Registration No. _________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ _____
Post-Effective Amendment No. _____ _____
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. ___ _____
(Check appropriate box or boxes)
Principal Life Insurance Company Separate Account B
--------------------------------------------------------------------------------
(Exact Name of Registrant)
Principal Life Insurance Company
--------------------------------------------------------------------------------
(Name of Depositor)
The Principal Financial Group, Des Moines, Iowa 50392
--------------------------------------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (515) 248-3842
M. D. Roughton, The Principal Financial Group, Des Moines, Iowa 50392
--------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of the Registration Statement
Title of Securities Being Registered: Principal Flexible Variable Annuity
Contract with Purchase Payment Credit
<PAGE>
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B
PRINCIPAL FLEXIBLE VARIABLE ANNUITY CONTRACT
WITH PURCHASE PAYMENT CREDIT
Registration Statement on Form N-4
Cross Reference Sheet
Form N-4 Item Caption in Prospectus
Part A
1. Cover Page Principal Flexible Variable
Annuity Contract with
Purchase Payment Credit
2. Definitions Glossary
3. Synopsis Summary of Expense Information
Summary
4. Condensed Financial Performance Calculation,
Information Independent Auditors,
Financial Statements
5. General Description of Summary, The Company, The
Registrant Separate Account, Fixed
Account and DCA Plus Accounts,
Voting Rights
6. Deductions Summary, Charges and
Deductions, Annual Fee,
Mortality and Expense Risks
Charge, Purchase Payment Credit
Rider Charge, Premium Taxes,
Surrender Charge,
Administrative Charge, Special
Provisions for Group or
Sponsored Arrangements,
Distribution of the
Contract
7. General Description of Summary, Investment Limita-
Variable Annuity Contract tions, Separate Account Invest-
ment Options, Transfers,
Surrenders, Charges and
Deductions, Annuity Payments,
Death Benefit, Free-Look
Period, The Separate Account,
The Contract,To Buy a Contract,
The Accumulation Period,
General Provisions, Rights
Reserved By The Company,
8. Annuity Period The Accumulation Period, The
Annuity Payment Period
9. Death Benefit Death Benefit, The
Accumulation Period, The
Annuity Payment Period,
Mortality and Expense Risks
Charge, Delay of Payments,
Non-Qualified Contracts,
Required Distributions for Non-
Qualified Contracts, IRA, SEP
and Simple-IRA, Rollover IRAs
10. Purchase and Contract Value Summary, Free-Look Period,
The Contract, To Buy a
Contract, The Accumulation
Period, The Annuity Payment
Period, Exchange Credit,
Purchase Payment Credit Rider,
Delay of Payments, Distribution
of the Contract
11. Redemptions Summary, Annuity Payments,
The Accumulation Period,
Charges and Deductions,
Annual Fee, Purchase Payment
Credit Rider Charge, Delay of
Payments, Contract Termination
12. Taxes Summary, Annuity Payments,
Federal Tax Matters,
Non-Qualified Contracts,
Required Distributions for
Non-Qualified Contracts, IRA,
SEP & Simple-IRA, Rollover
IRAs, Withholding, Mutual Fund
Diversification
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Table of Contents of the
Statement of Additional Statement of Additional
Information Information
Part B Statement of Additional
Information
Caption**
15. Cover Page Principal Flexible
Variable Annuity Contract with
Purchase Payment Credit
16. Table of Contents Table of Contents
17. General Information and General Information and
History History
18. Services Independent Auditors**,
Independent Auditors
19. Purchase of Securities Summary**, To Buy a Contract**
Being Offered Distribution of the Contract**
20. Underwriters Summary**, Distribution of the
Contract**
21. Calculation of Performance Calculation of Yield and
Data Total Return
22. Annuity Payments Annuity Payments**,
Delay of Payments**
23. Financial Statements Financial Statements
** Prospectus caption given where appropriate.
<PAGE>
Flexible Variable Annuity
Issued by Principal Life Insurance Company (the "Company")
This prospectus is dated ____ _, 2000.
The individual deferred annuity contract ("Contract") described in this
prospectus is funded with the Principal Life Insurance Company Separate Account
B ("Separate Account"), dollar cost averaging fixed accounts ("DCA Plus
Accounts") and a fixed account ("Fixed Account"). The assets of the Separate
Account Divisions ("Divisions") are invested in a corresponding Account of the
Principal Variable Contracts Fund, Inc., AIM V.I. Growth Fund, AIM V.I. Growth
and Income Fund, AIM V.I. Value Fund, Fidelity Variable Insurance Products Fund
II Contrafund Portfolio, Fidelity Variable Insurance Products Fund Growth
Portfolio and Janus Aspen Series - Service Shares Aggressive Growth Portfolio
(the "Funds"). The DCA Plus Accounts and the Fixed Account are a part of the
General Account of the Company.
This prospectus provides information about the Contract and the Separate Account
that you, as owner, should know before investing. It should be read and retained
for future reference. Additional information about the Contract is included in
the Statement of Additional Information ("SAI"), dated ____ _, 2000, which has
been filed with the Securities and Exchange Commission (the "SEC"). The SAI is a
part of this prospectus. The table of contents of the SAI is on page __ of this
prospectus. You may obtain a free copy of the SAI by writing or telephoning:
Principal Flexible Variable Annuity
Principal Financial Group
P. O. Box 9382
Des Moines, Iowa 50306-9382
Telephone: 1-800-852-4450
An investment in the Contract is not a deposit or obligation of any bank and is
not insured or guaranteed by any bank, the Federal Deposit Insurance Corporation
or any other government agency.
As the owner of this Contract, you may elect a purchase payment credit rider
with an additional charge and an associated 9-year surrender charge period.
The purchase payment credit rider is only available when the Contract is
issued. The portions of this prospectus that specifically pertain to election
of the purchase payment credit are shown by gray boxes.
The charges used to recoup our expense of paying the purchase payment credit
include the surrender charge and the purchase payment credit rider charge.
The Contract is available with or without the purchase payment credit rider.
There may be circumstances where electing the purchase payment credit rider
is not to your advantage. In certain circumstances, the amount of the credit
may be more than offset by the charges associated with it. The Contract
without the purchase payment credit rider has surrender charges and total
Separate Account annual expenses that may be lower than the charges for the
Contract with the purchase payment credit rider. You should consult with your
sales representative to decide if the purchase payment credit rider is
suitable. In making this determination, you and your sales representative
should consider the following factors:
o the length of time you plan to own the Contract;
o the frequency, amount and timing of any partial surrenders; and
o the amount of your purchase payment(s).
Additionally, if you decide to return the Contract during the examination
period, we will recover the original purchase payment credit amount. As a
result, if the value of the purchase payment credit has declined during the
examination period, then we still recover the full amount of the purchase
payment credit.
The Contract provides an exchange credit that is available to eligible
purchasers (see Replacement Contracts - Exchange Credit). The exchange credit is
paid for by a reduction in sales commissions for Contracts sold with the
exchange credit. Sales commissions are paid by Contract charges and deductions.
The charges and deductions are neither proportionally reduced nor increased for
Contracts sold with the exchange credit.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
This prospectus is valid only when accompanied by the current prospectuses for
the Funds. These prospectuses should be kept for future reference.
TABLE OF CONTENTS
GLOSSARY .................................................... 4
SUMMARY OF EXPENSE INFORMATION............................... 6
SUMMARY .................................................... 10
Investment Limitations................................... 10
Separate Account Investment Options...................... 10
Transfers................................................ 11
Surrenders............................................... 11
Charges and Deductions................................... 11
Annuity Payments......................................... 12
Death Benefit............................................ 12
Examination Period (Free-Look)........................... 12
CONDENSED FINANCIAL INFORMATION.............................. 13
THE PRINCIPAL FLEXIBLE VARIABLE ANNUITY...................... 16
THE COMPANY.................................................. 16
THE SEPARATE ACCOUNT......................................... 16
THE UNDERLYING MUTUAL FUNDS.................................. 16
SURPLUS DISTRIBUTIONS........................................ 21
THE CONTRACT................................................. 21
To Buy a Contract........................................ 21
Purchase Payments............................................ 21
Right to Examine the Contract (Free-Look)................ 21
Replacement Contracts.................................... 22
Purchase Payment Credit Rider............................ 23
The Accumulation Period.................................. 25
Automatic Portfolio Rebalancing (APR).................... 27
Telephone Services....................................... 27
Direct Dial.............................................. 27
Internet................................................. 28
Surrenders............................................... 28
Death Benefit............................................ 29
The Annuity Payment Period............................... 30
CHARGES AND DEDUCTIONS....................................... 32
Annual Fee............................................... 32
Mortality and Expense Risks Charge....................... 33
Purchase Payment Credit.................................. 33
Transaction Fee.......................................... 33
Premium Taxes............................................ 33
Surrender Charge......................................... 34
Free Surrender Privilege................................. 35
Administration Charge.................................... 36
Special Provisions for Group or Sponsored Arrangements... 36
FIXED ACCOUNT AND DCA PLUS ACCOUNTS.......................... 36
Fixed Account............................................ 37
Fixed Account Accumulated Value.......................... 37
Fixed Account Transfers, Total and Partial Surrenders.... 37
Dollar Cost Averaging Plus Program (DCA Plus Program).... 38
GENERAL PROVISIONS........................................... 39
The Contract............................................. 39
Delay of Payments........................................ 39
Misstatement of Age or Gender............................ 39
Assignment............................................... 39
Change of Owner.......................................... 39
Beneficiary.............................................. 40
Contract Termination..................................... 40
Reinstatement............................................ 40
Reports.................................................. 40
RIGHTS RESERVED BY THE COMPANY............................... 40
DISTRIBUTION OF THE CONTRACT................................. 41
PERFORMANCE CALCULATION...................................... 41
VOTING RIGHTS................................................ 41
FEDERAL TAX MATTERS.......................................... 42
Non-Qualified Contracts.................................. 42
Required Distributions for Non-Qualified Contracts....... 43
IRA, SEP and SIMPLE-IRA.................................. 43
Rollover IRAs............................................ 44
Withholding.............................................. 44
MUTUAL FUND DIVERSIFICATION.................................. 44
STATE REGULATION............................................. 44
LEGAL OPINIONS............................................... 44
LEGAL PROCEEDINGS............................................ 45
REGISTRATION STATEMENT....................................... 45
OTHER VARIABLE ANNUITY CONTRACTS............................. 45
INDEPENDENT AUDITORS......................................... 45
FINANCIAL STATEMENTS......................................... 45
CUSTOMER INQUIRIES........................................... 45
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION. 45
The Contract offered by this prospectus may not be available in
all states. This prospectus is not an offer to sell, or
solicitation of an offer to buy, the Contract in states in which
the offer or solicitation may not be lawfully made. No person is
authorized to give any information or to make any representation
in connection with this Contract other than those contained in
this prospectus.
GLOSSARY
Accumulated value - an amount equal to the DCA Plus Account(s) value plus the
Fixed Account value plus the Separate Account value.
Anniversary - the same date and month of each year following the Contract date.
Annuitant - the person, including any joint annuitant, on whose life the annuity
payment is based. This person may or may not be the owner.
Annuity payment date - the date the owner's accumulated value is applied, under
an annuity payment option, to make income payments. (Referred to in the Contract
as "Retirement Date.")
Contract date - the date that the Contract is issued and which is used to
determine Contract years.
Contract year - the one-year period beginning on the Contract date and ending
one day before the Contract anniversary and any subsequent one-year period
beginning on a Contract anniversary. (e.g. If the contract date is June 5, 2000,
the first Contract year ends on June 4, 2001, and the first Contract anniversary
falls on June 5, 2001.)
Dollar Cost Averaging Plus (DCA Plus) Account - an account which earns
guaranteed interest for a specific amount of time. (Referred to in the Contract
as "Fixed DCA Account.")
Dollar Cost Averaging Plus (DCA Plus) accumulated value - the amount of your
accumulated value which is in the DCA Plus Account(s).
Dollar Cost Averaging Plus (DCA Plus) Program - a program through which purchase
payments are transferred from a DCA Plus Account to the Divisions and/or the
Fixed Account over a specified period of time. (Referred to in the Contract as
"Fixed DCA Account.")
Fixed Account - an account which earns guaranteed interest.
Fixed Account accumulated value - the amount of your accumulated value which is
in the Fixed Account.
Investment Options - the DCA Plus Accounts, Fixed Account and Separate Account
Divisions.
Joint annuitant - additional annuitant. Joint annuitants must be husband and
wife and must be named as owner and joint owner.
Joint owner - an owner who has an undivided interest with the right of
survivorship in this Contract with another owner. Joint owners must be husband
and wife and must be named as annuitant and joint annuitant.
Mutual Fund - a registered open-end investment company, including a series or
portfolio thereof, in which a Division invests.
Non-Qualified Contract - a Contract which does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
Simple IRA or Tax Sheltered Annuity.
Notice - any form of written communication received by us, at the annuity
service office, P.O. Box 9382, Des Moines, Iowa 50306-9382, or in another form
approved by us in advance.
Owner - the person, including joint owner, who owns all the rights and
privileges of this Contract.
Purchase payments - the gross amount contributed to the Contract.
Qualified Plans - retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code (the "Code").
Separate Account Division (Division(s) )- a part of the Separate Account which
invests in shares of a Mutual Fund. (Referred to in the marketing materials as
"sub-accounts.")
Separate Account accumulated value - the amount of your accumulated value in all
Divisions.
Surrender charge - the charge deducted upon certain partial or total surrender
of the Contract before the annuity payment date.
Surrender value - accumulated value less any applicable surrender charge, annual
fee, transaction fee and any premium or other taxes.
Unit - the accounting measure used to calculate the value of the Division prior
to annuity payment date.
Unit value - a measure used to determine the value of an investment in a
Division.
Valuation date - each day the New York Stock Exchange ("NYSE") is open.
Valuation period - the period of time from one determination of the value of a
unit of a Division to the next. Each valuation period begins at the close of
normal trading on the NYSE, generally 4:00 p.m. E.T. (3:00 p.m. C.T.) on each
valuation date and ends at the close of normal trading of the NYSE on the next
valuation date.
You, Your - the owner of this Contract, including any joint owner.
SUMMARY OF EXPENSE INFORMATION
The purpose of these tables is to assist you in understanding the various costs
and expenses of the Contract. This information includes expenses of the Contract
as well as the Mutual Funds but does not include any premium taxes that may
apply. For a more complete description of the Contract expenses see CHARGES AND
DEDUCTIONS.
Contract owner transaction expenses:
o There is no sales charge imposed on purchase payments.
o Surrender charge without the purchase payment credit rider (as a
percentage of amounts surrendered):
Table of surrender charges without the purchase payment credit rider
Number of completed Contract years Surrender charge applied to all
since each purchase payment purchase payments received in
was made that Contract year
0 (year of purchase payment) 6%
1 6%
2 6%
3 5%
4 4%
5 3%
6 2%
7 and later 0%
o Surrender charge with the purchase payment credit rider (as a
percentage of amounts surrendered):
Table of surrender charges with the purchase payment credit rider
Number of completed Contract years Surrender charge applied to all
since each purchase payment purchase payments received in
was made that Contract year
0 (year of purchase payment) 8%
1 8%
2 8%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 and later 0%
o Annual Contract fee - the lesser of $30 or 2% of the accumulated
value.
Separate Account annual expenses (as a percentage of average account value)
mortality and expense risks charge 1.25%
other Separate Account expenses .00
total Separate Account annual expenses 1.25%
optional purchase payment credit rider charge 0.60%
total Separate Account annual expenses
with the purchase payment credit rider 1.85%
Annual expenses of the Mutual Funds (as a percentage of average net assets) as
of December 31, 1999:
<TABLE>
<CAPTION>
Management Other Rule 12(b)1 Total Annual Expenses
Mutual Fund Fees Expenses Fees After Reimbursement
Principal Variable Contracts Fund, Inc.
<S> <C> <C> <C> <C> <C>
Aggressive Growth 0.75% 0.02% N/A 0.77%
Asset Allocation 0.80 0.05 N/A 0.85
Balanced 0.57 0.01 N/A 0.58
Bond 0.49 0.01 N/A 0.50
Capital Value 0.43(1) 0.00 N/A 0.43
Government Securities 0.49 0.01 N/A 0.50
Growth 0.45(1) 0.00 N/A 0.45
International 0.73(1) 0.05 N/A 0.78
International Emerging Markets
International SmallCap 1.20 0.12 N/A 1.32
LargeCap Growth
LargeCap Growth Equity
LargeCap Stock Index 0.35 0.14 N/A 0.49(2)
MicroCap 1.00 0.28 N/A 1.28(2)
MidCap 0.61 0.00 N/A 0.61
MidCap Growth 0.90 0.19 N/A 1.09(2)
MidCap Growth Equity
Money Market 0.50 0.02 N/A 0.52
Real Estate 0.90 0.09 N/A 0.99
SmallCap 0.85 0.06 N/A 0.91
SmallCap Growth 1.00 0.07 N/A 1.07(2)
SmallCap Value 1.10 0.34 N/A 1.44(2)
Utilities 0.60 0.04 N/A 0.64
AIM V.I. Growth Fund 0.63 0.10 N/A 0.73
AIM V.I. Growth and Income Fund 0.61 0.16 N/A 0.77
AIM V.I. Value Fund 0.61 0.15 N/A 0.76
Fidelity Variable Insurance Products Fund II
Fidelity VIP II Contrafund Portfolio-Service Class 0.58 0.10 0.10%(3) 0.78(4)
Fidelity Variable Insurance Products Fund
Fidelity VIP Growth Portfolio-Service Class 0.58 0.09 0.10%(3) 0.77(4)
Janus Aspen Series - Service Shares Aggressive
Growth Portfolio
<FN>
(1) As a result of a shareholder meeting the Account's management fee
was modified effective 1/1/2000.
(2) Manager has agreed to reimburse expenses, if necessary, so that
total Account operating expenses for 2000 will be no more than:
MicroCap 1.06% SmallCap Growth 1.06%
MidCap Growth 0.96% SmallCap Value 1.16%
LargeCap Stock Index 0.40%
(3) The Company and Princor Financial Services Corporation may receive
a portion of the Mutual Fund Annual Expenses for recordkeeping,
marketing and distribution services.
(4) Without third party payments or reductions the Total Annual
Expenses would have been:
Fidelity VIP II Contrafund Portfolio-Service Class 0.81%
Fidelity VIP Growth Portfolio-Service Class 0.79%
</FN>
</TABLE>
Example:
The purpose of the following examples is to assist you in understanding the
various costs and expenses that you, as a Contract owner, bear directly or
indirectly. They reflect expenses of the Division as well as the expenses of the
Mutual Fund in which the Division invests. In certain circumstances, state
premium taxes also apply.
The examples should not be considered representations of past or future
expenses. Actual expenses may be more or less than those shown.
If you surrender your Contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment. The examples assume
that your investment has a 5% return each year and that current expense levels
(and waivers and reimbursements, if any) continue.
<TABLE>
<CAPTION>
Separate Account Division 1 Year 1 Year 3 Years 3 Years 5 Years 5 Years 10 years 10 Years
<S> <C> <C> <C> <C> <C>
Aggressive Growth $83 $119 $145 $238
Asset Allocation 83 121 149 247
Balanced 81 113 136 218
Bond 80 111 132 210
Capital Value 79 109 128 202
Government Securities 80 111 132 210
Growth 80 110 129 205
International 83 119 146 239
International Emerging Markets
International SmallCap 88 135 172 294
LargeCap Growth
LargeCap Growth Equity
LargeCap Stock Index* 85 125 156 261
MicroCap* 87 134 170 290
MidCap 81 114 137 222
MidCap Growth* 86 128 161 271
MidCap Growth Equity
Money Market 80 112 133 212
Real Estate 85 125 156 261
SmallCap 84 123 152 253
SmallCap Growth* 85 128 160 269
SmallCap Value* 89 138 178 306
Utilities 81 115 139 225
AIM V.I. Growth 82 118 143 234
AIM V.I. Growth and Income 83 119 145 238
AIM V.I. Value 83 119 145 237
Fidelity VIP II Contrafund 83 119 146 239
Fidelity VIP Growth 83 119 145 238
Janus Aspen Aggressive Growth
* After expense reimbursement
</TABLE>
If you elect to receive payments under an annuity payment option (referred to in
the Contract as "Benefit Option") at the end of the applicable time period or do
not surrender your Contract, you would pay the following expenses on a $1,000
investment. The examples assume that your investment has a 5% annual return each
year and that current expense levels (and waivers and reimbursements, if any)
continue.
<TABLE>
<CAPTION>
Separate Account Division 1 Year 1 Year 3 Years 3 Years 5 Years 5 Years 10 years 10 Years
<S> <C> <C> <C> <C> <C>
Aggressive Growth $21 $64 $111 $238
Asset Allocation 22 67 115 247
Balanced 19 59 101 218
Bond 18 56 97 210
Capital Value 17 54 93 202
Government Securities 18 56 97 210
Growth 18 55 94 205
International 21 65 111 239
International Emerging Markets
International SmallCap 26 81 138 294
LargeCap Growth
LargeCap Growth Equity
LargeCap Stock Index* 23 71 122 261
MicroCap* 26 80 136 290
MidCap 19 60 102 222
MidCap Growth* 24 74 127 271
MidCap Growth Equity
Money Market 18 57 98 212
Real Estate 23 71 122 261
SmallCap 22 69 118 253
SmallCap Growth* 24 73 126 269
SmallCap Value* 28 85 144 306
Utilities 20 60 104 225
AIM V.I. Growth 20 63 109 234
AIM V.I. Growth and Income 21 64 111 238
AIM V.I. Value 21 64 110 237
Fidelity VIP II Contrafund 21 65 111 239
Fidelity VIP Growth 21 64 111 238
Janus Aspen Aggressive Growth
* After expense reimbursement
</TABLE>
SUMMARY
This prospectus describes a flexible variable annuity offered by the Company.
The Contract is designed to provide individuals with retirement benefits,
including (1) Individual Retirement Annuity plans ("IRA Plans"), Simplified
Employee Pension plans ("SEPs") and Savings Incentive Match Plan for Employees
("SIMPLE") IRAs adopted according to Section 408 of the Internal Revenue Code
(the "Code") and (2) non-qualified retirement programs.
This is a brief summary of the Contract's features. More detailed information
follows later in this prospectus.
Investment Limitations
o Initial purchase payment must be $2,500 or more for non-qualified retirement
programs.
o Initial purchase payment must be $1,000 for all other contracts.
o Each subsequent payment must be at least $100.
o If you are a member of a retirement plan covering three or more persons and
payments are made through an automatic investment program, then the initial
and subsequent purchase payments for the Contract must average at least $100
and not be less than $50.
If purchase payments are not paid during two consecutive calendar years and the
accumulated value or total purchase payments less partial surrenders and
applicable surrender charges is less than $2,000, then we reserve the right to
terminate a Contract and distribute the accumulated value, less any applicable
charges.
Separate Account Investment Options (see THE UNDERLYING MUTUAL FUNDS):
<TABLE>
<CAPTION>
Division invests in:
Principal Variable Contracts Fund, Inc.
<S> <C> <C>
Aggressive Growth Aggressive Growth Account
Asset Allocation Asset Allocation Account
Balanced Balanced Account
Bond Bond Account
Capital Value Capital Value Account
Government Securities Government Securities Account
Growth Growth Account
International International Account
International Emerging Markets International Emerging Markets Account
International SmallCap International SmallCap Account
LargeCap Growth LargeCap Growth Account
LargeCap Growth Equity LargeCap Growth Equity Account
LargeCap Stock Index LargeCap Stock Index Account
MicroCap MicroCap Account
MidCap MidCap Account
MidCap Growth MidCap Growth Account
MidCap Growth Equity MidCap Growth Equity Account
Money Market Money Market Account
Real Estate Real Estate Account
SmallCap SmallCap Account
SmallCap Growth SmallCap Growth Account
SmallCap Value SmallCap Value Account
Utilities Utilities Account
AIM V.I. Growth AIM V.I. Growth Fund
AIM V.I. Growth and Income AIM V.I. Growth and Income Fund
AIM V.I. Value AIM V.I. Value Fund
Fidelity Variable Insurance Products Fund II
Fidelity VIP II Contrafund Fidelity VIP II Contrafund Portfolio Service Class
Fidelity Variable Insurance Products Fund
Fidelity VIP Growth Fidelity VIP Growth Portfolio Service Class
Janus Aspen Aggressive Growth Janus Aspen Series -
Service Shares Aggressive Growth Portfolio
</TABLE>
You may allocate your net premium payments to Divisions, the DCA Plus Accounts
and/or the Fixed Account. Not all Divisions or the DCA Plus Accounts are
available in all states. A current list of Divisions available in your state may
be obtained from a sales representative or our annuity service office.
Each Division invests in shares of an underlying Mutual Fund. More detailed
information about the underlying Mutual Funds may be found in the current
prospectus for each underlying Mutual Fund.
The underlying Mutual Funds are NOT available to the general public directly.
The underlying Mutual Funds are available only as investment options in variable
life insurance policies or variable annuity contracts issued by life insurance
companies. Some of the underlying Mutual Funds have been established by
investment advisers that manage publicly traded mutual funds having similar
names and investment objectives. While some of the underlying Mutual Funds may
be similar to, and may in fact be modeled after publicly traded mutual funds,
you should understand that the underlying Mutual Funds are not otherwise
directly related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and of any underlying
Mutual Fund may differ substantially.
Transfers (See SEPARATE ACCOUNT DIVISION TRANSFERS and FIXED ACCOUNT TRANSFERS,
TOTAL AND PARTIAL SURRENDERS for additional restrictions.) This section does not
apply to transfers under the DCA Plus Program (see SCHEDULED DCA PLUS TRANSFERS
and UNSCHEDULED DCA PLUS TRANSFERS)
During the accumulation period:
o a dollar amount or percentage of transfer must be specified;
o a transfer may occur on a scheduled or unscheduled basis; and
o transfers into DCA Plus Accounts are not permitted.
During the annuity payment period, transfers are not permitted (no transfers
once payments have begun).
Surrenders (see SURRENDERS and FIXED ACCOUNT TRANSFERS, TOTAL AND PARTIAL
SURRENDERS and DCA PLUS SURRENDERS) During the accumulation period:
o a dollar amount must be specified;
o surrendered amounts may be subject to surrender charge;
o total surrenders may be subject to an annual Contract fee;
o during a Contract year, partial surrenders less than the Contract's earnings
or 10% of purchase payments are not subject to a surrender charge; and
o withdrawals before age 59 1/2 may involve an income tax penalty (see FEDERAL
TAX MATTERS).
Charges and Deductions
o No sales charge on purchase payments.
o A contingent deferred surrender charge is imposed on certain total or partial
surrenders.
o A mortality and expense risks daily charge equal to 1.25% per year applies to
amounts in the Separate Account.
o If elected, a purchase payment credit rider daily charge equal to 0.60% per
year applies to amounts in the Separate Account.
o The purchase payment credit rider charge terminates upon completion of your
8th Contract year.
o Daily Separate Account administration charge is currently zero but we reserve
the right to assess a charge not to exceed 0.15% annually.
o Contracts with an accumulated value of less than $30,000 are subject to an
annual Contract fee of the lesser of $30 or 2% of the accumulated value.
Currently we do not charge the annual fee if your accumulated value is
$30,000 or more. If you own more than one Contract, then all the Contracts
you own or jointly own are aggregated, on each Contract's anniversary, to
determine if the $30,000 minimum has been met.
o Certain states and local governments impose a premium tax. The Company
reserves the right to deduct the amount of the tax from purchase payments or
accumulated values.
Annuity Payments
o You may choose from several fixed annuity payment options which start on your
selected annuity payment date.
o Payments are made to the owner (or beneficiary depending on the annuity
payment option selected). You should carefully consider the tax implications
of each annuity payment option (see ANNUITY PAYMENT OPTIONS and FEDERAL TAX
MATTERS).
o Your Contract refers to annuity payments as "retirement benefit" payments.
Death Benefit
o If the annuitant or owner dies before the annuity payment date, then a death
benefit is payable to the beneficiary of the Contract.
o The death benefit may be paid as either a single sum cash benefit or under an
annuity payment option (see DEATH BENEFIT).
o If the annuitant dies on or after the annuity payment date, then the
beneficiary will receive only any continuing payments which may be provided
by the annuity payment option in effect.
Examination Period (Free-Look)
o You may return the Contract during the examination period which is generally
10 days from the date you receive the Contract. The examination period may be
longer in certain states.
o We return all purchase payments if required by state law. Otherwise we return
accumulated value.
o We recover the full amount of any purchase payment credit.
CONDENSED FINANCIAL INFORMATION
Financial statements are included in the Statement of Additional Information.
Following are unit values for the Contract for the periods ended December 31.
<TABLE>
<CAPTION>
Number of
Accumulation Unit Value Accumulation Units
Outstanding
Beginning End of Percentage of Change End of Period
of Period Period from Prior Period (in thousands)
Aggressive Growth Division
Year Ended December 31
<S><C> <C> <C> <C> <C>
1999 $27.815 $38.363 37.92% 9,018
1998 23.689 27.815 17.42 7,486
1997 18.340 23.689 29.17 6,077
1996 14.503 18.340 26.46 3,971
1995 10.184 14.503 42.41 1,324
Period Ended December 31, 1994(1) 10.075 10.184 1.08 362
Asset Allocation Division
Year Ended December 31
1999 16.690 19.696 18.01 3,913
1998 15.478 16.690 7.83 3,762
1997 13.260 15.478 16.73 3,134
1996 11.891 13.260 11.51 2,264
1995 9.978 11.891 19.17 912
Period Ended December 31, 1994(1) 10.075 9.978 -0.96 303
Balanced Division
Year Ended December 31
1999 17.647 17.846 1.13 9,103
1998 15.966 17.647 10.53 8,903
1997 13.708 15.966 16.47 6,717
1996 12.270 13.708 11.72 4,661
1995 9.972 12.270 23.04 1,373
Period Ended December 31, 1994(1) 10.266 9.972 -2.86 370
Bond Division
Year Ended December 31
1999 14.260 13.718 -3.80 7,677
1998 13.408 14.260 6.35 7,499
1997 12.275 13.408 9.23 5,017
1996 12.143 12.275 1.09 3,872
1995 10.064 12.143 20.66 1,401
Period Ended December 31, 1994(1) 10.050 10.064 0.14 301
Capital Value Division
Year Ended December 31
1999 23.156 21.888 -5.48 11,634
1998 20.642 23.156 12.18 11,720
1997 16.261 20.642 26.94 9,320
1996 13.333 16.261 21.96 6,267
1995 10.234 13.333 30.28 2,232
Period Ended December 31, 1994(1) 10.328 10.234 -0.91 699
Government Securities Division
Year Ended December 31
1999 13.954 13.741 -1.53 8,554
1998 13.049 13.954 6.94 8,554
1997 11.969 13.049 9.02 5,946
1996 11.728 11.969 2.06 5,443
1995 9.973 11.728 17.60 2,023
Period Ended December 31, 1994(1) 10.133 9.973 -1.93 572
</TABLE>
<TABLE>
<CAPTION>
Number of
Accumulation Unit Value Accumulation Units
Outstanding
Beginning End of Percentage of Change End of Period
of Period Period from Prior Period (in thousands)
Growth Division
Year Ended December 31
<S><C> <C> <C> <C> <C>
1999 $21.657 $24.904 14.99% 10,999
1998 18.070 21.657 19.85 9,863
1997 14.411 18.070 25.39 7,898
1996 12.970 14.411 11.11 6,089
1995 10.454 12.970 24.07 2,619
Period Ended December 31, 1994(1) 10.336 10.454 1.14 764
International Division
Year Ended December 31
1999 16.071 19.987 24.37 7,799
1998 14.795 16.071 8.62 7,866
1997 13.347 14.795 10.85 7,316
1996 10.804 13.347 23.54 4,797
1995 9.582 10.804 12.75 2,146
Period Ended December 31, 1994(1) 9.624 9.582 -0.43 936
International SmallCap Division
Year Ended December 31
1999 8.978 17.184 91.40 1,246
Period Ended December 31, 1998(2) 10.000 8.978 -10.22 419
LargeCap Stock Index Division(3)
Period Ended December 31, 1999(4) 10.000 10.956 9.56 2,314
MicroCap Division
Year Ended December 31
1999 8.106 7.920 -2.30 244
Period Ended December 31, 1998(2) 10.000 8.106 -18.94 141
MidCap Division
Year Ended December 31
1999 19.125 21.351 11.64 9,229
1998 18.676 19.125 2.40 10,738
1997 15.405 18.676 21.23 9,820
1996 12.880 15.405 19.60 7,285
1995 10.108 12.880 27.42 3,059
Period Ended December 31, 1994(1) 10.157 10.108 -0.48 973
MidCap Growth Division
Year Ended December 31
1999 9.607 10.522 9.52 746
Period Ended December 31, 1998(2) 10.000 9.607 -3.93 352
Money Market Division
Year Ended December 31
1999 11.913 12.306 3.30 7,145
1998 11.463 11.913 3.93 4,905
1997 11.027 11.463 3.95 2,752
1996 10.628 11.027 3.75 2,929
1995 10.194 10.628 4.26 1,370
Period Ended December 31, 1994(1) 10.027 10.194 1.67 702
</TABLE>
<TABLE>
<CAPTION>
Number of
Accumulation Unit Value Accumulation Units
Outstanding
Beginning End of Percentage of Change End of Period
of Period Period from Prior Period (in thousands)
Real Estate Division
Year Ended December 31
<S><C> <C> <C> <C> <C>
1999 $ 9.275 $ 8.750 -5.66% 261
Period Ended December 31, 1998(2) 10.000 9.275 -7.25 195
SmallCap Division
Year Ended December 31
1999 7.928 11.242 41.80 1,208
Period Ended December 31, 1998(2) 10.000 7.928 -20.72 459
SmallCap Growth Division
Year Ended December 31
1999 10.179 19.672 93.26 1,388
Period Ended December 31, 1998(2) 10.000 10.179 1.79 314
SmallCap Value Division
Year Ended December 31
1999 8.440 10.123 19.94 536
Period Ended December 31, 1998(2) 10.000 8.440 -15.60 306
Utilities Division
Year Ended December 31
1999 11.464 11.581 1.02 1,670
Period Ended December 31, 1998(2) 10.000 11.464 14.64 639
AIM V.I. Growth Division
Period Ended December 31, 1999(4) 10.000 12.256 22.56 968
AIM V.I. Growth and Income Division
Period Ended December 31, 1999(4) 10.000 12.101 21.01 1,494
AIM V.I. Value Division
Period Ended December 31, 1999(4) 10.000 11.553 15.53 1,149
Fidelity VIP II Contrafund Division
Period Ended December 31, 1999(4) 10.000 11.294 12.94 1,436
Fidelity VIP Growth Division
Period Ended December 31, 1999(4) 10.000 12.108 21.08 1,441
<FN>
(1) Commenced operations on June 16, 1994.
(2) Commenced operations on May 1, 1998.
(3) Formerly known as Stock Index 500 Division.
(4) Commenced operations on July 30, 1999.
</FN>
</TABLE>
THE PRINCIPAL FLEXIBLE VARIABLE ANNUITY
The Principal Flexible Variable Annuity is significantly different from a fixed
annuity. As the owner of a variable annuity, you assume the risk of investment
gain or loss (as to amounts in the Divisions) rather than the insurance company.
The Separate Account value under a variable annuity is not guaranteed and varies
with the investment performance of the underlying Mutual Funds.
Based on your investment objectives, you direct the allocation of purchase
payments and accumulated values. There can be no assurance that your investment
objectives will be achieved.
THE COMPANY
The Company is a stock life insurance company with its home office at: Principal
Financial Group, Des Moines, Iowa 50306. It is authorized to transact life and
annuity business in all of the United States and the District of Columbia. The
Company is a wholly owned subsidiary of Principal Financial Services, Inc.
In 1879, the Company was incorporated under Iowa law as a mutual life insurance
company named Bankers Life Association. It changed its name to Bankers Life
Company in 1911 and then to Principal Mutual Life Insurance Company in 1986. The
name change to Principal Life Insurance Company and reorganization into a mutual
holding company structure took place in 1998.
THE SEPARATE ACCOUNT
Separate Account B was established under Iowa law on January 12, 1970. It was
registered as a unit investment trust with the SEC on July 17, 1970. This
registration does not involve SEC supervision of the investments or investment
policies of the Separate Account.
The income, gains, and losses, whether or not realized, of the Separate Account
are credited to or charged against the Separate Account without regard to other
income, gains, or losses of the Company. Obligations arising from the Contract,
including the promise to make annuity payments, are general corporate
obligations of the Company. However, the Contract provides that the portion of
the Separate Account's assets equal to the reserves and other liabilities under
the Contract are not charged with any liabilities arising out of any other
business of the Company.
The assets of each Division invest in a corresponding Mutual Fund. New Divisions
may be added and made available. Divisions may also be eliminated from the
Separate Account.
THE UNDERLYING MUTUAL FUNDS
The Principal Variable Contracts Fund, Inc., AIM V.I. Growth Fund, AIM V.I.
Growth and Income Fund, AIM V.I. Value Fund, Fidelity Variable Insurance Product
Fund, Fidelity Variable Insurance Product Fund II and Janus Aspen Series are
Mutual Funds registered under the Investment Company Act of 1940 as open-end
investment management companies. The Mutual Funds provide the investment
vehicles for the Separate Account. A full description of the Mutual Funds, the
investment objectives, policies and restrictions, charges and expenses and other
operational information are contained in the accompanying prospectuses (which
should be read carefully before investing) and the Statement of Additional
Information ("SAI"). Additional copies of these documents are available from a
sales representative or our annuity service office.
Principal Management Corporation (the "Manager") serves as the manager for the
Principal Variable Contracts Fund. The Manager is a subsidiary of Princor
Financial Services Corporation. It has managed mutual funds since 1969. As of
December 31, 1999, the funds it managed had assets of approximately $6.4
billion. The Manager's address is Principal Financial Group, Des Moines, Iowa
50392-0200.
Some of the Principal Variable Contracts Fund's Accounts are used to fund the
Company's variable life insurance contracts. The Board of Directors (the
"Board") monitors events in order to identify any material irreconcilable
conflicts between the interests of the variable annuity contract owners and
variable life insurance policyowners. The Board determines any responsive action
which may need to be taken. If it becomes necessary for any Separate Account to
replace shares of any division with an alternate investment, then the division
may have to liquidate securities on a disadvantageous basis.
AIM Advisors, Inc. (the advisor) serves as the investment advisor for the AIM
V.I. Growth Fund, AIM V.I. Growth and Income Fund and the AIM V.I. Value Fund.
The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173. The advisor supervises all aspects of the funds' operations and
provides investment advisory services to the funds, including obtaining and
evaluating economic, statistical and financial information to formulate and
implement investment programs for the funds.
Fidelity Investments Institutional Services, Inc. is the manager for the
Fidelity Insurance Products Fund and Fidelity Insurance Products Fund II. As of
December 31, 1999, Fidelity had approximately $863 billion in discretionary
assets under management. The manager is located at 82 Devonshire Street, Boston,
Massachusetts 02109. As the manager, Fidelity is responsible for choosing the
account investments and handling their business affairs.
Janus Capital ("Janus") is the investment advisor for the Janus Aspen Series.
Janus is located at 100 Fillmore Street, Denver, Colorado 80206-4928. Janus is
responsible for the day-to-day management of investment portfolio and other
business affairs of the portfolio.
The Company purchases and sells Mutual Fund shares for the Separate Account at
their net asset value without any sales or redemption charge. Shares represent
interests in the Mutual Fund available for investment by the Separate Account.
Each Mutual Fund corresponds to one of the Divisions. The assets of each
Division are separate from the others. A Division's performance has no effect on
the investment performance of any other Division.
The following is a brief summary of the investment objectives of each Division:
<TABLE>
<CAPTION>
Division Division Invests In Investment Advisor* Investment Objective
<S> <C> <C> <C>
Aggressive Growth Principal Variable Contracts Morgan Stanley Asset to provide long-term capital appreciation
Fund, Inc. - Management through a by investing primarily in growth-oriented
Account Aggressive Growth sub-advisory agreement common stocks of medium and large
capitalization U.S. corporations and, to a
limited extent, foreign corporations.
Asset Allocation Principal Variable Contracts Morgan Stanley Asset to generate a total investment return
Fund, Inc. - Management through a consistent with the preservation of capital.
Asset Allocation Account sub-advisory agreement The Account intends to pursue a flexible
investment policy in seeking to achieve
this investment objective.
Balanced Principal Variable Contracts Invista Capital Management, LLC to generate a total return consisting of
Fund, Inc. - through a sub-advisory agreement current income and capital appreciation
Balanced Account while assuming reasonable risks in
furtherance of this objective.
Bond Principal Variable Contracts Principal Management Corporation to provide as high a level of income as is
Fund, Inc. - consistent with preservation of capital and
Bond Account prudent investment risk.
Capital Value Principal Variable Contracts Invista Capital Management, LLC to provide long-term capital appreciation
Fund, Inc. - through a sub-advisory agreement and secondarily growth of investment
Capital Value Account income. The Account seeks to achieve its
investment objectives through the purchase
primarily of common stocks, but the Account
may invest in other securities.
Division Division Invests In Investment Advisor* Investment Objective
-------- ------------------- ------------------ --------------------
Government Securities Principal Variable Contracts Invista Capital Management, LLC to seek a high level of current income,
Fund, Inc. - through a sub-advisory agreement liquidity and safety of principal. The
Government Securities Account Account seeks to achieve its objective
through the purchase of obligations
issued or guaranteed by the United States
Government or its agencies, with
emphasis on Government National
Mortgage Association Certificates
("GNMA Certificates"). Account shares
are not guaranteed by the United States
Government.
Growth Principal Variable Contracts Invista Capital Management, LLC to seek growth of capital. The Account
Fund, Inc. - through a sub-advisory agreement seeks to achieve its objective through the
Growth Account purchase primarily of common stocks, but
the Account may invest in other securities.
International Principal Variable Contracts Invista Capital Management, LLC to seek long-term growth of capital by
Fund, Inc. - through a sub-advisory agreement investing in a portfolio of equity
International Account securities domiciled in any of the nations
of the world.
International Principal Variable Contracts Invista Capital Management, LLC seeks to achieve long-term growth of capital
Emerging Markets Fund, Inc. - through a sub-advisory agreement by investing primarily in equity securities
International Emerging of issuers in emerging market countries.
Account
International SmallCap Principal Variable Contracts Invista Capital Management, LLC seeks long-term growth of capital. The
Fund, Inc. - through a sub-advisory agreement Account will attempt to achieve its
International SmallCap Account objective by investing primarily in equity
securities of non-United States companies
with comparatively smaller market
capitalizations.
LargeCap Growth Principal Variable Contracts Janus Capital Management, LLC seeks long-term growth of capital by
Fund, Inc. - through a sub-advisory agreement investing in equity securities of growth
LargeCap Growth Account companies with market capitalization of
greater than $10 billion.
LargeCap Growth Principal Variable Contracts Duncan-Hurst Capital seeks to achieve long-term growth of capital
Equity Fund, Inc. - Management, Inc. investing primarily in common stocks
LargeCap Growth through a sub-advisory agreement of larger capitalization domestic companies.
Equity Account
LargeCap Stock Index Principal Variable Contracts Invista Capital Management, LLC The Account attempts to mirror the
Fund, Inc. - through a sub-advisory agreement investment results of the Standard &
LargeCap Stock Index Account Poor's 500 Stock Index.
MicroCap Principal Variable Contracts Goldman Sachs Asset Management seeks long-term growth of capital. The
Fund, Inc. - through a sub-advisory agreement Account will attempt to achieve its
MicroCap Account objective by investing primarily in value
and growth oriented companies with small
market capitalizations, generally
less than $700 million.
MidCap Principal Variable Contracts Invista Capital Management, LLC to achieve capital appreciation by
Fund, Inc. - through a sub-advisory agreement investing primarily in securities of
MidCap Account emerging and other growth-oriented
companies.
Division Division Invests In Investment Advisor* Investment Objective
-------- ------------------- ------------------ --------------------
MidCap Growth Principal Variable Contracts Dreyfus Corporation through seeks long-term growth of capital. The
Fund, Inc. - a sub-advisory agreement Account will attempt to achieve its
MidCap Growth Account objective by investing primarily in growth
stocks of companies with market
capitalizations in the $1 billion to $10
billion range.
MidCap Growth Principal Variable Contracts Turner Investment Partners, Inc. seeks to achieve long-term growth of
Equity Fund, Inc. - through a sub-advisory agreement capital by investing primarily in medium
MidCap Growth capitalization of U.S. companies with
Equity Account strong earnings growth potential.
Money Market Principal Variable Contracts Principal Management Corporation to seek as high a level of current income
Fund, Inc. - available from short-term securities as is
Money Market Account considered consistent with preservation of
principal and maintenance of liquidity by
investing all of its assets in a portfolio
of money market instruments.
Real Estate Principal Variable Contracts Principal Management Corporation seeks to generate a high total return. The
Fund, Inc. - Account will attempt to achieve its
Real Estate Account objective by investing primarily in equity
securities of companies principally
engaged in the real estate industry.
SmallCap Principal Variable Contracts Invista Capital Management, LLC seeks long-term growth of capital. The
Fund, Inc. - through a sub-advisory agreement Account will attempt to achieve its
SmallCap Account objective by investing primarily in equity
securities of both growth and value
oriented companies with comparatively
smaller market capitalizations.
SmallCap Growth Principal Variable Contracts Berger LLC through seeks long-term growth of capital. The
Fund, Inc. - a sub-advisory agreement Account will attempt to achieve its
SmallCap Growth Account objective by investing primarily in equity
securities of small growth companies with
market capitalization of less than
$1 billion.
SmallCap Value Principal Variable Contracts J.P. Morgan Investment seeks long-term growth of capital. The
Fund, Inc. - Management Inc. through a Account will attempt to achieve its
SmallCap Value Account sub-advisory agreement objective by investing primarily in equity
securities of small companies with value
characteristics and market capitalizations
of less than $1 billion.
Utilities Principal Variable Contracts Invista Capital Management, LLC seeks to provide current income and long-
Fund, Inc. - through a sub-advisory agreement term growth of income and capital. The
Utilities Account Account will attempt to achieve its
objective by investing primarily in equity
and fixed-income securities of companies
in the public utilities industry.
AIM V.I. Growth AIM V.I. Growth Fund AIM Advisors, Inc. seeks growth of capital primarily by
investing in seasoned and better capitalized
companies considered to have strong earnings
momentum.
AIM V.I. Growth AIM V.I. Growth AIM Advisors, Inc. seeks growth of capital with a secondary
and Income and Income Fund objective of current income.
Division Division Invests In Investment Advisor* Investment Objective
AIM V.I. Value AIM V.I. Value Fund AIM Advisors, Inc. seeks long-term growth of capital 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 current
market values of assets owned by the
companies issuing the securities or
relative to the equity market generally.
Income is a secondary objective.
Fidelity VIP II Fidelity Variable Insurance Fidelity Management seeks long-term capital appreciation.
Contrafund Products Fund II and Research Company
Fidelity VIP II
Contrafund Portfolio
Service Class
Fidelity VIP Growth Fidelity Variable Insurance Fidelity Management seeks to maximize total return by allocating
Products Fund and Research Company its assets among stocks, bonds, short-term
Fidelity VIP Growth instruments, and other investments.
Portfolio Service Class
Janus Aspen Janus Aspen Series - Janus Capital Corporation seeks long-term growth of capital.It pursues
Aggressive Growth Service Shares its objective by investing primarily in
Aggressive Growth common stocks selected for their growth
Portfolio potential, and normally invests at least
50% of its equity assets in medium-sized
companies. Medium-sized companies are those
whose market capitalization falls within
the range of companies in the S&P MidCap 400
Index.
</TABLE>
* An Investment Advisor agrees to provide investment advisory services for a
specific underlying Mutual Fund or underlying Mutual Fund Account. For these
services, each Investment Advisor is paid a fee.
SURPLUS DISTRIBUTIONS
Divisible surplus distributions are not anticipated because the Contracts are
not expected to result in a contribution to the divisible surplus of the
Company. However, if any divisible surplus distribution is made, then it will be
made to the owners in the form of cash.
THE CONTRACT
The following descriptions are based on provisions of the Contract offered by
this prospectus. You should refer to the actual Contract and the terms and
limitations of any qualified plan which is to be funded by the Contract.
Qualified plans are subject to several requirements and limitations which may
affect the terms of any particular Contract or the advisability of taking
certain action permitted by the Contract.
To Buy a Contract
If you want to buy a Contract, you must submit an application and make an
initial purchase payment. If you are buying the Contract to fund a SIMPLE-IRA or
SEP, an initial purchase payment is not required at the time you send in the
application. If the application is complete and the Contract applied for is
suitable, the Contract is issued subject to underwriting. If the completed
application is received in proper order, the initial purchase payment is
credited within two valuation days after the later of receipt of the application
or receipt of the initial purchase payment at the annuity service office. If the
initial purchase payment is not credited within five valuation days, it is
refunded unless we have received your permission to retain the purchase payment
until we receive the information necessary to issue the Contract.
The date the Contract is issued is the Contract date. The Contract date is the
date used to determine Contract years, regardless of when the Contract is
delivered.
Purchase Payments
o The initial purchase payment must be at least $2,500 for non-qualified
retirement programs.
o All other initial purchase payments must be at least $1,000.
o If you are making purchase payments through a payroll deduction plan or
through a bank account (or similar financial institution) under an automated
investment program, then your initial and subsequent purchase payments must
be at least $100.
o You may elect a purchase payment credit rider with an additional charge and
an associated 9-year surrender charge period.
o Subsequent payments must be at least $100 and can be made until the annuity
payment date.
o If you are a member of a retirement plan covering three or more persons, then
the initial and subsequent purchase payments for the Contract must average at
least $100 and cannot be less than $50.
o The total of all purchase payments may not be greater than $2,000,000 without
our prior approval.
o In New Jersey after the first Contract year, purchase payments cannot exceed
$100,000 per Contract year.
The Company reserves the right to:
o increase the minimum amount for each purchase payment to not more than
$1,000; and
o terminate* a Contract and send you the accumulated value if no premiums are
paid during two consecutive calendar years and the accumulated value (or
total purchase payments less partial surrenders and applicable surrender
charges) is less than $2,000.
* The Company will first notify you of its intent to exercise this right
and give you 60 days to increase the accumulated value to at least
$2,000.
Right to Examine the Contract (Free-Look)
Under state law, you have the right to return the Contract for any reason during
the examination period. The examination period is 10 days after the Contract is
delivered to you in all states, unless your Contract is issued in:
a. California and you are age 60 and over (30 day examination period);
b. Colorado (15 day examination period); or
c. Idaho or North Dakota (20 day examination period).
Some states require us to return the initial purchase payment. If your Contract
is issued in one of those states, your initial purchase payments are allocated
to the Money Market Division for 15 days (20 days for Contracts issued in Idaho)
after the Contract date. After the 15-day period (20 days in Idaho), the then
current value of the Money Market Division is reallocated according to your
allocation instructions. The states in which purchase payments are returned are:
Colorado Kentucky North Carolina
Connecticut* Louisiana Oklahoma
Georgia Maryland Rhode Island
Hawaii Michigan South Carolina
Idaho Missouri Utah
Indiana Nebraska Washington
* Purchase payments are refunded if the Contract is canceled prior to
its delivery, otherwise the accumulated value is refunded.
If your Contract is issued in a state not listed above and if you return the
Contract during the examination period, you will receive the accumulated value.
Additionally, if you decide to return the Contract during the examination
period, the amount returned is reduced by any credits. If the value of the
purchase payment credit declines during the examination period, we recover the
full amount of the purchase payment credit.
To return a Contract you must send it and a written request to the annuity
service office or to the sales representative who sold it to you before the
close of business on the last day of the examination period. If you send the
request (properly addressed and postage prepaid) to the annuity service office,
the date of the postmark is used to determine if the examination period has
expired.
Replacement Contracts
If the purchase of this Contract is a replacement for another annuity contract
or a life insurance policy, different examination periods may apply. The Company
reserves the right to keep the initial purchase payment in the Money Market
Division longer than 15 days to correspond to the examination periods of a
particular state's replacement requirements.
Exchange Credit
If you own a Single Premium Deferred Annuity ("SPDA") or a Single Premium
Deferred Annuity Plus ("SPDA+") issued by us and are within at least 8
months of the 8th Contract year, then you may transfer the accumulated
value, without charge, to the Contract described in this prospectus.
Additionally, we will add 1% of the current SPDA/SPDA+ surrender value to
the purchase payment. We reserve the right to change or terminate this
program. Any changes or termination will follow at least 1 year notice.
Both SPDA and SPDA+ are annuities which provide a fixed rate of
accumulation. This Contract varies with the investment experience and
objectives of the various Divisions. Thus, the value of your Contract may
increase or decrease with the investment holdings of the Divisions.
When making an exchange decision, the owner should carefully review the SPDA
or SPDA+ contract and this prospectus because the charges and provisions of
the contracts differ. An existing SPDA or SPDA+ contract may be currently
eligible for waiver of surrender charge due to critical need, while similar
riders may not be available under this Contract.
To complete a transfer to this Contract, send
1) a Contract application,
2) a SPDA/SPDA+ surrender form,
3) a replacement form (based on state written), and
4) an Annuity Exchange Request and Release Form.
The exchange is effective when we receive the completed forms and accept the
application. The transaction is valued at the end of the valuation period in
which we receive the necessary documents.
(This "exchange credit" is not available in New York and may not be
available in other states as well. Specific information is available from
your registered representative or the annuity service office
(1-800-852-4450)).
The Exchange Credit is allocated among the Separate Account Divisions, the
DCA Plus Account(s) or the Fixed Account in the same ratio as the allocation
of the purchase payment. The credit is treated as earnings. The 1% credit is
subject to a vesting period. Therefore, the 1% credit is not credited to
your Contract until the examination period has expired. If you exercise your
right to return the Contract during the examination period, then the amount
returned is the original amount invested (see RIGHT TO EXAMINE THE
CONTRACT).
Purchase Payment Credit Rider
You may elect a purchase payment credit rider at the time the Contract is issued
(may not be available in all states; consult your sales representative or the
annuity service office for availability). If the purchase payment credit rider
is elected, then the following provisions apply to the Contract:
o A credit of 5% will be applied to purchase payments received during your
first Contract year. For example, if you make purchase payments totaling
$10,000 in your first Contract year, a credit amount of $500 will be added to
your Contract (5% x $10,000). If an additional purchase payment of $5,000 is
made in your second Contract year, then a credit is not added as a result of
the $5,000 purchase payment.
o The credit is allocated among the Fixed Account and the Divisions according
to your then current purchase payment allocations.
o If you exercise your right to return the Contract during the examination
period, the amount returned to you is reduced by any credits.
o Credits are considered earnings under the Contract.
o All purchase payments are subject to the 9-year surrender charge table (see
Surrender Charge).
o The purchase payment credit rider may not be cancelled and the associated
9-year surrender charge period cannot be changed.
o You may not participate in the DCA Plus Program.
The 0.60% purchase payment credit rider charge is assessed against the entire
Separate Account accumulated value for the first eight Contract years. If you
anticipate making additional purchase payments after the first Contract year you
should carefully examine the purchase payment credit rider and consult your
sales representative regarding its desirability.
The following table demonstrates hypothetical Contract accumulated values for
Contracts with the purchase payment credit rider and Contracts without the
rider. The example is based on:
o a $100,000 initial purchase payment and no additional purchase payments; o no
surrender during the 10 years shown by the example;
o the deduction of total Separate Account annual expenses of 1.85% annually for
Contracts with the purchase payment credit rider and 1.25% annually for
Contracts without the rider;
o the deduction of Mutual Fund expenses equal to those calculated as of
December 31, 1999
o purchase payment allocation among the Divisions proportionally equal to the
allocation of the company's total Separate Account assets as of April 30,
2000;
o 5% and 10% annual rates of return before charges for a period of 10 years.
<TABLE>
<CAPTION>
5% Annual Return 10% Annual Return
Contract without Contract with Contract without Contract with
purchase payment purchase payment purchase payment purhcase payment
Contract Year credit rider credit credit rider credit
<S> <C> <C> <C> <C> <C>
1 $103,138 $107,648 $108,410 $113,151
2 $106,383 $110,371 $117,553 $121,960
3 $109,731 $113,164 $127,468 $131,455
4 $113,185 $116,027 $138,219 $141,691
5 $116,747 $118,964 $149,878 $152,723
6 $120,423 $121,975 $162,521 $164,616
7 $124,214 $125,062 $176,232 $177,435
8 $128,126 $128,229 $191,099 $191,253
9 $132,161 $132,252 $207,222 $207,336
10 $136,323 $136,414 $224,705 $224,823
15 $159,196 $159,322 $336,921 $337,186
20 $185,924 $186,070 $505,220 $505,617
</TABLE>
Based on the assumptions stated above, Contract accumulated value will generally
be higher for Contracts with the purchase payment credit rider than without,
regardless of the rate of return. In addition, the higher the rate of return,
the more advantageous the purchase payment credit rider becomes.
The Accumulation Period
The Value of Your Contract
The value of your Contract is the total of the Separate Account value plus
the DCA Plus Account(s) value plus the Fixed Account value. The DCA Plus
Accounts and Fixed Account are described in the section titled FIXED
ACCOUNT AND DCA PLUS ACCOUNTS.
There is no guaranteed minimum Separate Account value. Its value reflects
the investment experience of the Divisions that you choose. It also
reflects your purchase payments, partial surrenders, surrender charges and
the Contract expenses deducted from the Separate Account.
The Separate Account value changes from day to day. To the extent the
accumulated value is allocated to the Separate Account, you bear the
investment risk. At the end of any valuation period, your Contract's value
in a Division is:
o the number of units you have in a Division multiplied by
o the value of a unit in the Division.
The number of units is the total of units purchased by allocations to the
Division from:
o your initial purchase payment;
o an exchange credit (if applicable);
o subsequent investments;
o purchase payment credits; and
o transfers from another Division, a DCA Plus Account or the Fixed
Account.
minus units sold:
o for partial surrenders from the Division;
o as part of a transfer to another Division or the Fixed Account; and
o to pay contract charges and fees.
Unit values are calculated each valuation date at the close of normal trading of
the New York Stock Exchange (generally 3:00 p.m. Central Time). To calculate the
unit value of a Division, the unit value from the previous valuation date is
multiplied by the Division's net investment factor for the current valuation
period. The number of units does not change due to a change in unit value.
The net investment factor measures the performance of each Division. The net
investment factor for a valuation period is calculated as follows:
[{share price (net asset value) of the underlying Mutual Fund at the
end of the valuation period
plus
per share amount of any dividend* (or other distribution) made by the
Mutual Fund during the valuation period}
divided by
share price (net asset value) of the underlying Mutual Fund at the
end of the previous valuation period]
minus
{total Separate Account annual expenses}
* When an investment owned by a Mutual Fund pays a dividend,
the dividend increases the net asset value of a share of
the Mutual Fund as of the date the dividend is recorded.
As the net asset value of a share of a Mutual Fund
increases, the unit value of the corresponding Division
also reflects an increase. Payment of a dividend under
these circumstances does not increase the number of units
you own in the Division.
The Separate Account charges are calculated by dividing the annual amount of the
charge by 365 and multiplying by the number of days in the valuation period.
The Separate Account charges and any taxes (currently none) are accrued daily
and are transferred from the Separate Account at the Company's discretion.
Purchase Payments
o On your application, you direct your purchase payments to be allocated
to the Investment Options.
o Allocations may be in percentages.
o Percentages must be in whole numbers and total 100%.
o Subsequent purchase payments are allocated according to your
instructions.
o Changes to the allocation instructions may be made without charge.
o A change is effective on the next valuation period after we receive
your new instructions.
o You can change the allocations by:
1) mailing your instructions to us;
2) calling us at 1-800-852-4450 (if telephone privileges
apply); or
3) faxing your instructions to us at 1-515-248-9800.
o Changes to purchase payment allocations do not transfer any existing
Investment Option accumulated values.
o Purchase payments are credited on the basis of unit value next
determined after we receive a purchase payment.
Separate Account Division Transfers
o You may request an unscheduled transfer or set up a scheduled transfer
by sending us a written request, by telephoning if you have telephone
privileges (1-800-852-4450) or sending us a fax (1-515-248-9800).
o You must specify the dollar amount or percentage to transfer from each
Division.
o The minimum amount is $100 or if the Division's value is less than $100,
then 100% of the Division from which the transfer is being made.
o In states where allowed, we reserve the right to reject transfer
instructions from someone providing them for multiple Contracts for
which he or she is not the owner.
You may not make a transfer to the Fixed Account if:
o a transfer has been made from the Fixed Account to a Division within six
months; or
o following the transfer, the Fixed Account value would be greater than
$1,000,000 (without our prior approval).
Unscheduled Transfers
o You may make unscheduled Division transfers from a Division to another
Division or to the Fixed Account.
o Transfers are not permitted into DCA Plus Accounts.
o The transfer is made, and values determined, as of the end of the
valuation period in which we receive your request.
Scheduled Transfers (Dollar Cost Averaging)
o You may elect to have transfers made on a scheduled basis.
o You must specify the dollar amount of the transfer.
o You select the transfer date (other than the 29th, 30th or 31st) and the
transfer period (monthly, quarterly, semi-annually or annually).
o If the selected date is not a valuation date, the transfer is completed on
the next valuation date.
o Transfers are not permitted into DCA Plus Accounts.
o If you want to stop a scheduled transfer, then you must provide us notice
prior to the date of the scheduled transfer.
o Transfers continue until your value in the Division is zero or we receive
notice to stop them.
o We reserve the right to limit the number of Divisions from which
simultaneous transfers are made. In no event will it ever be less than
two.
Automatic Portfolio Rebalancing (APR)
o APR allows you to maintain a specific percentage of your Separate Account
accumulated value in specified Divisions over time.
o You may elect APR at any time.
o APR is not available for values in the Fixed Account or the DCA Plus
Accounts.
o APR is not available if you have arranged scheduled transfers from the same
Division.
o APR will not begin until the examination period has expired.
o There is no charge for APR transfers.
o APR can be selected for quarterly, semi-annual or annual rebalancing.
o You may rebalance by completing and submitting a form to us, by telephoning
if you have telephone privileges (1-800-852-4450) or faxing your instructions
to us (1-515-248-9800). (Divisions are rebalanced at the end of the next
valuation period following your request.)
Example:
You elect APR to maintain your Separate Account accumulated value with 50% in
the A Division and 50% in the B Division. At the end of the specified period,
60% of the values are in the A Division, with the remaining 40% in the B
Division. By rebalancing, units from the A Division are sold and applied to
the B Division so that 50% of the Separate Account accumulated value is once
again in each Division.
Telephone Services*
Telephone services are permitted for:
o purchase payment allocation changes;
o transfers; and o changes to APR.
Telephone services are available for both you and your sales representative.
Telephone services may be declined on the application or at any later date by
providing us with written notice. Telephone services are used by calling us at
1-800-852-4450.
Telephone instructions must be made while we are open for business. They are
effective when received by us before the close of normal trading of the New York
Stock Exchange (generally 3 p.m. Central Time). Requests received when we are
not open for business or after the New York Stock Exchange closes its normal
trading will be effective on the next valuation date.
Direct Dial*
You may obtain Contract information from our direct dial system between 7:00
a.m. and 9:00 p.m., Central Time, Sunday through Friday, and between 7:00 a.m.
and 4:00 p.m., Central Time, on Saturday. The telephone number is
1-800-852-4450.
Internet*
Internet access is available for both you and your sales representative at
www.principal.com. Internet access may be declined on the application or at a
later date by providing us with written notice.
* Instructions received via our telephone services, direct dial system and
internet are binding on both owners if the Contract is jointly owned.
Neither the Company nor the Separate Account are responsible for the
authenticity of telephone service, direct dial or internet transaction
requests. We reserve the right to refuse telephone service, direct dial or
internet transaction requests. You assume the risk of loss caused by
fraudulent telephone service, direct dial or internet transactions we
reasonably believe to be genuine. We follow procedures in an attempt to
assure genuine telephone service, direct dial or internet transactions. If
these procedures are not followed, then we may be liable for loss caused
by unauthorized or fraudulent transactions. The procedures may include
recording telephone service transactions, recording direct dial
transactions, requesting personal identification (name, daytime telephone
number, social security number and/or birth date) and sending written
confirmation to your address of record.
We reserve the right to modify or terminate telephone service, direct dial or
internet transaction procedures at any time.
Surrenders
Surrenders result in the cancellation of units and your receipt of the canceled
unit values minus any applicable fee and surrender charge. Surrenders from the
Separate Account are generally paid within seven days of the effective date of
the request for surrender (or earlier if required by law). However, certain
delays in payment are permitted (see DELAY OF PAYMENTS). Surrenders before age
59 1/2 may involve an income tax penalty (see FEDERAL TAX MATTERS). You must
send us a written request for any surrender.
You may specify surrender allocation percentages with each partial surrender
request. If you don't provide us with specific percentages, we will use your
purchase payment allocation percentages for the partial surrender. Surrenders
may be subject to a surrender charge (see SURRENDER CHARGE).
Total Surrender
o You may surrender the Contract at any time before the annuity payment
date.
o You receive the cash surrender value at the end of the valuation period
during which we receive your surrender request.
o The cash surrender value is your accumulated value minus any applicable
fee and charge.
o The written consent of all collateral assignees and irrevocable
beneficiaries must be obtained prior to surrender.
o We reserve the right to require you to return the Contract to us prior to
making any payment though this does not affect the amount of the cash
surrender value.
Unscheduled Partial Surrender
o Prior to the annuity payment date and during the lifetime of the
Annuitant, you may surrender a part of the accumulated value by sending us
a written request.
o You must specify the dollar amount of the surrender (which must be at
least $100).
o The surrender is effective at the end of the valuation period during which
we receive your written request for surrender.
o The surrender is deducted from your Investment Options according to the
surrender allocation percentages you specify.
o If surrender allocation percentages are not specified, we use your
purchase payment allocation percentages.
o We surrender units from your Investment Options to equal the dollar amount
of the surrender request plus any applicable surrender charge and fee.
o The accumulated value after the unscheduled partial surrender must be
equal to or greater than $5,000 (we reserve the right to change the
minimum remaining accumulated value but it will not be greater than
$10,000).
Scheduled Partial Surrender
o You may elect partial surrenders from any of the Investment Options on a
scheduled basis by sending us written notice.
o Your accumulated value must be at least $5,000 when the scheduled
surrenders begin.
o You may specify monthly, quarterly, semi-annually or annually and choose a
surrender date (other than the 29th, 30th or 31st).
o If the selected date is not a valuation date, the surrender is completed
on the next valuation date.
o The surrenders continue until your value in the Division is zero or we
receive written notice to stop them.
Death Benefit
If you or the annuitant die before the annuity payment date, then we will pay a
death benefit. In the case of joint annuitants, the death benefit is paid upon
death of the first annuitant. If the owner is not a natural person, death
benefits are paid to the beneficiary(ies) upon the death of the annuitant.
Before the annuity payment date, you may give us written instructions for
payment under a death benefit option. If we do not receive your instructions,
the death benefit is paid according to instructions from the beneficiary(ies).
You name the beneficiary or beneficiaries in your application. The
beneficiary(ies) receives benefits upon your death. Generally, unless the
beneficiary(ies) elects otherwise we pay the death benefit in a single sum,
subject to proof of your death.
Unless you have named an irrevocable beneficiary(ies), you may change your
beneficiary by providing us with written notice. If a beneficiary dies before
you, on your death we will make equal payments to the surviving beneficiaries
unless you had provided us with other written instructions. If none of your
beneficiaries survive you, we will pay the death benefit to your estate in a
lump sum.
Upon death of the annuitant, your beneficiary may elect to:
o apply the death benefit under an annuity payment option; or
o receive the death benefit as a single payment.
No surrender charge applies when a death benefit is paid.
If you die before the annuitant and your beneficiary is your spouse, we will
continue the Contract with your spouse as the new owner unless your spouse
elects to receive the death benefit.
If the owner or annuitant of a Contract, not issued as an Individual Retirement
Annuity, Roth IRA, SEP IRA or Simple IRA, dies before the annuitant and before
the annuity payment date, written notice of the death must be sent to us
promptly so distribution arrangements can be made to avoid adverse tax
consequences.
Standard Death Benefit
The amount of the standard death benefit is the greatest of:
o your accumulated value on the date we receive proof of death and all
required documents;
o the total of purchase payments minus any partial surrenders, fees and
charges as of the date we receive all required documents and notice
(including proof) of death; or
o the highest accumulated value on any prior Contract anniversary that is
divisible equally by seven, plus any purchase payments and less any
partial surrenders (and surrender charges incurred) made after that
Contract anniversary.
Annual Enhanced Death Benefit
This is an optional death benefit rider. Under this rider, if the original
annuitant or owner dies before the annuity payment date, then the death
benefit payable to the beneficiary is the greatest of:
1) the standard death benefit;
2) the annual increasing death benefit, based on purchase payments
(accumulated at 5% annually) minus any surrenders and surrender charges
(accumulated at 5% annually) until the later of the Contract
anniversary after the original owner's or original annuitant's 75th
birthday or five years from the effective date of the rider; or
3) the highest accumulated value on a Contract anniversary, plus any
subsequent purchase payments minus any surrenders and surrender
charges, until the Contract anniversary following the original owner's
or original annuitant's 75th birthday or five years from the effective
date of the rider, whichever comes last.
For Contracts issued in New York - under this rider, if the original
annuitant or owner dies before the annuity payment date, then the death
benefit payable to the beneficiary is the greater of:
1) the standard death benefit; o
2) the highest accumulated value on a Contract anniversary until the
Contract anniversary following the original owner's or original
annuitant's 75th birthday or five years from the effective date of the
rider, whichever comes last.
Lock-In Feature
At the later of the Contract anniversary following the original owner's
or original annuitant's 75th birthday ("lock-in date"), the death
benefit amount is locked-in. After the lock-in date, the death benefit
increases by purchase payments (subject to applicable restrictions)
made after the lock-in date, minus any surrenders and surrender
charges. However, because the death benefit is locked-in, it will only
decrease by surrenders and surrender charges. Once the standard death
benefit equals the annual enhanced death benefit, then the annual
enhanced death benefit and any associated charge terminate. The
standard death benefit then applies.
Termination
You may terminate the annual enhanced death benefit at anytime. Once
the annual enhanced death benefit is terminated, it cannot be
reinstated (except in Florida).
The annual cost of the rider is 0.20% of the annual accumulated value
(0.15% in New York). The charge is equal to 0.05% (0.0375% in New York)
of the average accumulated value during the calendar quarter. The cost
will be deducted throughout the redemption of units from your
Contract's accumulated value in the same proportion as the purchase
payment allocations among the DCA Plus Accounts, Fixed Account and
Separate Account Divisions. If the rider is purchased after the
beginning of a quarter, then the charge is prorated according to the
number of days it is in effect during the quarter. Upon termination of
the rider or upon death, you will be charged based on the number of
days it is in effect during the quarter. The enhanced death benefit
rider is only available at the time the Contract is issued. Thus, once
a Contract has been purchased without the rider, it may not be added at
a later date.
Payment of Death Benefit
The death benefit is usually paid within seven days of our receiving all
documents (including proof of death) that we require to process the claim.
Payment is made according to benefit instructions provided by you. Some
states require this payment to be made in less than seven days. Under
certain circumstances, this payment may be delayed (see DELAY OF PAYMENTS).
We pay interest (at least 3% or as required by state law) on the death
benefit from the date we receive all required documents until payment is
made or until the death benefit is applied under an annuity payment option.
NOTE: Proof of death includes: a certified copy of a death
certificate; a certified copy of a court order; a
written statement by a medical doctor; or other proof
satisfactory to us.
The Annuity Payment Period
Annuity Payment Date
You may specify an annuity payment date in your application. You may elect
to receive payments under an annuity payment option at any time. If you do
not specify an annuity payment date, then the annuity payment date is the
later of the older annuitant's 85th birthday or 10 years after issuance. If
the annuitant is living and the Contract is in force on that date, we will
notify you to begin taking payments under the Contract. You may not select
an annuity payment date which is on or after the older annuitant's 85th
birthday or 10 years after the Contract date, whichever is the later. (No
later than age 88 in Pennsylvania or age 90 in New York.)
Depending on the type of annuity payment option selected, payments that are
initiated either before or after the annuity payment date may be subject to
penalty taxes (see FEDERAL TAX MATTERS). You should consider this carefully
when you select or change the annuity payment date.
You may change the annuity payment date with our prior approval. The
request must be in writing and approved before we issue a supplementary
Contract which provides an annuity payment option.
Annuity Payment Options
We offer fixed annuity payments. If, however, the accumulated value on the
annuity payment date is less than $5,000 or if the amount applied under an
annuity payment option is less than the minimum requirement we may pay out
the entire amount. No surrender charge would be imposed. The Contract would
then be canceled.
You may choose from several fixed annuity payment options. Payments will be
made on the frequency you choose. You may elect to have your annuity
payments made on a monthly, quarterly, semiannual or annual basis. The
dollar amount of the payments is specified for the entire payment period
according to the option selected. There is no right to make any total or
partial surrender after the annuity payments start.
The amount of the annuity payment depends on:
o amount of accumulated value;
o annuity payment option selected; and
o age and gender of annuitant (unless fixed income option is selected).
Annuity payments generally are higher for male annuitants than for female
annuitants with an otherwise identical Contract. This is because
statistically females have longer life expectancies than males. In certain
states, this difference may not be taken into consideration in fixing the
payment amount. Additionally, Contracts with no gender distinctions are
made available for certain employer-sponsored plans because under most such
plans, such Contract provisions are prohibited by law.
You may select an annuity payment option or change a previous selection by
written request. We must receive the request on or before the annuity
payment date. If an annuity payment option is not selected, then we will
automatically apply the Life Income with Payments Guaranteed for a Period
of 10 Years (see below). If you designate joint annuitants, then payment
will be made pursuant to a Joint and Full Survivor Life Income for a Period
of 10 Years (see below). Tax laws and regulations may impose further
restrictions on annuity payment options.
Payments under the annuity payment options are made as of the first day of
each payment period beginning with the annuity payment date. The available
annuity payment options are:
Fixed Income. Payments of a fixed amount or payments for a fixed period
of at least five years but not more than 30 years. Payments stop after
all guaranteed payments are made.
Life Income. Payments are made as of the first day of each payment
period during the annuitant's life, starting with the annuity payment
date. No payments are made after the annuitant dies. It is possible
that you would only receive one payment under this option if the
annuitant dies before the second payment is due.
Life Income with Payments Guaranteed for a Period of 5 to 20 Years.
Payments are made on the first day of each payment period beginning on
the annuity payment date. Payments will continue until the annuitant
dies. If the annuitant dies before all of the guaranteed payments have
been made, then we will continue the guaranteed payments to the
beneficiary.
Joint and Full Survivor Life Income with Payments Guaranteed for a
Period of 10 Years. Payments continue as long as either the annuitant
or the joint annuitant is alive. If both die before all guaranteed
payments have been made, the guaranteed remaining payments are made to
the beneficiary.
Joint and Two-thirds Survivor Life Income. Payments continue as long as
either the annuitant or the joint annuitant is alive. If either the
annuitant or joint annuitant dies, payments continue to the survivor at
two-thirds the original amount. Payments stop when both the annuitant
and joint annuitant have died. It is possible that only one payment is
made under this option if both annuitants die before the second payment
is due.
Other annuity payment options may be available with our approval.
Death of Annuitant
If the owner or annuitant dies during the annuity payment period, remaining
payments are made to the beneficiary throughout the guarantee period, if
any, or for the life of any joint annuitant, if any. In all cases the
person entitled to receive payments also receives any rights and privileges
under the annuity payment option.
The mortality risk assumed by the Company is to make annuity payments for
the full life of all annuitants regardless of how long they, or any
individual annuitant, might live. Mortality risk does not apply to the
Fixed Income option. Annuity payments are determined in accordance with
annuity tables and other provisions contained in the Contract. This assures
neither an annuitant's own longevity, nor an improvement in life
expectancy, will have an adverse effect on the annuity payments received
under this Contract. The annuity payment tables contained in this Contract
are based on the Annuity Mortality 1983 Table a. These tables are
guaranteed for the life of the Contract.
If you own one or more qualified annuity contracts, in order to avoid tax
penalties, payments from at least one of your qualified contracts must
start no later than April 1 following the calendar year in which you turn
age 70 1/2. The required minimum payment is a distribution in equal (or
substantially equal) amounts over your life or over the joint lives of you
and your designated beneficiary. In addition, payments must be made at
least once a year. Tax penalties may also apply at your death on certain
excess accumulations. You should consider potential tax penalties with your
tax advisor when selecting an annuity payment option or taking other
distributions from the Contract.
Additional rules apply to distributions under non-qualified contracts (see
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS). However, the rules do
not apply to contracts issued in connection with IRAs, SEPs or SIMPLE-IRAs.
CHARGES AND DEDUCTIONS
An annual fee, a mortality and expense risks charge and in some circumstances a
purchase credit rider charge are deducted under the Contract. A surrender charge
may also be deducted from certain surrenders made before the annuity payment
date. We reserve the right to assess a transaction fee, state premium taxes and
a daily administration charge. There are also deductions from and expenses paid
out of the assets of the Mutual Funds which are described in the Mutual Funds'
prospectuses.
Annual Fee
An annual fee exists which is the lesser of $30 or 2% of your accumulated value
(subject to any applicable state law limitations). The fee is deducted from the
DCA Plus Accounts, Fixed Account or your interest in a Division, whichever has
the greatest value. The fee is deducted on each contract anniversary and upon
total surrender of the Contract. This fee is currently waived for Contracts
having an accumulated value on the last day of the Contract year of $30,000 or
more. The aggregate value of multiple Contracts owned, or jointly owned, by you
is used to attain the $30,000 accumulated value. Aggregation occurs on each
Contract's anniversary. The fee assists in covering administrative costs. The
Company does not anticipate any profit from this fee.
The administrative costs include costs associated with:
o issuing Contracts;
o establishing and maintaining the records which relate to Contracts;
o making regulatory filings and furnishing confirmation notices;
o preparing, distributing and tabulating voting materials and other
communications;
o providing computer, actuarial and accounting services; and
o processing Contract transactions.
Mortality and Expense Risks Charge
We assess each Separate Account Division with a daily charge for mortality and
expense risks. The annual rate of the charge is 1.25% of the average daily net
assets of the Separate Account. We agree not to increase this charge for the
duration of the Contract. This charge is assessed only prior to the annuity
payment date. This charge is assessed daily when the value of a unit is
calculated.
We have a mortality risk in that we guarantee payment of a death benefit in a
single sum or under an annuity payment option. No surrender charge is imposed on
a death benefit payment which gives us an additional mortality risk.
The expense risk that we assume is that the actual expenses incurred in issuing
and administering the Contract exceed the Contract limits on administrative
charges.
If the mortality and expense risks charge is not enough to cover the costs, we
bear the loss. If the amount of mortality and expense risks charge deducted is
more than our costs, the excess is profit to the Company. We expect a profit
from the mortality and expense risks charge.
Purchase Payment Credit
If you elect the purchase payment credit rider we assess each Division with an
additional daily charge. The annual rate of the charge is 0.60% of the average
daily net assets of the Separate Account. We agree not to increase this charge
for the duration of the Contract. This charge is assessed until completion of
your 8th Contract year and only prior to the annuity payment date. This charge
is assessed daily when the value of a unit is calculated.
If the purchase payment credit rider charge is not enough to cover the cost of
the credit, we bear the loss. If the amount of the purchase payment credit rider
charge deducted is more than our costs, the excess is profit to the Company. We
expect a profit from the purchase payment credit rider charge.
Transaction Fee
We reserve the right to charge a transaction fee of $30 that applies to each
unscheduled partial surrender after the 12th unscheduled partial surrender in a
Contract year. We also reserve the right to charge a $30 transaction fee on each
unscheduled transfer after the 12th such transfer in a Contract year. The
transaction fee would be deducted from the DCA Plus Accounts, Fixed Account
and/or your interest in a Division from which the amount is surrendered or
transferred, on a pro rata basis.
Premium Taxes
We reserve the right to deduct an amount to cover any premium taxes imposed by
states or other jurisdictions. Any deduction is made from either a purchase
payment when we receive it, or the accumulated value when you request a
surrender (total or partial) or it is applied under an annuity payment option.
Premium taxes range from 0% in most states to as high as 3.50%.
Surrender Charge
No sales charge is collected or deducted when purchase payments are applied
under the Contract. A surrender charge is assessed on certain total or partial
surrenders. The amounts we receive from the surrender charge are used to cover
some of the expenses of the sale of the Contract (commissions and other
promotional or distribution expenses). If the surrender charge collected is not
enough to cover the actual costs of distribution, the costs are paid from the
company's General Account assets which includes profit, if any, from the
mortality and expense risks charge.
The surrender charge for any total or partial surrender is a percentage of the
purchase payments surrendered which were received by us during the Contract
years prior to the surrender. The applicable percentage which is applied to the
sum of the purchase payments paid during each Contract year is determined by the
following tables.
Surrender Charge without the purchase payment credit rider (as a percentage of
amounts surrendered)
Table of surrender charges without the purchase payment credit rider
Number of completed Contract years Surrender charge applied to all
since each purchase payment purchase payments received in
was made that Contract year
0 (year of purchase payment)* 6%
1 6%
2 6%
3 5%
4 4%
5 3%
6 2%
7 and later 0%
Surrender Charge with the purchase payment credit rider (as a percentage of
amounts surrendered)
Number of completed Contract years Surrender charge applied to all
since each purchase payment purchase payments received in
was made that Contract year
0 (year of purchase payment)* 8%
1 8%
2 8%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 and later 0%
* Each purchase payment begins in year 0 for purposes of
calculating the percentage applied to that payment. However,
purchase payments are added together by Contract year for
purposes of determining the applicable surrender charge
percentage.
For purpose of calculating surrender charges, we assume that surrenders and
transfers are made in the following order:
o first from purchase payments no longer subject to a surrender charge;
o then from the free surrender privilege (first from the earnings, then from
the oldest purchase payments (first-in, first-out)) described below; and
o then from purchase payments subject to a surrender charge on a first-in,
first-out basis.
A surrender charge is not imposed in states where it is prohibited, including:
o New Jersey- no surrender charge for total surrender on or after the later of
the annuitant's 64th birthday or 4 years after the Contract date.
o Washington- no surrender charge for total surrender on or after the later of
the annuitant's 70th birthday or 10 years after the Contract date.
Free Surrender Privilege
The free surrender privilege is an amount normally subject to a surrender charge
that may be surrendered without a charge. The free surrender privilege is the
greater of:
o earnings in the Contract (earnings = accumulated value less unsurrendered
purchase payments as of the surrender date); or
o 10% of the purchase payments still subject to the surrender charge, decreased
by any partial surrenders since the last Contract anniversary.
The free surrender privilege not used in a Contract year is not added to the
free surrender privilege for any following Contract year(s).
Unscheduled partial surrenders of the free surrender privilege may be subject to
the transaction fee described above.
Waiver of Surrender Charge The surrender charge does not apply to:
o amounts applied under an annuity payment option; or
o payment of any death benefit, however, the surrender charge does apply to
purchase payments made by a surviving spouse after an owner's death; or
o amounts distributed to satisfy the minimum distribution requirement of
Section 401(a)9 of the Code provided that the amount surrendered does not
exceed the minimum distribution amount which would have been calculated
based on the value of this Contract alone; or
o an amount transferred from the Contract to a single premium immediate
annuity issued by the Company after the surrender charge period has
expired; or
o an amount transferred from a Contract used to fund an IRA to another
annuity contract issued by the Company to fund an IRA of the participant's
spouse when the distribution is made pursuant to a divorce decree; or
o if permitted by state law, withdrawals made after the first Contract
anniversary if the original owner or original annuitant has a critical
need.
Waiver of the surrender charge is available for critical need if the
following conditions are met:
o original owner or original annuitant has a critical need; and
o the critical need did not exist before the Contract date.
For the purposes of this section, the following definitions apply:
o critical need - owner's or annuitant's confinement to a health care facility,
terminal illness diagnosis or total and permanent disability. If the critical
need is confinement to a health care facility, the confinement must continue
for at least 60 consecutive days after the Contract date and the surrender
must occur within 90 days of the confinement's end.
o health care facility - a licensed hospital or inpatient nursing facility
providing daily medical treatment and keeping daily medical records for each
patient (not primarily providing just residency or retirement care). This
does not include a facility primarily providing drug or alcohol treatment, or
a facility owned or operated by the owner, annuitant or a member of their
immediate families.
o terminal illness - sickness or injury that results in the owner's or
annuitant's life expectancy being 12 months or less from the date notice to
receive a distribution from the Contract is received by the Company.
o total and permanent disability - a disability that occurs after the Contract
date but before the original owner or annuitant reaches age 65 and qualifies
to receive social security disability benefits. In New York and West
Virginia, different definitions of total and permanent disability apply.
Contact us at 1-800-852-4450 for additional information.
This waiver of surrender charge rider is not available in Massachusetts, New
Jersey or Pennsylvania. In New York, the rider only applies if the original
owner or original annuitant suffers a total and permanent disability. Specific
information is available from your sales representative or the annuity service
office (1-800-852-4450).
Administration Charge
We reserve the right to assess each Division with a daily charge at the annual
rate of 0.15% of the average daily net assets of the Division. This charge would
only be imposed before the annuity payment date. This charge would be assessed
to help cover administrative expenses. Administrative expenses include the cost
of issuing the Contract, clerical, recordkeeping and bookkeeping services,
keeping the required financial and accounting records, communicating with
Contract owners and making regulatory filings.
Special Provisions for Group or Sponsored Arrangements
Wherepermitted by state law, Contracts may be purchased under group or sponsored
arrangements as well as on an individual basis.
Group Arrangement - program under which a trustee, employer or similar entity
purchases Contracts covering a group of individuals on a group basis.
Sponsored Arrangement - program under which an employer permits group
solicitation of its employees or an association permits group solicitation of
its members for the purchase of Contracts on an individual basis.
The charges and deductions described above may be reduced or eliminated for
Contracts issued in connection with group or sponsored arrangements. The rules
in effect at the time the application is approved will determine if reductions
apply. Reductions may include but are not limited to sales of Contracts without,
or with reduced, mortality and expense risks charges, annual fees or surrender
charges.
Availability of the reduction and the size of the reduction (if any) is based on
certain criteria.
Eligibility for and the amount of these reductions are determined by a number of
factors, including the number of individuals in the group, the amount of
expected purchase payments, total assets under management for the Contract
owner, the relationship among the group's members, the purpose for which the
Contract is being purchased, the expected persistency of the Contract, and any
other circumstances which, in our opinion are rationally related to the expected
reduction in expenses. Reductions reflect the reduced sales efforts and
administrative costs resulting from these arrangements. We may modify the
criteria for and the amount of the reduction in the future. Modifications will
not unfairly discriminate against any person, including affected Contract owners
and other contract owners with contracts funded by the Separate Account.
FIXED ACCOUNT AND DCA PLUS ACCOUNTS
This prospectus is intended to serve as a disclosure document only for the
Contract as it relates to the Separate Account. It only contains selected
information regarding the Fixed Account and DCA Plus Accounts. Assets in the
Fixed Account and DCA Plus Accounts are held in the General Account of the
Company.
The General Account is the assets of the Company other than those allocated to
any of the Company's Separate Accounts. Subject to applicable law, the Company
has sole discretion over the assets in the General Account. Because of exemptive
and exclusionary provisions, interests in the Fixed Account and DCA Plus
Accounts are not registered under the Securities Act of 1933 and the General
Account is not registered as an investment company under the Investment Company
Act of 1940. The Fixed Account and DCA Plus Accounts are not subject to these
Acts. The staff of the SEC does not review the prospectus disclosures relating
to the Fixed Account or DCA Plus Accounts. However, these disclosures are
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in the
prospectus. Separate Account expenses are not assessed against any Fixed Account
or DCA Plus Account values. More information concerning the Fixed Account and
DCA Plus Accounts is available from our annuity service office or from a sales
representative.
Fixed Account
The Company guarantees that purchase payments allocated to the Fixed Account
earn interest at a guaranteed interest rate. In no event will the guaranteed
interest rate be less than 3% compounded annually.
Each purchase payment allocated or amount transferred to the Fixed Account earns
interest at the guaranteed rate in effect on the date it is received or
transferred. This rate applies to each purchase payment or amount transferred
through the end of the Contract year.
Each Contract anniversary, we declare a renewal interest rate that is guaranteed
and applies to the Fixed Account value in existence at that time. This rate
applies until the end of the Contract year. Interest is earned daily and
compounded annually at the end of each Contract year. Once credited, the
interest is guaranteed and becomes part of the Fixed Account accumulated value
from which deductions for fees and charges may be made.
Fixed Account Accumulated Value
Your Fixed Account value on any valuation date is equal to:
o purchase payments allocated to the Fixed Account;
o plus any transfers to the Fixed Account from the Separate Account and DCA
Plus Accounts;
o plus interest credited to the Fixed Account;
o minus any surrenders, applicable surrender charges or transaction fee from
the Fixed Account;
o minus any transfers to the Separate Account.
Fixed Account Transfers, Total and Partial Surrenders
Transfers and surrenders from the Fixed Account are subject to certain
limitations. In addition, surrenders from the Fixed Account may be subject to a
charge (see SURRENDER CHARGE).
You may transfer amounts from the Fixed Account to the Divisions before the
annuity payment date and as provided below. The transfer is effective on the
valuation date following our receiving your instructions. You may transfer
amounts on either a scheduled or unscheduled basis. You may not make both
scheduled and unscheduled Fixed Account transfers in the same Contract year.
Unscheduled Fixed Account Transfers
The minimum transfer amount is $100 (or entire Fixed Account accumulated
value if less than $100). Once per Contract year, within the 30 days
following the Contract anniversary date, you can:
1) transfer an amount not to exceed 25% of your Fixed Account accumulated
value; or
2) transfer up to 100% of your Fixed Account accumulated value if :
o your Fixed Account value is less than $1,000; or
o the renewal interest rate for your Fixed Account accumulated value for
the current Contract year is more than one percentage point lower than
the weighted average of your Fixed Account interest rates for the
preceding Contract year. We will inform you if the renewal interest
rate falls to that level.
Scheduled Fixed Account Transfers
Fixed Account Dollar Cost Averaging
You may make scheduled transfers on a monthly basis from the Fixed Account to
the Separate Account as follows:
o You may establish scheduled transfers by sending a written request or by
telephoning the annuity service office at 1-800-852-4450.
o Transfers occur on a date you specify (other than the 29th, 30th or 31st
of any month).
o If the selected date is not a valuation date, the transfer is completed on
the next valuation date.
o Scheduled monthly transfers of an amount not to exceed 2% of your Fixed
Account accumulated value at the beginning of the Contract year or the
current Fixed Account value will continue until the Fixed Account value is
zero or until you notify us to discontinue them.
o The minimum transfer amount is $100.
o If the Fixed Account accumulated value is less than $100 at the time of
transfer, then the entire Fixed Account accumulated value will be
transferred.
o If you stop the transfers, you may not start them again without our prior
approval.
Dollar Cost Averaging Plus Program (DCA Plus Program)
Purchase payments allocated to the DCA Plus Accounts earn a guaranteed interest
rate. A portion of your DCA Plus Account accumulated value is periodically
transferred (on the 28th of each month) to Divisions or to the Fixed Account. If
the 28th is not a valuation date, then the transfer occurs on the next valuation
date. The transfers are allocated according to your DCA Plus allocation
instructions. Transfers into a DCA Plus Account are not permitted. If you elect
the purchase payment credit rider, you may not participate in the DCA Plus
Program.
DCA Plus Purchase Payments
You may enroll in the DCA Plus program by allocating a minimum purchase
payment of $1,000 into a DCA Plus Account and selecting Divisions and/or the
Fixed Account into which transfers will be made. Subsequent purchase payments
of at least $1,000 are permitted. You can change your DCA Plus allocation
instructions during the transfer period. Automatic portfolio rebalancing does
not apply to DCA Plus Accounts.
DCA Plus purchase payments receive the fixed rate of return in effect on the
date each purchase payment is received by us. The rate of return remains in
effect for the remainder of the 6-month or 12-month DCA Plus transfer
program.
Selecting A DCA Plus Account
DCA Plus Accounts are available in either a 6-month transfer program or a
12-month transfer program. The 6-month transfer program and the 12-month
transfer program generally will have different credited interest rates. You
may enroll in both a 6-month and 12-month DCA Plus program. However, you may
only participate in one 6-month and one 12-month DCA Plus program at a time.
Under the 6-month transfer program, all payments and accrued interest must be
transferred from the DCA Plus Account to the selected Divisions and/or Fixed
Account in no more than 6 months. Under the 12-month transfer program, all
payments and accrued interest must be transferred to the selected Divisions
and/or Fixed Account in no more than 12 months.
We will transfer an amount each month which is equal to your DCA Plus Account
value divided by the number of months remaining in your transfer program. For
example, if 4 scheduled transfers remain in your 6-month transfer program and
you had a $4,000 DCA Plus Account accumulated value, the transfer amount
would be $1,000 ($4,000 / 4).
Scheduled DCA Plus Transfers
Transfers are made from DCA Plus Accounts to Divisions and the Fixed Account
according to your allocation instructions. The transfers begin after we
receive your purchase payment and completed enrollment instructions.
Transfers occur on the 28th of the month and continue until your entire DCA
Plus Account accumulated value is transferred.
Unscheduled DCA Plus Transfers
You may make unscheduled transfers from DCA Plus Accounts to Divisions and/or
the Fixed Account. A $30 fee is imposed for unscheduled transfers following
the 12th unscheduled transfer in a Contract year. A transfer is made, and
values determined, as of the end of the valuation period in which we receive
your request.
DCA Plus Surrenders
You may make scheduled or unscheduled surrenders from DCA Plus Accounts.
Purchase payments earn interest according to the corresponding rate until the
surrender date. Surrenders are subject to any applicable surrender charge.
GENERAL PROVISIONS
The Contract
The entire Contract is made up of: the Contract, copies of any applications,
amendments, riders and endorsements attached to the Contract; current data
pages; copies of any supplemental applications, amendments, endorsements and
revised Contract pages or data pages which are mailed to you. Only our corporate
officers can agree to change or waive any provisions of a Contract. Any change
or waiver must be in writing and signed by an officer of the Company.
Delay of Payments
Surrenders are generally made within seven days after we receive your
instruction for a surrender in a form acceptable to us. This period may be
shorter where required by law. However, payment of any amount upon total or
partial surrender, death or the transfer to or from a Division may be deferred
during any period when the right to sell Mutual Fund shares is suspended as
permitted under provisions of the Investment Company Act of 1940 (as amended).
The right to sell shares may be suspended during any period when:
o trading on the New York Stock Exchange is restricted as determined by the SEC
or when the Exchange is closed for other than weekends and holidays; or
o an emergency exists, as determined by the SEC, as a result of which:
o disposal by a Mutual Fund of securities owned by it is not reasonably
practicable;
o it is not reasonably practicable for a Mutual Fund to fairly determine the
value of its net assets; or
o the SEC permits suspension for the protection of security holders.
If payments are delayed and your surrender or transfer is not canceled by your
written instruction, the amount to be surrendered or transferred will be
determined the first valuation date following the expiration of the permitted
delay. The surrender or transfer will be made within seven days thereafter.
In addition, payments on surrenders attributable to a purchase payment made by
check may be delayed up to 15 days. This permits payment to be collected on the
check. We may also defer payment of surrender proceeds payable out of the Fixed
Account for a period of up to six months.
Misstatement of Age or Gender
If the age or, where applicable, gender of the annuitant has been misstated, we
adjust the annuity payment under your Contract to reflect the amount that would
have been payable at the correct age and gender. If we make any overpayment
because of incorrect information about age or gender, or any error or
miscalculation, we deduct the overpayment from the next payment or payments due.
Underpayments are added to the next payment.
Assignment
You may assign ownership of your non-qualified Contract. Each assignment is
subject to any payments made or action taken by the Company prior to our
notification of the assignment. We assume no responsibility for the validity of
any assignment. An assignment or pledge of a Contract may have adverse tax
consequences.
An assignment must be made in writing and filed with us at the annuity service
office. The irrevocable beneficiary(ies), if any, must authorize any assignment
in writing. Your rights, as well as those of the annuitant and beneficiary, are
subject to any assignment on file with us. Any amount paid to an assignee is
treated as a partial surrender and is paid in a single lump sum.
Change of Owner
You may change your non-qualified Contract ownership designation at any time.
Your request must be in writing and approved by us. After approval, the change
is effective as of the date you signed the request for change. If ownership is
changed, then the waiver of the surrender charge for surrenders made because of
critical need of the owner is not available. We reserve the right to require
that you send us the Contract so that we can record the change.
Beneficiary
Before the annuity payment date and while the annuitant is alive, you have the
right to name or change a beneficiary. This may be done as part of the
application process or by sending us a written request. Under certain retirement
programs, however, spousal consent may be required to name or change a
beneficiary. Unless you have named an irrevocable beneficiary, you may change
your beneficiary designation by sending us a written request. If a beneficiary
has not been named at the time of the annuitant's death, then the benefit will
be paid to the owner, if living, otherwise, to the owner's estate. If the
beneficiary dies during the annuity payment period, and no other beneficiary is
alive, then any remaining benefits will be paid to the beneficiary's estate.
If there are joint annuitants on the Contract, the benefit is paid on the first
annuitant's death.
Contract Termination
We reserve the right to terminate the Contract and make a single sum payment
(without imposing any charges) to you if your accumulated value at the end of
the accumulation period is less than $2,000. Before the Contract is terminated,
we will send you a notice to increase the accumulated value to $2,000 within 60
days.
Reinstatement
If you have replaced this Contract with an annuity contract from another company
and want to reinstate this Contract, then the following applies:
o we reinstate the Contract effective on the original surrender date;
o if you elect the purchase payment credit rider on the reinstatement Contract,
then the 9-year surrender charge period will commence from the date of
reinstatement;
o we calculate the credit based on the amount of the reinstatement;
o we apply the amount received from the other company and the amount of the
surrender charge you paid when you surrendered the Contract;
o these amounts are priced on the valuation day the money from the other
company is received by us;
o commissions are not paid on the reinstatement amounts; an
o new data pages are sent to your address of record.
Reports
We will mail to you a statement, along with any reports required by state law,
of your current accumulated value at least once per year prior to the annuity
payment date. After the annuity payment date, any reports will be mailed to the
person receiving the annuity payments.
Quarterly statements reflect purchases and surrenders occurring during the
quarter as well as the balance of units owned and accumulated values.
RIGHTS RESERVED BY THE COMPANY
We reserve the right to make certain changes if, in our judgment, they best
serve the interests of you and the annuitant or are appropriate in carrying out
the purpose of the Contract. Any changes will be made only to the extent and in
the manner permitted by applicable laws. Also, when required by law, we will
obtain your approval of the changes and approval from any appropriate regulatory
authority. Approvals may not be required in all cases. Examples of the changes
the Company may make include:
o transfer assets in any Division to another Division or to the Fixed Account;
o add, combine or eliminate a Division(s);
o substitute the units of a Division for the units of another Division;
o if units of a Division are no longer available for investment; or
o if in our judgment, investment in a Division becomes inappropriate
considering the purposes of the Separate Account.
DISTRIBUTION OF THE CONTRACT
The individuals who sell the Contract are authorized to sell life and other
forms of personal insurance and variable annuities. These people will usually be
representatives of Princor Financial Services Corporation ("Princor"), Principal
Financial Group, Des Moines, Iowa 50392-0200 which is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. As the principal underwriter, Princor is
paid 6.5% of purchase payments by the Company for the distribution of the
Contract. The Company and Princor may receive a portion of the Fidelity Variable
Insurance Products Funds' expenses for recordkeeping, marketing and distribution
services. The Contract may also be sold through other selected broker-dealers
registered under the Securities and Exchange Act of 1933 or firms that are
exempt from such registration. Princor is also the principal underwriter for
various registered investment companies organized by the Company. Princor is a
subsidiary of Principal Financial Services, Inc.
PERFORMANCE CALCULATION
The Separate Account may publish advertisements containing information
(including graphs, charts, tables and examples) about the hypothetical
performance of its Divisions for this Contract as if the Contract had been
issued on or after the date the Mutual Fund in which the Division invests was
first offered. The hypothetical performance from the date of the inception of
the Mutual Fund in which the Division invests is calculated by reducing the
actual performance of the underlying Mutual Fund by the fees and charges of this
Contract as if it had been in existence.
The yield and total return figures described below vary depending upon market
conditions, composition of the underlying Mutual Fund's portfolios and operating
expenses. These factors and possible differences in the methods used in
calculating yield and total return should be considered when comparing the
Separate Account performance figures to performance figures published for other
investment vehicles. The Separate Account may also quote rankings, yields or
returns as published by independent statistical services or publishers and
information regarding performance of certain market indices. Any performance
data quoted for the Separate Account represents only historical performance and
is not intended to indicate future performance. For further information on how
the Separate Account calculates yield and total return figures, see the SAI.
From time to time the Separate Account advertises its Money Market Division's
"yield" and "effective yield" for these Contracts. Both yield figures are based
on historical earnings and are not intended to indicate future performance. The
"yield" of the Division refers to the income generated by an investment in the
division over a 7-day period (which period is stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week 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 Division is assumed to be reinvested. The "effective yield" is slightly
higher than the "yield" because of the compounding effect of the assumed
reinvestment.
In addition, the Separate Account advertises the "yield" for other Divisions for
the Contract. The "yield" of a Division is determined by annualizing the net
investment income per unit for a specific, historical 30-day period and dividing
the result by the ending maximum offering price of the unit for the same period.
The Separate Account also advertises the average annual total return of its
various Divisions. The average annual total return for any of the Divisions is
computed by calculating the average annual compounded rate of return over the
stated period that would equate an initial $1,000 investment to the ending
redeemable accumulated value.
VOTING RIGHTS
The Company votes shares of the Principal Variable Contracts Fund, Inc., AIM
V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. Value Fund, Fidelity
Variable Insurance Products Fund, Fidelity Variable Insurance Products Fund II
and Janus Aspen Series - Service Shares Aggressive Growth Portfolio held in the
Separate Account at meetings of shareholders of those Mutual Funds. It follows
your voting instructions if you have an investment in the corresponding
Division.
The number of Mutual Fund shares in which you have a voting interest is
determined by your investments in a Mutual Fund as of a "record date." The
record date is set by the Mutual Fund within the requirements of the laws of the
state which govern the various Mutual Funds. The number of Mutual Fund shares
held in the Separate Account attributable to your interest in each Division is
determined by dividing the value of your interest in that Division by the net
asset value of one share of the Mutual Fund. Shares for which owners are
entitled to give voting instructions, but for which none are received, and
shares of the Mutual Fund owned by the Company are voted in the same proportion
as the total shares for which voting instructions have been received.
Voting materials are provided to you along with an appropriate form that may be
used to give voting instructions to the Company.
If the Company determines pursuant to applicable law, that Mutual Fund shares
held in Separate Account B need not be voted pursuant to instructions received
from owners, then the Company may vote Mutual Fund shares held in the Separate
Account in its own right.
FEDERAL TAX MATTERS
The following description is a general summary of the tax rules, primarily
related to federal income taxes, which in our opinion are currently in effect.
These rules are based on laws, regulations and interpretations which are subject
to change at any time. This summary is not comprehensive and is not intended as
tax advice. Federal estate and gift tax considerations, as well as state and
local taxes, may also be material. You should consult a qualified tax adviser
about the tax implications of taking action under a Contract or related
retirement plan.
Non-Qualified Contracts
Section 72 of the Code governs the income taxation of annuities in general.
o Purchase payments made under non-qualified Contracts are not excludable or
deductible from your gross income or any other person's gross income.
o An increase in the accumulated value of a non-qualified Contract owned by a
natural person resulting from the investment performance of the Separate
Account or interest credited to the DCA Plus Accounts and the Fixed Account
is generally not taxable until paid out as surrender proceeds, death benefit
proceeds, or otherwise.
o Generally, owners who are not natural persons are immediately taxed on any
increase in the accumulated value.
The following discussion applies generally to Contracts owned by natural
persons.
o Surrenders or partial surrenders are taxed as ordinary income to the extent
of the accumulated income or gain under the Contract.
o The value of the Contract pledged or assigned is taxed as ordinary income to
the same extent as a partial surrender.
o Annuity payments:
o The investment in the Contract is generally the total of the purchase
payments made.
o The portion of the annuity payment that represents the amount by which the
accumulated value exceeds purchase payments is taxed as ordinary income.
The remainder of each annuity payment is not taxed.
o After the purchase payment(s) in the Contract is paid out, the full amount
of any annuity payment is taxable.
For purposes of determining the amount of taxable income resulting from
distributions, all Contracts and other annuity contracts issued by us or our
affiliates to the same owner within the same calendar year are treated as if
they are a single contract.
A transfer of ownership of a Contract, or designation of an annuitant or other
payee who is not also the owner, may result in a certain income or gift tax
consequences to the owner. If you are contemplating any transfer or assignment
of a Contract, you should contact a competent tax advisor with respect to the
potential tax effects of such transactions.
Required Distributions for Non-Qualified Contracts
In order for a non-qualified Contract to be treated as an annuity contract for
federal income tax purposes, the Code requires:
o If the person receiving payments dies on or after the annuity payment date
but prior to the time the entire interest in the Contract has been
distributed, the remaining portion of the interest is distributed at least as
rapidly as under the method of distribution being used as of the date of that
person's death.
o If you die prior to the annuity payment date, the entire interest in the
Contract will be distributed:
o within five years after the date of your death; or
o as annuity payments which begin within one year of your death and which
are made over the life of your designated beneficiary or over a period not
extending beyond the life expectancy of that beneficiary.
o If you take a distribution from the Contract before you are 59 1/2, you may
incur an income tax penalty.
Generally, unless the beneficiary elects otherwise, the above requirements are
satisfied prior to the annuity payment date by paying the death benefit in a
single sum, subject to proof of your death. The beneficiary may elect by written
request to receive an annuity payment option instead of a lump sum payment.
If your designated beneficiary is your surviving spouse, the Contract may be
continued with your spouse deemed to be the new owner for purposes of the Code.
Where the owner or other person receiving payments is not a natural person, the
required distributions provided for in the Code apply upon the death of the
annuitant.
IRA, SEP, and SIMPLE-IRA
The Contract may be used to fund IRAs, SEPs, and SIMPLE-IRAs.
The tax rules applicable to owners, annuitants and other payees vary according
to the type of plan and the terms and conditions of the plan itself. In general,
purchase payments made under a retirement program recognized under the Code are
excluded from the participant's gross income for tax purposes prior to the
annuity payment date (subject to applicable state law). The portion, if any, of
any purchase payment made that is not excluded from their gross income is their
investment in the Contract. Aggregate deferrals under all plans at the
employee's option may be subject to limitations.
If you are purchasing this Contract to fund a tax qualified retirement plan, you
should be aware that the tax-deferred accrual feature is available with any
qualified investment vehicle within a qualified plan and is NOT unique to a
variable annuity. This Contract provides additional benefits such as lifetime
income options, death benefit protection and guaranteed expense levels.
The tax implications of these plans are further discussed in the SAI under the
heading Taxation Under Certain Retirement Plans. Check with your tax advisor for
the rules which apply to your specific situation.
With respect to IRAs, IRA rollovers and SIMPLE-IRAs there is a 10% penalty under
the Code on the taxable portion of a "premature distribution." The tax is
increased to 25% in the case of distributions from SIMPLE-IRAs during the first
two years of participation. Generally, an amount is a "premature distribution"
unless the distribution is:
o made on or after you reach age 59 1/2;
o made to a beneficiary on or after your death;
o made upon your disability;
o part of a series of substantially equal periodic payments for the life or
life expectancy of you or you and the beneficiary;
o made to pay medical expenses;
o for certain unemployment expenses;
o for first home purchases (up to $10,000); or
o for higher education expenses.
Rollover IRAs
If you receive a lump-sum distribution from a pension or profit sharing plan or
tax-sheltered annuity, you may maintain the tax deferred status of the money by
rolling it into a "Rollover Individual Retirement Annuity." Generally,
distributions from a qualified plan are subject to mandatory income tax
withholding at a rate of 20%, unless the participant elects a direct rollover.
You have 60 days from receipt of the money to complete this transaction. If you
choose not to reinvest or go beyond the 60 day limit and are under age 59 1/2,
you will incur a 10% IRS penalty as well as income tax expenses.
Withholding
Annuity payments and other amounts received under the Contract are subject to
income tax withholding unless the recipient elects not to have taxes withheld.
The amounts withheld vary among recipients depending on the tax status of the
individual and the type of payments from which taxes are withheld.
Notwithstanding the recipient's election, withholding may be required on
payments delivered outside the United States. Moreover, special "backup
withholding" rules may require us to disregard the recipient's election if the
recipient fails to supply us with a "TIN" or taxpayer identification number
(social security number for individuals), or if the Internal Revenue Service
notifies us that the TIN provided by the recipient is incorrect.
Mutual Fund Diversification
The United States Treasury Department has adopted regulations under Section
817(h) of the Code which establishes standards of diversification for the
investments underlying the Contracts. Under this Code Section, Separate Account
investments must be adequately diversified in order for the increase in the
value of non-qualified Contracts to receive tax-deferred treatment. In order to
be adequately diversified, the portfolio of each underlying Mutual Fund must, as
of the end of each calendar quarter or within 30 days thereafter, have no more
than 55% of its assets invested in any one investment, 70% in any two
investments, 80% in any three investments and 90% in any four investments.
Failure of a Mutual Fund to meet the diversification requirements could result
in tax liability to non-qualified Contract holders.
The investment opportunities of the Mutual Funds could conceivably be limited by
adhering to the above diversification requirements. This would affect all
owners, including owners of Contracts for whom diversification is not a
requirement for tax-deferred treatment.
STATE REGULATION
The Company is subject to the laws of the State of Iowa governing insurance
companies and to regulation by the Insurance Department of the State of Iowa. An
annual statement in a prescribed form must be filed by March 1 in each year
covering our operations for the preceding year and our financial condition on
December 31 of the prior year. Our books and assets are subject to examination
by the Commissioner of Insurance of the State of Iowa or her representatives at
all times. A full examination of our operations is conducted periodically by the
National Association of Insurance Commissioners. Iowa law and regulations also
prescribe permissible investments, but this does not involve supervision of the
investment management or policy of the Company.
In addition, we are subject to the insurance laws and regulations of other
states and jurisdictions where we are licensed to operate. Generally, the
insurance departments of these states and jurisdictions apply the laws of the
state of domicile in determining the field of permissible investments.
LEGAL OPINIONS
Legal matters applicable to the issue and sale of the Contracts, including our
right to issue Contracts under Iowa Insurance Law, have been passed upon by
Karen Shaff, General Counsel and Senior Vice President.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which Separate Account B is a party or
which would materially affect Separate Account B.
REGISTRATION STATEMENT
This prospectus omits some information contained in the SAI (Part B of the
registration statement) and Part C of the registration statement which the
Company has filed with the SEC. The SAI is hereby incorporated by reference into
this prospectus. You may request a free copy of the SAI by writing or
telephoning the annuity service office. You may obtain a copy of Part C of the
registration statement from the SEC, Washington, D.C. by paying the prescribed
fees.
OTHER VARIABLE ANNUITY CONTRACTS
The Company currently offers other variable annuity contracts that participate
in Separate Account B. In the future, we may designate additional group or
individual variable annuity contracts as participating in Separate Account B.
INDEPENDENT AUDITORS
The financial statements of Principal Life Insurance Company Separate Account B
and the consolidated financial statements of Principal Life Insurance Company
are included in the SAI. Those statements have been audited by Ernst & Young
LLP, independent auditors, for the periods indicated in their reports which also
appear in the SAI.
FINANCIAL STATEMENTS
The consolidated financial statements of Principal Life Insurance Company which
are included in the SAI should be considered only as they relate to our ability
to meet our obligations under the Contract. They do not relate to investment
performance of the assets held in the Separate Account.
CUSTOMER INQUIRIES
Your questions should be directed to: Principal Flexible Variable Annuity,
Principal Financial Group, P.O. Box 9382, Des Moines, Iowa 50306-9382,
1-800-852-4450.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Independent Auditors ..................................................... 4
Calculation of Yield and Total Return .................................... 4
Taxation Under Certain Retirement Plans..................................... 5
Principal Life Insurance Company Separate Account B
Report of Independent Auditors ........................................ 9
Financial Statements................................................... 10
Principal Life Insurance Company
Report of Independent Auditors ........................................ 37
Consolidated Financial Statements...................................... 38
To obtain a free copy of the SAI write or telephone:
Principal Flexible Variable Annuity
Principal Financial Group
P.O. Box 9382
Des Moines, Iowa 50306-9382
Telephone: 1-800-852-4450
<PAGE>
PART B
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B
FLEXIBLE VARIABLE ANNUITY ("FVA") CONTRACT
Statement of Additional Information
dated __________
This Statement of Additional Information provides information about Principal
Life Insurance Company Separate Account B Flexible Variable Annuity (the
"Contract") in addition to the information that is contained in the Contract's
Prospectus, dated ---------------.
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
Variable Annuity
The Principal Financial Group
P.O. Box 9382
Des Moines Iowa 50306-9382
Telephone: 1-800-852-4450
TABLE OF CONTENTS
Independent Auditors ....................................................... 4
Calculation of Yield and Total Return....................................... 4
Taxation Under Certain Retirement Plans..................................... 7
Principal Life Insurance Company Separate Account B
Report of Independent Auditors...................................... 9
Financial Statements................................................ 10
Principal Life Insurance Company
Report of Independent Auditors...................................... 37
Consolidated Financial Statements................................... 38
INDEPENDENT AUDITORS
Ernst & Young LLP, Des Moines, Iowa, serve as independent auditors for Principal
Life Insurance Company Separate Account B and Principal Life Insurance Company
and perform audit and accounting services for Separate Account B and Principal
Life Insurance Company.
CALCULATION OF YIELD AND TOTAL RETURN
The Separate Account may publish advertisements containing information
(including graphs, charts, tables and examples) about the performance of one or
more of its Divisions.
The Contract was not offered prior to June 16, 1994. However, the Divisions
invest in Accounts of the Principal Variable Contracts Fund, Inc., AIM V.I.
Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. Value Fund, Fidelity
Variable Insurance Products Fund, and Fidelity Variable Income Products Fund II.
Effective January 1, 1998 the Mutual Funds which correspond to Accounts of the
Principal Variable Contracts Fund, Inc. were reorganized as follows:
<TABLE>
<CAPTION>
Old Mutual Fund Name New Corresponding Name
-------------------- ----------------------
Principal Variable Contracts Fund, Inc.
<S> <C> <C>
Principal Aggressive Growth Fund, Inc. Aggressive Growth Account
Principal Asset Allocation Fund, Inc. Asset Allocation Account
Principal Balanced Fund, Inc. Balanced Account
Principal Bond Fund, Inc. Bond Account
Principal Capital Accumulation Fund, Inc. Capital Value Account
Principal Emerging Growth Fund, Inc. MidCap Account
Principal Government Securities Fund, Inc. Government Securities Account
Principal Growth Fund, Inc. Growth Account
Principal Money Market Fund, Inc. Money Market Account
Principal World Fund, Inc. International Account
</TABLE>
These Accounts, along with AIM V.I. Growth Fund, AIM V.I. Growth and Income
Fund, AIM V.I. Value Fund and Fidelity VIP Growth Portfolio Service Class, were
offered prior to the date the Contract was available. Thus, the Separate Account
may publish advertisements containing information about the hypothetical
performance of one or more of its Divisions for this Contract had the Contract
been issued on or after the date the Mutual Fund in which such Division invests
was first offered. Because Service Class shares for the Fidelity VIP Growth
Division were not offered until November 3, 1997, performance shown for periods
prior to that date represent the historical results of Initial Class shares and
do not include the effects of the Service Class' higher annual fees and
expenses. Because Service Shares for the Janus Aspen Aggressive Growth Division
were not offered until December 31, 1999, performance shown for periods prior to
that date represent the historical results of Institutional Shares. The
hypothetical performance from the date of inception of the Mutual Fund in which
the Division invests is derived by reducing the actual performance of the
underlying Mutual Fund by the fees and charges of the Contract as if it had been
in existence. The yield and total return figures described below will vary
depending upon market conditions, the composition of the underlying Mutual
Fund's portfolios and operating expenses. These factors and possible differences
in the methods used in calculating yield and total return should be considered
when comparing the Separate Account performance figures to performance figures
published for other investment vehicles. The Separate Account may also quote
rankings, yields or returns as published by independent statistical services or
publishers and information regarding performance of certain market indices. Any
performance data quoted for the Separate Account represents only historical
performance and is not intended to indicate future performance.
From time to time the Separate Account advertises its Money Market Division's
"yield" and "effective yield" for these Contracts. Both yield figures are based
on historical earnings and are not intended to indicate future performance. The
"yield" of the Division refers to the income generated by an investment under
the Contract in the Division over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week 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 Division is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. Neither yield quotation
reflects a sales load deducted from purchase payments which, if included, would
reduce the "yield" and "effective yield."
In addition, from time to time, the Separate Account will advertise the "yield"
for certain other Divisions for the Contract. The "yield" of a Division is
determined by annualizing the net investment income per unit for a specific,
historical 30-day period and dividing the result by the ending maximum offering
price of the unit for the same period. This yield quotation does not reflect a
surrender charge which, if included, would reduce the "yield."
Also, from time to time, the Separate Account will advertise the average annual
total return of its various Divisions. The average annual total return for any
of the Divisions is computed by calculating the average annual compounded rate
of return over the stated period that would equate an initial $1,000 investment
to the ending redeemable Contract value. In this calculation the ending value is
reduced by a surrender charge that decreases from 6% to 0% over a period of 7
years. The Separate Account may also advertise total return figures for its
Divisions for a specified period that does not take into account the surrender
charge in order to illustrate the change in the Division's unit value over time.
See "Charges and Deductions" in the Prospectus for a discussion of surrender
charges.
Following are the hypothetical average annual total returns for the period
ending December 31, 1999 assuming the Contract had been offered as of the
effective dates of the underlying Mutual Funds in which the Divisions invest:
<TABLE>
<CAPTION>
Contract without purchase payment credit rider
With Surrender Charge Without Surrender Charge
Division One Year Five Year Ten Year One Year Five Year Ten Year
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Division 31.74% 30.07% 27.01%(1) 37.74% 30.34% 27.19%(1)
Asset Allocation Division 11.98 14.06 12.56(1) 17.98 14.53 12.87(1)
Balanced Division (4.91) 11.80 9.94 1.09 12.31 9.94
Bond Division (9.83) 5.72 6.38 (3.83) 6.35 6.38
Capital Value Division (11.51) 15.95 11.48 (5.51) 16.39 11.48
Government Securities Division (7.56) 5.96 6.36 (1.56) 6.58 6.36
Growth Division 8.96 18.52 17.19(2) 14.96 18.92 17.44(2)
International Division 18.34 15.35 12.66(2) 24.34 15.80 12.96(2)
International Emerging Markets Divsion
International SmallCap Division 85.38 N/A N/A 91.38 N/A N/A
LargeCap Growth Division
LargeCap Growth Equity Division
MicroCap Division (8.33) N/A N/A (2.33) N/A N/A
MidCap Division 5.61 15.65 13.87 11.61 16.10 13.87
MidCap Growth Division 3.27 N/A N/A 9.27 N/A N/A
MidCap Growth Equity Division
Money Market Division (2.51) 3.14 3.63 3.49 3.84 3.63
Real Estate Division (11.69) N/A N/A (5.69) N/A N/A
SmallCap Division 35.77 N/A N/A 41.77 N/A N/A
SmallCap Growth Division 87.23 N/A N/A 93.23 N/A N/A
SmallCap Value Division 13.91 N/A N/A 19.91 N/A N/A
Stock Index 500 Division 2.01(3) N/A N/A 8.01 (3) N/A N/A
Utilities Division (5.01) N/A N/A 0.99 N/A N/A
AIM V.I. Growth Division 27.54 27.72 21.27(4) 33.54 28.02 21.37(4)
AIM V.I. Growth and Income Division 26.57 26.26 22.72(2) 32.57 26.57 22.93(2)
AIM V.I. Value Division 22.27 25.31 21.41(4) 28.27 25.64 21.51(4)
Fidelity VIP II Contrafund Division 16.58 26.63(5) N/A 22.58 26.95(5) N/A
Fidelity VIP Growth Division 29.56 27.76 18.38 35.56 28.06 18.38
Janus Aspen Aggressive Growth Division
<FN>
(1) Partial period beginning June 1, 1994.
(2) Partial period beginning May 2, 1994.
(3) Partial period beginning May 3, 1999.
(4) Partial period beginning May 5, 1993.
(5) Partial period beginning January 31, 1995.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Contract with purchase payment credit rider
With Surrender Charge Without Surrender Charge
Division One Year Five Year Ten Year One Year Five Year Ten Year
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Division % % % % % %
Asset Allocation Division
Balanced Division
Bond Division
Capital Value Division
Government Securities Division
Growth Division
International Division
International Emerging Markets Divsion
International SmallCap Division
LargeCap Growth Division
LargeCap Growth Equity Division
MicroCap Division
MidCap Division
MidCap Growth Division
MidCap Growth Equity Division
Money Market Division
Real Estate Division
SmallCap Division
SmallCap Growth Division
SmallCap Value Division
Stock Index 500 Division
Utilities Division
AIM V.I. Growth Division
AIM V.I. Growth and Income Division
AIM V.I. Value Division
Fidelity VIP II Contrafund Division
Fidelity VIP Growth Division
Janus Aspen Aggressive Growth Division
<FN>
(1) Partial period beginning June 1, 1994.
(2) Partial period beginning May 2, 1994.
(3) Partial period beginning May 3, 1999.
(4) Partial period beginning May 5, 1993.
(5) Partial period beginning January 31, 1995.
</FN>
</TABLE>
TAXATION UNDER CERTAIN RETIREMENT PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Purchase Payments. Individuals may make contributions for individual retirement
annuity ("IRA") Contracts. Deductible contributions for any year may be made up
to the lesser of $2,000 or 100% of compensation for individuals who (1) are not
active participants in another retirement plan, (2) are unmarried and have
adjusted gross income of $40,000 or less, or (3) are married and have adjusted
gross income of $60,000 or less. Such individuals may establish an IRA for a
spouse who makes no contribution to an IRA for the tax year. The annual purchase
payments for both spouses' Contracts cannot exceed the lesser of $4,000 or 100%
of the working spouse's earned income, and no more than $2,000 may be
contributed to either spouse's IRA for any year. Individuals who are active
participants in other retirement plans and whose adjusted gross income (with
certain special adjustments) exceeds the cut-off point ($40,000 for unmarried,
$60,000 for married persons filing jointly, and $0 for married persons filing a
separate return) by less than $10,000 are entitled to make deductible IRA
contributions in proportionately reduced amounts. For example, a married
individual who is an active participant in another retirement plan and files a
separate tax return is entitled to a partial IRA deduction if the individual's
adjusted gross income is less than $10,000, and no IRA deduction if his or her
adjusted gross income is equal to or greater than $10,000. Individuals whose
spouse is an active participant in other retirement plans and whose combined
adjusted gross income exceeds the cutoff point of $150,000 by less than $10,000
are entitled to make deductible IRA contributions in proportionately reduced
amounts.
An individual may make non-deductible IRA contributions to the extent of the
excess of (1) the lesser of $2,000 ($4,000 in the case of a spousal IRA) or 100%
of compensation over (2) the IRA deductible contributions made with respect to
the individual.
An individual may not make any contribution to his/her own IRA for the year in
which he/she reaches age 70 1/2 or for any year thereafter.
Taxation of Distributions. Distributions from IRA Contracts are taxed as
ordinary income to the recipient, although special rules exist for the tax-free
return of non-deductible contributions. In addition, taxable distributions
received under an IRA Contract prior to age 59 1/2 are subject to a 10% penalty
tax in addition to regular income tax. Certain distributions are exempted from
this penalty tax, including distributions following the owner's death or
disability if the distribution is paid as part of a series of substantially
equal periodic payments made for the life (or life expectancy) of the Owner or
the joint lives (or joint life expectancies) of Owner and the Owner's designated
Beneficiary; distributions to pay medical expenses; distributions for certain
unemployment expenses; distributions for first home purchases (up to $10,000)
and distributions for higher education expenses.
Required Distributions. Generally, distributions from IRA Contracts must
commence not later than April 1 of the calendar year following the calendar year
in which the owner attains age 70 1/2, and such distributions must be made over
a period that does not exceed the life expectancy of the owner (or the owner and
beneficiary). A penalty tax of 50% would be imposed on any amount by which the
minimum required distribution in any year exceeded the amount actually
distributed in that year. In addition, in the event that the owner dies before
his or her entire interest in the Contract has been distributed, the owner's
entire interest must be distributed in accordance with rules similar to those
applicable upon the death of the Contract Owner in the case of a non-qualified
Contract, as described in the Prospectus.
Tax-Free Rollovers. The Internal Revenue Code (the "Code") permits the taxable
portion of funds to be transferred in a tax-free rollover from a qualified
employer pension, profit-sharing, annuity, bond purchase or tax-deferred annuity
plan to an IRA Contract if certain conditions are met, and if the rollover of
assets is completed within 60 days after the distribution from the qualified
plan is received. A direct rollover of funds may avoid a 20% federal tax
withholding generally applicable to qualified plans or tax-deferred annuity plan
distributions. In addition, not more frequently than once every twelve months,
amounts may be rolled over tax-free from one IRA to another, subject to the
60-day limitation and other requirements. The once-per-year limitation on
rollovers does not apply to direct transfers of funds between IRA custodians or
trustees.
SIMPLIFIED EMPLOYEE PENSION PLANS AND SALARY REDUCTION SIMPLIFIED EMPLOYEE
PENSION PLANS
Purchase Payments. Under Section 408(k) of the Code, employers may establish a
type of IRA plan referred to as a simplified employee pension plan (SEP).
Employer contributions to a SEP cannot exceed the lesser of $24,000 or 15% or
the employee's earned income. Employees of certain small employers may have
contributions made to the salary reduction simplified employee pension plan
("SAR/SEP") on their behalf on a salary reduction basis. These salary reduction
contributions may not exceed $10,000 in 2000, which is indexed for inflation.
Employees of tax-exempt organizations and state and local government agencies
are not eligible for SAR/SEPs.
Taxation of Distributions. Generally, distribution payments from SEPs and
SAR/SEPs are subject to the same distribution rules described above for IRAs.
Required Distributions. SEPs and SAR/SEPs are subject to the same minimum
required distribution rules described above for IRAs.
Tax-Free Rollovers. Generally, rollovers and direct transfers may be made to and
from SEPs and SAR/SEPs in the same manner as described above for IRAs, subject
to the same conditions and limitations.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA)
Purchase Payments. Under Section 408(p) of the Code, employers may establish a
type of IRA plan known as a Simple IRA. Employees may have contributions made to
the SIMPLE IRA on a salary reduction basis. These salary reduction contributions
may not exceed $6,000 in 2000, which is indexed for inflation. Total salary
reduction contributions are limited to $10,000 per year for any employee who
makes salary reduction contributions to more than one plan. Employers are
required to contribute to the SIMPLE IRA, which contributions may not exceed the
lesser of: (1) The amount of salary deferred by the employee, (2) 3% of the
employee's compensation, or (3) $6,000, if the employer contributes on a
matching basis; or the lesser of: (1) 2% of the employee's compensation, or (2)
$3,200, if the employer makes non-elective contributions. An employer may not
make contributions to both a SIMPLE IRA and another retirement plan for the same
calendar year.
Taxation of Distributions. Generally, distribution payments from SIMPLE IRAs are
subject to the same distribution rules described above for IRAs, except that
distributions made within two years of the date of an employee's first
participation in a SIMPLE IRA of an employer are subject to a 25% penalty tax
instead of the 10% penalty tax discussed previously.
Required Distributions. SIMPLE IRAs are subject to the same minimum required
distribution rules described above for IRAs.
Tax-Free Rollovers. Direct transfers may be made among SIMPLE IRAs in the same
manner as described above for IRAs, subject to the same conditions and
limitations. Rollovers from SIMPLE IRAs are permitted after two years have
elapsed from the date of an employee's first participation in a SIMPLE IRA of
the employer. Rollovers to SIMPLE IRAs from other plans are not permitted.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA)
Purchase Payments. Under Section 408A of the Code, Individuals may make
nondeductible contributions to Roth IRA contracts up to $2,000. This
contribution amount must be reduced by the amount of any contributions made to
other IRAs for the benefit of the Roth IRA owner. The maximum $2,000
contribution is phased out for single taxpayers with adjusted gross income
between $95,000 and $110,000 and for joint filers with adjusted gross income
between $150,000 and $160,000. If taxable income is recognized on the regular
IRA, an IRA owner with adjusted gross income of less than $100,000 may convert a
regular IRA into a Roth IRA. If the conversion is made in 1999, IRA income
recognized may be spread over four years. Otherwise, all IRA income will need to
be recognized in the year of conversion. No IRS 10% tax penalty will apply to
the conversion.
Taxation of Distribution. Qualified distributions are received income-tax free
by the Roth IRA owner, or beneficiary in case of the Roth IRA owner's death. A
qualified distribution is any distribution made after five years if the IRA
owner is over age 59 1/2, dies, becomes disabled, or uses the funds for
first-time home buyer expenses at the time of distribution. The five-year period
for converted amounts begins from the year of the conversion.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in the Registration Statement
(1) Part A:
None
(2) Part B:
None
(b) Exhibits
(1) Board Resolution of Registrant
(3a) Distribution Agreement*
(3b) Selling Agreement
(4a) Form of Variable Annuity Contract
(4b) Form of Variable Annuity Contract
(5) Form of Variable Annuity Application
(6a) Articles of Incorporation of the Depositor
(6b) Bylaws of Depositor
(9) Opinion of Counsel
(10b) Powers of Attorney
(13a) Total Return Calculation*
(13b) Annualized Yield for Separate Account B*
* To be filed by amendment
<PAGE>
Item 25. Officers and Directors of the Depositor
Principal Life Insurance Company is managed by a Board of
Directors which is elected by its policyowners. The directors and
executive officers of the Company, their positions with the Company,
including Board Committee memberships, and their principal business
address, are as follows:
DIRECTORS: Principal
Name, Positions and Offices Business Address
BETSY J. BERNARD U.S. West
Director 1801 California Street
Member, Nominating Committee 52nd Floor
Denver, CO 80202
JOCELYN CARTER-MILLER Motorola, Inc.
Director 1000 Corporate Drive
Member, Audit Committee Suite 700
Ft. Lauderdale, FL 33334
DAVID J. DRURY The Principal Financial Group
Director Des Moines, IA 50392-0100
Chairman of the Board
Chair, Executive Committee
C. DANIEL GELATT, JR. NMT Corporation
Director P.O. Box 2287
Member, Executive Committee La Crosse, WI 54602-2287
Chair, Human Resources
Committee
J. BARRY GRISWELL The Principal Financial Group
Director, President Des Moines, IA 50392-0100
and Chief Executive Officer
Member, Executive Committee
CHARLES S. JOHNSON DuPont
Director 4935 Mesa Capella Drive
Member, Audit Committee Las Vegas, NV 89113-1441
WILLIAM T. KERR Meredith Corporation
Director 1716 Locust St.
Member, Executive Committee Des Moines, IA 50309-3023
and Chair, Nominating
Committee
LEE LIU Alliant Energy Corporation
Member, Executive and Post Office Box 351
Human Resources Committees Cedar Rapids, IA 52406
VICTOR. H. LOEWENSTEIN Egon Zehnder International
Director Cours de Rive #10
Member, Nominating CH-1204 Geneva, Switzerland
Committee
RONALD D. PEARSON Hy-Vee, Inc.
Director 5820 Westown Parkway
Member, Human Resources West Des Moines, IA 50266
Committee
Federico F. Pena Vestar Capital Partners
Member, Audit 1225 17th Street, Ste 1660
Committee Denver, CO 80202
JOHN R. PRICE The Chase Manhattan Corporation
Director 270 Park Avenue - 21st Floor
Member, Nominating Committee New York, NY 10169
DONALD M. STEWART The Chicago Community Trust
Director 222 North LaSalle Street,Suite 1400
Member, Human Resources Chicago, IL 60601-1009
Committee
ELIZABETH E. TALLETT Dioscor, Inc.
Director 48 Federal Twist Road
Chair, Audit Committee Stockton, NJ 08559
FRED W. WEITZ Essex Meadows, Inc.
Director 800 Second Avenue, Suite 150
Member, Human Resources Des Moines, IA 50309
Committee
Executive Officers (Other than Directors):
JOHN E. ASCHENBRENNER Executive Vice President
MICHAEL T. DALEY Executive Vice President
MICHAEL H.GERSIE Executive Vice President and
Chief Financial Officer
RICHARD L. PREY Executive Vice President
PAUL S. BOGNANNO Senior Vice President
GARY M. CAIN Senior Vice President
C. ROBERT DUNCAN Senior Vice President
DENNIS P. FRANCIS Senior Vice President
THOMAS J. GRAF Senior Vice President
ROBB B. HILL Senior Vice President
DANIEL J. HOUSTON Senior Vice President
ELLEN Z. LAMALE Senior Vice President and
Chief Actuary
MARY A. O'KEEFE Senior Vice President
KAREN E. SHAFF Senior Vice President and
General Counsel
ROBERT A. SLEPICKA Senior Vice President
NORMAN R. SORENSEN Senior Vice President
CARL C. WILLIAMS Senior Vice President and Chief
Information Officer
LARRY D. ZIMPLEMAN Senior Vice President
Item 26. Persons Controlled by or Under Common Control with Registrant
Principal Financial Services, Inc. (an Iowa corporation) an
intermediate holding company organized pursuant to Section 512A.14 of
the Iowa Code.
Subsidiaries wholly-owned by Principal Financial Services, Inc.
a. Principal Life Insurance Company (an Iowa corporation) a stock
life insurance company engaged in the business of insurance and
retirement services.
b. Princor Financial Services Corporation (an Iowa Corporation) a
registered broker-dealer.
c. PFG DO Brasil LTDA (Brazil) a Brazilian holding company.
d. Principal Financial Group (Mauritius) Ltd. a Mauritius holding
company.
e. Principal Pensions Co., Ltd. (Japan) a Japan company who engages
in the management, investment and administration of financial
assets and any services incident thereto.
f. Principal Financial Services (Australia), Inc. (an Iowa holding
company) formed to facilitate the acquisition of the Australian
business of BT Australia.
g. Principal Financial Services (NZ), Inc. (an Iowa holding company)
formed to facilitate the acquisition of the New Zealand business
of BT Australia.
h. Principal Capital Management (Singapore) Limited (a Singapore
corporation) a company engaging in funds management.
i. Principal Capital Management (Europe) Limited a United Kingdom
company that engages in European representation and distributor
of the Principal Investments Funds.
j. Principal Capital Management (Ireland) Limited an Ireland company
that engages in fund management.
k. Principal Financial Group Investments (Australia) Pty Limited an
Australia holding company.
Subsidiary wholly-owned by Princor Financial Services Corporation:
a. Principal Management Corporation (an Iowa Corporation) a
registered investment advisor.
Subsidiary 42% owned by PFG DO Brasil LTDA
a. Brasilprev Previdencia Privada S.A.(Brazil) a pension
fund company.
Subsidiary wholly-owned by Principal Financial Group (Mauritius) Ltd.
a. IDBI Principal Asset Management Company (India) a India asset
management company.
Subsidiary wholly-owned by Principal Financial Services (Australia),
Inc.:
a. Principal Financial Group (Australia) Holdings Pty Ltd. an
Australian holding company organized in connection with the
contemplated acquisition of BT Australia Funds Management.
Subsidiary wholly-owned by Principal Financial Group (Australia)
Holdings Pty Ltd:
a. BT Financial Group Pty Ltd. an Australia holding company.
Subsidiary wholly-owned by BT Financial Group Pty Ltd:
a. BT Investments (Australia) Limited a Delaware holding
company.
Subsidiary wholly-owned by BT Investments (Australia) Limited:
a. BT Australia (Holdings) Ltd an Australia commercial and
investment banking and asset management company.
Subsidiary wholly-owned by BT Australia (Holdings) Ltd:
a. BT Australia Limited an Australia company engaged in asset
management and trustee/administrative activites.
Subsidiaries wholly-owned by BT Financial Group Limited:
a. BT Life Limited an Australia company engaged in commercial and
investment linked life insurance policies.
b. BT Funds Management Limited an Australia company engaged in
institutional and retail money management.
c. BT Funds Management (International) Limited an Australia company
who manages international funds (New Zealand, Singapore, Asia,
North America and United Kingdom).
d. BT Securities Limited an Australia company that engages in loan
finance secured against share and managed fund portfolios.
e. BT (Queensland) Pty Limited an Australia trustee company.
f. BT Portfolio Services Limited an Australia company that engages
in processing and transaction services for financial planners and
financial intermediaries.
g. BT Australia Corporate Services Pty Limited an Australia holding
company for internal service companies.
h. Oniston Pty Ltd an Australia company that is a financial services
investment vehicle.
i. QV1 Pty Limited an Australia company.
Subsidiaries wholly-owned by BT Portfolio Services Limited:
a. BT Custodial Services Pty Ltd an Australia custodian nominee for
investment management activities.
b. National Registry Services Pty Ltd. an Australia company that
engages in registry services.
c. National Registry Services (WA) Pty Limited an Australia company
that engages in registry services.
d. BT Finance & Investments Pty Ltd an Australia trustee of
wholesale cash management trust.
Subsidiaries organized and wholly-owned by BT Australia Corporate
Services Pty Limited:
a. BT Finance Pty Limited an Australia provider of finance by loans
and leases.
b. Chifley Services Pty Limited an Australia company that engages in
staff car leasing management.
c. BT Nominees Pty Limited an Australia company that operates as a
trustee of staff superannuation fund (pension plan).
Subsidiary organized and wholly-owned by BT Funds Management Limited:
a. BT Tactical Asset Management Pty Limited an Australia company
that engages in management of futures positions.
Subsidiary organized and wholly-owned by BT Custodial Services Pty
Ltd:
a. BT Hotel Group Pty Ltd an Australia corporation - an inactive
shelf corporation to be wound up.
b. BT Custodians Ltd an Australia manager and trustee of various
unit trusts.
c. Dellarak Pty Ltd an Australia trustee company.
Subsidiary organized and wholly-owned by Principal Financial Services
(NZ), Inc.
a. BT Financial Group (NZ) Limited a New Zealand holding company.
Subsidiary organized and wholly-owned by BT Financial Group (NZ)
Limited:
a. BT Portfolio Service (NZ) Limited a New Zealand company that
provides third party administration and registry services.
b. BT New Zealand Nominees Limited a New Zealand company who acts as
a custodian for local assets.
c. BT Funds Management (NZ) Limited a New Zealand funds manager.
Subsidiary organized and wholly-owned by Principal Financial Group
Investments (Australia) Pty Limited:
a. Principal Hotels Holdings Pty Ltd. a holding company.
b. Principal Hotels Holdings Trust an Australia trust company.
Subsidiary organized and wholly-owned by Principal Hotels Holdings
Trust:
a. Principal Hotels Australia Pty Ltd. a holding company.
b. Principal Hotels Australia Trust a trust company.
Subsidiary organized and wholly-owned by Principal Hotels Australia
Trust:
a. BT Hotel Limited an Australia corporation, which is the hotel
operating/managing company of the BT Hotel Group.
b. BT Hotel Trust an Australia trust.
Principal Life Insurance Company sponsored the organization of the
following mutual funds, some of which it controls by virtue of owning
voting securities:
Principal Balanced Fund, Inc.(a Maryland Corporation) 0.18% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000.
Principal Blue Chip Fund, Inc.(a Maryland Corporation) 0.37% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000.
Principal Bond Fund, Inc.(a Maryland Corporation) 0.73% of shares
outstanding owned by Principal Life Insurance Company (including
subsidiaries and affiliates) on June 21, 2000.
Principal Capital Value Fund, Inc. (a Maryland Corporation)
26.57% of outstanding shares owned by Principal Life Insurance
Company (including subsidiaries and affiliates)on June 21,
2000.
Principal Cash Management Fund, Inc. (a Maryland Corporation)
7.41% of outstanding shares owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on June 21,
2000.
Principal European Equity Fund, Inc. (a Maryland Corporation)
93.60% of outstanding shares owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on June 21,
2000.
Principal Government Securities Income Fund, Inc. (a Maryland
Corporation) 0.04% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
June 21, 2000.
Principal Growth Fund, Inc. (a Maryland Corporation) 0.01% of
outstanding shares owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000.
Principal High Yield Fund, Inc. (a Maryland Corporation) 8.33%
of shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000.
Principal International Emerging Markets Fund, Inc. (a Maryland
Corporation) 29.77% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
June 21, 2000.
Principal International Fund, Inc. (a Maryland Corporation)
24.21% of shares outstanding owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on June 21,
2000.
Principal International SmallCap Fund, Inc. (a Maryland
Corporation) 14.56% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
June 21, 2000.
Principal Limited Term Bond Fund, Inc. (a Maryland Corporation)
17.23% of shares outstanding owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on June 21,
2000.
Principal LargeCap Stock Index Fund, Inc. (a Maryland
Corporation) 31.94% of shares outstanding owned by Principal
Life Insurance Company (including subsidiaries and affiliates) on
June 21, 2000.
Principal MidCap Fund, Inc. (a Maryland Corporation) 0.39% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000
Principal Pacific Basin Fund, Inc. (a Maryland Corporation)
94.23% of outstanding shares owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on June 21,
2000.
Principal Partners Aggressive Growth Fund, Inc.(a Maryland
Corporation) 6.88% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
June 21, 2000
Principal Partners LargeCap Growth Fund, Inc.(a Maryland
Corporation) 42.01% of shares outstanding owned by Principal
Life Insurance Company (including subsidiaries and affiliates) on
June 21, 2000
Principal Partners MidCap Growth Fund, Inc.(a Maryland
Corporation) 38.30% of shares outstanding owned by Principal
Life Insurance Company (including subsidiaries and affiliates) on
June 21, 2000
Principal Real Estate Fund, Inc. (a Maryland Corporation) 59.76%
of shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000
Principal SmallCap Fund, Inc.(a Maryland Corporation) 7.50% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000.
Principal Special Markets Fund, Inc. (a Maryland Corporation)
83.56% of shares outstanding of the International Emerging
Markets Portfolio, 46.61% of the shares outstanding of the
International Securities Portfolio, 98.66% of shares outstanding
of the International SmallCap Portfolio and 100% of the shares
outstanding of the Mortgage-Backed Securities Portfolio were
owned by Principal Life Insurance Company (including subsidiaries
and affiliates) on June 21, 2000
Principal Tax-Exempt Bond Fund, Inc. (a Maryland Corporation)
0.05% of shares outstanding owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on June 21,
2000.
Principal Utilities Fund, Inc. (a Maryland Corporation) 0.31% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on June 21, 2000.
Principal Variable Contracts Fund, Inc. (a Maryland Corporation)
100% of shares outstanding of the following Accounts owned by
Principal Life Insurance Company and its Separate Accounts on
June 21, 2000: Aggressive Growth, Asset Allocation, Balanced,
Blue Chip, Bond, Capital Value, Government Securities, Growth,
High Yield, International, International SmallCap, LargeCap
Growth, MicroCap, MidCap, MidCap Growth, MidCap Value, Money
Market, Real Estate, SmallCap, SmallCap Growth, SmallCap Value
Stock Index 500, and Utilities.
Subsidiaries organized and wholly-owned by Principal Life Insurance
Company:
a. Principal Holding Company (an Iowa Corporation) a downstream
holding company for Principal Life Insurance Company.
b. Principal Development Investors, LLC (a Delaware Corporation) a
limited liability company engaged in acquiring and improving real
property through development and redevelopment.
c. Principal Capital Management, LLC (a Delaware Corporation) a
limited liability company that provides private mortgage, real
estate & fixed-income securities services to institutional
clients.
d. Principal Net Lease Investors, LLC (a Delaware Corporation) a
limited liability company which operates as a buyer and seller of
net leased investments.
Subsidiaries organized and 90% owned by Principal Life Insurance
Company:
a. PT Asuransi Jiwa Principal Indonesia (an Indonesia Corporation) a
life insuranced corporation which offers group and individual
products.
Subsidiaries wholly-owned by Principal Capital Management, LLC:
a. Principal Structured Investments, LLC (a Delaware Corporation) a
limited liability company that provides product development
administration, marketing and asset management services
associated with stable value products together with other related
institutional financial services including derivatives,
asset-liability management, fixed income investment management
and ancillary money management products.
b. Principal Enterprise Capital, LLC (a Delaware Corporation) a
company engaged in portfolio management on behalf of
institutional clients for structuring, underwriting and
management of entity-level investments in real estate operating
companies (REOCs).
c. Principal Commercial Acceptance, LLC (a Delaware Corporation) a
limited liability company that provides private market bridge
financing and other secondary market opportunities.
d. Principal Real Estate Investors, LLC (a Delaware Corporation) a
registered investment advisor.
e. Principal Commercial Funding, LLC (a Delaware Corporation) a
limited liability company engaged in the structuring,
warehousing, securitization and sale of commercial
mortgage-backed securities.
f. Principal Generation Plant, LLC an inactive Delaware limited
liability company.
g. Principal Income Investors, LLC a Delaware limited liability
company which provides investment and financial services.
h. Principal Capital Futures Trading Advisor, LLC a Delaware funds
management limited liability company.
Subsidiaries wholly-owned by Principal Holding Company:
a. Principal Bank (a Federal Corporation) a Federally chartered
direct delivery savings bank.
b. Patrician Associates, Inc. (a California Corporation) a real
estate development company.
c. Petula Associates, Ltd. (an Iowa Corporation) a real estate
development company.
d. Principal Development Associates, Inc. (a California Corporation)
a real estate development company.
e. Principal Spectrum Associates, Inc. (a California Corporation) a
real estate development company.
f. Principal FC, Ltd. (an Iowa Corporation) a limited purpose
investment corporation.
g. Equity FC, Ltd. (an Iowa Corporation) engaged in investment
transactions, including limited partnerships and limited
liability companies.
h. HealthRisk Resource Group, Inc. (an Iowa Corporation) a general
business corporation that engages in investment transactions,
including limited partnerships and limited liability companies
i. Invista Capital Management, LLC (an Delaware Corporation) a
limited liability company which is a registered investment
adviser.
j. Principal Residential Mortgage, Inc. (an Iowa Corporation) a full
service mortgage banking company that makes and services a wide
variety of loan types on a nationwide basis.
k. Principal Asset Markets, Inc. (an Iowa Corporation) a corporation
which is currently inactive.
l. Principal Portfolio Services, Inc. (an Iowa Corporation) a
corporation which is currently inactive.
m. The Admar Group, Inc. (a Florida Corporation) a national managed
care service organization that develops and manages preferred
provider organizations.
n. The Principal Financial Group, Inc. (a Delaware corporation) a
corporation which is currently inactive.
o. Principal Product Network, Inc. (a Delaware corporation) an
insurance broker.
p. Principal Health Care, Inc. (an Iowa Corporation) a managed care
company.
q. Dental-Net, Inc. (an Arizona Corporation) a managed dental care
services organization. HMO and dental group practice.
r. Principal Financial Advisors, Inc. (an Iowa Corporation) a
registered investment advisor.
s. Delaware Charter Guarantee & Trust Company, d/b/a Trustar
Retirement Services (a Delaware Corporation) a corporation that
administers individual and group retirement plans for stock
brokerage firm clients and mutual fund distributors.
t. Professional Pensions, Inc. d/b/a Northeast Plan Administrators
(a Connecticut Corporation) a corporation engaged in sales,
marketing and administration of group insurance plans and
third-party administrator for defined contribution plans.
u. Principal Investors Corporation (a New Jersey Corporation) a
corporation which is currently inactive.
v. Principal International, Inc. (an Iowa Corporation) a company
engaged in international business development.
Subsidiaries organized and wholly-owned by PT Asuransi Jiwa
Principal Indonesia:
a. PT Jasa Principal Indonesia an Indonesia pension company.
b. PT Principal Capital Management Indonesia an Indonesia funds
management company.
Subsidiary wholly-owned by Invista Capital Management, LLC:
a. Principal Capital Trust. (a Delaware Corporation) a business
trust and private investment company offering non-registered
units, initially, to tax-exempt entities.
Subsidiary wholly-owned by Principal Residential Mortgage, Inc.:
a. Principal Wholesale Mortgage, Inc. (an Iowa Corporation) a
brokerage and servicer of residential mortgages.
b. Principal Mortgage Reinsurance Company (a Vermont corporation)
a mortgage reinsurance company.
Subsidiaries wholly-owned by The Admar Group, Inc.:
a. Admar Corporation (a California Corporation) a managed care
services organization.
Subsidiaries wholly-owned by Dental-Net, Inc.
a. Employers Dental Services, Inc. (an Arizona corporation) a
prepaid dental plan organization.
Subsidiaries wholly-owned by Professional Pensions, Inc.:
a. Benefit Fiduciary Corporation (a Rhode Island corporation) serves
as a corporate trustee for retirement trusts.
b. PPI Employee Benefits Corporation (a Connecticut corporation) a
registered broker-dealer limited to the sale of open-end mutual
funds and variable insurance products.
c. Boston Insurance Trust, Inc. (a Massachusetts corporation) a
corporation which serves as a trustee and administrator of
insurance trusts and arrangements.
Subsidiaries wholly-owned by Principal International, Inc.:
a. Principal International Espana, S.A. de Seguros de Vida (Spain) a
life insurance, annuity, and accident and health company.
b. Zao Principal International (a Russia Corporation) inactive.
c. Principal International Argentina, S.A. (an Argentina
corporation) a holding company that owns Argentina corporations
offering annuities, group and individual insurance policies.
d. Principal Asset Management Company (Asia) Ltd. (Hong Kong) an
asset management company.
e. Principal International (Asia) Limited (Hong Kong) a corporation
operating as a regional headquarters for Asia.
f. Principal Trust Company (Asia) Limited (Hong Kong) (an Asia trust
company).
g. Principal International de Chile, S.A. (Chile) a holding company.
h. Principal Mexico Compania de Seguros, S.A. de C.V. (Mexico) a
life insurance company.
i. Principal Pensiones, S.A. de C.V. (Mexico) a pension company.
j. Principal Afore, S.A. de C.V. (Mexico), a pension company.
k. Principal Consulting (India) Private Limited (an India
corporation) an India consulting company.
Subsidiaries 88% owned by Principal International, Inc.:
a. Principal Insurance Company (Hong Kong) Limited (a Hong Kong
Corporation) a company that sells insurance and pension products.
Subsidiary wholly-owned by Principal International Espana, S.A. de
Seguros de Vida (Spain):
a. Princor International Espana S.A. de Agencia de Seguros (Spain)
an insurance agency.
Subsidiary wholly-owned by Principal International (Asia) Limited
(Hong Kong):
a. Principal Capital Management (Asia) Limited (Hong Kong) Asian
representative and distributor for the Principal Investment
Funds.
Subsidiaries wholly-owned by Principal International Argentina, S.A.
(Argentina):
a. Principal Retiro Compania de Seguros de Retiro, S.A. (Argentina)
an annuity company.
b. Principal Life Compania de Seguros, S.A. (Argentina) a life
insurance company.
Subsidiary wholly-owned by Principal International de Chile, S.A.:
a. Principal Compania de Seguros de Vida Chile S.A. (Chile) life
insurance company.
Subsidiary 60% owned by Principal Compania de Seguros de Vida Chile
S.A. (Chile):
a. Andueza & Principal Creditos Hipotecarios S.A. (Chile) a
residential mortgage company.
Subsidiary wholly-owned by Principal Afore, S.A. de C.V.:
a. Siefore Principal, S.A. de C.V. (Mexico) an investment fund
company.
Item 27. Number of Contractowners - As of: March 30, 2000
(1) (2) (3)
Number of Plan Number of
Title of Class Participants Contractowners
-------------- -------------- --------------
BFA Variable Annuity Contracts 76 8
Pension Builder Contracts 535 308
Personal Variable Contracts 5,514 125
Premier Variable Contracts 21,677 259
Flexible Variable Annuity Contract 40,796 40,796
Principal Freedom Variable Annuity Contract 268 268
Item 28. Indemnification
None
Item 29. Principal Underwriters
(a) Princor Financial Services Corporation, principal underwriter for
Registrant, acts as principal underwriter for, Principal Balanced Fund, Inc.,
Principal Blue Chip Fund, Inc., Principal Bond Fund, Inc., Principal Capital
Value Fund, Inc., Principal Cash Management Fund, Inc., Principal European
Equity Fund, Inc., Principal Government Securities Income Fund, Inc., Principal
Growth Fund, Inc., Principal High Yield Fund, Inc., Principal International
Emerging Markets Fund, Inc., Principal International Fund, Inc., Principal
International SmallCap Fund, Inc., Principal LargeCap Stock Index Fund, Inc.,
Principal Limited Term Bond Fund, Inc., Principal MidCap Fund, Inc., Principal
Pacific Basin Fund Inc., Principal Partners Aggressive Growth Fund, Inc.,
Principal Partners LargeCap Growth Fund, Inc., Principal Partners MidCap Growth
Fund, Inc., Principal Real Estate Fund, Inc., Principal SmallCap Fund, Inc.,
Principal Special Markets Fund, Inc., Principal Tax-Exempt Bond Fund, Inc.,
Principal Utilities Fund, Inc., Principal Variable Contracts Fund, Inc. and for
variable annuity contracts participating in Principal Life Insurance Company
Separate Account B, a registered unit investment trust for retirement plans
adopted by public school systems or certain tax-exempt organizations pursuant to
Section 403(b) of the Internal Revenue Code, Section 457 retirement plans,
Section 401(a) retirement plans, certain non- qualified deferred compensation
plans and Individual Retirement Annuity Plans adopted pursuant to Section 408 of
the Internal Revenue Code, and for variable life insurance contracts issued by
Principal Life Insurance Company Variable Life Separate Account, a registered
unit investment trust.
(b) (1) (2)
Positions
and offices
Name and principal with principal
business address underwriter
John E. Aschenbrenner Director
The Principal
Financial Group
Des Moines, IA 50392
Robert W. Baehr Marketing Services
The Principal Officer
Financial Group
Des Moines, IA 50392
Craig L. Bassett Treasurer
The Principal
Financial Group
Des Moines, IA 50392
Michael J. Beer Executive Vice President
The Principal
Financial Group
Des Moines, IA 50392
Jerald L. Bogart Insurance License Officer
The Principal
Financial Group
Des Moines, IA 50392
David J. Drury Director
The Principal
Financial Group
Des Moines, IA 50392
Ralph C. Eucher Director and
The Principal President
Financial Group
Des Moines, IA 50392
Arthur S. Filean Vice President
The Principal
Financial Group
Des Moines, IA 50392
Dennis P. Francis Director
The Principal
Financial Group
Des Moines, IA 50392
Paul N. Germain Vice President -
The Principal Mutual Fund Operations
Financial Group
Des Moines, IA 50392
Ernest H. Gillum Vice President -
The Principal Compliance and Product Development
Financial Group
Des Moines, IA 50392
Thomas J. Graf Director
The Principal
Financial Group
Des Moines, IA 50392
J. Barry Griswell Director and
The Principal Chairman of the
Financial Group Board
Des Moines, IA 50392
Susan R. Haupts Marketing Officer
The Principal
Financial Group
Des Moines, IA 50392
Joyce N. Hoffman Vice President and
The Principal Corporate Secretary
Financial Group
Des Moines, IA 50392
Kraig L. Kuhlers Marketing Officer
The Principal
Financial Group
Des Moines, IA 50392
Ellen Z. Lamale Director
The Principal
Financial Group
Des Moines, IA 50392
Julia M. Lawler Director
The Principal
Financial Group
Des Moines, IA 50392
John R. Lepley Senior Vice
The Principal President - Marketing
Financial Group and Distribution
Des Moines, IA 50392
Kelly A. Paul Systems and Technology
The Principal Officer
Financial Group
Des Moines, IA 50392
Elise M. Pilkington Assistant Director -
The Principal Retirement Consulting
Financial Group
Des Moines, IA 50392
Richard L. Prey Director
The Principal
Financial Group
Des Moines, IA 50392
Layne A. Rasmussen Controller -
The Principal Mutual Funds
Financial Group
Des Moines, IA 50392
Martin R. Richardson Operations Officer -
The Principal Broker/Dealer Services
Financial Group
Des Moines, IA 50392
Elizabeth R. Ring Controller
The Principal
Financial Group
Des Moines, IA 50392
Michael D. Roughton Counsel
The Principal
Financial Group
Des Moines, IA 50392
Jean B. Schustek Product Compliance Officer -
The Principal Registered Products
Financial Group
Des Moines, IA 50392
Kyle R. Selberg Vice President-Marketing
The Principal
Financial Group
Des Moines, IA 50392
Minoo Spellerberg Compliance Officer
The Principal
Financial Group
Des Moines, IA 50392
(c) (1) (2)
Net Underwriting
Name of Principal Discounts and
Underwriter Commissions
Princor Financial $12,331,736.46
Services Corporation
(3) (4) (5)
Compensation on Brokerage
Redemption Commissions Compensation
0 0 0
Item 30. Location of Accounts and Records
All accounts, books or other documents of the Registrant are located
at the offices of the Depositor, The Principal Financial Group, Des
Moines, Iowa 50392.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
The Registrant undertakes to 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 so long as payments under the
variable annuity contracts may be accepted.
The Registrant undertakes to include either (1) as part of any
application to purchase a contract 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
to send for a Statement of Additional Information.
The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
REPRESENTATION PURSUANT TO SECTION 26 OF THE INVESTMENT COMPANY ACT OF 1940
Principal Life Insurance Company represents the fees and charges deducted under
the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Principal Life Insurance
Company Separate Account B, has duly caused this Registration Statement to be
signed on its behalf by the undersigned thereto duly authorized in the City of
Des Moines and State of Iowa, on the 27th day of June, 2000
PRINCIPAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
(Registrant)
By: PRINCIPAL LIFE INSURANCE COMPANY
(Depositor)
/s/ David J. Drury
By ______________________________________________
David J. Drury
Chairman
Attest:
/s/ Joyce N. Hoffman
-----------------------------------
Joyce N. Hoffman
Vice President and
Corporate Secretary
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
Signature Title Date
/s/ D. J. Drury Chairman and June 27, 2000
-------------------- Director
D. J. Drury
/s/ D. C. Cunningham Vice President and June 27, 2000
-------------------- Controller (Principal
D. C. Cunningham Accounting Officer)
/s/ M. H. Gersie Executive Vice President and June 27, 2000
-------------------- Chief Financial Officer
M. H. Gersie (Principal Financial Officer)
(B. J. Bernard)* Director June 27, 2000
--------------------
B. J. Bernard
(J. Carter-Miller)* Director June 27, 2000
--------------------
J. Carter-Miller
(C. D. Gelatt, Jr.)* Director June 27, 2000
--------------------
C. D. Gelatt, Jr.
(J. B. Griswell)* Director June 27, 2000
--------------------
J. B. Griswell
(C. S. Johnson)* Director June 27, 2000
--------------------
C. S. Johnson
(W. T. Kerr)* Director June 27, 2000
--------------------
W. T. Kerr
(L. Liu)* Director June 27, 2000
--------------------
L. Liu
(V. H. Loewenstein)* Director June 27, 2000
--------------------
V. H. Loewenstein
(R. D. Pearson)* Director June 27, 2000
--------------------
R. D. Pearson
(F. F. Pena)* Director June 27, 2000
--------------------
F. F. Pena
(J. R. Price)* Director June 27, 2000
--------------------
J. R. Price, Jr.
(D. M. Stewart)* Director June 27, 2000
--------------------
D. M. Stewart
(E. E. Tallett)* Director June 27, 2000
--------------------
E. E. Tallett
(F. W. Weitz)* Director June 27, 2000
--------------------
F. W. Weitz
*By /s/ David J. Drury
------------------------------------
David J. Drury
Chairman
Pursuant to Powers of Attorney
Previously Filed or Included Herein
