Registration No. 33-44565
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. __14__ __X__
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)
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 2000 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date for
a previously filed post- effective amendment.
<PAGE>
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B
PERSONAL VARIABLE - GROUP VARIABLE ANNUITY CONTRACTS
Registration Statement on Form N-4
Cross Reference Sheet
Form N-4 Item Caption in Prospectus
Part A
1. Cover Page Principal Life Insurance Company
Separate Account B Personal Variable - A Group
Variable Annuity Contract For Employer
Sponsored Qualified and Non-Qualified
Retirement Plans
2. Definitions Glossary of Special Terms
3. Synopsis Expense Table and Example, Summary
4. Condensed Financial Condensed Financial Information,
Information Independent Auditors
5. General Description Summary, Description of
of Registrant Principal Life Insurance
Company, Principal Life
Insurance Company Separate Account B,
Voting Rights
6. Deductions Expense Table and Example, Summary, Deductions
Under the Contract, Contingent Deferred Sales
Charge, Contract Administration Expense/
Recordkeeping Charge, Mortality and Expense
Risks Charge, Distribution of the Contract,
Other Expenses, Documentation Expense, Special
Services
7. General Description of Summary, The Contract, Contract Values
Variable Annuity Contract and Accounting Before Annuity Commencement
Date, Income Benefits, Payment on Death of
Plan Participant, Withdrawals and Transfers,
Other Contractual Provisions, Contractholders'
Inquiries
8. Annuity Period Income Benefits
9. Death Benefit Payment on Death of Plan Participant,
Federal Tax Status
10. Purchases and Contract Summary, The Contract, Contract Values and
Value Accounting Before Annuity Commencement
Date, Other Contractual Provisions,
Distribution of the Contract
11. Redemptions Summary, Income Benefits,
Withdrawals and Transfers
12. Taxes Summary, Principal Life Insurance Company
Separate Account B, Income Benefits,
Federal Tax Status
13. Legal Proceedings Legal Proceedings
14. Table of Contents of Table of Contents of the Statement
the Statement of of Additional Information
Additional Information
Part B Statement of Additional Information Caption**
15. Cover Page Principal Life Insurance Company
Separate Account B Personal Variable - A Group
Variable Annuity Contract for Employer
Sponsored Qualified and Non-Qualified
Retirement Plans Issued by Principal Life
Insurance Company
16. Table of Contents Table of Contents
17. General Information None
and History
18. Services Independent Auditors**
19. Purchase of Securities Summary**, Deductions Under
Being Offered the Contracts**, Withdrawals and Transfers**,
Distribution of the Contract**
20. Underwriters Summary**, Distribution of the Contract**,
Underwriting Commissions
21. Calculation of Calculation of Yield and Total Return
Performance Data
22. Annuity Payments Income Benefits**
23. Financial Statements Financial Statements
** Prospectus caption given where appropriate.
<PAGE>
PRINCIPAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
PERSONAL VARIABLE
(A Group Variable Annuity Contract
For Employer Sponsored Qualified
And Non-Qualified Retirement Plans)
Issued by Principal Life Insurance Company (the "Company")
Prospectus dated _____________
This Prospectus concisely sets forth information about Principal Life Insurance
Company Separate Account B and Personal Variable (a Group Variable Annuity
Contract) (the "Contract") that an investor ought to know before investing. It
should be read and retained for future reference.
Additional information about the Contracts, including a Statement of Additional
Information, dated __________, has been filed with the Securities and Exchange
Commission. The Statement of Additional Information is incorporated by reference
into this Prospectus. The table of contents of the Statement of Additional
Information appears on page __ of this Prospectus. A copy of the Statement of
Additional Information can be obtained, free of charge, upon request by writing
or telephoning:
Princor Financial Services Corporation
a company of
the Principal Financial Group
Des Moines, IA 50392
Telephone: 1-800-633-1373
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 prospectus for
Principal Variable Contracts Fund, Inc. (the "Fund") which should be kept for
future reference.
TABLE OF CONTENTS
Page
Glossary of Special Terms .................................................. 4
Expense Table and Example................................................... 6
Summary..................................................................... 7
Condensed Financial Information ............................................ 9
Description of Principal Life Insurance Company ............................10
Principal Life Insurance Company Separate Account B ........................10
Deductions under the Contract ..............................................12
Contingent Deferred Sales Charge........................................12
Contract Administration Expense/Recordkeeping Charge ...................13
Mortality and Expense Risks Charge .....................................14
Other Expenses .............................................................14
Application Fee and Transfer Fee........................................14
Documentation Expense...................................................15
Location Fee ..........................................................15
Outside Asset Recordkeeping Charge......................................15
Special Services........................................................15
Surplus Distribution at Sole Discretion of the Company .....................15
The Contract ..............................................................15
Contract Values and Accounting Before Annuity Commencement Date ........16
Investment Accounts ...............................................16
Unit Value ........................................................16
Net Investment Factor .............................................16
Hypothetical Example of Calculation of Unit Value for All
Divisions Except the Money Market Division.....................16
Hypothetical Example of Calculation of Unit Value for
the Money Market Division.....................................17
Income Benefits ........................................................17
Variable Annuity Payments..........................................17
Selecting a Variable Annuity ..................................17
Forms of Variable Annuities ...................................18
Basis of Annuity Conversion Rates .............................19
Determining the Amount of the
First Variable Annuity Payment ...........................19
Determining the Amount of the Second and Subsequent
Monthly Variable Annuity Payments ........................19
Hypothetical Example of Calculation
of Variable Annuity Payments ........................... 20
Flexible Income Option.............................................20
Payment on Death of Plan Participant....................................21
Prior to Annuity Purchase Date ....................................21
Subsequent to Annuity Purchase Date ...............................21
Withdrawals and Transfers .............................................22
Cash Withdrawals ..................................................22
Transfers Between Divisions .......................................22
Transfers to the Contract .........................................22
Transfers to Companion Contract ...................................23
Special Situation Involving Alternate Funding Agents ..............23
Postponement of Cash Withdrawal or Transfer .......................23
Loans .............................................................23
Other Contractual Provisions ...........................................23
Contribution Limits ...............................................23
Assignment ........................................................23
Cessation of Contributions ........................................24
Substitution of Securities.........................................24
Changes in the Contract ...........................................24
Statement of Values.........................................................24
Services Available by Telephone.............................................25
Distribution of the Contract................................................25
Performance Calculation.....................................................25
Voting Rights ............................................................ 26
Federal Tax Status..........................................................27
Taxes Payable by Owners of Benefits and Annuitants......................27
Tax-Deferred Annuity Plans.........................................27
Public Employee Deferred Compensation Plans........................28
401(a) Plans.......................................................28
Creditor-Exempt Non-Qualified Plans................................29
General Creditor Non-Qualified Plans...............................30
Fund Diversification....................................................30
State Regulation ..........................................................30
Legal Opinions ..........................................................31
Legal Proceedings ......................................................... 31
Registration Statement.................................................... 31
Independent Auditors...................................................... 31
Contractholders' Inquiries................................................ 32
Table of Contents of the Statement of Additional Information.............. 32
This Prospectus does not constitute an offer of, or solicitation of any offer to
acquire, any interest or participation in the Contracts in any jurisdiction in
which such an offer or solicitation may not lawfully be made. No person is
authorized to give any information or to make any representations in connection
with the Contracts other than those contained in this Prospectus.
GLOSSARY OF SPECIAL TERMS
Account -- Series or portfolio of a Mutual Fund in which a Separate Account
Division invests.
Aggregate Investment Account Value -- The sum of the Investment Account Values
for Investment Accounts which correlate to a Plan Participant.
Annual Average Balance -- The total value at the beginning of the Deposit Year
of all Investment Accounts which correlate to a Plan Participant under the
contract and other Plan assets that correlate to a Plan Participant that are not
allocated to the contract or an Associated or Companion Contract but for which
the Company provides recordkeeping services ("Outside Assets"), adjusted by the
time weighted average of Contributions to, and withdrawals from, Investment
Accounts and Outside Assets (if any) which correlate to the Plan Participant
during the period.
Annuity Change Factor -- The factor used to determine the change in value of a
Variable Annuity in the course of payment.
Annuity Commencement Date -- The beginning date for Annuity Payments.
Annuity Premium -- The amount applied under the contract to purchase an annuity.
Annuity Purchase Date -- The date an Annuity Premium is applied to purchase an
annuity.
Associated Contract -- An annuity contract issued by the Company to the same
Contractholder to fund the same or a comparable Plan as determined by the
Company.
Commuted Value -- The dollar value, as of a given date, of remaining Variable
Annuity Payments. It is determined by the Company using the interest rate
assumed in determining the initial amount of monthly income and assuming no
variation in the amount of monthly payments after the date of determination.
Companion Contract -- An unregistered group annuity contract offering guaranteed
interest crediting rates and which is issued by the Company to the
Contractholder for the purpose of funding benefits under the Plan. The Company
must agree in writing that a contract is a Companion Contract.
Contingent Deferred Sales Charge -- The charge deducted from certain cash
withdrawals from an Investment Account before the Annuity Purchase Date,
payments made because of a Termination of Employment or amounts transferred to
an Alternate Funding Agent.
Contract Administration/Recordkeeping Charge -- A charge deducted or paid
separately by the Contractholder on a quarterly basis each Deposit Year prior to
the Annuity Commencement Date or on a complete redemption of Investment Accounts
which correlate to a Plan Participant from the Aggregate Investment Accounts
that correlate to each Plan Participant.
Contract Date -- The date this contract is effective, as shown on the face page
of the contract.
Contract Year -- A period beginning on a Yearly Date and ending on the day
before the next Yearly Date.
Contractholder -- The entity to which the contract will be issued, which will
normally be an Employer, an association, or a trust established for the benefit
of Plan Participants and their beneficiaries.
Contributions -- Amounts contributed under the contract which are accepted by
the Company.
Deposit Year -- The twelve-month period ending on a day selected by the
Contractholder.
Division -- The part of Separate Account B which is invested in shares of an
Account of a Mutual Fund.
Employer -- The corporation, sole proprietor, firm, organization, agency or
political subdivision named as employer in the Plan and any successor.
Flexible Income Option -- A periodic distribution from the contract in an amount
equal to the minimum annual amount determined in accordance with the minimum
distribution rules of the Internal Revenue Code, or a greater amount as
requested by the Owner of Benefits.
Funding Agent -- An insurance company, custodian or trustee designated by the
Contractholder and authorized to receive any amount or amounts transferred from
the contract described in this prospectus. Funding Agent will also mean
Principal Life Insurance Company where the Contractholder directs the Company to
transfer such amounts from the contract described in this prospectus to another
group annuity contract issued by the Company to the Contractholder.
Internal Revenue Code ("Code") -- The Internal Revenue Code of 1986, as amended,
and the regulations thereunder. Reference to the Internal Revenue Code means
such Code or the corresponding provisions of any subsequent revenue code and any
regulations thereunder.
Investment Account -- An account that correlates to a Plan Participant
established under the contract for each type of Contribution and for each
Division in which the Contribution is invested.
Investment Account Value -- The value of an Investment Account for a Division
which on any date will be equal to the number of units then credited to such
account multiplied by the Unit Value of this series of contracts for that
Division for the Valuation Period in which such date occurs.
Mutual Fund -- A registered open-end investment company in which a Division of
Separate Account B invests.
Net Investment Factor -- The factor used to determine the change in Unit Value
of a Division during a Valuation Period.
Normal Income Form -- The form of benefit to be provided under the Plan if the
Owner of Benefits does not elect some other form. If the Plan does not specify a
Normal Income Form, the Normal Income Form shall be: (a) for an unmarried Plan
Participant, the single life with ten years certain annuity option described in
this Prospectus, (b) for a married Plan Participant, the joint one-half survivor
annuity option described in this Prospectus.
Notification -- Any form of notice received by the Company at the Company's home
office and approved in advance by the Company including written forms,
electronic transmissions, telephone transmissions, facsimiles or photocopies.
Owner of Benefits -- The entity or individual that has the exclusive right to be
paid benefits and exercise rights and privileges pursuant to such benefits. The
Owner of Benefits is the Plan Participant under all contracts except contracts
used to fund General Creditor Non-Qualified Plans (see "Summary") wherein the
Contractholder is the Owner of Benefits.
Plan -- The plan established by the Employer in effect on the date the contract
is executed and as amended from time to time, which the Employer has designated
to the Company in writing as the Plan funded by the contract.
Plan Participant -- A person who is (i) a participant under the Plan, (ii) a
beneficiary of a deceased participant, or (iii) an alternative payee under a
Qualified Domestic Relations Order, in whose name an Investment Account has been
established under this contract.
Qualified Domestic Relations Order -- A Qualified Domestic Relations Order as
defined in Internal Revenue Code Section 414(p)(1)(A).
Quarterly Date -- The last Valuation Date of the third, sixth, ninth and twelfth
month of each Deposit Year.
Separate Account B -- A separate account established by the Company under Iowa
law to receive Contributions under the contract offered by this Prospectus and
other contracts issued by the Company. It is divided into Divisions, each of
which invest in a corresponding Account of the Principal Variable Contracts
Fund, Inc.
Termination of Employment -- A Plan Participant's termination of employment with
the Employer, determined under the Plan and as reported to the Company.
Total and Permanent Disability -- The condition of a Plan Participant when, as
the result of sickness or injury, the Plan Participant is prevented from
engaging in any substantial gainful activity and such total disability has been
continuous for a period of at least six months. For contracts sold in the state
of Pennsylvania, this term shall have the same meaning as defined in the Plan.
The Plan Participant must submit due proof thereof which is acceptable to the
Company.
Unit Value -- The value of a unit of a Division of Separate Account B.
Valuation Date -- The date as of which the net asset value of an Account is
determined.
Valuation Period -- The period of time between when the net asset value of an
Account is determined on one Valuation Date and when such value is determined on
the next following Valuation Date.
Variable Annuity Payments -- A series of periodic payments, the amounts of which
are not guaranteed but which will increase or decrease to reflect the investment
experience of the Capital Value Division of Separate Account B. Periodic
payments made pursuant to the Flexible Income Option are not Variable Annuity
Payments.
Variable Annuity Reserves -- The reserves held for annuities in the course of
payment for the Contract.
Yearly Date -- The Contract Date and the same day of each year thereafter.
EXPENSE TABLE AND EXAMPLE
The following tables depict fees and expenses applicable to the aggregate of all
Investment Accounts that correlate to a Plan Participant established under the
Contract. The purpose of the table is to assist the Owner of Benefits in
understanding the various costs and expenses that an Owner of Benefits will bear
directly or indirectly. The table reflects expenses of the Separate Account as
well as the expenses of the Accounts in which the Separate Account invests as of
the fiscal year ended December 31, 1999. The example below should not be
considered a representation of past or future expenses; actual expenses may be
greater or lesser than those shown. See "Deductions under the Contract."
<TABLE>
EXPENSE TABLE(1)
<S> <C>
Transaction Expenses
Sales Load Imposed on Purchases
(as a percentage of purchase payments) None
Deferred Sales Load(2)
(as a percentage of amount surrendered)
For Withdrawals Occurring During
Plan Participant's Year of Coverage
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 7 Thereafter
- -----------------------------------------------------------------------------------------------------------
5.00% 4.25% 3.50% 2.75% 2.00% 1.25% 0.50% 0%
<S> <C>
Surrender Fees None
Exchange Fee None
Annual Contract Fee (3)
Contract Administration Expense/ $34 per Plan Participant + (.35% of the Balance of the Investment Accounts
Recordkeeping Charge(2) and Outside Assets which correlate to the Plan Participant
subject to a minimum annual charge of $3,000).(4) (5)
Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Charge(2) .64%
Annual Expenses of Accounts
(as a percentage of average net assets of the following accounts)
<S> <C> <C> <C>
Management Other Total Accounts
Fees Expenses Annual Expenses
Balanced Account .57% .02% .59%
Bond Account .49 .02 .51
Capital Value Account .43 .01 .44
Government Securities Account .49 .01 .50
Growth Account .47 .01 .48
International Account .73 .04 .77
MidCap Account .61 .01 .62
Money Market Account .50 .02 .52
<FN>
(1) The Contractholder must also pay a documentation expense (if applicable)
and, if services are provided to multiple employee group locations, a
location fee. (See "Other Expenses.")
(2) The Contingent Deferred Sales Charge, Contract Administration
Expense/Recordkeeping Charge and mortality and expense risks charge may be
changed on 60-days notice subject to certain limitations.
(3) Annual contract fees are charged on a quarterly basis (based on balance of
Investment Accounts at the end of each quarter) or assessed upon a complete
redemption of all Investment Accounts which correlate to a Plan
Participant. (See "Deductions Under the Contract.")
(4) If benefit plan reports are mailed to the Plan Participants' home address,
the $34 charge will be increased to $37. If more than one 401(k) or 401(m)
non-discrimination tests are provided by the Company in any Deposit Year,
the $34 ($37) per Plan Participant Contract Administration Expense may be
increased by 3% for each additional test. If benefit plan reports are
mailed monthly instead of quarterly, the $34 ($37) charge will be increased
by 24%. (See "Deductions Under the Contract.")
(5) An additional $25 annual charge will be made for aggregate Investment
Account Values which correlate to the Plan Participant for which a Flexible
Income Option has been selected. (See "Deductions Under the Contract.")
</FN>
</TABLE>
<TABLE>
EXAMPLE
<CAPTION>
Separate Account
Division 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------ ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
If the Investments Accounts which correlate
to a Plan Participant are surrendered at the
end of the applicable time period:
The Owner of Benefits would pay the Balanced $71 $97 $125 $220
following expenses on a $1,000 investment, Bond $70 $95 $121 $212
assuming a 5% annual return on assets: Capital Value $69 $93 $117 $203
Government Securities $70 $95 $120 $211
Growth $70 $94 $119 $207
International $72 $103 $134 $239
MidCap $71 $98 $126 $223
Money Market $70 $95 $121 $213
If the Investment Accounts which correlate
to a Plan Participant are annuitized at the
end of the applicable time period or rate
not surrendered:
The Owner of Benefits would pay the Balanced $19 $59 $102 $220
following expenses on a $1,000 investment, Bond $18 $57 $97 $212
assuming a 5% annual return on assets: Capital Value $17 $54 $93 $203
Government Securities $18 $56 $97 $211
Growth $18 $55 $95 $207
International $21 $65 $111 $239
MidCap $19 $60 $103 $223
Money Market $18 $57 $98 $213
</TABLE>
SUMMARY
The following summary should be read in conjunction with the detailed
information appearing elsewhere in this Prospectus.
Contract Offered
The group variable annuity contract described by this Prospectus was issued by
the Company and designed to aid in retirement planning. The Contract provides
for the accumulation of Contributions and the payment of Variable Annuity
Payments on a completely variable basis. As of January 1, 1998, the Contract is
no longer offered.
Contributions
The contract prescribes no limits on the minimum Contribution which may be made
to an Investment Account. Plan Participant maximum Contributions are discussed
under "Federal Tax Status." Contributions may also be limited by the Plan. The
Company may also limit Contributions on 60-days notice.
All Contributions made pursuant to the contract are allocated to one or more
Investment Accounts which correlate to a Plan Participant. An Investment Account
is established for each type of Contribution for each Division of Separate
Account B as directed by the Owner of Benefits. Currently, the Divisions
available under the Contract are: Balanced, Bond, Capital Value, Government
Securities, Growth, International, MidCap and Money Market. The Contractholder
may choose to limit the number of Divisions available to the Owner of Benefits,
but the Money Market Division may not be so restricted to the extent the
Division is necessary to permit the Company to allocate initial Contributions
and the Capital Value Division may not be so restricted to the extent the
Division is necessary to permit the Company to pay Variable Annuity Payments.
Additional Divisions may be added in the future. If no direction is provided for
a particular Contribution, such Contribution will be allocated to an Investment
Account which is invested in the Money Market Division.
Separate Account B
Each of the Divisions corresponds to one of the Accounts in which Contributions
may be invested. The objective of the contract is to provide a return on amounts
contributed that will reflect the investment experience of the Accounts in which
the Divisions to which Contributions are directed are invested. The value of the
Contributions accumulated in Separate Account B prior to the Annuity
Commencement Date will vary with the investment experience of the Accounts.
Each of the Divisions invests only in shares of an Account of Principal Variable
Contracts Fund, Inc. as indicated in the table below.
Division Account
-------- -------
Balanced Division Balanced Account
Bond Division Bond Account
Capital Value Division Capital Value Account
Government Securities Division Government Securities Account
Growth Division Growth Account
International Division International Account
MidCap Division MidCap Account
Money Market Division Money Market Account
Distributions, Transfers and Withdrawals
Variable Annuity Payments will be made on and after a Plan Participant's Annuity
Commencement Date. All Variable Annuity Payments will reflect the performance of
the Account underlying the Capital Value Division and therefore the annuitant is
subject to the risk that the amount of variable annuity payments may decline.
(See "Income Benefits.")
Generally, at any time prior to the Annuity Purchase Date, the Owner of Benefits
may transfer all or any portion of an Investment Account which correlates to a
Plan Participant to another available Investment Account correlating to such
Plan Participant. If a Companion Contract has been issued to the Contractholder
to fund the Plan, and if permitted by the Plan and Companion Contract, amounts
transferred from such Companion Contract may be invested in this Contract to
establish Investment Accounts which correlate to a Plan Participant at any time
at least one month before the Annuity Commencement Date. Similarly, if the
Company has issued a Companion Contract to the Contractholder, and if permitted
by the Plan and the Companion Contract, the Owner of Benefits, subject to
certain limitations, may file a Notification with the Company to transfer all or
a portion of the Investment Account values which correlate to a Plan Participant
to the Companion Contract. (See "Withdrawals and Transfers.") In addition,
subject to any Plan limitations or any reduction for vesting provided for in the
Plan as to amounts available, the Owner of Benefits may withdraw cash from the
Investment Accounts that correlate to the Plan Participant at any time prior to
the Plan Participant's Termination of Employment, disability, retirement or the
Annuity Purchase Date subject to any charges that may be applied. (See
"Withdrawals and Transfers.") Note that withdrawals before age 59 1/2 may
involve an income tax penalty. (See "Federal Tax Status.") No withdrawals are
permitted after the Annuity Purchase Date.
CONDENSED FINANCIAL INFORMATION
Financial statements are included in the Statement of Additional Information.
Following are Unit Values for the Personal Variable Annuity Contract for the
periods ended December 31.
<TABLE>
<CAPTION>
Number of
Accumulation Unit Value Accumulation Units
Outstanding
Beginning End End of Period
of Period of Period (in thousands)
<S> <C> <C> <C>
Balanced Division
Year Ended December 31
1999 $1.771 $1.801 2,849
1998 1.592 1.771 2,321
1997 1.359 1.592 1,775
1996 1.208 1.359 1,015
1995 .975 1.208 327
Period Ended December 31, 1994 (1) 1.000 .975 101
Bond Division
Year Ended December 31
1999 1.471 1.423 998
1998 1.374 1.471 766
1997 1.251 1.374 487
1996 1.229 1.251 274
1995 1.012 1.229 124
Period Ended December 31, 1994 (1) 1.000 1.012 0
Capital Value Division
Year Ended December 31
1999 2.651 2.522 4,014
1998 2.349 2.651 3,764
1997 1.840 2.349 3,443
1996 1.498 1.840 2,915
1995 1.142 1.498 2,336
1994 1.143 1.142 1,638
1993 1.066 1.143 504
Government Securities Division
Year Ended December 31
1999 1.522 1.508 2,111
1998 1.414 1.522 1,954
1997 1.289 1.414 1,816
1996 1.255 1.289 1,936
1995 1.060 1.255 1,890
1994 1.116 1.060 1,575
1993 1.020 1.116 809
1992 (2) 1.000 1.020 15
Growth Division
Year Ended December 31
1999 2.125 2.459 3,115
1998 1.763 2.125 2,232
1997 1.397 1.763 1,575
1996 1.249 1.397 814
1995 1.000 1.249 278
Period Ended December 31, 1994 (1) 1.000 1.000 5
International Division
Year Ended December 31
1999 1.647 2.061 1,755
1998 1.507 1.647 1,511
1997 1.352 1.507 1,014
1996 1.087 1.352 487
1995 .957 1.087 160
Period Ended December 31, 1994 (1) 1.000 .957 21
MidCap Division
Year Ended December 31
1999 1.922 2.159 2,156
1998 1.866 1.922 1,918
1997 1.530 1.866 1,478
1996 1.270 1.530 830
1995 .990 1.270 288
Period Ended December 31, 1994 (1) 1.000 .990 14
Money Market Division
Year Ended December 31
1999 1.278 1.332 1,513
1998 1.222 1.278 1,330
1997 1.169 1.222 1,056
1996 1.119 1.169 841
1995 1.066 1.119 1,143
1994 1.033 1.066 742
1993 1.011 1.033 183
1992 (2) 1.000 1.011 29
<FN>
(1) Commenced operations on October 3, 1994.
(2) Commenced operations on July 15, 1992.
</FN>
</TABLE>
DESCRIPTION OF PRINCIPAL LIFE INSURANCE COMPANY (The "Company")
Principal Life Insurance Company is a life insurance company with its home
office at the Principal Financial Group, Des Moines, Iowa 50392, telephone
number 515-247-5111. It was originally incorporated under the laws of the State
of Iowa in 1879 as Bankers Life Association, changed its name to Bankers Life
Company in 1911 and changed its name to Principal Mutual Life Insurance Company
in 1986. The name change to Principal Life Insurance Company and reorganization
into a mutual holding company structure took place in 1998. The Company is a
company of the Principal Financial Group, a diversified family of insurance and
financial services corporations.
Principal Life Insurance Company is authorized to do business in the 50 states
of the United States, the District of Columbia, the Commonwealth of Puerto Rico,
and the Canadian Provinces of Alberta, British Columbia, Manitoba, Ontario and
Quebec. The Company offers a full range of products and services for businesses,
groups and individuals including individual insurance, pension plans and
group/employee benefits. The Company has ranked in the upper one percent of life
insurers in assets and premium income and has consistently received excellent
ratings from the major rating firms based upon the Company's claims paying
ability. The Company has $70.1 billion in assets under management and serves
more than 10.1 million individuals and their families.
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B
Separate Account B was established on January 12, 1970 pursuant to a resolution
(as amended) of the Executive Committee of the Board of Directors of the
Company. Under Iowa insurance laws and regulations the income, gains or losses,
whether or not realized, of Separate Account B are credited to or charged
against the assets of Separate Account B without regard to the other income,
gains or losses of the Company. Although the assets of Separate Account B equal
to the reserves and liabilities arising under the contract will not be charged
with any liabilities arising out of any other business conducted by the Company,
the reverse is not true. Hence, all obligations arising under the Contract,
including the promise to make Variable Annuity Payments, are general corporate
obligations of the Company.
Separate Account B was registered on July 17, 1970 with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940, as amended. Such registration does not involve supervision by the
Commission of the investments or investment policies of Separate Account B.
You may allocate your net premium payments to certain divisions of the Separate
Account and/or the Fixed Account. Currently there are eight divisions available
to you. Not all divisions are available in all states. A current list of
divisions available in your state may be obtained from a sales representative or
our home office.
Each Division invests in shares of a corresponding Account of the underlying
mutual fund. The underlying mutual fund is NOT available to the general public
directly. The underlying mutual fund is available only to provide investment
options in variable life insurance policies or variable annuity contracts issued
by life insurance companies. Some of the underlying mutual fund Accounts have
been established by investment advisers that manage publicly traded mutual funds
having similar names and investment objectives. While some of the underlying
mutual fund Accounts may be similar to, and may in fact be modeled after
publicly traded mutual funds, you should understand that the underlying mutual
fund Accounts 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 Account may differ substantially.
<TABLE>
<CAPTION>
Division Division Invests In Investment Advisor Investment Objective
<S> <C> <C> <C>
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
Bond Account and 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 is 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.
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.
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.
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.
</TABLE>
Principal Management Corporation (the "Manager") has executed a sub-advisory
agreement with Invista Capital Management LLC. Under that sub-advisory
agreement, the sub-advisor agrees to assume the obligations of the Manager to
provide investment advisory services for a specific Account. For these services,
the sub-advisor is paid a fee by the Manager.
Accounts: Balanced, Capital Value, Government Securities, Growth,
International and MidCap
Sub-Advisor: Invista Capital Management, LLC ("Invista"), an indirectly
wholly-owned subsidiary of Principal Life Insurance Company and
an affiliate of the Manger was founded in 1985. It manages
investments for institutional investors, including Principal
Life. Assets under management as of December 31, 1999 were
approximately $35.3 billion. Invista's address is 1800 Hub
Tower, 699 Walnut, Des Moines, Iowa 50309.
Additional information concerning these Accounts, including their investment
policies and restrictions, investment management fees and operating expenses is
given in the prospectus for the Fund. A Prospectus for the Principal Variable
Contracts Fund, Inc. is attached to and follows this Prospectus. It should be
read carefully in conjunction with this Prospectus before investing.
Each Division purchases shares of an Account at net asset value. In addition,
all distributions made by an Account with respect to shares held by Divisions of
Separate Account B are reinvested at net asset value in additional shares of the
same Account. Contract benefits are provided and charges are made in effect by
redeeming Account shares at net asset value. Values under the contract, both
before and after the commencement of Variable Annuity Payments, will increase or
decrease to reflect the investment performance of the Account and Owners of
Benefits assume the risks of such change in values.
The Company is taxed as an insurance company under the Internal Revenue Code.
The operations of Separate Account B are part of the total operations of the
Company but are treated separately for accounting and financial statement
purposes and are considered separately in computing the Company's tax liability.
Separate Account B is not affected by federal income taxes paid by the Company
with respect to its other operations, and under existing federal income tax law,
investment income and capital gains attributable to Separate Account B are not
taxed. The Company reserves the right to charge Separate Account B with, and to
create a reserve for, any tax liability which the Company determines may result
from maintenance of Separate Account B. To the best of the Company's knowledge,
there is no current prospect of any such liability.
DEDUCTIONS UNDER THE CONTRACT
A Contract Administration Expense/Recordkeeping Charge and a mortality and
expense risks charge are deducted under the contract. Also, in certain
circumstances, a Contingent Deferred Sales Charge may be deducted from certain
cash withdrawals and transfers to alternate Funding Agents from an Investment
Account before the Annuity Purchase Date.
There are also deductions from and expenses paid out of the assets of the
Accounts. These expenses are described in the Fund's prospectus.
A. Contingent Deferred Sales Charge
There is no initial sales charge. However, any cash withdrawal from an
Investment Account which correlates to a Plan Participant before the
Annuity Purchase Date, may be subject to a Contingent Deferred Sales Charge
equal to a percentage of the amount being withdrawn. The percentage will be
determined according to the following table:
Number of Years From The
Date First Contribution
Which Correlates to a Plan
Participant is Accepted Contingent Deferred Sales
by the Company Charge Percentage
Less than 1 5.00%
1 but less than 2 4.25
2 but less than 3 3.50
3 but less than 4 2.75
4 but less than 5 2.00
5 but less than 6 1.25
6 but less than 7 0.50
7 or more None
The charge will be made by redeeming a sufficient number of units from the
Investment Account or Accounts from which the withdrawal is made by an
amount equal to the charge (see "Cash Withdrawals"). If the Investment
Account or Accounts from which the withdrawal is made are insufficient to
permit the full amount of the charge to be made, a sufficient number of
units from other Investment Accounts which correlate to the Plan
Participant will be redeemed on a pro rata basis in an amount equal to the
charge. If the amounts in the Investment Accounts which correlate to the
Plan Participant are insufficient to permit the full amount of the charge
to be made, the amount of the withdrawal will be reduced by an amount equal
to the charge.
The Contingent Deferred Sales Charge does not apply to withdrawals made as
a result of the Plan Participant's death or Total and Permanent Disability.
The charge also does not apply to amounts paid pursuant to the Flexible
Income Option that do not exceed the greater of (i) the minimum annual
amount determined in accordance with the minimum distribution rules of the
Internal Revenue Code, or (ii) 10% of the aggregate value of the Investment
Accounts which correlate to a Plan Participant determined as of the last
Valuation Date in the preceding Deposit Year. The charge also does not
apply to transfers between Investment Accounts or transfers to a Companion
Contract, transfers from a Premier Annuity Contract or to amounts applied
to provide Variable Annuity Payments. The charge may apply to amounts
transferred to an alternate Funding Agent. The charge does not apply to
amounts redeemed to assure the plan complies with Sections 401(k) and
401(m) of the Internal Revenue Code.
The amount of any Contingent Deferred Sales Charge will never exceed 9% of
Contributions which correlate to a Plan Participant. For this purpose, a
transfer from a Companion Contract will be considered a Contribution to
this contract.
The Contingent Deferred Sales Charge, when applicable, will be applied by
the Company to defray sales and distribution expenses incurred by the
Company. The Company may decrease or eliminate the Contingent Deferred
Sales Charge if it estimates that its sales expenses will be lower. The
Company will waive the Contingent Deferred Sales Charge on Contracts
(except Contracts sold in the state of New York) acquired directly from the
Company upon a recommendation of an independent pension consultant who
charges a fee for its pension consulting services and who receives no
remuneration from the Company in association with the sale of the contract.
If revenues from the Contingent Deferred Sales Charge are not sufficient to
cover sales expenses, the short fall could be viewed as being provided for
out of other revenues or the Company's surplus, including revenues
attributable to the mortality and expense risks charge.
B. Contract Administration Expense/Recordkeeping Charge
An annual Contract Administration Expense/Recordkeeping Charge of $34 per
Plan Participant plus .35% of the Annual Balance ($3,000 minimum) will be
assessed on a quarterly basis during each Deposit Year. The Annual Balance
used to compute the charge is the aggregate value of Investment Accounts
which correlate to a Plan Participant, and other Plan assets that correlate
to a Plan Participant that are not allocated to the contract or an
Associated or Companion Contract but for which the Company provides
recordkeeping services ("Outside Assets"), at the end of each quarter. The
$34 per Plan Participant charge is increased to $37 if the Company
distributes benefit plan reports directly to the homes of the Plan
Participants.
The Contract Administration Expense/Recordkeeping Charge will be assessed
on the earlier of (i) the date the Investment Accounts are paid in full (a
total redemption) or (ii) each Quarterly Date. One-fourth of the annual
charge is normally assessed on each Quarterly Date.
If the accounts are paid in full (a total redemption) at any time during
the Deposit Year, that portion of the $34 ($37) per Plan Participant charge
for the Deposit Year in which such total redemption occurs not yet paid to
the Company will be assessed in full. However, the remaining part of the
Contract Administration Expense/Recordkeeping Charge consisting of the .35%
of the Average Annual Balance will be assessed on a pro rata basis for any
fractional part of the Deposit Year.
The recordkeeping expense will be $34 ($37). The recordkeeping expense is
increased by 10% if Plan contributions are not reported in the Company's
standard form by modem. In addition, if benefit plan reports are mailed on
other than a quarterly basis the $34 ($37) per Plan Participant charge is
adjusted according to the following schedule:
Reporting Frequency Adjustment to $34 ($37) Charge
------------------- ------------------------------
Annual 9% decrease
Semi-Annual 6% decrease
Monthly 24% increase
The $34 ($37) per Plan Participant charge is also adjusted if the Company
performs more (or less) than one 401(k) and 401(m) non-discrimination tests
in a Deposit Year. Such a charge is increased by 3% for each additional
test and is reduced by 3% for each test not performed by the Company.
The .35% portion of the Contract Administration Expense/Recordkeeping
charge will be reduced by 10% if the Company has issued an Associated
Contract to the Contractholder.
If the Owner of Benefits chooses the Flexible Income Option, an additional
charge of $25 will be assessed annually.
The Company does not expect to recover from the charge to the extent
deducted from the Investment Account Values, any amount above its
accumulated expenses associated with the administration of the contracts.
However, since a portion of the charge is based on a percent of Investment
Account Values, amounts derived from larger Investment Accounts may to an
extent cover expenses associated with smaller Investment Accounts depending
upon the relative degree of Investment Account activity.
As part of the Company's policy of ensuring client satisfaction with the
services it provides, the Company may agree to waive the assessment of all
or a portion of the Contract Administration Expense/Recordkeeping Charge in
response to any reasonably-based complaint the Company is unable to rectify
from the Contractholder as to the quality of the services covered by such
charge.
A Contractholder may agree to pay all or a portion of the Contract
Administration Expense/Recordkeeping Charge separately or have the fees
deducted from Investment Accounts which correlate to a Plan Participant.
If deducted from Investment Accounts, the charge will be allocated among
Investment Accounts which correlate to the Plan Participant in proportion
to the relative values of such Accounts and will be effected by cancelling
a number of units in each such Investment Account equal to such Account's
proportionate share of the deduction.
If the Company provides recordkeeping services for any Outside Assets, the
Contractholder can elect to deduct from Investment Accounts only the $34
($37) portion of the Contract Administration Expense/Recordkeeping Charges
which correlate to Plan Participants.
C. Mortality and Expense Risks Charge
Variable Annuity Payments will not be affected by adverse mortality
experience or by any excess in the actual sales and administrative expenses
over the charges provided for in the Contract. The Company assumes the
risks that (i) Variable Annuity Payments will continue for a longer period
than anticipated and (ii) the allowance for administration expenses in the
annuity conversion rates will be insufficient to cover the actual costs of
administration relating to Variable Annuity Payments. For assuming these
risks, the Company, in determining Unit Values and Variable Annuity
Payments, makes a charge as of the end of each Valuation Period against the
assets of Separate Account B held with respect to the Contract. The charge
is equivalent to a simple annual rate of .64%. The Company does not believe
that it is possible to specifically identify that portion of the .64%
deduction applicable to the separate risks involved, but estimates that a
reasonable approximate allocation would be .43% for the mortality risks and
.21% for the expense risks. The mortality and expense risks charge may be
changed by the Company at any time by giving not less than 60-days prior
written notice to the Contractholder. However, the charge may not exceed
1.25% on an annual basis, and only one change may be made in any one-year
period. If the charge is insufficient to cover the actual costs of the
mortality and expense risks assumed, the financial loss will fall on the
Company; conversely, if the charge proves more than sufficient, the excess
will be a gain to the Company.
OTHER EXPENSES
The Contractholder is obligated to pay additional expenses associated with the
acquisition and servicing of the contract in accordance with the terms of a
Service and Expense Agreement between the Contractholder and the Company. In no
event are these expenses deductible from Investment Accounts which correlate to
Plan Participants. The expenses which the Contractholder must pay, if
applicable, include an application fee, a transfer fee, documentation expense, a
location fee, Outside Asset Recordkeeping Charge and charges for special
services requested by the Contractholder. As part of the Company's policy of
ensuring client satisfaction with the services it provides, the Company may
agree to waive the assessment of all of these expenses or charges in response to
any reasonably-based complaint from the Contractholder as to the quality of the
services covered by such expenses or charges that the Company is unable to
rectify.
A. Documentation Expense
The Company can provide a sample Plan document and summary plan
descriptions to the Contractholder. The Contractholder will be billed $125
if the Contractholder uses a Principal Financial Group Prototype for
Savings Plans or Standardized Plan. If the Company provides a sample
custom-written Plan, the Contractholder will be billed $700 for the initial
Plan or for any restatement thereof, $300 for any amendments thereto, and
$500 for standard summary plan description booklets. If the Contractholder
adopts a Plan other than one provided by the Company, a $900 charge will be
made for summary plan description booklets requested by the Contractholder,
if any.
B. Location Fee
Contractholders may request the Company to provide services to groups of
employees at multiple locations. If the Company agrees to provide such
services, the Contractholder will be billed $150 on a quarterly basis ($600
annually) for each additional employee group or location. In addition,
separate contract administration/recordkeeping charges and documentation
fees may apply for each employee group or location requiring separate
government reports and/or sample plan documents.
C. Outside Asset Recordkeeping Charge
If the Company provides recordkeeping services for Plan assets which
correlate to a Plan Participant other than assets under this contract or an
Associated or Companion Contract ("Outside Assets"), the Company will bill
the Contractholder an Outside Asset Recordkeeping Charge. The annual charge
is calculated based upon the following table:
Number of Outside Asset
Members with Annual Recordkeeping
Outside Accounts Expense
---------------- ---------------------------------
1-25 $1,000
26-49 $15.30 per member + $614.70
50-99 $13.95 per member + $682.20
100-299 $12.60 per member + $817.20
300-499 $10.35 per member + $1,492.20
500-999 $8.55 per member + $2,392.20
1000-2499 $6.30 per member + $4,642.20
2500-4999 $5.40 per member + $6,892.20
5000 and over $4.50 per member + $11,392.20
The charge calculated in accordance with the above table will be increased
by 15% for the second and each additional Outside Asset for which the
Company provides recordkeeping services. One-fourth of the annual Outside
Asset Recordkeeping Charge will be billed on a quarterly basis. This charge
does not apply if the Outside Assets which correlate to the Plan
Participant consist solely of shares of mutual funds for which a subsidiary
of the Company serves as investment adviser.
D. Special Services
If requested by the Contractholder, the Company may provide services not
provided as part of the contract administration/recordkeeping services. The
Company will charge the Contractholder the cost of providing such services.
SURPLUS DISTRIBUTION AT SOLE DISCRETION OF THE COMPANY
It is not anticipated that any divisible surplus will ever be distributable to
the contract in the future because the contract is not expected to result in a
contribution to the divisible surplus of the Company. However, if any
distribution of divisible surplus is made, it will be made to Investment
Accounts in the form of additional units.
THE CONTRACT
The contract will normally be issued to an Employer or association or a trust
established for the benefit of Plan Participants and their beneficiaries. The
Company will issue a pre-retirement certificate describing the benefits under
the contract to Plan Participants who reside in a state that requires the
issuance of such certificates. The initial Contribution which correlates to a
Plan Participant will be invested in the Division or Divisions that are chosen
as of the end of the Valuation Period in which such Contribution is received by
the Company at its home office in Des Moines, Iowa. If the allocation
instructions are late, or not completed, the Company will invest such
unallocated Contributions in the Money Market Division on the date such
Contributions are received. Subsequently, the Company will transfer all or a
portion of such Contributions as of the date complete allocation instructions
are received by the Company in accordance with the allocation specified therein.
After complete allocation instructions have been received by the Company, all
current and future Contributions will be allocated to the chosen Divisions as of
the end of the Valuation Period in which such Contributions are received. If
complete allocation instructions are not received by the Company within 105 days
after the initial Contributions are allocated to the Money Market Division, the
Company will remit the Contributions plus any earnings thereon to the
Contractholder. The Contractholder may limit the number of Divisions available
to the Owner of Benefits, but the Money Market Division may not be so restricted
to the extent the Division is necessary to permit the Company to allocate
initial Contributions and the Capital Value Division may not be so restricted to
the extent the Division is necessary to permit the Company to pay Variable
Annuity Payments.
A. Contract Values and Accounting Before Annuity Commencement Date
1. Investment Accounts
An Investment Account or Accounts correlating to a Plan Participant
will be established for each type of Contribution and for each Division
of Separate Account B in which such Contribution is invested.
Investment Accounts will be maintained until the Investment Account
Values are either (a) applied to effect Variable Annuity Payments (b)
paid to the Owner of Benefits or the beneficiary or (c) transferred in
accordance with the provisions of the contract.
Each Contribution will be allocated to the Division or Divisions
designated by the Notification on file with the Company and will result
in a credit of units to the appropriate Investment Account. The number
of units so credited will be determined by dividing the portion of the
Contributions allocated to a Division by the Unit Value for such
Division for the Valuation Period within which the Contribution was
received by the Company at its home office in Des Moines, Iowa.
2. Unit Value
The Unit Value for a contract which participates in a Division of
Separate Account B determines the value of an Investment Account
consisting of Contributions allocated to that Division. The Unit Value
for each Division for the contract is determined on each day on which
the net asset value of its underlying Account is determined. The Unit
Value for a Valuation Period is determined as of the end of that
period. The investment performance of the underlying Account and
deducted expenses affect the Unit Value.
For this series of contracts, the Unit Value for each Division will be
fixed at $1.00 for the Valuation Period in which the first amount of
money is credited to the Division. A Division's Unit Value for any
later Valuation Period is equal to its Unit Value for the immediately
preceding Valuation Period multiplied by the Net Investment Factor (see
below) for that Division for this series of contracts for the later
Valuation Period.
3. Net Investment Factor
Each Net Investment Factor is the quantitative measure of the
investment performance of each Division of Separate Account B.
For any specified Valuation Period the Net Investment Factor for a
Division for this series of contracts is equal to
(a) the quotient obtained by dividing (i) the net asset value of a
share of the underlying Account as of the end of the Valuation
Period, plus the per share amount of any dividend or other
distribution made by the Account during the Valuation Period (less
an adjustment for taxes, if any) by (ii) the net asset value of a
share of the Account as of the end of the immediately preceding
Valuation Period,
reduced by
(b) a mortality and expense risks charge, equal to a simple interest
rate for the number of days within the Valuation Period at an
annual rate of 0.64%.
The amounts derived from applying the rate specified in subparagraph
(b) above and the amount of any taxes referred to in subparagraph (a)
above will be accrued daily and will be transferred from Separate
Account B at the discretion of the Company.
4. Hypothetical Example of Calculation of Unit Value for All Divisions
Except the Money Market Division
The computation of the Unit Value may be illustrated by the following
hypothetical example. Assume that the current net asset value of an
Account share is $14.8000; that there were no dividends or other
distributions made by the Account and no adjustment for taxes since the
last determination; that the net asset value of an Account share last
determined was $14.7800; that the last Unit Value was $1.0185363; and
that the Valuation Period was one day. To determine the current Net
Investment Factor, divide $14.8000 by $14.7800 which produces 1.0013532
and deduct from this amount the mortality and expense risks charge of
0.0000175, which is the rate for one day that is equivalent to a simple
annual rate of 0.64%. The result, 1.0013381, is the current Net
Investment Factor. The last Unit Value ($1.0185363) is then multiplied
by the current Net Investment Factor (1.0013381) which produces a
current Unit Value of $1.0198992.
5. Hypothetical Example of Calculation of Unit Value for the Money
Market Division
The computation of the Unit Value may be illustrated by the following
hypothetical example. Assume that the current net asset value of an
Account share is $1.0000; that a dividend of .0328767 cents per share
was declared by the Account prior to calculation of the net asset value
of the Account share and that no other distributions and no adjustment
for taxes were made since the last determination; that the net asset
value of an Account share last determined was $1.0000; that the last
Unit Value was $1.0162734; and that the Valuation Period was one day.
To determine the current Net Investment Factor, add the current net
asset value ($1.0000) to the amount of the dividend ($.000328767) and
divide by the last net asset value ($1.0000), which when rounded to
seven places equals 1.0003288. Deduct from this amount the mortality
and expense risks charge of .0000175 (the proportionate rate for one
day based on a simple annual rate of 0.64%). The result (1.0003137) is
the current Net Investment Factor. The last Unit Value ($1.0162734) is
then multiplied by the current Net Investment Factor (1.0003137),
resulting in a current Unit Value of $1.0165922.
B. Income Benefits
Income Benefits consist of either monthly Variable Annuity Payments or
periodic payments made on a monthly, quarterly, semi-annual or annual basis
pursuant to the Flexible Income Option.
1. Variable Annuity Payments
The amount applied to provide Variable Annuity Payments must be at
least $1,750. Variable Annuity Payments will be provided by the
Investment Accounts which correlate to the Plan Participant held under
the Capital Value Division. Thus, if the Owner of Benefits elects
Variable Annuity Payments, any amounts that are to be used to provide
Variable Annuity Payments will be transferred to Investment Accounts
held under the Capital Value Division as of the last Valuation Date in
the month which begins two months before the Annuity Commencement Date.
After any such transfer, the value of the Capital Value Division
Investment Accounts will be applied on the Annuity Purchase Date to
provide Variable Annuity Payments. The Annuity Commencement Date, which
will be one month following the Annuity Purchase Date, will be the
first day of a month. Thus, if the Annuity Commencement Date is August
1, the Annuity Purchase Date will be July 1, and the date of any
transfers to a Capital Value Division Investment Account will be the
Valuation Date immediately preceding July 1.
The Annuity Commencement Date must be no later than April 1 of the
calendar year following the calendar year in which the Plan
Participant attains age 70 1/2. (See "Federal Tax Status.")
a. Selecting a Variable Annuity
Variable Annuity Payments will be made to an Owner of Benefits
beginning on the Annuity Commencement Date and continuing
thereafter on the first day of each month. An Owner of
Benefits may select an Annuity Commencement Date by
Notification to the Company. The date selected may be the
first day of any month the Plan allows which is at least one
month after the Notification. Generally, the Annuity
Commencement Date cannot begin before the Plan Participant is
age 59 1/2, separated from service, or is totally disabled.
See "Federal Tax Status" for a discussion of required
distributions and the federal income tax consequences of
distributions.
At any time not less than one month preceding the desired
Annuity Commencement Date, an Owner of Benefits may, by
Notification, select one of the annuity options described
below (see "Forms of Variable Annuities"). If no annuity
option has been selected at least one month before the Annuity
Commencement Date, and if the Plan does not provide one,
payments which correlate to an unmarried Plan Participant will
be made under the annuity option providing Variable Life
Annuity with Monthly Payments Certain for Ten Years. Payments
which correlate to a married Plan Participant will be made
under the annuity option providing a Variable Life Annuity
with One-Half Survivorship.
b. Forms of Variable Annuities
Because of certain restrictions contained in the Internal
Revenue Code and regulations thereunder, an annuity option is
not available under a Contract used to fund a TDA Plan, PEDC
Plan or 401(a) Plan unless (i) the contingent annuitant is the
Plan Participant's spouse or (ii) on the Plan Participant's
Annuity Commencement Date, the present value of the amount to
be paid while the Plan Participant is living is greater than
50% of the present value of the total benefit to the Plan
Participant and the Plan Participant's beneficiary (or
contingent annuitant, if applicable).
An Owner of Benefits may elect to have all or a portion of
Investment Account Values applied under one of the following
annuity options. However, if the monthly Variable Annuity
Payment at any time would be less than $20, the Company may,
at its sole option, pay the Variable Annuity Reserves in full
settlement of all benefits otherwise available.
Variable Life Annuity with Monthly Payments Certain for Zero,
Five, Ten, Fifteen or Twenty Years or Installment Refund
Period -- a variable annuity which provides monthly payments
during the Plan Participant's lifetime, and further provides
that if, at the death of the Plan Participant, monthly
payments have been made for less than a minimum period, e.g.
five years, any remaining payments for the balance of such
period shall be paid to the Owner of Benefits, if the Owner of
Benefits is not the Plan Participant, or to a designated
beneficiary unless the Owner of Benefits or the beneficiary
requests in writing that the Commuted Value of the remaining
payments be paid in a single sum. (Persons entitled to take
the remaining payments or the Commuted Value thereof rather
than continuing monthly payments should consult with their tax
advisor to be made aware of the differences in tax treatment.)
The minimum period may be either zero, five, ten, fifteen or
twenty years or the period (called "installment refund
period") consisting of the number of months determined by
dividing the amount applied under the option by the initial
payment. If, for example, $14,400 is applied under a life
option with an installment refund period, and if the first
monthly payment provided by that amount, as determined from
the applicable annuity conversion rates, would be $100, the
minimum period would be 144 months ($14,400 divided by $100
per month) or 12 years. A variable life annuity with an
installment refund period guarantees a minimum number of
payments, but not the amount of any monthly payment or the
amount of aggregate monthly payments. The longer the minimum
period selected, the smaller will be the amount of the first
annuity payment.
Under the Variable Life Annuity with Zero Years Certain, which
provides monthly payments to the Owner of Benefits during the
Plan Participant's lifetime, it would be possible for the
Owner of Benefits to receive no Annuity Payments if the Plan
Participant died prior to the due date of the first payment
since payment is made only during the lifetime of the Plan
Participant.
Joint and Survivor Variable Life Annuity with Monthly Payments
Certain for Ten Years -- a variable annuity which provides
monthly payments for a minimum period of ten years and
thereafter during the joint lifetimes of the Plan Participant
on whose life the annuity is based and the contingent
annuitant named at the time this option is elected, and
continuing after the death of either of them for the amount
that would have been payable while both were living during the
remaining lifetime of the survivor. In the event the Plan
Participant and the contingent annuitant do not survive beyond
the minimum ten year period, any remaining payments for the
balance of such period will be paid to the Owner of Benefits,
if the owner of Benefits is not the Plan Participant, or to a
designated beneficiary unless the Owner of Benefits or the
beneficiary requests in writing that the Commuted Value of the
remaining payments be paid in a single sum. (Persons entitled
to take the remaining payments or the Commuted Value thereof
rather than continuing monthly payments should consult with
their tax advisor to be made aware of the differences in tax
treatment.)
Joint and Two-Thirds Survivor Variable Life Annuity -- a
variable annuity which provides monthly payments during the
joint lives of a Plan Participant and the person designated as
contingent annuitant with two-thirds of the amount that would
have been payable while both were living continuing until the
death of the survivor.
Variable Life Annuity with One-Half Survivorship -- a variable
annuity which provides monthly payments during the life of the
Plan Participant with one-half of the amount otherwise payable
continuing so long as the contingent annuitant lives.
Under the Joint and Two-thirds Survivor Variable Life Annuity
and under the Variable Life Annuity with One-Half
Survivorship, it would be possible for the Owner of Benefits
and/or contingent annuitant to receive no annuity payments if
the Plan Participant and contingent annuitant both died prior
to the due date of the first payment since payment is made
only during their lifetimes.
Other Options -- Other variable annuity options permitted
under the applicable Plan may be arranged by mutual agreement
of the Owner of Benefits and the Company.
c. Basis of Annuity Conversion Rates
Because women as a class live longer than men, it has been
common that retirement annuities of equal cost for women and
men of the same age will provide women less periodic income at
retirement. The Supreme Court of the United States ruled in
Arizona Governing Committee vs. Norris that sex distinct
annuity tables under an employer-sponsored benefit plan result
in discrimination that is prohibited by Title VII of the
Federal Civil Rights Act of 1964. The Court further ruled that
sex distinct annuity tables will be deemed discriminatory only
when used with values accumulated from employer contributions
made after August 1, 1983, the date of the ruling.
Title VII applies only to employers with 15 or more employees.
However, certain State Fair Employment Laws and Equal Payment
Laws may apply to employers with less than 15 employees.
The contract described in this Prospectus offers both sex
distinct and sex neutral annuity conversion rates. The annuity
rates are used to convert a Plan Participant's pre-retirement
Investment Account Values to a monthly lifetime income at
retirement. Usage of either sex distinct or sex neutral
annuity rates will be determined by the Contractholder.
For each form of variable annuity, the annuity conversion
rates determine how much the first monthly Variable Annuity
Payment will be for each $1,000 of the Investment Account
Value applied to effect the variable annuity. The conversion
rates vary with the form of annuity, date of birth, and, if
distinct rates are used, the sex of the Plan Participant and
the contingent annuitant, if any. The sex neutral guaranteed
annuity conversion rates are based upon (i) an interest rate
of 2.5% per annum and (ii) mortality according to the "1983
Table a for Individual Annuity Valuation" projected with Scale
G to the year 2001 set back five years in age. The sex
distinct female rates are determined for all Plan Participants
in the same way as sex neutral rates, as described above. The
sex distinct male rates are determined for all Plan
Participants in the same way as the sex neutral rates, as
described above, except mortality is not set back five years
in age. The guaranteed annuity conversion rates may be
changed, but no change which would be less favorable to the
Owner of Benefits will take effect for a current Plan
Participant.
The contract provides that an interest rate of not less than
2.5% per annum will represent the assumed investment return.
Currently the assumed investment return used in determining
the amount of the first monthly payment is 4% per annum. This
rate may be increased or decreased by the Company in the
future but in no event will it be less than 2.5% per annum.
If, under the contract, the actual investment return (as
measured by an Annuity Change Factor, defined below) should
always equal the assumed investment return, Variable Annuity
Payments would remain level. If the actual investment return
should always exceed the assumed investment return, Variable
Annuity Payments would increase; conversely, if it should
always be less than the assumed investment return, Variable
Annuity Payments would decrease.
The current 4% assumed investment return is higher than the
2.5% interest rate reflected in the annuity conversion rates
contained in the contract. With a 4% assumption, Variable
Annuity Payments will commence at a higher level, will
increase less rapidly when actual investment return exceeds
4%, and will decrease more rapidly when actual investment
return is less than 4%, than would occur with a lower
assumption.
d. Determining the Amount of the First Variable Annuity Payment
The initial amount of monthly annuity income shall be based on
the option selected, the age of the Plan Participant and
contingent annuitant, if any, and the Investment Account
Values applied as of the Annuity Purchase Date. The initial
monthly income payment will be determined on the basis of the
annuity conversion rates applicable on such date to such
conversions under all contracts of this class issued by the
Company. However, the basis for the annuity conversion rates
will not produce payments less beneficial to the Owner of
Benefits than the annuity conversion rate basis described
above.
e. Determining the Amount of the Second and Subsequent Monthly
Variable Annuity Payments
The second and subsequent monthly Variable Annuity Payments
will increase or decrease in response to the investment
experience of the Account underlying the Capital Value
Division. The amount of each payment will be determined by
multiplying the amount of the monthly Variable Annuity Payment
due in the immediately preceding calendar month by the Annuity
Change Factor for the Capital Value Division for the Contract
for the calendar month in which the Variable Annuity Payment
is due.
The Annuity Change Factor for the Capital Value Division for
a calendar month is the quotient of (1) divided by (2), below:
(1) The number which results from dividing (i) the Contract's
Unit Value for the Capital Value Division for the first
Valuation Date in the calendar month beginning one month
before the given calendar month by (ii) the Contract's
Unit Value for such Division for the first Valuation Date
in the calendar month beginning two months before the
given calendar month.
(2) An amount equal to one plus the effective interest rate
for the number of days between the two Valuation Dates
specified in subparagraph (1) above at the interest rate
assumed to determine the initial payment of variable
benefits to the Owner of Benefits.
f. Hypothetical Example of Calculation of Variable Annuity
Payments
Assume that on the date one month before the Annuity
Commencement Date the Investment Account Value that is
invested in the Capital Value Division which correlates to a
Plan Participant is $37,592. Using the appropriate annuity
conversion factor (assuming $5.88 per $1,000 applied) the
Investment Account Value provides a first monthly Variable
Annuity Payment of $221.04. To determine the amount of the
second monthly payment assume that the Capital Value Division
Unit Value as of the first Valuation Date in the preceding
calendar month was $1.3712044 and the Unit Value as of the
first Valuation Date in the second preceding calendar month
was $1.3273110. The Annuity Change Factor is determined by
dividing $1.3712044 by $1.3273110, which equals 1.0330694, and
dividing the result by an amount corresponding to the amount
of one increased by an assumed investment return of 4% (which
for a thirty day period is 1.0032288). 1.0330694 divided by
1.0032288 results in an Annuity Change Factor for the month of
1.0297446. Applying this factor to the amount of Variable
Annuity Payment for the previous month results in a current
monthly payment of $227.61 ($221.04 multiplied by 1.0297446
equals $227.61).
2. Flexible Income Option
Instead of Variable Annuity Payments an Owner of Benefits may choose to
receive income benefits under the Flexible Income Option. Unlike
Variable Annuity Payments, payments under the Flexible Income Option
may be made from any Division of the Separate Account. Under the
Flexible Income Option, the Company will pay to the Owner of Benefits a
portion of the Aggregate Investment Accounts on a monthly, quarterly,
semi-annual or annual basis on the date or dates requested each Year
and continuing for a period not to exceed the life or life expectancy
of the Plan Participant, or the joint lives or life expectancy of such
Plan Participant and the contingent annuitant, if the contingent
annuitant is the Plan Participant's spouse. If the Notification does
not specify from which Investment Accounts payments are to be made,
amounts will be withdrawn on a pro rata basis from all Investment
Accounts which correlate to the Plan Participant. Payments will end,
however, on the date no amounts remain in such Accounts or the date
such Accounts are paid or applied in full as described below. Payments
will be subject to the following:
a. The life expectancy of the Plan Participant and the Plan
Participant's spouse, if applicable, will be determined in
accordance with the life expectancy tables contained in Internal
Revenue Regulation Section 1.72-9. Life expectancy will be
determined as of the date on which the first payment is made. Life
expectancy will be redetermined annually thereafter.
b. Payments may begin any time after the Flexible Income Option is
requested. Payments must begin no later than the latest date
permitted or required by the Plan or regulation to be the Owner of
Benefit's Annuity Commencement Date.
c. Payments will be made annually, semiannually, quarterly, or
monthly as requested by the Owner of Benefits and agreed to by the
Company. The annual amount payable will be the lesser of the
Aggregate Investment Account Value which correlates to the Plan
Participant or the minimum annual amount determined in accordance
with the minimum distribution rules of the Internal Revenue Code.
d. If the Plan Participant should die before the Aggregate Investment
Account Value has been paid or applied in full, the remaining
Investment Account Values will be treated as benefits payable at
death as described in this Prospectus.
e. Year for purposes of determining payments under the Flexible
Income Option means the twelve month period starting on the
installment payment starting date and each corresponding twelve
month period thereafter.
An Owner of Benefits may request a payment in excess of the minimum
described above. Such payment may be equal to all or any portion of the
Investment Accounts which correlate to the Plan Participant; provided,
however, that if the requested payment would reduce the total value of
such accounts to a total balance of less than $1,750 then such request
will be a request for the total of such Investment Accounts. Payments
in excess of the minimum described above may be subject to the
Contingent Deferred Sales Charge.
The Owner of Benefits may terminate the Flexible Income Payments by
giving the Company Notification (i) requesting an excess payment equal
to the remaining balance of the Aggregate Investment Account Values
which correlate to a Plan Participant, (ii) requesting that the
remaining balance of the Aggregate Investment Account Values be applied
to provide Variable Annuity Payments or (iii) a combination of (i) and
(ii), as long as the amount applied to provide an annuity is at least
$1,750. The Company will make such excess payment on the later of (i)
the date requested, or (ii) the date seven (7) calendar days after the
Company receives the Notification. The Annuity Commencement Date for
amounts so applied will be one month after the Annuity Purchase Date.
The Annuity Purchase Date for amounts so applied will be the first
Valuation Date in the month following the Company's receipt of the
Notification or the first Valuation Date of such subsequent month as
requested.
If the Owner of Benefits chooses the Flexible Income Option, an
additional charge $25.00 will be deducted annually on a pro rata basis
from the Investment Accounts which correlate to the Plan Participant.
C. Payment on Death of Plan Participant
1. Prior to Annuity Purchase Date
If a Plan Participant dies prior to the Annuity Purchase Date, the
Company (upon receipt of due proof of death and any waiver or consent
required by applicable state law) will pay the death benefit in
accordance with the provisions of the Plan. The Owner of Benefits may
elect to either (1) leave the assets in the contract to the extent
permitted by applicable laws; (2) receive such value as a single sum
benefit; or (3) apply the Investment Account Values which correlate to
the Plan Participant to purchase Variable Annuity Payments for the
beneficiary if the aggregate value of such Investment Accounts is at
least $1,750. If the beneficiary does not provide Notification to the
Company within 120 days of the date the Company receives due proof of
death (i.e. a certified copy of the death certificate, a certified copy
of a decree of a court of competent jurisdiction as to the finding of
death, a written statement by a medical doctor who attended the
deceased during his last illness), the beneficiary will be deemed a
Plan Participant under the contract described in the Prospectus.
A beneficiary may elect to have all or a part of the amount available
under this contract transferred to any Companion Contract.
Alternatively, this contract may accept all or part of the amount
available under a Companion Contract to establish an Investment Account
or Accounts for a beneficiary under this contract. If the aggregate
value of such Investment Accounts is less than $1,750, the Company may
at its option pay the beneficiary the value of such accounts in lieu of
all other benefits.
An election to receive Variable Annuity Payments must be made prior to
the single sum payment to the beneficiary. The amount of the death
benefit is determined by the terms of the Plan. Annuity income must be
payable as lifetime annuity income with no benefits beyond the
beneficiary's life or life expectancy. In addition, the amount of the
monthly Variable Annuity Payments must be at least $20, or the Company
may at its option pay the beneficiary the value of the Variable Annuity
Reserves in lieu of all other benefits. The beneficiary's Annuity
Purchase Date will be the first day of the calendar month specified in
the election, but in no event prior to the first day of the calendar
month following the date Notification is received by the Company. The
amount to be applied will be determined as of the Annuity Purchase
Date. The beneficiary's Annuity Commencement Date will be the first day
of the calendar month following the Annuity Purchase Date. The
beneficiary must be a natural person in order to elect Variable Annuity
Payments. The annuity conversion rates applicable to a beneficiary
shall be the annuity conversion rates the Company makes available to
Owners of Benefits under this contract. The beneficiary will receive a
written description of the options available.
2. Subsequent to Annuity Purchase Date
Upon the death of a Plan Participant subsequent to the Annuity Purchase
Date, no benefits will be available except as may be provided under the
form of annuity selected. If provided for under the form of annuity,
the Owner of Benefits or the beneficiary will continue receiving any
remaining payments unless the Owner of Benefits or the beneficiary
requests in writing that the Commuted Value of the remaining payments
be paid in a single sum.
D. Withdrawals and Transfers
1. Cash Withdrawals
The contract is designed for and intended to be used to fund retirement
Plans. However, subject to any Plan limitations or any reduction for
vesting provided for in the Plan as to amounts available, the Owner of
Benefits may withdraw cash from the Investment Accounts which correlate
to a Plan Participant at any time prior to the Annuity Purchase Date
subject to any charges that may be applied. The Internal Revenue Code
generally provides that distributions from the contracts (except those
used to fund Creditor Exempt or General Creditor Non-qualified Plans)
may begin only after the Plan Participant attains age 59 1/2,
terminates employment, dies or becomes disabled, or in the case of
deemed hardship (or, for PEDC Plans, unforeseen emergencies).
Withdrawals before age 59 1/2 may involve an income tax penalty. (See
"Federal Tax Status.")
The procedure with respect to cash withdrawals is as follows:
(a) The Plan must allow for such withdrawal.
(b) The Company must receive a Notification requesting a cash
withdrawal from the Owner of Benefits on a form either furnished
or approved by the Company. The Notification must specify the
amount to be withdrawn for each Investment Account from which
withdrawals are to be made. If no specification is made,
withdrawals from Investment Accounts will be made on a pro rata
basis.
(c) If a certificate has been issued to the Owner of Benefits the
Company may require that any Notification be accompanied by such
certificate.
(d) The amount withdrawn may be subject to the Contingent Deferred
Sales Charge and, in the case of a withdrawal of the Aggregate
Investment Account Value, will be subject to the Contract
Administration Expense/Recordkeeping Charge. If the Aggregate
Investment Account Values are insufficient to satisfy the amount
of the requested withdrawal and applicable charges, the amount
paid will be reduced to satisfy such charges.
Any cash withdrawal will result in the cancellation of a number of
units from each Investment Account from which values have been
withdrawn. The number of units cancelled from an Investment Account
will be equal to the amount withdrawn from that Account divided by the
Unit Value for the Division of Separate Account B in which the Account
is invested for the Valuation Period in which the cancellation is
effective. Units will also be cancelled to cover any charges assessed
under (d) above.
(Special Note: Under the Texas Education Code, Plan Participants
under contracts issued in connection with Optional Retirement
Programs for certain employees of Texas institutions of higher
education are prohibited from making withdrawals except in the
event of termination of employment, retirement or death of the
Plan Participant. Also, see "Federal Tax Status" for a description
of further withdrawal restrictions.)
2. Transfers Between Divisions
Upon Notification, all or a portion of the value of an Investment
Account which correlates to a Plan Participant may be transferred to
another available Investment Account correlating to such Plan
Participant for the same type of Contribution.
Transfers may be made at any time before the Annuity Purchase Date.
A transfer will be effective as of the end of the Valuation Period in
which the request is received. Any amount transferred will result in
the cancellation of units in the Investment Account from which the
transfer is made. The number of units cancelled will be equal to the
amount transferred from that account divided by the Unit Value of the
Division for the Valuation Period in which the transfer is effective.
The transferred amount will result in the crediting of Units in the
Investment Account to which the transfer is made. The number of Units
credited will be equal to the amount transferred to that account
divided by the Unit Value of the Division for the Valuation Period in
which the transfer is effective.
3. Transfers to the Contract
If a Companion Contract has been issued by the Company to fund the
Plan, and except as otherwise provided by the applicable Plan, the
contract described in this prospectus may accept all or a portion of
the proceeds available under the Companion Contract at any time at
least one month before Annuity Commencement Date, subject to the terms
of the Companion Contract.
4. Transfers to Companion Contract
If a Companion Contract has been issued by the Company to fund the
Plan, except as otherwise provided by the applicable Plan and the
provisions of the Companion Contract, an Owner of Benefits may by
Notification transfer all or a portion of the Investment Account Values
which correlate to a Plan Participant to the Companion Contract. If the
Notification does not state otherwise, amounts will be transferred on a
pro rata basis from the Investment Accounts which correlate to the Plan
Participant. Transfers with respect to a Plan Participant from this
contract to the Companion Contract will not be permitted if this
contract has accepted, within the six-month period preceding the
proposed transfer from this contract to the Companion Contract, a
transfer from an unmatured Investment Account which correlates to the
Plan Participant established under the Companion Contract. An unmatured
Investment Account is an Investment Account which has not reached the
end of its interest guarantee period. In all other respects, such
transfers are subject to the same provisions regarding frequency of
transfer, effective date of transfer and cancellation of units as
described above in "Transfers Between Divisions".
5. Special Situation Involving Alternate Funding Agents
The contract allows the Investment Account Values of all Plan
Participants to be transferred to an alternate Funding Agent with or
without the consent of the Plan Participants. Transfers to an alternate
Funding Agent require Notification from the Contractholder.
The amount to be transferred will be equal to the Investment Account
Values determined as of the end of the Valuation Period in which the
Notification is received. Such transfers may be subject to the
Contingent Deferred Sales Charge and will be subject to the Contract
Administration Expense/Recordkeeping Charge.
6. Postponement of Cash Withdrawal or Transfer
Any cash withdrawal or transfer to be made from the contract or between
Investment Accounts in accordance with the preceding paragraphs will be
made (i) within seven calendar days after Notification for such payment
or transfer is received by the Company at its Home Office or (ii) on
the requested date of payment or transfer, if later. However, such
withdrawal or transfer may be deferred during any period when the right
to redeem Account shares is suspended as permitted under provisions of
the Investment Company Act of 1940, as amended. The right to redeem
shares may be suspended during any period when (a) trading on the New
York Stock Exchange is restricted as determined by the Securities and
Exchange Commission or such Exchange is closed for other than weekends
and holidays; (b) an emergency exists, as determined by the Securities
and Exchange Commission, as a result of which (i) disposal by the
Account of securities owned by it is not reasonably practicable or (ii)
it is not reasonably practicable for the Account fairly to determine
the value of its net assets; or (c) the Commission by order so permits
for the protection of security holders. If any deferment of transfer or
withdrawal is in effect and has not been cancelled by Notification to
the Company within the period of deferment, the amount to be
transferred or withdrawn shall be determined as of the first Valuation
Date following expiration of the permitted deferment, and transfer or
withdrawal will be made within seven calendar days thereafter. The
Company will notify the Contractholder of any deferment exceeding 30
days.
7. Loans.
The Company will not make available a loan option for the contract
described in this Prospectus.
E. Other Contractual Provisions
1. Contribution Limits
The contract prescribes no limits on the minimum Contribution which may
be made to an Investment Account which correlates to a Plan
Participant. Plan Participant maximum Contributions are discussed under
"Federal Tax Status." Contributions may also be limited by the Plan.
The Company may also limit Contributions on 60-days notice.
2. Assignment
No benefits in the course of payment under a contract used to fund a
TDA Plan, 401(a) Plan or Creditor-Exempt Non-Qualified Plan are
assignable, by any Owner of Benefits, Plan Participant, beneficiary or
contingent annuitant and all such benefits under such contracts, shall
be exempt from the claims of creditors to the maximum extent permitted
by law. Benefits in the course of payment for contracts used to fund
PEDC plans and General Creditor Non-Qualified Plans are assignable only
by the Contractholder and such benefits are subject to the claims of
the Contractholder's general creditors.
Investment Account Values which correlate to a Plan Participant are
non-forfeitable by the Owner of Benefits; provided, however, if the
Plan specifically so provides, Investment Account Values which
correlate to a Plan Participant shall be reduced to the extent required
by the vesting provisions of the Plan as of the date the Company
receives Notification of the event requiring the reduction.
3. Cessation of Contributions
A cessation of Contributions with respect to all Plan Participants
shall occur at the election of the Contractholder upon Notification to
the Company, on the date the Plan terminates or on the date no
Investment Account Values remain under the contract or at the election
of the Company upon 60-days notice to the Contractholder. Following a
cessation of Contributions all terms of the Contract will continue to
apply except that no further Contributions may be made.
4. Substitution of Securities
If shares of an Account are not available at some time in the future,
or if in the judgment of the Company further investment in such shares
would no longer be appropriate, there may be substituted therefor, or
Contributions received after a date specified by the Company may be
applied to purchase (i) shares of another Account or another registered
open-end investment company or (ii) securities or other property as the
Company should in its discretion select. In the event of any investment
pursuant to clause (ii) above, the Company can make such changes as in
its judgment are necessary or appropriate in the frequency and methods
of determination of Unit Values, Net Investment Factors, Annuity Change
Factors, and Investment Account Values, including any changes in the
foregoing which will provide for the payment of an investment advisory
fee; provided, however, that any such changes shall be made only after
approval by the Insurance Department of the State of Iowa. The Company
will give written notice to each Owner of Benefits of any substitution
or such change and any substitution will be subject to the rules and
regulations of the Securities and Exchange Commission.
5. Changes in the Contract
The terms of a contract may be changed at any time by written agreement
between the Company and the Contractholder without the consent of any
Plan Participant, Owner of Benefits, beneficiary, or contingent
annuitant. However, except as required by law or regulation, no such
change shall apply to variable annuities which were in the course of
payment prior to the effective date of the change. The Company will
notify any Contractholder affected by any change under this paragraph.
The Company may unilaterally change the contract at any time, including
retroactive changes, in order to meet the requirements of any law or
regulation issued by any governmental agency to which the Company is
subject. The Company may also add additional Divisions to Separate
Account B at any time. In addition, the Company may, on 60-days prior
notice to the Contractholder, unilaterally change the basis for
determining Investment Account Values, Net Investment Factors, Annuity
Change Factors; the guaranteed annuity conversion rates; the provisions
with respect to transfers to or from a Companion Contract or between
Investment Accounts; the Contingent Deferred Sales Charge; and the
Contract Administration Expense/Recordkeeping Charge.
However, no amendment or change will apply to annuities in the course
of payment except to the extent necessary to meet the requirements of
any law or regulation issued by any governmental agency to which the
company is subject. In addition, no change on the guaranteed annuity
conversion rates or the Contingent Deferred Sales Charge will be
effective for any current Plan Participant if the effect of such
amendment or change would be less favorable to the Owner of Benefits.
Also, any change in the Contract Administration Expense/Recordkeeping
Charge will not take affect as to any Investment Accounts to be
transferred to an Alternate Funding Agent if, prior to the date of the
amendment or change is to take affect, the Company receives a written
request from the Contractholder for payment of all such Investment
Account Values to the Alternate Funding Agent and such request is not
revoked.
Furthermore, the Company may, on 60-days notice to the Contractholder,
unilaterally change the mortality and expense risks charge provided
that (a) the charge shall in no event exceed 1.25%, (b) the charge
shall not be changed more frequently than once in any one year period
and (c) no change shall apply to annuities which were in the course of
payment prior to the effective date of the change.
STATEMENT OF VALUES
The Company will furnish each Owner of Benefits at least once during each year a
statement showing the number of units credited to the Investment Account or
Accounts which correlate to the Plan Participant, Unit Values for such
Investment Accounts and the resulting Investment Account Values.
SERVICES AVAILABLE BY TELEPHONE
Telephone Transactions The following transactions may be exercised by telephone
by any Owner of Benefits: 1) transfers between Investment Accounts; and 2)
changes in Contribution allocation percentages. The telephone transactions may
be exercised by telephoning 1-800-633-1373. Telephone transfer requests must be
received by the close of the New York Stock Exchange on a day when the Company
is open for business to be effective that day. Requests made after that time or
on a day when the Company is not open for business will be effective the next
business day.
Although neither the Separate Account nor the Company is responsible for the
authenticity of telephone transaction requests, the right is reserved to refuse
to accept telephone requests when in the opinion of the Company it seems prudent
to do so. The Owner of Benefits bears the risk of loss caused by fraudulent
telephone instructions the Company reasonably believes to be genuine. The
Company will employ reasonable procedures to assure telephone instructions are
genuine and if such procedures are not followed, the Company may be liable for
losses due to unauthorized or fraudulent transactions. Such procedures include
recording all telephone instructions, requesting personal identification
information such as the caller's name, daytime telephone number, social security
number and/or birthdate and sending a written confirmation of the transaction to
the Owner of Benefits' address of record. Owners of Benefits may obtain
additional information and assistance by telephoning the toll free number.
TeleTouch(R) By calling TeleTouch at 1-800-547-7754 and inputting their personal
identification number, Plan Participants may access daily account and investment
information, counselor assistance and more. This service is available Sunday
through Friday from 2 a.m. to midnight (CT) and Saturday from 2 a.m. to 9 p.m.
Principal Retirement Service Center sm By visiting our internet site at
www.principal.com and inputting your personal identification number, you can
access a variety of information including investment account values, investment
results and retirement planning tools. Plan Participants may also change
investment directions, transfer money and rebalance their portfolios.
DISTRIBUTION OF THE CONTRACT
The contract, which is no longer offered, was sold primarily by persons who are
insurance agents of or brokers for the Company authorized by applicable law to
sell life and other forms of personal insurance and variable annuities. In
addition, those persons were usually registered representatives of Princor
Financial Services Corporation, a company of the Principal Financial Group, Des
Moines, Iowa 50392-0200, a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. Princor Financial Services Corporation, the principal underwriter,
is paid for the distribution of the Contract in accordance with two separate
schedules one of which provides for payment of 4.5% of Contributions scaling
down for Contributions in excess of $5,000 and one which provides for payments
of 3.0% of Contributions scaling down for Contributions in excess of $50,000.
The contract was also sold through other selected broker-dealers registered
under the Securities Exchange Act of 1934. Princor Financial Services
Corporation is also the principal underwriter for various registered investment
companies organized by the Company. Princor Financial Services Corporation 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 performance of one or
more of its Divisions. The contract was not offered prior to July 15, 1992.
However, the Divisions invest in Accounts of the Principal Variable Contract
Fund, Inc. These Accounts correspond to open-end investment companies ("mutual
funds") which, effective January 1, 1998, were reorganized into the Accounts of
the Principal Variable Contracts Fund, Inc. as follows:
Old Mutual Fund Name New Corresponding Account Name
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
Some of the Accounts (under their former names) were offered prior to the date
that 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 Account in which such Division invests was first offered. The
hypothetical performance from the date of inception of the Account in which the
Division invests is derived by reducing the actual performance of the underlying
Account 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 Account'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
Statement of Additional Information.
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 contingent deferred sales charges which, if included, would reduce the
"yield" and "effective yield."
In addition, from time to time, the Separate Account will advertise its "yield"
for the Bond Division and Government Securities Division for these contracts.
The "yield" of these Divisions 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 contingent deferred sales 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 for these contracts. 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 contingent deferred sales charge
that decreases from 5% to 0% over a period of 7 years. The Separate Account may
also advertise total return figures of its Divisions for a specified period that
do not take into account the contingent deferred sales charge in order to
illustrate the change in the Division's unit value over time. See "Deductions
Under the Contract" for a discussion of contingent deferred sales charges. The
Separate Account may also advertise total return figures of its Divisions for a
specified period that do not take into account the Contract Administration
Expense/Recordkeeping Charge in order to illustrate performance applicable to
Owners of Benefits when this charge is not deducted from Investment Accounts.
VOTING RIGHTS
The Company shall vote Account shares held in Separate Account B at regular and
special meetings of shareholders of each Account, but will follow voting
instructions received from persons having the voting interest in the Account
shares.
The number of Account shares as to which a person has the voting interest will
be determined by the Company as of a date which will not be more than ninety
days prior to the meeting of the Account, and voting instructions will be
solicited by written communication at least ten days prior to the meeting.
During the accumulation period, the Owner of Benefits is the person having the
voting interest in the Account shares attributable to the Investment Accounts
which correlate to the Plan Participant. The number of Account shares held in
Separate Account B which are attributable to each Investment Account is
determined by dividing the Investment Account Value attributable to a Division
of Separate Account B by the net asset value of one share of the underlying
Account.
During the annuity period, the person then entitled to Variable Annuity Payments
has the voting interest in the Account shares attributable to the variable
annuity. The number of Account shares held in Separate Account B which are
attributable to each variable annuity is determined by dividing the reserve for
the variable annuity by the net asset value of one Account share. The voting
interest in the Account shares attributable to the variable annuity will
ordinarily decrease during the annuity period since the reserve for the variable
annuity decreases due to the reduction in the expected payment period.
Account shares for which Owners of Benefits or payees of variable annuities are
entitled to give voting instructions, but for which none are received, and
shares of the Fund owned by the Company will be voted in the same proportion as
the aggregate shares for which voting instructions have been received.
Proxy material will be provided to each person having a voting interest together
with an appropriate form which may be used to give voting instructions to the
Company.
If the Company determines pursuant to applicable law that Account shares held in
Separate Account B need not be voted pursuant to instructions received from
persons otherwise having the voting interest as provided above, then the Company
may vote Account shares held in Separate Account B in its own right.
FEDERAL TAX STATUS
It should be recognized that the descriptions below of the federal income tax
status of amounts received under the contracts are not exhaustive and do not
purport to cover all situations. A qualified tax advisor should be consulted for
complete information. (For the federal tax status of the Company and Separate
Account B, see "Principal Life Insurance Company Separate Account B".)
A. Taxes Payable by Owners of Benefits and Annuitants
The contract offered in connection with this prospectus is used with
retirement programs which receive favorable tax deferred treatment under
Federal income tax law and deferred annuity contracts purchased with after
tax dollars. Annuity payments or other amounts received under the contract
are subject to income tax withholding. The amounts withheld will vary among
recipients depending on the tax status of the individual and the type of
payments from which taxes are withheld.
Contributions to contracts used to fund Creditor-Exempt and General
Creditor Non-Qualified Plans do not enjoy the advantages available to
qualified retirement plans, but Contributions invested in contracts used to
fund Creditor-Exempt Non-qualified Retirement Plans may receive tax
deferred treatment of the earnings , until distributed from the contract as
retirement benefits.
1. Tax Deferred Annuity Plans-- (Section 403(b) Annuities for Employees
of Certain Tax-Exempt Organizations or Public Educational Institutions)
Contributions. Under section 403(b) of the Code, payments made by
certain employers (i.e., tax-exempt organizations, meeting the
requirements of section 501(c)(3) of the Code and public educational
institutions) to purchase annuity contracts for their employees are
excludable from the gross income of employees to the extent that the
aggregate Contributions do not exceed the limitations prescribed by
section 402(g), section 403(b)(2), and section 415 of the Code. This
gross income exclusion applies to employer contributions and voluntary
salary reduction contributions.
An individual's voluntary salary reduction contributions under section
403(b) are generally limited to the lesser of $9,500 or 25 percent of
net salary (or 20 percent of gross salary); additional catch-up
contributions are permitted under certain circumstances. Combined
employer and salary reduction contributions are generally limited to
approximately 25 percent of net salary. In addition, for plan years
beginning after December 31, 1988, employer contributions must comply
with various nondiscrimination rules; these rules may have the effect
of further limiting the rate of employer contributions for highly
compensated employees.
Taxation of Distributions. Distributions are restricted. The
restrictions apply to amounts accumulated after December 31, 1988
(including voluntary contributions after that date and earnings on
prior and current voluntary contributions). These restrictions require
that no distributions will be permitted prior to one of the following
events: (1) attainment of age 59 1/2, (2) separation from service, (3)
death, (4) disability, or (5) hardship (hardship distributions will be
limited to the amount of salary reduction contributions exclusive of
earnings thereon).
All distributions, other than distributions from after-tax
Contributions, from a section 403(b) annuity Plan are taxed as ordinary
income of the recipient in accordance with section 72 of the Code and
are subject to 20% income tax withholding. Distributions received
before the recipient attains age 59 1/2 generally are subject to a 10%
penalty tax in addition to regular income tax. Certain distributions
are excepted from this penalty tax, including distributions following
(1) death, (2) disability, (3) separation from service during or after
the year the Plan Participant reaches age 55, (4) separation from
service at any age if the distribution is in the form of payments over
the life (or life expectancy) of the Plan Participant (or the Plan
Participant and beneficiary), and distributions (5) to alternate payee
pursuant to a qualified domestic relations order, (6) made on account
of certain levies on income or payments and (7) not in excess of tax
deductible medical expenses.
Required Distributions. Generally, distributions from section 403(b)
Plans must commence no later than April 1 of the calendar year
following the calendar year in which the Plan Participant attains age
70 1/2 and such distributions must be made over a period that does not
exceed the life expectancy of the Plan Participant (or the Plan
Participant and beneficiary). Plan Participants employed by
governmental entities and certain church organizations may delay the
commencement of payments until April 1 of the calendar year following
retirement if they remain employed after attaining age 70 1/2. However,
upon the death of the Plan Participant prior to the commencement of
annuity payments, the amount accumulated under the contract must be
distributed within five years or, if distributions to a beneficiary
designated under the contract commence within one year of the Plan
Participant's death, distributions are permitted over the life of the
beneficiary or over a period not extending beyond the beneficiary's
life expectancy. If the Plan Participant has commenced receiving
annuity distributions prior to the Plan Participant's death,
distributions must continue at least as rapidly as under the method in
effect at the date of death. Amounts accumulated under a contract on
December 31, 1986, are not subject to these minimum distributions
requirements. A penalty tax of 50% will be imposed on the amount by
which the minimum required distribution in any year exceeds the amount
actually distributed in that year.
Tax-Free Transfers and Rollovers. The Code provides for the tax-free
exchange of one annuity contract for another annuity contract, and the
IRS has ruled that total or partial amounts transferred between section
403(b) annuity contracts and/or 403(b)(7) custodial accounts may
qualify as tax-free exchanges under certain circumstances. In addition,
section 403(b) of the Code permits tax-free rollovers of eligible
rollover distributions from section 403(b) programs to Individual
Retirement Accounts (IRAs) under certain circumstances. If an eligible
rollover distribution is taken as a direct rollover to an IRA (or
another 403(b) plan) the mandatory 20% income tax withholding does not
apply. However, the 20% mandatory withholding requirement does apply to
an eligible rollover distribution that is not made as a direct
rollover. In addition, such a rollover must be completed within 60 days
of receipt of the distribution.
2. Public Employee Deferred Compensation Plans--(Section 457 Unfunded
Deferred Compensation Plans of Public Employers and Tax-Exempt
Organizations)
Contributions. Under section 457 of the Code, individuals who perform
services for a unit of a state or local government may participate in a
deferred compensation program. Tax-exempt employers may establish
deferred compensation plans under section 457 only for a select group
of management or highly compensated employees and/or independent
contractors.
This type of program allows individuals to defer the receipt of
compensation which would otherwise be presently payable and to
therefore defer the payment of Federal income taxes on the amounts.
Assuming that the program meets the requirements to be considered a
Public Employee Deferred Compensation Plan (an "PEDC Plan"), an
individual may contribute (and thereby defer from current income for
tax purposes) the lesser of $7,500 or 331/3% of the individuals
includible compensation. (Includible compensation means compensation
from the employer which is current includible in gross income for
Federal tax purposes.) During the last three years before an individual
attains normal retirement age, additional catch-up deferrals are
permitted.
The amounts which are deferred may be used by the employer to purchase
the contract offered by this prospectus. The contract is owned by the
employer and, in fact, is subject to the claims of the employer's
creditors. The employee has no present rights or vested interest in the
contract and is only entitled to payment in accordance with the PEDC
Plan provisions.
Taxation of Distributions. Amounts received by an individual from an
PEDC Plan are includible in gross income for the taxable year in which
such amounts are paid or otherwise made available.
Distributions Before Separation from Service. Distributions generally
are not permitted under an PEDC Plan prior to separation from service
except for unforeseeable emergencies or upon reaching age 70 1/2.
Emergency distributions are includible in the gross income of the
individual in the year in which paid.
Required Distributions. The minimum distribution requirements for PEDC
Plans are generally the same as those for qualified plans and section
403(b) Plans, except that no amounts are exempted from minimum
distribution requirements.
Tax Free Transfers and Rollovers. Federal income tax law permits the
tax free transfer of PEDC Plan amounts to another PEDC Plan, but not to
an IRA or other type of plan.
3. 401(a) Plans
Contributions. Payments made by employers to purchase annuity contracts
for qualified pension and profit sharing plans, under Section 401(a) of
the Code, are excludable from the gross income of employees to the
extent that the aggregate Contributions do not exceed the limitations
prescribed by section 402(g), and section 415 of the Code. This gross
income exclusion applies to employer contributions and voluntary salary
reduction contributions.
An individual's voluntary salary reduction contributions for a 401(k)
plan are generally limited to $10,500 (2000 limit).
For 401(a) qualified plans, the maximum annual contribution that a
member can receive is limited to the lesser of 25% of includible
compensation or $30,000.
Taxation of Distributions. Distributions are restricted. These
restrictions require that no distributions of employer contributions or
salary deferrals will be permitted prior to one of the following
events: (1) attainment of age 59 1/2, (2) separation from service, (3)
death, (4) disability, or (5) for certain 401(a) Plans, hardship
(hardship distributions will be limited to the amount of salary
reduction contributions exclusive of earnings thereon). In-service
distributions may be permitted under various circumstances in certain
plans.
All distributions from a section 401(a) Plan are taxed as ordinary
income of the recipient in accordance with section 72 of the Code.
Distributions received before the recipient attains age 59 1/2
generally are subject to a 10% penalty tax in addition to regular
income tax. Certain distributions are excepted from this penalty tax,
including distributions following (1) death, (2) disability, 3)
separation from service during or after the year the Plan Participant
reaches age 55, (4) separation from service at any age if the
distribution is in the form of payments over the life (or life
expectancy) of the Plan Participant (or the Plan Participant and
beneficiary), and (5) distributions not in excess of tax deductible
medical expenses.
Required Distributions. Generally, distributions from section 401(a)
Plans must commence no later than April 1 of the calendar year
following the calendar year in which the Plan Participant attains age
70 1/2 and such distributions must be made over a period that does not
exceed the life expectancy of the Plan Participant (or the Plan
Participant and beneficiary). Following the death of the Plan
Participant, the distribution requirements are generally the same as
those described with respect to 403(b) Plans. A penalty tax of 50% will
be imposed on the amount by which the minimum required distribution in
any year exceeds the amount actually distributed in that year.
Tax-Free Transfers and Rollovers. The Code provides for the tax-free
exchange of one annuity contract for another annuity contract.
Distributions from a 401(a) Plan may also be transferred to a Rollover
IRA.
4. Creditor-Exempt Non-Qualified Plans
Certain employers may establish Creditor-Exempt Non-Qualified Plans.
Under such Plans the employer formally funds the Plan either by
purchasing an annuity contract or by transferring funds on behalf of
Plan Participants to a trust established for the benefit of such Plan
Participants with a direction to the trustee to use the funds to
purchase an annuity contract. The Trustee is the Contractholder and is
considered the nominal owner of the contract. Each Plan Participant as
a Trust beneficiary, is an Owner of Benefits under the contract and is
treated as the owner for income tax purposes.
Taxation of Contract Earnings. Since each Plan Participant for income
tax purposes is considered the owner of the Investment Account or
Accounts which correlate to such Participant, any increase in a
Participant's Investment Account Value resulting from the investment
performance of the contract is not taxable to the Plan Participant
until received by such Plan Participant.
Contributions. Payments made by the employer to the Trust on behalf of
a Plan Participant are currently includible in the Plan Participant's
gross income as additional compensation and, if such payments coupled
with the Plan Participant's other compensation is reasonable in amount,
such payments are currently deductible as compensation by the Employer.
Taxation of Distributions. In general, partial withdrawals from an
Investment Account that are not received by a Plan Participant as an
annuity under the contract allocated to post-August 13, 1982
Contributions under a pre-existing contract are taxed as ordinary
income to the extent of the accumulated income or gain under the
contract. Partial redemptions from a contract that are allocated to
pre-August 14, 1982 Contributions under a pre-existing contract are
taxed only after the Plan Participant has received all of the
"investment in the contract" (Contributions less any amounts previously
received and excluded from gross income).
In the case of a complete redemption of an Investment Account under the
contract (regardless of the date of purchase), the amount received will
be taxed as ordinary income to the extent that it exceeds the Plan
Participant's investment in the contract.
If a Contractholder purchases two or more contracts from the Company
(or an affiliated company) within any twelve month period after October
21, 1988, those contracts are treated as a single contract for purposes
of measuring the income on a partial redemption or complete surrender.
When payments are received as an annuity, the Plan Participant's
investment in the contract is treated as received ratably over the
expected payment period of the annuity and excluded from gross income
as a tax-free return of capital. Individuals who commence receiving
annuity payments on or after January 1, 1987, can exclude from income
only their unrecovered investment in the contract. Where such
individuals die before they have recovered their entire investment in
the contract on a tax-free basis, they are entitled to a deduction of
the unrecovered amount on their final tax return.
In addition to regular income taxes, there is a 10% penalty tax on the
taxable portion of a distribution received before the Plan Participant
attains age 59 1/2 under the contract, unless the distribution is; (1)
made to a beneficiary on or after death of the Plan Participant, (2)
made upon the disability of the Plan Participant; (3) part of a series
of substantially equal annuity payments for the life or life expectancy
of the Plan Participant or the Plan Participant and beneficiary; (4)
made under an immediate annuity contract, or (5) allocable to
Contributions made prior to August 14, 1982.
Required Distributions. The Internal Revenue Code does not require a
Plan Participant under a Creditor-Exempt Non-Qualified Plan to commence
receiving distributions at any particular time and does not limit the
duration of annuity payments. However, the contract provides the
Annuity Commencement Date must be no later than the April 1 of the
calendar year following the calendar year in which the Plan Participant
attains age 70 1/2. However, upon the death of the Plan Participant
prior to the commencement of annuity payments, the amount accumulated
under the contract for the Plan Participant must be distributed within
five years or, if distributions to a beneficiary designated under the
contract commence within one year of the Plan Participant's death,
distributions are permitted over the life of the beneficiary or over a
period not extending beyond the beneficiary's life expectancy. If the
Plan Participant has commenced receiving annuity distributions prior to
the Plan Participant's death, distributions must continue at least as
rapidly as under the method in effect at the date of death.
Tax-Free Exchanges. Under Section 1035 of the Code, the exchange of
one annuity contract for another is not a taxable transaction, but is
reportable to the IRS. Transferring Investment Account Values from
this contract to a Companion Contract would fall within the provisions
of Section 1035 of the Code.
5. General Creditor Non-Qualified Plans
Contributions. Private taxable employers may establish informally
funded, General Creditor Non-Qualified Plans for a select group of
management or highly compensated employees and/or independent
contractors. Certain arrangements of nonprofit employers entered into
prior to August 16, 1989, and not subsequently modified, are subject to
the rules discussed below.
Informally funded General Creditor Non-Qualified Plans represent a bare
contractual promise on the part of the employer to pay wages at some
future time. The contract used to informally fund the employer's
obligation is owned by the employer and is subject to the claims of the
employer's creditors. The Plan Participant has no present right or
vested interest in the contract and is only entitled to payment in
accordance with Plan provisions. If the Employer who is the
Contractholder, is not a natural person, the contract does not receive
tax-deferred treatment afforded other Contractholders under the
Internal Revenue Code.
Taxation of Distributions. Amounts received by an individual from a
General Creditor Non-Qualified Plan are includible in the employee's
gross income for the taxable year in which such amounts are paid or
otherwise made available. Such amounts are deductible by the employer
when paid to the individual.
B. Fund Diversification
Separate Account B investments must be adequately diversified in order for
the increase in the value of Creditor-Exempt Non-Qualified Contracts to
receive tax-deferred treatment. In order to be adequately diversified, the
portfolio of each underlying Account 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 an Account to
meet the diversification requirements could result in tax liability to
Creditor-Exempt Non-Qualified Contractholders.
The investment opportunities of the Accounts could conceivably be limited
by adhering to the above diversification requirements. This would affect
all Contractholders, including those 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 the operations of the Company for the preceding year and its financial
condition on December 31st of such year. Its books and assets are subject to
review or examination by the Commissioner of Insurance of the State of Iowa or
her representatives at all times, and a full examination of its 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, the Company is subject to the insurance laws and regulations of
other states and jurisdictions in which it is 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 the
right of the Company to issue Contracts under Iowa Insurance Law, have been
passed upon by Karen E. Shaff, Senior Vice President and General Counsel of the
Company.
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 Statement of Additional
Information (or Part B of the Registration Statement) and Part C of the
Registration Statement which the Company has filed with the Securities and
Exchange Commission. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus. A copy of the Statement of
Additional Information can be obtained upon request, free of charge, by writing
or telephoning Princor Financial Services Corporation. You may obtain a copy of
Part C of the Registration Statement filed with the Securities and Exchange
Commission, Washington, D.C. from the Commission upon payment of the prescribed
fees.
INDEPENDENT AUDITORS
The financial statements of Principal Life Insurance Company Separate Account B
and the financial statements of Principal Life Insurance Company which are
included in the Statement of Additional Information have been audited by Ernst &
Young LLP, independent auditors, for the periods indicated in their reports
thereon which appear in the Statement of Additional Information.
CONTRACTHOLDERS' INQUIRIES
Contractholders' inquiries should be directed to Princor Financial Services
Corporation, a company of the Principal Financial Group, Des Moines, Iowa
50392-0200, (515) 247-5711.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The table of contents for the Statement of Additional Information is provided
below.
TABLE OF CONTENTS
Page
Independent Auditors..................................................3
Underwriting Commissions..............................................3
Calculation of Yield and Total Return.................................3
Principal Life Insurance Company Separate Account B
Report of Independent Auditors...............................7
Financial Statements.........................................8
Principal Life Insurance Company
Report of Independent Auditors..............................31
Financial Statements........................................32
To obtain a copy of the Statement of Additional Information, free of charge,
write or telephone:
Princor Financial Services Corporation
a company of
the Principal Financial Group
Des Moines, IA 50392-0200
Telephone: 1-800-633-1373
<PAGE>
PART B
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B
PERSONAL VARIABLE (A GROUP VARIABLE ANNUITY CONTRACT FOR
EMPLOYER SPONSORED QUALIFIED AND NON-QUALIFIED RETIREMENT PLANS)
Statement of Additional Information
dated May 1, 2000
This Statement of Additional Information provides information about Principal
Life Insurance Company Separate Account B Personal Variable - Group Variable
Annuity Contracts (the "Contract" or the "Contracts") in addition to the
information that is contained in the Contract's Prospectus, dated May 1, 2000.
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:
Princor Financial Services Corporation
a company of
the Principal Financial Group
Des Moines Iowa 50392-0200
Telephone: 1-800-633-1373
TABLE OF CONTENTS
Independent Auditors .................................................... 3
Underwriting Commissions ................................................ 3
Calculation of Yield and Total Return.................................... 3
Principal Life Insurance Company Separate Account B
Report of Independent Auditors................................... 7
Financial Statements............................................. 8
Principal Life Insurance Company
Report of Independent Auditors................................... 31
Financial Statements............................................. 32
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.
UNDERWRITING COMMISSIONS
Aggregate dollar amount of underwriting commissions paid to and retained by
Princor Financial Services Corporation for all Separate Account B contracts:
Year Paid To Retained by
---- ------- -----------
1999 $12,331,736.46 _
1998 $13,709,101.12 _
1997 $11,491,356.06 $340.24
1996 $11,090,837.12 $14,528.47
1995 $5,326,848.77 $26,014.78
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 July 15, 1992.
However, the Divisions invest in Accounts of the Principal Variable Contract
Fund, Inc. These Accounts correspond to open-end investment companies ("mutual
funds") which, effective January 1, 1998, were reorganized into the Accounts of
the Principal Variable Contracts Fund, Inc. as follows:
Old Mutual Fund Name New Corresponding Account Name
-------------------- ------------------------------
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
Some of the Accounts (under their former names) were offered prior to the date
that 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 Account in which such Division invests was first offered. The
hypothetical performance from the date of inception of the Account in which the
Division invests is derived by reducing the actual performance of the underlying
Account 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 Account'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 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 sales load deducted from purchase payments that, if included, would
reduce the "yield" and "effective yield." For the period ended December 31,
1999, the 7-day annualized and effective yields were 4.61% and 4.71%,
respectively.
From time to time, the Separate Account will advertise the average annual total
return of its various divisions for these contracts. 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 contingent deferred sales charge that decreases
from 5% to 0% over a period of 7 years. The Separate Account may also advertise
total return figures of its Divisions for a specified period that does not take
into account the sales charge in order to illustrate the change in the
Division's unit value over time. See "Deductions Under the Contract" for a
discussion of contingent deferred sales charges.
Assuming the contract had been offered as of the dates indicated in the table
below, the hypothetical average annual total returns for the periods ending
December 31, 1999 are:
<TABLE>
<CAPTION>
With Contingent Deferred Without Contingent Deferred
Sales Charge Sales Charge
One Five Ten One Five Ten
Year Year Year Year Year Year
<S> <C> <C> <C> <C> <C> <C>
Balanced Division -3.55 12.42 10.41 1.52 12.88 10.41
Bond Division -8.26 6.44 6.82 -3.43 6.87 6.82
Capital Value Division -9.86 16.53 11.95 -5.12 17.00 11.95
Government Securities Division -6.09 6.67 6.80 -1.14 7.10 6.80
Growth Division 9.70 19.06 17.80(1) 15.48 19.54 18.06(1)
International Division 18.67 15.92 13.28(1) 24.91 16.39 13.53(1)
MidCap Division 6.50 16.23 14.39 12.11 16.70 14.39
Money Market Division -1.23 3.90 4.05 3.97 4.32 4.05
<FN>
(1) Period from May 2, 1994 - December 31, 1999
</FN>
</TABLE>
Assuming the contract had been offered as of the dates indicated in the table
below and assuming the Contract Administration Expense/Recordkeeping Charge is
not deducted from Investment Accounts, the hypothetical average annual total
returns for the periods ending December 31, 1999 are:
<TABLE>
<CAPTION>
With Contingent Deferred Without Contingent Deferred
Sales Charge Sales Charge
One Five Ten One Five Ten
Year Year Year Year Year Year
<S> <C> <C> <C> <C> <C> <C>
Balanced Division -3.34 12.60 10.73 1.74 13.06 10.73
Bond Division -8.05 6.64 7.15 -3.21 7.07 7.15
Capital Value Division -9.65 16.69 12.28 -4.89 17.16 12.28
Government Securities Division -5.88 6.87 7.13 -0.92 7.30 7.13
Growth Division 9.91 19.23 18.23(1) 15.70 19.72 18.23(1)
International Division 18.88 16.11 13.73(1) 25.13 16.58 13.73(1)
MidCap Division 6.71 16.40 14.69 12.33 16.87 14.69
Money Market Division -1.02 4.13 4.41 4.19 4.55 4.41
<FN>
(1) Period from May 2, 1994 - December 31, 1999
</FN>
</TABLE>
PART C
PERSONAL VARIABLE CONTRACT
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in the Registration Statement
(1) Part A:*
(2) Part B:*
(b) Exhibits
(1) Board resolution of Registrant (Filed 3/1/96)
(3a) Distribution Agreement (Filed 3/1/96)
(3b) Selling Agreement (Filed 3/1/96)
(4a) Form of Variable Annuity Contract (Filed 12/16/97)
(4b) Variable Annuity Contract Endorsement (Filed 12/16/97)
(4c) Variable Annuity Contract Rider (Filed 12/16/97)
(5) Form of Variable Annuity Application (Filed 10/23/97)
(6a) Articles of Incorporation of Depositor (Filed 3/1/96)
(6b) Bylaws of Depositor (Filed 3/1/96)
(9) Opinion of Counsel (Filed 3/1/96)
(10a) Consent of Ernst & Young LLP
(10b) Powers of Attorney*
(13a) Total Return Calculation
(13b) Annualized Yield for Separate Account B (Filed 3/1/96)
* to be filed by amendment
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
Chairman of the Board
Chair, Executive Committee
C. DANIEL GELATT, JR. NMT Corporation
Director 2004 Kramer Street
Member, Executive Committee La Crosse, WI 54603
Chair, Human Resources
Committee
J. BARRY GRISWELL The Principal Financial Group
Director, President Des Moines, IA 50392
and Chief Executive Officer
G. DAVID HURD The Principal Financial Group
Director Des Moines, IA 50392
Member, Executive and
Nominating Committees
CHARLES S. JOHNSON Pioneer Hi-Bred International, Inc.
Director 400 Locust, Ste. 700 Capital Square
Member, Audit Committee Des Moines, IA 50309
WILLIAM T. KERR Meredith Corporation
Director 1716 Locust St.
Member, Executive Committee Des Moines, IA 50309-3023
and Chair, Nominating
Committee
LEE LIU IES Industries Inc.
Director Post Office Box 351
Member, Executive and Cedar Rapids, IA 52406
Human Resources Committees
VICTOR. H. LOEWENSTEIN Egon Zehnder International
Director 350 Park Avenue - 8th Floor
Member, Nominating New York, NY 10022
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 - 44th Floor
Member, Nominating Committee New York, NY 10017
DONALD M. STEWART The College Board
Director 45 Columbus Avenue
Member, Human Resources New York, NY 10023-6992
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
PAUL S. BOGNANNO Senior Vice President
GARY M. CAIN Senior Vice President
C. ROBERT DUNCAN Senior Vice President
DENNIS P. FRANCIS Senior Vice President
MICHAEL H.GERSIE Executive Vice President and
Chief Financial Officer
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
RICHARD L. PREY 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 Depositor
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 life
group, pension and individual insurance company.
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 Services (Australia), Inc. (an Iowa holding
company) formed to facilitate the acquisition of the Australian
business of BT Australia.
e. Principal Financial Services (NZ), Inc. (an Iowa holding company)
formed to facilitate the acquisition of the New Zealand business
of BT Australia.
f. Principal Capital Management (Singapore) Limited (a Singapore
asset management company).
g. Principal Capital Management (Europe) Limited a fund management
company.
h. Principal Capital Management (Ireland) Limited a fund management
company.
i. Principal Financial Group Investments (Australia) Pty Limited.
Subsidiary wholly-owned by Princor Financial Services Corporation:
a. Principal Management Corporation (an Iowa Corporation) a
registered investment advisor.
Subsidiary wholly-owned by PFG Do Brasil LTDA
a. Brasilprev Previdencia Privada S.A.(Brazil) a pension
administration 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. Principal Financial Group (Australia) Pty Ltd. an Australia
holding company organized on connection the contemplated
acquisition of BT Australia Funds Management.
Subsidiary wholly-owned by Principal Financial Group (Australia) Pty
Ltd:
a. BT International (Australia) Limited (an Australian holding
company).
Subsidiary wholly-owned by BT Investment (Australia) Limited:
a. Bankers Trust Australia Limited (an Australian holding company).
Subsidiary wholly-owned by Bankers Trust Australia Limited:
a. BT Financial Group Limited an asset management company.
Subsidiaries wholly-owned by BT Financial Group Limited:
a. BT Life Limited a commercial and investment linked life insurance
company.
b. BT Funds Management Limited (an Australian financial services
company).
c. BT Funds Management (International) Limited (an Australian
financial services company).
d. BT Securities Limited (an Australian financial services
company).
e. BT (Queensland) Pty Limited (an Australian financial services
company).
f. BT Portfolio Services Pty Limited (an Australian financial
services company).
g. BT Australia Corporate Services Pty Limited a holding
company.
h. Oniston Pty Ltd (an Australian financial services company).
i. QV1 Pty Limited
Subsidiaries wholly-owned by BT Portfolio Services Limited:
a. BT Custodial Services Pty Ltd (an Australian financial services
company).
b. National Registry Services Pty Ltd. (an Australian financial
services company).
c. National Registry Services (WA) Pty Limited (an Australian
financial services company).
d. BT Finance & Investments Pty Ltd (an Australian financial
services company).
Subsidiaries organized and wholly-owned by BT Australia Corporate
Services Pty Limited:
a. BT Finance Pty Limited (an Australian financial services
company).
b. Chifley Services Pty Limited (an Australian financial services
company).
c. BT Nominees Pty Limited (an Australian financial services
company).
Subsidiary organized and wholly-owned by BT Funds Management Limited:
a. BT Tactical Asset Management Limited (an Australian financial
services company).
Subsidiary organized and wholly-owned by Principal Financial Services
(NZ), Inc.
a. BT Financial Group (NZ) Limited (a New Zealand holding company).
b. BT Hotel Group Pty Limited
c. BT Custodians Limited a manager and trustee of various unit
trusts.
d. Dellarak Pty Limited a trustee company.
Subsidiary organized and wholly-owned by BT Financial Group (NZ)
Limited:
a. BT Portfolio Service (NZ) Limited (a New Zealand financial
services company).
b. BT New Zealand Nominees Limited (a New Zealand financial services
company).
c. BT Funds Management (NZ) Limited (a New Zealand financial
services company).
Subsidiary organized and wholly-owned by Principal Financial Group
Investments (Australia) Pty Limited:
a. Principal Hotels Holdings Pty Ltd. a holding company.
Subsidiary organized and wholly-owned by Principal Hotels Holdings
Pty Ltd.:
a. Principal Hotels Australia Pty Ltd. a holding company.
Subsidiary organized and wholly-owned by Principal Hotels Australia
Pty Ltd.:
a. BT Hotel Limited
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) 0.15% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 2000.
Principal Blue Chip Fund, Inc.(a Maryland Corporation) 0.80% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 2000.
Principal Bond Fund, Inc.(a Maryland Corporation) 0.67% of shares
outstanding owned by Principal Life Insurance Company (including
subsidiaries and affiliates) on January 31, 2000.
Principal Capital Value Fund, Inc. (a Maryland Corporation)
24.72% of outstanding shares owned by Principal Life Insurance
Company (including subsidiaries and affiliates)on January 31,
2000.
Principal Cash Management Fund, Inc. (a Maryland Corporation)
5.73% of outstanding shares owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on January 31,
2000.
Principal Government Securities Income Fund, Inc. (a Maryland
Corporation) 0.03% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
January 31, 2000.
Principal Growth Fund, Inc. (a Maryland Corporation) 0.37% of
outstanding shares owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 2000.
Principal High Yield Fund, Inc. (a Maryland Corporation) 7.80%
of shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 2000.
Principal International Emerging Markets Fund, Inc. (a Maryland
Corporation) 34.31% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
January 31, 2000.
Principal International Fund, Inc. (a Maryland Corporation)
24.74% of shares outstanding owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on January 31,
2000.
Principal International SmallCap Fund, Inc. (a Maryland
Corporation) 31.00% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
January 31, 2000.
Principal Limited Term Bond Fund, Inc. (a Maryland Corporation)
21.85% of shares outstanding owned by Principal Life Insurance
Company (including subsidiaries and affiliates) on January 31,
2000.
Principal LargeCap Stock Index Fund, Inc. (a Maryland
Corporation) 100.00% of shares outstanding owned by Principal
Life Insurance Company (including subsidiaries and affiliates) on
February 24, 2000.
Principal MidCap Fund, Inc. (a Maryland Corporation) 0.79% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 2000
Principal Partners Aggressive Growth Fund, Inc.(a Maryland
Corporation) 12.91% of shares outstanding owned by Principal Life
Insurance Company (including subsidiaries and affiliates) on
January 31, 2000
Principal Partners LargeCap Growth Fund, Inc.(a Maryland
Corporation) 100.00% of shares outstanding owned by Principal
Life Insurance Company (including subsidiaries and affiliates) on
February 24, 2000
Principal Partners MidCap Growth Fund, Inc.(a Maryland
Corporation) 100.00% of shares outstanding owned by Principal
Life Insurance Company (including subsidiaries and affiliates) on
February 24, 2000
Principal Real Estate Fund, Inc. (a Maryland Corporation) 62.40%
of shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 2000
Principal SmallCap Fund, Inc.(a Maryland Corporation) 13.73% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 2000.
Principal Special Markets Fund, Inc. (a Maryland Corporation)
83.47% of shares outstanding of the International Emerging
Markets Portfolio, 43.49% 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 January 31, 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 January 31,
2000.
Principal Utilities Fund, Inc. (a Maryland Corporation) 0.27% of
shares outstanding owned by Principal Life Insurance Company
(including subsidiaries and affiliates) on January 31, 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
January 31, 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 holding company
wholly-owned by Principal Life Insurance Company.
b. PT Asuransi Jiwa Principal Indonesia (an Indonesia Corporation) a
life insuranced corporation which offers group and individual
products.
c. Principal Development Investors, LLC (a Delaware Corporation) a
limited liability company engaged in acquiring and improving real
property through development and redevelopment.
d. Principal Capital Management, LLC (a Delaware Corporation) a
limited liability company that provides investment management
services.
e. Principal Net Lease Investors, LLC (a Delaware Corporation) a
limited liability company which operates as a buyer and seller of
net leased investments.
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 the operation of nonresidential buildings.
c. Principal Commercial Acceptance, LLC (a Delaware Corporation) a
limited liability company involved in purchasing, managing and
selling commercial real estate assets in the secondary market.
d. Principal Real Estate Investors, LLC (a Delaware Corporation) a
registered investment advisor.
e. Principal Commercial Funding, LLC (a Delaware Corporation) a
correspondent lender and service provider for loans.
f. Principal Real Estate Services, LLC (a Delaware Corporation) a
limited liability company which acts as a property manager and
real estate service provider.
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 partnership and limited liability
companies.
h. HealthRisk Resource Group, Inc. (an Iowa Corporation) a
management services organization.
i. Invista Capital Management, LLC (an Iowa Corporation) a
registered investment adviser.
j. Principal Residential Mortgage, Inc. (an Iowa Corporation) a
residential mortgage loan broker.
k. Principal Asset Markets, Inc. (an Iowa Corporation) a residential
mortgage loan broker.
l. Principal Portfolio Services, Inc. (an Iowa Corporation) a
mortgage due diligence company.
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
general business corporation established in connection with the
new corporate identity. It is not currently active.
o. Principal Product Network, Inc. (a Delaware corporation) an
insurance broker.
p. Principal Health Care, Inc. (an Iowa Corporation) a developer and
administrator of managed care systems.
q. Dental-Net, Inc. (an Arizona Corporation) holding company of
Employers Dental Services; 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 nondepository
trust company.
t. Professional Pensions, Inc. (a Connecticut Corporation) a
corporation engaged in sales, marketing and administration of
group insurance plans and serves as a record keeper and third
party administrator for various clients' defined contribution
plans.
u. Principal Investors Corporation (a New Jersey Corporation) a
registered broker-dealer with the Securities Exchange Commission.
It is not currently active.
v. Principal International, Inc. (an Iowa Corporation) a company
formed for the purpose of international business development.
Subsidiaries organized and wholly-owned by PT Asuransi Jiwa
Principal Indonesia:
a. PT Jasa Principal Indonesia a defined benefit pension company.
b. PT Principal Capital Management Indonesia a fund management
company.
Subsidiary wholly-owned by Invista Capital Management, LLC:
a. Principal Capital - Invista 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 pursuant to Section 15(b) of the
Securities Exchange Act an a member of the National Association
of Securities Dealers (NASD), limited to the sale of open-end
mutual funds and variable insurance products.
c. Boston Insurance Trust, Inc. (a Massachusetts corporation)
authorized by charter to serve as a trustee in connection with
multiple-employer group life insurance trusts or arrangements,
and to generally participate in the administration of insurance
trusts.
Subsidiaries wholly-owned by Principal International, Inc.:
a. Principal International Espana, S.A. de Seguros de Vida (a Spain
Corporation) a life insurance company (individual group),
annuities and pension.
b. Zao Principal International (a Russia Corporation) inactive.
c. Principal International Argentina, S.A. (an Argentina services
corporation).
d. Principal Asset Management Company (Asia) Ltd. (Hong Kong) a
corporation which manages pension funds.
e. Principal International Asia Limited (a Hong Kong Corporation) a
corporation operating as a regional headquarters for Asia.
f. Principal Insurance Company (Hong Kong) Limited (a Hong Kong
Corporation) group life and group pension products.
g. Principal Trust Company (Asia) Limited (an Asia trust company).
h. Principal International de Chile, S.A. (a Chile Corporation) a
holding company.
i. Principal Mexico Compania de Seguros, S.A. de C.V. (a Mexico
Corporation) a life insurance company (individual and group),
personal accidents.
j. Principal Pensiones, S.A. de C.V. (a Mexico Corporation) a single
premium annuity.
k. Principal Afore, S.A. de C.V. (a Mexico Corporation), a pension
administration company.
l. Principal Consulting (India) Private Limited (an India
corporation) an India consulting company.
Subsidiary wholly-owned by Principal International Espana, S.A. de
Seguros de Vida:
a. Princor International Espana Sociedad Anonima de Agencia de
Seguros (a Spain Corporation) an insurance agency.
Subsidiary wholly-owned by Principal International (Asia) Limited
(Hong Kong):
a. BT Funds Management (Asia) Limited (Hong Kong)(a Hong Kong
Corporation) an asset management company.
Subsidiaries wholly-owned by Principal International Argentina, S.A.:
a. Principal Retiro Compania de Seguros de Retiro, S.A. (an
Argentina Corporation) an individual annuity/employee benefit
company.
b. Principal Life Compania de Seguros, S.A. (an Argentina
Corporation) a life insurance company.
Subsidiary wholly-owned by Principal International de Chile, S.A.:
a. Principal Compania de Seguros de Vida Chile S.A. (a Chile
Corporation) life insurance and annuity company.
Subsidiary wholly-owned by Principal Compania de Seguros de Vida Chile
S.A.:
a. Andueza & Principal Creditos Hipotecarios S.A. (a Chile
Corporation) a residential mortgage company.
Subsidiary wholly-owned by Principal Afore, S.A. de C.V.:
a. Siefore Principal, S.A. de C.V. (a Mexico Corporation) an
investment fund company.
Item 27. Number of Contractowners - As of: December 31, 1999
(1) (2) (3)
Number of Plan Number of
Title of Class Participants Contractowners
-------------- -------------- --------------
BFA Variable Annuity Contracts 76 8
Pension Builder Contracts 571 325
Personal Variable Contracts 5548 127
Premier Variable Contracts 22384 266
Flexible Variable Annuity Contract 39884 39884
Freedom Variable Annuity Contract 218 218
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 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 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 President
The Principal
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
Financial Group Development
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 & 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-Mutual Funds
The Principal
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-
The Principal Marketing
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 that in restricting cash withdrawals from
Tax Sheltered Annuities to prohibit cash withdrawals before the
Participant attains age 59 1/2, separates from service, dies, or
becomes disabled or in the case of hardship, Registrant acts in
reliance of SEC No Action Letter addressed to American Counsel of Life
Insurance (available November 28, 1988). Registrant further undertakes
that:
1. Registrant has included appropriate disclosure regarding the
redemption restrictions imposed by Section 403(b)(11) in its
registration statement, including the prospectus, used in
connection with the offer of the contract;
2. Registrant will include appropriate disclosure regarding the
redemption restrictions imposed by Section 403(b)(11) in any
sales literature used in connection with the offer of the
contract;
3. Registrant will instruct sales representatives who solicit Plan
Participants to purchase the contract specifically to bring the
redemption restrictions imposed by Section 403(b)(11) to the
attention of the potential Plan Participants; and
4. Registrant will obtain from each Plan Participant who purchases a
Section 403(b) annuity contract, prior to or at the time of such
purchase, a signed statement acknowledging the Plan Participant's
understanding of (a) the restrictions on redemption imposed by
Section 403(b)(11), and (b) the investment alternatives available
under the employer's Section 403(b) arrangement, to which the
Plan Participant may elect to transfer his contract value.
REPRESENTATION PURSUANT TO SECTION 26 OF THE INVESTMENT COMPANY ACT OF 1940
Principal Mutual Life Insurance Company represents the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
<PAGE>
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, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of the Registration Statement and has duly caused
this Amendment to the Registration Statement to be signed on its behalf by the
undersigned thereto duly authorized in the City of Des Moines and State of Iowa,
on the 28th day of February, 2000
PRINCIPAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B
(Registrant)
By: PRINCIPAL LIFE INSURANCE COMPANY
(Depositor)
/s/ David J. Drury
By ______________________________________________
David J. Drury
Chairman and Chief Executive Officer
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 February 28, 2000
- -------------------- Director
D. J. Drury
/s/ D. C. Cunningham Vice President and February 28, 2000
- -------------------- Controller (Principal
D. C. Cunningham Accounting Officer)
/s/ M. H. Gersie Executive Vice President and February 28, 2000
- -------------------- Chief Financial Officer
M. H. Gersie (Principal Financial Officer)
(B. J. Bernard)* Director February 28, 2000
- --------------------
B. J. Bernard
(J. Carter-Miller)* Director February 28, 2000
- --------------------
J. Carter-Miller
(C. D. Gelatt, Jr.)* Director February 28, 2000
- --------------------
C. D. Gelatt, Jr.
(J. B. Griswell)* Director February 28, 2000
- --------------------
J. B. Griswell
(G. D. Hurd)* Director February 28, 2000
- --------------------
G. D. Hurd
(C. S. Johnson)* Director February 28, 2000
- --------------------
C. S. Johnson
(W. T. Kerr)* Director February 28, 2000
- --------------------
W. T. Kerr
(L. Liu)* Director February 28, 2000
- --------------------
L. Liu
(V. H. Loewenstein)* Director February 28, 2000
- --------------------
V. H. Loewenstein
(R. D. Pearson)* Director February 28, 2000
- --------------------
R. D. Pearson
(F. F. Pena)* Director February 28, 2000
- --------------------
F. F. Pena
(J. R. Price)* Director February 28, 2000
- --------------------
J. R. Price, Jr.
(D. M. Stewart)* Director February 28, 2000
- --------------------
D. M. Stewart
(E. E. Tallett)* Director February 28, 2000
- --------------------
E. E. Tallett
(F. W. Weitz)* Director February 28, 2000
- --------------------
F. W. Weitz
*By /s/ David J. Drury
------------------------------------
David J. Drury
Chairman
Pursuant to Powers of Attorney
Previously Filed or Included Herein
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life
Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and
appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each
of them (with full power to each of them to act alone), the undersigned's true
and lawful attorney-in-fact and agent, with full power of substitution to each,
for and on behalf and in the name, place and stead of the undersigned, to
execute and file any of the documents referred to below relating to registration
under the Securities Act of 1933 with respect to variable annuity contracts,
with premiums received in connection with such contracts held in the Principal
Life Insurance Company Separate Account B on Form N-4 or other forms under the
Securities Act of 1933, and any and all amendments thereto and reports
thereunder with all exhibits and all instruments necessary or appropriate in
connection therewith, each of said attorneys-in-fact and agents and his or their
substitutes being empowered to act with or without the others or other, and to
have full power and authority to do or cause to be done in the name and on
behalf of the undersigned each and every act and thing requisite and necessary
or appropriate with respect thereto to be done in and about the premises in
order to effectuate the same, as fully to all intents and purposes as the
undersigned might or could do in person; hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this
28th day of February, 2000.
/s/ Federico F. Pena
__________________________
F. F. Pena
