is backdated. Monthly Policy Charges are deducted from the Policy
Value for the period the Policy is backdated.
Each Policy also has an Effective Date. The Policy Date and the Effective
Date will be the same unless (i) a backdated Policy Date is requested, (ii)
Policy applied for on a COD basis or the application was not accompanied by a
payment in an amount equal to or greater than the minimum monthly premium, or
(iii) additional premiums or application amendments are required. In such cases,
the Effective Date will be the date on which the required premiums have been
received at the Company's home office and any application amendments have been
received, reviewed, and accepted in the Company's home office.
No insurance under a Policy will take effect until actual physical delivery
to and acceptance of a Policy by the applicant. If the proposed insured dies
before actual physical delivery to and acceptance of a Policy by the applicant,
there will be no coverage under the Policy and coverage will be determined
solely under the terms of the conditional receipt, if any, given to the
applicant.
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
twenty-four Policy months (the "Minimum Required Premium") (except where
prohibited by state law). 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, semiannual, quarterly or
monthly payments. A "preauthorized 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 result in termination of
a Policy during the first twenty-four Policy months provided that any Minimum
Required Premium is paid and no policy loan is taken. Likewise, payment of
premiums in accordance with the planned periodic premium schedule does not
guarantee that the Policy will stay in force twenty-four months or later
following the Policy Date or any time after a policy loan is taken, if the
Policy's Net Surrender Value is not at least equal to the Monthly Policy Charge
on the current Monthly Date, unless the death benefit guarantee rider is in
effect.
The Company will send premium reminder notices in accordance with planned
periodic premium schedules to policyowners who are on annual, semi-annual or
quarterly premium payment 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 twelve month period 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. 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 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 Policy Value.
This percentage is 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 a Policy 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 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 Policy 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 Value,
the Company reserves the right to refund the premium payment. Evidence of
insurability under the Company's current underwriting guidelines then in effect
may be required before acceptance of any such premium.
Allocation Of Premiums
The initial Net Premium Payment and any additional premiums received at the
home office of the Company prior to the Effective Date and during the first 20
days from the Effective Date are allocated to the Money Market Division of the
Separate Account at the end of the Valuation Period during which such premiums
are received. On the 21st day from the Effective Date, Policy Value held in the
Money Market Division is automatically transferred to the Divisions of the
Separate Account or to the Fixed Account, or both, in accordance with the
policyowner's direction for allocation of premium payments. If the 21st day from
the Effective Date is not a Business Day, then the transfer will occur on the
first Business Day after the 21st day from the Effective Date.
Premium payments received after expiration of the initial 20-day period
described above are allocated among the Divisions, the Fixed Account, or both in
accordance with the directions in the application for the Policy. For each
Division and the Fixed Account, the allocation percentage must be zero or a
whole number not less than ten. The sum of the percentages for all the Divisions
and the Fixed Account must equal 100. The policyowner may change the allocation
of future premium payments among the Divisions and the Fixed Account without
payment of any fee or penalty, at any time, by Written Request to the Company or
by telephone as described below. Changes in allocation percentages will be
effective at the end of the Valuation Period in which the Company receives the
policyowner's request.
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 after the Policy is received by the policyowner, except
- 30 days for policies applied for in California by policyowners age
60 or over
- 15 days for policies applied for in Colorado
- 20 days for policies applied for in Idaho or North Dakota
o 10 days after a written notice is delivered or mailed (as determined by
its postmark) to the policyowner which tells about the cancellation
right; except
- 30 days for policies applied for in California by policyowners age
60 or over
- 15 days for policies applied for in Colorado
- 20 days for policies applied for in Idaho or North Dakota
o 45 days after the policyowner completes the application.
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.
The refunded amount will ordinarily be disbursed by the Company to the
policyowner within five Business Days after the Written Request for cancellation
and the Policy are received in the Company's home office. (See "Postponement of
Payments." )
VALUES AND POLICY FEATURES WHILE THE POLICY IS IN FORCE
Policy Values
A Policy has a Policy Value, a portion of which is available to the
policyowner by taking a policy loan or upon total or partial surrender of the
Policy. See "Policy Loans" and "Total and Partial Surrenders" below. The Policy
Value may also affect the amount of the death benefit. See DEATH BENEFITS AND
RIGHTS - "Death Benefit." This Policy Value at any time is equal to the sum of
the Values in the Investment Accounts, the Fixed Account and the Loan Account.
The following discussion relates only to the Investment Accounts. Policy loans
are discussed under "Policy Loans" and the Fixed Account is discussed under "The
Fixed Account." The portion of the Policy Value based on the Investment Accounts
is not guaranteed and will vary each Business Day with the investment
performance of the underlying Accounts.
It is possible that the investment performance would cause the loss of the
entire amount allocated to the Investment Accounts. Absent additional payments,
investment in the Fixed Account or a death benefit guarantee rider, this could
result in no death benefit upon the insured's death.
An Investment Account is established under each Policy for each Division of
the Separate Account to which Net Premiums or transfer amounts have been
allocated. Each Investment Account under a Policy measures the interest of the
Policy in the corresponding Division. The value of the Investment Account
established for a particular Division is equal to the number of Units of that
Division credited to the Policy times the value of those Units.
Units of a particular Division are credited to a Policy when Net Premiums
are allocated to that Division or amounts are transferred to that Division.
Units of a Division are cancelled when amounts are deducted, transferred or
withdrawn from the Division. The number of Units credited or cancelled for a
specific transaction is based on the dollar amount of the transaction divided by
the value of the Unit at the end of the Business Day on which the transaction
occurs. The number of Units credited with respect to a premium payment will be
based on the applicable Unit values at the end of the Business Day on which the
premium is received at the Company's home office.
Units are valued at the end of each Business Day. A Business Day is deemed
to end at the time of the determination of the net asset value of the Account
shares. When an order involving the crediting or cancelling of Units is received
at the Company's home office after the end of a Business Day or on a day which
is not a Business Day, the order will be processed on the basis of Unit values
determined at the end of the next Business Day. Similarly, any determination of
Policy Value, Investment Account value or death benefit to be made on a day
which is not a Business Day will be made at the end of the next Business Day.
The value of a Unit of each Division was initially fixed at $10. For each
subsequent Business Day the Unit value is determined by multiplying the Unit
value for the preceding Business Day by the "net investment factor" for the
particular Division for such subsequent Business Day. The net investment factor
for a Division for any Business Day is equal to (a) divided by (b), where:
(a) is the net asset value of the underlying Account or Mutual Fund shares
held by that Division at the end of such Business Day before any policy
transactions are made that day; and
(b) is the net asset value of the underlying Account or Mutual Fund shares
held by that Division at the end of the immediately preceding Business
Day after all policy transactions have been made for that day.
The Company reserves the right to adjust the above formula for any taxes
determined by it to be attributable to the operations of the Division.
Transfers
The policyowner may transfer amounts among the Investment Accounts and the
Fixed Account on either an unscheduled or a scheduled basis.
Transfers From an Investment Account
Unscheduled Transfers. Transfers of amounts from one Investment Account
to another or to the Fixed Account can be made by the policyowner. A
transfer from an Investment Account to the Fixed Account may not be
made if a transfer from the Fixed Account to an Investment Account has
been made within the six month period prior to the date of the
requested transfer or if immediately after the transfer to the Fixed
Account the policyowner's Fixed Account Value exceeds $1 million. The
amount to be transferred may be stated as a dollar amount or as a
percentage of the value of the Investment Account from which the
transfer is to be made. The amount transferred from each Investment
Account must equal or exceed the lesser of $100 or 100% of the
policyowner's interest in the Investment Account. Transfers may be
completed by sending a Written Request to the Company at its home
office, or by telephone as described below. (See "Service Available by
Telephone.")
All or part of the values in one or more Investment Accounts may be
transferred at one time. Transfers from an Investment Account will be
executed and values will be determined in connection with the transfers
at the next computed Unit value after the Company receives the transfer
request. There is a $25 charge for the transfer on unscheduled
transfers after the twelfth such transfer during a Policy Year. For
this purpose, all transfers between and among the Investment Accounts
and the Fixed Account will be treated as one transfer, if all the
transfer requests are made at the same time as part of one request. The
Company also reserves the right to reject transfer instructions
submitted for multiple contracts if the instructions are provided by a
person other than the policyowner.
Scheduled Transfers. The policyowner may elect to have automatic
transfers completed on a periodic basis from any Investment Account.
Scheduled transfers may be initiated from an Investment Account only if
the value of the Investment Account equals or exceeds $2,500 when
scheduled transfers begin. A policyowner may establish scheduled
transfers by sending a Written Request to the Company at its home
office or by telephone. (See "Service Available by Telephone.")
Scheduled transfers will be completed on a monthly, quarterly,
semiannual or annual basis on the date (other than the 29th, 30th or
31st) specified by the policyowner. The amount of the scheduled
transfers (minimum of $100) will be the dollar amount or percentage of
the value of the Investment Account as of the later of the Policy Date
or most recent Anniversary Date, as specified by the policyowner.
Scheduled transfers will continue until the Policy Value in the
Investment Account from which such transfers are made is exhausted or
until the policyowner notifies the Company to discontinue such
transfers. The Company reserves the right to limit the number of
Investment Accounts from which transfers will be made simultaneously,
but in no event will such limitation be less than two Investment
Accounts.
Transfer From The Fixed Account
Transfers from the Fixed Account have special limitations which are
described below. A policyowner may not make both an unscheduled transfer and
scheduled transfers from the Fixed Account during the same Policy Year.
Unscheduled Transfer. An unscheduled transfer in an amount not to
exceed 25% of the policyowner's Fixed Account value as of the later of
the Policy Date or the last Anniversary, may be made each Policy Year
during the 30-day period following the Policy Date or Anniversary. A
transfer request must be made by the policyowner within such 30-day
period. The minimum transfer amount is $100 (or, if less, the entire
amount of the Fixed Account value).
Scheduled Transfers. The policyowner may elect to have automatic
transfers completed on a monthly basis from the Fixed Account to one or
more Investment Accounts. Scheduled transfers are available from the
Fixed Account only if the policyowner's Fixed Account value equals or
exceeds $2,500 at the time scheduled transfers begin. (The Company
reserves the right to change that amount but it will never exceed
$10,000.) A policyowner may establish scheduled transfers by sending a
Written Request to the Company at its home office or by telephone (See
"Service Available by Telephone"). Scheduled transfers will be
completed on a monthly basis on the date (other than the 29th, 30th or
31st) specified by the policyowner. The amount of the monthly transfers
(minimum $50) will be the dollar amount specified by the policyowner
or, if elected by the policyowner, a percentage of the Fixed Account
Value as of the later of the Policy Date or the most recent Anniversary
Date, or if requested by the policyowner, the date the Company receives
the request. In no event shall the monthly amount be more than 2% of
the Fixed Account value as of the applicable date, as specified by the
policyowner. Scheduled monthly transfers will continue until the Fixed
Account value is exhausted or until the policyowner notifies the
Company to discontinue the scheduled transfers. The amount of these
scheduled transfers can be changed by the policyowner once each Policy
Year, by Written Request or by telephone. If the policyowner
discontinues the scheduled transfers, these transfers may not begin
again until six months after the date of the last scheduled transfer.
Automatic Portfolio Rebalancing
Automatic Portfolio Rebalancing (APR) allows you to maintain a specific
percentage of your Policy Values in each account over time. You may elect APR at
the time of application or after the Policy has been issued.
For example, a customer may elect APR and choose to rebalance so 50% of
Policy Values are in the Capital Value Division and 50% are in the Money Market
Division. At the end of the specified period, 60% of the values may be invested
in the Capital Value Division, with the remaining 40% invested in the Money
Market Division. By rebalancing, units from the Capital Value Division are
redeemed and applied as purchase payments to the Money Market Division so 50% of
the Policy Values are once again invested in each division.
APR is not available for values in the Fixed Account. You may elect APR
only if you have not arranged for scheduled transfers from the same divisions.
APR transfers will not begin until the expiration of the "free look" period
(see "Policy Free Look"). There will be no charge for APR transfers. These
transfers will not be considered as unscheduled transfers in determining any
transfer fee.
You may rebalance through APR quarterly, semi-annually, or annually based
on a calendar year or Policy Year. In addition, you may rebalance on a one-time
basis by completing a form and submitting it to the Company home office or by
calling 1-800-247-9988 (if telephone privileges apply). The transfers will be
made at the end of the next Valuation Period after the APR instruction is
received by the Company.
Policy Loans
So long as a Policy remains in effect and the Policy has Net Surrender
Value, a policyowner may borrow money from the Company using the Policy as the
only security for the loan. The maximum amount that may be borrowed is 90% of
the Net Surrender Value of the Policy as of the date a loan request is processed
at the Company's home office. Policy loans, whether in writing, by telephone or
other means, by any joint policyowner shall be binding on all joint
policyowners.
The minimum amount of any policy loan is $500. Proceeds of policy loans
ordinarily will be disbursed within five Business 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 taken, a portion of the Policy Value equal to the
amount of the loan is transferred from the Fixed Account and/or the Investment
Accounts to the Loan Account 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 in the same proportion as the allocation used for
the most recent Monthly Policy Charge. Any loan interest that is due and unpaid
will be transferred in the same manner. The Loan Account will be credited
interest from the date of transfer. During the first ten Policy Years, the Loan
Account will earn interest at an annual rate of six percent. After the tenth
Policy Anniversary, the Loan Account will earn interest at an annual rate of
7.75%. Loan repayments will be allocated among the Fixed Account and the
Investment Accounts 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 at an annual rate of 8.0%.
Interest accrues daily and 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 same rate. Adding unpaid interest to the loan principal will cause
additional amounts to be withdrawn from the Fixed Account and/or Investment
Accounts in the same manner as described above for loans. Amounts withdrawn 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 Policy Charges on a Monthly
Date. If on any Monthly Date occurring after a policy loan is taken the Net
Surrender Value is not sufficient to pay the Monthly Policy Charges, 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 if a loan is
outstanding. Loan Account values equal to the loan repayment will be transferred
to the Fixed Account and/or Investment Accounts 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
Value. If the policy loan had not been made, the Policy Value would have
reflected the investment experience of the Investment Accounts and/or the
interest credited to the Fixed Account. 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 the Policy Value
payable at maturity.
Total and Partial Surrenders
A Policy has a Surrender Value and a Net Surrender Value. The Surrender
Value of a Policy is the Policy Value less the Surrender Charge. The Net
Surrender Value of a Policy is its Surrender Value less any loans and loan
interest. While 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. 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.")
After the second Policy Anniversary and so long as a Policy is in effect,
a policyowner may request a partial surrender from the Net Surrender Value, but
no more than two times per Policy Year. The minimum amount of a partial
surrender is $500 and the maximum amount that may be surrendered in a Policy
Year is 75% of the Net Surrender Value as of the date of the first partial
surrender. 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. No Surrender
Charge is assessed upon a partial surrender. The Policy Value is reduced 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 face amount also is reduced by the amount of the partial surrender
and the transaction charge.
A policyowner may designate the amount of the partial surrender and
transaction charge to be withdrawn from the Fixed Account and/or each Investment
Account. If no designation is made, the amount of the partial surrender and the
transaction charge will be withdrawn in the same proportion as the allocation
instruction in effect for the Monthly Policy Charge. The amount surrendered will
be withdrawn from the Policy on a last in, first out basis.
Proceeds from partial or total surrender of a Policy will ordinarily be
disbursed within five Business Days from the date of receipt of a Written
Request at the Company's home office. (See "Postponement of Payments.")
DEATH BENEFITS AND RIGHTS
Death Proceeds
As long as a Policy remains in force, the Company will, upon proof of the
insured's death and receipt of all additional claim requirements, 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 unpaid loans and
loan interest on the Policy, and less any overdue Monthly Policy Charges 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 credited 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 Policy Value. Under Option 1, the amount of death benefit remains
level (until the Policy Value exceeds certain limits). Under Option 2, the total
death benefit increases as the Policy Value increases. Thus, Option 1 emphasizes
the growth of Policy 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 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 Policy Value on the date of death or the Policy 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 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
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 unpaid policy loans or
loan interest at the time of death, and that the face amount of the Policy is
$50,000.
Under Option 1, because the death benefit will be equal to or greater than
250% of the Policy Value under this illustrative Policy, any time the Policy
Value of the Policy exceeds $20,000, the death benefit will exceed the Policy's
$50,000 face amount. Each additional dollar added to Policy Value above $20,000
will increase the death benefit by $2.50. Similarly, any time Policy Value
exceeds $20,000, each dollar taken out of Policy Value will reduce the death
benefit by $2.50. If, for example, the Policy Value is reduced from $24,000 to
$20,000 because of charges or negative investment performance, the death benefit
will be reduced from $60,000 to $50,000. If, however, at any time in this
illustration 250% of the Policy Value is less than $50,000 and no partial
surrenders have been made, the death benefit will equal $50,000. 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
$50,000.
Under Option 2, a Policy with an Policy Value of $10,000 will have a death
benefit of $60,000 ($50,000 + $10,000); a Policy Value of $30,000 will yield a
death benefit of $80,000 ($50,000 + $30,000). The death benefit under this
illustrative Policy, however, must be at least equal to 250% of Policy Value
(Policy Value plus 150% of Policy Value). As a result, if the Policy Value of
the Policy exceeds $33,334, the death benefit will be greater than the face
amount plus Policy Value. Each additional dollar of Policy Value above $33,334
will increase the death benefit by $2.50. A contract on a 40-year old insured
that has an Policy Value of $40,000 will provide a death benefit of $100,000
(250% x $40,000). Similarly, any time Policy Value exceeds $33,334, each dollar
taken out of Policy Value reduces the death benefit by $2.50. If, for example,
the Policy Value is reduced from $40,000 to $34,000 because of partial
surrenders, charges, or negative investment performance, the death benefit will
be reduced from $100,000 to $85,000. If, however, at any time in this
illustration 250% of the Policy Value were less than $50,000 plus Policy Value,
the death benefit would be $50,000 plus the Policy 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 Policy Charges.
Change in Death Benefit Option
A policyowner may make a Written Request to change the death benefit option
on or after the second Policy Anniversary. 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 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 $50,000.
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 guidelines 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 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 and the
policyowner is not receiving benefits under a waiver rider. If the face amount
of the Policy is increased during the first twenty-four policy months, the
Minimum Required Premium will increase for the remainder of the twenty-four
month period following the date of the face amount increase. A policyowner may
make a Written Request to decrease the face amount at any time on or after the
second Policy Anniversary so long as the Policy is not in a grace period and
Monthly Policy Charges 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 and an adjustment application, signed by the
policyowner and the insured, and shall be subject to evidence of
insurability satisfactory to the Company under its underwriting
guidelines then in effect. The minimum increase in face amount is
$50,000. The age of the insured must be 85 or less at the time of the
request.
2. A request for a decrease in face amount must be applied for by an
adjustment application, signed by the Policyowner and the insured, and
may not reduce the face amount of the Policy below $50,000.
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.
If a payment in an amount greater than or equal to the adjustment
conditional receipt premium deposit is submitted with the adjustment
application, then a conditional receipt is given to the policyowner reflecting
receipt of the payment and outlining any interim insurance coverage provided by
the conditional receipt. The adjustment conditional receipt premium deposit is
that amount calculated by the Company and provided to the policyowner in
connection with the policyowner's request for a face amount increase. 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 and the
Fixed Account 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 and the Fixed Account in
accordance with the policyowner's exiting directions for allocation of premium
payments.
There is no free look period with respect to any increase in face amount.
Any increase in face amount will, however, carry its own exchange right, which
will apply only to the increase in face amount, not the entire Policy. 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 Value attributable to the increase
will be transferred to the fixed benefit policy. The portion of the Policy Value
attributable to the increase in face amount is determined by use of the ratio of
the face amount of the increase over the face amount of 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 unpaid 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." )
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
Value on a monthly basis, and other charges will be deducted from the Policy
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 Policy Value.
Premium Expense Charge
Upon receipt of each premium payment, the Company deducts a Premium Expense
Charge. The Premium Expense Charge includes a charge of 2.20% for state and
local taxes and a charge of 1.25% for federal taxes. The charges for state,
local and federal taxes are not expected to exceed these taxes. The charge also
includes a premium sales load of 2.75% for premium payments less than or equal
to the Target Premium and .75% for premium payments in excess of Target Premium
made during each of the first ten Policy Years and, with respect to premiums
attributable to any face amount increase, made during each of the first ten
years following the increase. 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. For the twelve month period
ended December 31, 1997, the Company collected $________ in premium expense
charges and $________ in premium tax charges.
Monthly Policy Charge
On each Monthly Date, the Company will deduct from the Policy Value an
amount to cover certain charges and expenses incurred in connection with the
Policy. The Monthly Policy Charge deduction is made only from the Policy Value
held in the Fixed Account and/or Investment Accounts. No deduction is made from
a Loan Account. The Monthly Policy Charge will be allocated among the Investment
Accounts and the Fixed Account in accordance with policyowner instruction on the
application for the Policy. The policyowner's choice of 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 the Fixed Account or each Investment Account,
the allocation percentage 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 would not be possible on any Monthly Date due to
insufficient value in the Fixed Account and/or Investment Accounts, Monthly
Policy Charges will be deducted on a Prorated Basis. The deduction for the
Monthly Policy Charge consists of a charge for the cost of insurance and a
charge for any optional benefits added by rider, a monthly administration
charge, and a mortality and expense risks charge. During the twelve month period
ended December 31, 1997, administrative and cost of insurance charges totaled
$________.
Cost of Insurance Charge
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 Policy Value at the beginning of the policy month calculated as
if the Monthly Policy Charges were zero.
The cost of insurance rate is based on the gender, issue age, duration
since issue, smoking status 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 gender of the insured.) The rate will be
determined by the Company based upon its expectations as to 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 gender of the insured (where allowed by law). Any change
in current cost of insurance rates will apply to all individuals of the same
age, gender and risk classification of the insured. However, different maximum
cost of insurance rates may apply to any face amount increases under a Policy.
The cost of insurance rate for a face amount increase is based on the insured's
gender (where allowed by law), age at time of increase, duration since increase,
smoking status and risk classification of the insured at the time of the
increase.
Administration Charge
The current administration charge for a Policy during the first Policy Year
is an amount equal to $.40 for each $1,000 of Policy face amount. The monthly
charge is 1/12 x ($.40 for each $1,000 of face amount), but not less than $6.00
per month and not greater than $16.67 per month. After the first Policy Year,
the monthly administration charge for a Policy is currently set at $6.00 per
month. The monthly administration charge is guaranteed not to exceed an amount
equal to the greater of 1/12 x ($.60 for each $1,000 of Policy face amount) or
$10.00 per month, but no more than $25.00 per month during the first Policy Year
and no more than $10.00 per month after the first Policy Year. 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. (See "Surrender
Charge.") 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, recordkeeping, 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.
Mortality and Expense Risks Charge
The Company deducts a monthly charge from the Policy Value for the
mortality and expense risks it assumes under the Policies. This charge is made
on each Monthly Date at an annual rate of .90% of the value of the policyowner's
Investment Accounts. The charge is currently reduced to an annual rate of .27%
after the ninth Policy Year. The Company reserves the right to increase the .27%
charge, subject to the guaranteed maximum annual rate of .90%. If the Company
increases the charge such increase will be applicable only to Policies issued on
or after the date of the increase. The mortality risk assumed is that lives
insured may live for a shorter period of time than the Company estimated. The
expense risk assumed is that expenses incurred in issuing and administering the
Policies will be greater than the Company estimated. The Company will realize a
gain from this charge to the extent it is not needed to provide benefits and pay
expenses under the Policies. During the twelve month period 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 Policy Value. A transaction
charge of $25 is imposed on each unscheduled transfer of Policy Value among the
Investment Accounts exceeding twelve 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. 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. Thus, surrender of a
Policy or termination of a Policy for insufficient value within the first ten
Policy Years and within ten Policy 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. 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. All or a
portion of the Surrender Charge will be partially or completely waived on
Policies issued with an accounting benefit rider upon total surrender in early
Policy Years. An accounting benefit rider is a rider issued to a corporate owner
of a Policy designed to permit the corporation to include greater Policy Value
amounts on its Statement of Net Assets in early Policy Years than would
otherwise be possible.
The Surrender Charge is comprised of two parts: A contingent deferred sales
charge and a contingent deferred administration charge. During the twelve month
period ended December 31, 1997, the Company collected $_____ in surrender
charges.
Contingent Deferred Sales Charge
The contingent deferred sales charge is equal to 47.25% multiplied by the
number of Target Premiums defined below:
Number of Target Premiums
-----------------------------------------
Insured's Age All States
on Issue or Except Oregon
Adjustment Date and New York New York Oregon
--------------- ------------- -------- ------
0-45 2.00 2.00 2.00
46-50 2.00 1.90 2.00
51-55 2.00 1.75 2.00
56-60 2.00 1.65 2.00
61-65 2.00 1.55 2.00
66-70 1.50 1.50 1.45
71-75 1.08 1.10 1.05
76-80 0.80 0.80 0.80
81-85 0.48 0.50 0.50
The contingent deferred sales charge portion of the Surrender Charge is
assessed to recover sales expenses and is in addition to the 2.75% and .75%
premium sales load which is deducted when premium payments are made.
Contingent Deferred Administration Charge
The contingent deferred administration charge is equal to $3 per $1,000 of
Policy face amount, but no greater than $1,500 per Policy. 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.
Surrender Charge Percentage
The Surrender Charge during any Policy Year is equal to the sum of the
contingent deferred sales charge and the contingent deferred administration
charge multiplied by the applicable surrender percentage as shown below.
Policy Year of Surrender Surrender Charge Percentage
------------------------ ---------------------------
1-5 100.00%
6 95.24%
7 85.71%
8 71.43%
9 52.38%
10 28.57%
11+ 0.00%
The Surrender Charge applicable to a face amount increase will be
determined by multiplying the increase in the face amount, in thousands, by the
contingent deferred administration charge on the increase in face amount
(subject to the $1,500 limit per Policy) and adding the premium attributable to
the face amount increase (up to a maximum of two Target Premiums) multiplied by
the contingent deferred sales charge (47.25%). The premium attributable to the
increase in face amount is determined by use of the ratio of the face amount of
the increase over the face amount of the Policy determined at the adjustment
date for the face amount increase. The contingent deferred sales charge may be
reduced for insureds based on age at the Issue or Adjustment Date as discussed
above under the heading "Contingent Deferred Sales Charge." The sum of these
amounts is then multiplied by the Surrender Charge percentage in the above table
to determine the Surrender Charge.
Surrender Charges following a Policy's reinstatement commence at the rate
in effect at the time of the Policy's termination.
Sales Charge Limitations
If a Policy is surrendered at any time during the first two years after
issuance or after an increase in face amount, the Company will forego taking
that part of the deferred sales charge with respect to "premiums" paid for the
initial face amount or such increase, whichever is applicable, which would cause
the total sales load (premium sales load portion of the Premium Expense Charge
deducted from premium payments plus contingent deferred sales charge) to exceed
the sum of (i) 30% of the premiums paid up to the lesser of one guideline annual
premium or the maximum amount of premiums subject to the deferred sales charge
plus (ii) 10% of the premiums paid in excess of one guideline annual premium, up
to the lesser of two guideline annual premiums or the maximum amount of premiums
subject to the deferred sales charge.
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 Accounts. The current investment management fee and total
operating expenses for each of the Accounts is provided under the heading
"Separate Account". These fees and expenses are fully described in the
prospectuses for the Funds.
Special Provisions for Group or Sponsored Arrangements
Where permitted by state insurance laws, Policies may be purchased under
group or sponsored arrangements, as well as on an individual basis. A "group
arrangement" includes a program under which a trustee, employer or similar
entity purchases Policies covering a group of individuals on a group basis. A
"sponsored arrangement" includes a program under which an employer permits group
solicitation of its employees or an association permits group solicitation of
its members for the purchase of Policies on an individual basis.
The charges and deductions described above may be reduced for Policies
issued in connection with group or sponsored arrangements. Such arrangements may
include sales without premium sales loads and/or Surrender Charges to employees,
officers, directors, agents, immediate family members of the foregoing, and
employees of agents of the Company and its subsidiaries. The Company will reduce
the above charges and deductions in accordance with its rules in effect as of
the date an application for a Policy is approved. To qualify for such a
reduction, a group or sponsored arrangement must satisfy certain criteria as to,
for example, size of the group, expected number of participants and anticipated
premium payments from the group. Generally, the sales contacts and effort,
administrative costs and mortality cost per Policy vary based on such factors as
the size of the group or sponsored arrangements, the purposes for which Policies
are purchased and certain characteristics of its members. The amount of
reduction and the criteria for qualification will reflect the reduced sales
effort and administrative costs resulting from, and the different mortality
experience expected as a result of, sales to qualifying groups and sponsored
arrangements.
The Company may modify from time to time, on a uniform basis, both the
amounts of reductions and the criteria for qualification. Reductions in these
charges will not be unfairly discriminatory against any person, including the
affected policyowners and all other policyowners with policies funded by the
Separate Account.
In addition, groups and persons purchasing under a sponsored arrangement
may apply for flexible underwriting. If flexible underwriting is granted, the
cost of insurance charge may increase as a result of higher anticipated
mortality experience. Flexible underwriting programs currently available include
batch underwriting, expanded nonmedical underwriting and guaranteed issue
underwriting.
THE FIXED ACCOUNT
Policyowners may allocate Net Premiums and transfer amounts from the
Separate Account to the Fixed Account, in which case such amounts are held in
the General Account of the Company. Because of exemptive and exclusionary
provisions, interests in the Fixed Account have not been registered under the
Securities Act of 1933 and the General Account has not been registered as an
investment company under the Investment Company Act of 1940. Accordingly,
neither the Fixed Account nor any interests therein are subject to the
provisions of these Acts and, as a result, the staff of the Securities and
Exchange Commission has not reviewed the disclosures in this prospectus relating
to the Fixed Account. Disclosures regarding the Fixed Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses. This prospectus is generally intended to serve as a disclosure
document only for the aspects of the Policy involving the Separate Account and
contains only selected information regarding the Fixed Account. More information
regarding the Fixed Account may be obtained from the Company's home office or
from a sales representative.
The Company's obligations with respect to the Fixed Account are supported
by the Company's General Account. Subject to applicable law, the Company has
sole discretion over the investment of the assets in the General Account.
The Company guarantees that Net Premiums allocated to the Fixed Account
will accrue interest daily at an effective annual interest rate of not less than
3% compounded annually. In its sole discretion, the Company may credit a higher
rate of interest.
Charges under the Policy are the same as when the Separate Account is being
used, except that the mortality and expense risks charge is not imposed on
amounts of Policy Value in the Fixed Account. The value of the Fixed Account on
any Business Day is the sum of the Net Premiums allocated to the Fixed Account,
plus any transfers from the Separate Account, plus interest credited to the
Fixed Account, less surrenders, Surrender Charges, Monthly Policy Charges or
transaction fees allocated to the Fixed Account or transfers to the Separate
Account.
POLICY TERMINATION AND REINSTATEMENT
Policy Termination
An initial minimum premium payment is required to commence coverage under a
Policy. A minimum premium is required during the first twenty-four policy months
(the "Minimum Required Premium"). A notice of impending termination of a Policy
will be sent if during the 24 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 current data pages; and
2. Is the number of completed months since the Policy Date.
Further, a notice of impending termination of a Policy will be sent if, 24
months after the Policy Date or later, or any time after a policy loan is taken,
the Net Surrender Value of the Policy is not at least equal to the Monthly
Policy Charge on the current Monthly Date and, if the Policy has a death benefit
guarantee rider, the death benefit guarantee premium requirement has not been
satisfied. Payment of a planned periodic premium does not ensure that the Policy
will not enter a grace period 24 months or later following the Policy Date.
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 (1) minus (2) where:
1. Is the Minimum Required Premium due on the second Monthly Date
following the beginning of the grace period; and
2. Is the sum of the premiums paid since the Policy Date.
If the grace period ends before receipt by the Company of the minimum
payment described above, the Company will pay to the policyowner any remaining
value in the Policy which would be (1) minus (2) where:
1. Is the Net Surrender Value on the Monthly Date on or immediately
preceding the start of the grace period; and
2. Is the two Monthly Policy Charges applicable during the grace period.
If the grace period begins because the Net Surrender Value is less than the
current Monthly Policy Charge, the minimum payment is equal to (1) plus (2)
divided by (3) where:
1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of the
grace period;
2. Is three Monthly Policy Charges; and
3. Is 1 minus the maximum Premium Expense Charge.
If the grace period ends before we receive the minimum payment, the Company
will keep any remaining value in the Policy.
This payment is intended to reimburse the Company for the Monthly Policy
Charges during the 61-day grace period and provide sufficient Policy Value to
pay the Monthly Policy Charge 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 Monthly Policy Charges as they
are processed. Should the Policy's Net Surrender Value not at least equal the
Monthly Policy Charges 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 all Monthly Policy Charges 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 failure to pay the Minimum Required Premium on a Monthly Date during the 24
months following the Policy Date, or as a result of insufficient value, 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
guidelines then in effect and payment of a reinstatement premium are required.
The reinstatement premium must be at least the greater of ((1) plus (2) divided
by (3)) or ((4) minus (5)) where:
1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of the
grace period;
2. Is three Monthly Policy Charges;
3. Is 1. minus the maximum Premium Expense Charge;
4. Is the Minimum Required Premium due on the second Monthly Date
following the beginning of the grace period; and
5. Is the sum of the premiums paid since the Policy Date.
Payment of Monthly Policy Charges 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 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.
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 Policy 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 Mutual Fund 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 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 Fund or Account.
In addition, the Company may disregard voting instructions in favor of changes
initiated by a policyowner in the investment policy or the investment adviser of
the Account or Mutual Fund 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 Fund 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 semiannual
report to policyowners.
Statement of Values
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 Policy Value and Surrender Value;
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;
9. any investment gain or loss since the last statement;
10. the designated beneficiary or beneficiaries;
11. all riders included with the Policy; and
12. a detailed summary of activity which occurred during the Policy Year.
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
Unless telephone transaction services are declined on the supplemental
application for a Policy, or at any subsequent time the policyowner notifies the
Company in writing to remove telephone transaction services, certain
transactions, including transfers permitted by the Policy, Policy loans (Policy
loan proceeds will be mailed only to the policyowner's address of record),
changes in the allocation of future premium payments and changes in allocation
of the Monthly Policy Charge, may be made pursuant to telephone instructions.
The telephone transactions may be exercised 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 Company is open for business to be effective that
day. Requests made after that time or on a day when the Company 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 procedures include recording all
telephone instructions, requesting personal identification 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. Telephone instructions
received from any joint policyowner will be binding on all joint policyowners.
The Company may modify or terminate telephone transfer procedures at any time.
You may obtain policy 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
policy values, initiate certain changes to your policy, 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 policyowners.
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 or
Mutual Fund should no longer be available for investment or if, in the judgment
of the Company's management, further investment in shares of any mutual fund
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. If the Company eliminates or combines existing
Divisions or transfers assets in one Division to another, 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. 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 Policy Charges or waiving of premium payments upon
disability, accelerating benefits in the event of terminal illness, providing
cost of living increases in benefits, providing a death benefit guarantee (also
known as "no lapse guarantee"), providing extended coverage beyond the Maturity
Date, and, in the case of business-owned Policies, permitting a change of the
life insured, providing face amount increases that reflect salary increases,
providing extra protection increases 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
Policy Charge.
The death benefit guarantee (also known as "no lapse 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 Policy Charges on a Monthly Date. This rider
is automatically made a part of a Policy if the issue age of the insured is
under age 65 and (where permitted by law) the planned periodic premium is equal
to or greater than the death benefit guarantee premium. The rider terminates on
the later of the Policy Anniversary following the insured's 65th birthday or
five years after the effective date of the rider. The death benefit (no lapse)
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 (no lapse) guarantee premiums
applicable to the number of months the Policy has been in force, less one month.
The death benefit (no lapse) guarantee premium is based on the issue age, gender
(where permitted by law), death benefit option, and risk class of the insured.
The monthly death benefit (no lapse) 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 (no lapse) 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 (no
lapse) guarantee premium requirement. If on any Monthly Date the death benefit
(no lapse) 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 a Company's home office prior to the expiration of 61 days
after the date the notice is mailed, the death benefit (no lapse) 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 (no lapse)
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.
The death benefit (no lapse) guarantee rider as discussed on this page and
on page 95 is not available in the Commonwealth of Massachusetts. Information
concerning this and other supplementary benefits may be obtained from an
authorized agent of the Company.
We will, however, subject to state availability, offer an Extended Maturity
Rider to the policyowner six months prior to the Policy's maturity date. This
rider will allow, under certain conditions, the contract to remain in force
until the insured's death with a death benefit being paid rather than maturing
the contract. The Extended Maturity Rider is not available in the Commonwealth
of Massachusetts.
The Contract
The Policy, the application attached to it, any supplemental application,
any adjustment applications, any amendments to the application and the current
data pages 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 gender of the insured has been misstated in an application,
including a reinstatement application, the death benefit under the Policy will
be that which would be purchased by the most recent mortality charge at the
correct age and gender.
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 that 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 to or from an
Investment Account 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 Mutual Funds.
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 five Business
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, semiannually, 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 Policy 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 several insurance policies
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 Effective 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 gender, issue age, and risk classification of the
insured under the Policy. An equitable adjustment in the new policy's payments
and cash or Policy Values will be made to reflect variances, if any, in the
payments and Policy 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, gender 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.")
Term Conversion Bonus Program
Owners of a One Year Term Policy, Renewable 7 Times (hereafter referred to
as Convertible Bonus Term or CBT) issued by the Company may convert the CBT
policy to the Policy described in this Prospectus subject to certain conditions.
If those conditions are met and if the conversion occurs within policy years 3-5
of the CBT policy, the Company will reduce the total annual first year premium
of the Policy by 20% of the lesser of the target premium or the planned periodic
premium as shown on the Policy data pages. The Company accomplishes this premium
reduction by paying into the Policy a single bonus payment equal to 20% of the
lesser of target premium or planned periodic premium as shown on the Policy data
pages. As a part of the conversion process, the Owner of the CBT policy must
satisfy certain suitability requirements for the PrinFlex Policy.
The 20% bonus will be allocated among the divisions of the Separate Account
or to the Fixed Account, or both, in the same ratio as the Net Premiums. The
policyowner will not receive a cost basis in the Policy for the amount of the
bonus. If the Owner exercises the right to return the Contract during the "free
look" period, the amount returned is reduced by any conversion credit applied.
See "Policy Free Look."
In making the decision as to whether to convert the CBT policy to a
PrinFlex policy, the Owner should carefully review the CBT contract and this
Prospectus as the charges and provisions of the contracts differ. Time elapsed
under the CBT policy will not be credited to the Policy for calculation of any
duration based charge or feature, including but not limited to: Surrender
Charges; Premium expense charges; monthly administration charges; minimum
required premium; Mortality and Expense Risks charges; or net loan rates.
To initiate a conversion, the Company must receive: 1) a life conversion
application; 2) a supplemental application; and 3) any required premiums. The
conversion will become effective upon receipt of the completed items listed
above and acceptance of the application. The transaction will be valued at the
end of the Valuation Period in which the Company receives all the necessary
documentation at its home office.
Policy Split Option Exchange
Subject to certain conditions, Owners of a First to Die Flexible Premium
Universal Life Policy or a Survivorship Life Policy (hereafter referred to as
"FTD" and "SL") issued by the Company may exchange the FTD or SL policy for one
or more Policy(ies) described in this Prospectus. If those conditions are met,
the Company will transfer the cash value of the FTD or SL policy to the PrinFlex
Policy waiving the Premium Expense Charge. Subsequent premiums into the PrinFlex
Policy(ies) will be subject to applicable Premium Expense Charges. As part of
the exchange process, the Owner of the FTD or SL policy must satisfy certain
suitability requirements for the PrinFlex Policy(ies).
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 Policies
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 gender of the insured. In addition, commissions will include 0% to 3% 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 Policies distributed by
broker-dealers other than the principal underwriter will vary.
For the twelve month period 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 also
the principal underwriter for various registered investment companies 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:
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
DIRECTORS:
<TABLE>
<CAPTION>
Name, Positions and Offices Principal Occupation During Last 5 Years
- --------------------------- ----------------------------------------
<S> <C>
MARY VERMEER ANDRINGA President and Chief Operating Officer, Vermeer Manufacturing Company.
Director
Member, Nominating Committee
RUTH MARGARET DAVIS President and Chief Executive Officer, The Pymatuning Group, Inc.
Director
Member, Nominating Committee
DAVID JAMES DRURY Chairman and Chief Executive Officer, Principal Mutual Life Insurance Company
Director since January 1995. President and Chief Executive Officer from 1994 - 1995;
Chairman of the Board President from 1993-1994; Executive Vice President from 1992 - 1993; Executive
Chief Executive Officer Vice President and Chief Actuary 1992.
Chair, Executive Committee
CHARLES DANIEL GELATT, JR. President, NMT Corporation.
Director
Member, Executive Committee
Chair, Human Resources Committee
GERALD DAVID HURD Retired. Chairman and Chief Executive Officer, Principal Mutual Life Insurance
Director Company 1989 - 1994.
Member, Executive and
Nominating Committees
THEODORE MURTAGH HUTCHISON Retired. Vice Chairman, Principal Mutual Life Insurance Company 1994 - 1997.
Director Prior thereto, Executive Vice President.
Member, Audit Committee
CHARLES SAMUEL JOHNSON Chairman, President and Chief Executive Officer, Pioneer Hi-Bred International, Inc. since
Director December 1996. President and Chief Executive Officer September 1995 - December 1996.
Member, Audit Committee 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 Corporation since 1997. President and Chief
Director Operating Officer 1994 - 1997. Prior thereto, Executive Vice President.
Member, Executive Committee and
Chair, Nominating Committee
LEE LIU Chair, Audit Committee
Member, Executive and Human
Resources Committees
VICTOR HENDRIK LOEWENSTEIN Chairman and Chief Executive Officer, IES Industries, Inc., since November 1996.
Director Prior thereto, Chairman, President and Chief Executive Officer.
Member, Audit Committee
RONALD DALE PEARSON Managing Partner, Egon Zehnder International
Director Chairman, President and Chief Executive Officer, Hy-Vee, Inc.
Member, Human Resources Committee
JOHN ROY PRICE Managing Director, The Chase Manhattan Corporation since April, 1996.
Director Prior thereto, Managing Director, Chemical Banking Corporation.
Member, Nominating Committee
DONALD MITCHELL STEWART President, The College Board.
Director
Member, Human Resources Committee
ELIZABETH EDITH TALLETT President & CEO of Dioscor, Inc. & Serex, Inc. since 1996. President and
Director Chief Executive Officer, Transcell Technologies, Inc. 1992 - 1996.
DEAN DICKSON THORNTON Retired since 1993. Prior thereto President, Boeing Commercial Airplane Group.
Director
Member, Audit Committee
FRED WILLIAM WEITZ President, Chairman of the Board and Chief Executive Officer,
Director Essex Meadows, Inc. since 1995. Prior thereto, President, Chairman of the Board,
Member, Human Resources Committee and Chief Executive Officer, The Weitz Corporation and its subsidiaries.
</TABLE>
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 to 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 Policy (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 Assignments 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 policyowner 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 gender. 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 Gregg 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 financial statements of the Company 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.
APPENDIX - A
SAMPLE ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES AND DEATH BENEFITS
The following illustrations have been prepared to help show how Policy
Values and Surrender 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 Accounts were uniform, gross, annual rates of 0%, 6% and 12% (or net rates
of -.66%, 5.34% and 11.34%, respectively). The death benefits and values would
be different from those shown if the return averaged 0%, 6% 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 six illustrations set out show hypothetical Policies issued to
45-year-old male nonsmokers. Illustrations for females or for younger males
would be more favorable; illustrations for older males or for smokers would be
less favorable than those presented. The Policies are illustrated on the basis
of $4,000 Target Premium and a face amount at issue of $250,000. Illustrations
1, 2 and 5 show the selection of Death Benefit Option 1; Illustrations 3, 4 and
6, Death Benefit Option 2.
The illustrations reflect all Policy charges (including deductions from
premiums for sales loads and state and federal taxes; monthly deductions from
Policy Value of administration charges, cost of insurance charges and mortality
and expense risk charges; and the contingent deferred administration charge and
contingent deferred sales load that may be deducted upon full surrenders or
lapse of a Policy) and the average fees and expenses of the Accounts.
Illustrations 1 and 3 reflect current administrative and cost of insurance
charges. Illustrations 2, 4, 5 and 6 reflect the guaranteed maximum
administration and cost of insurance charges. Illustrations 5 and 6 reflect
guaranteed administration and cost of insurance charges for policies applied for
in Texas only. The average fees and expenses of the Accounts may decrease or
increase in the future making operating expenses actually incurred by the
Accounts differ from the .69% average rate shown in the illustrations.
The six illustrations are based on the assumption that payments are made in
accordance with a $4,000 annual Target Premium schedule, that no values are
allocated to the Fixed Account, no changes in death benefit option or face
amount are made, no policy loans or partial surrenders occur, and that no riders
are in effect. Upon request, the Company will prepare a comparable illustration
reflecting the proposed insured's actual age, gender, risk classification and
desired policy features.
From time to time, in advertisements or sales literature for the Policies
that quote performance data for one or more of the Accounts, the Company may
include Policy Values, Surrender Values and death benefit figures computed using
the same methodology as that used in the following illustrations, but with the
average annual total return of the Account for which performance data is shown
in the advertisement replacing the hypothetical rates of return shown in the
following tables. This information may be shown in the form of graphs, charts,
tables and examples and may include data for periods prior to the offering of
the Policies for which an Account has had performance (with Policy charges
assumed to be equal to current charges for any periods prior to offering the
Policies).
Illustration 1
PLANNED PREMIUM $4,000
Initial Face Amount $250,000
Death Benefit Option 1
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
PRINFLEX LIFE
MALE AGE 45 NON-SMOKER
ASSUMING CURRENT CHARGES
(All States)
<TABLE>
<CAPTION>
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $250,000 $250,000 $250,000 $2,926 $ 3,123 $ 3,321
2 8,610 250,000 250,000 250,000 5,780 6,356 6,957
3 13,241 250,000 250,000 250,000 8,535 9,674 10,909
4 18,103 250,000 250,000 250,000 11,217 13,107 15,239
5 23,208 250,000 250,000 250,000 13,824 16,658 19,982
6 28,568 250,000 250,000 250,000 16,353 20,328 25,181
7 34,196 250,000 250,000 250,000 18,802 24,119 30,879
8 40,106 250,000 250,000 250,000 21,154 28,022 37,116
9 46,312 250,000 250,000 250,000 23,396 32,026 43,935
10 52,827 250,000 250,000 250,000 25,688 36,364 51,723
11 59,669 250,000 250,000 250,000 27,976 40,954 60,427
12 66,852 250,000 250,000 250,000 30,204 45,749 70,083
13 74,395 250,000 250,000 250,000 32,378 50,766 80,809
14 82,314 250,000 250,000 250,000 34,524 56,041 92,752
15 90,630 250,000 250,000 250,000 36,564 61,520 105,997
16 99,361 250,000 250,000 250,000 38,477 67,198 120,690
17 108,530 250,000 250,000 250,000 40,251 73,078 137,008
18 118,156 250,000 250,000 250,000 41,871 79,165 155,153
19 128,264 250,000 250,000 250,000 43,325 85,469 175,362
20 138,877 250,000 250,000 250,000 44,621 92,016 197,915
</TABLE>
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
End of 0% 6% 12%
Year (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 1,077 1,275 $1,473
2 3,411 3,987 4,587
3 4,404 5,543 6,778
4 7,086 8,977 11,108
5 9,693 12,527 15,852
6 12,419 16,394 21,247
7 15,261 20,579 27,339
8 18,203 25,071 34,165
9 21,233 29,862 41,771
10 24,507 35,184 50,543
11 27,976 40,954 60,427
12 30,204 45,749 70,083
13 32,378 50,766 80,809
14 34,524 56,041 92,752
15 36,564 61,520 105,997
16 38,477 67,198 120,690
17 40,251 73,078 137,008
18 41,871 79,165 155,153
19 43,325 85,469 175,362
20 44,621 92,016 197,915
(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%, 6% 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%, 6% 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>
Illustration 2
PLANNED PREMIUM $4,000
Initial Face Amount $250,000
Death Benefit Option 1
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
PRINFLEX LIFE
MALE AGE 45 NON-SMOKER
ASSUMING GUARANTEED CHARGES
(All States Except Texas)
<TABLE>
<CAPTION>
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $250,000 $250,000 $250,000 $2,712 $ 2,902 $ 3,094
2 8,610 250,000 250,000 250,000 5,350 5,899 6,473
3 13,241 250,000 250,000 250,000 7,882 8,961 10,132
4 18,103 250,000 250,000 250,000 10,304 12,085 14,097
5 23,208 250,000 250,000 250,000 12,611 15,270 18,395
6 28,568 250,000 250,000 250,000 14,796 18,508 23,053
7 34,196 250,000 250,000 250,000 16,847 21,791 28,099
8 40,106 250,000 250,000 250,000 18,752 25,108 33,564
9 46,312 250,000 250,000 250,000 20,497 28,447 39,482
10 52,827 250,000 250,000 250,000 22,212 32,002 46,187
11 59,669 250,000 250,000 250,000 23,851 35,696 53,626
12 66,852 250,000 250,000 250,000 25,299 39,421 61,769
13 74,395 250,000 250,000 250,000 26,548 43,175 70,705
14 82,314 250,000 250,000 250,000 27,578 46,945 80,526
15 90,630 250,000 250,000 250,000 28,364 50,713 91,338
16 99,361 250,000 250,000 250,000 28,879 54,464 103,268
17 108,530 250,000 250,000 250,000 29,093 58,179 116,463
18 118,156 250,000 250,000 250,000 28,959 61,823 131,092
19 128,264 250,000 250,000 250,000 28,430 65,365 147,362
20 138,877 250,000 250,000 250,000 27,454 68,773 165,526
</TABLE>
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
End of 0% 6% 12%
Year (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 863 $ 1,054 $1,245
2 2,980 3,530 4,103
3 3,751 4,830 6,002
4 6,173 7,955 9,966
5 8,481 11,139 14,264
6 10,862 14,574 19,119
7 13,307 18,251 24,559
8 15,802 22,158 30,613
9 18,333 26,284 37,318
10 21,032 30,821 45,007
11 23,851 35,696 53,626
12 25,299 39,421 61,769
13 26,548 43,175 70,705
14 27,578 46,945 80,526
15 28,364 50,713 91,338
16 28,879 54,464 103,268
17 29,093 58,179 116,463
18 28,959 61,823 131,092
19 28,430 65,365 147,362
20 27,454 68,773 165,526
(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%, 6% 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%, 6% 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>
Illustration 3
PLANNED PREMIUM $4,000
Initial Face Amount $250,000
Death Benefit Option 2
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
PRINFLEX LIFE
MALE AGE 45 NON-SMOKER
ASSUMING CURRENT CHARGES
(All States)
<TABLE>
<CAPTION>
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $252,917 $253,113 $253,311 $2,917 $ 3,113 $ 3,311
2 8,610 255,752 256,326 256,923 5,752 6,326 6,923
3 13,241 258,478 259,609 260,834 8,478 9,609 10,834
4 18,103 261,121 262,993 265,103 11,121 12,993 15,103
5 23,208 263,678 266,477 269,759 13,678 16,477 19,759
6 28,568 266,146 270,060 274,838 16,146 20,060 24,838
7 34,196 268,521 273,742 280,376 18,521 23,742 30,376
8 40,106 270,785 277,506 286,401 20,785 27,506 36,401
9 46,312 272,922 281,337 292,941 22,922 31,337 42,941
10 52,827 275,086 285,455 300,358 25,086 35,455 50,358
11 59,669 277,225 289,775 308,582 27,225 39,775 58,582
12 66,852 279,285 294,249 317,638 29,285 44,249 67,638
13 74,395 281,275 298,890 327,622 31,275 48,890 77,622
14 82,314 283,222 303,736 338,663 33,222 53,736 88,663
15 90,630 285,037 308,704 350,783 35,037 58,704 100,783
16 99,361 286,692 313,770 364,066 36,692 63,770 114,066
17 108,530 288,171 318,920 378,619 38,171 68,920 128,619
18 118,156 289,456 324,137 394,559 39,456 74,137 144,559
19 128,264 290,531 329,408 412,017 40,531 79,408 162,017
20 138,877 291,404 334,740 431,164 41,404 84,740 181,164
</TABLE>
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
End of 0% 6% 12%
Year (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 1,068 $ 1,265 $ 1,462
2 2,805 3,379 3,976
3 4,347 5,478 6,704
4 6,990 8,862 10,972
5 9,547 12,346 15,628
6 12,212 16,126 20,904
7 14,980 20,201 26,836
8 17,834 24,555 33,450
9 20,758 29,174 40,777
10 23,906 34,275 49,178
11 27,225 39,775 58,582
12 29,285 44,249 67,638
13 31,275 48,890 77,622
14 33,222 53,736 88,663
15 35,037 58,704 100,783
16 36,692 63,770 114,066
17 38,171 68,920 128,619
18 39,456 74,137 144,559
19 40,531 79,408 162,017
20 41,404 84,740 181,164
(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%, 6% 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%, 6% 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>
Illustration 4
PLANNED PREMIUM $4,000
Initial Face Amount $250,000
Death Benefit Option 2
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
PRINFLEX LIFE
MALE AGE 45 NON-SMOKER
ASSUMING GUARANTEED CHARGES
(All States Except Texas)
<TABLE>
<CAPTION>
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $252,700 $252,890 $253,081 $2,700 $ 2,890 $ 3,081
2 8,610 255,317 255,863 256,432 5,317 5,863 6,432
3 13,241 257,815 258,885 260,045 7,815 8,885 10,045
4 18,103 260,191 261,950 263,937 10,191 11,950 13,937
5 23,208 262,438 265,054 268,128 12,438 15,054 18,128
6 28,568 264,546 268,184 272,637 14,546 18,184 22,637
7 34,196 266,503 271,328 277,480 16,503 21,328 27,480
8 40,106 268,293 274,466 282,671 18,293 24,466 32,671
9 46,312 269,901 277,580 288,226 19,901 27,580 38,226
10 52,827 271,450 280,847 294,446 21,450 30,847 44,446
11 59,669 272,892 284,183 301,248 22,892 34,183 51,248
12 66,852 274,111 287,467 308,566 24,111 37,467 58,566
13 74,395 275,097 290,685 316,442 25,097 40,685 66,442
14 82,314 275,826 293,807 324,910 25,826 43,807 74,910
15 90,630 276,270 296,794 334,000 26,270 46,794 84,000
16 99,361 276,402 299,611 343,748 26,402 49,611 93,748
17 108,530 276,190 302,212 354,188 26,190 52,212 104,188
18 118,156 275,583 304,531 365,338 25,583 54,531 115,338
19 128,264 274,536 306,503 377,221 24,536 56,503 127,221
20 138,877 273,001 308,056 389,863 23,001 58,056 139,863
</TABLE>
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
End of 0% 6% 12%
Year (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 852 $ 1,042 $ 1,233
2 2,370 2,916 3,486
3 3,685 4,754 5,914
4 6,060 7,819 9,806
5 8,307 10,923 13,998
6 10,612 14,250 18,703
7 12,962 17,787 23,939
8 15,343 21,516 29,721
9 17,737 25,416 36,063
10 20,270 29,667 43,265
11 22,892 34,183 51,248
12 24,111 37,467 58,566
13 25,097 40,685 66,442
14 25,826 43,807 74,910
15 26,270 46,794 84,000
16 26,402 49,611 93,748
17 26,190 52,212 104,188
18 25,583 54,531 115,338
19 24,536 56,503 127,221
20 23,001 58,056 139,863
(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%, 6% 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%, 6% 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>
Illustration 5
PLANNED PREMIUM $4,000
Initial Face Amount $250,000
Death Benefit Option 1
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
PRINFLEX LIFE
MALE AGE 45 NON-SMOKER
ASSUMING GUARANTEED CHARGES
(Texas Only)
<TABLE>
<CAPTION>
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $250,000 $250,000 $250,000 $2,712 $ 2,902 $ 3,094
2 8,610 250,000 250,000 250,000 5,350 5,899 6,473
3 13,241 250,000 250,000 250,000 7,882 8,961 10,132
4 18,103 250,000 250,000 250,000 10,304 12,085 14,097
5 23,208 250,000 250,000 250,000 12,611 15,270 18,395
6 28,568 250,000 250,000 250,000 14,796 18,508 23,053
7 34,196 250,000 250,000 250,000 16,847 21,791 28,099
8 40,106 250,000 250,000 250,000 18,752 25,108 33,564
9 46,312 250,000 250,000 250,000 20,497 28,447 39,482
10 52,827 250,000 250,000 250,000 22,212 32,002 46,187
11 59,669 250,000 250,000 250,000 23,851 35,696 53,626
12 66,852 250,000 250,000 250,000 25,299 39,421 61,769
13 74,395 250,000 250,000 250,000 26,548 43,175 70,705
14 82,314 250,000 250,000 250,000 27,578 46,945 80,526
15 90,630 250,000 250,000 250,000 28,366 50,715 91,340
16 99,361 250,000 250,000 250,000 28,883 54,468 103,271
17 108,530 250,000 250,000 250,000 29,100 58,185 116,468
18 118,156 250,000 250,000 250,000 28,970 61,833 131,101
19 128,264 250,000 250,000 250,000 28,445 65,380 147,374
20 138,877 250,000 250,000 250,000 27,476 68,795 165,542
</TABLE>
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
End of 0% 6% 12%
Year (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 863 $ 1,054 $1,245
2 2,982 3,531 4,104
3 3,751 4,830 6,002
4 6,173 7,955 9,966
5 8,481 11,139 14,264
6 10,862 14,574 19,119
7 13,307 18,251 24,559
8 15,802 22,158 30,613
9 18,333 26,284 37,318
10 21,032 30,821 45,007
11 23,851 35,696 53,626
12 25,299 39,421 61,769
13 26,548 43,175 70,705
14 27,578 46,945 80,526
15 28,366 50,715 91,340
16 28,883 54,468 103,271
17 29,100 58,185 116,468
18 28,970 61,833 131,101
19 28,445 65,380 147,374
20 27,476 68,795 165,542
(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%, 6% 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%, 6% 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>
Illustration 6
PLANNED PREMIUM $4,000
Initial Face Amount $250,000
Death Benefit Option 2
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
PRINFLEX LIFE
MALE AGE 45 NON-SMOKER
ASSUMING GUARANTEED CHARGES
(Texas Only)
<TABLE>
<CAPTION>
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $252,700 $252,890 $253,081 $2,700 $ 2,890 $ 3,081
2 8,610 255,317 255,863 256,432 5,317 5,863 6,432
3 13,241 257,815 258,885 260,045 7,815 8,885 10,045
4 18,103 260,191 261,950 263,937 10,191 11,950 13,937
5 23,208 262,438 265,054 268,128 12,438 15,054 18,128
6 28,568 264,546 268,184 272,637 14,546 18,184 22,637
7 34,196 266,503 271,328 277,480 16,503 21,328 27,480
8 40,106 268,293 274,466 282,671 18,293 24,466 32,671
9 46,312 269,901 277,580 288,226 19,901 27,580 38,226
10 52,827 271,450 280,847 294,446 21,450 30,847 44,446
11 59,669 272,892 284,183 301,248 22,892 34,183 51,248
12 66,852 274,111 287,467 308,566 24,111 37,467 58,566
13 74,395 275,097 290,685 316,442 25,097 40,685 66,442
14 82,314 275,826 293,807 324,910 25,826 43,807 74,910
15 90,630 276,273 296,797 334,003 26,273 46,797 84,003
16 99,361 276,407 299,616 343,753 26,407 49,616 93,753
17 108,530 276,198 302,220 354,197 26,198 52,220 104,197
18 118,156 275,596 304,544 365,353 25,596 54,544 115,353
19 128,264 274,553 306,522 377,243 24,553 56,522 127,243
20 138,877 273,026 308,084 389,895 23,026 58,084 139,895
</TABLE>
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
End of 0% 6% 12%
Year (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 852 $ 1,042 $ 1,233
2 2,370 2,916 3,486
3 3,685 4,754 5,914
4 6,060 7,819 9,806
5 8,307 10,923 13,998
6 10,612 14,250 18,703
7 12,962 17,787 23,939
8 15,343 21,516 29,721
9 17,737 25,416 36,063
10 20,270 29,667 43,265
11 22,892 34,183 51,248
12 24,111 37,467 58,566
13 25,097 40,685 66,442
14 25,826 43,807 74,910
15 26,273 46,797 84,003
16 26,407 49,616 93,753
17 26,198 52,220 104,197
18 25,596 54,544 115,353
19 24,553 56,522 127,243
20 23,026 58,084 139,895
(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%, 6% 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%, 6% 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.
APPENDIX B
TARGET PREMIUMS
ANNUAL PER $1,000 FACE AMOUNT
NONSMOKER AND SMOKER
Age* Male Female Unisex Age* Male Female Unisex
0 $ 3.50 $ 2.83 $ 3.41 43 $ 12.91 $ 10.82 $ 12.64
1 3.50 2.83 3.41 44 13.59 11.36 13.30
2 3.50 2.83 3.41 45 14.31 11.93 14.00
3 3.50 2.83 3.41 46 15.09 12.53 14.76
4 3.50 2.83 3.41 47 15.90 13.16 15.54
5 3.50 2.83 3.41 48 16.77 13.83 16.39
6 3.50 2.83 3.41 49 17.70 14.54 17.29
7 3.50 2.83 3.41 50 18.68 15.30 18.24
8 3.50 2.83 3.41 51 19.74 16.10 19.27
9 3.50 2.83 3.41 52 20.86 16.94 20.35
10 3.50 2.83 3.41 53 22.05 17.85 21.50
11 3.65 2.91 3.55 54 23.32 18.80 22.73
12 3.80 3.00 3.70 55 24.67 19.82 24.04
13 3.95 3.08 3.84 56 26.11 20.90 25.43
14 4.10 3.17 3.98 57 27.65 22.05 26.92
15 4.25 3.25 4.12 58 29.30 23.29 28.52
16 4.62 3.63 4.49 59 31.05 24.62 30.21
17 4.99 4.00 4.86 60 32.93 26.06 32.04
18 5.36 4.38 5.23 61 34.94 27.60 33.99
19 5.73 4.75 5.60 62 37.10 29.26 36.08
20 6.10 5.13 5.97 63 39.40 31.06 38.32
21 6.11 5.16 5.99 64 41.86 32.97 40.70
22 6.12 5.20 6.00 65 44.48 35.02 43.25
23 6.13 5.23 6.01 66 47.29 37.21 45.98
24 6.14 5.27 6.03 67 50.30 39.58 48.91
25 6.15 5.30 6.04 68 53.52 42.14 52.04
26 6.29 5.42 6.18 69 56.98 44.93 55.41
27 6.43 5.54 6.31 70 60.71 47.98 59.06
28 6.57 5.65 6.45 71 64.73 51.30 62.98
29 6.71 5.77 6.59 72 69.02 54.93 67.19
30 6.85 5.89 6.73 73 73.62 58.86 71.70
31 7.17 6.16 7.04 74 78.48 63.12 76.48
32 7.51 6.44 7.37 75 83.65 67.71 81.58
33 7.87 6.74 7.72 76 87.41 71.10 85.29
34 8.26 7.06 8.10 77 91.34 74.66 89.17
35 8.66 7.40 8.50 78 95.45 78.39 93.23
36 9.10 7.76 8.93 79 99.75 82.31 97.48
37 9.55 8.13 9.37 80 104.24 86.43 101.92
38 10.03 8.53 9.84 81 112.06 94.21 109.74
39 10.54 8.94 10.33 82 120.46 102.69 118.15
40 11.09 9.38 10.87 83 129.49 111.93 127.21
41 11.66 9.83 11.42 84 139.20 122.00 136.96
42 12.26 10.32 12.01 85 149.64 132.98 147.47
* Last Birthday
APPENDIX C EXCHANGE OFFER
The Company, the Separate Account, and Princor Financial Services
Corporation have received an order from the SEC permitting an offer to exchange
the policy described in this Prospectus (the "PrinFlex Life Policy") for certain
outstanding Flexible Variable Life Insurance policies issued by the Company (the
"FVLI Policy"). The exchange offer is extended to owners of the FVLI policies.
The exchange offer will remain open for at least one year after the date of the
order, February 13, 1997. Thereafter, the Company may withdraw the exchange
offer at any time. The exchange offer is only made in states in which the
PrinFlex Life Policy is available for sale. In considering whether to accept the
exchange offer, you should consult this Prospectus and the prospectus for the
FVLI Policy since the provisions and charges of the FVLI Policy differ from
those of the PrinFlex Life Policy. Owners of the FVLI Policy may request
personalized policy illustrations for the FVLI Policy and the PrinFlex Life
Policy from the Company. These illustrations are available at no charge.
The FVLI Policy will be exchanged at net asset value for the PrinFlex Life
Policy. Because the exchange will be at net asset value, at the time of exchange
the accumulated value of the PrinFlex Life Policy issued in the exchange will
equal the accumulated value of the FVLI Policy surrendered in the exchange.
However, because the surrender charges of the two policies are calculated
differently, the surrender value of the PrinFlex Life Policy at the time of
exchange may be lower or higher than the surrender value of the FVLI Policy.
To effect an exchange, the Company must receive from the policyowner (1) a
completed application for the PrinFlex Life Policy, (2) a request and release
for the exchange on a form supplied by the Company, and (3) the FVLI Policy to
be exchanged (or, if the FVLI Policy has been lost or destroyed, an indication
to that effect on the request and release). The policyowner and the insured must
be the same person(s) under the PrinFlex Life Policy acquired as under the
exchanged FVLI Policy. The PrinFlex Life Policy will be issued without evidence
of insurability for the same amount of insurance as the FVLI Policy. The
exchange will become effective as of the close of the Valuation Period in which
all of these three items are received by the Company at its home office. The
accumulated value of the FVLI Policy will be determined as of the time the
exchange becomes effective and will be transferred to the PrinFlex Life Policy.
No surrender charge otherwise applicable to the FVLI Policy will apply to
the surrender in connection with the exchange, and no Premium Expense Charge
will be deducted from the proceeds of that surrender when these proceeds are
applied to the purchase of a PrinFlex Life Policy as part of an exchange. If the
Policy Date of the FVLI Policy surrendered in the exchange is the same day of
the month as the Policy Date of the PrinFlex Life Policy issued in the exchange,
then surrender charges and front-end sales loads on subsequent premium payments
for the PrinFlex Life Policy will be calculated using the Policy Date of the
FVLI Policy, as if the Policy Date of the FVLI Policy were also the Policy Date
of the PrinFlex Life Policy. (Example: If the Policy Date of the FVLI Policy is
December 1, 1990 and the FVLI Policy is exchanged for a PrinFlex Life Policy
with a Policy Date of April 1, 1997, then front-end sales loads on subsequent
premium payments and surrender charges for the PrinFlex Life Policy will be
calculated as if the Policy Date of the PrinFlex Life Policy were December 1,
1990).
If the Policy Date of the FVLI Policy surrendered in the exchange is on a
day of the month different from the Policy Date of the PrinFlex Life Policy
issued in the exchange, then surrender charges and front-end loads on subsequent
premium payments for the PrinFlex Life Policy will be calculated using the
hypothetical Monthly Date of the PrinFlex Life Policy that would have
immediately preceded the Policy Date of the FVLI Policy surrendered in the
exchange, as if that hypothetical Monthly Date were the Policy Date of the
PrinFlex Life Policy. (Example: If the Policy Date of the FVLI Policy is
December 15, 1990 and the FVLI Policy is exchanged for a PrinFlex Life Policy
with a Policy Date of April 1, 1997, then front-end sales loads on subsequent
premium payments and surrender charges for the PrinFlex Life Policy will be
calculated as if the Policy Date of the PrinFlex Life Policy were December 1,
1990).
If the FVLI Policy includes one or more face amount increases, then surrender
charges and front-end sales loads for the entire face amount of the PrinFlex
Life Policy acquired in the exchange will be calculated using the same date that
would be used if no face amount increases had occurred. (Example: The FVLI
Policy was issued with a Policy Date of June 15, 1989 in an initial face amount
of $100,000. On September 15, 1994, the face amount of the FVLI Policy was
increased to $150,000. If the FVLI Policy is exchanged for a PrinFlex Life
Policy with a Policy Date of August 1, 1997, the surrender charges and front-end
sales loads for the entire $150,000 face amount of the PrinFlex Life Policy will
be calculated as if the Policy Date of the PrinFlex Life Policy were June 1
1989).
All other duration-related charges under the PrinFlex Life Policy and the
time period restrictions associated with certain policy transactions (e.g.,
death benefit option changes, face amount decreases, and partial surrenders)
will be calculated based on the actual Policy Date of the PrinFlex Life Policy.
The Policy Date of the PrinFlex Life Policy will be the date the exchange is
effected, unless that date falls on the 29th, 30th or 31st of a month. In that
event, the PrinFlex Life Policy will be dated on the 28th of the month.
Summary of Charges Under Policies
The charges under the FVLI Policy and the PrinFlex Life Policy differ
substantially, as summarized below. There may be other differences important to
you and the prospectuses for both policies should be reviewed carefully before
you decide whether to exchange your FVLI Policy for a PrinFlex Life Policy. The
table does not include management fees and other expenses of the underlying
Accounts in which the Divisions of the Separate Account invest. Please refer to
the prospectus for both policies for information regarding these fees and
expenses. A table summarizing charges under the respective policies follows:
FVLI POLICY PRINFLEX LIFE POLICY
FRONT-END 5% of all premiums 2.75% of all premiums
SALES LOAD up to one Target
Premium in a Policy
Year during the first
ten Policy Years;
0.75% of all premiums
in excess of Target
Premium during the
first ten Policy
Years; and 0.00% of
all premiums after
ten policy years.
(Credit is given for
time in the FVLI
Policy in calculating
front-end sales loads
on the PrinFlex Life
Policy). A new 10-
year period for
imposition of front-
end sales loads
commences with any
face amount increase
for all premium
payments attributable
to the increase.
PREMIUM 2% of all premiums for state 2.20% of all premiums
TAX CHARGE premium taxes for state and local
premium taxes (this
charge is not
deducted from amounts
transferred from the
FVLI Policy to the
PrinFlex Life Policy)
CHARGE FOR FEDERAL None 1.25% of all premiums
TAXES (this charge is not
deducted from amounts
transferred from the
FVLI Policy to the
PrinFlex Life Policy)
MONTHLY Currently $4.75 per month During the first
ADMINISTRATIVE (guaranteed never to exceed Policy Year, an
CHARGE $5.00 per month) amount equal to 1/12
x ($.40 for each
$1,000 of policy face
amount) but not less
than $6.00 per month
and no greater than
$16.67 per month
(PrinFlex Life
Policies issued in
the exchange are
subject to first-year
administrative
charges). After the
first Policy Year,
the monthly
administrative charge
is currently $6.00
(guaranteed to be no
more than $10.00).
POLICY LOANS Interest on policy loans During the first ten
is charged at an effective years, interest on
annual rate of 8% and policy loans is
interest on amounts in the charged at an
loan account accrues at an effective annual rate
annual rate of 6% of 8% and interest on
amounts in the Loan
Account is credited
at an annual rate of
6%. After the tenth
Policy Year, interest
on amounts in the
Loan Account is
credited at an annual
rate of 7.75%. (For
PrinFlex Life
Policies issued in
the exchange,
interest crediting
rate on amounts in
the Loan Account is
based on Policy Date
of PrinFlex Life
Policy).
PARTIAL Allowed after the first policy Allowed after second
SURRENDERS anniversary, but no more than policy anniversary
two times per Policy Year. (PrinFlex Life
Minimum partial surrender is Policies issued in
$500 and maximum is 50% of the exchange are
Policy's net surrender value subject to this
at the time the written request limitation), but not
for surrender is received in more than two times
the home office. A transaction per Policy Year. The
charge of the lesser of $25.00 minimum partial
or 2% of the amount of each surrender is $500 and
partial surrender applies. the maximum in any
(The transaction charge will be Policy Year is 75% of
waived for partial surrenders the PrinFlex Life
to pay off loans in connection Policy's Net
with the exchange). Surrender Value as of
the date of the first
partial surrender
during the Policy
Year. A transaction
charge of the lesser
of $25.00 or 2% of
the amount
surrendered is
imposed on each
partial surrender.
COST OF INSURANCE COI charges each month are COI charges are
("COI") CHARGES based on attained age, sex based on the same
(except where unisex values factors as apply to
are mandated by law) determine COI charges
smoking status, and risk on the FVLI Policy
class. No "preferred" and two additional
underwriting classification factors: issue age
is available. and duration since
issue. (For PrinFlex
Life Policies issued
in the exchange,
issue age and
duration since issue
are calculated based
on the Policy Date of
the PrinFlex Life
Policy. "Preferred"
underwriting
classification is
available.
MORTALITY AND Assessed daily on the assets Deducted monthly from
EXPENSE RISKS of each division at a current the Policy Value
CHARGE annual rate of .75% allocated to the
(guaranteed not to exceed .90%). Divisions at an
annual rate of .90%
of the value of the
PrinFlex Life Policy
allocated to the
Divisions. The
charge is not
deducted from values
allocated to the
Fixed Account. After
the ninth Policy
Year, the charge is
reduced to a 0.27%
annual rate. (For
PrinFlex Life
Policies issued in
the exchange, the
charge is calculated
based on the Policy
Date of the PrinFlex
Life Policy).
SURRENDER 10-year surrender charge 10-year surrender
CHARGES period. Surrender charge charge period.
consists of contingent Surrender charge
deferred sales load that never consists of
exceeds 25% of minimum Contingent Deferred
required first year premium, Sales Charge of up
and contingent deferred to 47.25% of premium
administrative charge that payments up to a
varies with age and (where maximum of two Target
allowed by law) sex of the Premiums and a
insured from $0.43 per contingent deferred
$1,000 of face amount to administration charge
$10.58 per $1,000 of face of $3.00 per $1,000
amount. of face amount for
the first $500,000
of face amount.
(Credit is given for
time in the FVLI
Policy in calculating
surrender charges on
the PrinFlex Life
Policy). A new 10-
year surrender charge
period commences with
respect to face
amount increases to
the PrinFlex Life
Policy.
Policy Free Look and Calculation of Certain Time Periods for PrinFlex Life
Policies Acquired by Exchange
For PrinFlex Life Policies acquired by exchange, the free look,
incontestability, and suicide clause time periods shall be calculated as if the
Policy Date of the PrinFlex Life Policy were the Policy Date of the FVLI Policy.
Therefore, any of these periods that had expired under the FVLI Policy will not
start anew, and any that had not expired will continue until they originally
were to expire. For FVLI Policies with one or more face amount increases or
riders added after issue, the new suicide clause and incontestability time
periods for the increases in face amount or riders carry over to the PrinFlex
Life Policy.
Values transferred from an FVLI Policy to a PrinFlex Life Policy issued in
an exchange, and all additional net premium payments made to the PrinFlex Life
Policy, will be allocated immediately among the Divisions and the Fixed Account
in accordance with the policyowners current allocation instructions. (By
contrast, for a PrinFlex Life Policy not acquired by exchange the initial Net
Premium Payment and any additional premiums received prior to the Effective Date
and during the first 20 days from the Effective Date are allocated to the Money
Market Division until the 21st day from the Effective Date of the PrinFlex Life
Policy).
Risk Class for PrinFlex Life Policies Acquired by Exchange
The risk class for a PrinFlex Life Policy acquired by exchange will be the
one most similar to the risk class for the exchanged FVLI Policy. If an FVLI
Policy includes a face amount increase at a risk class less favorable than that
for the FVLI Policy as originally issued, then the PrinFlex Life Policy will be
issued at the risk class most similar to that for the FVLI Policy as originally
issued. New evidence of insurability will not be required as a condition of the
exchange unless (i) the owner requests one or more of certain optional insurance
riders under the PrinFlex Life Policy that were not a part of the FVLI Policy;
(ii) the owner applies to have the insureds underwriting class upgraded to the
preferred class that is offered under the PrinFlex Life Policy but not under the
FVLI Policy or (iii) the owner requests a face amount increase at the time of
the exchange. The PrinFlex Life Policy's $50,000 minimum face amount increase
will be reduced to $25,000 for increases requested at the time of the exchange.
If new underwriting is required as part of the exchange because of reason number
(ii) above, a charge of $100 normally would be imposed. If the owner also
requests a face amount increase of $25,000 or more at the time of the exchange,
however, this $100 charge for the new underwriting will be waived. Any increase
in face amount, upgrade to a preferred rating or any new rider added in
connection with an exchange will take effect on the next Monthly Date following
underwriting approval.
Minimum Required Premium
Under the FVLI Policy, payment of a minimum required premium is required
during the first policy year. For a PrinFlex Life Policy not acquired by
exchange, payment of a Minimum Required Premium is required during the first two
Policy Years. For a PrinFlex Life Policy acquired by exchange of an FVLI Policy,
there will be no Minimum Required Premium even if the FVLI Policy was within the
first policy year.
A PrinFlex Life Policy (other than one acquired by exchange) will not
terminate during the first 24 months following the Policy Date even if the Net
Surrender Value of the PrinFlex Life Policy on a Monthly Date is less than the
Monthly Policy Charge, provided that no policy loans have been taken and the
policyowner has paid at least the Minimum Required Premium. Because the Minimum
Required Premium does not apply to a PrinFlex Life Policy acquired by exchange,
such a policy will enter a grace period during the first 24 Policy Months (and
thereafter) if the Net Surrender Value on a Monthly Date is less than the
Monthly Policy Charge, even if no loans have been taken. (However, if the
PrinFlex Life Policy has a death benefit guarantee rider, the Policy will not
enter a grace period if the terms of the rider are satisfied).
Policy Riders
Where permitted by law, the following riders are currently available for
issue with the FVLI Policy: Cost of Living Increase (Increase Option Rider in
Florida), Waiver of Monthly Deductions, Guaranteed Increase Option, Accidental
Death Benefit, Children Term Insurance, Spouse Term Insurance, Change of
Insured, Accelerated Death Benefit, and Death Benefit Guarantee. The Death
Benefit Guarantee Rider is not available in the Commonwealth of Massachusetts.
The Guaranteed Increase Option is not available on the PrinFlex Life Policy.
With that exception, the same or corresponding riders are available on the
PrinFlex Life Policy. There are differences between the terms of some riders
available for issue with the FVLI Policy and the corresponding riders available
for issue with the PrinFlex Life Policy. Where permitted by law, the following
additional riders are available on the PrinFlex Life Policy that are not
available on the FVLI Policy: Waiver of Specified Premium, Salary Increase,
Extra Protection Increase, Extended Coverage, and Accounting Benefit.
If an FVLI Policy with one or more policy riders is exchanged, then except
as provided below, the policyowner may elect to have the PrinFlex Life Policy
issued with the same riders (or, if the terms of the available rider differ for
the PrinFlex Life Policy, the corresponding rider) by applying for the rider on
the exchange offer application. However, if the FVLI Policy has a Cost of Living
Increase Rider, then the PrinFlex Life Policy will be issued with a Cost of
Living Increase Rider automatically. If a PrinFlex Life Policy with a Cost of
Living Increase Rider is issued in the exchange, the first cost of living
increase offer under the PrinFlex Life Policy will be three years after the
Policy Date of the PrinFlex Life Policy.
The death benefit guarantee rider is available for issue with both the FVLI
Policy and the PrinFlex Life Policy. The terms of the rider differ between the
FVLI Policy and the PrinFlex Life Policy. The death benefit guarantee rider is
included automatically on all FVLI Policies but, where permitted by law, is only
included on a PrinFlex Life Policy if the insured is under age 65 at issue and
if the planned periodic premium at issue is equal to or greater than the
guaranteed death benefit premium amount specified for the PrinFlex Life Policy.
While the death benefit guarantee rider under the FVLI Policy can apply
throughout the insureds life, the comparable rider under the PrinFlex Life
Policy terminates on the later of the age 65 policy anniversary or five years
after the effective date of the rider. If an FVLI Policy has the death benefit
guarantee rider, the PrinFlex Policy will be issued with the comparable death
benefit guarantee rider only if the insured is under age 65 on the date of
exchange and the planned periodic premium is equal to or greater than the death
benefit guarantee premium.
Certain riders available under the PrinFlex Life Policy may be applied for
in connection with the exchange offer application, subject to underwriting
approval. Additional information about riders and the differences between them
is available from the Company.
<PAGE>
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>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The prospectus, consisting of 108 pages;
The undertaking to file reports;
The undertaking pursuant to Rule 484;
Representations pursuant to Section 26 of the Investment Company Act of
1940;
The signatures;
Written consents of the following persons:
G.R. Narber, Esq.(Filed January 8, 1996)
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.A(1) Resolution of Executive Committee of Board of Directors of
Principal Mutual Life Insurance Company establishing the Variable
Life Separate Account.(*Filed January 8, 1996)
1.A(3)(a) Distribution Agreement between Princor Financial Services
Corporation and Principal Mutual Life Insurance Company.
(*Filed January 8, 1996)
1.A(3)(a)(i) Form of Selling Agreement. (@Filed December 19, 1997)
1.A(3)(b) Registered Representative Agreement.(*Filed January 8, 1996)
1.A(3)(c) Schedule of sales commissions.(*Filed January 8, 1996)
1.A(5)(a) Form of PrinFlex Life Insurance Policy.(**Filed June 5, 1996)
1.A(5)(a)(i) Cost of Living Increase Rider.(**Filed June 5, 1996)
1.A(5)(a)(ii) Waiver of Monthly Policy Charge Rider.(**Filed June 5, 1996)
1.A(5)(a)(iii) Waiver of Specified Premium Rider.(**Filed June 5, 1996)
1.A(5)(a)(iv) Accidental Death Benefit Rider.(*Filed January 8, 1996)
1.A(5)(a)(v) Children Term Insurance Rider.(**Filed June 5, 1996)
1.A(5)(a)(vi) Spouse Term Insurance Rider.(**Filed June 5, 1996)
1.A(5)(a)(vii) Change of Insured Rider.(**Filed June 5, 1996)
1.A(5)(a)(viii)Death Benefit Guarantee Rider.(**Filed June 5, 1996)
1.A(5)(a)(ix) Salary Increase Rider.(**Filed June 5, 1996)
1.A(5)(a)(x) Extra Protection Increase Rider.(**Filed June 5, 1996)
1.A(5)(a)(xi) Accounting Benefits Rider.(*Filed January 8, 1996)
1.A(5)(a)(xii) Extended Coverage Rider.(*Filed June 5, 1996)
1.A(5)(a)(xiii)Accelerated Benefits Rider.(*Filed January 8, 1996)
1.A(5)(b) Form of PrinFlex Life Insurance Policy - Unisex Version.
(**Filed June 5, 1996)
1.A(5)(b)(i) Accidental Death Benefit Rider.(**Filed January 8, 1996)
1.A(5)(b)(ii) Children Term Insurance Rider.(**Filed June 5, 1996)
1.A(5)(b)(iii) Spouse Term Insurance Rider.(**Filed June 5, 1996)
1.A(5)(b)(iv) Change of Insured Rider.(**Filed June 5, 1996)
1.A(5)(b)(v) Death Benefit Guarantee Rider.(**Filed June 5, 1996)
1.A(6)(a) Articles of Incorporation, as Amended of Principal Mutual Life
Insurance Company.(*Filed January 8, 1996)
1.A(6)(b) By-laws of Principal Mutual Life Insurance Company.
(*Filed January 8, 1996)
1.A(10) Form of Application for PrinFlex Life Insurance Policy.
(*Filed January 8, 1996)
1.A(10)(b) Form of Supplemental Application for PrinFlex Life Insurance
Policy.(**Filed June 5, 1996)
2. Opinion and consent of G.R. Narber, Senior Vice President and
General Counsel of Principal Mutual Life Insurance Company.
(*Filed January 8, 1996)
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 December 19, 1997)
7. Description of Issuance, Transfer and Redemption Procedures
Pursuant to Rule 6e-3(T)(b)(12)(iii).(***Filed October 23, 1996)
8. Powers of Attorney of Directors of Principal Mutual Life
Insurance Company.(* & ***)
9. Opinion and consent of Lisa Ford, Assistant Actuary.
(@Filed December 19, 1997)
- ---------------------------
* Filed by Initial Filing.
** Filed by Amendment No. 1.
*** Filed by Amendment No. 2.
@ Filed by Amendment No. 3.
<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.A(1) Resolution of Executive Committee *
of Board of Directors of Depositor
establishing Variable Life Separate
Account.
1.A(3)(a) Distribution Agreement Between *
Depositor and Principal Underwriter.
1.A(3)(a)(i) Form of Selling Agreement. *
1.A(3)(b) Registered Representative Agreement. *
1.A(3)(c) Schedule of Sales Commissions. *
1.A(5)(a) PrinFlex Life Policy. *
1.A(5)(a)(i) Cost of Living Increase Rider. *
1.A(5)(a)(ii) Waiver of Monthly Policy Charge Rider. *
1.A(5)(a)(iii) Waiver of Specified Premium Rider. *
1.A(5)(a)(iv) Accidental Death Benefit Rider. *
1.A(5)(a)(v) Children Term Insurance Rider. *
1.A(5)(a)(vi) Spouse Term Insurance Rider. *
1.A(5)(a)(vii) Change of Insured Rider. *
1.A(5)(a)(viii) Death Benefit Guarantee Rider. *
1.A(5)(a)(ix) Salary Increase Rider. *
1.A(5)(a)(x) Extra Protection Increase Rider. *
1.A(5)(a)(xi) Accounting Benefits Rider. *
1.A(5)(a)(xii) Extended Coverage Rider. *
1.A(5)(a)(xiii) Accelerated Benefits Rider. *
1.A(5)(b) PrinFlex Life Policy - Unisex Version. *
1.A(5)(b)(i) Accidental Death Benefit Rider. *
1.A(5)(b)(ii) Children Term Insurance Rider. *
1.A(5)(b)(iii) Spouse Term Insurance Rider. *
1.A(5)(b)(iv) Change of Insured Rider. *
1.A(5)(b)(v) Death Benefit Guarantee Rider. *
1.A(6)(a) Articles of Incorporation, as Amended, *
of Depositor.
1.A(6)(b) By-laws of Depositor. *
1.A(10) Form of Application for the PrinFlex *
Life Policy.
1.A(10)(a) Form or Supplemental Application *
For the PrinFlex Life Policy.
2 Opinion and consent of G.R. Narber, *
Senior Vice President and General
Counsel.
6 Consent of Ernst & Young LLP *
7 Description of Issuance, Transfer and Redemption
Procedurespursuant 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>
