As filed with the Securities and Exchange Commission on December 20, 2000
File No. 33-
File No. 811-8994
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
KANSAS CITY LIFE INSURANCE COMPANY
(Name of Depositor)
3520 Broadway
Kansas City, Missouri 64111-2565
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (816) 753-7000
C. John Malacarne
3520 Broadway
Kansas City, Missouri 64111-2565
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
Title of securities being registered: Individual Flexible Premium Deferred
Variable Annuity Contracts
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the commission, acting pursuant to said Section 8(a),
may determine.
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
Kansas City Life Insurance Company
through the Kansas City Life Variable Annuity Separate Account
Home Office: Correspondence to:
3520 Broadway Variable Administration
Kansas City, Missouri 64111-2565 P.O. Box 219364
Telephone: (816) 753-7000 Kansas City, Missouri 64121-9364
Telephone: (800) 616-3670
This Prospectus describes an individual flexible premium deferred variable
annuity contract (the "Contract") offered by Kansas City Life Insurance Company
("Kansas City Life"). We have provided a Definitions section at the beginning of
this Prospectus for your reference as you read.
The Contract is designed to meet investors' long-term investment needs. The
Contract also provides you the opportunity to allocate premiums to one or more
divisions ("Subaccount") of Kansas City Life Variable Annuity Separate Account
("Variable Account") or the Fixed Account. The assets of each Subaccount are
invested in a corresponding portfolio of a designated mutual fund ("Funds") as
follows:
<TABLE>
<S> <C>
MFS Variable Insurance TrustSM Manager
MFS Emerging Growth Series MFS Investment Management
MFS Research Series
MFS Total Return Series
MFS Utilities Series
MFS Global Governments Series
MFS Bond Series
American Century Variable Portfolios Manager
American Century VP Capital Appreciation American Century Investment Management, Inc.
American Century VP Income & Growth
American Century VP International
American Century VP Value
Federated Insurance Series Manager
Federated American Leaders Fund II Federated Investment Management Company
Federated High Income Bond Fund II Federated Investment Management Company
Federated Prime Money Fund II Federated Investment Management Company
Federated International Small Company Fund II Federated Global Investment Management Corporation
Dreyfus Variable Investment Fund Manager
Appreciation Portfolio The Dreyfus Corporation
Small Cap Portfolio Sub-Investment Adviser for Appreciation Portfolio:
Fayez Sarofim & Co.
Dreyfus Stock Index Fund Manager
The Dreyfus Corporation
Sub-Investment Adviser: Mellon Equity Associates
The Dreyfus Socially Responsible Growth Fund, Inc. Manager
The Dreyfus Corporation
Sub-Investment Adviser: NCM Capital Management Group, Inc.
J.P. Morgan Series Trust II Manager
J.P. Morgan U.S. Disciplined Equity Portfolio J.P. Morgan Investment Management Inc.
J.P. Morgan Small Company Portfolio
Franklin Templeton Variable Insurance Products Trust Manager
Templeton International Securities Fund (Class 2) Templeton Investment Counsel, Inc.
Franklin Small Cap Fund (Class 2) Franklin Advisers, Inc.
Franklin Real Estate Fund (Class 2) Franklin Advisers, Inc.
Templeton Developing Markets Securities Fund (Class 2) Templeton Asset Management Ltd.
Calamos Advisors Trust Manager
Calamos Convertible Portfolio Calamos Asset Management, Inc.
AIM Variable Insurance Funds Manager
AIM V. I. Dent Demographic Trends Fund AIM Advisors, Inc.
AIM V. I. Telecommunications and Technology Fund
AIM V. I. Value Fund
Seligman Portfolios, Inc. Manager
Seligman Capital Portfolio (Class 2) J. & W. Seligman & Co. Incorporated
Seligman Communications and Information Portfolio (Class 2)
</TABLE>
The accompanying prospectuses for the Funds describe these portfolios. The value
of amounts allocated to the Variable Account will vary according to the
investment performance of the Funds. You bear the entire investment risk of
amounts allocated to the Variable Account. Another choice available for
allocation of premiums is our Fixed Account. The Fixed Account is part of Kansas
City Life's general account. It pays interest at declared rates guaranteed to
equal or exceed 3%.
This Prospectus provides basic information about the Contract and the Variable
Account that you should know before investing. The Statement of Additional
Information contains more information about the Contract and the Variable
Account. The date of the Statement of Additional Information is the same as this
Prospectus and is incorporated by reference. We show the Table of Contents for
the Statement of Additional Information on page 46 of this Prospectus. You may
obtain a copy of the Statement of Additional Information free of charge by
writing or calling us at the address or phone number shown above.
The Securities and Exchange Commission maintains a web site that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding registrants that file electronically with the
Securities and Exchange Commission. The address of the site is
http://www.sec.gov.
If you already have a variable annuity contract, you should consider whether or
not purchasing another contract as a replacement for an existing contract is
advisable.
This Prospectus and the accompanying Fund prospectuses provide important
information you should have before deciding to purchase a Contract. Please keep
for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
An investment in the Contract is not a deposit or obligation of, or guaranteed
or endorsed by, any bank, nor is the Contract federally insured by the Federal
Deposit Insurance Corporation or any other government agency. An investment in
the Contract involves certain risks including the loss of Premium Payments
(principal).
The date of this Prospectus is XXX.
PROSPECTUS CONTENTS
DEFINITIONS....................................................................1
HIGHLIGHTS.....................................................................3
The Contract................................................................3
Charges and Deductions......................................................4
Annuity Provisions..........................................................6
Federal Tax Status..........................................................6
TABLE OF EXPENSES..............................................................6
CONDENSED FINANCIAL INFORMATION...............................................16
KANSAS CITY LIFE, THE VARIABLE ACCOUNT AND THE FUNDS..........................16
Kansas City Life Insurance Company.........................................16
Kansas City Life Variable Annuity Separate Account.........................16
The Funds..................................................................16
Resolving Material Conflicts...............................................21
Addition, Deletion or Substitution of Investments..........................21
Voting Rights..............................................................22
DESCRIPTION OF THE CONTRACT...................................................22
Purchasing a Contract......................................................22
Free-Look Period...........................................................22
Allocation of Premiums.....................................................23
Determination of Contract Value............................................23
Variable Account Value.....................................................23
Transfer Privilege.........................................................25
Dollar Cost Averaging Plan.................................................25
Portfolio Rebalancing Plan.................................................26
Partial and Full Cash Surrenders...........................................26
Contract Termination.......................................................27
Contract Loans.............................................................27
Death Benefit Before Maturity Date.........................................28
Proceeds on Maturity Date..................................................30
Payments...................................................................31
Modifications..............................................................31
Reports to Contract Owner..................................................32
Telephone Authorizations...................................................32
THE FIXED ACCOUNT.............................................................32
Minimum Guaranteed and Current Interest Rates..............................32
Calculation of Fixed Account Value.........................................32
Transfers from Fixed Account...............................................33
Delay of Payment...........................................................33
CHARGES AND DEDUCTIONS........................................................33
Surrender Charge (Contingent Deferred Sales Charge)........................33
Transfer Processing Fee....................................................34
Administrative Charges.....................................................34
Mortality and Expense Risk Charge..........................................34
Premium Taxes..............................................................35
Reduced Charges for Eligible Groups........................................35
Other Taxes................................................................35
Investment Advisory Fees and Other Expenses of the Funds...................35
PAYMENT OPTIONS...............................................................36
Election of Options........................................................36
Description of Options.....................................................36
YIELDS AND TOTAL RETURNS......................................................37
Yields.....................................................................37
Total Returns..............................................................37
Benchmarks and Ratings.....................................................37
FEDERAL TAX STATUS............................................................38
Introduction...............................................................38
Taxation of Non-Qualified Contracts........................................38
Taxation of Qualified Contracts............................................39
Possible Tax Law Changes...................................................40
DISTRIBUTION OF THE CONTRACTS.................................................40
LEGAL PROCEEDINGS.............................................................41
COMPANY HOLIDAYS..............................................................41
FINANCIAL STATEMENTS..........................................................41
CONDENSED FINANCIAL INFORMATION...............................................42
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS.........................46
DEFINITIONS
Many terms used within this Prospectus are described within the text where they
appear. The description of those terms are not repeated in this Definition
Section.
<TABLE>
<S> <C>
Annuitant The person on whose life the Contract's annuity benefit is based.
Beneficiary The person you designate to receive any proceeds payable under the Contract at your death or the
death of the Annuitant.
Cash Surrender Value The Contract Value less any applicable surrender charge, loan balance and premium taxes payable.
Contract Date The date from which Contract Months, Years, and Anniversaries are measured.
Contract Value The sum of the Variable Account Value and the Fixed Account Value.
Contract Year Any period of twelve months starting with the Contract Date or any contract anniversary.
Fixed Account An account that is one option we offer for allocation of your premiums. It is part of our general
account and is not part of or dependent on the investment performance of the Variable Account.
Fixed Account Value Measure of value accumulating in the Fixed Account.
Guaranteed Minimum This Contract provides for a Base Guaranteed Minimum Death Benefit. In addition, there are two
Death Benefit Options enhanced death benefit options available under the Contract.
The two options provide different levels of death benefit guarantees. The two options have
different issue requirements and expense charges associated with them. These Guaranteed Minimum
Death Benefit options are available only in the states where we have received regulatory
approval.
Issue Age The Annuitant's age on his/her last birthday as of or on the Contract Date.
Life Payment Option A payment option based upon the life of the Annuitant.
Maturity Date The date when the Contract terminates and we either pay the proceeds under a payment option or
pay you the Cash Surrender Value in a lump sum. The latest Maturity Date is the later of the
contract anniversary following the Annuitant's 85th birthday and the tenth contract anniversary.
(Certain states and Qualified Contracts may place additional restrictions on the maximum Maturity
Date.)
Monthly Anniversary Day The same day of each month as the Contract Date, or the last day of the month for those months not
having such a day.
Non-Life Payment Option A payment option that is not based upon the life of the Annuitant.
Non-Qualified Contract A Contract that is not a "Qualified Contract."
Owner The person entitled to exercise all rights and privileges provided in the Contract. The terms
"you" and "your" refer to the Owner.
Premium Year Refers to the 12 month period following the date we credit a particular premium to your Contract.
This measure of time is important in calculating the surrender charge applicable to the Contract.
Qualified Contract A Contract issued in connection with plans that qualify for special federal income tax treatment
under sections 401, 403, 408 or 408A of the Internal Revenue Code of 1986, as amended.
Subaccount The divisions of the Variable Account. The assets of each Subaccount are invested in a portfolio
of a designated Fund.
Valuation Day Each day the New York Stock Exchange is open for business.
Valuation Period The interval of time beginning at the close of business on one Valuation Day and ending at the
close of business on the next Valuation Day.
Variable Account Value The Variable Account Value is equal to the sum of all Subaccount Values of a Contract.
Written Notice A written request or notice in a form satisfactory to us that is signed by the Owner and received
at the Home Office.
</TABLE>
HIGHLIGHTS
The Contract
Who Should Invest. The Contract is designed for investors seeking long-term
tax-deferred accumulation of funds. The goal for this accumulation is generally
retirement, but may be for other long-term investment purposes. The tax-deferred
feature of the Contract is most attractive to investors in high federal and
state marginal income tax brackets. We offer the Contract as both a Qualified
Contract and a Non-Qualified Contract. (See "FEDERAL TAX STATUS," page 38.)
Tax favored arrangements, including IRAs and Roth IRAs, should carefully
consider the costs and benefits of the Contracts (including annuity income
benefits) before purchasing the Contract, since the tax arrangement itself
provides for tax-sheltered growth.
The Contract. The Contract is an individual flexible premium deferred
variable annuity. In order to purchase a Contract, you must complete an
application and submit it to us through a licensed Kansas City Life
representative, who is also a registered representative of Sunset Financial
Services, Inc. ("Sunset Financial"). You must pay the minimum initial premium.
The maximum Issue Age is 80. (See "Purchasing a Contract," page 22.)
Free-Look Period. You have the right to cancel your Contract and receive a
refund if you return the Contract within 10 days after you receive it. The
amount returned to you will vary depending on your state. (See "Free-Look
Period," page 22.)
Premiums. The minimum amount that we will accept as an initial premium is
$10,000. You may pay additional premiums at any time during the Annuitant's
lifetime and before the Maturity Date. The minimum premium allowed after the
initial premium is $50. (See "Purchasing a Contract," page 22.)
Premium Allocation. You direct the allocation of premium payments among the
Subaccounts of the Variable Account and/or the Fixed Account. In the Contract
application, you specify the percentage of a premium, in whole numbers, you want
allocated to each Subaccount and/or to the Fixed Account. We will invest the
assets of each Subaccount in a corresponding Portfolio of a designated Fund. The
Contract Value, except for amounts in the Fixed Account, will vary according to
the investment performance of the Subaccounts. We will credit interest to
amounts in the Fixed Account at a guaranteed minimum rate of 3% per year. We may
declare a higher current interest rate.
The sum of your allocations must equal 100%. We have the right to limit the
number of Subaccounts to which you allocate premiums (not applicable to Texas
Contracts). We will never limit the number to less than 15. You can change the
allocation percentages at any time by sending Written Notice. You can make
changes in your allocation by telephone if you have provided proper
authorization. (See "Telephone Authorizations," page 32.) The change will apply
to the premium payments received with or after receipt of your notice.
We will allocate the initial premium to the Federated Prime Money Fund II
Subaccount for a 15-day period in states that:
o require premium payments to be refunded under the free-look provision; or
o require the greater of premium payments or Contract Value to be refunded
under the free-look provision.
At the end of that period, we will allocate the amount in the Federated Prime
Money Fund II Subaccount to the Subaccounts and Fixed Account according to your
allocation instructions. (See "Allocation of Premiums," page 23.)
Transfers. After the free look period and before the Maturity Date, you may
transfer amounts among the Subaccounts and the Fixed Account. Certain
restrictions apply. The first six transfers during a Contract Year are free.
After the first six transfers, we will assess a $25 transfer processing fee.
(See "Transfer Privilege," page 25.)
Full and Partial Surrender. You may surrender all or part of the Cash
Surrender Value (subject to certain limitations) any time before the earlier of:
o the date that the Annuitant dies; or
o the Maturity Date.
Sub-account Bonus. There are two bonuses that will be credited to the
Variable Account Value. We credit the first bonus on each Monthly Anniversary
Date where the Contract Value is greater than or equal to $100,000 on that date.
The monthly amount of this bonus equals .0125% of the Variable Account Value,
which equals .15% on an annualized basis.
We credit a second bonus on all policies, regardless of size. After the
eighth Contract Year, we credit this bonus each Monthly Anniversary Date to the
Variable Account Value. The monthly amount of this bonus equals .01665% of the
Variable Account Value, which equals .20% on an annualized basis.
Both of the bonuses are guaranteed. We will not attempt to recapture the
bonus at any time, including upon surrender, death or election of an annuity
option. Each of the bonuses, if applicable, is paid on the Variable Account
Value on the Monthly Anniversary Date.
Death Benefit. If the Annuitant dies before the Maturity Date while the
Contract is in force, the Beneficiary will receive a death benefit. The death
benefit will be calculated depending upon which Guaranteed Death Benefit Option
is in effect on the Contract at the date of death. There is a base Guaranteed
Minimum Death Benefit Option, or at issue one of two enhanced options may be
chosen. There is a charge assessed each month if one of the enhanced options is
selected. The three Guaranteed Minimum Death Benefit provisions available are as
follows:
o Base Guaranteed Minimum Death Benefit;
o Annual Ratchet Guaranteed Minimum Death Benefit Option; and
o Enhanced Combination Guaranteed Minimum Death Benefit Option.
The issue requirements and the Monthly Guaranteed Minimum Death Benefit Expense
Charge varies for each Guaranteed Minimum Death Benefit Option. See "Death
Benefit Before Maturity Date" on page 26.
The minimum death benefit (Base Guaranteed Minimum Death Benefit) is equal
to the greater of:
o premiums paid, proportionately adjusted for any surrenders (including
applicable surrender charges) less any loan balance; and
o the Contract Value on the date we receive proof of Annuitant's death.
If you die before the Maturity Date, the Contract Value (or, if the Owner is
also the Annuitant, the death benefit) must generally be distributed to the
Beneficiary within five years after the date of the Owner's death. (See "Death
Benefit Before Maturity Date," page 28.)
The Guaranteed Minimum Death Benefit is paid to the Beneficiary at the death of
the Annuitant. If the Owner, who is not the same as the Annuitant, predeceases
the Annuitant, the Cash Surrender Value of the contract will be paid to the
Beneficiary.
Death Proceeds are taxable and generally are included in the income of the
recipient as follows:
o If received under a payment option, they are taxed in the same manner
as annuity payments.
o If distributed in a lump sum, they are taxed in the same manner as a
full surrender.
Charges and Deductions
The following charges and deductions apply to the Contract:
Surrender Charge We do not deduct a charge for sales expenses from premiums
at the time they are paid. However, we will apply a surrender charge to a
premium for surrenders or partial surrenders and, in certain cases, on
annuitization occurring during the first eight years following a premium
payment.
The surrender charge is calculated as a percentage of your premium payment being
surrendered or withdrawn during the applicable Premium Year. The amount of the
surrender charge decreases over time, measured from the date the premium payment
is applied. The surrender charge percentages are shown below.
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Premium Years 1 2 3 4 5 6 7 8 9+
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
CHARGE (%) 8.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 0
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Each premium payment has its own surrender charge period. When you make a
withdrawal, we assume that the oldest premium payment is being withdrawn first
so that the lowest surrender charge is deducted from the amount withdrawn. After
eight (8) complete Premium Years from the date you make a premium payment, no
surrender charge will be assessed if you withdraw or surrender that premium
payment. The total surrender charge at a given time will be the sum of surrender
charges applicable to each premium that has been paid.
Subject to certain restrictions, the first withdrawal up to 10% of the Contract
Value per Contract Year will not be subject to a surrender charge. (See
"Transfers from Fixed Account," page 33.)
Annual Administration Fee. We will deduct an annual administration fee of
$30 from the Contract Value for administrative expenses at the beginning of each
Contract Year. We will waive this fee for Contracts with Contract Values of
$50,000 or more. (See "Administrative Charges," page 34.)
Transfer Processing Fee. The first six transfers of amounts in the
Subaccounts and the Fixed Account each Contract Year are free. We assess a $25
transfer processing fee for each additional transfer during a Contract Year.
(See "Transfer Processing Fee," page 34.)
Asset-Based Administration Charge. We deduct a daily asset-based
administration charge for expenses we incur in administration of the Contract.
Prior to the Maturity Date, we deduct the charge from the assets of the Variable
Account at an annual rate of 0.15%. (See "Administrative Charges," page 34.)
Mortality and Expense Risk Charge. We deduct a daily mortality and expense risk
charge to compensate us for assuming certain mortality and expense risks. Prior
to the Maturity Date , we deduct this charge from the assets of the Variable
Account at an annual rate of 1.25%. (See "Mortality and Expense Risk Charge,"
page 34.
Monthly Guaranteed Minimum Death Benefit Expense Charge. If a Guaranteed
Minimum Death Benefit option other than the base provision is selected, there is
an additional charge. The amount of this charge varies depending on the
Guaranteed Minimum Death Benefit Option you have elected, as follows:
o Base Guaranteed Minimum Death Benefit: no additional charge.
o Annual Ratchet Guaranteed Minimum Death Benefit Option: A monthly
charge of .01665% of Variable Account Value is deducted from the
Variable Account Value on the Monthly Anniversary Date. This charge
equals .20% of Variable Account Value on an annualized basis.
o Enhanced Combination Guaranteed Minimum Death Benefit Option: A
monthly charge of .02912% of Variable Account Value is deducted from
the Variable Account Value on the Monthly Anniversary Date. This
charge equals .35% of Variable Account Value on an annualized basis.
(See "Mortality and Expense Risk Charge," page 34
Premium Taxes. If state or other premium taxes are applicable to a
Contract, we will deduct them either upon surrender or when we apply the
proceeds to a payment option. (See "Premium Taxes," page 35.)
Investment Advisory Fees and Other Expenses of the Funds. The funds deduct
investment advisory fees on a daily basis and incur other expenses. The value of
the net assets of each Subaccount already reflects the investment advisory fees
and other expenses incurred by the corresponding Fund in which the Subaccount
invests. This means that these charges are deducted before we calculate
Subaccount Values. Expenses of the Funds are not fixed or specified in the
Contract and actual expenses may vary. See the prospectuses for the Funds for
specific information about these fees. (See "Investment Advisory Fees and Other
Expenses of the Funds" page 35.)
Annuity Provisions
Maturity Date. On the Maturity Date we will apply the proceeds to the
payment option you choose. If you choose a Life Payment Option, the amount of
proceeds will be the full Contract Value. If you elect a payment option other
than a Life Payment Option or if you elect to receive a lump sum payment, we
will apply the Cash Surrender Value. (See "Payment Options," page 36.)
Payment Options. The payment options are:
o Interest Payments (Non-Life Payment Option)
o Installments of a Specified Amount (Non-Life Payment Option)
o Installments for a Specified Period (Non-Life Payment Option)
o Life Income (Life Payment Option)
o Joint and Survivor Income (Life Payment Option)
Payments under these options do not vary based on Variable Account performance.
(See "Payment Options," page 36.)
Federal Tax Status
Under existing tax law there generally should be no federal income tax on
increases in the Contract Value until a distribution under the Contract occurs.
A distribution includes an actual distribution of funds such as surrender or
annuity payment. However, a distribution also includes certain changes in the
Contract such as a pledge or assignment. Generally, a portion of any
distribution is taxable as ordinary income. In addition, a penalty tax may apply
to certain distributions made prior to the Owner's reaching age 59 1/2. Special
tax rules apply to Qualified Contracts. Governing federal tax statutes may be
amended, revoked, or replaced by new legislation. Changes in interpretation of
these statutes may also occur. We encourage you to consult your own tax adviser
before making a purchase of the Contract. (See "Federal Tax Status," page 38.)
TABLE OF EXPENSES
Contract Owner Transaction Expenses
Sales Charge Imposed on Premiums None
Surrender Charge Note: Subject to certain restrictions, up to 10% of the
Contract Value will not be subject to a surrender charge each Contract
Year. (See "Surrender Charge," page 33.)
Surrender Charge as a Percentage
of each Premium Withdrawn or
Annuitized under a Non-Life
Premium Year Payment Option
1 8%
2 8
3 7
4 6
5 5
6 4
7 3
8 2
9 and after 0
Transfer Processing Fee No fee for first six transfers in
Contract Year; $25 for each
additional transfer during a
Contract Year.
Annual Administration Fee $30 per Contract Year -- Waived if Contract Value is
equal to or greater than $50,000.
Variable Account Annual Expenses
(as a percentage of Variable Account assets)
Mortality and Expense Risk Charge 1.25%
Asset-Based Administration Charge 0.15%
Total Variable Account Annual Expenses 1.40%
Monthly Guaranteed Minimum Death Benefit Expense Charge
Base Guaranteed Minimum Death Benefit: 0.00%
Annual Ratchet Guaranteed Minimum Death Benefit Option: 0.20%
Enhanced Combination Guaranteed Minimum Death Benefit Option: 0.35%
<TABLE>
<CAPTION>
MFS MFS MFS
Emerging MFS Total MFS Global MFS
Growth Research Return Utilities Gov't Bond
Series Series Series Series Series Series
<S> <C> <C> <C> <C> <C> <C>
MFS Variable Insurance TrustSM Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75% 0.75% 0.75% 0.75% 0.75% 0.60%
Other Expenses 1/ 0.09% 0.11% 0.15% 0.16% 0.30% 0.46%
Total Annual Fund Expenses 1/ 0.84% 0.86% 0.90% 0.91% 1.05% 1.06%
Expense Reimbursement2/ _NA_ _NA_ _NA_ _NA_ (0.14%) (0.30%)
Net Annual Fund Expenses1/ 0.84% 0.86% 0.90% 0.91% 0.91% 0.76%
</TABLE>
<TABLE>
<CAPTION>
Am Cent Am Cent VP
VP Capital Income & Am Cent VP Am Cent
Appreciation Growth International VP Value
<S> <C> <C> <C> <C>
American Century Variable Portfolios Annual Expenses (as a
percentage of average net assets)
Management Fees (Investment Advisory Fees) 1.00% 0.70% 1.34% 1.00%
Other Expenses 3/ 0.00% 0.00% 0.00% 0.00%
Total Annual Fund Expenses3/ 1.00% 0.70% 1.34% 1.00%
</TABLE>
<TABLE>
<CAPTION>
Federated Federated Federated Federated
American High Income Prime International
Leaders Bond Money Small
Fund II Fund II Fund II Company
Fund II
<S> <C> <C> <C> <C>
Federated Insurance Series Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75% 0.60% 0.50% 1.25% 4/
Rule 12b-1 Fees 6/ NA NA NA 0.25%
Shareholder Services Fee 5/ 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.13% 0.19% 0.23% 1.00% 7/
Total Annual Fund Expenses 1.13% 1.04% 0.98% 2.75%
Waiver of Fund Expenses6/ (0.25%) (0.25%) (0.25%) (0.25%) 8/
Net Annual Fund Expenses6/ 0.88% 0.79% 0.73% 2.50%
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Dreyfus
Appreciation Small Cap
Portfolio Portfolio
<S> <C> <C>
Dreyfus Variable Investment Fund Annual Expenses (as a
percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75% 0.75%
Other Expenses 0.03% 0.03%
Total Annual Fund Expenses 0.78% 0.78%
</TABLE>
Dreyfus Stock
Index Fund
Dreyfus Stock Index Fund Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.25%
Other Expenses 9/ 0.01%
Net Annual Fund Expenses9/ 0.26%
The Dreyfus
Socially
Responsible
Growth Fund,
Inc.
The Dreyfus Socially Responsible Growth Fund, Inc.
Annual Expenses (as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Other Expenses 9/ 0.04%
Net Annual Fund Expenses 9/ 0.79%
<TABLE>
<CAPTION>
JP Morgan
U.S. JP Morgan
Disciplined Small Company
Equity Portfolio
Portfolio
<S> <C> <C>
J.P. Morgan Series Trust II Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.35% 0.60%
Other Expenses 0.52% 1.97%
Total Annual Fund Expenses 10/ 0.87% 2.57%
Expense Reimbursement10/ (0.02%) (1.42%)
Net Annual Fund Expenses10/ 0.85% 1.15%
</TABLE>
<TABLE>
<CAPTION>
Templeton
Templeton Franklin Franklin Developing
International Small Cap Real Estate Markets
Securities Fund (Class Fund (Class Securities
Fund (Class 2) 14/ 2) Fund(Class
2) 11/ 2) 15/
<S> <C> <C> <C> <C>
Franklin Templeton Variable Insurance Products Trust Annual
Expenses (as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.69% 0.55% 0.56% 13/ 1.25%
Rule 12b-1 Fees 12/ 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.19% 0.27% 0.02% 0.31%
Total Annual Fund Expenses 1.13% 1.07% 0.83% 1.81%
</TABLE>
Calamos
Convertible
Portfolio
Calamos Advisors Trust Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Other Expenses 9.11%
Total Annual Fund Expenses 9.86%
Expense Reimbursement (8.86)%
Net Annual Fund Expenses16/ 1.00%
<TABLE>
<CAPTION>
AIM V.I. AIM V.I. AIM V.I.
Dent Telecommunications Value
Demographic and Technology Fund
Trends Fund Fund
<S> <C> <C> <C>
A I M Variable Insurance Fund
Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.85% 17/ 1.00% 0.61%
Other Expenses 0.55% 18/ 0.27% 0.15%
Total Annual Fund Expenses 1.40% 1.27% 0.76%
</TABLE>
<TABLE>
<CAPTION>
Seligman Capital Seligman Communications
Portfolio and Information Portfolio
(Class 2) (Class 2)
<S> <C> <C>
Seligman Portfolios, Inc. Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.40% 0.75%
Rule 12b-1 Fees 19/ 0.25% 0.25%
Other Expenses 0.19% 0.11%
Total Annual Fund Expenses 0.84% 1.11%
Waiver of Fund Expenses 20/ NA NA
Net Annual Fund Expenses 20/ 0.84% 1.11%
</TABLE>
__________________________
1/ Each series has an expense offset arrangement which reduces the
series' custodian fee based upon the amount of cash maintained by the
series with its custodian and dividend disbursing agent. Each series
may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the series'
expenses. "Other Expenses" do not take into account these expense
reductions and are therefore higher than the actual expenses of the
series. Had these fee reductions been taken into account, "Net
Expenses" would be lower for certain series and would equal:
0.83% for Emerging Growth Series 0.90% for Utilities Series
0.85% for Research Series 0.90% for Global Governments Series
0.89% for Total Return Series 0.75% for Bond Series
2/ MFS has contractually agreed, subject to reimbursement, to bear
expenses for these series such that each such series' "Other Expenses"
(after taking into account the expense offset arrangement described
above), do not exceed the following percentages of the average daily
net assets of the series during the current fiscal year:
0.15% for Global Governments Series 0.15% for Bond Series
These contractual fee arrangements will continue until at least May 1,
2001, unless changed with the consent of the board of trustees which
oversees the series.
3/ The investment adviser to American Century Variable Portfolios pays
all the expenses of the Fund except brokerage, taxes, interest, fees
and expenses of the non-interested person directors (including counsel
fees) and extraordinary expenses. For the services provided to the
American Century VP Capital Appreciation Fund, the manager receives an
annual fee of 1.00% of the first $500 million of the average net
assets of the fund, 0.95% of the next $500 million and 0.90%
thereafter. For the services provided to the American Century VP
International Fund, the manager receives an annual fee of 1.50% of the
first $250 million of the average net assets of the fund, 1.20% of the
next $250 million and 1.10% thereafter. For the services provided to
the American Century VP Value Fund, the manager receives an annual fee
of 1.00% of the first $500 million of the average net assets of the
fund, 0.95% of the next $500 million and 0.90% thereafter.
4/ The adviser expects to voluntarily waive a portion of the management
fee. The adviser can terminate this waiver at any time. The maximum
management fee is 1.25%.
5/ The shareholder services provider expects to voluntarily waive a
portion of its fee during the fiscal year ending December 31, 2000.
The maximum shareholder services fee is 0.25%.
6/ The Fund has no present intention of paying or accruing the Rule 12b-1
Fee during the fiscal year ending December 31, 2000. The maximum Rule
12b-1 Fee is 0.25%.
7/ Since the Fund recently commenced operations, Other Expenses is based
on estimates for the current year.
8/ The waiver amount shown in the table reflects only the waiver of the
Rule 12b-1 Fees. After deducting the amount of voluntary waivers, the
Net Annual Fund Expenses would be 1.50%.
9/ The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Stock
Index Fund reimburse their investment adviser, The Dreyfus
Corporation, for certain expenses relating to servicing and/or
maintaining shareholder accounts. These expenses are reflected as part
of "Other Expenses." The Dreyfus Corporation has agreed that these
expenses will not exceed an annual rate of 0.25% of 1.00% of each
Fund's average daily net assets.
10/ The trust, on behalf of each portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan Guaranty"), under which Morgan Guaranty
is responsible for certain aspects of the administration and operation
of each portfolio. Under the Service Agreement, each portfolio has
agreed to pay Morgan Guaranty a fee based on the percentages described
below. If total expenses of each portfolio, excluding the advisory
fees, exceed the expense limits of: 0.50% of the average daily net
assets of J.P. Morgan U.S. Disciplined Equity Portfolio and 0.55% of
the average daily net assets of J.P. Morgan Small Company Portfolio,
Morgan Guaranty will reimburse each portfolio for the excess expense
amount and receive no fee. Should such expenses be less than the
expense limits, Morgan Guaranty's fees would be limited to the
difference between such expenses and the fees calculated under the
Services Agreement. For the fiscal year ended December 31, 1999,
Morgan Guaranty has agreed to reimburse the portfolios for expenses
under this agreement as follows: $7,543 for the U.S. Disciplined
Equity and $129,795 for the Small Company.
11/On2/8/00, shareholders approved a merger and reorganization that
combined the fund with theTempleton International Equity Fund,
effective 5/1/00. The shareholders of that fund had approved new
management fees, which apply to the combined fund effective 5/1/00.
The table shows restated total expenses based on the new fees and the
assets of the fund as of 12/31/99, and not the assets of the combined
fund. However, if the table reflected both the new fees and the
combined assets, the fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.65%, Distribution and Service Fees 0.25%, Other
Expenses 0.20%, and Total Fund Operating Expenses 1.10%.
12/The Fund's Class 2 distribution plan or Rule 12b-1 Plan is described in
the Fund's prospectus.
13/ The Fund administration fee is paid indirectly through the management
fee.
14/ On 2/8/00, a merger and reorganization was approved that combined the
assets of the Fund with a similar fund of the Templeton Variable
Products Series Fund, effective 5/1/00. On 2/8/00, fund shareholders
approved new management fees, which apply to the combined fund
effective 5/1/00. The table shows restated Total Annual Fund Expenses
based on the new fees and assets of the funds as of 12/31/99, and not
the assets of the combined fund. However, if the table reflected both
the new fees and the combined assets, the Fund's expenses after 5/1/00
would be: Management Fees 0.55%, Rule 12b-1 Fees 0.25%, Other Expenses
0.27%, and Total Annual Fund Expenses 1.07%.
15/ On 2/8/00, shareholders approved a merger and reorganization that
combined the Fund with the Templeton Developing Markets Equity Fund,
effective 5/1/00. The shareholders of that fund had approved new
management fees, which apply to the combined fund effective 5/1/00.
The table shows restated Total Annual Fund Expenses based on the new
fees and the assets of the fund as of 12/31/99, and not the assets of
the combined fund. However, if the table reflected both the new fees
and the combined assets, the Fund's expenses after 5/1/00 would be
estimated as: Management Fees 1.25%, Rule 12b-1 Fees 0.25%, Other
Expenses 0.29%, and Total Annual Fund Expenses 1.79%.
16/Pursuant to a written agreement the investment manager has undertaken to
waive fees and/or reimburse portfolio expenses so that the Total
Annual Fund Expenses are limited to 1.00% of the portfolio's average
net assets. The fee waiver and/or reimbursement is binding on the
investment manager through May 31, 2001.
17/ The advisor is to receive a fee calculated at the annual rate of 0.85%
of the first $2 billion of average daily net assets and 0.80% of the
average daily net assets over $2 billion.
18/ Other Expenses is calculated based on estimates for the current year.
19/ Under a Rule 12b-1 Plan adopted by the Fund with respect to each
Portfolio, Class 2 shares pay annual 12b-1 Fees of up to 0.25% of
average net assets. Each Portfolio pays this fee to Seligman Advisors,
Inc., the principal underwriter of the Portfolio's shares. Seligman
Advisors uses this fee to make payments to participating insurance
companies or their affiliates for services that the participating
insurance companies provide to Contract owners of Class 2 shares, and
for distribution related expenses. Because these 12b-1 Fees are paid
out of the Portfolio's assets on an ongoing basis, over time they will
increase the cost of a Contract owner's investment and may cost you
more than other types of sales charges.
20/ The manager of Seligman Capital Portfolio and Seligman Communications
and Information Portfolio has voluntarily agreed to reimburse "Other
Expenses" of the Portfolio to the extent they exceed 0.20% per annum
of average daily net assets. No expenses were reimbursed in 1999. This
agreement is not binding on the manager.
Examples
The following information regarding expenses assumes that the entire Contract
Value is in the Variable Account. You would pay the following expenses on a
$1,000 investment, assuming a 5% annual return on assets and the selection of
the Enhanced Combination Guaranteed Minimum Death Benefit:
1. If the Contract is surrendered or is paid out under a Non-Life Payment
Option at the end of the applicable time period:
Year 1 Year 3 Year 5 Year 10
MFS
Research $98.82 $145.29 $185.29 $297.21
Emerging Growth $98.62 $144.70 $184.30 $295.27
Total Return $99.22 $146.48 $187.26 $301.06
Bond $97.83 $142.31 $180.34 $287.49
Global Government $99.32 $146.78 $187.75 $302.02
Utilities $99.32 $146.78 $187.75 $302.02
AMERICAN CENTURY
VP International $103.60 $159.48 $208.67 $342.39
VP Capital Appreciation $100.22 $149.45 $192.17 $310.63
VP Value $100.22 $149.45 $192.17 $310.63
VP Income And Growth $97.23 $140.52 $177.36 $281.61
FEDERATED
American Leaders Fund II $99.02 $145.89 $186.27 $299.14
High Income Bond Fund II $98.12 $143.21 $181.83 $290.42
Prime Money Prime Fund II $97.53 $141.42 $178.86 $284.55
International. Small Company $115.05 $192.92 NA NA
DREYFUS
Appreciation $98.02 $142.91 $181.33 $289.44
Small Cap $98.02 $142.91 $181.33 $289.44
Stock Index $92.82 $127.26 $155.23 $237.28
Socially Responsible Growth $98.12 $143.21 $181.83 $290.42
TEMPLETON
International Securities $101.51 $153.30 $198.51 $322.91
Developing Markets Securities $108.26 $173.17 $231.00 $384.39
CALAMOS
Convertible $100.22 $149.45 $192.17 $310.63
J.P. MORGAN
U.S. Disciplined Equity $98.72 $145.00 $184.80 $296.24
Small Company $101.71 $153.89 $199.48 $324.79
SELIGMAN
Comm. And Information Portfolio $101.31 $152.71 $197.54 $321.04
Capital Portfolio $98.62 $144.70 $184.30 $295.27
AIM
Dent Demographics $104.20 $161.24 $211.55 $347.87
Telecommunications and Tech. $102.91 $157.43 $205.29 $335.95
Value $97.83 $142.31 $180.34 $287.49
FRANKLIN
Small Cap $100.92 $151.53 $195.59 $317.27
Real Estate $98.52 $144.40 $183.81 $294.30
2. If the Contract is not surrendered or is paid out under a Life Payment
Option at the end of the applicable time period:
Year 1 Year 3 Year 5 Year 10
MFS
Research $26.82 $82.29 $140.29 $297.21
Emerging Growth $26.62 $81.70 $139.30 $295.27
Total Return $27.22 $83.48 $142.26 $301.06
Bond $25.83 $79.31 $135.34 $287.49
Global Government $27.32 $83.78 $142.75 $302.02
Utilities $27.32 $83.78 $142.75 $302.02
AMERICAN CENTURY
VP International $31.60 $96.48 $163.67 $342.39
VP Capital Appreciation $28.22 $86.45 $147.17 $310.63
VP Value $28.22 $86.45 $147.17 $310.63
VP Income And Growth $25.23 $77.52 $132.36 $281.61
FEDERATED
American Leaders Fund II $27.02 $82.89 $141.27 $299.14
High Income Bond Fund II $26.12 $80.21 $136.83 $290.42
Prime Money Prime Fund II $25.53 $78.42 $133.86 $284.55
International. Small Company $43.05 $129.92 NA NA
DREYFUS
Appreciation $26.02 $79.91 $136.33 $289.44
Small Cap $26.02 $79.91 $136.33 $289.44
Stock Index $20.82 $64.26 $110.23 $237.28
Socially Responsible Growth $26.12 $80.21 $136.83 $290.42
TEMPLETON
International Securities $29.51 $90.30 $153.51 $322.91
Developing Markets Securities $36.26 $110.17 $186.00 $384.39
CALAMOS
Convertible $28.22 $86.45 $147.17 $310.63
J.P. MORGAN
U.S. Disciplined Equity $26.72 $82.00 $139.80 $296.24
Small Company $29.71 $90.89 $154.48 $324.79
SELIGMAN
Comm. And Information Portfolio $29.31 $89.71 $152.54 $321.04
Capital Portfolio $26.62 $81.70 $139.30 $295.27
AIM
Dent Demographics $32.20 $98.24 $166.55 $347.87
Telecommunications and Tech. $30.91 $94.43 $160.29 $335.95
Value $25.83 $79.31 $135.34 $287.49
FRANKLIN
Small Cap $28.92 $88.53 $150.59 $317.27
Real Estate $26.52 $81.40 $138.81 $294.30
*In these Examples "N/A" indicates that SEC rules require that the Federated
International Small Company complete the Examples for only the one and three
year periods.
The examples above assume that we assess no transfer charges or premium taxes.
The annual administration fee is $30.00 for Contracts with a Contract Value less
than $50,000 at the beginning of the Contract Year. There is no administration
fee for Contracts with a Contract Value greater than or equal to $50,000 at the
beginning of the Contract Year. It is assumed that the average policy size will
equal $53,866, resulting in an average administration fee equal to $24.23. This
translates the annual administrative fee into an assumed .045% charge on a
$1,000 investment for the purposes of the examples. The average policy size
assumption is based on the $10,000 minimum premium required for this contract
and actual sales of Kansas City Life's other variable annuity products.
You should not consider the assumed expenses in the examples to represent past
or future expenses. Actual expenses may be greater or less than those shown. The
assumed 5% annual rate of return is hypothetical and you should not view it as a
representation of past or future annual returns. Actual returns may be greater
or less than the assumed amount.
The various Funds themselves provided the expense information regarding the
Funds. The Funds and their investment advisers are not affiliated with us. While
we have no reason to doubt the accuracy of these figures provided by these
non-affiliated Funds, we have not independently verified the figures.
CONDENSED FINANCIAL INFORMATION
Condensed financial information containing the Accumulation Unit Value listing
appears at the end of this prospectus.
KANSAS CITY LIFE, THE VARIABLE ACCOUNT AND THE FUNDS
Kansas City Life Insurance Company
Kansas City Life Insurance Company is a stock life insurance company organized
under the laws of the State of Missouri on May 1, 1895. Kansas City Life is
currently licensed to transact life insurance business in 48 states and the
District of Columbia.
We are regulated by the Department of Insurance of the State of Missouri as well
as by the insurance departments of all other states and jurisdictions in which
we do business. We submit annual statements on our operations and finances to
insurance officials in such states and jurisdictions. We also file the forms for
the Contract described in this Prospectus with insurance officials in each state
and jurisdiction in which Contracts are sold.
We are a member of the Insurance Marketplace Standards Association ("IMSA") and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
Kansas City Life Variable Annuity Separate Account
We established the Kansas City Life Variable Annuity Separate Account as a
separate investment account under Missouri law on January 23, 1995. This
Variable Account supports the Contracts and may be used to support other
variable annuity insurance contracts and for other purposes as permitted by law.
The Variable Account is registered with the Securities and Exchange Commission
("SEC") as a unit investment trust under the Investment Company Act of 1940 (the
"1940 Act") and is a "separate account" within the meaning of the federal
securities laws. We have established other separate investment accounts that may
also be registered with the SEC.
The Variable Account is divided into Subaccounts. The Subaccounts available
under the Contract invest in shares of corresponding fund portfolios. The
Variable Account may include other Subaccounts not available under the Contracts
and not otherwise discussed in this Prospectus. We own the assets in the
Variable Account.
We apply income, gains and losses of a Subaccount (realized or unrealized)
without regard to any other income, gains or losses of Kansas City Life or any
other separate account. We cannot use Variable Account assets (reserves and
other contract liabilities) to cover liabilities arising out of any other
business we conduct. We are obligated to pay all benefits provided under the
Contracts.
The Funds
Each of the Funds is registered with the SEC as a diversified open-end
management investment company under the 1940 Act. However, the SEC does not
supervise their management, investment practices or policies. Each Fund is a
series fund-type mutual fund made up of the Portfolios and other series that are
not available under the Contracts. The investment objectives of each of the
Portfolios is described below.
Certain Subaccounts invest in Portfolios that have similar investment objectives
and/or policies. Therefore, before choosing Subaccounts, carefully read the
individual prospectuses for the Funds along with this Prospectus.
The investment objectives and policies of certain Funds are similar to the
investment objectives and policies of other funds that may be managed by the
same investment adviser or manager. The investment results of the Portfolios,
however, may be higher or lower than the results of such other funds. There can
be no assurance that the investment results of any of the Funds will be
comparable to the investment results of any other funds, even if the other fund
has the same investment adviser or manager.
Not all Funds may be available in all states.
MFS Variable Insurance TrustSM
MFS Emerging Growth Series (Manager: MFS Investment Management). The
Emerging Growth Series seeks to provide long-term growth of capital. Dividend
and interest income from portfolio securities, if any, is incidental to the
Series' investment objective of long-term growth of capital. The Series' policy
is to invest primarily (i.e., at least 65% of its assets under normal
circumstances) in common stocks of companies that MFS believes are early in
their life cycle but which have the potential to become major enterprises
(emerging growth companies).
MFS Research Series (Manager: MFS Investment Management). The Research
Series seeks to provide long-term growth of capital and future income. The
Series' assets are allocated to selected economic sectors and then to industry
groups within those sectors.
MFS Total Return Series (Manager: MFS Investment Management). The Total
Return Series seeks to provide above-average income (compared to a portfolio
entirely invested in equity securities) consistent with the prudent employment
of capital, and secondarily to provide a reasonable opportunity for growth of
capital and income.
MFS Utilities Series (Manager: MFS Investment Management). The Utilities
Series seeks capital growth and current income (income above that available from
a portfolio invested entirely in equity securities). The Series will seek to
achieve its objective by investing, under normal circumstances, at least 65% of
its assets in equity and debt securities of both domestic and foreign (including
emerging market) companies in the utilities industry.
MFS Global Governments Series (Manager: MFS Investment Management). The
Global Governments Series seeks income and capital appreciation. The Series
invests, under normal market conditions, at least 65% of its total assets in
U.S. government securities, foreign government securities, corporate bonds,
mortgage-backed securities, asset-backed securities, and derivative securities.
MFS Bond Series (Manager: MFS Investment Management ). The Bond Series
seeks primarily to provide as high a level of current income as is believed
consistent with prudent investment risk and secondarily to protect Shareholders'
capital. Up to 20% of the Series' total assets may be invested in lower-rated or
non-rated debt securities commonly known as "junk bonds."
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation Portfolio (Manager: American
Century Investment Management, Inc.) . The investment objective of American
Century VP Capital Appreciation is capital growth. The Portfolio will seek to
achieve its investment objective by investing primarily in common stocks that
are considered by the investment adviser to have better-than-average prospects
for appreciation.
American Century VP Income & Growth (Manager: American Century Investment
Management, Inc.) . American Century VP Income & Growth seeks dividend growth,
current income and capital appreciation. The fund will seek to achieve its
investment objective by investing in common stocks.
American Century VP International Portfolio (Manager: American Century
Investment Management, Inc.). The investment objective of American Century VP
International Portfolio is capital growth. The Portfolio will seek to achieve
its investment objective by investing primarily in an internationally
diversified portfolio of common stocks that are considered by management to have
prospects for appreciation. International investment involves special risk
considerations. These include economic and political conditions, expected
inflation rates and currency swings.
American Century VP Value (Manager: American Century Investment Management,
Inc.). American Century VP Value seeks long-term capital growth. Income is a
secondary objective. The fund will seek to achieve its investment objective by
investing in securities that management believes to be undervalued at the time
of purchase.
Federated Insurance Series
Federated American Leaders Fund II (Manager: Federated Investment
Management Company).The primary investment objective of the Federated American
Leaders Fund II is to achieve long-term growth of capital. The Fund's secondary
objective is to provide income. The Fund pursues its investment objectives by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue-chip" companies, which are generally top-quality,
established growth companies.
Federated High Income Bond Fund II (Manager: Federated Investment
Management Company). The investment objective of the Federated High Income Bond
Fund II is to seek high current income. The Fund endeavors to achieve its
objective by investing primarily in lower-rated corporate debt obligations
commonly referred to as "junk bonds."
Federated International Small Company Fund II (Manager: Federated Global
Investment Management Corp). The investment objective is to provide long-term
growth of capital. The Fund pursues its investment objective by investing at
least 65% of its assets in equity securities of foreign companies that have a
market capitalization at the time of purchase of $1.5 billion or less.
Federated Prime Money Fund II (Manager: Federated Investment Management
Company). The investment objective of the Federated Prime Money Fund II is to
provide current income consistent with stability of principal and liquidity. The
Fund pursues its investment objective by investing exclusively in a portfolio of
money market instruments maturing in 397 days or less.
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio (Manager: The Dreyfus Corporation;
Sub-Investment Advisor: Fayez Sarofim & Co.). The portfolio seeks long-term
capital growth consistent with the preservation of capital; current income is a
secondary goal. To pursue these goals the portfolio invests in common stocks
focusing on "blue chip" companies with total market values of more than $5
billion at the time of purchase.
Small Cap Portfolio (Manager: The Dreyfus Corporation). The portfolio seeks
to maximize capital appreciation. To pursue this goal, the portfolio generally
invests at least 65% of its assets in the common stock of U.S. and foreign
companies. The portfolio focuses on small-cap companies with total market values
of less than $1.5 billion.
Dreyfus Stock Index Fund
(Manager: The Dreyfus Corporation; Sub-Investment Advisor: Mellon Equity
Associates)
The fund seeks to match the total return of the Standard & Poor's 500 Composite
Stock Price Index. To pursue this goal, the fund generally invests in all 500
stocks in the S&P 500 in proportion to their weighting in the index. The S&P
500 is an unmanaged index of 500 common stocks chosen to reflect the industries
of the U.S. economy and is often considered a proxy for the stock market in
general. Each stock is weighted by its market capitalization, which means larger
companies have greater representation in the index than smaller ones. The fund
may also use stock index futures as a substitute for the sale or purchase of
securities. The fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of investing in the fund.
The Dreyfus Socially Responsible Growth Fund, Inc.
(Manager: The Dreyfus Corporation; Sub-Investment Adviser: NCM Capital
Management Group, Inc.)
The fund seeks to provide capital growth, with current income as a secondary
goal. To pursue these goals, the fund invests primarily in the common stock of
companies that, in the opinion of the fund's management, meet traditional
investment standards and conduct their business in a manner that contributes to
the enhancement of the quality of life in America.
J.P. Morgan Series Trust II
J.P. Morgan U.S. Disciplined Equity Portfolio (Manager: J.P. Morgan
Investment Management Inc.). J.P. Morgan U.S. Disciplined Equity Portfolio seeks
to provide a high total return from a portfolio comprised of selected equity
securities. Total return will consist of realized and unrealized capital gains
and losses plus income less expenses. The Portfolio invests primarily in the
common stocks of U.S. corporations typically represented by the Standard &
Poor's 500 Stock Index with market capitalizations above $1.5 billion.
J.P. Morgan Small Company Portfolio (Manager: J.P. Morgan Investment
Management Inc.). The investment objective of J.P. Morgan Small Company
Portfolio is to provide a high total return from a portfolio of equity
securities of small companies. Total return will consist of realized and
unrealized capital gains and losses plus income less expenses. The Portfolio
invests at least 65% of the value of its total assets in the common stock of
small U.S. companies primarily with market capitalizations greater than $110
million and less than $1.5 billion.
Franklin Templeton Variable Insurance Products Trust
Templeton International Securities Fund (Class 2) (Manager: Templeton
Investment Counsel, Inc)). The investment objective of Templeton International
Securities Fund is long-term capital growth. The Fund invests in equity
securities of companies located outside the United States, including those in
emerging markets.
Franklin Small Cap Fund (Class 2) (Manager: Franklin Advisers, Inc.). The
Fund's investment goal is long-term capital growth. Under normal market
conditions, the Fund will invest at least 65% of its total assets in the equity
securities of U.S. small capitalization (small cap) companies. For this Fund,
small cap companies are those companies with market cap values not exceeding (i)
$1.5 billion; or (ii) the highest market cap value in the Russell 2000 Index;
whichever is greater at the time of purchase. The Russell 2000 Index consists of
2,000 small companies that have publicly traded securities.
Franklin Real Estate Fund (Class 2) (Manager: Franklin Advisers, Inc). The
Fund's principal investment goal is capital appreciation. Its secondary goal is
to earn current income. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities of companies operating in the real
estate industry.
Templeton Developing Markets Securities Fund (Class 2) (Manager: Templeton
Asset Management Ltd.) The Fund's investment goal is long-term capital
appreciation. Under normal market conditions, the Fund will invest at least 65%
of its total assets in emerging market equity securities.
Calamos Advisors Trust
Calamos Convertible Portfolio (Manager: Calamos Asset Management, Inc.).
Calamos Convertible Portfolio seeks current income as its primary objective with
capital appreciation as its secondary objective. The Portfolio invests primarily
in a diversified portfolio of convertible securities. These convertible
securities may be either debt securities (bonds) or preferred stock that are
convertible into common stock, and may be issued by both U.S. and foreign
companies.
AIM Variable Insurance Funds
AIM V.I. Dent Demographic Trends Fund (Manager: A I M Advisors, Inc.). The
investment objective is long-term growth of capital. The Fund seeks to meet its
objective by investing in securities of companies that are likely to benefit
from changing demographic, economic and lifestyle trends.
AIM V.I. Telecommunications and Technology Fund (Manager: A I M Advisors,
Inc.). The investment objective is long-term growth of capital. The Fund seeks
to meet its objective by investing primarily in equity securities of companies
throughout the world engaged in the development, manufacture or sale of
telecommunications and technology services or equipment.
AIM V.I. Value Fund (Manager: A I M Advisors, Inc.). The investment
objective is to achieve long-term growth of capital. Income is a secondary
objective. The Fund seeks to meet its objectives by investing primarily in
equity securities judged by the Fund's investment advisor to be undervalued
relative to the investment advisor's appraisal of the current or projected
earnings of the companies issuing the securities or relative to the equity
market generally.
Seligman Portfolios, Inc.
Seligman Capital Portfolio (Class 2)(Manager: J. & W. Seligman & Co.
Incorporated). The objective is capital appreciation. The Portfolio invests
primarily in the common stock of medium-sized U.S. companies.
Seligman Communications and Information Portfolio (Class 2) (Manager: J. &
W. Seligman & Co. Incorporated). The Portfolio's objective is capital gain. The
Portfolio seeks to achieve this objective by investing at least 80% of its net
assets, exclusive of government securities, short-term notes, and cash and cash
equivalents, in securities of companies operating in the communications,
information and related industries. The Portfolio generally invests at least 65%
of its total assets in securities of companies engaged in these industries.
There is no assurance that the Funds will achieve their stated objectives and
policies.
See the current prospectus for each Fund that accompanies this Prospectus as
well as the current Statement of Additional Information for each Fund. These
important documents contain more detailed information regarding all aspects of
the Funds. Please read the prospectuses for the Funds carefully before making
any decision concerning the allocation of premium payments or transfers among
the Subaccounts.
We (or our affiliates) may receive significant compensation from a Fund's 12b-1
fees or from a Fund's investment adviser (or its affiliates) in connection with
administration, distribution, or other services provided with respect to the
Funds and their availability through the Contracts. The amount of this
compensation is generally based upon a percentage of the assets of the Fund
attributable to the Contracts and other contracts we issue. These percentages
differ, and some Funds or their advisers (or affiliates) may pay us (or our
affiliates) more than others. Currently, these percentages range from 0% to
0.25%.
We cannot guarantee that each Fund or portfolio will always be available for the
Contracts, but in the event that a Fund or portfolio is not available, we will
take reasonable steps to secure the availability of a comparable fund. Shares of
each Fund are purchased and redeemed at net asset value, without a sales charge.
Resolving Material Conflicts
The Funds presently serve as the investment medium for the Contracts. In
addition, the Funds are available to registered separate accounts of other
insurance companies offering variable annuity and variable life insurance
contracts.
We don't currently foresee any disadvantages to you resulting from the Funds
selling shares to fund products other than the Contracts. However, there is a
possibility that a material conflict of interest may arise between Contract
Owners and the owners of variable contracts issued by other companies whose
values are allocated to one of the Funds. Shares of some of the Funds may also
be sold to certain qualified pension and retirement plans qualifying under
Section 401 of the Code. As a result, there is a possibility that a material
conflict may arise between the interests of Owners or owners of other contracts
(including contracts issued by other companies), and such retirement plans or
participants in such retirement plans. In the event of a material conflict, we
will take any necessary steps, including removing the Variable Account from that
Fund, to resolve the matter. The Board of Directors of each Fund will monitor
events in order to identify any material conflicts that may arise and determine
what action, if any, should be taken in response to those events or conflicts.
See the accompanying prospectuses of the Funds for more information.
Addition, Deletion or Substitution of Investments
Subject to applicable law, we may make additions to, deletions from, or
substitutions for the shares that are held in the Variable Account or that the
Variable Account may purchase. If the shares of a portfolio are no longer
available for investment or for any other reason in our sole discretion, we
decide that further investment in any portfolio should become inappropriate in
view of the purposes of the Variable Account, we may redeem the shares, if any,
of that portfolio and substitute shares of another registered open-end
management investment company. The substituted fund may have different fees and
expenses. We will not substitute any shares attributable to a Contract's
interest in a Subaccount of the Variable Account without notice and prior
approval of the SEC and state insurance authorities, to the extent required by
applicable law.
Subject to applicable law and any required SEC approval, we may establish new
Subaccounts or eliminate one or more Subaccounts if marketing needs, tax
considerations or investment conditions warrants or for any reason in our sole
discretion. We will determine on what basis we might make any new Subaccounts
available to existing Contract Owners.
If we make any of these substitutions or changes we may, by appropriate
endorsement, change the Contract to reflect the substitution or change. If we
decide it is in the best interests of Contract Owners (subject to any approvals
that may be required under applicable law), we may take the following actions
with regard to the Variable Account:
o operate the Variable Account as a management investment company under
the 1940 Act;
o de-register it under that Act if registration is no longer required;
o combine it with other Kansas City Life separate accounts; or
o make any changes required by the 1940 Act.
Voting Rights
We are the legal owner of shares held by the Subaccounts and we have the right
to vote on all matters submitted to shareholders of the Funds. As required by
law, we will vote shares held in the Subaccounts in accordance with instructions
received from Owners with Contract Value in the Subaccounts. We may be permitted
to vote shares of the Funds in our own right if the applicable federal
securities laws, regulations or interpretations of those laws or regulations
change.
To obtain voting instructions from you, before a meeting you will be sent voting
instruction material, a voting instruction form and any other related material.
Your votes will be calculated separately for each Subaccount of the Variable
Account, and may include fractional shares. We will determine the number of
votes attributable to a Subaccount by applying your percentage interest, if any,
in a particular Subaccount to the total number of votes attributable to that
Subaccount. The number of votes for which you may give instructions will be
determined as of the date established by the Fund for determining shareholders
eligible to vote. We will vote shares held by a Subaccount for which we have no
instructions and any shares held in our General Account in the same proportion
as those shares for which we do receive voting instructions.
If required by state insurance officials, we may disregard voting instructions
when it would require us to vote shares in a manner that would:
o cause a change in sub-classification or investment objectives of one
or more of the Portfolios;
o approve or disapprove an investment advisory agreement; or
o require changes in the investment advisory contract or investment
adviser of one or more of the Portfolios, if we reasonably disapprove
of such changes in accordance with applicable federal regulations.
If we ever disregard voting instructions, we will advise you of that action and
of the reasons for it in the next semiannual report. We may change how we
calculate the weight given to pass-through voting instructions when such a
change is necessary to comply with current federal regulations or the current
interpretation of them.
DESCRIPTION OF THE CONTRACT
The Contract is a variable annuity that provides accumulation of Variable
Account Value based on the performance of Subaccounts within the Kansas City
Life Variable Annuity Separate Account. You may also allocate a portion of your
premiums to our Fixed Account. We provide options such as dollar cost averaging,
portfolio rebalancing and the Systematic Partial Surrender Plan. The Contract
offers only fixed annuity payment options.
Purchasing a Contract
The maximum Issue Age for which we issue a Contract is 80. However, for
Qualified Contracts with an Issue Age of 70 1/2 or greater, tax laws may require
that distributions begin immediately. We may issue Contracts above the maximum
Issue Age under certain circumstances. We may issue Contracts in connection with
retirement plans that may or may not qualify for special federal tax treatment
under the Internal Revenue Code.
The Annual Ratchet and Enhanced Combination Guaranteed Minimum Death Benefit
Options are only available at issue of the Contract. The Annual Ratchet option
is available for Annuitants with Issue Ages of 75 and below and the Enhanced
Combination option is only available for Annuitants with Issue Ages of 70 and
below. These Guaranteed Minimum Death Benefit options are offered only in the
states where we have received regulatory approval.
The minimum initial premium that we accept is a single premium of $10,000. You
may pay additional premium payments at any time while the Annuitant is alive and
before the Maturity Date. These payments must be at least $50. We may limit the
number and amount of additional premium payments (where permitted).
Free-Look Period
You may cancel your Contract for a refund during your "free-look" period. The
free look period applies for the 10 days after you receive the Contract. When we
receive the returned Contract at our Home Office, we will cancel the Contract.
The amount that we will refund will vary according to state requirements. Most
states allow us to refund the Contract Value. In those states, we will return an
amount equal to the Contract Value. We will determine the amount of the Contract
Value as of the earlier of:
o the date the returned Contract is received by us at our Home Office;
or
o the date the returned Contract is received by the Kansas City Life
representative who sold you the Contract.
A few states require a return of the greater of premium payments or Contract
Value. In these states, we will refund the greater of:
(a) the premiums paid under the Contract; and
(b) the Contract Value as of the earlier of:
o the date we receive the returned Contract at our Home Office; or
o the date the Kansas City Life representative who sold the
Contract receives the returned Contract.
Some states permit only the return of premiums even if this amount is less than
what we would have returned otherwise.
In all states we will also refund the $30 annual administration fee, if it was
deducted prior to the return of the Contract.
Allocation of Premiums
At the time of application, you select how we will allocate premiums among the
Subaccounts and the Fixed Account. You can change the allocation percentages at
any time by sending Written Notice to us. You may also change your allocation by
telephone if you have provided proper authorization. (See "Telephone
Authorizations," page 32.)
Our procedures for allocation of premiums during the free-look period vary by
state, based on the amount that each state requires to be refunded if the
Contract is returned within the free-look period:
o for Contracts sold to residents of states that allow refund of
Contract Value we will immediately allocate premiums according to the
allocation you requested; and
o for contracts sold to residents of states that require either the
refund of premiums paid or the refund of the greater of Contract Value
or premiums paid, we will allocate premiums received during a 15-day
period following the Contract Date to the Federated Prime Money Fund
II Subaccount for that 15-day period. At the end of this 15-day
period, we will allocate the amount in the Federated Prime Money Fund
II Subaccount according to your allocation instructions.
We will allocate the initial premium within two business days of when we receive
the premium at our Home Office. In order to allocate the premium in this time
frame, you must properly complete the application and it must include all the
information necessary to process it, including payment of the initial premium.
If the application is not properly completed, we will retain the premium for up
to five business days while we attempt to complete the application. If the
application is not complete at the end of the 5-day period, we will inform you
of the reason for the delay. We will also return the initial premium
immediately, unless you specifically consent to our keeping the premium until
the application is complete. Once the application is complete, we will allocate
the initial premium within two business days.
We will allocate subsequent premiums at the end of the Valuation Period in which
we receive the premium payment.
The values of the Subaccounts will vary with their investment experience, so
that you bear the entire investment risk with respect to the Variable Account
Value. You should periodically review your premium allocation schedule in light
of market conditions and your overall financial objectives.
Determination of Contract Value
The Contract Value is the sum of the Variable Account Value and the Fixed
Account Value.
Variable Account Value
The Variable Account Value reflects the following:
o the investment experience of the selected Subaccounts;
o premiums paid;
o surrenders;
o transfers;
o charges assessed in connection with the Contract;
o Contract loan balance; and
o Bonuses paid on the Monthly Anniversary Date.
There are two bonuses that will be credited to the Variable Account Value.
The first bonus is credited to policies on each Monthly Anniversary Date where
the Contract Value is greater than or equal to $100,000 on that date. The
monthly amount of this bonus equals .0125% of Variable Account Value, which
equals .15% on an annualized basis.
The second bonus is credited to all policies, regardless of size. After the
eighth Contract Year, this bonus will be credited each Monthly Anniversary Date
to the Variable Account Value. The amount of this bonus equals .01665% of
Variable Account Value, which equals .20% on an annualized basis.
Both of the bonuses are guaranteed. We will not attempt to recapture the
bonus at any time, including upon surrender, death or election of an annuity
option. Each of the bonuses are paid on the Variable Account Value on the
Monthly Anniversary Date.
There is no guaranteed minimum Variable Account Value. Since a Contract's
Variable Account Value on any future date depends upon a number of factors, it
cannot be predetermined.
Calculation of Variable Account Value. We calculate the Variable Account
Value on each Valuation Date. Its value will be the sum of the values
attributable to the Contract in each of the Subaccounts. We will determine the
amount for each Subaccount by multiplying the Subaccount's unit value on the
Valuation Date by the number of Subaccount accumulation units allocated to the
Contract. The value of a Subaccount may increase, decrease, or remain the same.
Determination of Number of Accumulation Units. We will convert any amounts
allocated to a Subaccount into accumulation units of that Subaccount. We
determine the number of accumulation units credited to the Contract by dividing
the dollar amount allocated to the Subaccount by the unit value for that
Subaccount at the end of the Valuation Period during which the amount was
allocated.
We will increase the number of accumulation units in any Subaccount at the end
of the Valuation Period by:
o any premiums allocated to the Subaccount during the current Valuation
Period;
o transfers to the Subaccount from another Subaccount or from the Fixed
Account during the current Valuation Period; and
o Bonuses credited on the Monthly Anniversary Date.
We will decrease the number of accumulation units in any Subaccount at the end
of the Valuation Period by:
o amounts transferred from the Subaccount to another Subaccount or the
Fixed Account, including any applicable transfer fee;
o amounts surrendered (including applicable charges) during the current
Valuation Period; and
o the pro rata portion of the Monthly Guaranteed Minimum Death Benefit
Charge assessed on the Monthly Anniversary Day.
The number of units in any Subaccount will also be reduced at the beginning of
each Contract Year by a pro rata share of the $30 annual administration fee.
Net Investment Factor. We will calculate a net investment factor on each
Valuation Day. A Subaccount's net investment factor measures the investment
performance of an accumulation unit in that Subaccount during a Valuation
Period. The net investment factor is the ratio of the Subaccount's current value
to the immediately preceding Valuation Day's value, less the daily mortality and
expense charge and the daily asset-based administration charge. The formula for
the net investment factor equals:
X - Z,
Y
where "X" equals the sum of:
1. the net asset value per accumulation unit held in the Subaccount at the end
of the current Valuation Day; plus
2. the per accumulation unit amount of any dividend or capital gain
distribution on shares held in the Subaccount during the current Valuation
Day; less
3. the per accumulation unit amount of any capital loss distribution on shares
held in the Subaccount during the current Valuation Day; less
4. the per accumulation unit amount of any taxes or any amount set aside
during the Valuation Day as a reserve for taxes.
"Y" equals the net asset value per accumulation unit held in the Subaccount as
of the end of the immediately preceding Valuation Day; and
"Z" equals the charges we deduct from the Subaccount on a daily basis. These
charges equal the sum of the asset-based administration charge and the mortality
and expense risk charge. The asset-based administration charge equals .15% on an
annual basis. The mortality and expense charge equals 1.25% on an annual basis.
Determination of Unit Value. We arbitrarily set the value of an
accumulation unit for each of the Subaccounts at $10 when the first investments
were bought. The accumulation unit value for each subsequent Valuation Period is
equal to:
A x B
"A" is equal to the Subaccount's accumulation unit value for the end of the
immediately preceding Valuation Day; and
"B" is equal to the net investment factor for the current Valuation Day.
This accumulation unit value may increase or decrease from day to day based on
investment results.
Transfer Privilege
After the free-look period and before the Maturity Date, you may transfer
amounts among the Subaccounts and the Fixed Account. Transfers are subject to
the following restrictions:
o the minimum transfer amount is the lesser of $250 or the entire amount
in that Subaccount or the Fixed Account;
o we will treat a transfer request that would reduce the amount in a
Subaccount or the Fixed Account below $250 as a transfer request for
the entire amount in that Subaccount or the Fixed Account;
o we have no limit on the number of transfers that you can make between
Subaccounts or to the Fixed Account. However, you can make only one
transfer from the Fixed Account each Contract Year. (See "Transfers
from Fixed Account," page 29, for restrictions); and
o we have the right, where permitted, to suspend or modify this transfer
privilege at any time.
We will make a transfer on the date that we receive Written Notice requesting
the transfer. You may also make transfers by telephone if you have provided
proper authorization. (See "Telephone Authorizations," page 32.)
The first six transfers during each Contract Year are free. We will charge a $25
transfer processing fee for all transfers during a Contract Year in addition to
the six free ones. For the purpose of charging the fee, we will consider each
request to be one transfer, regardless of the number of Subaccounts or the Fixed
Account affected by that request. We will deduct the transfer processing fee
from the amount being transferred or from the remaining Contract Value,
according to your instructions.
An excessive number of transfers, including short-term "market timing"
transfers, may adversely affect the performance of the underlying Fund in which
a Subaccount invests. If, in our sole opinion, a pattern of excessive transfers
develops, we reserve the right not to process a transfer request. We also
reserve the right not to process a transfer request when the sale or purchase of
shares of a Fund is not reasonably practicable due to actions taken or
limitations imposed by the Fund.
Dollar Cost Averaging Plan
The Dollar Cost Averaging Plan is an optional feature available with the
Contract. If you elect this plan, it enables you to automatically transfer
amounts from the Federated Prime Money Fund II Subaccount to other Subaccounts.
The goal of the Dollar Cost Averaging Plan is to make you less susceptible to
market fluctuations by allocating on a regularly scheduled basis instead of
allocating the total amount all at one time. We do not guarantee that the Dollar
Cost Averaging Plan will result in a gain.
Transfers under this plan occur on a monthly basis for a period you choose,
ranging from 3 to 36 months. To participate in this plan you must transfer at
least $250 from the Federated Prime Money Fund II Subaccount each month. You may
allocate the required amounts to the Federated Prime Money Fund II Subaccount
through initial and subsequent premium payments or by transferring amounts into
the Federated Prime Money Fund II Subaccount from the other Subaccounts or from
the Fixed Account. Restrictions apply to transfers from the Fixed Account.
You may elect this plan at the time of application by completing the
authorization. You may also elect it at any time after the Contract is issued by
completing the election form. Dollar cost averaging transfers will start on the
next monthly anniversary day following the date we receive your request or on
the date you request.
Once elected, we will process transfers from the Federated Prime Money Fund II
Subaccount monthly until:
o we have completed the number of designated transfers;
o the value of the Federated Prime Money Fund II Subaccount is
completely depleted; or
o you send us Written Notice instructing us to cancel the monthly
transfers.
There is no transfer charge for participation in the Dollar Cost Averaging Plan
and transfers made under the Dollar Cost Averaging Plan won't count toward the
six free transfers allowed each Contract Year. We have the right to cancel this
feature at any time with notice to you.
Portfolio Rebalancing Plan
The Portfolio Rebalancing Plan is an optional feature available with the
Contract. Under this plan we will redistribute the accumulated balance of each
Subaccount to equal a specified percentage of the Variable Account Value. We
will do this on a quarterly basis at three month intervals from the monthly
anniversary day on which the Portfolio Rebalancing Plan begins. The purpose of
the Portfolio Rebalancing Plan is to automatically diversify your portfolio mix.
The plan automatically adjusts your portfolio mix to be consistent with your
current premium allocation instructions. If you make a change to your premium
allocation, we will also automatically change the allocation used for portfolio
rebalancing to be consistent with the new premium allocation.
The redistribution will not count as a transfer permitted under the Contract
each Contract Year. If you also have elected the Dollar Cost Averaging Plan and
it has not been completed, the Portfolio Rebalancing Plan will start on the
monthly anniversary day the Dollar Cost Averaging Plan ends. If the Contract
Value is negative at the time portfolio rebalancing is scheduled, we will not
complete the redistribution.
You may elect this plan at the time of application by completing the
authorization. You may also elect it at any time after the Contract is issued by
completing the election form. Portfolio rebalancing will terminate when:
o you request any transfer unless you authorize a new allocation; or
o the day we receive Written Notice instructing us to cancel the plan.
Partial and Full Cash Surrenders
Partial Surrenders. You may surrender part of the Cash Surrender Value at
any time before your death, the Annuitant's death and the Maturity Date. The
minimum partial surrender requested must be at least $100. We will surrender the
amount requested from the Contract Value on the date we receive Written Notice
for the surrender. We will deduct any applicable surrender charge from the
amount surrendered or from the remaining Contract Value, according to your
instructions. If the remaining Contract Value is less than the surrender charge,
we will reduce the amount surrendered. We will make the surrender from each
Subaccount and the Fixed Account based on your instructions. If the amount
requested exceeds the Subaccount and/or Fixed Account Value, we will process the
surrender for the amount available and contact you for further instructions.
Subject to certain restrictions, we will not apply a surrender charge on the
first partial surrender of up to 10% of the Contract Value per Contract Year.
(See "Surrender Charge," page 33.)
Systematic Partial Surrender Plan. The Systematic Partial Surrender Plan
enables you to authorize an automatic regular payment of a partial surrender
amount. If you wish to participate in the plan, you should instruct us to
surrender a particular dollar amount from the Contract on a monthly, quarterly,
semi-annual or annual basis. The minimum payment under this plan is $100. We
will make the surrender from each Subaccount and the Fixed Account based on your
instructions. If the amount requested exceeds the Subaccount and/or Fixed
Account Value, we will process the surrender for the amount available and
contact you for further instructions.
Subject to certain restrictions, we will not apply a surrender charge on the
first amounts paid out under the Systematic Partial Surrender Plan of up to 10%
of the Contract Value each Contract Year . (See "Surrender Charge," page 33.)
You may discontinue participation in the Systematic Partial Surrender Plan at
any time by sending us Written Notice.
Certain federal income tax consequences may apply to partial and systematic
partial surrenders. You should consult your tax adviser before requesting a
partial or systematic partial surrender. (See "Federal Tax Status," page 38.)
Full Surrender. You may request a surrender of the Contract for its Cash
Surrender Value at any time before your death, the Annuitant's death and the
Maturity Date. The Cash Surrender Value will equal the Contract Value less:
o any applicable surrender charge;
o any loan balance;
o any premium taxes payable; and
o any withholding taxes.
We will determine the Cash Surrender Value on the date we receive Written Notice
of surrender and the Contract. We will pay the Cash Surrender Value in a lump
sum unless you request payment under a payment option.
Subject to certain restrictions, we will not apply a surrender charge on up to
10% of the Contract Value when you surrender the Contract. (See "Surrender
Charge," page 33.)
Certain federal income tax consequences may apply to a surrender of the
Contract. You should consult your tax adviser before requesting a surrender.
(See "Federal Tax Status," page 38.)
Restrictions on Distributions from Certain Contracts. Certain restrictions
apply to surrenders and partial surrenders from Contracts used as funding
vehicles for Internal Revenue Code Section 403(b) retirement plans. Section
403(b)(11) of the Internal Revenue Code of 1986, as amended, restricts the
distribution under Section 403(b) annuity contracts of:
o elective contributions made in years beginning after December 31,
1988;
o earnings on those contributions; and
o earnings in such years on amounts held as of the last year beginning
before January 1, 1989.
Distributions of those amounts may only occur upon the:
o death of the employee;
o attainment of age 59 1/2;
o separation from employment;
o disability; or
o financial hardship.
In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Contract Termination
We may terminate the Contract and pay you the Cash Surrender Value if all of
these events simultaneously exist prior to the Maturity Date:
o you have not paid premiums for at least two years;
o the Contract Value is less than $2,000; and
o total premiums paid under the Contract, less any partial surrenders,
is less than $2,000.
We will mail a termination notice to you and to the holder of any assignment of
record at least six months before we terminate the Contract. We have the right
to automatically terminate the Contract on the date specified in the notice,
unless we receive an additional premium payment before the termination date
specified or the Contract Value has increased to the amount required. This
additional premium payment must be for at least the required minimum amount.
Contract Loans
If your Contract is a 403(b) (TSA) Qualified Contract, you have the option of
taking a Contract loan at any time after the first Contract Year. You may obtain
a loan by submitting Written Notice. The only security we require is an
assignment of the Contract to us. We allow only one loan per Contract Year.
We will show the current loan amount and any withdrawals for unpaid interest on
your annual report.
Amount of Loan Available. You may borrow up to the lesser of:
(1) $50,000, reduced by the excess (if any) of the highest outstanding
loan balance during the one-year period ending on the day before the
loan is made over the total outstanding loan balance of all loans
under the Contract on the day loan is made;
(2) the greater of 50% of the Cash Surrender Value of the Contract or
$10,000; or
(3) the Cash Surrender Value less any outstanding loans, determined as of
the date of the loan.
At any time you make a new loan, the sum of all prior loans, loan interest
outstanding, and the current loan applied for, may not exceed the applicable
limit described above. Each loan must be at least $2,500.
Loan Account. When you make a loan, we will withdraw an amount equal to the
loan from the Fixed Account and Variable Account and transfer this amount to the
loan account. The loan account is part of the Fixed Account. If you do not
specify allocation instructions in your loan application, we will withdraw the
loan pro rata from all Subaccounts having values and from the Fixed Account.
Amounts transferred to the loan account do not participate in the investment
experience of the Fixed Account and the Subaccounts from which they were
withdrawn.
Interest Credited on Loaned Amount. We will pay interest on amounts in the
loan account at the minimum guaranteed effective annual interest rate of 3.0%
per year. We may apply different interest rates to the loan account than the
Fixed Account. Any interest we credit on loaned amounts will remain in the Fixed
Account.
Loan Interest Charged. On each Contract anniversary, we will charge accrued
interest on a Contract loan at the maximum rate of 8% per year. We may establish
a lower rate for any period during which the Contract loan is outstanding.
Interest is payable at the end of each Contract Year and on the date the loan is
repaid.
If we do not receive the loan interest payment by the contract anniversary, we
will transfer the accrued loan interest from the Fixed Account and Subaccounts
to the loan account on a pro rata basis.
Repayment of Loan. You must specifically identify any loan repayment as
such in order to ensure that it will be applied correctly. Each loan repayment
will result in a transfer of an amount equal to the loan repayment from the loan
account to the Fixed Account and/or Subaccounts. We will use your current
premium allocation schedule to allocate the loan repayment, unless you provide
specific instructions to allocate the loan repayment differently. Each loan
repayment must be at least $25.
You must repay principal and interest in substantially equal monthly payments
over a five-year period. You are allowed a 31-day grace period from the
installment due date. If a monthly installment is not received within the 31-day
grace period, federal tax laws require us to make a deemed distribution of the
entire amount of the outstanding principal, interest due, and any applicable
charges under this Contract, including any surrender charge. This deemed
distribution may be subject to income and penalty tax under the Code and may
adversely affect the treatment of the Contract under Internal Revenue Code
section 403(b).
Loan Balance. Loan balance means all unpaid Contract loans and loan
interest. We will deduct any outstanding loan balance from the Contract
proceeds. We will terminate your Contract if your total loan balance exceeds the
Cash Surrender Value of the Contract. We will mail notice to you at least 31
days before such termination.
Allowing a Contract to terminate under these circumstances could have adverse
tax consequences.
ERISA Plans. If your 403(b) (TSA) Qualified Contract is part of a plan
subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), you
should consult a qualified legal adviser about compliance with ERISA
requirements prior to requesting a Contract loan. Any loan under this Contract
may also be subject to the rules of the plan it is part of.
Death Benefit Before Maturity Date
A death benefit will be paid at the death of either the Annuitant or the Owner
of the contract. Once a death benefit has been paid, the contract is terminated.
If you are also the Annuitant, the death benefit proceeds payable will be those
payable on the death of the Annuitant. However, if the contract is issued with
an Owner and an Annuitant who are not the same individual, the death benefit
will be paid at the first death. If the Owner predeceases the Annuitant, the
Cash Surrender Value of the contract will be paid to the Beneficiary. If the
Annuitant predeceases the Owner, the Guaranteed Minimum Death Benefit, as
described below, will be paid to the Beneficiary.
Calculation of the Guaranteed Minimum Death Benefit.
The contract provides a Base Guaranteed Minimum Death Benefit and also
offers two enhanced Guaranteed Minimum Death Benefit options that can be
selected at issue for an additional charge. The two options are:
o The Annual Ratchet Guaranteed Minimum Death Benefit Option; and
o The Enhanced Combination Guaranteed Minimum Death Benefit Option.
The issue requirements and the Monthly Guaranteed Minimum Death Benefit Charge
will vary for each Guaranteed Minimum Death Benefit Option as described below.
Base Guaranteed Minimum Death Benefit
Under this option we guarantee that the death benefit will be the greater
of:
o premiums paid, proportionately adjusted for partial surrenders, less
any loan balance; or
o the Contract Value less any loan balance on the date we receive proof
of the Annuitant's death.
There is no Monthly Guaranteed Minimum Death Benefit Charge for the Base
Guaranteed Minimum Death Benefit. This option is available at issue and at
any time thereafter.
Annual Ratchet Guaranteed Minimum Death Benefit Option
Under this option we guarantee that the death benefit for Annuitants with
an attained age of 80 and below will be the greater of:
o the death benefit calculated under the Base Guaranteed Minimum Death
Benefit Option; or
o the highest Contract Value as of a Contract Anniversary during any
point the Contract has been in effect on or before the Annuitant's
death. Any loan balance will be deducted from and premiums paid since
the last Contract Anniversary will be added to such Contract Value and
the Contract Value will also be proportionately adjusted for partial
surrenders.
We guarantee that the death benefit for Annuitants with an attained age of
above 80 will equal the greater of:
o the Contract Value at the time of death; or
o the value of the Guaranteed Minimum Death Benefit on the Contract
Anniversary following the Annuitant's 80th birthday, calculated as
described above, proportionately adjusted for partial surrenders, less
any loan balance and plus any premiums paid since the Contract
Anniversary following the Annuitant's 80th birthday.
If you elect the Annual Ratchet Guaranteed Minimum Death Benefit Option,
the Monthly Guaranteed Minimum Death Benefit Charge will equal .01665% of
Variable Account Value, which equals 0.20% of Variable Account Value on an
annualized basis. This charge is deducted from the Variable Account Value
every Monthly Anniversary Day. (See Monthly Guaranteed Minimum Death
Benefit Expense Charge, page 35.) This option is only available at issue of
the Contract and is only available to Annuitants with Issue Ages of 75 or
below.
Enhanced Combination Guaranteed Minimum Death Benefit Option
Under this option we guarantee that the death benefit for Annuitants with
an attained age of 80 and below will be the greater of:
o the death benefit calculated under the Base Guaranteed Minimum Death
Benefit Option; or
o premiums paid, accumulated annually at 5% interest until the date of
the Annuitant's death, proportionately adjusted for partial surrenders
and deducting any loan balance. We place a maximum on the amount
accumulated at 5% interest of two times the total premiums paid, less
surrenders and any loan balance; or
o the highest Contract Value as of a Contract Anniversary during any
point the Contract has been in effect on or before the Annuitant's
death. Any loan balance will be deducted from and premiums paid since
the last Contract Anniversary will be added to such Contract Value and
the Contract Value was also be proportionately adjusted for partial
surrenders.
We guarantee that the death benefit for Annuitants with an attained age of
above 80 will equal the greater of:
o the Contract Value at the time of death; or
o the value of the Guaranteed Minimum Death Benefit on the Contract
Anniversary following the Annuitant's 80th birthday, calculated as
described above, proportionately adjusted for partial surrenders, less
any loan balance and plus any premiums paid since the Contract
Anniversary following the Annuitant's 80th birthday.
If you elect the Enhanced Combination Guaranteed Minimum Death Benefit
Option, the Monthly Guaranteed Minimum Death Benefit Charge will equal
.02912% of Variable Account Value, which equals 0.35% of Variable Account
on an annualized basis. This charge is deducted from the Variable Account
Value every Monthly Anniversary Day. (See Monthly Guaranteed Minimum Death
Benefit Expense Charge, page XX.) This option is only available at issue of
the Contract and is only available to Annuitants with Issue Ages of 70 or
below.
Adjustment to Guaranteed Minimum Death Benefit Calculation for Partial
Surrenders
We will reduce the Guaranteed Minimum Death Benefit calculation by an
amount equal to the percentage of the partial surrender (including any
surrender charge) as compared to the Contract Value immediately prior to
the date of the partial surrender.
Changes in Guaranteed Minimum Death Benefit Options
If you have elected the Annual Ratchet or Enhanced Combination Guaranteed
Minimum Death Benefit Options, you may change the option at any time to the
Base Guaranteed Minimum Death Benefit. The effective date of change will be
the Monthly Anniversary Day on or following the date we receive Written
Notice of the change.
Death of Annuitant. If the Annuitant dies before the Maturity Date, we will
pay the death benefit under the Contract to the Beneficiary.
On the Contract Date, the death benefit is equal to the initial premium payment.
Thereafter, any subsequent premium payment increases the Guaranteed Minimum
Death Benefit by the amount of the payment. Any partial surrender will decrease
the Guaranteed Minimum Death Benefit by the same percentage that the surrender
decreases the Contract Value.
We will pay the proceeds to the Beneficiary in a lump sum unless you or the
Beneficiary elect a payment option. If the Annuitant is the Owner, we are
required to distribute the proceeds in accordance with the rules described below
in "Death of Owner" for the death of an Owner before the Maturity Date.
No death benefit is payable if the Annuitant dies on or after the Maturity Date.
Death of Owner. If an Owner dies before the Maturity Date, federal tax law
requires (for a Non-Qualified Contract) that we distribute the Cash Surrender
Value (or if an Owner is the Annuitant, the proceeds payable upon the
Annuitant's death) to the Beneficiary within five years after the date of the
Owner's death. If an Owner dies on or after the Maturity Date, we must
distribute any remaining payments at least as rapidly as under the payment
option in effect on the date of such Owner's death.
These distribution requirements will be considered satisfied as to any portion
payable to the benefit of the Beneficiary if:
o the proceeds are distributed over the life of that Beneficiary (or a
period not exceeding the Beneficiary's life expectancy);
o the distributions begin within one year of the Owner's death; and
o the Beneficiary is a person.
If the deceased Owner's spouse is the designated Beneficiary, the Contract may
be continued with such surviving spouse as the new Owner. In this situation, if
the Beneficiary wants to leave the Contract in force and the death benefit due
to the Beneficiary is greater than the Contract Value, we will increase the
Contract Value to equal the death benefit. We will base this increase on the
Contract Value on the date we are notified of the death of the Owner. If the
Contract has joint Owners, the surviving joint Owner will be the Beneficiary,
unless otherwise specified in the application. Joint Owners must be husband and
wife as of the Contract Date.
If an Owner is not an individual, the Annuitant, as determined in accordance
with Section 72(s) of the Internal Revenue Code, will be treated as an Owner for
purposes of these distribution requirements. Any change in or death of the
Annuitant will be treated as the death of an Owner.
Other rules may apply to a Qualified Contract.
Proceeds on Maturity Date
The Maturity Date is the latest date when proceeds under the Contract are
payable. The proceeds available on the Maturity Date vary depending upon how you
elect to receive the proceeds:
o we will apply the Contract Value (less any loan balance and any
applicable premium taxes) if you elect to receive the proceeds under a
Life Payment Option; and
o we will apply the Cash Surrender Value (less any applicable premium
taxes) if you elect to receive the proceeds as a lump sum payment or
as a Non-Life Payment Option.
You select the Maturity Date, subject to the following restrictions. The latest
Maturity Date is the later of:
o the Contract anniversary following the Annuitant's 85th birthday; or
o the tenth Contract anniversary.
For Qualified Contracts, distributions may be required to begin at age 70 1/2.
Certain states limit the maximum Maturity Date.
You may change the Maturity Date subject to these limitations:
o we must receive your Written Notice at least 30 days before the
current Maturity Date;
o you must request a Maturity Date that is at least 30 days after
receipt of the Written Notice;
o the requested Maturity Date must be not later than any earlier
Maturity Date required by law; and
o you submit your contract if we require it.
On the Maturity Date, we will apply the proceeds under the Life Annuity with Ten
Year Certain Payment Option, unless you have chosen to receive the proceeds
under another payment option or in a lump sum. (See "Payment Options," page 27.)
Payments
We will usually pay any partial surrender, full surrender, or death benefit
within seven days of receipt of a Written Notice. We must also receive proof of
death to pay a death benefit. We may postpone payments if:
o the New York Stock Exchange is closed, other than customary weekend
and holiday closings or trading on the exchange is restricted as
determined by the SEC; or
o the SEC permits by an order the postponement for the protection of
Contract Owners; or
o the SEC determines that an emergency exists that would make the
disposal of securities held in the Variable Account or the
determination of the value of the Variable Account's net assets not
reasonably practical.
If you have made a recent premium or loan payment by check or draft, we may
defer payment until such check or draft has been honored.
Personal Growth Account. As described below, we will pay proceeds through
Kansas City Life's Personal Growth Account. We place proceeds to be paid through
the Personal Growth Account in our general account. The Personal Growth Account
pays interest and provides check-writing privileges under which we reimburse the
bank that pays the check out of the proceeds held in our general account. A
Contract Owner or Beneficiary (whichever applicable) has immediate and full
access to proceeds by writing a check on the account.
The Personal Growth Account is not a bank account and is not insured, nor
guaranteed, by the FDIC or any other government agency.
We will pay proceeds through the Personal Growth Account when:
o the proceeds are paid to an individual; and
o the amount of proceeds is $5,000 or more.
Any other use of the Personal Growth Account requires our approval.
Modifications
We may modify the Contract, subject to providing notice to you. We may only make
modification if it is necessary to:
o make the Contract or the Variable Account comply with any law or
regulation issued by a governmental agency to which we are subject;
o assure continued qualification of the Contract under the Internal
Revenue Code or other federal or state laws relating to retirement
annuities or variable annuity contracts (except that your consent may
be required by some states);
o reflect a change in the operation of the Variable Account; or
o provide additional Variable Account and/or fixed accumulation options.
We also have the right to modify the Contract as necessary to attempt to prevent
the Contract Owner from being considered the owner of the assets of the Variable
Account.
In the event of any such modification, we will issue an endorsement to the
Contract (if required) which will reflect the changes.
Reports to Contract Owner
We will mail you a report containing key information about the Contract at least
annually. The report will include the Contract Value and Cash Surrender Value of
your Contract and any further information required by any applicable law or
regulation. We will show the information in the report as of a date no more than
two months prior to the date of mailing. We will send you a report at any other
time during the year that you request for a reasonable charge.
Telephone Authorizations
You may request a transfer of Contract Value, change in premium allocation,
change in dollar cost averaging, change in portfolio rebalancing or Contract
loan by telephone, provided you made the election at the time of application or
provided proper authorization to us. We may suspend these telephone privileges
at any time if we decide that such suspension is in the best interests of
Contract Owners.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If we follow those procedures, we will not be liable
for any losses due to unauthorized or fraudulent instructions. The procedures we
will follow for telephone privileges include requiring some form of personal
identification prior to acting on instructions received by telephone, providing
written confirmation of the transaction and making a tape recording of the
instructions given by telephone.
THE FIXED ACCOUNT
You may allocate some or all of the premiums and transfer some or all of the
Variable Account Value to the Fixed Account. You may also make transfers from
the Fixed Account, but restrictions may apply. (See "Transfers from Fixed
Account," page 24.) The Fixed Account is part of our General Account and pays
interest at declared rates guaranteed for each calendar year. We guarantee that
this rate will be at least 3%. We guarantee the amount of premiums paid plus
guaranteed interest and less applicable deductions.
Our general account supports our insurance and annuity obligations. Since the
Fixed Account is part of our general account, we assume the risk of investment
gain or loss on this amount. All assets in the general account are subject to
our general liabilities from business operations.
The Fixed Account is not registered under the Securities Act of 1933 and is not
registered as an investment company under the Investment Company Act of 1940 The
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the Fixed Account. Certain general provisions of the
Federal securities laws relating to the accuracy and completeness of statements
made in prospectuses may still apply.
Minimum Guaranteed and Current Interest Rates
We guarantee to credit the Fixed Account Value with a minimum 3% effective
annual interest rate. We intend to credit the Fixed Account Value with current
rates in excess of 3% minimum, but are not obligated to do so. Current interest
rates are influenced by, but don't necessarily correspond to, prevailing general
market interest rates. We will determine current rates in our discretion. You
assume the risk that the interest we credit may not exceed the guaranteed rate.
Since we anticipate changing the current interest rate from time to time, we
will credit different allocations with different interest rates, based upon the
date amounts are allocated to the Fixed Account. We may change the interest rate
credited to allocations from premiums or new transfers at any time. We will not
change the interest rate more than once a year on amounts in the Fixed Account.
For the purpose of crediting interest, we currently account for amounts deducted
from the Fixed Account on a last-in, first-out ("LIFO") method. We may change
the method of crediting from time to time, provided that such changes do not
have the effect of reducing the guaranteed rate of interest below 3%. We may
also shorten the period for which the interest rate applies to less than a year
(except for the year in which such amount is received or transferred).
Calculation of Fixed Account Value
Fixed Account Value is equal to:
o amounts allocated or transferred to the Fixed Account; plus
o interest credited; less
o amounts deducted, transferred, or surrendered.
Transfers from Fixed Account
We allow one transfer each Contract Year from the Fixed Account. The amount
transferred from the Fixed Account may not exceed 25% of the unloaned Fixed
Account Value on the date of transfer (unless the balance after the transfer is
less than $250, in which case we will transfer the entire amount.)
Delay of Payment
We have the right to defer payment of any surrender, partial surrender, or
transfer from the Fixed Account for up to six months from the date we receive
Written Notice for a partial surrender, full surrender, or transfer. If we do
not make the payment within 30 days after we receive the documentation required
to complete the transaction, we will add 3% interest to the amount paid from the
date we receive documentation. Some states may require that we pay interest on
periods of delay less than 30 days and some states may require us to pay an
interest rate higher than 3% when we delay payment proceeds.
CHARGES AND DEDUCTIONS
Surrender Charge
General. We do not deduct a charge for sales expense from premiums at the
time you pay them. However, a surrender charge may apply if you make a partial
or full surrender or if you elect a Non-Life Payment Option within eight years
of when a premium was credited to your Contract. The purpose of the surrender
charge is to reimburse us for some of the expenses we incur in distributing the
Contracts. If the surrender charges are not enough to cover sales expenses, we
will bear the loss. If the amount of such charges proves more than enough, we
will keep the excess. We do not currently believe that the surrender charges
imposed will cover the expected costs of distributing the Contracts. We will
make up any shortfall from our general assets, which may include amounts we
derive from the mortality and expense risk charge.
Charge for Partial Surrender or Full Surrender. If you take a partial or
full surrender of the Contract or elect a Non-Life Payment Option, the
applicable surrender charge applicable to each premium will be as follows:
During Premium Year*
Year 1 2 3 4 5 6 7 8 9 and after
Percentage 8% 8% 7% 6% 5% 4% 3% 2% 0%
*Premium year refers to the 12-month period following the date we credit a
particular premium to your Contract. After eight years following the date we
credit a particular premium, there will be no surrender charge applicable to
that premium payment.
The total surrender charge applicable will be the sum of the surrender charges
applicable to each premium. To determine the surrender charge we first assume
that your surrender or Non-Life Payment Option election is from amounts (other
than earnings) that can be withdrawn without a surrender charge, then from other
amounts (other than earnings) and then from earnings, each on a
"first-in-first-out" (oldest money first) basis. Once we have calculated the
total surrender charge amount we actually withdraw it from the Fixed Account and
Subaccount in the same proportion that the withdrawal is being made. In
calculating the surrender charge, we do not include earnings, although the
actual withdrawal to pay the surrender charge may come from earnings.
If you surrender the Contract, we will deduct the surrender charge from the
Contract Value in determining the Cash Surrender Value. For a partial surrender,
we will deduct the surrender charge from the amount surrendered or from the
Contract Value remaining after the amount requested is surrendered, according to
your instructions.
Amounts Not Subject to Surrender Charge. Your first partial surrender
during a Contract Year will not be subject to a surrender charge to the extent
that the amount you surrender under the plan is not in excess of 10% of the
Contract Value. We limit this 10% free partial surrender to the first partial
surrender per Contract Year, even if the amount you surrender is less than 10%
of the Contract Value. We will assess the applicable surrender charge on any
amounts surrendered in excess of 10% and any additional surrenders which occur
after the first partial surrender in a Contract Year. The 10% free partial
surrender is not cumulative from year to year.
If you make a full surrender of the Contract the surrender charge does not apply
to 10% of the Contract Value provided you have not already received credit for
the 10% free partial surrender during that Contract Year. If you have not
already received the free 10% partial surrender in that Contract Year, then only
90% of the Contract Value is subject to a surrender charge upon a full
surrender.
If you have elected to participate in the Systematic Partial Surrender Plan (see
"Systematic Partial Surrender Plan," page 19), your 10% free partial withdrawal
may apply to payments under this plan as long as you have not already received
your free partial withdrawal for that Contract Year. You are limited to one
election of the Systematic Partial Surrender Plan per Contract Year without
being subject to the surrender charge. (This limitation applies even if the
amount surrendered during that Contract Year is less than 10% of the Contract
Value.) In the Contract Year in which you elect to participate in the plan, we
will calculate the 10% limitation based on the Contract Value at the time of
election. In each subsequent Contract Year in which you continue to participate
in the Plan, we will calculate the 10% limitation based on the Contract Value as
of the beginning of that year. We will notify you if the total amount to be
surrendered in a subsequent Contract Year will exceed 10% of the Contract Value
as of the beginning of such Contract Year. Unless you instruct us to reduce the
surrender amount for that year so that it does not exceed the 10% limit, we will
continue to process surrenders for the designated amount. Once the amount of the
surrender exceeds the 10% limit, we will deduct the applicable surrender charge
from the remaining Contract Value.
If you elect a Life Payment Option, we will not apply a surrender charge.
Nursing Home Waiver. If you meet the requirements described below for the
Nursing Home Waiver, we will pay out the full Contract Value without applying
any surrender charges. In order to be eligible for this waiver:
o we must receive satisfactory proof that you are admitted to a licensed
nursing home;
o the Contract Value must be paid out in equal amounts over at least a
three-year period; and
o you must be confined for at least 90 days before we will waive the
surrender charges.
This waiver may not be available in all states.
Transfer Processing Fee
The first six transfers during each Contract Year are free. We will assess a
transfer processing fee for each additional transfer during such Contract Year.
For the purpose of assessing the fee, we will consider each written or telephone
request for a transfer to be one transfer, regardless of the number of accounts
affected by the transfer. We will deduct the transfer processing fee from the
amount being transferred or from the remaining Contract Value, according to your
instructions.
Administrative Charges
Annual Administration Fee. At the beginning of each Contract Year we will
deduct an annual administration fee of $30 (or less if required by applicable
state law) from the Contract Value. The purpose of this fee is to reimburse us
for administrative expenses relating to the Contract. We will waive this fee for
Contracts with Contract Values of $50,000 or more at the beginning of the
applicable Contract Year. We will deduct the charge from each Subaccount and the
Fixed Account based on the proportion that the value in each account bears to
the total Contract Value. This fee does not apply after the Maturity Date.
Asset-Based Administration Charge. We will deduct a daily asset-based
administration charge from the assets of the Variable Account equal to an annual
rate of .15%. The purpose of this charge is to reimburse us for costs associated
with administration of the Contract amounts allocated to the Variable Account.
This charge does not apply after the Maturity Date.
Mortality and Expense Risk Charge
We will deduct a daily mortality and expense risk charge from the assets of the
Variable Account. This charge will be equal to an annual rate of 1.25%. This
translates to a daily rate of .0034247%. The purpose of this charge is to
compensate us for assuming mortality and expense risks. This charge does not
apply after the Maturity Date.
The mortality risk we assume is that Annuitants may live for a longer period of
time than estimated when we established the guarantees in the Contract. Because
of these guarantees, we provide each payee with the assurance that longevity
will not have an adverse effect on the annuity payments received. The mortality
risk we assume also includes a guarantee to pay a death benefit if the Annuitant
dies before the Maturity Date. The expense risk we assume is the risk that the
annual administration fee, asset-based administration charge, and transfer
processing fee may be insufficient to cover actual future expenses.
If the mortality and expense risk charge is not enough to cover the actual cost
of the mortality and expense risks we undertake, we will bear the loss. If the
amount of such charges proves more than enough, we will keep the excess and this
amount will be available for any proper corporate purpose including financing of
distribution expenses.
Monthly Guaranteed Minimum Death Benefit Expense Charge
If a Guaranteed Minimum Death Benefit option other than the base provision
is selected, there is an additional charge. The amount of this charge varies
depending on the Guaranteed Minimum Death Benefit Option you have elected, as
follows:
o Base Guaranteed Minimum Death Benefit: no additional charge.
o Annual Ratchet Guaranteed Minimum Death Benefit Option: A monthly
charge of .01665% is deducted from the Variable Account Value on the
Monthly Anniversary Date. This charge equals .20% on an annualized
basis.
o Enhanced Combination Guaranteed Minimum Death Benefit Option: A
monthly charge of .02912% is deducted from the Variable Account Value
on the Monthly Anniversary Date. This charge equals .35% on an
annualized basis.
Premium Taxes
Various states and other governmental entities levy a premium tax, currently
ranging up to 3.5%, on annuity contracts issued by insurance companies. Premium
tax rates may change from time to time by legislative and other governmental
action. In addition, other governmental units within a state may levy such
taxes.
If premium taxes are applicable, we will deduct them upon surrender or when we
apply the Contract proceeds to a payment option or a lump sum payment.
Reduced Charges for Eligible Groups
We may reduce the surrender charges and/or administration charges for Contracts
issued to a class of associated individuals or to a trustee, employer or similar
entity. We may reduce these charges if we anticipate that the sales to the
members of the class will result in lower than normal sales or administrative
expenses. We will make any reductions in accordance with our rules in effect at
the time of the application. The factors we will consider in determining the
eligibility of a particular group and the level of the reduction are as follows:
o nature of the association and its organizational framework;
o method by which sales will be made to the members of the class;
o facility with which premiums will be collected from the associated
individuals;
o association's capabilities with respect to administrative tasks;
o anticipated persistency of the Contract;
o size of the class of associated individuals;
o number of years the association has been in existence; and
o any other such circumstances which justify a reduction in sales or
administrative expenses.
Any reduction will be reasonable, will apply uniformly to all prospective
Contract purchases in the class and will not be unfairly discriminatory to the
interests of any Contract holder.
Other Taxes
We do not currently assess a charge against the Variable Account for federal
income taxes. We may make such a charge in the future if income or gains within
the Variable Account result in any federal income tax liability to us. We may
also deduct charges for other taxes attributable to the Variable Account.
Investment Advisory Fees and Other Expenses of the Funds
The funds deduct investment advisory fees and other expenses. The value of the
net assets of each Subaccount already reflects the investment advisory fees and
other expenses incurred by the corresponding Fund in which the Subaccount
invests. This means that these charges are deducted before we calculate
Subaccount Values. These charges are not directly deducted from your Contract
Value. See the prospectuses for the Funds for more information about the
investment advisory fees and other expenses.
PAYMENT OPTIONS
The Contract offers a variety of ways, in addition to a lump sum, for you to
receive proceeds payable under the Contract. Payment options are available for
use with various types of proceeds, such as surrender, death or maturity. We
summarize these payment options below. All of these options are forms of
fixed-benefit annuities which do not vary with the investment performance of a
separate account.
The Contract ends on the Maturity Date and we will pay the proceeds to the payee
under the payment option selected. The amount we apply to the payment option
will vary depending upon which payment option you select. If you elect a Life
Payment Option (Options 4 and 5 described below), we will apply the full
Contract Value to that option. If you elect a Non-Life Payment Option (Options
1, 2, and 3 described below) or you have elected to receive a lump sum payment,
we will apply the Cash Surrender Value. If you have not filed an election of a
payment option with us on the Maturity Date, we will pay the Contract proceeds
as a life annuity with payments guaranteed for ten years.
You may also apply Contract proceeds under a payment option prior to the
Maturity Date. If you elect a Life Payment Option we will apply the full
Contract Value. If you elect a Non-Life Payment Option or a lump sum payment we
will apply the Cash Surrender Value.
The Beneficiary may also apply a death benefit (upon the Annuitant's death)
under a payment option.
We will deduct any premium tax applicable from proceeds at the time payments
start. In order for us to pay proceeds under a payment option or a lump sum, the
Contract must be surrendered.
We describe the payment options available below. The term "payee" means a person
who is entitled to receive payment under that option.
If we have options or rates available on a more favorable basis than those
guaranteed at the time a payment option is elected, the more favorable benefits
will apply.
Election of Options
You may elect, revoke or change an option at any time before the Maturity Date
while the Annuitant is living. If the payee is not the Owner, we must provide
our consent for the election of a payment option. If an election is not in
effect at the Annuitant's death or if payment is to be made in one sum under an
existing election, the Beneficiary may elect one of the options after the
Annuitant's death.
An election of a payment option and any revocation or change must be made by
Written Notice. Proceeds of at least $2,000 are required for all payment
options. You may not elect an option if any periodic payment under the election
would be less than $50. We may make payments less frequently so that each
payment is at least $50. Subject to this condition, we will make payments
annually or monthly at the end of such period.
Description of Options
Option1: Interest Payments. We will make guaranteed interest payments to
the payee annually or monthly as elected. We will pay interest on the proceeds
at the guaranteed rate of 3.0% per year. We may pay additional interest
annually. The proceeds and any unpaid interest may be withdrawn in full at any
time.
Option 2: Installments of a Specified Amount. We will make annual or
monthly payments until the proceeds plus interest are fully paid. We will pay
interest on the proceeds at the guaranteed rate of 3.0% per year. We may pay
additional interest. The present value of any unpaid installments may be
withdrawn at any time.
Option 3: Installments for a Specified Period. We will pay the proceeds in
equal annual or monthly payments for a specified number of years. We will pay
interest on the proceeds at the guaranteed rate of 3.0% per year. We may also
pay additional interest. The present value of any unpaid installments may be
withdrawn at any time.
Option 4: Life Income. We will pay an income during the payee's lifetime. A
minimum guaranteed payment period may be chosen. Another form of minimum
guaranteed payment period is the installment refund option under which we will
make payments until the total income payments received equal the proceeds
applied.
Option 5: Joint and Survivor Income. We will pay an income during the
lifetime of two persons and will continue to pay an income as long as either
person is living. A minimum guaranteed payment period of ten years may be
chosen.
YIELDS AND TOTAL RETURNS
Yields
From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the Subaccounts. These figures are based
on historical earnings and do not indicate or project future performance. Each
Subaccount may, from time to time, advertise or include in sales literature
performance relative to certain performance rankings and indices compiled by
independent organizations. More detailed information as to the calculation of
performance information, as well as comparisons with unmanaged market indices,
appears in the Statement of Additional Information.
Effective yields and total returns for the Subaccounts are based on the
investment performance of the corresponding Portfolio of the Funds. The Funds'
performance reflects the Funds' expenses. (See the prospectuses for the Funds.)
The yield of the Federated Prime Money Fund II Subaccount refers to the
annualized income generated by an investment in the Subaccount over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
the Subaccount is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
The yield of a Subaccount (except the Federated Prime Money Fund II Subaccount)
refers to the annualized income generated by an investment in the Subaccount
over a specified 30-day or one-month period. The yield is calculated by assuming
that the income generated by the investment during that 30-day or one-month
period is generated each period over a 12-month period and is shown as a
percentage of the investment.
Total Returns
Standard Subaccount Average Annual Total Return. The average annual total
return of a Subaccount refers to return quotations assuming an investment under
a Contract has been held in the Subaccount for various periods of time, each
beginning with a period measured from the date the Subaccount commenced
operations. When a Subaccount has been in operation for one, five, and ten
years, respectively, the total return for these periods will be provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which standard subaccount average annual total return
quotations are provided. Standard subaccount average annual total return
information shows the average percentage change in the value of an investment in
the Subaccount from the beginning date of the measuring period to the end of
that period. This standardized average annual total return reflects all
historical investment results, less all charges and deductions applied against
the Subaccount (including any surrender charge that would apply if you
terminated the Contract at the end of each period indicated, but excluding any
deductions for premium taxes).
Adjusted Historic Portfolio Average Annual Total Returns. In addition to
the standard version described above, other total return performance information
computed on two different bases may be used in advertisements. For periods prior
to the date the Variable Account commenced operations, performance information
for Contracts funded by the Subaccounts will be calculated based on the
performance of the Funds' Portfolios and the assumption that the Subaccounts
were in existence for the same periods as those indicated for the Funds'
Portfolios, with the level of Contract charges that were in effect at the
inception of the Subaccounts for the Contracts. Adjusted Historic Portfolio
Average Annual Total Return information may be presented, computed on the same
basis as described above, except deductions will not include the surrender
charge. In addition, we may from time to time disclose standard subaccount
average annual total return in non-standard formats and cumulative total return
for Contracts funded by Subaccounts.
We will only disclose other total returns if we also disclose the standard
average annual total returns for the required periods. For additional
information regarding the calculation of performance data, please refer to the
Statement of Additional Information.
Benchmarks and Ratings
We are a member of the Insurance Marketplace Standards Association ("IMSA") and
as such may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
In advertising and sales literature, the performance of each Subaccount may be
compared to the performance of other variable annuity issuers in general or to
the performance of particular types of variable annuities investing in mutual
funds, or investment series of mutual funds with investment objectives similar
to each of the Subaccounts. Lipper Analytical Services, Inc. ("Lipper"),
Morningstar, Inc. ("Morningstar"), and the Variable Annuity Research Data
Service ("VARDS") are independent services that monitor and rank the performance
of variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers as
well as variable annuity issuers. VARDS rankings compare only variable annuity
issuers. The performance analyses prepared by Lipper, Morningstar and VARDS each
rank such issuers on the basis of total return, assuming reinvestment of
distributions, but do not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration. In
addition, VARDS and Morningstar prepare risk rankings, which consider the
effects of market risk on total return performance. This type of ranking
provides data as to which funds provide the highest total return within various
categories of funds defined by the degree of risk inherent in their investment
objectives. Performance data published by CDA/Weisenberger also may be used in
advertisements and sales literature.
Advertising and sales literature may also compare the performance of each
Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for the expense of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
We may also report other information, including the effect of tax-deferred
compounding on a Subaccount's investment returns, or returns in general, which
may be illustrated by tables, graphs, or charts. All income and capital gains
derived from Subaccount investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the underlying Portfolio's
investment experience is positive.
FEDERAL TAX STATUS
Introduction
The following discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. No attempt is made
to consider any applicable state tax or other tax laws.
When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money -- generally for retirement
purposes. If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your contract is called a Qualified
Contract. If your annuity is independent of any formal retirement or pension
plan, it is termed a Non-Qualified Contract. The tax rules applicable to
Qualified Contracts vary according to the type of retirement plan and the terms
and conditions of the plan.
Taxation of Non-Qualified Contracts
Non-Natural Person. If a non-natural person (e.g., a corporation or a
trust) owns a Non-Qualified Contract, the taxpayer generally must include in
income any annual increases in the excess of the Contract Value. There are some
exceptions to this rule and a prospective owner that is not a natural person
should discuss these with a tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
Withdrawals. When a withdrawal from a Non-Qualified Contract occurs, the
amount received will be treated as ordinary income subject to tax up to an
amount equal to the excess (if any) of the Contract Value immediately before the
distribution over the Owner's investment in the Contract (generally, the
premiums or other consideration paid for the Contract, reduced by any amount
previously distributed from the Contract that was not subject to tax) at that
time. In the case of a surrender under a Non-Qualified Contract, the amount
received generally will be taxable only to the extent it exceeds the Owner's
investment in the Contract.
Penalty Tax on Certain Withdrawals. In the case of a distribution from a
Non-Qualified Contract, there may be imposed a federal tax penalty equal to 10%
of the amount treated as income. In general, however, there is no penalty on
distributions:
o made on or after the taxpayer reaches age 59 1/2;
o made on or after the death of an Owner;
o attributable to the taxpayer's becoming disabled; or
o made as part of a series of substantially equal periodic payments for
the life (or life expectancy) of the taxpayer or the joint lives (or
joint life expectancies) of the taxpayer and his or her designated
Beneficiary.
Other exceptions may be applicable under certain circumstances and special rules
may be applicable in connection with the exceptions enumerated above. You should
consult a tax adviser with regard to exceptions from the penalty tax. A similar
penalty tax may apply to Qualified Contracts.
Annuity Payments. Although tax consequences may vary depending on the
payment option elected under an annuity contract, a portion of each annuity
payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an annuity payment is generally determined in a
manner that is designed to allow you to recover your investment in the contract
ratably on a tax-free basis over the expected stream of annuity payments, as
determined when annuity payments start. Once your investment in the Contract has
been fully recovered, however, the full amount of each annuity payment is
subject to tax as ordinary income.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of your death or the death of the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the Contract, or (ii) if distributed under a payment option, they are taxed in
the same way as annuity payments.
Transfers, Assignments or Exchanges of a Contract. A transfer or assignment
of ownership of a Contract, the designation of an annuitant, the selection of
certain Maturity Dates, or the exchange of a Contract may result in certain tax
consequences to you that are not discussed herein. An Owner contemplating any
such transfer, assignment or exchange should consult a tax adviser as to the tax
consequences.
Withholding. Annuity distributions are generally subject to withholding for
the recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.
Multiple Contracts. All Non-Qualified deferred annuity contracts that are
issued by us (or our affiliates) to the same owner during any calendar year are
treated as one annuity contract for purposes of determining the amount
includible in such owner's income when a taxable distribution occurs.
Further Information. We believe that the Contracts will qualify as annuity
contracts for Federal income tax purposes and the above discussion is based on
that assumption. Further details can be found in the Statement of Additional
Information under the heading "Tax Status of the Contracts."
Taxation of Qualified Contracts
The tax rules applicable to Qualified Contracts vary according to the type of
retirement plan and the terms and conditions of the plan. Your rights under a
Qualified Contract may be subject to the terms of the retirement plan itself,
regardless of the terms of the Qualified Contract. Adverse tax consequences may
result if you do not ensure that contributions, distributions and other
transactions with respect to the contract comply with the law.
Individual Retirement Accounts (IRAs), as defined in Sections 219 and 408 of the
Code, permit individuals to make annual contributions of up to the lesser of
$2,000 or 100% of adjusted gross income. The contributions may be deductible in
whole or in part, depending on the individual's income. Distributions from
certain pension plans may be "rolled over" into an IRA on a tax-deferred basis
without regard to these limits. Amounts in the IRA (other than nondeductible
contributions) are taxed when distributed from the IRA. A 10% penalty tax
generally applies to distributions made before age 59 1/2, unless certain
exceptions apply.
SIMPLE IRAs permit certain small employers to establish SIMPLE plans as provided
by Section 408(p) of the Code, under which employees may elect to defer to a
SIMPLE IRA a percentage of compensation up to $6,000 (as increased for cost of
living adjustments). The sponsoring employer is required to make matching or
non-elective contributions on behalf of employees. Distributions from SIMPLE
IRAs are subject to the same restrictions that apply to IRA distributions and
are taxed as ordinary income. Subject to certain exceptions, premature
distributions prior to age 59 1/2 are subject to a 10% penalty tax, which is
increased to 25% if the distribution occurs within the first two years after the
commencement of the employee's participation in the plan.
Roth IRAs, as described in Code section 408A, permit certain eligible
individuals to make non-deductible contributions to a Roth IRA in cash or as a
rollover or transfer from another Roth IRA or other IRA. A conversion of an IRA
to a Roth IRA is generally subject to tax and other special rules apply. The
Owner may wish to consult a tax adviser before combining any converted amounts
with any other Roth IRA contributions, including any other conversion amounts
from other tax years. Distributions from a Roth IRA generally are not taxed,
except that, once aggregate distributions exceed contributions to the Roth IRA,
income tax and a 10% penalty tax may apply to distributions made (1) before age
59 1/2 (subject to certain exceptions) or (2) during the five taxable years
starting with the year in which the first contribution is made to any Roth IRA.
A 10% penalty tax may apply to amounts attributable to a conversion from an IRA
if they are distributed during the five taxable years beginning in the year in
which the conversion was made.
The Internal Revenue Service has not reviewed the Contract for qualification as
a IRA, and has not addressed in a ruling of general applicability whether a
death benefit provision such as the provision in the Contract comports with IRA
qualification requirements.
Corporate pension and profit-sharing plans under Section 401(a) of the Code
allow corporate employers to establish various types of retirement plans for
employees, and self-employed individuals to establish qualified plans for
themselves and their employees. Adverse tax consequences to the retirement plan,
the participant or both may result if the contract is transferred to any
individual as a means to provide benefit payments, unless the plan complies with
all the requirements applicable to such benefits prior to transferring the
Contract. The Contract includes a death benefit that in some cases may exceed
the greater of the premium payments or the Contract Value. The death benefit
could be characterized as an incidental benefit, the amount of which is limited
in any pension or profit-sharing plan. Because the death benefit may exceed this
limitation, employers using the Contract in connection with such plans should
contact their tax advisor.
Tax Sheltered Annuities under section 403(b) of the Code allow employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the premium payments made, within certain limits, on a contract
that will provide an annuity for the employee's retirement. These premium
payments may be subject to FICA (social security) tax. Distributions of (1)
salary reduction contributions made in years beginning after December 31, 1988;
(2) earnings on those contributions; and (3) earnings on amounts held as of the
last year beginning before January 1, 1989, are not allowed prior to age 59 1/2,
separation from service, death or disability. Salary reduction contributions may
also be distributed upon hardship, but would generally be subject to penalties.
The Contract includes a death benefit that in some cases may exceed the greater
of the premium payments or the Contract Value. The death benefit could be
characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b). Because the death benefit may exceed
this limitation, employers using the Contract in connection with such plans
should contact their tax advisor.
Other Tax Issues. Qualified Contracts have minimum distribution rules that
govern the timing and amount of distributions. You should refer to your
retirement plan, adoption agreement, or consult a tax adviser for more
information about these distribution rules.
Distributions from Qualified Contracts generally are subject to withholding for
the Owner's federal income tax liability. The withholding rate varies according
to the type of distribution and the Owner's tax status. The Owner will be
provided the opportunity to elect not have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a) plans and Section 403(b)
annuities are subject to a mandatory federal income tax withholding of 20%. An
eligible rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions such as distributions required by the
Code or distributions in a specified annuity form. The 20% withholding does not
apply, however, if the Owner chooses a "direct rollover" from the plan to
another tax-qualified plan or IRA.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is always the
possibility that the tax treatment of the Contract could change by legislation
or otherwise. Consult a tax adviser with respect to legislative developments and
their effect on the Contract. We have the right to modify the Contract in
response to legislative changes that could otherwise diminish the favorable tax
treatment that Contract Owners currently receive. We make no guarantee regarding
the tax status of any Contact and do not intend the above discussion as tax
advice.
DISTRIBUTION OF THE CONTRACTS
We will offer the Contracts to the public on a continuous basis and we do not
anticipate discontinuing the offering of the Contracts. However, we have the
right to discontinue the offering. Applications for Contracts are solicited by
agents who are licensed by applicable state insurance authorities to sell our
variable annuity contracts and who are also registered representatives of Sunset
Financial Services, Inc. ("Sunset Financial"), one of our wholly-owned
subsidiaries, or of broker-dealers who have entered into written sales
agreements with Sunset Financial. Sunset Financial was incorporated in the state
of Washington on April 23, 1964 and the address is 3200 Capitol Blvd. South,
Olympia, WA 98501-3396. Sunset Financial is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc.
Sunset Financial acts as the Principal Underwriter, as defined in the 1940 Act,
of the Contracts for the Variable Account pursuant to an Underwriting Agreement
between Kansas City Life and Sunset Financial. Sunset Financial is not obligated
to sell any specific number of Contracts. Sunset Financial's principal business
address is P.O. Box 219365, Kansas City, Missouri 64121-9365. Sunset Financial
will receive commissions of up to 4.0% of premiums paid. In addition, we may pay
an asset-based commission of up to 0.25% of the Variable Account beginning in
the second Contract Year and up to 0.90% of the Variable Account beginning in
the eighth Contract Year. Additional amounts may be paid in certain
circumstances. All commissions paid to Sunset Financial will be paid out to
Sunset Financial's registered representatives. Compensation may also be paid in
the form of non-cash compensation, subject to applicable regulatory
requirements.
When policies are sold through other broker-dealers that have entered into
selling agreements with Sunset Financial Services, the commission which will be
paid by such broker-dealers to their representatives will be in accordance with
their established rules. The commission rates may be more or less than those set
forth above for Kansas City Life's representatives. In addition, their qualified
registered representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred. The broker-dealers will be compensated as provided in the selling
agreements, and Sunset Financial Services, Inc. will reimburse Kansas City Life
for such amounts and for certain other direct expenses in connection with
marketing the Contracts through other broker-dealers.
LEGAL PROCEEDINGS
Kansas City Life and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, Kansas City Life believes that at
the present time there are not pending or threatened lawsuits that are
reasonably likely to have a material adverse impact on the Variable Account or
Kansas City Life.
COMPANY HOLIDAYS
We are closed on days that the New York Stock Exchange is closed. Currently, the
New York Stock Exchange is closed on the following holidays: New Year's Day,
President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. The New York Stock Exchange recognizes holidays that fall on
a Saturday on the previous Friday, and holidays that fall on a Sunday on the
following Monday.
FINANCIAL STATEMENTS
The following financial statements for Kansas City Life are included in the
Statement of Additional Information:
o balance sheets as of December 31, 2000 and 1999; and
o related statements of income, stockholders' equity and cash flows for
each of the three years ended December 31, 2000.
The following reports for the Variable Account are included in the Statement of
Additional Information:
o financial statements for the Variable Account for the year ended
December 31, 2000, and
o related statement of operations and changes in net assets for the
periods ended December 31, 2000 and 1999.
Kansas City Life's financial statements should be distinguished from financial
statements of the Variable Account. You should consider Kansas City Life's
financial statements only as an indication of Kansas City Life's ability to meet
its obligations under the Contracts. You should not consider them as having an
effect on the investment performance of the assets held in the Variable Account.
CONDENSED FINANCIAL INFORMATION
The unit values and the number of accumulation units for each Subaccount for the
periods shown are as follows:
<TABLE>
<CAPTION>
No. of Units Unit Value No. of Units Unit Value No. of Units Unit Value
as of as of as of as of as of as of
12-31-00 12-31-00 1-1-00 12-31-99 12-31-99 1-1-99 12-31-98 12-31-98 1-1-98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFS
Emerging Growth Series 959,024 34.34 19.52 772,321 19.57 14.82
Research Series 854,627 22.00 18.15 770,593 18.23 15.01
Total Return Series 663,964 15.75 15.71 525,904 15.73 14.23
Utilities Series 779,090 23.78 18.78 476,246 18.63 15.96
Global Governments Series 37,881 10.39 10.89 32,531 10.83 10.16
Bond Series 248,885 11.42 11.84 228,058 11.83 11.29
American Century
VP Capital Appreciation 201,336 13.79 8.55 209,506 8.59 8.84
VP Income & Growth 127,360 7.84 N/A N/A N/A N/A
VP International 351,829 25.75 16.30 318,032 15.71 13.49
VP Value 119,093 5.75 N/A N/A N/A N/A
Federated
American Leaders Fund II 880,408 19.49 18.91 671,781 18.89 16.33
High Income Bond Fund II 725,350 13.19 13.12 629,345 13.10 12.94
Prime Money Fund II 1,637,233 11.54 11.19 732,947 11.19 10.81
International Small Company Fund
Dreyfus
Appreciation 850,787 15.29 14.07 522,930 14.08 11.07
Small Cap 1,022,402 13.05 10.87 916,842 10.95 11.45
Stock Index Fund 1,478,541 17.15 14.55 866,145 14.56 11.57
The Socially 46,470 39.60 N/A N/A N/A N/A
J. P. Morgan
U.S. Disciplined 64,227 18.28 N/A N/A N/A N/A
Small Company Portfolio 15,815 16.80 N/A N/A N/A N/A
Franklin Templeton
International Securities 42,265 22.10 N/A N/A N/A N/A
Franklin Small Cap Fund (Class 2)
Franklin Real Estate Fund (Class
Templeton Developing Markets
Calamos
Convertible Portfolio 175,917 12.08 N/A N/A N/A N/A
AIM
V.I. Dent Demographic Trends Fund
V.I. Telecommunications and
V.I. Value Fund
Seligman
Capital Portfolio (Class 2)
Communications and Information
Portfolio (Class 2)
</TABLE>
<TABLE>
<CAPTION>
No. of Units Unit Value No. of Units Unit Value No. of Units Unit Value
as of as of as of as of as of as of
12-31-97 12-31-97 1-1-97 12-31-96 12-31-96 1-1-96 12-31-95 12-31-95 9-6-95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFS
Emerging Growth Series 518,578 14.79 12.17 253,083 12.31 10.65 13,900 10.66 10.00
Research Series 516,667 14.99 12.51 190,114 12.64 10.49 19,430 10.48 10.00
Total Return Series 292,413 14.20 11.81 79,175 11.88 10.56 3,981 10.53 10.00
Utilities Series 204,977 16.00 12.21 32,814 12.32 10.58 11,752 10.54 10.00
Global Governments Series 36,847 10.17 10.39 22,139 10.44 10.39 9,423 10.17 10.00
Bond Series 94,899 11.23 10.29 58,082 10.34 10.29 1,273 10.27 10.00
American Century
VP Capital Appreciation 200,605 8.90 9.15 147,134 9.33 9.91 11,998 9.89 10.00
VP Income & Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A
VP International 188,540 13.41 11.37 77,422 11.47 10.24 12,190 10.16 10.00
VP Value N/A N/A N/A N/A N/A N/A N/A N/A N/A
Federated
American Leaders Fund II 341,341 16.29 12.43 94,537 12.48 10.50 15,359 $10.41 $10.00
High Income Bond Fund II 348,642 12.93 11.52 88,100 11.52 10.23 11,792 10.22 10.00
Prime Money Fund II 141,386 10.81 10.45 53,502 10.45 10.12 11,335 10.07 10.00
International Small Company Fund
Dreyfus
Appreciation 154,014 10.97 N/A N/A N/A N/A N/A N/A N/A
Small Cap 349,294 11.50 N/A N/A N/A N/A N/A N/A N/A
Stock Index Fund 355,380 11.52 N/A N/A N/A N/A N/A N/A N/A
The Socially N/A N/A N/A N/A N/A N/A N/A N/A N/A
J. P. Morgan
U.S. Disciplined N/A N/A N/A N/A N/A N/A N/A N/A N/A
Small Company Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
Franklin Templeton
International Securities N/A N/A N/A N/A N/A N/A N/A N/A N/A
Franklin Small Cap Fund (Class 2)
Franklin Real Estate Fund (Class
Templeton Developing Markets N/A N/A N/A
AIM
V.I. Dent Demographic Trends Fund
V.I. Telecommunications and
V.I. Value Fund
Seligman
Capital Portfolio (Class 2)
Communications and Information
Portfolio (Class 2)
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS................................................ 1
The Contract......................................................... 1
Incontestability..................................................... 1
Misstatement of Age or Sex........................................... 1
Non-Participation.................................................... 1
Tax Status of the Contracts ......................................... 1
CALCULATION OF YIELDS AND TOTAL RETURNS....................................... 2
Federated Prime Money Fund II Subaccount Yields...................... 2
Other Subaccount Yields.............................................. 4
Standard Subaccount Average Annual Total Returns..................... 7
Effect of the Annual Administration Fee on Performance Data..........11
TERMINATION OF PARTICIPATION AGREEMENTS...................................... 11
SAFEKEEPING OF ACCOUNT ASSETS................................................ 13
STATE REGULATION............................................................. 13
RECORDS AND REPORTS.......................................................... 14
LEGAL MATTERS................................................................ 14
EXPERTS...................................................................... 14
OTHER INFORMATION............................................................ 14
FINANCIAL STATEMENTS......................................................... 14
To order a copy of the Statement of Additional Information you must complete and
mail the form below, or you may call (800) 616-3670 to order a copy.
To: Kansas City Life Insurance Company
Variable Administration Department
P.O. Box 219364
Kansas City, Missouri 64121-9364
Please mail a copy of the Statement of Additional Information for the Kansas
City Life Variable Annuity Separate Account to:
Name:___________________________________________________________________________
Address:________________________________________________________________________
Street
________________________________________________________________________________
City State Zip
Signature of Requestor:_________________________________________________________
Date:___________________________________________________________________________
PART B
STATEMENT OF ADDITIONAL INFORMATION
Kansas City Life Insurance Company
3520 Broadway
P.O. Box 219364
Kansas City, Missouri 64121-9364
(800) 616-3670
Statement Of Additional Information
Kansas City Life Variable Annuity Separate Account
Individual Flexible Premium Deferred Variable Annuity Contract
This Statement of Additional Information contains information in addition to the
information described in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") we offer. This Statement of
Additional Information is not a Prospectus and you should read it only in
conjunction with the Prospectus for the Contract and the prospectuses for the
Funds. The Prospectus is dated the same as this Statement of Additional
Information. You may obtain a copy of the Prospectus by writing or calling
Kansas City Life at the address or phone number shown above.
The date of this Statement of Additional Information is May 1, 2001.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS.................................................1
The Contract...................................................................1
Incontestability...............................................................1
Misstatement of Age or Sex.....................................................1
Non-Participation..............................................................1
Tax Status of the Contracts....................................................1
Control of the contract........................................................2
Ownership......................................................................2
Assignment.....................................................................2
Beneficiary....................................................................2
Simultaneous Death of Beneficiary and Annuitant................................3
CALCULATION OF YIELDS AND TOTAL RETURNS........................................3
Federated Prime Money Fund II Subaccount Yields................................3
Other Subaccount Yields........................................................4
Standard Subaccount Average Annual Total Returns...............................7
Effect of the Annual Administration Fee on Performance Data...................12
TERMINATION OF PARTICIPATION AGREEMENTS.......................................12
SAFEKEEPING OF ACCOUNT ASSETS.................................................15
STATE REGULATION..............................................................15
RECORDS AND REPORTS...........................................................15
LEGAL MATTERS.................................................................16
EXPERTS.......................................................................16
OTHER INFORMATION.............................................................16
FINANCIAL STATEMENTS..........................................................16
ADDITIONAL CONTRACT PROVISIONS
The Contract
The entire Contract is made up of the contract and the application. The
statements made in the application are deemed representations and not
warranties. We cannot use any statement to deny a claim or to void the Contract
unless it is in the application and we attach a copy of the application to the
Contract at issue.
Incontestability
We will not contest the Contract after it has been in force during the
Annuitant's lifetime for two years from the Contract Date of the Contract.
Misstatement of Age or Sex
If the age or sex of the Annuitant has been misstated, the amount that we will
pay is the amount that the proceeds would have purchased at the correct age and
sex.
If we make an overpayment because of an error in age or sex, the overpayment
plus interest at 3% (compounded annually) will be a debt against the Contract.
If you do not repay this amount, we will reduce future payments accordingly.
If an underpayment is made because of an error in age or sex, we will calculate
any annuity payments at the correct age and sex and we will adjust future
payments. We will pay the underpayment with interest at 3% (compounded annually)
in a single sum.
Non-Participation
The Contract is not eligible for any dividends and will not participate in our
surplus earnings.
Tax Status of the Contracts
Tax law imposes several requirements that variable annuities must satisfy in
order to receive the tax treatment normally accorded to annuity contracts.
Diversification Requirements. The Internal Revenue Code ("Code") requires
that the investments of each investment division of the separate account
underlying the contracts be "adequately diversified" in order for the Contracts
to be treated as annuity contracts for Federal income tax purposes. It is
intended that the Variable Account, through each Portfolio of the Funds, will
satisfy these diversification requirements.
Owner Control. In certain circumstances, owners of variable annuity
contracts have been considered for Federal income tax purposes to be the owners
of the assets of the separate account supporting their contracts due to their
ability to exercise investment control over those assets. When this is the case,
the contract owners have been currently taxed on income and gains attributable
to the variable account assets. There is little guidance in this area, and some
features of the Contract, such as the flexibility of an Owner to allocate
premium payments and transfer amounts among the investment divisions of the
separate account, have not been explicitly addressed in published rulings. While
we believe that the Contract does not give an Owner investment control over
separate account assets, we reserve the right to modify the Contract as
necessary to prevent an Owner from being treated as the owner of the separate
account assets supporting the Contract.
Required Distributions. In order to be treated as an annuity contract for
Federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to contain certain provisions specifying how your
interest in the Contract will be distributed in the event of the death of an
Owner of the Contract. Specifically, section 72(s) requires that: (a) if any
Owner dies on or after the annuity starting date, but prior to the time the
entire interest in the Contract has been distributed, the entire interest in the
Contract will be distributed at least as rapidly as under the method of
distribution being used as of the date of such Owner's death; and (b) if any
Owner dies prior to the annuity starting date, the entire interest in the
Contract will be distributed within five years after the date of such Owner's
death. These requirements will be considered satisfied as to any portion of an
Owner's interest which is payable to or for the benefit of a designated
Beneficiary and which is distributed over the life of such designated
Beneficiary or over a period not extending beyond the life expectancy of that
Beneficiary, provided that such distributions begin within one year of the
Owner's death. The designated Beneficiary refers to a natural person designated
by the Owner as a Beneficiary and to whom ownership of the Contract passes by
reason of death. However, if the designated Beneficiary is the surviving spouse
of the deceased Owner, the Contract may be continued with the surviving spouse
as the new Owner.
The Non-Qualified Contracts contain provisions that are intended to comply with
these Code requirements, although no regulations interpreting these requirements
have yet been issued. We intend to review such provisions and modify them if
necessary to assure that they comply with the applicable requirements when such
requirements are clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
CONTROL OF THE CONTRACT
Ownership
The Annuitant is the owner unless otherwise provided in the application. As
owner, you may exercise every right provided by your contract. These rights and
privileges end at the Annuitant's death.
The consent of the beneficiary is required to exercise these rights if you have
not reserved the right to change the beneficiary.
Change of Ownership
You may change the ownership of this contract by giving written notice to us.
The change will be effective on the date your written notice was signed but will
have no effect on any payment made or other action taken by us before we receive
it. We may require that the contract be submitted for endorsement to show the
change.
Certain federal income tax consequences may apply to a change of ownership on
non-qualified contracts. You should consult with your tax advisor before
requesting any change of ownership on a non-qualified contract.
Assignment
An assignment is a transfer of some or all of your rights under this contract.
No assignment will be binding on us unless made in writing and filed at our Home
Office. We assume no responsibility for the validity or effect of any
assignment.
Certain federal income tax consequences may apply to an assignment. You should
consult with your tax advisor before requesting any assignment.
Beneficiary
The beneficiary is shown on the application or in the last beneficiary
designation filed with us. Death proceeds will be paid to the beneficiary except
as provided in this Section.
If any beneficiary dies before the Annuitant, that beneficiary's interest will
pass to any other beneficiaries according to their respective interest.
If all beneficiaries die before the Annuitant, we will pay the death proceeds to
you, if living, otherwise to your estate or legal successors.
Unless you have waived the right to do so, you may change the beneficiary by
filing a written notice in a form satisfactory to us. In order to be effective,
the written notice for change of beneficiary must be signed while your contract
is in force and the Annuitant is living. The change will be effective on the
date your written notice was signed but will have no effect on any payment made
or other action taken by us before we receive it.
The interest of any beneficiary will be subject to:
(1) any assignment of this contract which is binding on us; and
(2) any optional settlement agreement in effect at the Annuitant's death.
Simultaneous Death of Beneficiary and Annuitant
We will pay death proceeds as though the beneficiary died before the Annuitant
if:
(1) the beneficiary dies at the same time as or within 15 days of the
Annuitant's death; and
(2) we have not paid the proceeds to the beneficiary within this 15-day
period.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, we may disclose yields, total returns, and other performance
data pertaining to the Contracts for a Subaccount. Such performance data will be
computed, or accompanied by performance data computed, in accordance with the
standards defined by the SEC.
Because of the charges and deductions imposed under a Contract, the yield for
the Subaccounts will be lower than the yield for their respective Portfolios.
The calculations of yields, total returns, and other performance data do not
reflect the effect of any premium tax that may be applicable to a particular
Contract. Premium taxes currently range from 0% to 3.5% of premium based on the
state in which the Contract is sold.
Federated Prime Money Fund II Subaccount Yields
From time to time, advertisements and sales literature may quote the current
annualized yield of the Federated Prime Money Fund II Subaccount for a seven-day
period in a manner that does not take into consideration any realized or
unrealized gains or losses, or income other than investment income, on shares of
the Federated Prime Money Fund II or on its portfolio securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation and exclusive of income other than investment
income) at the end of the seven-day period in the value of a hypothetical
account under a Contract having a balance of one unit of the Federated Prime
Money Fund II Subaccount at the beginning of the period, dividing such net
change in account value by the value of the hypothetical account at the
beginning of the period to determine the base period return, and annualizing
this quotient on a 365-day basis.
The net change in account value reflects:
1) net income from the Federated Prime Money Fund II attributable to the
hypothetical account; and
2) charges and deductions imposed under the Contract which are attributable to
the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for:
1) the annual administration fee,
2) the asset-based administration charge, and
3) the mortality and expense risk charge.
For purposes of calculating current yields for a Contract, an average per unit
administrative fee is used based on the $30 annual administration fee deducted
at the beginning of each Contract Year and an assumed account size equal to the
subaccount's average account size. Current Yield will be calculated according to
the following formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Portfolio (exclusive of realized
gains or losses on the sale of securities and unrealized appreciation
and depreciation and exclusive of income other than investment income)
for the seven-day period attributable to a hypothetical account having
a balance of one subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the
seven-day period.
UV = the unit value for the first day of the seven-day period.
365/7
Effective Yield = (1 + ((NCS-ES)/UV)) - 1
Where:
NCS = the net change in the value of the Portfolio (exclusive of realized
gains or losses on the sale of securities and unrealized appreciation
and depreciation and exclusive of income other than investment income)
for the seven-day period attributable to a hypothetical account having
a balance of one subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the
seven-day period.
UV = the unit value for the first day of the seven-day period.
Because of the charges and deductions imposed under the Contract, the yield for
the Federated Prime Money Subaccount will be lower than the yield for the
Federated Prime Money Fund II.
The current and effective yields on amounts held in the Federated Prime Money
Fund II Subaccount normally will fluctuate on a daily basis. Therefore, the
disclosed yield for any given past period is not an indication or representation
of future yields or rates of return. The Federated Prime Money Fund II
Subaccount's actual yield is affected by:
o changes in interest rates on money market securities;
o average portfolio maturity of the Federated Prime Money Fund II;
o the types and quality of portfolio securities held by the Federated
Prime Money Fund II; and
o the Federated Prime Money Fund II's operating expenses.
Yields on amounts held in the Federated Prime Money Fund II Subaccount may also
be presented for periods other than a seven-day period.
The current and effective yields for the Federated Prime Money Fund II
subaccount for the seven-day period ended December 31, 2000 was x.xx% and y.yy%,
respectively.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the Subaccounts (except the Federated Prime
Money Fund II Subaccount) for a Contract for 30-day or one-month periods. The
annualized yield of a Subaccount refers to income generated by the Subaccount
during a 30-day or one-month period that is assumed to be generated each period
over a 12-month period.
The yield is computed by:
1) dividing the net investment income of the Portfolio attributable to the
Subaccount units less Subaccount expenses for the period; by
2) the maximum offering price per unit on the last day of the period times the
daily average number of units outstanding for the period; by
3) compounding that yield for a six-month period; and by
4) multiplying that result by two. Expenses attributable to the Subaccount
include the annual administration fee, asset-based administration charge,
and mortality and expense risk charge.
The yield calculation assumes an annual administration fee of $30 per year per
Contract deducted at the beginning of each Contract Year. For purposes of
calculating the 30-day or one-month yield, an average annual administration fee
per dollar of Contract value in the Account is used to determine the amount of
the charge attributable to the Subaccount for the 30-day or one-month period.
The 30-day or one-month yield is calculated according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV)) + 1)6 - 1)
Where:
NI = net income of the Portfolio for the 30-day or one-month period
attributable to the Subaccount's units.
ES = expenses of the Subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
UV = the unit value at the close of the last day in the 30-day one-month
period.
Because of the charges and deductions imposed under the Contracts, the yield for
the Subaccount will be lower than the yield for the corresponding Funds'
Portfolio.
The yield on the amounts held in the Subaccounts normally will fluctuate over
time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. A Subaccount's
actual yield is affected by the types and quality of portfolio securities held
by the corresponding Portfolio and its operating expenses.
Yield calculations do not take into account the surrender charge under the
Contract. The surrender charge is calculated as a percentage of your premium
payment being surrendered or withdrawn during the applicable Premium Year. The
amount of the surrender charge decreases over time, measured from the date the
premium payment is applied. The initial surrender charge is 8%, decreasing to 0
after eight Premium Years. Subject to certain restrictions, a surrender charge
will not be imposed upon surrender or on the first partial surrender in any
Contract year on an amount up to 10% of the Contract Value as of the beginning
of the Contract Year.
Subaccount Yields for 30-day Period Ended December 31, 2000
Subaccount Yields
for the 30 Day Period
Fund Manager Subaccount ending 12/31/2000
MFS Emerging Growth
Research
Total Return
Utilities
Global Gov't
Bond
AMER. CENTURY VP Capital Appreciation
VP Income And Growth
VP International
VP Value
FEDERATED American Leaders Fund II
High Income Bond Fund II
Prime Money Fund II
International Small Company Fund II
DREYFUS Appreciation
Small Capitalization
Stock Index
Socially Responsible
J.P. MORGAN U.S. Disciplined Equity
Small Company Portfolio
FRANKLIN International Securities
TEMPLETON Fund Class 2
Franklin Small Cap Fund (Class 2)
Franklin Real Estate Fund (Class 2)
CALAMOS Convertible
AIM V.I. Dent Demographic Trends Fund
V.I. Telecommunications And
Technology Fund
V.I. Value Fund
SELIGMAN Capital Portfolio (Class 2)
Communications And Information
Portfolio
Note: These yields are shown on an annualized basis
Standard Subaccount Average Annual Total Returns
From time to time, sales literature or advertisements may also quote standard
subaccount average annual total returns for the Subaccounts for various periods
of time.
When a Subaccount has been in operation for one, five and 10 years,
respectively, the standard subaccount average annual total return for these
periods will be provided. Standard subaccount average annual total returns for
other periods of time may, from time to time, also be disclosed.
Standard subaccount average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent month-end practicable,
considering the type and media of the communication that will be stated in the
communication.
We will calculate standard subaccount average annual total returns using
Subaccount unit values which we calculate on each valuation day based on:
o the performance of the Subaccount's underlying Portfolio;
o the deductions for the annual administration fee;
o asset-based administration charge; and
o mortality and expense risk charge.
The calculation assumes that the annual administration fee is $30 per year per
Contract deducted at the beginning of each Contract year. For purposes of
calculating average annual total return, an average per dollar annual
administration fee attributable to the hypothetical account for the period is
used based on an account size equal to the subaccount's average account size.
The calculation also assumes surrender of the Contract at the end of the period
for the return quotation. Standard subaccount average annual total returns will
therefore reflect a deduction of the surrender charge for any period less than
eight years.
The total return will then be calculated according to the following formula:
TR = ((ERV/P)1/N) - 1
Where:
TR = the standard subaccount average annual total return net of
Subaccount recurring charges.
ERV = the ending redeemable value (net of any applicable surrender charge)
of the hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
The standard subaccount average annual total returns for the Subaccounts for the
period of each Subaccount's operations during 2000 are presented below.
Standard Subaccount Average Annual Total Returns
<TABLE>
One Year Three Year Since
Return From Return From Inception Subaccount
Fund 1/1/1999 to 1/1/1997 to Return to Inception
Manager Subaccount 12/31/2000 12/31/2000 12/31/2000 Date
<S> <C> <C> <C> <C> <C>
MFS Emerging Growth Sept 6, 1995
Research Sept 6, 1995
Total Return Sept 6, 1995
Utilities Sept 6, 1995
Global Gov't Sept 6, 1995
Bond Sept 6, 1995
AMER. CENTURY VP Capital Appreciation Sept 6, 1995
VP Income & Growth May 1, 1999
VP International Sept 6, 1995
VP Value May 1, 1999
FEDERATED American Leaders Fund II Sept 6, 1995
High Income Bond Fund II Sept 6, 1995
Prime Money Fund II Sept 6, 1995
International Small Company Fund II Aug 29, 2000
DREYFUS Appreciation May 1, 1997
Small Capitalization May 1, 1997
Stock Index May 1, 1997
Socially Responsible May 1, 1999
J.P. MORGAN U.S. Disciplined Equity Portfolio May 1, 1999
Small Company Portfolio May 1, 1999
FRANKLIN International Securities Fund Class 2 May 1, 1999
TEMPLETON Franklin Small Cap Fund (Class 2) Aug 29, 2000
Franklin Real Estate Fund (Class 2) Aug 29, 2000
Templeton Developing Markets Aug 29, 2000
Securities Fund (Class 2)
CALAMOS Convertible May 1, 1999
AIM V.I. Dent Demographic Trends Fund Aug 29, 2000
V.I. Telecommunications And Aug 29, 2000
Technology Fund
V.I. Value Fund Aug 29, 2000
SELIGMAN Capital Portfolio (Class 2) Aug 29, 2000
Communications And Information Aug 29, 2000
Portfolio(Class 2)
</TABLE>
Other Total Returns
Adjusted Historic Portfolio Average Annual Total Return. From time to time,
sales literature or advertisements may also quote total returns for periods
prior to the date the Variable Account began operations. Such performance
information will be calculated based on the performance of the Portfolios and
the assumption that the Subaccounts were in existence for the same periods as
those indicated for the Portfolios, with the level of Contract charges currently
in effect.
Such Adjusted Historic Portfolio Average Annual Total Return information
(including deduction of the surrender charge) is as follows:
Adjusted Historic Portfolio Average Annual Total Returns (Net of Surrender
Charge)
<TABLE>
From
For the For the For the Inception of
1-year Period 3-year Period 5-year Period Series Fund
Inception Date Ended Ended Ended Ended
Portfolio 12/31/2000 12/31/2000 12/31/2000 12/31/2000
<S> <C> <C> <C> <C> <C> <C>
MFS Emerging Growth July 25, 1995
Research July 28, 1995
Total Return Jan. 3, 1995
Utilities Jan. 3, 1995
Global Gov't June 14, 1994
Bond Oct. 24, 1995
AMERICAN VP Capital Appreciation Nov. 20, 1987
CENTURY VP Income And Growth Nov.1, 1997
VP International May 1, 1994
VP Value May 1, 1996
FEDERATED American Leaders Feb.10, 1994
Fund II
High Income Bond March 1, 1994
Fund II
Prime Money Fund II Nov.11, 1994
International Small Company Fund II
DREYFUS Appreciation April 5, 1993
Small Capitalization Aug. 31, 1990
Stock Index Sept. 29, 1989
Socially Responsible Oct. 1, 1993
J.P. MORGAN U.S. Disciplined Jan. 3, 1995
Equity Portfolio
Small Company Portfolio Jan. 3, 1995
FRANKLIN International Securities Fund Class 2 May 1, 1992
TEMPLETON Franklin Small Cap Fund (Class 2) Nov 1, 1995
Franklin Real Estate Fund (Class 2) Jan 24, 1989
Templeton Developing Markets Mar 4, 1996
Securities Fund (Class 2)
CALAMOS Convertible May 1, 1999
AIM V.I. Dent Demographic Trends Fund Dec 29, 1999
V.I. Telecommunications And Oct 18, 1993
Technology Fund
V.I. Value Fund May 5, 1993
SELIGMAN Capital Portfolio (Class 2) Jun 21, 1988
Communications And Information Oct 11, 1994
Portfolio (Class 2)
</TABLE>
From time to time, sales literature or advertisements may also quote Adjusted
Historic Portfolio Average Annual Total Returns that do not reflect the
surrender charge. These are calculated in exactly the same way as the Adjusted
Historic Portfolio Average Annual Total Returns described above, except that the
ending redeemable value of the hypothetical account for the period is replaced
with an ending value for the period that does not take into account any charges
on amounts surrendered.
Such Adjusted Historic Portfolio Average Annual Total Return information (not
including deduction of the surrender charge) is as follows:
Adjusted Historic Portfolio Average Annual Total Returns (No Surrender Charge
Deducted)
<TABLE>
From
For the For the For the Inception of
1-year Period 3-year Period 5-year Period Series Fund
Inception Date Ended Ended Ended Ended
Portfolio 12/31/2000 12/31/2000 12/31/2000 12/31/2000
<S> <C> <C> <C> <C> <C> <C>
MFS Emerging Growth July 25, 1995
Research July 28, 1995
Total Return Jan. 3, 1995
Utilities Jan. 3, 1995
Global Gov't June 14, 1994
Bond Oct. 24, 1995
AMER. CENTURY VP Capital Appreciation Nov. 20, 1987
VP Income And Growth Nov.1, 1997
VP International May 1, 1994
VP Value May 1, 1996
FEDERATED American Leaders Feb.10, 1994
Fund II
High Income Bond March 1, 1994
Fund II
Prime Money Fund II Nov.11, 1994
International Small Company Fund II
DREYFUS Appreciation April 5, 1993
Small Capitalization Aug. 31, 1990
Stock Index Sept. 29, 1989
Socially Responsible Oct. 1, 1993
J.P. MORGAN U.S. Disciplined Jan. 3, 1995
Equity Portfolio
FRANKLIN International Securities Fund Class 2 May 1, 1992
TEMPLETON Franklin Small Cap Fund (Class 2) Nov 1, 1995
Franklin Real Estate Fund (Class 2) Jan 24, 1989
Templeton Developing Markets Mar 4, 1996
Securities Fund (Class 2)
CALAMOS Convertible May 1, 1999
AIM V.I. Dent Demographic Trends Fund Dec 29, 1999
V.I. Telecommunications And Oct 18, 1993
Technology Fund
V.I. Value Fund May 5, 1993
SELIGMAN Capital Portfolio (Class 2) Jun 21, 1988
Communications And Information Oct 11, 1994
Portfolio (Class 2)
</TABLE>
We may disclose cumulative total returns in conjunction with the standard
formats described above. The cumulative total returns will be calculated using
the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Subaccount recurring charges for
the period.
ERV = The ending redeemable value of the hypothetical investment at the
end of the period.
P = A hypothetical single payment of $1,000.
Effect of the Annual Administration Fee on Performance Data
The Contract provides for a $30 annual administration fee (waived for Contracts
with a Contract Value of at least $50,000 at the beginning of the Contract Year)
to be deducted annually at the beginning of each Contract Year, from the
Subaccounts and the Fixed Account based on the proportion that the value of each
such account bears to the total Contract Value. For purposes of reflecting the
annual administration fee in yield and total return quotations, the annual
charge is converted into a per-dollar per-day charge based on the average
Contract Value in the Variable Account of all Contracts on the last day of the
period for which quotations are provided. The per-dollar per-day average charge
will then be adjusted to reflect the basis upon which the particular quotation
is calculated.
Kansas City Life may receive compensation from the investment adviser of a Fund
(or affiliates thereof) and/or from the Fund's 12b-1 fees in connection with
administration, distribution, or other services provided with respect to the
Fund and their availability through the Contracts. The amount of this
compensation is based upon a percentage of the assets of the Fund attributable
to the Contracts, and in some cases, other contracts issued by Kansas City Life.
These percentages range from 0.15% to 0.25% of net assets.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sells their shares to
the Variable Account contain provisions regarding termination. The following
summarizes those provisions:
MFS Variable Insurance Trust. This agreement provides for termination: (1)
on six months' advance written notice by any party; (2) at Kansas City
Life's option if shares of the Fund are not reasonably available to meet
the requirements of the Contracts or are not "appropriate funding vehicles"
for the Contracts, as reasonably determined by Kansas City Life; (3) at the
option of the Fund or Massachusetts Financial Services Company ("MFS"), the
Fund's investment adviser, upon institution of certain proceedings against
Kansas City Life; (4) at Kansas City Life's option upon institution of
certain enforcement proceedings against the Fund; (5) at the option of
Kansas City Life, the Fund or MFS upon receipt of any necessary regulatory
approvals and/or the vote of Contract Owners to substitute the shares of
another investment company for shares of the Fund; (6) by the Fund or MFS
upon written notice to Kansas City Life upon a determination that Kansas
City Life has suffered a material adverse change in its business,
operations, financial condition, or prospects; (7) by Kansas City Life upon
written notice to the Fund and MFS upon a determination that the Fund or
MFS has suffered a material adverse change in its business, operations,
financial condition, or prospects; (8) at any party's option upon another
party's material breach of any provision of the agreement; or (9) upon
assignment of the agreement, unless made with the written consent of all
parties.
American Century Variable Portfolios, Inc. This agreement provides for
termination: (1) on six months' advance written notice by any party; (2) at
Kansas City Life's option if the Fund's shares are not available for any
reason to meet the requirements of the Contracts; (3) at the option of
either Kansas City Life, the Fund, or American Century Investment
Management, Inc. upon institution of certain proceedings against any person
marketing the Contracts, the Variable account, Kansas City Life, the Fund,
or American Century Investment Management, Inc.; (4) upon termination of
the advisory agreement between the Fund and American Century Investment
Management, Inc.; (5) upon vote of Contract Owners to substitute the shares
of another investment company for the shares of the Fund, or similar
regulatory approval; (6) upon assignment of the agreement, unless made with
written consent of all parties, (7) upon a determination that continuing to
perform under the agreement would violate applicable federal or state law,
rule, regulation, or judicial order; (8) at the option of Kansas City Life
if the Fund fails to meet the requirements of applicable diversification
requirements; (9) upon a determination that a party has experienced a
material adverse change in its business operations or financial condition,
or is the subject of substantial adverse publicity; or (10) as a result of
any other breach by a non-affiliated party.
Federated Insurance Series. This agreement provides for termination: (1) on
180 days advance written notice by any party; (2) at Kansas City Life's
option if the Fund's shares are not reasonably available to meet the
requirements of the Contracts; (3) at the option of the Fund or Federated
Securities Corp., the Fund's distributor (the "Distributor") upon
institution of certain proceedings against Kansas City Life or its agent;
(4) at Kansas City Life's option upon institution of certain proceedings
against the Fund or the Distributor; (5) upon vote of Contract Owners to
substitute the shares of another investment company for the shares of the
Fund, or similar regulatory approval; (6) in the event any of the Fund's
shares are not registered, issued or sold in accordance with applicable
law, or such law precludes the use of such shares to fund the Contracts;
(7) by any party upon a determination by a majority of the Fund's trustees,
or a majority of its disinterested trustees, that an irreconcilable
conflict exists; (8) at the option of Kansas City Life if the Fund fails to
meet the requirements of applicable diversification requirements; or (9) by
any party upon another party's failure to cure a material breach of the
agreement within 30 days after written notice thereof.
Dreyfus Variable Investment Fund, Dreyfus Stock Index Fund and The Dreyfus
Socially Responsible Growth Fund, Inc. This agreement provides for
termination as to any of the Funds: (1) on 180 days' advance written notice
by any party; (2) at Kansas City Life's option if the Fund's shares are not
available for any reason to meet the requirements of the Contracts; (3) at
the option of the Fund or The Dreyfus Corporation upon institution of
certain proceedings against Kansas City Life; (4) at Kansas City Life's
option upon institution of certain enforcement proceedings against the
Fund; (5) upon termination of the Investment Advisory Agreement between the
Fund and The Dreyfus Corporation or its successors unless Kansas City Life
specifically approves the selection of a new Fund investment adviser; (6)
upon a determination that shares of the Fund or the variable products are
not registered, issued or sold in conformity with federal or state laws or
that Fund shares may no longer be used as an investment medium for variable
products; (7) at the option of the Fund or The Dreyfus Corporation upon a
determination that Kansas City Life has suffered a material adverse change
in its business, operations, financial condition, or prospects; (8) at
Kansas City Life's option a determination that the Fund or The Dreyfus
Corporation has suffered a material adverse change in its business,
operations, financial condition, or prospects; (9) at either party's option
upon the other party's material breach of any provision of the Agreement
and failure to remedy the breach within 30 days; or (10) upon assignment of
the agreement, unless made with the written consent of all parties; (11) at
the option of the Fund upon a determination by its Board in good faith that
it is no longer advisable and in the best interests of shareholders of that
Fund to continue to operate pursuant to this agreement; (12) at the option
of the Fund if the Contracts cease to qualify as annuity contracts or life
insurance policies, as applicable, under the Internal Revenue Code, or if
the Fund reasonably believes that the Contracts may fail to qualify; or
(13) if the Fund fails to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, or fails to manage and invest in
a manner that complies with the requirements of Section 817(h) of the
Internal Revenue Code.
J.P. Morgan Series Trust II. This agreement provides for termination: (1)
on 180 days' notice by any party; (2) by Kansas City Life if shares of any
Series are not available to meet the requirements of the Contracts; (3) by
Kansas City Life upon the institution of formal proceedings against the
Fund by the SEC, NASD or any other regulatory body; (4) by the Fund, upon
the institution of formal proceedings against Kansas City Life by the SEC,
NASD, or any other regulatory body; (5) by the Fund upon determination that
Kansas City Life has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity; (6)
upon termination of the Investment Advisory Agreement between the Fund and
its investment adviser or its successors unless Kansas City Life
specifically approves the selection of the new Fund investment adviser; (7)
upon a determination that the Fund's shares are not registered, issued or
sold in accordance with applicable federal law or that Fund shares may no
longer be used as an investment medium for Contracts; (8) by the Fund upon
a determination by its Board in good faith that it is no longer advisable
and in the best interests of shareholders of that Fund to continue to
operate pursuant to this agreement; (9) by the Fund if the Contracts cease
to qualify as annuity contracts or life insurance policies, as applicable,
under the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify; (10) by either party, upon the other party's failure to
cure a breach of any material provision within 30 days after written notice
thereof; (11) by the Fund, if the Contracts are not registered, issued or
sold in accordance with applicable federal and/or state law; (12) upon
assignment of this agreement, unless made with the written consent of the
non-assigning party; (13) by Kansas City Life upon a determination that the
Fund has suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity; (14) if the Fund
fails to qualify as a regulated investment company under Subchapter M of
the Code or fails to comply with the requirements of Section 817(h) of the
Code.
Franklin Templeton Variable Insurance Products Trust. This agreement
provides for termination: (1) by any party in its entirety or with respect to
one, some or all Portfolios for any reason by sixty (60) days advance written
notice delivered to the other parties, and shall terminate immediately in the
event of its assignment, as that term is used in the 1940-Act; or (2)
immediately by Franklin Templeton Variable Insurance Products Trust or Franklin
Templeton Distributors, Inc. by written notice if (a) Kansas City Life notifies
the Trust or the Underwriter that the exemption from registration under
Section-3(c) of the 1940-Act no longer applies, or might not apply in the
future, to the unregistered accounts, or that the exemption from registration
under Section-4(2) or Regulation-D promulgated under the 1933-Act no longer
applies or might not apply in the future, to interests under the unregistered
contracts; or (b) either one or both of the Trust or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that Kansas City Life has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this agreement or
are the subject of material adverse publicity; or (c) Kansas City Life gives
written notice specified in Section-3.3 of the agreement and at the same time
gives such notice there was no notice of termination outstanding under any other
provision of this agreement; provided, however, that any termination under this
provision shall be effective forty-five (45) days after the notice specified in
Section-3.3 of the agreement was given; or (d) upon Kansas City Life's
assignment of this agreement without prior written approval.
Calamos Advisors Trust. This agreement provides for termination: (1) on six
months' advance written notice by any party; (2) by Kansas City Life if the
Fund's shares are not available to meet the requirements of the Contracts; (3)
by Kansas City Life upon a determination that shares of the Fund are not
registered, issued or sold in accordance with applicable state and/or federal
securities laws or such law precludes the use of such shares to fund the
Contracts; (4) by the Fund, Calamos Advisors Trust or Calamos Financial
Services, Inc. upon institution of certain proceedings against Kansas City Life
or any affiliate; (5) by Kansas City Life upon the institution of certain
proceedings against the Fund, Calamos Advisors Trust or Calamos Financial
Services, Inc.; (6) by Kansas City Life in the event that the Fund, Calamos
Advisors Trust or Calamos Financial Services, Inc. ceases to qualify or Kansas
City Life reasonably believes it/they may fail to qualify as a regulated
investment company under Subchapter M or fails to comply with Section 817(h)
diversification requirements; (7) by the Fund, Calamos Advisors Trust or Calamos
Financial Services, Inc. if the Contracts fail to meet the qualifications
specified in the agreement; (8) by the Fund, Calamos Advisors Trust or Calamos
Financial Services, Inc. if it is determined that Kansas City Life has suffered
a material and adverse change in its business, operations, financial condition,
insurance company rating or prospects or is the subject of material adverse
publicity; (9) by Kansas City Life if it is determined that the Fund, Calamos
Advisors Trust or Calamos Financial Services, Inc. has suffered a material
adverse change in its business, operations, financial condition or prospects or
is the subject of material adverse publicity; (10) by Kansas City Life (as one
party) or by the Fund, Calamos Advisors Trust or Calamos Financial Services,
Inc. (as one party) upon the other party's material breach of any provision of
this agreement upon 30 days written notice and opportunity to cure.
AIM Variable Insurance Funds. This agreement (as to a Fund) provides for
termination: (1) at the option of any party, with or without cause, upon six (6)
months advance written notice to the other parties, or, if later, upon receipt
of any required exemptive relief from the SEC, unless otherwise agreed to in
writing by the parties; (2) at the option of AIM Variable Insurance Funds upon
institution of formal proceedings against Kansas City Life Insurance Company or
its affiliates by the NASD, the SEC, any state insurance regulator or any other
regulatory body regarding Kansas City Life's obligations under the agreement or
related to the sale of the Contracts, the operation of each account, or the
purchase of shares, if, in each case, AIM Variable Insurance Funds reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the agreement is to be terminated; (3) at the
option of Kansas City Life upon institution of formal proceedings against AIM
Variable Insurance Funds, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AIM Variable Insurance Funds' obligations under this agreement or
related to the operation or management of AIM Variable Insurance Fund or the
purchase of AIM Variable Insurance Funds, if, in each case, Kansas City Life
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Kansas City Life, or the subaccount corresponding to the
Fund with respect to which the agreement is to be terminated; (4) at the option
of any party in the event that (a) the Fund's shares are not registered and, in
all material respects, issued and sold in accordance with any applicable federal
or state law, or (b) such law precludes the use of such shares as an underlying
investment medium of the contracts issued or to be issued by Kansas City Life;
(5) upon termination of the corresponding subaccount's investment in the Fund;
(6) at the option of Kansas City Life if the Fund ceases to qualify as a
regulated investment company under Subchapter M of the Code or under successor
or similar provisions, or if Kansas City Life reasonably believes that the Fund
may fail to so qualify; (7) at the option of Kansas City Life if the Fund fails
to comply with Section 817(h) of the Code or with successor or similar
provisions, or if Kansas City Life reasonably believes that the Fund may fail to
so comply; (8) at the option of AIM Variable Insurance Funds if the contracts
issued by Kansas City Life cease to qualify as annuity contracts or life
insurance contracts under the Code (other than by reason of the Fund's
noncompliance with Section 817(h) or Subchapter M of the Code) or if interests
in an account under the contracts are not registered, where required, and, in
all material respects, are not issued or sold in accordance with any applicable
federal or state law; (9) upon another party's material breach of any provision
of this agreement.
Seligman Portfolios, Inc. This agreement provides for termination: (1) for
any reason by six months' advance written notice delivered to the other party;
(2) by Kansas City Life by written notice to the Fund based upon the Kansas City
Life's determination that shares of the Fund are not reasonably available to
meet the requirements of the contracts; (3) by Kansas City Life by written
notice to the Fund in the event shares of any of the Portfolios are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the contracts issued or to be issued by Kansas City Life; (4) by the
Fund in the event that formal administrative proceedings are instituted against
Kansas City Life by the NASD, the SEC, the Insurance Commissioner or like
official of any state or any other regulatory body regarding Kansas City Life's
duties under this agreement or related to the sale of the contracts, the
operation of any account, or the purchase of the Fund's shares; provided,
however, that the Fund determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material adverse effect
upon the ability of Kansas City Life to perform its obligations under this
agreement; (5) by Kansas City Life in the event that formal administrative
proceedings are instituted against the Fund by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body; provided,
however, that Kansas City Life determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a material adverse
effect upon the ability of the Fund to perform its obligations under this
agreement; (6) by Kansas City Life by written notice to the Fund with respect to
any Portfolio in the event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to comply with the Section 817(h)
diversification requirements or if Kansas City Life reasonably believes that
such Portfolio may fail to so qualify or comply; (7) by the Fund by written
notice to Kansas City Life, if the Fund shall determine, in its sole judgment
exercised in good faith, that Kansas City Life has suffered a material adverse
change in its business, operations, financial condition, or prospects since the
date of this agreement or is the subject of material adverse publicity; (8) by
Kansas City Life by written notice to the Fund, if Kansas City Life shall
determine, in its sole judgment exercised in good faith, that the Fund has
suffered a material adverse change in its business, operations, financial
condition or prospects since the date of this agreement or is the subject of
material adverse publicity; (9) by Kansas City Life upon any substitution of the
shares of another investment company or series thereof for shares of a portfolio
of the Fund in accordance with the terms of the contracts, provided that Kansas
City Life has given at least 45 days prior written notice to the Fund of the
date of substitution; (10) by either party in the event that the Fund's Board of
Directors determines that a material irreconcilable conflict exists; (11) at the
option of either party upon another party's failure to cure a material breach of
any provision of this agreement within 30 days after written notice thereof.
SAFEKEEPING OF ACCOUNT ASSETS
We hold the title to the assets of the Variable Account. The assets are kept
physically segregated and held separate and apart from our Account assets and
from the assets in any other separate account.
Records are maintained of all purchases and redemptions of Portfolio shares held
by each of the Subaccounts.
Our officers and employees are covered by an insurance company blanket bond
issued by Fidelity and Deposit Company of Maryland to Kansas City Life in the
amount of $5,000,000. The bond insures against dishonest and fraudulent acts of
officers and employees.
STATE REGULATION
We are subject to regulation and supervision by the Department of Insurance of
the State of Missouri, which periodically examines our affairs. We are also
subject to the insurance laws and regulations of all jurisdictions where we are
authorized to do business. A copy of the Contract form has been filed with, and
where required approved by, insurance officials in each jurisdiction where the
Contracts are sold. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for the purposes of determining
solvency and compliance with local insurance laws and regulations.
RECORDS AND REPORTS
We will retain all records and accounts relating to the Variable Account. As
presently required by the Investment Company Act of 1940 and regulations
promulgated thereunder, reports containing such information as may be required
under the Act or by any other applicable law or regulation will be sent to
Contract Owners semi-annually at the Owner's last known address of record.
LEGAL MATTERS
All matters relating to Missouri law pertaining to the Contracts, including the
validity of the Contracts and Kansas City Life's authority to issue the
Contracts, have been passed upon by C. John Malacarne, General Counsel of Kansas
City Life. Sutherland, Asbill & Brennan LLP of Washington, D.C. has provided
advice on certain matters relating to the federal securities laws.
EXPERTS
Ernst & Young LLP, independent auditors has audited the following financial
statements included in this Prospectus:
o consolidated financial statements for Kansas City Life at December 31,
2000, 1999 and 1998;
o financial statements of the Variable Account at December 31, 2000 and
1999.
The Independent Auditor's Reports are also included in this Statement of
Additional Information and are provided in reliance upon the authority of such
firm as experts in accounting and auditing.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all the information set forth in the registration
statement, amendments and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
The following financial statements for Kansas City Life are included in the
Statement of Additional Information:
o balance sheets as of December 31, 2000 and 1999; and
o related statements of income, stockholders' equity and cash flows for
each of the three years ended December 31, 2000.
The following financial statements for the Variable Account are included in the
Statement of Additional Information:
o statements of net assets for the Variable Account for the year ended
December 31, 2000; and
o related statement of operations and changes in net assets for the
periods ended December 31, 2000 and 1999.
Kansas City Life's financial statements should be distinguished from financial
statements of the Variable Account. You should consider Kansas City Life's
financial statements only as an indication of Kansas City Life's ability to meet
its obligations under the Contracts. You should not consider them as having an
effect on the investment performance of the assets held in the Variable Account.
Financial Statements to be included by pre-effective amendment.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.9
(b) Exhibits
(1) Resolutions of the board of directors of Kansas City Life Insurance
Company ("Kansas City Life") establishing Kansas City Life Variable
Annuity Separate Account (the "Variable Account").1
(2) Not Applicable.
(3) Underwriting Agreement between Kansas City Life and Sunset Financial
Services, Inc. ("Sunset Financial").2
(4) (a) Contract Form.
(b) Bonus Endorsement M465.
(c) Bonus Endorsement M466.
(5) Contract Application.
(6) (a) Restated Articles of Incorporation of Kansas City Life.1
(b) By-Laws of Kansas City Life.7
(7) Not Applicable.
(8) (a) Form of Participation Agreement with MFS Variable Insurance
Trust.2
(b) Form of Participation Agreement with TCI Portfolios, Inc.2
(c) Form of Participation Agreement with Federated Insurance Series.2
(d) Agreement between Kansas City Life Insurance Company and each of
Dreyfus Variable Investment Fund, The Dreyfus Socially
Responsible Growth Fund, Inc., and Dreyfus Life and Annuity Index
Fund, Inc.6
(e) Agreement between Kansas City Life Insurance Company and J. P.
Morgan Series Trust II.4
(f) Amended and Restated agreement between Kansas City Life Insurance
Company and each of Calamos Insurance Trust, Calamos Asset
management, Inc. and Calamos Financial Services, Inc.5
(g) Form of Participation Agreement between Kansas City Life
Insurance Company and each of Franklin Templeton Variable
Insurance Products Trust and Franklin Templeton Distributors,
Inc.8
(h) Amendment to Participation Agreement between Kansas City Life
Insurance Company and each of Dreyfus Variable Investment Fund,
The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus
Life and Annuity Index Fund, Inc. (d/b/a/ Dreyfus Stock Index
Fund).4
(i) Revised Exhibit B to Fund Participation Agreement between Kansas
City Life Insurance Company, Insurance Management Series, and
Federated Securities Corp.8
(j) Form of Participation Agreement by and among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., and Kansas City
Life Insurance Company.8
(k) Form of Fund Participation Agreement between Kansas City Life
Insurance Company and Seligman Portfolios, Inc., Segliman
Advisors, Inc.8
(9) Opinion and Consent of Counsel.9
(10) (a) Consent of Sutherland Asbill & Brennan.9
(b) Consent of Ernst & Young LLP.9
(c) Consent of KPMG LLP.9
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule for computation of performance quotations.3
(14) Not applicable.
----------------
1 Incorporated by reference to the Registrant's registration statement
filed with the Securities and Exchange Commission on March 3, 1995
(File No. 33-89984).
2 Incorporated by reference to the Registrant's Pre-Effective Amendment
No.1 to its Registration statement filed with the Securities and
Exchange Commission on August 25, 1995 (File No. 33-89984).
3 Incorporated by reference to the Registrant's Post-Effective Amendment
No. 2 to its Registration Statement filed with the Securities and
Exchange Commission on April 30, 1996. (File No. 33-89984).
4 Incorporated by reference to the Form S-6 Registration Statement (File
No. 033-95354) for Kansas City Life Variable Life Separate Account
filed on April 19, 1999.
5 Incorporated by reference to the Form S-6 Registration Statement (File
No. 333-25443) for Kansas City Life Variable Life Separate Account
filed on April 30, 1999.
6 Incorporated herein by reference to Pre-Effective Amendment No. 1 to
the Form S-6 Registration Statement (File No. 333-25443) for Kansas
City Variable Life Separate Account filed on July 15, 1997.
7 Incorporated herein by reference to the Form S-6 Registration
Statement filed with the Securities and Exchange Commission on October
31, 2000 (File No. 333-49000).
8 Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 7 to its Registration Statement filed with the
Securities and Exchange Commission on August 28, 2000 (File No.
33-89984).
9 To be filed by Amendment.
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Position and Offices with Depositor
Joseph R. Bixby Director, Chairman of the Board
R. Philip Bixby Director, Vice Chairman of the Board,
President and CEO
Richard L. Finn Director, Senior Vice President, Finance
Jack D. Hayes Director,Senior Vice President-Emeritus,
Marketing
Robert C. Miller Senior Vice President, Administrative
Services
Charles R. Duffy, Jr. Senior Vice President, Operations
Michael P. Horton Vice President, Group
John K. Koetting Vice President and Controller
C. John Malacarne Director, Vice President, General
Counsel and Secretary
Walter E. Bixby, III Director
Anne C. Moberg Treasurer
Daryl D. Jensen Director
Nancy Bixby Hudson Director
Webb R. Gilmore Director
Warren J. Hunzicker Director
Michael J. Ross Director
Elizabeth T. Solberg Director
Larry Winn Jr. Director
Peter Hathaway, M.D. Vice President and Medical Director
Scott M. Stone Vice President, Securities
Mark A. Milton Vice President and Actuary
Glenda R. Cline Assistant Vice President, Special Plan
Administration
Robert J. Milroy Vice President, Policy Administration
Robert E. Janes Assistant Vice President, Assistant
Controller
David A. Laird Assistant Vice President, Assistant
Controller
* The principal business address of all the persons listed above is
3520 Broadway, Kansas City, Missouri 64141-6139.
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
Percent of Voting
Name Jurisdiction Securities Owned Principal Business
Sunset Life Insurance Washington Ownership of all voting Insurance
Company of America securities by depositor
Sunset Financial Ownership of all voting
Services, Inc. Washington securities by Sunset Life
Insurance Company of
America Broker/Dealer
KCL Service Ownership of all voting
Company Missouri securities by depositor Marketing Insurance
Lioness Realty Ownership of all voting Real Estate
Group, Inc. Missouri securities by depositor Services
Property Operating Ownership of all voting Real Estate
Company Missouri securities by depositor Services
Old American Ownership of all voting
Insurance Company Missouri securities by depositor Insurance
Contact Data, Inc. Missouri Ownership of all voting
securities by depositor Direct Marketing
Kansas City Life
Financial Group, Inc. Missouri Ownership of all voting
securities by depositor Insurance Marketing
Item 27. Number of Contract owners
9,104--As of December 15, 2000
Item 28. Indemnification
The By-Laws of Kansas City Life Insurance Company provide, in part, in
Article XII:
1. The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the Company, by reason of the fact
that he or she is or was a Director, Officer or employee of the Company, or is
or was serving at the request of the Company as a Director, Officer or employee
of another company, partner ship, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
2. The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the company to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer or employee of
the company, or is or was serving at the request of the company as a director,
officer or employee of another company, partnership, joint venture, trust or
other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him or her in connection with the defense or settlement
of the action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
company; except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to the
company unless and only to the extent that the court in which the action or suit
was brought determines upon application that, despite the adjudication of
liability and in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper.
3. To the extent that a Director, Officer or employee of the Company has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, he or she shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by him or
her in connection with the action, suit or proceeding.
4. Any indemnification under Sections 1 and 2 of this Article, unless
ordered by a court, shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the director, Officer
or employee is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in this Article. The determination
shall be made by the Board of Directors of the Company by a majority vote of a
quorum consisting of Directors who were not parties to the action, suit or
proceeding, or, if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, or by the Stockholders of the Company .
5. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Company in advance of the final disposition of the
action, suit or proceeding as authorized by the Board of Directors in the
specific case up on receipt of an undertaking by or on behalf of the Director,
Officer or employee to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the Company as
authorized in this Article.
6. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the Articles of Incorporation or Bylaws, or any agreement, vote
of Stockholders or disinterested Directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
7. The Company shall have the power to give any further indemnity, in
addition to the indemnity authorized or contemplated under this Article,
including subsection 6, to any person who is or was a Director, Officer,
employee or agent of the Company, or to any person who is or was serving at the
request of the Company as a Director, Officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, provided
such further indemnity is either (i) authorized, directed, or provided for in
the Articles of Incorporation of the Company or any duly adopted amendment
thereof or (ii) is authorized, directed, or provided for in any bylaw or
agreement of the Company which has been adopted by a vote of the Stockholders of
the Company, and provided further that no such indemnity shall indemnify any
person from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest, or willful misconduct .
Nothing in this paragraph shall be deemed to limit the power of the Company
under subsection 6 of this Bylaw to enact Bylaws or to enter into agreement
without Stockholder adoption of the same.
8. The Company may purchase and maintain insurance on behalf of any
person who is or was a Director, Officer, employee or agent of the Company, or
is or was serving at the request of the Company as a Director, Officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as such,
whether or not the Company would have the power to indemnify him or her against
such liability under the provisions of this Article.
9. For the purpose of this Article, references to "the Company" include
all constituent corporations absorbed in a consolidation or merger as well as
the resulting or surviving corporation so that any person who is or was a
Director, Officer , employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a Director,
Officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he or
she would if he or she had served the resulting or surviving corporation in the
same capacity.
10. For purposes of this Article, the term "other enterprise" shall
include employee benefit plans; the term "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and the term
"serving at the request of the Company" shall include any service as a
Director, Officer or employee of the Company which imposes duties on, or
involves services by, such Director, Officer or employee with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he or she reasonable believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Article.
11. Any Director, Officer or employee of the Company shall be
indemnified under this Article for any act taken in good faith and upon reliance
upon the books and records of the Company, upon financial statements or other
reports prepared by the Officers of the Company, or on financial statements
prepared by the Company's independent accountants, or on information or
documents prepared or provided by legal counsel to the Company.
12. To the extent that the indemnification of Officers, Directors or
employees as permitted under Section 351.355 (as amended or superseded) of The
General and Business Corporation Law of Missouri, as in effect from time to
time, provides for greater indemnification of those individuals than the
provisions of this Article XII, then the Company shall indemnify its Directors,
Officers, employees as provided in and to the full extent allowed by Section
351.355.
13. The indemnification provided by this Article shall continue as to a
person who has ceased to be a Director or Officer of the Company and shall inure
to the benefit of the heirs, executors, and administrators of such a person. All
rights to indemnification under this Article shall be deemed to be provided by a
contract between the Company and the person who serves in such capacity at any
time while these Bylaws and other relevant provisions of the applicable law, if
any, are in effect. Any repeal or modification thereof shall not affect any
rights or obligations then existing.
14. If this Article or any portion or provision hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify each person entitled to indemnification
pursuant too this Article to the full extent permitted by any applicable portion
of this Article that shall not have been invalidated, or to the fullest extent
provided by any other applicable law.
Missouri law authorizes Missouri corporations to provide indemnification
to directors, officers and other persons.
Kansas City Life owns a directors and officers liability insurance
policy covering liabilities that directors and officers of Kansas City Life and
its subsidiaries and affiliates may incur in acting as directors and officers.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 29. Principal Underwriter
(a) Sunset Financial Services, Inc. is the registrant's principal
underwriter.
(b) Officers and Directors of Sunset Financial.
Name and Principal Positions and Offices
Business Address* With the Underwriter
Gregory E. Smith President, Director
Daryl D. Jensen Director
Gary K. Hoffman Secretary, Director
Robert E. Janes Treasurer
Jack D. Hayes Chairman of the Board and Director
Walter E. Bixby, III Director
R. Philip Bixby Director
Bret L. Benham Vice President
Kelly T. Ullom Vice President
Bruce Olberding Vice President
Anne C. Moberg Assistant Treasurer
Susanna J. Denney Assistant Vice President
Billy J. Dahle Assistant Vice President
* The principal business address of all of the persons listed above is P.O. Box
219365, Kansas City, Missouri, 64121-9365.
Item 30. Location Books and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Kansas City Life at 3520 Broadway, Kansas City,
Missouri 64111-2565.
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this
registration statement.
Item 32. Undertakings and Representations
(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement are never
more than 16 months old for as long as purchase payments under the policies
offered herein are being accepted.
(b) The registrant undertakes that it will include either (1) as part of
any application to purchase a policy offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove and send to Kansas City Life for a
Statement of Additional Information.
(c) The registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request to Kansas City Life at the
address or phone number listed in the prospectus.
(d) Kansas City Life represents that in connection with its offering of
the policies as funding vehicles for retirement plans meeting the requirements
of Section 403(b) of the Internal Revenue Code of 1986, it is relying on a
no-action letter dated November 28, 1988, to the American Council of Life
Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of
the Investment Company Act of 1940, and that paragraphs numbered (1) through (4)
of that letter will be complied with.
(e) Kansas City Life Insurance Company hereby represents that the fees
and charges deducted under the Contracts described in this post-effective
amendment are, in the aggregate, reasonable in relationship to the services
rendered, the expenses expected to be incurred, and the risks assumed by Kansas
City Life Insurance Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Kansas City Life Variable Annuity Separate Account, has
duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Kansas City and the State of Missouri on the 19th
day of December, 2000.
[Seal] Kansas City Life Variable
Annuity Separate Account
Registrant
Kansas City Life Insurance Company
Depositor
Attest: /s/C. John Malacarne By: /s/R. Philip Bixby
C. John Malacarne R. Philip Bixby, President,
CEO, and Vice Chairman of
the Board
Pursuant to the requirements of the Securities Act of 1933, Kansas City Life
Insurance Company has duly caused this Registration Statement to be signed on
its behalf by the following persons in the capacities indicated and on the
date(s) set forth below.
Signature Title Date
/s/R. Philip Bixby President, CEO, and Vice Chairman December 19, 2000
R. Philip Bixby of the Board
/s/Richard L. Finn Senior Vice President, Finance December 19, 2000
Richard L. Finn and Director
(Principal Financial Officer)
/s/John K. Koetting Vice President and Controller December 19, 2000
John K. Koetting (Principal Accounting Officer)
/s/ J. R. Bixby Chairman of the Board and December 19, 2000
J.R. Bixby Director
/s/W. E. Bixby III Director December 19, 2000
W. E. Bixby III
Daryl D. Jensen Director December 19, 2000
/s/C. John Malacarne Director December 19, 2000
C. John Malacarne
/s/Jack D. Hayes Director December 19, 2000
Jack D. Hayes
/s/Webb R. Gilmore Director December 19, 2000
Webb R. Gilmore
Warren J. Hunzicker, M.D. Director December 19, 2000
Michael J. Ross Director December 19, 2000
Elizabeth T. Solberg Director December 19, 2000
/s/E. Larry Winn Jr. Director December 19, 2000
E. Larry Winn Jr.
Nancy Bixby Hudson Director December 19, 2000
EXHIBIT INDEX
Page No.*
(4) (a) Contract Form.
(b) Bonus Endorsement M465.
(c) Bonus Endorsement M466.
(5) Contract Application.
* Page numbers included only in manually executed original in compliance with
Rule 403(d) under the Securities Act of 1933.
Exhibit 4(a)
Contract Form.
Exhibit 4(b)
Bonus Endorsement M465.
Exhibit 4(c)
Bonus Endorsement M466.
Exhibit 5
Contract Application.
