Kansas City Life Variable Life Separate Account
Filed: 3 Jan 02, 12:00am
As filed with the Securities and Exchange Commission on January 3, 2002. Registration No. 333-69508
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF
UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
Kansas City Life Variable Life Separate Account (Exact name of trust)
KANSAS CITY LIFE INSURANCE COMPANY
(Name of depositor)
3520 Broadway
Kansas City, Missouri 64111-2565
(Complete address of depositor's principal
executive offices)
C. John Malacarne
Kansas City Life Insurance Company
3520 Broadway Kansas City, Missouri 64111-2565
(Name and complete address of agent for service)
Copy to: Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
It is proposed that this filing will become effective as soon as practicable after the effective date.
Title of Securities Being Registered: Flexible Premium Variable Joint Survivorship Life Insurance Contracts.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
PROSPECTUS
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE CONTRACT
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT OF
Kansas City Life Insurance Company
Home Office: Correspondence to:
3520 Broadway Variable Administration
Kansas City, Missouri 64111-2565 P.O. Box 219364
Telephone (816) 753-7000 Kansas City, Missouri 64121-9364
Telephone (800) 616-3670
This Prospectus describes a flexible Premium survivorship variable universal life insurance contract (“Contract”) offered by Kansas City Life Insurance Company (“Kansas City Life”). We have provided a definition section at the beginning of this Prospectus for your reference as you read.
The Contract is designed to provide insurance protection upon the death of the second of the two Insureds named in the Contract. The Contract also provides you the opportunity to allocate Premiums and Contract Value to one or more Subaccounts of the Kansas City Life Variable Life Separate Account (“Variable Account”) or to the Fixed Account. The assets of each Subaccount are invested in a corresponding portfolio of a designated mutual fund (“Funds”) as follows:
| MFS(R)VARIABLE INSURANCE TRUSTSM | MANAGER |
|---|---|
| MFS Emerging Growth Series | MFS Investment Management(R) |
| MFS Research Series | |
| MFS Total Return Series | |
| MFS Utilities Series | |
| MFS Global Governments Series | |
| MFS Bond Series |
| AMERICAN CENTURY VARIABLE PORTFOLIOS | MANAGER |
|---|---|
| American Century VP Capital Appreciation | American Century Investment Management, Inc. |
| American Century VP Income & Growth | |
| American Century VP International | |
| American Century VP Value |
| FEDERATED INSURANCE SERIES | MANAGER |
|---|---|
| Federated American Leaders Fund II | Federated Investment Management Company |
| Federated High Income Bond Fund II | Federated Investment Management Company Federated |
| Prime Money Fund II | Federated Investment Management Company |
| Federated International Small Company Fund II | Federated Global Investment Management Corp. |
| DREYFUS VARIABLE INVESTMENT FUND | MANAGER |
|---|---|
| Appreciation Portfolio(Initial Class) | The Dreyfus Corporation |
| Small Cap Portfolio(Initial Class) |
| DREYFUS STOCK INDEX FUND(Initial Class) | MANAGER |
|---|---|
| The Dreyfus Corporation | |
| Sub-Investment Adviser: Mellon Equity Associates |
| THE DREYFUS SOCIALLY | MANAGER |
|---|---|
| RESPONSIBLE GROWTH FUND, INC. (INITIAL CLASS) | |
| The Dreyfus CorporationSub-Investment Adviser: NCM | |
| Capital Management Group, Inc. |
| J.P. MORGAN SERIES TRUST II | MANAGER |
|---|---|
| J.P. Morgan U.S. Disciplined Equity Portfolio | J.P. Morgan Investment Management Inc. |
| J.P. Morgan Small Company Portfolio |
| FRANKLIN TEMPLETON VARIABLE INSURANCE | MANAGER |
|---|---|
| PRODUCTS TRUST | |
| Templeton International Securities Fund (Class 2) | Templeton Investment Counsel, Inc. |
| Franklin Small Cap Fund (Class 2) | Franklin Advisers, Inc. |
| Franklin Real Estate Fund (Class 2) | Franklin Advisers, Inc. |
| Templeton Developing Markets Securities Fund (Class 2) | Templeton Asset Management Ltd. |
| CALAMOS ADVISORS TRUST | MANAGER |
|---|---|
| Calamos Convertible Portfolio | Calamos Asset Management, Inc. |
| A.I.M VARIABLE INSURANCE FUNDS | MANAGER |
|---|---|
| AIM V.I. Dent Demographic Trends Fund | A I M Advisors, Inc. |
| AIM V.I. New Technology Fund | |
| AIM V.I. Value Fund |
| SELIGMAN PORTFOLIOS, INC. | MANAGER |
|---|---|
| Seligman Capital Portfolio(Class 2) | J. & W. Seligman & Co. Incorporated |
| Seligman Communications and Information Portfolio (Class 2) |
The accompanying prospectuses for the Funds describe these portfolios. The value of amounts allocated to the Variable Account will vary according to the investment performance of the Portfolios of the Funds. You bear the entire investment risk of amounts allocated to the Variable Account. Another choice available for allocation of Premiums is our Fixed Account. The Fixed Account is part of Kansas City Life’s general account. It pays interest at declared rates guaranteed to equal or exceed 4%.
The Contract also offers you the flexibility to vary the amount and timing of Premiums and to change the amount of Death Benefits payable. This flexibility allows you to provide for your changing insurance needs under a single insurance contract.
You can select from three Coverage Options available under the Contract:
We also offer a Guaranteed Minimum Death Benefit Option which guarantees payment of the Specified Amount (less the Loan Balance and past due charges) upon the death of the last surviving Insured provided that you meet the Premium requirements.
The Contract provides for a value that you can receive by surrendering the Contract. There is no guaranteed minimum value and there may be no cash surrender value on early surrenders. If the value is insufficient to cover the charges due under the Contract, the Contract will lapse without value. It may not be advantageous to replace existing insurance. Within certain limits, you may return the Contract or exercise a no-fee transfer right.
This Prospectus and the accompanying fund prospectuses provide important information you should have before deciding to purchase a Contract. Please keep these for future reference.
An investment in the Contract is not a deposit or obligation of, or guaranteed or endorsed by, any bank, nor is the Contract federally insured by the Federal Deposit Insurance Corporation or any other government agency. An investment in the Contract involves certain risks, including the loss of Premiums (principal).
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
DEFINITIONS....................................................................1 SUMMARY AND DIAGRAM OF THE CONTRACT............................................4 DIAGRAM OF CONTRACT............................................................5 TABLE OF FUND EXPENSES.........................................................9 GENERAL INFORMATION ABOUT KANSAS CITY LIFE....................................13 KANSAS CITY LIFE INSURANCE COMPANY..........................................13 THE VARIABLE ACCOUNT AND THE FUNDS............................................13 KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT.............................13 THE FUNDS...................................................................13 RESOLVING MATERIAL CONFLICTS................................................17 ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS...........................17 VOTING RIGHTS...............................................................17 PURCHASING A CONTRACT.........................................................19 APPLYING FOR A CONTRACT.....................................................19 REPLACEMENT OF EXISTING INSURANCE...........................................19 DETERMINATION OF CONTRACT DATE..............................................19 PREMIUMS......................................................................20 PREMIUMS....................................................................20 PREMIUMS TO PREVENT LAPSE...................................................22 ALLOCATION AND TRANSFERS......................................................22 PREMIUM ALLOCATIONS AND CREDITING...........................................23 TRANSFER PRIVILEGE..........................................................23 DOLLAR COST AVERAGING PLAN..................................................23 PORTFOLIO REBALANCING PLAN..................................................24 FIXED ACCOUNT.................................................................24 MINIMUM GUARANTEED AND CURRENT INTEREST RATES...............................25 CALCULATION OF FIXED ACCOUNT VALUE..........................................25 DELAY OF PAYMENT............................................................25 CHARGES AND DEDUCTIONS........................................................26 PREMIUM EXPENSE CHARGES.....................................................26 COST OF INSURANCE CHARGE....................................................26 DAILY MORTALITY AND EXPENSE RISK CHARGE.....................................28 TRANSFER PROCESSING FEE.....................................................28 SURRENDER CHARGE............................................................28 PARTIAL SURRENDER FEE.......................................................28 FUND EXPENSES...............................................................28 REDUCED CHARGES FOR ELIGIBLE GROUPS.........................................28 OTHER TAX CHARGE............................................................29 HOW YOUR CONTRACT VALUES VARY.................................................29 BONUS ON CONTRACT VALUE IN THE VARIABLE ACCOUNT.............................29 DETERMINING THE CONTRACT VALUE..............................................29 CASH SURRENDER VALUE........................................................30 DEATH BENEFIT.................................................................30 AMOUNT OF DEATH PROCEEDS....................................................31 TOTAL SUM INSURED, SPECIFIED AMOUNT, ADDITIONAL INSURANCE AMOUNT............31 COVERAGE OPTIONS............................................................31 CORRIDOR DEATH BENEFIT......................................................31 GUARANTEED MINIMUM DEATH BENEFIT OPTION.....................................32 EFFECT OF COMBINATIONS OF SPECIFIED AMOUNT AND ADDITIONAL INSURANCE AMOUNT..33 CHANGES IN DEATH BENEFIT......................................................33 EFFECT OF INVESTMENT PERFORMANCE ON DEATH BENEFIT...........................33 CHANGES IN COVERAGE OPTION..................................................33 INCREASES IN THE ADDITIONAL INSURANCE AMOUNT................................34 DECREASES IN TOTAL SUM INSURED..............................................34 CASH BENEFITS.................................................................35 CONTRACT LOANS..............................................................35 SURRENDERING THE CONTRACT FOR CASH SURRENDER VALUE..........................36 PARTIAL SURRENDERS..........................................................36 PAYMENT OPTIONS.............................................................37 SPECIALIZED USES OF THE CONTRACT............................................37 ILLUSTRATIONS.................................................................37 ASSUMPTIONS.................................................................39 CHARGES ILLUSTRATED.........................................................39 OTHER CONTRACT BENEFITS AND PROVISIONS........................................45 LIMITS ON RIGHTS TO CONTEST THE CONTRACT....................................45 CHANGES IN THE CONTRACT OR BENEFITS.........................................45 PAYMENT OF PROCEEDS.........................................................46 REPORTS TO CONTRACT OWNERS..................................................46 SELECTING AND CHANGING THE BENEFICIARY......................................46 SIMULTANEOUS DEATH OF BENEFICIARY AND THE LAST SURVIVING INSURED............46 CHANGE OF OWNERSHIP.........................................................46 ASSIGNMENT..................................................................46 REINSTATEMENT OF CONTRACT...................................................47 OPTIONAL RIDERS.............................................................47 TAX CONSIDERATIONS............................................................48 INTRODUCTION................................................................48 TAX STATUS OF THE CONTRACT..................................................48 TAX TREATMENT OF CONTRACT BENEFITS..........................................48 OUR INCOME TAXES............................................................50 POSSIBLE TAX LAW CHANGES....................................................50 OTHER INFORMATION ABOUT THE CONTRACTS AND KANSAS CITY LIFE....................50 SALE OF THE CONTRACTS.......................................................50 TELEPHONE, FACSIMILE AND ELECTRONIC MAIL AUTHORIZATIONS.....................51 KANSAS CITY LIFE DIRECTORS AND EXECUTIVE OFFICERS...........................51 STATE REGULATION............................................................53 ADDITIONAL INFORMATION......................................................53 EXPERTS.....................................................................53 LITIGATION..................................................................53 COMPANY HOLIDAYS............................................................54 LEGAL MATTERS...............................................................54 FINANCIAL STATEMENTS........................................................54
| DEFINITIONS | |
|---|---|
| Accumulation Unit | An accounting unit used to measure the net investment results of each of the Subaccounts. |
| Additional Insurance Amount | The amount of insurance coverage under the Contract which is not part of the Specified Amount. The Guaranteed Minimum Death Benefit Option, if elected, does not guarantee the Additional Insurance Amount. |
| Age | The age of each Insured on their last birthday as of each Contract Anniversary. The Contract is issued at the Age shown in the Contract. |
| Allocation Date | The date we apply the initial Premium to your Contract. We allocate this Premium to the Federated Prime Money Fund II Subaccount where it remains until the Reallocation Date. The Allocation Date is the later of the date we approve your application or the date we receive the initial Premium at our Home Office. |
| Beneficiary | The person you have designated to receive any proceeds payable at the death of the last surviving Insured. |
| Cash Surrender Value | The Contract Value less any applicable surrender charge and any Loan Balance. |
| Contract Anniversary | The same day and month as the Contract Date each year that the Contract remains in force. |
| Contract Date | The date on which coverage takes effect, Contract Months, Years and Anniversaries are measured from the Contract Date. |
| Contract Value | Measure of the value in your Contract. It is the sum of the Variable Account Value and the Fixed Account Value which includes the Loan Account Value. |
| Contract Year | Any period of twelve months starting with the Contract Date or any Contract Anniversary. |
| Corridor Death Benefit | A Death Benefit under the Contract designed to ensure that in certain situations the Contract will not be disqualified as a life insurance contract under Section 7702 of the Internal Revenue Code, as amended. The Corridor Death Benefit is calculated by multiplying the Contract Value by the applicable corridor percentage. |
| Coverage Options | Death Benefit options available which affect the calculation of the Death Benefit. Three coverage options (A, B or L) are available. |
| Death Proceeds | The amount of proceeds payable upon the death of the last surviving Insured. |
| Fixed Account Value | Measure of value accumulating in the Fixed Account. |
| Grace Period | A 61-day period we provide when there is insufficient value in your Contract and after which the Contract will terminate unless you pay additional Premium. This period of time gives you the chance to pay enough Premiums to keep your Contract in force. |
| Guaranteed Minimum Death Benefit Option | An optional benefit, available only at issue of the Contract. If elected, it guarantees payment of the Specified Amount less the Loan Balance and any past due charges upon the death of the last surviving Insured, provided you meet the Guaranteed Minimum Death Benefit Option Premium requirement. |
| Guaranteed Minimum Death Benefit Option Premium | The amount we require to guarantee that the Guaranteed Minimum Death Benefit Option remains in effect. |
| Guaranteed Monthly Premium | A Premium amount which when paid guarantees that your Contract will not lapse during the Guaranteed Payment Period. |
| Guaranteed Payment Period | The period of time during which we guarantee that your Contract will not lapse if you pay the Guaranteed Monthly Premiums. |
| Home Office | P.O. Box 219364, Kansas City, Missouri 64121-9364. |
| Insureds | The two persons whose lives we insure under the Contract. |
| Lapse | Termination of the Contract because there is not enough value in the Contract when the Grace Period ends. |
| Loan Account | The Loan Account is used to track loan amounts and accrued interest on the loan. It is part of the Fixed Account. |
| Loan Account Value | Measure of the amount of Contract Value assigned to the Loan Account. |
| Loan Balance | The sum of all outstanding Contract loans plus accrued interest. |
| Monthly Anniversary Day | The day of each month as of which we make the Monthly Deduction. It is the same day of each month as the Contract Date, or the last day of the month for those months not having such a day. |
| Monthly Deduction | The amount we deduct from the Contract Value to pay the cost of insurance charge, monthly expense charges, any applicable Guaranteed Minimum Death Benefit Option charge, and any charges for optional benefits and/or riders. We make the Monthly Deduction as of each Monthly Anniversary Day. |
| Net Investment Factor | An index used to measure Subaccount performance. We describe calculation of the Net Investment Factor on page 30. |
| Owner, You, Your | The person entitled to exercise all rights and privileges of the Contract. |
| Planned Premiums | The amount and frequency of Premiums you chose to pay in your last instructions to us. This is the amount we will bill you. It is only an indication of your preferences of future Premiums. |
| Premium Expense Charges | The amounts we deduct from each Premium which include the Sales Charge and the Premium Tax Charge. |
| Premium(s) | The amount you pay to purchase the Contract. It includes both Planned Premiums and Unscheduled Premiums. |
| Proceeds | The total amount we are obligated to pay. |
| Reallocation Date | The date as of which the Contract Value we initially allocated to the Federated Prime Money Fund II Subaccount on the Allocation Date is allocated to the Subaccounts and/or to the Fixed Account. We allocate the Contract Value based on the Premium allocation percentages you specify in the application. The Reallocation Date is 30 days after the Allocation Date. |
| Specified Amount | The Total Sum Insured less any Additional Insurance Amount provided under the Contract. |
| Subaccounts | The divisions of the Variable Account. The assets of each Subaccount are invested in a corresponding portfolio of a designated mutual fund. |
| Subaccount Value | Measure of the value in a particular Subaccount. |
| Total Sum Insured | The sum of the Specified Amount and any Additional Insurance Amount provided under the Contract. This amount does not include any additional benefits provided by riders. |
| Unscheduled Premium | Any Premium other than a Planned Premium . |
| Valuation Day | Each day the New York Stock Exchange is open for business. |
| Valuation Period | The interval of time beginning at the close of business on one Valuation Day and ending at the close of business on the next Valuation Day. Close of business is at 3 p.m. Central Standard Time. |
| Variable Account Value | The Variable Account Value is equal to the sum of all Subaccounts Values of a Contract. |
| We, Our, Us, Kansas City Life | Kansas City Life Insurance Company |
| Written Notice/Written Request | A written notice or written request in a form satisfactory to us that is signed by the Owner and received at the Home Office. |
The following summary of Prospectus information and diagram provides an overview of the Contract. Please read it along with the detailed information which follows in this Prospectus and the Contract.
Who Should Purchase a Contract. The Contract is designed to provide long-term insurance benefits on the two Insureds and may also provide long-term accumulation of value. You should evaluate the Contract in conjunction with other insurance policies that you own and you should consider your insurance needs and the Contract’s long-term investment potential. It may not be advantageous to replace existing insurance coverage with this Contract. You should carefully consider replacement especially if the decision to replace existing coverage is based solely on a comparison of illustrations. (See “ILLUSTRATIONS,” on page 38 and “Specialized Uses of the Contract,” on page 37.)
The Contract.The Contract is a flexible premium survivorship variable universal life insurance contract. As long as it remains in force it provides lifetime insurance protection on the death of the second of the two Insureds. You pay Premiums for insurance coverage. The Contract also provides for accumulation of Premiums and a value if the Contract terminates. The value during the early years of the Contract is likely to be much lower than the Premiums paid.
The Death Benefit may and the Contract Value will increase or decrease to reflect the investment performance of the Subaccounts to which you allocate Premiums. There is no guaranteed minimum value. However, there is a Guaranteed Minimum Death Benefit Option. Under this option we guarantee that we will pay the Specified Amount upon the death of the last surviving Insured (regardless of the Contract’s investment performance) as long as you have met the Guaranteed Minimum Death Benefit Option Premium requirement. (See “Guaranteed Minimum Death Benefit Option,” page 32.) If this option in not in effect and the value is not enough to pay charges due, then the Contract will lapse without value after a Grace Period. (See ” Premiums to Prevent Lapse,” page 22.) We do guarantee to keep the Contract in force during the first three years of the Contract as long as you meet certain Premium requirements. (See “Guaranteed Payment Period and Guaranteed Monthly Premium” page 21). If a Contract lapses while loans are outstanding, adverse tax consequences may result. (See “TAX CONSIDERATIONS,” page 48.) The Contract also permits loans and partial surrenders, within limits.
We may offer other variable life insurance contracts that have different death benefits, contract features and optional programs. These contracts would also have different charges that would affect your Subaccount performance and Contract Value. To obtain more information about these other contracts, contact your registered representative.
Free Look Right to Cancel. For a limited time, you have the right to cancel your Contract and receive a refund. (See "Free Look Right to Cancel Contract", page 20.)
Illustrations. Illustrations in this Prospectus or those used in connection with the purchase of a Contract are based on hypothetical rates of return. These rates are not guaranteed. They are illustrative only and do not show past or future performance. Actual rates of return may be higher or lower than those shown in Contract illustrations. Actual Contract Values will be different from those illustrated.
The illustrations show Contract Values based on both current charges and guaranteed charges. (See “ILLUSTRATIONS,” page 37.)
Contract Tax Compliance.We intend for the Contract to satisfy the definition of a life insurance contract under Section 7702 of the Internal Revenue Code. Due to the lack of guidance, however, there is uncertainty in this regard, particularly if you pay the full amount of Premiums permitted under the Contract. Under certain circumstances, federal tax law views a Contract as a “modified endowment contract.” Violation of the definition of life insurance and/or designation as a “modified endowment contract” will affect the tax advantages offered. We will monitor Contracts and will notify you on a timely basis if, based on our interpretation, your Contract is in jeopardy of violating the definition of life insurance or becoming a modified endowment contract. (See”TAX CONSIDERATIONS,” page 48, for further discussion of the tax status of a Contract and the tax consequences.)
Owner Inquiries. If you have any questions, you may write or call Kansas City Life's Home Office at P.O. Box 219364, Kansas City, MO 64121-9364, 1-800-616-3670.
For information concerning compensation paid for the sale of Contracts, see “Sale of the Contracts,” page 49.
| The portfolios in the Funds pay management (or investment advisory) fees and other expenses. The following tables helps you understand the costs and expenses you will bear, directly or indirectly. The table shows Fund expenses for the year ended December 31, 2000, as a percentage of each Fund’s average net assets. |
MFS MFS MFS
Emerging MFS Total MFS Global MFS
Growth Research Return Utilities Gov't Bond
Series Series Series Series Series Series
MFS(R)Variable Insurance TrustSM Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75% 0.75% 0.75% 0.75% 0.75% 0.60%
Other Expenses 1/ 0.10% 0.10% 0.15% 0.16% 0.32% 0.40%
Total Annual Fund Expenses 1/ 0.85% 0.85% 0.90% 0.91% 1.07% 1.00%
Expense Reimbursement2/ _NA_ _NA_ _NA_ _NA_ (0.16%) (0.24%)
Net Annual Fund Expenses1/ 0.85% 0.85% 0.90% 0.91% 0.91% 0.76%
Am Cent Am Cent VP
VP Capital Income & Am Cent VP Am Cent
Appreciation Growth International VP Value
American Century Variable Portfolios Annual Expenses (as a
percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.98% 0.70% 1.23% 1.00%
Other Expenses 3/ 0.00% 0.00% 0.00% 0.00%
Total Annual Fund Expenses3/ 0.98% 0.70% 1.23% 1.00%
Federated Federated Federated Federated
American High Income Prime International
Leaders Bond Money Small Company
Fund II Fund II Fund II Fund II
Federated Insurance Series Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75% 0.60% 0.50% 1.25%
Rule 12b-1 Fees 4/ NA NA NA 0.25%
Shareholder Services Fee 4/ 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.12% 0.16% 0.19% 4.49%5/
Total Annual Fund Expenses 4/ 1.12% 1.01% 0.94% 6.24%
Waiver of Fund Expenses 4/ (0.25%) (0.25%) (0.27%) (4.74%)
Net Annual Fund Expenses 4/ 0.87% 0.76% 0.67% 1.50%
Dreyfus Dreyfus
Appreciation Small Cap
Portfolio - Portfolio -
Initial Shares Initial Shares
Dreyfus Variable Investment Fund Annual Expenses (as a
percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75% 0.75%
Other Expenses 0.03% 0.03%
Total Annual Fund Expenses 0.78% 0.78%
Dreyfus Stock
Index Fund -
Initial
Shares
Dreyfus Stock Index Fund Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.25%
Other Expenses 0.01%
Net Annual Fund Expenses 0.26%
The Dreyfus
Socially
Responsible
Growth Fund,
Inc. - Initial
Shares
The Dreyfus Socially Responsible Growth Fund, Inc.
Annual Expenses (as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Other Expenses 0.03%
Net Annual Fund Expenses 0.78%
JP Morgan JP Morgan
U.S. Small Company
Disciplined Portfolio
Equity
Portfolio
J.P. Morgan Series Trust II Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.35% 0.60%
Other Expenses 0.52% 1.97%
Total Annual Fund Expenses 6/ 0.87% 2.57%
Expense Reimbursement 6/ (0.02%) (1.42%)
Net Annual Fund Expenses 6/ 0.85% 1.15%
Templeton
Templeton Developing
International Franklin Small Franklin Real Markets
Securities Cap Fund (Class Estate Fund Securities Fund
Fund (Class 2) 2) 7/ (Class 2) (Class 2) 7/
7/
Franklin Templeton Variable Insurance Products Trust Annual
Expenses (as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.67% 0.53% 0.58% 1.25%
Rule 12b-1 Fees 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.20% 0.28% 0.02% 0.31%
Total Annual Fund Expenses 1.12% 1.06% 0.85% 1.81%
Management Fee Reduction NA (0.04%) NA NA
Net Annual Fund Operating Expense 1.12% 1.02% 0.85% 1.81%
Calamos
Convertible
Portfolio
Calamos Advisors Trust Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.75%
Other Expenses 2.69%
Total Annual Fund Expenses 3.44%
Expense Reimbursement (2.44%)
Net Annual Fund Expenses8/ 1.00%
AIM V.I. Dent AIM V.I. New AIM V.I.
Demographic Fund Technology Fund Value Fund
AIM Variable Insurance Funds
Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.72% 1.00% 0.61%
Other Expenses 0.81% 0.31% 0.23%
Total Annual Fund Expenses 1.63% 1.31% 0.84%
Waiver of Fund Expenses (0.13%) N/A N/A%
Net Annual Fund Expenses8/ 1.50%9/10/ 1.31% 0.84%
Seligman Capital Seligman Communications
Portfolio (Class 2) and Information Portfolio
(Class 2)
Seligman Portfolios, Inc. Annual Expenses
(as a percentage of average net assets)
Management Fees (Investment Advisory Fees) 0.40% 0.75%
Rule 12b-1 Fees 0.25% 0.25%
Other Expenses 0.19% 0.12%
Total Annual Fund Expenses 0.84% 1.12%
Waiver of Fund Expenses N/A%11/ N/A11/
Net Annual Fund Expenses8/ 0.84%11/ 1.12%11/
The above tables are intended to assist you in understanding the costs and expenses that you will bear, directly or indirectly. The tables reflect expenses of the Variable Account as well as for the Funds. The Contract Owner transaction expenses, annual administration fee, and Variable Account annual expenses are based on charges described in the Contract. The annual expenses for the Funds are expenses for the most recent fiscal year, except as noted below. For a more complete description of the various costs and expenses, see “CHARGES AND DEDUCTIONS” on page 29 of this Prospectus and the prospectuses for the underlying Funds that accompany it.
__________
| 1/ | Each series has an expense offset arrangement which reduces the series’ custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. Each series may enter into other such arrangements and directed brokerage arrangements, which would also have the effect of reducing the series’ expenses. “Other Expenses” do not take into account these expense reductions and are therefore higher than the actual expenses of the series. Had these fee reductions been taken into account, “Net Expenses” would be lower for certain series and would equal: |
0.84% for Emerging Growth Series 0.90% for Utilities Series
0.85% for Research Series 0.90% for Global Governments Series
0.89% for Total Return Series 0.75% for Bond Series
| 2/ | MFS has contractually agreed, subject to reimbursement, to bear expenses for these series such that each such series’ “Other Expenses” (after taking into account the expense offset arrangement described above), do not exceed the following percentages of the average daily net assets of the series during the current fiscal year: |
0.15% for Global Governments Series 0.15% for Bond Series
| These contractual fee arrangements will continue until at least May 1, 2002, unless changed with the consent of the board of trustees which oversees the series. |
| 3/ | The investment adviser to American Century Variable Portfolios pays all the expenses of the Fund except brokerage, taxes, interest, fees and expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. For the services provided to the American Century VP Capital Appreciation Fund, the manager receives an annual fee of 1.00% of the first $500 million of the average net assets of the fund, 0.95% of the next $500 million and 0.90% thereafter. For the services provided to the American Century VP International Fund, the manager receives an annual fee of 1.50% of the first $250 million of the average net assets of the fund, 1.20% of the next $250 million and 1.10% thereafter. For the services provided to the American Century VP Value Fund, the manager receives an annual fee of 1.00% of the first $500 million of the average net assets of the fund, 0.95% of the next $500 million and 0.90% thereafter. |
| 4/ | The Fund did not pay or accrue the shareholder services fee on the Rule 12b-1 fee during the fiscal year ended December 31, 2000. The Fund has no present intention of paying or accruing the shareholder service fee during the fiscal year ending December 31, 2001. |
| 5/ | Since the Fund recently commenced operations, Other Expenses is based on estimates for the current year. |
| 6/ | The trust, on behalf of each portfolio, has an Administrative Services Agreement (the “Services Agreement”) with Morgan Guaranty Trust Company of New York (“Morgan Guaranty”), under which Morgan Guaranty is responsible for certain aspects of the administration and operation of each portfolio. Under the Service Agreement, each portfolio has agreed to pay Morgan Guaranty a fee based on the percentages described below. If total expenses of each portfolio, excluding the advisory fees, exceed the expense limits of: 0.50% of the average daily net assets of J.P. Morgan U.S. Disciplined Equity Portfolio and 0.55% of the average daily net assets of J.P. Morgan Small Company Portfolio, Morgan Guaranty will reimburse each portfolio for the excess expense amount and receive no fee. Should such expenses be less than the expense limits, Morgan Guaranty’s fees would be limited to the difference between such expenses and the fees calculated under the Services Agreement. |
| 7/ | Franklin Small Cap Fund expenses have been restated to reflect a new management fee in effect since May 1, 2000. The manager has agreed in advance to reduce its fee to reflect reduced services resulting from the Fund’s involvement in a Franklin Templeton money fund. This reduction is required by the Fund’s Board of Trustees as an order of the Securities Exchange Commission. |
| 8/ | Pursuant to a written agreement the investment manager has voluntarily undertaken to waive fees and/or reimburse portfolio expenses so that the Total Annual Fund Expenses are limited to 1.00% of the portfolio’s average net assets. The fee waiver and/or reimbursement is binding on the investment manager through May 31, 2002. |
| 9/ | Expenses have been restated to reflect current fees |
| 10/ | Expenses have been restated to reflect current fees. The investment advisor has agreed to waive fees and/or reimburse expenses (excluding interest, taxes, dividend expenses on short sales, extraordinary items and increases in expenses due to expense offset arrangements, if any) to limit total annual fund operating expenses to 1.50% of average daily net assets until December 31, 2001. |
| 11/ | The manager of Seligman Capital Portfolio and Seligman Communications and Information Portfolio has voluntarily agreed to reimburse “Other Expenses” of the Portfolio to the extent they exceed 0.20% per annum of average daily net assets. |
Kansas City Life Insurance Company is a stock life insurance company organized under the laws of the State of Missouri in 1895. Kansas City Life is currently licensed to transact life insurance business in 48 states and the District of Columbia.
We are regulated by the Department of Insurance of the State of Missouri as well as by the insurance departments of all other states and jurisdictions in which we do business. We submit annual statements on our operations and finances to insurance officials in such states and jurisdictions. We also file the forms for the Contract described in this Prospectus with insurance officials in each state and jurisdiction in which Contracts are sold.
We are a member of the Insurance Marketplace Standards Association (“IMSA”) and may include the IMSA logo and information about IMSA membership in our advertisements. Companies that belong to IMSA subscribe to a set of ethical standards covering the various aspects of sales and service for individually sold life insurance and annuities.
We established the Kansas City Life Variable Life Separate Account as a separate investment account under Missouri law on April 24, 1995. This Variable Account supports the Contracts and may be used to support other variable life insurance contracts as well as for other purposes permitted by law. The Variable Account is registered with the Securities and Exchange Commission (“SEC”) as a unit investment trust under the Investment Company Act of 1940 (the “1940 Act”) and is a “separate account” within the meaning of the federal securities laws. We have established other separate investment accounts that may also be registered with the SEC.
The Variable Account is divided into Subaccounts. The Subaccounts available under the Contracts invest in shares of portfolios of the Funds. The Variable Account may include other Subaccounts not available under the Contracts and not otherwise discussed in this Prospectus. We own the assets in the Variable Account.
We apply income, gains and losses of a Subaccount (realized or unrealized) without regard to any other income, gains or losses of Kansas City Life or any other separate account. We cannot use Variable Account assets (reserves and other contract liabilities) to cover liabilities arising out of any other business we conduct. We are obligated to pay all benefits provided under the Contracts.
Each of the Funds is registered with the SEC as a diversified open-end management investment company under the 1940 Act. However, the SEC does not supervise their management, investment practices or policies. Each Fund is a series fund-type mutual fund made up of the Portfolios and other series that are not available under the Contracts. The investment objectives of each of the Portfolios is described below.
The investment objectives and policies of certain Portfolios are similar to the investment objectives and policies of other mutual fund portfolios that may be managed by the same investment adviser or manager. The investment results of the Portfolios, however, may be higher or lower than the results of such other portfolios. There can be no assurance that the investment results of any of the Portfolios will be comparable to the investment results of any other portfolios, even if the other portfolio has the same investment adviser or manager.
Not all Funds may be available in all States.
MFS Emerging Growth Series (Manager: MFS Investment Management® ).The Emerging Growth Series seeks to provide long-term growth of capital. Dividend and interest income from portfolio securities, if any, is incidental to the Series’ investment objective of long-term growth of capital. The Series’ policy is to invest primarily (i.e., at least 65% of its assets under normal circumstances) in common stocks of companies that MFS believes are early in their life cycle but which have the potential to become major enterprises (emerging growth companies).
MFS Research Series (Manager: MFS Investment Management® ).The Research Series seeks to provide long-term growth of capital and future income. The Series’ assets are allocated to selected economic sectors and then to industry groups within those sectors.
MFS Total Return Series (Manager: MFS Investment Management® ).The Total Return Series seeks to provide above-average income (compared to a portfolio entirely invested in equity securities) consistent with the prudent employment of capital, and secondarily to provide a reasonable opportunity for growth of capital and income.
MFS Utilities Series (Manager: MFS Investment Management® ). The Utilities Series seeks capital growth and current income (income above that available from a portfolio invested entirely in equity securities). The Series will seek to achieve its objective by investing, under normal circumstances, at least 65% of its assets in equity and debt securities of both domestic and foreign (including emerging market) companies in the utilities industry.
MFS Global Governments Series (Manager: MFS Investment Management® ).The Global Governments Series seeks income and capital appreciation. The Series invests, under normal market conditions, at least 65% of its total assets in U.S. government securities, foreign government securities, corporate bonds, mortgage-backed securities, asset-backed securities, and derivative securities.
MFS Bond Series (Manager: MFS Investment Management® ).The Bond Series seeks primarily to provide as high a level of current income as is believed consistent with prudent investment risk and secondarily to protect Shareholders’ capital. Up to 20% of the Series’ total assets may be invested in lower-rated or non-rated debt securities commonly known as “junk bonds.”
American Century VP Capital Appreciation Portfolio (Manager: American Century Investment Management, Inc.). The investment objective of American Century VP Capital Appreciation is capital growth. The Portfolio will seek to achieve its investment objective by investing primarily in common stocks that are considered by the investment adviser to have better-than-average prospects for appreciation.
American Century VP Income & Growth (Manager: American Century Investment Management, Inc.) . American Century VP Income & Growth seeks dividend growth, current income and capital appreciation. The fund will seek to achieve its investment objective by investing in common stocks.
American Century VP International (Manager: American Century Investment Management, Inc.).The investment objective of American Century VP International Portfolio is capital growth. The Portfolio will seek to achieve its investment objective by investing primarily in an internationally diversified portfolio of common stocks that are considered by management to have prospects for appreciation. International investment involves special risk considerations. These include economic and political conditions, expected inflation rates and currency swings.
American Century VP Value (Manager: American Century Investment Management, Inc.). American Century VP Value seeks long-term capital growth. Income is a secondary objective. The fund will seek to achieve its investment objective by investing in securities that management believes to be undervalued at the time of purchase.
Federated American Leaders Fund II(Manager: Federated Investment Management Company).The primary investment objective of the Federated American Leaders Fund II is to achieve long-term growth of capital. The Fund’s secondary objective is to provide income. The Fund pursues its investment objectives by investing, under normal circumstances, at least 65% of its total assets in common stock of “blue-chip” companies, which are generally top-quality, established growth companies.
Federated High Income Bond Fund II (Manager: Federated Investment Management Company).The investment objective of the Federated High Income Bond Fund II is to seek high current income. The Fund endeavors to achieve its objective by investing primarily in lower-rated corporate debt obligations commonly referred to as “junk bonds.”
Federated International Small Company Fund II (Manager: Federated Global Investment Management Corp). The investment objective is to provide long-term growth of capital. The Fund pursues its investment objective by investing at least 65% of its assets in equity securities of foreign companies that have a market capitalization at the time of purchase of $1.5 billion or less.
Federated Prime Money Fund II (Manager: Federated Investment Management Company).The investment objective of the Federated Prime Money Fund II is to provide current income consistent with stability of principal and liquidity. The Fund pursues its investment objective by investing exclusively in a portfolio of money market instruments maturing in 397 days or less.
Appreciation Portfolio (Manager: The Dreyfus Corporation; Sub-Investment Advisor: Fayez Sarofim & Co.). The portfolio seeks long-term capital growth consistent with the preservation of capital; current income is a secondary goal. To pursue these goals the portfolio invests in common stocks focusing on "blue chip" companies with total market values of more than $5 billion at the time of purchase.
Small Cap Portfolio (Manager: The Dreyfus Corporation). The portfolio seeks to maximize capital appreciation. To pursue this goal, the portfolio primarily invests in small-cap companies with the total market values of less than $2 billion at the time of purchase. The portfolio may continue to hold the securities of companies as their market capitalizations grow and thus, at any given time, a substantial portion of the portfolio holdings may have market capitalizations in excess of $2 billion. The investments may include common stocks, preferred stocks, and convertible stocks, including those issued in initial public offerings.
Dreyfus Stock Index Fund (Manager: The Dreyfus Corporation; Index Sub-Investment Advisor: Mellon Equity Associates).
The fund seeks to match the total return of the Standard & Poor’s 500 Composite Stock Price Index. To pursue this goal, the fund generally invests in all 500 stocks in the S&P 500® in proportion to their weighting in the index. The S&P 500 is an unmanaged index of 500 common stocks chosen to reflect the industries of the U.S. economy and is often considered a proxy for the stock market in general. Each stock is weighted by its market capitalization, which means larger companies have greater representation in the index than smaller ones. The fund may also use stock index futures as a substitute for the sale or purchase of securities. The fund is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the fund.
The Dreyfus Socially Responsible Growth Fund, Inc. (Manager: The Dreyfus Corporation; Sub-Investment Adviser: NCM Capital Management Group, Inc.).
The fund seeks to provide capital growth, with current income as a secondary goal. To pursue these goals, the fund invests primarily in the common stock of companies that, in the opinion of the fund’s management, meet traditional investment standards and conduct their business in a manner that contributes to the enhancement of the quality of life in America.
J.P. Morgan U.S. Disciplined Equity Portfolio (Manager: J.P. Morgan Investment Management Inc.). J.P. Morgan U.S. Disciplined Equity Portfolio seeks to provide a high total return from a portfolio comprised of selected equity securities. Total return will consist of realized and unrealized capital gains and losses plus income less expenses. The Portfolio invests primarily in the common stocks of U.S. corporations typically represented by the Standard & Poor's 500 Stock Index with market capitalizations above $1.5 billion.
J.P. Morgan Small Company Portfolio (Manager: J.P. Morgan Investment Management Inc.). The investment objective of J.P. Morgan Small Company Portfolio is to provide a high total return from a portfolio of equity securities of small companies. Total return will consist of realized and unrealized capital gains and losses plus income less expenses. The Portfolio invests at least 65% of the value of its total assets in the common stock of small U.S. companies primarily with market capitalizations greater than $110 million and less than $1.5 billion.
Effective May 1, 2000, each fund in the Templeton Variable Products Series Fund merged with the similar, corresponding fund of the Franklin Templeton Variable Insurance Products Trust.
Templeton International Securities Fund (Class 2) (Manager: Templeton Investment Counsel, Inc.).The investment objective of Templeton International Securities Fund is long-term capital growth. The Fund invests in equity securities of companies located outside the United States, including those in emerging markets.
Franklin Small Cap Fund (Class 2) (Manager: Franklin Advisers, Inc.). The Fund’s investment goal is long-term capital growth. Under normal market conditions, the Fund will invest at least 65% of its total assets in the equity securities of U.S. small capitalization (small cap) companies. For this Fund, small cap companies are those companies with market cap values not exceeding (i) $1.5 billion; or (ii) the highest market cap value in the Russell 2000 Index; whichever is greater at the time of purchase.
Franklin Real Estate Fund (Class 2) (Manager: Franklin Advisers, Inc). The Fund’s principal investment goal is capital appreciation. Its secondary goal is to earn current income. Under normal market conditions, the Fund will invest at least 65% of its total assets in securities of companies operating in the real estate industry.
Templeton Developing Markets Securities Fund (Class 2) (Manager: Templeton Asset Management Ltd.). The Fund's investment goal is long-term capital appreciation. Under normal market conditions, the Fund will invest at least 65% of its total assets in emerging market equity securities.
Calamos Convertible Portfolio (Manager: Calamos Asset Management, Inc.). Calamos Convertible Portfolio seeks current income as its primary objective with capital appreciation as its secondary objective. The Portfolio invests primarily in a diversified portfolio of convertible securities. These convertible securities may be either debt securities (bonds) or preferred stock that are convertible into common stock, and may be issued by both U.S. and foreign companies.
AIM V.I. Dent Demographic Trends Fund (Manager: A I M Advisors, Inc.). The investment objective is long-term growth of capital. The Fund seeks to meet its objective by investing in securities of companies that are likely to benefit from changing demographic, economic and lifestyle trends.
AIM V.I. New Technology Fund (Manager: A I M Advisors, Inc.)( formerly known as AIM V.I. Telecommunications and Technology Fund). The investment objective is long-term growth of capital. The Fund seeks to meet its objective by investing at least 65% of its total net assets in equity securities of technology and science companies.
AIM V.I. Value Fund (Manager: A I M Advisors, Inc.). The investment objective is to achieve long-term growth of capital. Income is a secondary objective. The Fund seeks to meet its objectives by investing primarily in equity securities judged by the Fund's investment advisor to be undervalued relative to the investment advisor's appraisal of the current or projected earnings of the companies issuing the securities or relative to the equity market generally.
Seligman Capital Portfolio (Class 2) (Manager: J. & W. Seligman & Co. Incorporated). The objective is capital appreciation. The Portfolio invests primarily in the common stock of medium-sized U.S. companies.
Seligman Communications and Information Portfolio (Class 2) (Manager: J. & W. Seligman & Co. Incorporated). The Portfolio's objective is capital gain. The Portfolio seeks to achieve this objective by investing at least 80% of its net assets, exclusive of government securities, short-term notes, and cash and cash equivalents, in securities of companies operating in the communications, information and related industries. The Portfolio generally invests at least 65% of its total assets in securities of companies engaged in these industries.
See the current prospectus for each Fund that accompanies this Prospectus as well as the current Statement of Additional Information for each Fund. These important documents contain more detailed information regarding all aspects of the Funds. Please read the prospectuses for the Funds carefully before making any decision concerning the allocation of Premiums or transfers among the Subaccounts.
We (or our affiliates) may receive significant compensation from a Fund’s 12b-1 fees or from a Fund’s investment adviser (or its affiliates) in connection with administration, distribution, or other services provided with respect to the Funds and their availability through the Contracts. The amount of this compensation is generally based upon a percentage of the assets of the Fund attributable to the Contracts and other contracts we issue. These percentages differ and some Funds or their advisers (or affiliates) may pay us (or our affiliates) more than others. Currently, these percentages range from 0.15% to 0.25%.
We cannot guarantee that each Fund or portfolio will always be available for the Contracts, but in the event that a Fund or portfolio is not available, we will take reasonable steps to secure the availability of a comparable fund. Shares of each portfolio are purchased and redeemed at net asset value, without a Sales Charge.
The Funds presently serve as the investment medium for the Contracts. In addition, the Funds are available to registered separate accounts of other insurance companies offering variable annuity and variable life insurance contracts.
We do not currently foresee any disadvantages to you resulting from the Funds selling shares to fund products other than the Contracts. However, there is a possibility that a material conflict of interest may arise between Contract Owners and the owners of variable contracts issued by other companies whose values are allocated to one of the Funds.Shares of some of the Funds may also be sold to certain qualified pension and retirement plans qualifying under Section 401 of the Code. As a result, there is a possibility that a material conflict may arise between the interests of Owners or owners of other contracts (including contracts issued by other companies), and such retirement plans or participants in such retirement plans. In the event of a material conflict, we will take any necessary steps, including removing the Variable Account from that Fund, to resolve the matter. The Board of Directors of each Fund will monitor events in order to identify any material conflicts that may arise and determine what action, if any, should be taken in response to those events or conflicts. See the accompanying prospectuses of the Funds for more information.
Subject to applicable law, we may make additions to, deletions from, or substitutions for the shares that are held in the Variable Account or that the Variable Account may purchase. If the shares of a portfolio are no longer available for investments or if further investment in any portfolio should become inappropriate (in our judgment) in view of the purposes of the Variable Account or for any reason in our sole discretion, we may redeem the shares, if any, of that portfolio and substitute shares of another registered open-end management investment company. The substituted fund may have different fees and expenses. Substitutions may be made with respect to existing investments or the investment of future Premiums or both. We will not substitute any shares attributable to a Contract’s interest in a Subaccount of the Variable Account without notice and prior approval of the SEC and state insurance authorities, to the extent required by applicable law.
Subject to applicable law and any required SEC approval, we may establish new Subaccounts or eliminate one or more Subaccounts if marketing needs, tax considerations or investment conditions warrant or for any other reason, in our sole discretion. We will determine on what basis we might make any new Subaccounts available to existing Contract Owners. Furthermore, we may close Subaccounts to allocation of Premiums or Contract Value, or both, at any time in our sole discretion.
If we make any of these substitutions or changes we may, by appropriate endorsement, change the Contract to reflect the substitution or change. If we decide it is in the best interests of Contract Owners (subject to any approvals that may be required under applicable law), we may take the following actions with regard to the Variable Account:
We are the legal owners of shares held by the Subaccounts and we have the right to vote on all matters submitted to shareholders of the Funds. As required by law, we will vote shares held in the Subaccounts in accordance with instructions received from Owners with Contract Value in the Subaccounts. We may be permitted to vote shares of the Funds in our own right if the applicable federal securities laws, regulations or interpretations of those laws or regulations change.
To obtain voting instructions from you, before a meeting you will be sent voting instruction material, a voting instruction form and any other related material. Your number of votes will be calculated separately for each Subaccount of the Variable Account, and may include fractional shares. The number of votes attributable to a Subaccount will be determined by applying your percentage interest, if any, in a particular Subaccount to the total number of votes attributable to that Subaccount. The number of votes for which you may give instructions will be determined as of the date established by the Fund for determining shareholders eligible to vote. We will vote shares held by a Subaccount for which we have no instructions and any shares held in our general account in the same proportion as those shares for which we do receive voting instructions.
If required by state insurance officials, we may disregard voting instructions if such instructions would require us to vote shares in a manner that would:
If we ever disregard voting instructions, we will advise you of that action and of the reasons for it in the next semiannual report. We may also modify the manner in which we calculate the weight to be given to pass-through voting instructions when such a change is necessary to comply with current federal regulations or the current interpretation of them.
Contracts issued in your state may provide different features and benefits from, and impose different costs than, those described in this Prospectus. This Prospectus provides a general description of the Contracts. Your actual Contract and any endorsements are the controlling documents. If you would like a copy of your Contract and endorsements, contact our Home Office.
To purchase a Contract, you must complete an application and submit it through an authorized Kansas City Life agent. If you are eligible for temporary insurance coverage, a temporary insurance agreement (“TIA”) should also accompany the application. As long as the initial Premium accompanies the TIA, the TIA provides insurance coverage from the date we receive the required Premium to the date we approve your application. In accordance with our underwriting rules, temporary life insurance coverage may not exceed $250,000. The TIA may not be in effect for more than 60 days. At the end of the 60 days, the TIA coverage terminates and then we will return the initial Premium to the applicant.
For coverage under the TIA, you must pay an initial Premium that is at least equal to two Guaranteed Monthly Premiums. We require only one Guaranteed Monthly Premium for Contracts when you will be paying Premiums under a pre-authorized payment or combined billing arrangement. (See “Premiums,” page 19.)
We require satisfactory evidence of both proposed Insureds’ insurability, which may include a medical examination. The available issue Ages are 20 through 85. Age is determined on the Contract Date based on of each Insured’s Age last birthday. The minimum Total Sum Insured is $200,000, with a minimum Specified Amount of $100,000. Acceptance of an application depends on our underwriting rules and we have the right to reject an application.
As the Owner of the Contract, you may exercise all rights provided under the Contract. The Insureds are the Owner, unless a different Owner is named in the application. While at least one of the Insureds is living, the Owner may name a contingent Owner or a new Owner by Written Notice. If a contingent Owner has not been named, on the death of the last surviving Owner, ownership of the Contract passes to the estate of the last Owner to die. The Owner may also be changed prior to the last surviving Insured’s death by Written Notice satisfactory to us. A change in Owner may have tax consequences. (See “Tax Considerations,” page 48.)
It may not be in your best interest to surrender, lapse, change, or borrow from existing life insurance or annuity contracts in connection with the purchase of a Contract. You should replace your existing insurance only when you determine that the Contract is better for you. The charges and benefits of your existing insurance may be different from a Contract purchased from us. You may have to pay a surrender charge on your existing insurance, and the Contract will impose a new surrender charge period.
You should talk to your financial professional or tax adviser to make sure the exchange will be tax-free. If you surrender your existing contract for cash and then buy the Contract, you may have to pay a tax, including possibly a penalty tax, on the surrender. Also, because we will not issue the Contract until we have received an initial Premium from your existing insurance company, the issuance of the Contract may be delayed.
In general, when applications are submitted with the required Premium the Contract Date will be the same as that of the TIA. For Contracts where the required Premium is not accepted at the time of application or Contracts where values are applied to the new Contract from another contract, the Contract Date will be the approval date plus up to seven days. There are several exceptions to these rules as described below.
| Contract Date Calculated to be 29th, 30th or 31st of Month No Contracts will be given a Contract Date of the 29th, 30th or 31st of the month. When values are applied to the new Contract from another contract and the Contract Date would be calculated to be one of these dates, the Contract Date will be the 28th of the month. In all other situations in which the Contract Date would be calculated to be the 29th, 30th or 31st of the month, the Contract Date will be the 1st of the next month. |
| Pre-Authorized Check Payment Plan (PAC) or Combined Billing (CB)-Premium With Application. If you request PAC or CB and provide the initial Premium with the application, the Contract Date will be the date of approval. Combined Billing is a billing where multiple Kansas City Life contracts are billed together. |
| Combined Billing (CB)-No Premium With Application. If you request CB and do not provide the initial Premium with the application, the Contract Date will be the earlier of the first of the month after the Contract is approved or the date the initial Premium is received. However, if approval occurs between the first and fifth of the month the Contract Date will be the first of the same month that we approve the Contract. In addition, if the Contract Date is calculated to be the 29th, 30th or 31st of the month then the Contract Date will be the first of the following month. |
| Government Allotment (GA) and Federal Allotment (FA). If you request GA or FA on the application and provide an initial Premium with the application, the Contract Date will be the date of approval. If you request GA or FA and we do not receive the required initial Premium the Contract Date will be the date we receive a full monthly allotment. |
The Contract Date is determined by these guidelines except, as provided for under state insurance law, the Owner may be permitted to backdate the Contract to preserve insurance age (and receive a lower cost of insurance rate). In no case may the Contract Date be more than six months prior to the date the application was completed. We will charge a Monthly Deduction from the Contract Date.
If coverage under an existing Kansas City Life insurance contract is being replaced, that contract will be terminated and values will be transferred on the date when you have met all underwriting and other requirements and we have approved your application. We will deduct Contract charges as of the Contract Date.
Free Look Right to Cancel Contract.You may cancel your Contract for a refund during your “freelook” period. The free look period expires 10 days after you receive your Contract. If you decide to cancel the Contract, you must return it by mail or other delivery method to the Home Office or your Kansas City Life agent. The Contract will be deemed void from the beginning immediately after you mail or deliver it for cancellation. We will refund Premiums paid within seven days after we receive the returned Contract.
The Contract is flexible with regard to the amount of Premiums you pay. When we issue the Contract we establish a Planned Premium set by you. This amount is only an indication of your preference in paying Premiums. You may change this amount at any time. You may pay additional Unscheduled Premiums at any time while the Contract is in force. We have the right to limit the number (except in Texas) and amount of such Premiums. We do have requirements regarding the minimum and maximum Premium amounts that you can pay.
We deduct Premium expense charges from all Premiums prior to allocating them to your Contract. (See “Charges and Deductions, page 26.)
Minimum Premium Amounts.The minimum initial Premium required is the least amount for which we will issue a Contract. This amount depends on a number of factors. These factors include Age, sex, and risk class of the proposed Insureds, the Specified Amount, any supplemental and/or rider benefits, and the Planned Premium you propose to make. (See “Planned Premiums,” page 21.) Consult your Kansas City Life agent for information about the initial Premium required for the coverage you desire.
Each Premium Payment after the initial Premium Payment must be at least $25.
Maximum Premium Information.Total Premiums paid may not exceed premium limitations for life insurance set forth in the Internal Revenue Code. We will monitor Contracts and will notify you if a Premium exceeds this limit and will cause the Contract to violate the definition of insurance. You may choose to take a refund of the portion of the Premium that we determine is in excess of the guideline premium limit or you may submit an application to increase the Additional Insurance Amount, subject to our underwriting approval. If you choose to increase the Additional Insurance Amount and the Insured fails to meet our underwriting requirements for the required increase in coverage, we have the right to refund, with interest, any Premium that we determine is in excess of the guideline Premium limit. (See “TAX CONSIDERATIONS,” page 48.)
Your Contract may become a modified endowment contract if Premiums exceed the “7-Pay Test” as set forth in the Internal Revenue Code. We will monitor Contracts and will attempt to notify you on a timely basis if, based on our interpretation of the relevant tax rules, your Contract is in jeopardy of becoming a modified endowment contract. (See “TAX CONSIDERATIONS,” page 48.)
We have the right to require satisfactory evidence of insurability prior to accepting Unscheduled Premiums. (See “Premium Allocations and Crediting,” page 23.)
General Premium Information.You must pay Premiums by check payable to Kansas City Life Insurance Company or by any other method that we deem acceptable. You must clearly mark a loan repayment as such or we will credit it as a Premium. (See “Contract Loans,” page 35.)
Planned Premiums.When applying for a Contract, you select a plan for paying Premiums. Failure to pay Planned Premiums will not necessarily cause a Contract to lapse. Conversely, paying all Planned Premiums will not guarantee that a Contract will not lapse. You may elect to pay level Premiums quarterly, semi-annually or annually. You may also arrange to pay Planned Premiums on a special monthly or quarterly basis under a pre-authorized payment arrangement.
You are not required to pay Premiums in accordance with your plan. You can pay more or less than planned or skip a Planned Premium entirely. (See, “Premiums to Prevent Lapse,” page 22,and “Guaranteed Minimum Death Benefit Option,“page 27.)Subject to the minimum and maximum limits described above, you can change the amount and frequency of Planned Premiums at any time.
Premiums Upon an Increase in Additional Insurance Amount. Depending upon the Contract Value at the time of an increase and the amount of the increase requested, you may need to pay an additional Premium or change the amount of Planned Premiums. (See "Increases in the Additional Insurance Amount" page 34.)
Guaranteed Payment Period and Guaranteed Monthly Premium.During the Guaranteed Payment Period, we guarantee that your Contract will not lapse if your Premiums meet the Guaranteed Monthly Premium requirement. For this guarantee to apply, the total Premiums must be at least equal to the sum of:
The Guaranteed Payment Period applies for three years after the Contract Date. The Contract shows the Guaranteed Monthly Premium.
The factors we use to determine the Guaranteed Monthly Premium vary by risk class, issue Age, and sex. In calculating the Guaranteed Monthly Premium, we include additional amounts for substandard ratings and optional benefits and/or riders. If you make a change to your Contract, we will:
Your Contract will lapse if there is insufficient value remaining in the Contract at the end of the Grace Period. Since the value of amounts allocated to the Variable Account will vary according to the investment performance of the Funds, the specific amount of Premiums required to prevent lapse will also vary.
On each Monthly Anniversary Day we will check your Contract to determine if there is enough value to prevent lapse. If your Contract does lapse you must pay the required amount before the end of the Grace Period.
Under the Guaranteed Payment Period.The conditions to prevent lapse will depend on whether a Guaranteed Payment Period is in effect as follows:
During the Guaranteed Payment Period. The Contract lapses and a Grace Period starts if:
If lapse occurs, the Premium you must pay to keep the Contract in force will be equal to the lesser of:
After the Guaranteed Payment Period. The Contract lapses and a Grace Period starts if the Cash Surrender Value is not enough to cover the Monthly Deduction. To prevent the Contract from terminating you must pay enough Premium to increase the Cash Surrender Value to at least the amount of three Monthly Deductions. You must make this payment before the end of the Grace Period.
Under the Guaranteed Minimum Death Benefit Option.If you elect the Guaranteed Minimum Death Benefit Option we guarantee that the Specified Amount will remain in force as long as you meet the Guaranteed Minimum Death Benefit Option Premium requirement. If you fail to meet the Guaranteed Minimum Death Benefit Option Premium requirement, the Guaranteed Minimum Death Benefit Option will terminate and the Premiums required to prevent lapse will be determined just as for a Contract without a Guaranteed Minimum Death Benefit Option. The Guaranteed Minimum Death Benefit Option does not guarantee riders and any riders will terminate if the Cash Surrender Value of your Contract becomes negative. (See “Guaranteed Minimum Death Benefit Option,” page 32.)
If you did not elect this option or if you do not pay the Premium required to keep the option in effect, your Contract will lapse at the end of the Grace Period if there is insufficient value remaining in the Contract. Since the value of amounts allocated to the Variable Account will vary according to the investment performance of the Funds, the specific amount of Premiums required to prevent lapse will also vary.
For Contracts That Do Not Have the Guaranteed Minimum Death Benefit Option.On each Monthly Anniversary Day we will check your Contract to determine if there is enough value to prevent lapse. If your Contract does lapse you must pay the required amount before the end of the Grace Period. The amount required is enough Premium to increase the Cash Surrender Value to at least the amount of three Monthly Deductions.
For Contracts That Do Have the Guaranteed Minimum Death Benefit Option.We will check your Contract on each Monthly Anniversary Day to determine if you have met the Guaranteed Minimum Death Benefit Option Premium requirement. If you have met the requirement, then we guarantee that the Contract will not lapse. If you have not met the requirement then you have 61 days to keep the option in force by paying the amount that will satisfy the Guaranteed Minimum Death Benefit Option Premium requirement. (See “Guaranteed Minimum Death Benefit Option”, page 32.)
Grace Period.The purpose of Grace Period is to give you the chance to pay enough Premiums to keep your Contract in force. We will send you notice of the amount required to be paid. The Grace Period is 61 days and starts when we send the notice. Your Contract remains in force during the Grace Period. If the last surviving Insured dies during the Grace Period, we will pay the Death Proceeds, but we will deduct any Monthly Deduction due. (See Amount of Death Proceeds, page 31.)If you do not pay adequate Premiums before the Grace Period ends, your Contract will terminate. (See “Reinstatement of Contract,” page 49 )
Premium Allocations and Crediting
In the Contract application, you select how we will allocate Premiums (less Premium Expense Charges) among the Subaccounts and the Fixed Account. The sum of your allocations must equal 100%. We may limit the number of Subaccounts to which you allocate Premiums (not applicable to Texas Contracts). We will never limit the number to less than 15. Youmay change the allocation percentages at any time by sending Written Notice. You may make changes in your allocation by telephone, facsimile or electronic mail if you have provided proper authorization. (See “Telephone, Facsimile and Electronic Mail Authorizations,” page 51.)The change will apply to the Premiums received with or after receipt of your notice.
On the Allocation Date, we will allocate the initial Premium to the Federated Prime Money Fund II Subaccount. If we receive any additional Premiums before the Reallocation Date, we will also allocate these Premiums to the Federated Prime Money Fund II Subaccount.
On the Reallocation Date (30 days after the Allocation Date), we will allocate the amount in the Federated Prime Money Fund II Subaccount as directed in your application. (See “Determining the Contract Value,” page 29.)
We will credit Premiums received on or after the Reallocation Date as directed by you. The Premiums will be invested within the Valuation Period during which we receive them at our Home Office unless we require additional underwriting. We won’t credit Premiums requiring additional underwriting until we have completed underwriting and accept the Premium. If we reject the additional Premium, we will return the Premium promptly, without any adjustment for investment experience.
After the Reallocation Date and prior to the Maturity Date, you may transfer amounts among the Subaccounts and the Fixed Account, subject to the following restrictions:
There is no limit on the number of transfers you can make between the Subaccounts or to the Fixed Account. The first six transfers during each Contract Year are free. After the first six transfers, we will assess a $25transfer processing fee. Unused free transfers do not carry over to the next Contract Year. For the purpose of assessing the fee, we consider each Written Notice or telephone, facsimile or electronic mail request to be one transfer, regardless of the number of Subaccounts or the Fixed Account affected by that transfer. We will deduct the transfer processing fee from the remaining Contract Value.
We will make the transfer on the Valuation Day that we receive Written Notice requesting such transfer. You may also make transfers by telephone, facsimile or electronic mail if you have provided proper authorization. (See “Telephone, Facsimile and Electronic Mail Authorizations,” page 51.)
An excessive number of transfers, including short-term “market timing” transfers, may adversely affect the performance of the underlying Fund in which a Subaccount invests. If, in our sole opinion, a pattern of excessive transfers develops, we have the right not to process a transfer request. We also have the right not to process a transfer request when the sale or purchase of shares of a Fund is not reasonably practicable due to actions taken or limitations imposed by the Fund.
The Dollar Cost Averaging Plan is an optional feature available with the Contract. If elected, it enables you to automatically transfer amounts from the Federated Prime Money Fund II Subaccount to other Subaccounts. The goal of the Dollar Cost Averaging Plan is to make you less susceptible to market fluctuations by allocating on a regularly scheduled basis instead of allocating the total amount all at one time. We can not guarantee that the Dollar Cost Averaging Plan will result in a gain.
Transfers under this plan occur on a monthly basis for a period you choose, ranging from 3 to 36 months. To participate in the plan you must transfer at least $250 from the Federated Prime Money Fund II Subaccount each month. You may allocate the required amounts to the Federated Prime Money Fund II Subaccount through initial or subsequent Premiums or by transferring amounts into the Federated Prime Money Fund II Subaccount from the other Subaccounts or from the Fixed Account. Restrictions apply to transfers from the Fixed Account.
You may elect this plan at the time of application by completing the authorization. You may also elect it at any time after the Contract is issued by completing the election form. You may make changes in dollar cost averaging by telephone, facsimile or electronic mail if you have provided proper authorization.
Dollar cost averaging transfers will start on the next Monthly Anniversary Day on or following the Reallocation Date or the date you request. Once elected, we will process transfers from the Federated Prime Money Fund II monthly until:
Transfers made under the Dollar Cost Averaging Plan will not count toward the six free transfers allowed each Contract Year. We may cancel this feature at any time with notice to you. We do not impose a charge for participation in this plan.
The Portfolio Rebalancing Plan is an optional feature available with the Contract. Under this plan we will redistribute the accumulated balance of each Subaccount to equal a specified percentage of the Variable Account Value. We will do this on a quarterly basis at three-month intervals from the Monthly Anniversary Day on which portfolio rebalancing begins.
The purpose of the Portfolio Rebalancing Plan is to automatically diversify your portfolio mix. This plan automatically adjusts your Portfolio mix to be consistent with your current allocation instructions. If you make a change to your Premium allocation, we will also automatically change the allocation used for portfolio rebalancing to be consistent with the new Premium allocation unless you instruct us otherwise.
The redistribution occurring under this plan will not count toward the six free transfers permitted each Contract Year. If you also have elected the Dollar Cost Averaging Plan and it has not been completed, the portfolio rebalancing Plan will start on the Monthly Anniversary Day after the Dollar Cost Averaging Plan ends.
You may elect this plan at the time of application by completing the authorization on the application. You may also elect it after the Contract is issued by completing the election form. You may make changes in portfolio rebalancing by telephone, facsimile or electronic mail if you have provided proper authorization. Portfolio rebalancing will terminate when:
If the Contract Value is negative at the time portfolio rebalancing is scheduled, we will not complete the redistribution. We may cancel the Portfolio Rebalancing Plan at any time with notice to you. We do not impose a charge for participation in this plan.
The Fixed Account is not registered under the Securities Act of 1933 and is not registered as an investment company under the Investment Company Act of 1940. The Securities and Exchange Commission has not reviewed the disclosure in this Prospectus relating to the Fixed Account. Certain general provisions of the Federal securities laws relating to the accuracy and completeness of statements made in prospectuses may still apply.
You may allocate some or all of your Premiums and transfer some or all of the Variable Account Value to the Fixed Account. You may also make transfers from the Fixed Account, but restrictions may apply. (See “Transfer Privilege”, page 23.) The Fixed Account is part of our general account and pays interest at declared rates guaranteed for each calendar year. We guarantee that this rate will be at least 4%.
Our general account supports our insurance and annuity obligations. Since the Fixed Account is part of our general account, we assume the risk of investment gain or loss on this amount. All assets in the General Account are subject to our general liabilities from business operations.
We guarantee to credit the Fixed Account Value with a minimum 4% effective annual interest rate. We intend to credit the Fixed Account Value with current rates in excess of the 4% minimum, but we are not obligated to do so. Current interest rates are influenced by, but do not necessarily correspond to, prevailing general market interest rates. We will determine current rates. You assume the risk that the interest we credit may not exceed the guaranteed rate. Since we anticipate changing the current interest rate from time to time, we will credit different allocations with different interest rates, based upon the date amounts are allocated to the Fixed Account. We may change the interest rate credited to allocations from Premiums or new transfers at any time. We will not change the interest rate more than once a year on amounts in the Fixed Account.
For the purpose of crediting interest, we currently account for amounts deducted from the Fixed Account on a last-in, first-out (“LIFO”) method. We may change the method of crediting from time to time, provided that such changes do not have the effect of reducing the guaranteed rate of interest below 4%. We may also shorten the period for which the interest rate applies to less than a year (except for the year in which an amount is received or transferred).
Fixed Account Value is equal to:
We have the right to delay payment of any surrender, partial surrender, or transfer from the Fixed Account for up to six months from the date we receive the request.
We may realize a profit on any charges and deductions under the Contract. We may use this profit for any purpose, including payment of distribution charges. Below is a listing and description of the applicable charges and deductions under the Contract.
Sales Charge. We deduct a 6.00% Sales Charge from each Premium. This charge reimburses us for administrative expenses associated with the Contracts. We apply Premiums to your Contract net of the Sales Charge.
Premium Tax Charge.We deduct a 2.25% Premium Tax Charge from each Premium. This charge reimburses us for state and local Premium taxes. We apply Premiums to your Contract net of the Premium Tax Charge.
Monthly Deduction.We will make a Monthly Deduction to collect various charges under your Contract. We will make these Monthly Deduction on each Monthly Anniversary following the Allocation Date. On the Allocation Date, we will deduct a Monthly Deduction for the Contract Day and each Monthly Anniversary Day that has occurred prior to the Allocation Date. (See “Applying for a Contract,” page 19.) The Monthly Deduction consists of:
We deduct the Monthly Deduction pro rata on the basis of the portion of Contract Value in each Subaccount and/or the Fixed Account.
Monthly Expense Charge
Current
- --------------------------------------------------------------------
Years 1-10
- --------------------------------------------------------------------
Youngest Insured Monthly Per Youngest Monthly Per
Issue Age Thousand of Insured Issue Thousand of
Specified Amount Age Specified Amount
- ------------------ ---------------- --------------- ----------------
20-29 $0.07 50-59 $0.18
- ------------------ ---------------- --------------- ----------------
30-39 $0.09 60-69 $0.28
- ------------------ ---------------- --------------- ----------------
40-49 $0.14 70+ $0.35
- ------------------ ---------------- --------------- ----------------
Years 11+ $0.00
- --------------------------------------------------------------------
The guaranteed maximum charge is $0.35 Monthly Per Thousand of Specified Amount for all ages and duration’s.
The monthly expense charge reimburses us for expenses incurred in the administration of the Contracts and the Variable Account. Such expenses include but are not limited to: underwriting and issuing the Contract, confirmations, annual reports and account statements, maintenance of Contract records, maintenance of Variable Account records, administrative personnel costs, mailing costs, data processing costs, legal fees, accounting fees, filing fees, the costs of other services necessary for Contract Owner servicing and all accounting, valuation, regulatory and updating requirements.
We guarantee that the monthly expense charge will not increase above the guaranteed maximum charge. Even if the guaranteed charges prove to be insufficient, we will not increase the charges above such guaranteed levels and will incur the loss.
This charge compensates us for the expense of providing insurance coverage. The charge depends on a number of variables and will vary from Contract to Contract and from month to month. For any Contract, we calculate the cost of insurance on a Monthly Anniversary Day by multiplying the current cost of insurance rate for the Insureds by the net amount at risk for that Monthly Anniversary Day. The cost of insurance rate for a Contract on a Monthly Anniversary Day is based on the Insureds’ Age, sex, number of completed Contract Years, Total Sum Insured, and risk class. We currently place each Insured in one of the following classes, based on underwriting:
We may place an Insured in a substandard risk class, which involves a higher mortality risk than the Standard Tobacco User or Standard Nontobacco User classes.
The net amount at risk on a Monthly Anniversary Day is the difference between the Death Benefit (discounted at an interest rate which is the monthly equivalent of 4% per year) and the Contract Value (as calculated on that Monthly Anniversary Day before we deduct the cost of insurance charge). For purposes of determining cost of insurance rates, we allocate Contract Value first to Specified Amount and then to the Additional Insurance Amount coverage in the order in which those coverage’s were issued. Then we allocate Contract Value to any additional coverage amount applicable under Coverage Option L.
We place the Insureds in risk classes when we approve the Contract, based on our underwriting of the application. When you request an increase in Additional Insurance Amount, we do additional underwriting before approving the increase to determine the risk class that will apply to the increase. If the risk class for the increase has lower cost of insurance rates than the existing risk class, we apply the lower rates to the entire Total Sum Insured. If the risk class for the increase has higher cost of insurance rates than the existing class, we apply the higher rates only to the increase in Total Sum Insured and the existing risk class will continue to apply to the existing Total Sum Insured.
We guarantee that the cost of insurance rates will not exceed the maximum cost of insurance rates set forth in the Contract. The guaranteed rates for standard and preferred risk classes are based on the 1980 Commissioners’ Standard Ordinary Mortality Tables, Male or Female, Smoker or Nonsmoker Mortality Rates (“1980 CSO Tables”). The guaranteed rates for substandard classes are based on multiples of or additives to the 1980 CSO Tables.
Our current cost of insurance rates may be less than the guaranteed rates that are set forth in the Contract. We will determine current cost of insurance rates based on our expectations as to future mortality experience. We may change these rates from time to time.
Cost of insurance rates (whether guaranteed or current) for one or both Insureds in a nontobacco user standard class are lower than rates for one or both Insureds of the same age and sex in a tobacco user standard class. Cost of insurance rates (whether guaranteed or current) for one or both Insureds in a nontobacco user or tobacco user standard risk class are lower than rates for one or both Insureds of the same age, sex and tobacco user class in a substandard risk class.
We may make a profit from this charge. Any profit may be used to finance distribution expenses.
Guaranteed Minimum Death Benefit Option Charge.There is no charge for the Guaranteed Minimum Death Benefit Option in the first ten Contract Years. Beginning in Contract Year 11,the charge is $.01 per $1,000 on a current basis and $.03 per $1,000 on a guaranteed basis. This charge is based on the Specified Amount and we will deduct it monthly.
Cost of Additional Benefits Provided by Riders. These charges are part of the Monthly Deduction and vary by the benefit. (See "OPTIONAL RIDERS", page 47.)
Legal Considerations Relating to Sex-Distinct Premiums and Benefits.Cost of insurance rates for Contracts generally distinguish between males and females. Thus, Premiums and benefits under Contracts covering males and females of the same Age will generally differ. (In some states, the costs of insurance rates do not vary by sex.)
We also offer Contracts that do not distinguish between males and female rates where required by state law. Employers and employee organizations considering purchase of a Contract should consult with their legal advisers to determine whether purchase of a Contract based on sex-distinct cost of insurance rates is consistent with Title VII of the Civil Rights Act of 1964 or other applicable law. We will make available to such prospective purchasers Contracts with cost of insurance rates that do not distinguish between males and females.
We deduct a daily charge from assets in the Subaccounts attributable to the Contracts. This charge does not apply to Fixed Account assets. The current and guaranteed charge is at an annual rate of 0.625% of net assets.
The mortality risk we assume is that the Insureds may die sooner than anticipated and we have to pay Death Benefits greater than we anticipated. The expense risk we assume is that expenses incurred in issuing and administering the Contracts and the Variable Account will exceed the administrative charges we assess. We may make a profit from this charge. Any profit may be used to finance distribution expenses.
The first six transfers during each Contract Year are free. We will assess a $25 transfer processing fee for each additional transfer during such Contract Year. For the purpose of assessing the fee, we will consider each written or telephone, facsimile or electronic mail request seeking a transfer to be one transfer, regardless of the number of accounts affected by the transfer. We will deduct the transfer processing fee from the amount being transferred or from the remaining Contract Value, according to your instructions.
During the first ten Contract Years, we will deduct a surrender charge from the Contract Value if the Contract is completely surrendered or lapses. The surrender charge is based on the Specified Amount at issue. We calculate this charge by multiplying the surrender charge factor for the applicable Ages and sex of each Insured by the surrender charge percentages (as shown in Appendix A). The surrender charge factor will vary by each insureds individual age, risk class, and sex, but will never exceed $50 per thousand of Specified Amount. We then multiply this amount by the Specified Amount, divided by 1,000 to reach the actual charge.
The total surrender charge will not exceed the maximum surrender charge shown in your Contract. We credit any surrender charge deducted upon lapse back to the Contract Value upon reinstatement. The surrender charge on the date of reinstatement will be the same as it was on the date of lapse. For purposes of determining the surrender charge on any date after reinstatement, the period during which the Contract was lapsed will not count.
Under some circumstances the amount of the surrender charge during the first few Contract Years could result in a Cash Surrender Value of zero. This will depend upon a number of factors, but is more likely if:
The surrender charges calculated are applicable at the end of each Contract Year. After the first Contract Year, we will prorate the surrender charges between Contract Years. However, after the end of the 10th Contract Year, there will be no surrender charge.
We will deduct an administrative charge upon a partial surrender. This charge is the lesser of 2% of the amount surrendered or $25. We will deduct this charge from the amount you request to be surrendered, and the charge will be considered part of the partial surrender amount.
The Fund deducts investment advisory fees and other expenses. The value of the net assets of each Subaccount reflects the investment advisory fees and other expenses incurred by the corresponding Portfolio in which the Subaccount invests. This means that these charges are deducted before we calculate Subaccount Values. These charges are not directly deducted from your Contract Value. See the prospectuses for the Funds.
We may reduce the Premium Expense Charge and the Monthly Deduction from Contract Value for Contracts issued to a class of associated individuals or to a trustee, employer or similar entity. We may reduce these charges if we anticipate that the sales to the members of the class will result in lower than normal sales or administrative expenses. We will make any reductions in accordance with our rules in effect at the time of the application. The factors we will consider in determining the eligibility of a particular group and the level of the reduction are as follows:
Any reduction will be reasonable, will apply uniformly to all prospective Contract purchases in the class, and will not be unfairly discriminatory to the interests of any Contract holder.
We do not currently assess a charge for any taxes other than state and local Premium taxes and Federal Deferred Acquisition taxes incurred as a result of the operations of the Subaccounts. We have the right to assess a charge for such taxes against the Subaccounts if we determine that such taxes will be incurred.
Your Contract does not provide a minimum guaranteed Contract Value or Cash Surrender Value. Values will vary with the investment experience of the Subaccounts and/or the crediting of interest in the Fixed Account, and will depend on the allocation of Contract Value. If the Cash Surrender Value on a Monthly Anniversary Day is less than the amount of the Monthly Deduction on that date and the Guaranteed Payment Period is not then in effect, the Contract will be in default and a Grace Period will begin. (See “Premiums to Prevent Lapse,” page 26 ) (See “Guaranteed Payment Period and Guaranteed Monthly Premium,” page 27 and “Grace Period”, page 27 ) However, we also offer an optional Guaranteed Minimum Death Benefit Option which guarantees the Death Benefit provided certain requirements are met. (See “Guaranteed Minimum Death Benefit Option,” page 32)
We may credit a bonus to the Contract on each Monthly Anniversary Day beginning on the first Monthly Anniversary Day following the Contract Date. The monthly bonus applies to Contracts with a Total Sum Insured of $5,000,000 and above and equals an annual rate of 0.125% of the Contract Value in each Subaccount of the Variable Account. We pay these bonus amounts out of savings we derive from the higher values of the contract. We do not guarantee that we will pay the bonus.
On the Allocation Date, the Contract Value is equal to the initial Premium less the Premium Expense Charges and Monthly Deduction deducted from the Contract Date. On each Valuation Day thereafter, the Contract Value is the aggregate of the Subaccount Values and the Fixed Account Value (including the Loan Account Value). The Contract Value will vary to reflect the following:
Subaccount Values.When you allocate an amount to a Subaccount, either by Premium or transfer, we credit your Contract with Accumulation Units in that Subaccount. The number of Accumulation Units in the Subaccount is determined by dividing the amount allocated to the Subaccount by the Subaccount’s Accumulation Unit value for the Valuation Day when the allocation is made.
The number of Subaccount Accumulation Units we credit to your Contract will increase when you allocate Premiums to the Subaccount and when you transfer amounts to the Subaccount. The number of Subaccount Accumulation Units credited to a Contract will decrease when:
Accumulation Unit Values. A Subaccount’s Accumulation Unit value varies to reflect the investment experience of the underlying Portfolio. It may increase or decrease from one Valuation Day to the next. We arbitrarily set the Accumulation Unit value for each Subaccount at $10 when we established the Subaccount. For each Valuation Period after establishment, the Accumulation Unit value is determined by multiplying the value of an Accumulation Unit for a Subaccount for the prior Valuation Period by the Net Investment Factor for the Subaccount for the current valuation period.
Net Investment Factor.The Net Investment Factor is an index used to measure the investment performance of a Subaccount from one Valuation Day to the next. It is based on the change in net asset value of the Fund shares held by the Subaccount and reflects any gains or losses in the Subaccounts, dividends paid, any capital gains or losses, any taxes and the daily mortality and expense risk charge.
Fixed Account Value. On any Valuation Day, the Fixed Account Value of a Contract will be equal to:
Loan Account Value. On any Valuation Day, if there have been any Contract loans, the Loan Account Value is equal to:
The Cash Surrender Value is the amount you have available in cash if you fully surrender the Contract. We use this amount to determine whether a partial surrender may be taken, whether Contract loans may be taken, and whether a Grace Period starts. (See “Premiums to Prevent Lapse,” page 22.) The Cash Surrender Value on the Valuation Day is equal to the Contract Value less any applicable surrender charges and any Loan Balance. (See “Surrendering the Contract for Cash Surrender Value,” page 36.).
As long as the Contract remains in force, we will pay the Death Proceeds upon receipt at the Home Office of satisfactory proof of death of the last surviving Insured. We may also require proof of the death of the Insured who died first and may require return of the Contract. We will pay Death Proceeds in a lump sum.(see “Payment of Proceeds,” page 46) or, if you prefer, under a payment option (See “Payment Options,” page 37). We will pay Death Proceeds to the Beneficiary. (See “Selecting and Changing the Beneficiary,” page 46.)
The Death Proceeds payable upon the death of the last surviving Insured is equal to the following:
Under certain circumstances, the amount of the Death Benefit may be further adjusted or the Death Benefit may not be payable. (See “Limits on Rights to Contest the Contract” and “Misstatement of Age or Sex,” page 45.)
The Guaranteed Minimum Death Benefit Option, if in effect, provides a minimum Death Benefit. If all or part of the Death Proceeds are paid in one sum, we will pay interest on this sum (as required by applicable state law) from the date of receipt of due proof of the last surviving Insured’s death to the date of payment.
The Total Sum Insured, Specified Amount and the Additional Insurance Amount are set at the time the Contract is issued. The Specified Amount plus the Additional Insurance Amount equals the Total Sum Insured. The minimum Total Sum Insured is $200,000. Within the Total Sum Insured minimum, we also require that the minimum Specified Amount be $100,000, while the minimum Additional Insurance Amount is required to be $10,000. The maximum amount of initial Additional Insurance Amount coverage is four times the Specified Amount at issue.
You may decrease the Total Sum Insured or increase the Additional Insurance Amount as described below. The Guaranteed Minimum Death Benefit Option only applies to the Specified Amount and not to the Additional Insurance Amount. Therefore, even if the Guaranteed Minimum Death Benefit Option is in effect, if the Contract Value is insufficient to pay the Monthly Deduction, the Additional Insurance Amount may lapse. (See “Guaranteed Minimum Death Benefit Option,” page 32.)
When you apply for the Contract, you may choose one of three Coverage Options, which will be used to determine the Death Benefit:
You may also change the Coverage Option, as described below. However, Coverage Option L is only available at issue. If a coverage option is not specified at the time of application, we will contact your representative to find out which Coverage Option the contractholder has selected.
We will increase Death Benefits under any Coverage Option by any additional benefits provided by riders in force on the date of death of the last surviving Insured, and any Premiums received after the date of death. We will also refund any cost of insurance charge deducted for the period beyond the date of death. We will reduce the Death Benefits by any Loan Balance.
The purpose of the Corridor Death Benefit is to ensure that the amount of insurance we provide meets the definition of life insurance under the Internal Revenue Code. We calculate the Corridor Death Benefit by multiplying the Contract Value by the appropriate corridor percentage. The corridor percentages vary by Age, sex, risk class, Specified Amount, Additional Insurance Amount, the number of years coverage has been in effect and any applicable optional benefits or riders.
An optional Guaranteed Minimum Death Benefit Option is available only at issue. This option is not available if you elect Coverage Option B or if the Joint First to Die Rider is issued. If you choose this option, it guarantees that we will pay the Specified Amount (less Loan Balance and any past due charges) upon the death of the last surviving Insured, regardless of the Contract’s investment performance, if you meet the Guaranteed Minimum Death Benefit Option Premium requirement. The Guaranteed Minimum Death Benefit Option does not guarantee any Additional Insurance Amount.
The Guaranteed Minimum Death Benefit Option Premium is the amount which guarantees that the Guaranteed Minimum Death Benefit Option will remain in effect. Your Contract shows the Guaranteed Minimum Death Benefit Option Premium. You satisfy the Guaranteed Minimum Death Benefit Option Premium requirement if, on each Monthly Anniversary Day, the cumulative Premiums that you have paid equal or exceed the cumulative Guaranteed Minimum Death Benefit Option Premiums plus any Loan Balance.
"Cumulative Premiums that you have paid" means the amount that is equal to:
“Cumulative Guaranteed Minimum Death Benefit Option Premiums” is equal to the sum of the Guaranteed Minimum Death Benefit Option Premiums. Each such Premium is accumulated at an annual effective interest rate of 4% to the Monthly Anniversary Day on which the Guaranteed Minimum Death Benefit Option Premium requirement is calculated.
If you do not meet the Guaranteed Minimum Death Benefit Option Premium requirement, the Guaranteed Minimum Death Benefit Option is in default. A 61-day notice period begins on the day we mail the notice that the option is in default and inform you of the amount of Premium required to maintain the Guaranteed Minimum Death Benefit Option. The Premium amount required to prevent default of the option is equal to:
The Guaranteed Minimum Death Benefit Option will terminate if you do not pay sufficient Premium by the end of the notice period.
If the Contract contains any Additional Insurance Amount coverage or any optional benefit riders, then we will also test the Contract to ensure that the you have funded the Contract at a sufficient level to support the Additional Insurance Amount or other optional riders. On each Monthly Anniversary Day we will test the Cash Surrender Value to determine if it is sufficient to cover the Monthly Deduction. If not, a 61-day notice period begins on the day we mail notice of the amount of Premium required to keep the Additional Insurance Amount and/or any optional riders in effect. The Premium required to keep the Additional Insurance Amount is equal to the amount which would provide a Cash Surrender Value equal to three Monthly Deduction. If we do not receive payment at least equal to the default Premium by the end of the notice period, we will terminate the additional insurance amount and other optional benefit riders.
We do not charge for this option during the first 10 Contract Years. Beginning in Contract Year 11 we will apply a monthly charge per $1,000 of Specified Amount at issue. The Guaranteed Minimum Death Benefit Option is not available for:
The Guaranteed Minimum Death Benefit Option will terminate:
You may apply to have the Guaranteed Minimum Death Benefit Option reactivated within two years of termination of such option. Re-activation requires:
On the Monthly Anniversary Day on which the re-activation takes effect, we will deduct from the Contract Value any unpaid Guaranteed Minimum Death Benefit Option charges. We have the right to deny re-activation of the Guaranteed Minimum Death Benefit Option more than once during the life of the Contract.
You should consider the following factors in determining how to allocate coverage in the form of the Specified Amount or in the form of an Additional Insurance Amount:
Generally, you will incur lower Contract Year charges and have more flexible coverage with respect to the Additional Insurance Amount than with the Specified Amount. On the other hand, if you wish to take advantage of the Guaranteed Minimum Death Benefit Option, the proportion of the Total Sum Insured that is guaranteed can be increased by taking out a larger part of the coverage as Specified Amount at the time of issue. The Guaranteed Minimum Death Benefit Option is not available at all if the Additional Insurance Amount exceeds or is scheduled to exceed the Specified Amount at any time. In such case, it could be to your advantage to increase the amount of coverage applied for at issue as Specified Amount in order that the Guaranteed Minimum Death Benefit Option will be available. However, if this guarantee is not important to you, you could choose to maximize the proportion of the Additional Insurance Amount.
If investment performance is favorable, the amount of the Death Proceeds may increase. The impact of investment performance will vary depending upon which Coverage Option applies:
We have the right to require that no change in Coverage Option occurs during the first Contract Year and that you make no more than one change in Coverage Option in any 12-month period. After any change, we require the Total Sum Insured be at least $200,000 and the Specified Amount to be at least $100,000. The effective date of the change will be the Monthly Anniversary Day that coincides with or next follows the day that we receive and accept the request. We may require satisfactory evidence of insurability.
If the Coverage Option is Option B or Option L, it may be changed to Option A. The Total Sum Insured will not change. The effective date of change will be the Monthly Anniversary Day following the date we receive and approve your application for change.
If the Coverage Option is Option A or Option B you may not change it to Option L. Coverage Option L is only available at issue, so no changes to Option L are allowed.
If the Coverage Option is Option A or Option L, you may change it to Option B subject to satisfactory evidence of insurability. This change will decrease the Total Sum Insured. The new Total Sum Insured will be the greater of the Total Sum Insured less the Contract Value as of the date of change or $25,000.
If the Coverage Option is changed to B, the Guaranteed Minimum Death Benefit Option, if in effect, will terminate.
We have the right to decline any Coverage Option change that we determine would cause the Contract to not qualify as life insurance under applicable tax laws.
Changes in the Coverage Option may have tax consequences. You should consult a tax adviser before changing the Coverage Option.
You may make increases to the Additional Insurance Amount through either scheduled annual increases requested at issue or unscheduled increases you request. The maximum Additional Insurance Amount coverage at issue is four times the Specified Amount. This coverage may increase to a maximum of eight times the Specified Amount after issue under scheduled annual increases.
Scheduled Increases.Scheduled increases to the Additional Insurance Amount, subject to our approval, may be based on a flat amount annual increase or a percentage annual increase. Available percentage increases range from 0-25% of the Additional Insurance Amount. We will base the percentage increase on the specified percentage of the Additional Insurance Amount at the time the scheduled increase occurs. Available amounts for a flat amount increase range from 0-25% of the Additional Insurance Amount at issue. The Guaranteed Minimum Death Benefit Option is not available if the Additional Insurance Amount is, or is scheduled to, exceed the Specified Amount
Unscheduled Increases.Youmay request increases to the Additional Insurance Amount other than the Schedule annual increases available at issue. We have the right to not allow increases in Additional Insurance Amount during the first Contract Year and to allow only one increase in any 12-month period. The following requirements apply for an unscheduled increase:
For both a scheduled and unscheduled increase, if the Cash Surrender Value is at any time insufficient to pay the Monthly Deduction for the Contract, the Additional Insurance Amount and riders will terminate in order to preserve the Guaranteed Minimum Death Benefit Option. (See “Guaranteed Minimum Death Benefit Option,” page 32.) Any increase in the Additional Insurance Amount will not effect the surrender charge or the Guaranteed Monthly Premium. Increases in the Additional Insurance Amount may have tax consequences. You should consult a tax adviser before increasing the Additional Insurance Amount.
You may request a decrease in the Total Sum Insured. When you make a decrease in Total Sum Insured, we will first reduce any amount of Additional Insurance Amount remaining. Then we will reduce the Specified Amount. If the Specified Amount is decreased, the Guaranteed Minimum Death Benefit Option coverage amount will be decreased by the same amount. Under certain circumstances, a partial surrender will result in a decrease in the Total Sum Insured. (See “Partial Surrenders,” page 36.)
We have the right to require that no decreases occur during the first Contract Year and that you make no more than one decrease in any 12-month period.
We require that the Total Sum Insured after any decrease be at least $200,000 and that the Specified Amount be $100,000. You must provide Written Notice of your request to decrease your Total Sum Insured. The effective date of the decrease will be the Monthly Anniversary Day following the date we receive your application.
Decreasing the Total Sum Insured may have the effect of decreasing monthly cost of insurance charges. A decrease in the Total Sum Insured will not affect the surrender charge and will not decrease the Guaranteed Monthly Premium or Guaranteed Minimum Death Benefit Option Premium.(See “Surrender Charge,” page 32.)
A decrease in the Total Sum Insured may have adverse tax consequences. You should consult a tax adviser before decreasing the Total Sum Insured.
You may borrow from your Contract (prior to the death of the last Insured to die) at any time by submitting a Written Request. You may also make loans by telephone, facsimile or electronic mail if you have provided proper authorization to do so. (See “Telephone, Facsimile and Electronic Mail Authorizations,” page 51.) The maximum loan amount available is the Contract’s Cash Surrender Value on the effective date of the loan less loan interest to the next Contract Anniversary. We will process Contract loans as of the date we approve your Written Request. We will generally send loan proceeds to you within seven calendar days. (See “Payment of Proceeds,” page 46.)
Interest.We will charge interest on any Loan Balance at an annual rate of 6.0%. Interest is due and payable at the end of each Contract Year while a loan is outstanding. If you do not pay interest when due, we add the amount of the interest to the loan and it becomes part of the Loan Balance.
Loan Collateral.When you make a Contract loan, we transfer an amount sufficient to secure the loan out of the Subaccounts and the unloaned value in the Fixed Account and into the Contract’s Loan Account. We will reduce the Cash Surrender Value by the amount transferred to the Loan Account. The loan does not have an immediate effect on the Contract Value. You may specify the Variable Accounts and/or Fixed Account from which we transfer collateral. If you do not specify we will transfer collateral in the same proportion that the Contract Value in each Subaccount and the unloaned value in the Fixed Account bears to the total unloaned Contract Value on the date you make the loan. On each Contract Anniversary we will transfer an amount of Cash Surrender Value equal to any due and unpaid loan interest to the Loan Account. We will transfer due and unpaid interest in the same proportion that each Subaccount Value and the unloaned value in the Fixed Account Value bears to the total unloaned Contract Value.
We will credit the Loan Account with interest at an effective annual rate of not less than 4.0%. Thus, the maximum net cost of a loan is 2.0% per year. (The net cost of a loan is the difference between the rate of interest charged on the Loan Balance and the amount credited to the Loan Account). We will add the interest earned on the Loan Account to the Fixed Account.
Preferred Loan Provision.Beginning in the eleventh Contract Year, an additional type of loan is available called a preferred loan. For a preferred loan we will credit the amount in the Loan Account securing the preferred loan with interest at an effective annual rate of 6.0%. Thus, the net cost of the preferred loan is 0.0% per year. The maximum amount available for a preferred loan is the Contract Value less Premiums paid. This amount may not exceed the maximum loan amount. The preferred loan provision is not guaranteed.
The tax consequences of a preferred loan are uncertain. You should consult a tax adviser before taking out a preferred loan.
Loan Repayment.You may repay all or part of your Loan Balance at any time while at least one Insured is living and the Contract is in force. We have the right to require that each loan repayment be at least $50. Loan repayments must be sent to the Home Office and we will credit them as of the date received. You should clearly mark a loan repayment as such or we will credit it as a Premium. (Sales Charges and Premium Tax Charges do not apply to loan repayments, unlike Unscheduled Premiums.) When you make a loan repayment, we transfer Contract Value in the Loan Account in an amount equal to the repayment from the Loan Account to the Subaccounts and the unloaned value in the Fixed Account. Thus, a loan repayment will immediately increase the Cash Surrender Value by the amount transferred from the Loan Account. A loan repayment does not have an immediate effect on the Contract Value. Unless you specify otherwise, we will transfer loan repayment amounts to the Subaccounts and the unloaned value in the Fixed Account according to the premium allocation instructions in effect at that time.
Effect of Contract Loan.A loan, whether or not repaid, will have a permanent effect on the Death Benefit and Contract Values because the investment results will apply only to the non-loaned portion of the Contract Value. The longer the loan is outstanding, the greater the effect is likely to be. Depending on the investment results of the Subaccounts or credited interest rates for the unloaned value in the Fixed Account while the loan is outstanding, the effect could be favorable or unfavorable. Loans may increase the potential for lapse if investment results of the Subaccounts are less than anticipated. Loans can (particularly if not repaid) make it more likely than otherwise for a Contract to terminate. (See “TAX CONSIDERATIONS,” page 48, for a discussion of the tax treatment of policy loans, and the adverse tax consequences if a Contract lapses with loans outstanding.) In particular, if your Contract is a “modified endowment contract,” loans may be currently taxable and subject to a 10% penalty tax. In addition, interest paid on Contract Loans generally is not tax deductible. We will deduct any Loan Balance from any Death Proceeds. (See “Amount of Death Proceeds,” page 31.)
Your Contract will be in default if the Loan Account Value on any Valuation Day exceeds the Contract Value. We will send you notice of the default. You will have a 61-day grace period to submit a sufficient payment to avoid termination of coverage under the Contract. The notice will specify the amount that must be repaid to prevent termination. (See “Premiums to Prevent Lapse,” page 22.)
You may surrender your Contract at any time for its Cash Surrender Value by submitting a Written Request. A surrender charge may apply. (See “Surrender Charge,” page 32)We may require return of the Contract. We will process a surrender request as of the date we receive your Written Request and all required documents. Generally we will make payment within seven calendar days. (See “Payment of Proceeds,” page 46.) You may receive the Cash Surrender Value in one lump sum or you may apply it to a payment option. (See “Payment Options,” page 37.) Your Contract will terminate and cease to be in force if you surrender it for one lump sum. You will not be able to reinstate it later.Surrenders may have adverse tax consequences.(See “Tax Considerations,” page 48.)
(In Texas, if you request a surrender within 31 days after a Contract Anniversary, the Cash Surrender Value applicable to the Fixed Account Value will not be less than the Cash Surrender Value applicable to the Fixed Account on that anniversary, less any Contract loans or partial surrenders made on or after such Anniversary.)
You may make partial surrenders under your Contract at any time subject to the conditions below. You must submit a Written Request, and we will assess a partial surrender fee. (See “Partial Surrender Fee,” page 28.) We will deduct this charge from your Contract Value along with the amount requested to be surrendered. Each partial surrender must be at least $500 and the partial surrender amount (including the partial surrender fee) may not exceed the Cash Surrender Value, less $300.
When you request a partial surrender, you can direct how we deduct the partial surrender amount (including the partial surrender fee) from your Contract Value in the Subaccounts and Fixed Account. If you provide no directions, we will deduct the partial surrender amount (including the partial surrender fee) from your Contract Value in the Subaccounts and Fixed Account on a pro rata basis. (See “Minimum Guaranteed and Current Interest Rates,” page 25)Partial surrenders may have adverse tax consequences.(See “TAX CONSIDERATIONS,” page 48.)
If Coverage Option A or L is in effect, we will reduce the Contract Value by the partial surrender amount. We will reduce the Total Sum Insured by the partial surrender amount (including the partial surrender fee) minus the excess, if any, of the Death Benefit over the Total Sum Insured at the time you make the partial surrender. If the partial surrender amount (including the partial surrender fee) is less than the excess of the Death Benefit over the Total Sum Insured, we will not reduce the Total Sum Insured. If Coverage Option B is in effect, we will reduce the Contract Value by the partial surrender amount and the partial surrender fee.
We have the right to reject a partial surrender request if the partial surrender would reduce the Total Sum Insured below the minimum amount for which the Contract would be issued under our then-current rules.
We will process partial surrender requests as of the date we receive your Written Request. Generally we will make payment within seven calendar days. (See "PAYMENT OF PROCEEDS," page 46.)
The Contract offers a variety of ways, in addition to a lump sum, for you to receive proceeds payable. Payment options are available for use with various types of proceeds, such as surrender or death. We summarize these payment options below. All of these options are forms of fixed benefit annuities which do not vary with the investment performance of a separate account.
You may apply proceeds of $2,000 (this minimum may not apply in some states) or more which are payable under this Contract to any of the following options:
Option 1: Interest Payments.We will make interest payments to the payee annually or monthly as elected. We will pay interest on the proceeds at the guaranteed rate of 3.0% per year and we may increase this by additional interest paid annually. You may withdraw the proceeds and any unpaid interest in full at any time.
Option 2: Installments of a Specified Amount.We will make annual or monthly payments until the proceeds plus interest are fully paid. We will pay interest on the proceeds at the guaranteed rate of 3.0%per year and we may increase this by additional interest. You may withdraw the present value of any unpaid installments at any time.
Option 3: Installments For a Specified Period.We pay proceeds in equal annual or monthly payments for a specified number of years. We will pay interest on the proceeds at the guaranteed rate of 3.0%per year and we may increase this by additional interest. You may withdraw the present value of any unpaid installments at any time.
Option 4: Life Income.We will pay an income during the payee’s lifetime. You may choose a minimum guaranteed payment period. One form of minimum guaranteed payment period is the installment refund option, under which we will make payments until the total income payments received equal the proceeds applied.
Option 5: Joint and Survivor Income.We will pay an income during the lifetime of two persons and will continue to pay the same income as long as either person is living. The minimum guaranteed payment period will be ten years.
Minimum Amounts.We have the right to pay the total amount of the Contract in one lump sum, ifless than $2,000. If payments under the payment option selected are less than $50, payments may be made less frequently at our option.
Choice of Options You may choose an option by written notice during the Insured’s lifetime. If a payment option is not in effect at the Insured’s death, the beneficiary may make a choice.
If we have options or rates available on a more favorable basis at the time you elect a payment option, we will apply the more favorable benefits.
Because the Contract provides for an accumulation of Contract Value as well as a Death Benefit, the Contract can be used for various individual and business financial planning purposes. Purchasing the Contract in part for such purposes entails certain risks. For example, if the investment performance of Subaccounts to which Variable Account Value is allocated is poorer than expected or if you do not pay sufficient Premiums, the Contract may lapse or may not accumulate sufficient value to fund the purpose for which you purchased the Contract. Partial surrenders and Contract loans may significantly affect current and future values and proceeds. A loan may cause a Contract to lapse, depending upon Subaccount investment performance and the amount of the loan. Before purchasing a Contract for a specialized purpose, you should consider whether the long-term nature of the Contract is consistent with the purpose for which you are considering it.Using a Contract for a specialized purpose may have tax consequences.(See “TAX CONSIDERATIONS” page 48.)
We have prepared the following tables to illustrate hypothetically how certain values under a Contract change with investment performance over an extended period of time. The tables illustrate how Contract Values, Cash Surrender Values and Death Benefits under a Contract covering both Insureds of a given age would vary over time if Planned Premiums were paid annually and the return on the assets in each of the Funds were an assumed uniform gross annual rate of 0%, 6% and 12%. The values would be different from those shown if the returns averaged 0%, 6% or 12% but fluctuated over and under those averages throughout the years shown. The tables also show Planned Premiums accumulated at 5% interest compounded annually.
The hypothetical investment rates of return are illustrative only. Do not assume they are representative of past or future investment rates of return.Actual rates of return for a particular Contract may be more or less than the hypothetical investment rates of return and will depend on a number of factors including the investment allocations you make, prevailing interest rates and rates of inflation. These illustrations assume that you allocate Premiums equally among the Subaccounts available under the Contract, and that you allocate noamounts to the Fixed Account. We have based these illustrations on the following assumptions:
The illustrations reflect the fact that the net investment return on the assets held in the Subaccounts is lower than the gross after-tax return of the selected Portfolios. The tables assume an average annual expense ratio of 0.96% of the average daily net assets of the Portfolios available under the Contracts. This average annual expense ratio is based on the expense ratios of each of the Portfolios for the last fiscal year, adjusted, as appropriate, for any material changes in expenses effective for the current fiscal year of a Portfolio. This average annual expense ratio takes into account expense reimbursement arrangements to be in place for 2001 for some of the Portfolios. At this time, we do not anticipate any changes in the expense reimbursement arrangements. However this agreement may be terminated at any time In the absence of the reimbursement arrangements for some of the Portfolios the average annual expense ratio would be higher. For information on the Portfolios’ expenses, see the Fee Table in this Prospectus and the prospectuses for the Funds and Portfolios accompanying this Prospectus.
In addition, the values calculated using current charges shown in the illustrations reflect the current daily charge to the Variable Account for assuming mortality and expense risks, which is equivalent to an annual charge of 0.625%. After deduction of Portfolio expenses and the mortality and expense risk charge, the illustrated gross annual investment rates of return of 0%, 6% and 12% corresponds to approximate net annual rates of –1.58%, 4.39% and 10.35%, respectively on a current basis. The values calculated using guaranteed charges shown in the illustrations reflect the guaranteed daily charge to the Variable Account for assuming mortality and expense risks, which is equivalent to an annual charge of 0.625%. After deduction of Portfolio expenses and the guaranteed mortality and expense risk charge, the illustrated gross annual investment rates of return of 0%, 6% and 12% would correspond to approximate net annual rates of –1.58%, 4.39% and 10.35%, respectively.
The illustrations also reflect the deduction of the Premium Expense Charges and the Monthly Deduction. The Monthly Deduction includes the cost of insurance charge. We have the contractual right to charge guaranteed maximum charges that are higher than our current cost of insurance charges. The current cost of insurance charges and, alternatively, the guaranteed cost of insurance charges are reflected in separate illustrations on each of the following pages. All the illustrations reflect the fact that no charges for Federal or state income taxes are currently made against the Variable Account and assume no Loan Balance or charges for optional benefits and/or riders.
The illustrations are based on our sex distinct rates for nontobacco users. Upon request, we will furnish you with a comparable illustration based upon the proposed Insureds’ specific circumstances. Such illustrations may assume different hypothetical rates of return than those illustrated in the following tables.
$10,000 ANNUAL PREMIUM
$1,000,000 TOTAL SUM INSURED: $1,000,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING CURRENT COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35; Female, Standard Nonsmoker, Age 35
- ------------------------------------------------------------------------------------------------------------------------
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
- --------- ----------------- ----------------------------- --------------------------- --------------------------------
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per Year Value Value Value
- --------- ----------------- --------- --------- --------- -------- --------- --------- ---------- --------- ----------
1 10500 7,868 0 1,000,000 8,377 0 1,000,000 8,887 0 1,000,000
2 21525 15,606 3,501 1,000,000 17,116 5,011 1,000,000 18,689 6,583 1,000,000
3 33101 23,216 12,224 1,000,000 26,232 15,240 1,000,000 29,497 18,505 1,000,000
4 45256 30,699 20,959 1,000,000 35,740 26,000 1,000,000 41,417 31,677 1,000,000
5 58019 38,054 29,706 1,000,000 45,656 37,307 1,000,000 54,560 46,212 1,000,000
6 71420 45,284 38,327 1,000,000 55,997 49,040 1,000,000 69,054 62,097 1,000,000
7 85491 52,387 46,822 1,000,000 66,778 61,212 1,000,000 85,035 79,470 1,000,000
8 100266 59,363 55,189 1,000,000 78,017 73,843 1,000,000 102,655 98,481 1,000,000
9 115779 66,212 63,429 1,000,000 89,733 86,950 1,000,000 122,082 119,299 1,000,000
10 132068 72,933 71,541 1,000,000 101,942 100,551 1,000,000 143,501 142,110 1,000,000
11 149171 80,595 80,595 1,000,000 115,770 115,770 1,000,000 168,255 168,255 1,000,000
12 167130 88,109 88,109 1,000,000 130,178 130,178 1,000,000 195,548 195,548 1,000,000
13 185987 95,474 95,474 1,000,000 145,190 145,190 1,000,000 225,641 225,641 1,000,000
14 205786 102,686 102,686 1,000,000 160,826 160,826 1,000,000 258,821 258,821 1,000,000
15 226575 109,742 109,742 1,000,000 177,109 177,109 1,000,000 295,393 295,393 1,049,567
20 347193 142,709 142,709 1,000,000 269,277 269,277 1,000,000 542,166 542,166 1,593,385
25 501136 171,704 171,704 1,000,000 382,361 382,361 1,000,000 941,970 941,970 2,301,334
30 697610 196,686 196,686 1,000,000 521,350 521,350 1,067,260 1,589,517 1,589,517 3,253,913
- -------------------------------------------------------------------------------------------------------------------------
You should not assume that the hypothetical investment rates of return shown above and elsewhere in this prospectus are representative of past or future investment rates of return. These rates are hypothetical. Actual rates of return may be more or less than those shown. The actual rates will depend on a number of factors including the investment allocations you make, prevailing rates and rates of inflation. The values for a Contract will be different from those shown if the actual rates of return averages 0%, 6% or 12% over a period of years but also fluctuated above or below those averages for individual Contract Years. Neither we nor any Fund can make the statement that these hypothetical rates of return can be achieved for any one year or sustained over any period of time.
$10,000 ANNUAL PREMIUM
$1,000,000 TOTAL SUM INSURED: $1,000,000 SPECIFIED AMOUNT
COVERAGE OPTION A
USING GUARANTEED COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35; Female, Standard Nonsmoker, Age 35
- ------------------------------------------------------------------------------------------------------------------------
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
- --------- ----------------- ----------------------------- --------------------------- --------------------------------
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per Year Value Value Value
- --------- ----------------- --------- --------- --------- -------- --------- --------- ---------- --------- ----------
1 10500 4,774 0 1,000,000 5,183 0 1,000,000 5,595 0 1,000,000
2 21525 9,468 0 1,000,000 10,588 0 1,000,000 11,763 0 1,000,000
3 33101 14,081 3,089 1,000,000 16,223 5,231 1,000,000 18,562 7,570 1,000,000
4 45256 18,613 8,873 1,000,000 22,097 12,358 1,000,000 26,056 16,316 1,000,000
5 58019 23,063 14,715 1,000,000 28,219 19,870 1,000,000 34,315 25,967 1,000,000
6 71420 27,432 20,475 1,000,000 34,597 27,640 1,000,000 43,417 36,460 1,000,000
7 85491 31,718 26,152 1,000,000 41,240 35,675 1,000,000 53,446 47,881 1,000,000
8 100266 35,920 31,745 1,000,000 48,159 43,984 1,000,000 64,497 60,323 1,000,000
9 115779 40,036 37,253 1,000,000 55,361 52,578 1,000,000 76,672 73,889 1,000,000
10 132068 44,065 42,674 1,000,000 62,857 61,466 1,000,000 90,085 88,694 1,000,000
11 149171 48,004 48,004 1,000,000 70,655 70,655 1,000,000 104,862 104,862 1,000,000
12 167130 51,851 51,851 1,000,000 78,766 78,766 1,000,000 121,138 121,138 1,000,000
13 185987 55,601 55,601 1,000,000 87,197 87,197 1,000,000 139,067 139,067 1,000,000
14 205786 59,250 59,250 1,000,000 95,958 95,958 1,000,000 158,814 158,814 1,000,000
15 226575 62,793 62,793 1,000,000 105,056 105,056 1,000,000 180,564 180,564 1,000,000
20 347193 78,570 78,570 1,000,000 155,776 155,776 1,000,000 327,167 327,167 1,000,000
25 501136 89,683 89,683 1,000,000 215,268 215,268 1,000,000 563,159 563,159 1,375,859
30 697610 92,097 92,097 1,000,000 282,088 282,088 1,000,000 937,061 937,061 1,918,266
- ------------------------------------------------------------------------------------------------------------------------
You should not assume that the hypothetical investment rates of return shown above and elsewhere in this prospectus are representative of past or future investment rates of return. These rates are hypothetical. Actual rates of return may be more or less than those shown. The actual rates will depend on a number of factors including the investment allocations you make, prevailing rates and rates of inflation. The values for a Contract will be different from those shown if the actual rates of return averages 0%, 6% or 12% over a period of years but also fluctuated above or below those averages for individual Contract Years. Neither we nor any Fund can make the statement that these hypothetical rates of return can be achieved for any one year or sustained over any period of time.
$10,000 ANNUAL PREMIUM
$1,000,000 TOTAL SUM INSURED: $1,000,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING CURRENT COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35; Female, Standard Nonsmoker, Age 35
- -----------------------------------------------------------------------------------------------------------------------
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
- -------- ----------------- ----------------------------- --------------------------- --------------------------------
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per Year Value Value Value
- -------- ----------------- --------- --------- --------- -------- --------- --------- ---------- --------- ----------
1 10500 7,868 0 1,007,868 8,377 0 1,008,377 8,887 0 1,008,887
2 21525 15,606 3,501 1,015,606 17,116 5,011 1,017,116 18,688 6,583 1,018,688
3 33101 23,216 12,224 1,023,216 26,232 15,239 1,026,232 29,497 18,505 1,029,497
4 45256 30,698 20,958 1,030,698 35,739 25,999 1,035,739 41,415 31,675 1,041,415
5 58019 38,052 29,704 1,038,052 45,653 37,305 1,045,653 54,557 46,208 1,054,557
6 71420 45,280 38,323 1,045,280 55,991 49,034 1,055,991 69,047 62,090 1,069,047
7 85491 52,380 46,814 1,052,380 66,768 61,203 1,066,768 85,023 79,457 1,085,023
8 100266 59,351 55,177 1,059,351 78,001 73,827 1,078,001 102,634 98,460 1,102,634
9 115779 66,194 63,412 1,066,194 89,708 86,925 1,089,708 122,047 119,264 1,122,047
10 132068 72,907 71,515 1,072,907 101,904 100,513 1,101,904 143,446 142,054 1,143,446
11 149171 80,558 80,558 1,080,558 115,714 115,714 1,115,714 168,170 168,170 1,168,170
12 167130 88,057 88,057 1,088,057 130,097 130,097 1,130,097 195,421 195,421 1,195,421
13 185987 95,403 95,403 1,095,403 145,075 145,075 1,145,075 225,453 225,453 1,225,453
14 205786 102,591 102,591 1,102,591 160,665 160,665 1,160,665 258,548 258,548 1,258,548
15 226575 109,615 109,615 1,109,615 176,888 176,888 1,176,888 295,015 295,015 1,295,015
20 347193 142,288 142,288 1,142,288 268,406 268,406 1,268,406 541,336 541,336 1,590,946
25 501136 170,645 170,645 1,170,645 379,723 379,723 1,379,723 940,622 940,622 2,298,041
30 697610 194,477 194,477 1,194,477 514,985 514,985 1,514,985 1,587,330 1,587,330 3,249,437
- ------------------------------------------------------------------------------------------------------------------------
You should not assume that the hypothetical investment rates of return shown above and elsewhere in this prospectus are representative of past or future investment rates of return. These rates are hypothetical. Actual rates of return may be more or less than those shown. The actual rates will depend on a number of factors including the investment allocations you make, prevailing rates and rates of inflation. The values for a Contract will be different from those shown if the actual rates of return averages 0%, 6% or 12% over a period of years but also fluctuated above or below those averages for individual Contract Years. Neither we nor any Fund can make the statement that these hypothetical rates of return can be achieved for any one year or sustained over any period of time.
$10,000 ANNUAL PREMIUM
$1,000,000 TOTAL SUM INSURED: $1,000,000 SPECIFIED AMOUNT
COVERAGE OPTION B
USING GUARANTEED COST OF INSURANCE RATES
Male, Standard Nonsmoker, Age 35; Female, Standard Nonsmoker, Age 35
- ------------------------------------------------------------------------------------------------------------------------
0% Hypothetical Gross 6% Hypothetical Gross 12% Hypothetical Gross
Investment Return Investment Return Investment Return
- --------- ----------------- ----------------------------- --------------------------- --------------------------------
End of Premiums Contract Cash Death Contract Cash Death Contract Cash Death
Contract Accumulated at 5% Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit
Year Interest per Year Value Value Value
- --------- ----------------- --------- --------- --------- -------- --------- --------- ---------- --------- ----------
1 10500 4,774 0 1,004,774 5,183 0 1,005,183 5,595 0 1,005,595
2 21525 9,468 0 1,009,468 10,588 0 1,010,588 11,763 0 1,011,763
3 33101 14,080 3,088 1,014,080 16,223 5,231 1,016,223 18,561 7,569 1,018,561
4 45256 18,612 8,872 1,018,612 22,096 12,357 1,022,096 26,054 16,315 1,026,054
5 58019 23,062 14,713 1,023,062 28,217 19,868 1,028,217 34,312 25,964 1,034,312
6 71420 27,429 20,472 1,027,429 34,593 27,636 1,034,593 43,412 36,455 1,043,412
7 85491 31,713 26,147 1,031,713 41,234 35,668 1,041,234 53,437 47,872 1,053,437
8 100266 35,912 31,737 1,035,912 48,147 43,973 1,048,147 64,482 60,308 1,064,482
9 115779 40,024 37,241 1,040,024 55,344 52,561 1,055,344 76,647 73,865 1,076,647
10 132068 44,048 42,656 1,044,048 62,831 61,439 1,062,831 90,047 88,655 1,090,047
11 149171 47,979 47,979 1,047,979 70,617 70,617 1,070,617 104,803 104,803 1,104,803
12 167130 51,816 51,816 1,051,816 78,711 78,711 1,078,711 121,050 121,050 1,121,050
13 185987 55,554 55,554 1,055,554 87,119 87,119 1,087,119 138,938 138,938 1,138,938
14 205786 59,187 59,187 1,059,187 95,850 95,850 1,095,850 158,628 158,628 1,158,628
15 226575 62,709 62,709 1,062,709 104,908 104,908 1,104,908 180,300 180,300 1,180,300
20 347193 78,278 78,278 1,078,278 155,158 155,158 1,155,158 325,806 325,806 1,325,806
25 501136 88,814 88,814 1,088,814 213,045 213,045 1,213,045 558,866 558,866 1,558,866
30 697610 89,802 89,802 1,089,802 274,834 274,834 1,274,834 928,824 928,824 1,928,824
- ------------------------------------------------------------------------------------------------------------------------
You should not assume that the hypothetical investment rates of return shown above and elsewhere in this prospectus are representative of past or future investment rates of return. These rates are hypothetical. Actual rates of return may be more or less than those shown. The actual rates will depend on a number of factors including the investment allocations you make, prevailing rates and rates of inflation. The values for a Contract will be different from those shown if the actual rates of return averages 0%, 6% or 12% over a period of years but also fluctuated above or below those averages for individual Contract Years. Neither we nor any Fund can make the statement that these hypothetical rates of return can be achieved for any one year or sustained over any period of time.
Incontestability.After the Contract has been in force during the Insureds’ lifetimes for two years from the Contract Date (or less if required by state law), we may not contest the Contract, except if the Contract lapses after the end of a Grace Period.
We will not contest any increase in the Additional Insurance Amount after the increase has been in force during the Insureds’ lifetimes for two years following the effective date of the increase (or less if required by state law) unless the contract lapses.
If a Contract lapses and it is reinstated, we cannot contest the reinstated Contract after the Contract has been in force during the Insureds’ lifetimes for two years from the date of the reinstatement application (or less if required by state law).
Suicide Exclusion.If either Insured dies by suicide, while sane or insane, within two years of the Contract Date (or less if required by state law), the Contract will terminate on the date of such suicide and the amount payable by us (in place of any other benefits) will be equal to the Contract Value less any Loan Balance. If either Insured dies by suicide, while sane or insane, within two years after the effective date of any increase in the Additional Insurance Amount (or less if required by state law), the amount of the Additional Insurance Amount associated with the increase will terminate and the amount payable by us associated with such increase will be limited to the cost of insurance charges associated with the increase.
Misstatement of Age or Sex.If, while the Contract is in force and either or both the Insureds are alive, it is determined that the Age or sex of either Insured as stated in the Contract is not correct, we will adjust the Contract Value. The adjustment will be the difference between the following amounts accumulated at 4% interest annually. The two amounts are:
If, after the death of the last surviving Insured while this Contract is in force, it is determined the Age or sex of either Insured as stated in the Contract is not correct, the Death Benefit will be the net amount at risk that the most recent cost of insurance deductions at the correct Age and sex would have provided plus the Contract Value on the date of death (unless otherwise required by state law).
Other Changes. Upon notice to you, we may modify the Contract. We can only do so if such modification is necessary to:
We have the right to modify the Contract as necessary to attempt to prevent you from being considered the owner of the assets of the Variable Account. In the event of any such modification, we will issue an appropriate amendment to the Contract, if required. We will exercise these changes in accordance with applicable law, including approval of Contract Owners if required.
We will usually pay proceeds within seven calendar days after we receive all the documents required for such a payment.
We determine the amount of the Death Proceeds as of the date of the Insured’s death. But, we determine the amount of all other proceeds as of the date we receive the required documents. We may delay a payment or a transfer request if:
If payment is not made within 30 days after receipt of all documents required for such a payment, we will add interest to the amount paid from the date of receipt of all required documents at 4% or such higher rate required for a particular state
Generations Legacy Account.We will pay Death Proceeds through Kansas City Life’s Generations Legacy Account. The Generations Legacy Account is an interest-bearing checking account at Generations Bank, an affiliate of Kansas City Life. Interest accrues daily and is paid monthly in the Generations Legacy Account. A Contract Owner or Beneficiary (whichever applicable) has immediate and full access to proceeds by writing a check on the account. We pay interest on Death Proceeds from the date of death to the date the Generations Legacy Account is opened. Generations Bank is a member of the Federal Deposit Insurance Corporation (FDIC). Each account is insured up to the limit established by the FDIC.
We will pay Death Proceeds through the Generations Legacy Account when the proceeds are paid to an individual.
At least once each Contract Year, we will send you a report showing updated information about the Contract since the last report, including any information required by law. We will also send you an annual and semi-annual report for each Fund or Portfolio underlying a Subaccount to which you have allocated Contract Value. This will include a list of the securities held in each Fund, as required by the 1940 Act. In addition, we will send you written confirmation of all Contract transactions.
You select the Beneficiary in your application. You may change the Beneficiary in accordance with the terms of the Contract. If you designate a Beneficiary as irrevocable, then you must obtain the Beneficiary’s consent to change the Beneficiary. The Primary Beneficiary is the person entitled to receive the Death Proceeds under the Contract. If the Primary Beneficiary is not living, the Contingent Beneficiary is entitled to receive the Death Proceeds. If both Insureds die and there is no surviving Beneficiary, the Owner will be the Beneficiary.
We will pay death proceeds as though the beneficiary died before the death of the last surviving Insured if:
You may change the ownership of the contract by giving written notice or written request. The change will be effective on the date your request was signed but will have no effect on any payment made or other action taken by us before we receive it. We may require that the contract be submitted for endorsement to show the change.
You may assign the Contract in accordance with its terms. In order for any assignment to bind us, it must be in writing and filed at the Home Office. When we receive a signed copy of the assignment, your rights and the interest of any Beneficiary (or any other person) will be subject to the assignment. We assume no responsibility for the validity or sufficiency of any assignment. An assignment is subject to any Loan Balance. We will send notices to any assignee we have on record concerning amounts required to be paid during a Grace Period in addition to sending these notices to you.
If your Contract lapses, you may reinstate it within two years (or such longer period if required by state law) after lapse. This reinstatement must meet certain conditions, including the payment of the required Premium and proof of insurability. See your Contract for further information.
The following optional riders are available and may be added to your Contract. We will deduct monthly charges for these optional riders from your Contract Value as part of the Monthly Deduction. All of these riders may not be available in all states.
| Contract Split Option Rider Issue Ages: 20-75 This rider allows you to split the Contract equally (based on Total Sum Insured) into two individual policies, one on the life of each Insured. This split option will be offered without evidence of insurability under the condition that you make the request as the result of either: 1) the divorce of the two Insureds; or 2) as a result of a change in the Unlimited Federal Estate Tax marital deduction or a reduction in the maximum Federal Estate Tax bracket rate to a rate below 25%. |
| You must also meet specific other conditions in order to qualify. When you exercise this option, we will terminate the existing Contract. (In Pennsylvania, this option may not be exercised in the event of divorce.) |
| The new contracts will be based on the Insureds' Age and sex, and is based on the risk class at the time of issue of the original Contract. |
| This rider will terminate at the earlier of the death of the first Insured to die or the older Insured’s age 80. The rider will also terminate if you elect to keep the Guaranteed Minimum Death Benefit Option in effect after it is determined that funding is not adequate to cover these rider charges. (See “Guaranteed Minimum Death Benefit Option,” page 32.) |
| The tax consequences of a contract split are uncertain. (See “Tax Treatment of Contract Benefits,” page 48). A significant unresolved federal tax issue affecting a Contract is whether the issuance of two individual life insurance contracts in exchange for a survivorship life insurance contract will be treated as a nontaxable exchange. If you are considering a contract split, you should be aware that it is possible that such a contract split may not be treated as a nontaxable exchange, in which case the tax treatment of the Contract could be significantly less favorable than that described in this discussion. In addition, it is not clear whether two individual contracts received in exchange for a survivorship contract in a Contract split transaction will be classified as modified endowment contracts. Before proceeding with a contract split, you should consult a competent tax adviser as to the possible tax consequences of such a split. |
| Joint First to Die Term Life Insurance Rider Issue Ages: 20-85 This rider covers the Insureds under the Contract and provides yearly renewable term coverage on the first Insured to die on or before the older Insured’s age 100 and while this rider is in force. Coverage amounts may differ between the two Insureds, but the maximum coverage equals to Total Sum Insured and the minimum non-zero coverage equals $10,000. You may increase (subject to insurability) or decrease the coverage under this rider. You may also choose at issue a schedule for the coverage to decrease annually. The scheduled decreases may be based on the percentage of the coverage amount ranging up to 25% of the rider coverage amount or may be a flat dollar amount. If this rider is elected, the Guaranteed Minimum Death Benefit Option is not available on the Contract. |
| Joint Survivorship Four- Year Term Life Insurance Rider Issue Ages: 20-85 This rider provides renewable one-year level term insurance and expires at the end of the fourth contract year. The term insurance provides a death benefit payable at the death of the last surviving Insured. The minimum coverage is $100,000 and the maximum coverage is equal to the Total Sum Insured. This rider is available at issue only. |
| The rider will also terminate if you elect to keep the Guaranteed Minimum Death Benefit Option in effect after it is determined that funding is not adequate to cover these rider charges. (See “Guaranteed Minimum Death Benefit Option,” page 32.) |
Additional rules and limits apply to these optional riders. Not all such benefits may be available at any time, and optional benefits or riders in addition to those listed above may be made available. Please ask your Kansas City Life agent for further information, or contact the Home Office.
The following summary provides a general description of the Federal income tax considerations associated with the Contract and does not purport to be complete or to cover all tax situations. This discussion is not intended as tax advice. You should consult counsel or other competent tax advisers for more complete information. This discussion is based upon our understanding of the present Federal income tax laws. We make no representation as to the likelihood of continuation of the present Federal income tax laws or as to how they may be interpreted by the Internal Revenue Service.
In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Contract must satisfy certain requirements which are set forth in the Internal Revenue Code. Guidance as to how these requirements are to be applied to certain features of the Contract is limited. Nevertheless, we believe it is reasonable to conclude that the Contracts should satisfy the applicable requirements. There is necessarily some uncertainty, however, particularly if you pay the full amount of Premiums permitted under the Contract. If it is subsequently determined that a Contract does not satisfy the applicable requirements, we may take appropriate steps to bring the Contract into compliance with such requirements and we have the right to restrict Contract transactions as necessary in order to do so.
In certain circumstances, owners of variable life insurance contracts have been considered for Federal income tax purposes to be the owners of the assets of the variable account supporting their contracts due to their ability to exercise investment control over those assets. Where this is the case, the Owners have been currently taxed on income and gains attributable to variable account assets. There is little guidance in this area, and some features of the Contracts, such as the flexibility of an Owner to allocate Premiums and Contract Value, have not been explicitly addressed in published rulings. While we believe that the Contracts do not give Owners investment control over Variable Account assets, we have the right to modify the Contracts as necessary to prevent an Owner from being treated as the owner of a pro rata share of the assets of the Subaccounts.
In addition, the Code requires that the investments of each of the Subaccounts must be “adequately diversified” in order for the Contract to be treated as a life insurance contract for Federal income tax purposes. It is intended that the Subaccounts, through the Portfolios, will satisfy these diversification requirements.
The following discussion assumes that the Contract will qualify as a life insurance contract for Federal income tax purposes.
In General. We believe that the Death Benefit under a Contract should be excludable from the gross income of the Beneficiary.
Generally, the Owner will not be deemed to be in constructive receipt of the Contract Value until there is a distribution. When distributions from a Contract occur, or when loans are taken out from or secured by a Contract, the tax consequences depend on whether the Contract is classified as a “Modified Endowment Contract.”
Modified Endowment Contracts.Under the Internal Revenue Code, certain life insurance contracts are classified as “Modified Endowment Contracts,” with less favorable tax treatment than other life insurance contracts. Due to the flexibility of the Contracts as to Premiums and benefits, the individual circumstances of each Contract will determine whether it is classified as a Modified Endowment Contract. The rules are too complex to be summarized here, but generally depend on the amount of Premiums paid during the first seven Contract years. Certain changes in a Contract after it is issued could also cause it to be classified as a Modified Endowment Contract. A current or prospective Owner should consult with a competent adviser to determine whether a Contract transaction will cause the Contract to be classified as a Modified Endowment Contract.
Distributions (Other Than Death Benefits) from Modified Endowment Contracts. Contracts classified as Modified Endowment Contracts are subject to the following tax rules:
This means that a distribution made from a Contract that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract.
Distributions (Other Than Death Benefits) From Contracts That Are Not Modified Endowment Contracts.Distributions (other than Death Benefits) from a Contract that is not classified as a Modified Endowment Contract are generally treated first as a recovery of the Owner’s investment in the Contract and only after the recovery of all investment in the Contract as taxable income. However, certain distributions which must be made in order to enable the Contract to continue to qualify as a life insurance contract for Federal income tax purposes if Contract benefits are reduced during the first 15 Contract years may be treated in whole or in part as ordinary income subject to tax.
Loans from or secured by a Contract that is not a Modified Endowment Contract are generally not treated as distributions. However, the tax consequences associated with preferred loans that are outstanding after the first 10 are less clear and you should consult a tax adviser about such loans.
Finally, neither distributions from nor loans from or secured by a Contract that is not a Modified Endowment Contract are subject to the 10 percent additional income tax.
Investment in the Contract.Your investment in the Contract is generally your aggregate Premiums. When a distribution is taken from the Contract, your investment in the Contract is reduced by the amount of the distribution that is tax-free.
Contract Loans.In general, interest on a Contract loan will not be deductible. If a Contract loan is outstanding when a Contract is canceled or lapses, the amount of the outstanding Loan Balance will be added to the amount distributed and will be taxed accordingly. If a Contract is surrendered or lapses with a Contract loan outstanding, the outstanding Loan Balance will be treated as distributed to the Owner and taxed accordingly. Before taking out a Contract loan, you should consult a tax adviser as to the tax consequences.
Multiple Contracts.All Modified Endowment Contracts that are issued by Kansas City Life (or its affiliates) to the same Owner during any calendar year are treated as one Modified Endowment Contract for purposes of determining the amount includable in the Owner’s income when a taxable distribution occurs.
Continuation of the Contract Beyond Age 100. The tax consequences of continuing the Contract beyond the younger Insured's 100th year are unclear. You should consult a tax adviser if you intend to keep the Contract in force beyond the younger Insured's 100th year.
Business Uses of the Contracts.The Contracts can be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and others. The tax consequences of such arrangements may vary depending on the particular facts and circumstances. If you are purchasing the Contract for any arrangement the value of which depends in part on its tax consequences, you should consult a qualified tax adviser. In recent years, moreover, Congress has adopted new rules relating to life insurance owned by businesses. Any business contemplating the purchase of a new Contract or a change in an existing Contract should consult a tax adviser.
Other Tax Considerations.The transfer of the Contract or designation of a Beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. For example, the transfer of the Contract to, or the designation as a Beneficiary of, or the payment of Proceeds to, a person who is assigned to a generation which is two or more generations below the generation assignment of the Owner may have generation-skipping transfer tax consequences under federal tax law. The individual situation of each Owner or Beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Contract Proceeds will be treated for purposes of federal, state and local estate, inheritance, generation-skipping and other taxes.
New Guidance on Split Dollar Plans. The IRS has recently issued guidance on split dollar insurance plans. A tax advisor should be consulted with respect to this new guidance if you have purchased or are considering the purchase of a Contract for a split dollar insurance plan.
Alternative Minimum Tax.There may also be an indirect tax upon the income in the Contract or the proceeds of a Contract under the Federal corporate alternative minimum tax, if the owner is subject to that tax.
At the present time, we make no charge for any Federal, state or local taxes (other than the Premium expense charge) that we incur that may be attributable to the Subaccounts or to the Contracts. We do have the right in the future to make additional charges for any such tax or other economic burden resulting from the application of the tax laws that we determine is attributable to the Subaccounts or the Contracts.
Under current laws in several states, we may incur state and local taxes (in addition to Premium taxes). These taxes are not now significant and we are not currently charging for them. If they increase, we may deduct charges for such taxes.
Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Contract.
The Contracts will be offered to the public on a continuous basis, and we do not plan to discontinue the offering of the Contracts. However, we have the right to do so. Applications for Contracts are solicited by agents appointed by us who are licensed by applicable state insurance authorities to sell our variable life contracts. They are generally registered representatives of Sunset Financial Services, Inc. (“Sunset Financial”), one of our wholly-owned subsidiaries. They are registered with the National Association of Securities Dealers, Inc. (“NASD”) and with the states in which they do business. It is also possible that these agents are instead registered representatives of broker-dealers who have entered into written sales agreements with Sunset Financial. Sunset Financial is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as well as with the securities commissions in the states in which it operates, and is a member of the NASD.
Sunset Financial, incorporated on October 18, 1968, acts as the Principal Underwriter, as defined in the 1940 Act, of the Contracts for the Variable Account as described in an Underwriting Agreement dated September 27, 1995 between Kansas CityLife and Sunset Financial. Sunset Financialis not obligated to sell any specific number of Contracts. Sunset Financial’s principal business address is P.O. Box 219365, Kansas City, Missouri 64121-9364.
Sunset Financial may pay registered representatives commissions on a Contract they sell based on Premiums paid in amounts up to 50% of Premiums paid during the first Contract Year and up to 2% of Premiums paid after the first Contract Year. In certain circumstances Sunset Financial may pay additional commissions, other allowances and overrides. Compensation may also be paid in the overrides form of non-cash compensation subject to applicable regulatory requirements.
Sunset Financial does not retain any override as distributor for the Contracts. However, Sunset Financial’s operating and other expenses are paid for by Kansas City Life. Also, Sunset Financial receives 12b-1 fees from Franklin Templeton.
Because registered representatives of Sunset Financial are also agents of Kansas City Life, they are eligible for various cash benefits, such as bonuses, insurance benefits and financing arrangements, and non-cash compensation programs that Kansas City Life offers, such as conferences, trips, prizes, and awards. Other payments may be made for other services that do not directly involve the sale of the Contracts. These services may be made for other services that do not directly involve the sale of the Contracts. These services may include the recruitment and training of personnel, production of promotional literature, and similar services.
When Contracts are sold through other broker-dealers that have entered into selling agreements with us, the commission which will be paid by such broker-dealers to their representatives will be in accordance with their established rules. The commission rates may be more or less than those set forth above for Kansas City Life’s representatives. Selling firms may retain a portion of commissions. In addition, their qualified registered representatives may be reimbursed by the broker-dealers under expense reimbursement allowance programs in any year for approved expenses. We will compensate the broker-dealers as provided in the selling agreements, and Sunset Financial Services, Inc. will reimburse Kansas City Life for such amounts and for certain other direct expenses in connection with marketing the Contracts through other broker-dealers.
We intend to recoup commissions and other sales expenses through fees and charges imposed under the Contract. Commissions paid on the Contract, including other incentives or payments, are not charged directly to the policy owners or the Variable Account.
You may request the following transactions by telephone, facsimile or electronic mail if you provided proper authorization to us:
We may suspend these privileges at any time if we decide that such suspension is in the best interests of Contract Owners.
We will employ reasonable procedures to confirm that instructions communicated to us are genuine. If we follow those procedures, we will not be liable for any losses due to unauthorized or fraudulent instructions.
The procedures we will follow for telephone privileges include requiring some form of personal identification prior to acting on instructions received by telephone, providing written confirmation of the transaction, and making a tape recording of the instructions given by telephone.
We accept written requests transmitted by facsimile, but reserve the right to require you to send us the original written request.
Electronic mail requests that are received before 3:00 CST at “customerservice@kclife.com” will be processed on the applicable Valuation Day. If an incomplete request is received, we will notify you as soon as possible by return e-mail. Your request will be honored as of the Valuation Day when all required information is received.
Telephone, facsimile and electronic mail systems may not always be available. Any telephone, facsimile or electronic mail system, whether it is yours, your service provider’s, your agent’s, or ours, can experience outages or slowdowns for a variety of reasons. These outages may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request by writing to our Home Office.
The following table sets forth the name, address and principal occupations during the past five years of each of Kansas City Life's directors and executive officers.
| Name and Principal Business Address * | Principal Occupation During Past Five |
|---|---|
| Joseph R. Bixby | Director, Kansas City Life; Chairman of the Board since 1972. Director of Sunset Life and Old American Insurance Company, subsidiaries of Kansas City Life. Chairman of the Board of Sunset Life and Old American since October, 1999. |
| R. Philip Bixby | Director, Kansas City Life; President and CEO since April, 1998; Vice Chairman of the Board since January, 2000; Elected Senior Vice President, Operations in 1990; Executive Vice President in 1996 and President and CEO in April, 1998. Primarily responsible for the operation of the Company. Director of Sunset Life and Old American, subsidiaries of Kansas City Life. President of Sunset Life, subsidiary of Kansas City Life, since June, 1999. |
| Walter E. Bixby | Director, Kansas City Life; Director and President of Old American Insurance Company, a subsidiary of Kansas City Life. Director of Sunset Life, a subsidiary of Kansas City Life. |
| Charles R. Duffy Jr. | Elected Vice President, Insurance Administration in , 1989; Senior Vice President, Operations since 1996; responsible for Computer Information Systems, Customer Services, Claims, Agency Administration, New Business and Underwriting. Director of Sunset Life and Old American, subsidiaries of Kansas City Life. |
| Richard L. Finn | Director, Kansas City Life; Senior Vice President, Finance, since 1984; Chief Financial Officer and responsible for investment of Kansas City Life's funds, accounting and taxes. Director, Vice President and Chief Financial Officer of Old American and Director and Treasurer of Sunset Life, subsidiaries of Kansas City Life. |
| Jack D. Hayes | Director, Kansas City Life; Elected Senior Vice President-Emeritus, Marketing; responsible for Marketing, Marketing Administration, Communications and Public Relations. |
| C. John Malacarne | Director, Kansas City Life; Senior Vice President, General Counsel and Secretary since 1991. Responsible for Legal Department, Office of the Secretary, Stock Transfer Department and Market Compliance. Director and Secretary of Sunset Life and Old American, subsidiaries of Kansas City Life. |
| Robert C. Miller | Senior Vice President, Administrative Services, since 1991. Responsible for Human Resources and Home Office building and maintenance. |
| Webb R. Gilmore | Director, Kansas City Life since 1990; Partner - Gilmore and Bell. |
| Nancy Bixby Hudson | Director, Kansas City Life since 1996; Investor. |
| Warren J. Hunzicker, M.D. | Director, Kansas City Life since 1989. |
| Daryl D. Jensen | Director, Kansas City Life; Vice Chairman of the Board and Retired President, Sunset Life Insurance Company of America, a subsidiary of Kansas City Life, since 1975. |
| Michael J. Ross | Director, Kansas City Life since 1972; President and Chairman of the Board, Jefferson Bank and Trust Company, St. Louis, Missouri, since 1971. |
| Elizabeth T. Solberg | Director, Kansas City Life since 1997; Executive Vice President and Senior Partner, Fleishman-Hilliard, Inc. since 1984. |
| Larry Winn Jr. | Director, Kansas City Life since 1985; Retired as the Kansas Third District Representative to the U.S. Congress. |
| John K. Koetting | Vice President and Controller since 1980; chief accounting officer; responsible for all corporate accounting reports. Director of Old American, a subsidiary of Kansas City Life. |
| Mark A. Milton | Senior Vice President and Actuary since January, 2001; Elected Vice President and Associate Actuary in 1989. Responsible for Actuarial, State Compliance and Group. Director of Sunset Life, a subsidiary of Kansas City Life. |
| Bruce W. Gordon | Senior Vice President, Marketing, since July, 2001; responsible for Marketing, Marketing Adminstration, Communications and Public Relations. Executive Vice President and Director of Sunset Life, a subsidiary of Kansas City Life. |
| William R. Blessing | Director, Kansas City Life since March 2001; Vice President, Development and Strategy, Sprint PCS |
| Cecil R. Miller | Director, Kansas City Life since March 2001; Retired partner of KPMG LLP |
*The principal business address of all the persons listed above is
3520 Broadway, Kansas City, Missouri 64111-2565.
We are regulated by the Department of Insurance of the State of Missouri, which periodically examines our financial condition and operations. We are also subject to the insurance laws and regulations of all jurisdictions where we do business.
We have filed a registration statement under the Securities Act of 1933 with the SEC relating to the offering described in this prospectus. This Prospectus does not include all the information set forth in the registration statement. The omitted information may be obtained at the SEC’s principal office in Washington, D.C. by paying the SEC’s prescribed fees.
The consolidated financial statements of Kansas City Life as of December 31, 2000 and for the year then ended, and the statement of net assets of the Variable Account as of December 31, 2000 and the related statements of operations and changes in net assets for the year then ended, except for those individual series operating for portions of such period as disclosed in the financial statements, have been included herein in reliance upon the reports of KPMG LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, has audited the following reports included in this prospectus:
Mark A. Milton, Senior Vice President and Actuary of Kansas City Life has examined actuarial matters in this Prospectus.
We and our affiliates, like other life insurance companies, are involved in lawsuits, including class action lawsuits. In some class action and other lawsuits involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, we believe that at the present time there are not pending or threatened lawsuits that are reasonably likely to have a material adverse impact on the Variable Account or Kansas City Life.
We are closed on the following holidays: New Year’s Day, President’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. We will recognize holidays that fall on a Saturday on the previous Friday. We will recognize holidays that fall on a Sunday on the following Monday. On these holidays, there will be no valuation.
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on certain matters relating to the federal securities laws. C. John Malacarne, General Counsel of Kansas City Life has passed on matters of Missouri law pertaining to the Contracts, including our right to issue the Contracts and our qualification to do so under applicable laws and regulations.
Kansas City Life’s financial statements included in this Prospectus should be distinguished from financial statements of the Variable Account. You should consider Kansas City Life’s financial statements only as an indication of Kansas City Life’s ability to meet its obligations under the Contracts. You should not consider them as having an effect on the investment performance of the assets held in the Variable Account. The following financial statements for the Variable Account are also included in the Prospectus:
KANSAS CITY LIFE INSURANCE COMPANY CONSOLIDATED FINANCIAL STATEMENTS
Nine Months, 2001 Interim Financial Statements
Consolidated
Balance Sheet
(unaudited)
(in thousands)
September 30 December 31
2001 2000
Assets
Investments:
Fixed maturities:
Securities available for sale,
at market $ 2,054,723 1,934,156
Securities held to maturity,
at amortized cost - 80,572
Equity securities available
for sale, at market 80,819 94,270
Mortgage loans 412,586 396,731
Short-term 123,623 54,171
Other 250,370 194,652
2,922,121 2,754,552
Cash 9,586 13,391
Deferred acquisition costs 239,307 244,960
Other assets 295,387 308,210
Separate account assets 271,172 325,148
$ 3,737,573 3,646,261
Liabilities and equity
Future policy benefits $ 817,707 821,286
Accumulated contract values 1,626,866 1,619,887
Notes Payable 97,590 41,520
Other liabilities 335,024 306,166
Separate account liabilities 271,172 325,148
Total liabilities 3,148,359 3,114,007
Stockholders' equity:
Capital stock 23,121 23,121
Paid in capital 21,562 20,109
Accumulated other
comprehensive loss (17,781) (55,280)
Retained earnings 670,605 651,324
Less treasury stock (108,293) (107,020)
589,214 532,254
$ 3,737,573 3,646,261
Consolidated
Income Statement
(unaudited)
(in thousands, except per share data)
Quarter ended Nine Months ended
September 30 September 30
2001 2000 2001 2000
Revenues
Insurance revenues:
Premiums:
Life insurance $ 24,209 25,103 72,741 74,605
Accident and health 10,837 10,772 33,645 33,124
Contract charges 26,312 26,609 80,045 81,877
Investment revenues:
Investment income, net 49,974 52,207 151,548 155,059
Realized gains (losses) (2,783) 139 (2,975) 561
Other 3,780 3,502 12,414 11,494
Total revenues 112,329 118,332 347,418 356,720
Benefits and expenses
Policyholder benefits 67,661 66,810 207,424 206,578
Amortization of policy acquisition costs 8,788 7,245 24,263 18,527
Insurance operating expenses 25,412 24,125 76,788 72,962
Total benefits and expenses 101,861 98,180 308,475 298,067
Pretax income 10,468 20,152 38,943 58,653
Federal income taxes:
Current 983 3,680 7,022 14,997
Deferred 703 1,896 2,155 2,240
1,686 5,576 9,177 17,237
Net income $ 8,782 14,576 29,766 41,416
Per common share
Net income $ 0.73 1.21 2.47 3.44
Cash dividends 0.27 0.25 0.81 0.75
Consolidated
Statement of Cash Flows
(unaudited)
(in thousands)
Nine Months ended
September 30
2001 2000
Operating activities
Net cash provided $ 60,892 34,417
Investing activities
Available for sale securities:
Purchases of fixed maturities (646,511) (243,191)
Sales of fixed maturities 482,338 236,207
Sales of equity securities 10,786 34,831
Maturities and principal paydowns
of fixed maturity investments 123,039 61,963
Purchases of other investments (58,598) (85,563)
Sales, maturities and principal
paydowns of other investments 46,494 55,590
Net purchase of short-term
investments (69,452) (7,619)
Disposition of life block:
Cash paid net of ceding
commission received (4,000) -
Net cash provided (used) (115,904) 52,218
Financing activities
Policyowner contract deposits 109,107 101,754
Withdrawals of policyowner
contract deposits (103,277) (152,784)
Dividends paid to stockholders (10,486) (9,031)
Proceeds from borrowings 56,070 25,400
Repayment of borrowings - (64,900)
Other, net (207) (1,662)
Net cash provided (used) 51,207 (101,223)
Decrease in cash (3,805) (14,588)
Cash at beginning of year 13,391 22,355
Cash at end of period $ 9,586 7,767
Notes:
KANSAS CITY LIFE INSURANCE COMPANY CONSOLIDATED FINANCIAL STATEMENTS
Twelve Months, 2000 Financial Statements
CONSOLIDATED INCOME STATEMENT
(Thousands, except per share data and parenthetical comments)
Year-ended December 31
2000 1999 1998
REVENUES
Insurance revenues:
Premiums:
Life insurance $ 99,195 104,086 108,510
Accident and health 44,641 42,636 42,441
Contract charges 109,783 108,873 108,608
Investment revenues:
Investment income, net 207,135 207,682 202,402
Realized investment gains (losses), net (3,871) 2,860 11,426
Other 16,024 13,956 14,671
TOTAL REVENUES 472,907 480,093 488,058
BENEFITS AND EXPENSES
Policy benefits:
Death benefits 113,403 110,672 107,355
Surrenders of life insurance 15,767 14,592 19,368
Other benefits 73,854 70,702 72,190
Increase in benefit and contract reserves 73,816 85,206 84,427
Amortization of deferred acquisition costs 26,828 31,261 36,201
Insurance operating expenses 100,735 103,597 100,568
TOTAL BENEFITS AND EXPENSES 404,403 416,030 420,109
Income before Federal income taxes 68,504 64,063 67,949
Federal income taxes:
Current 15,633 21,172 20,471
Deferred 3,788 (2,154) (1,034)
19,421 19,018 19,437
NET INCOME $ 49,083 45,045 48,512
Basic and diluted earnings per share:
Net income $4.08 3.66 3.92
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEET
December 31
2000 1999
ASSETS
Investments:
Fixed maturities:
Available for sale, at fair value (amortized cost $1,998,319,000;
$2,079,458,000 - 1999) $ 1,934,157 1,999,215
Held to maturity, at amortized cost (fair value $80,463,000;
$107,570,000 - 1999) 80,572 107,606
Equity securities available for sale, at fair value
(cost $100,866,000; $122,371,000 - 1999) 94,269 115,968
Mortgage loans on real estate, net 396,731 340,704
Real estate, net 44,443 42,011
Real estate joint ventures 34,185 37,336
Policy loans 116,024 118,521
Short-term investments 54,171 19,380
TOTAL INVESTMENTS 2,754,552 2,780,741
Cash 13,391 22,355
Accrued investment income 41,028 43,907
Receivables, net 3,688 7,552
Property and equipment, net 20,701 22,010
Deferred acquisition costs 244,960 236,370
Value of purchased insurance in force 87,833 95,636
Reinsurance recoverables 135,378 131,995
Deferred income taxes 8,870 14,716
Other assets 10,712 6,103
Separate account assets 325,148 259,899
$ 3,646,261 3,621,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits:
Life insurance $ 775,381 782,341
Accident and health 45,905 47,215
Accumulated contract values 1,619,887 1,688,706
Policy and contract claims 34,083 34,721
Other policyholders' funds:
Dividend and coupon accumulations 61,354 61,740
Other 88,195 90,885
Notes payable 41,520 69,500
Current income taxes payable 6,383 7,870
Other liabilities 116,151 84,602
Separate account liabilities 325,148 259,899
TOTAL LIABILITIES 3,114,007 3,127,479
Stockholders' equity:
Common stock, par value $1.25 per share
Authorized 36,000,000 shares, issued 18,496,680 shares 23,121 23,121
Paid in capital 20,109 18,498
Retained earnings 651,324 614,278
Accumulated other comprehensive loss (55,280) (59,095)
Less treasury stock, at cost (6,475,203 shares; 6,411,738 shares - 1999) (107,020) (102,997)
TOTAL STOCKHOLDERS' EQUITY 532,254 493,805
$ 3,646,261 3,621,284
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
2000 1999 1998
COMMON STOCK, beginning and end of year $ 23,121 23,121 23,121
PAID IN CAPITAL:
Beginning of year 18,498 17,633 16,256
Excess of proceeds over cost of treasury stock sold 1,611 865 1,377
End of year 20,109 18,498 17,633
RETAINED EARNINGS:
Beginning of year 614,278 581,074 543,715
Net income 49,083 45,045 48,512
Other comprehensive income (loss):
Unrealized gains (losses) on securities 9,581 (104,921) 15,094
Decrease (increase) in unfunded pension liability (5,766) 360 (6,076)
Comprehensive income (loss) 52,898 (59,516) 57,530
Transfer other comprehensive (income) loss to
accumulated other comprehensive income (3,815) 104,561 (9,018)
Stockholder dividends of $1.00 per share
($.96 - 1999 and $.90 - 1998) (12,037) (11,841) (11,153)
End of year 651,324 614,278 581,074
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Beginning of year (59,095) 45,466 36,448
Other comprehensive income (loss) 3,815 (104,561) 9,018
End of year (55,280) (59,095) 45,466
TREASURY STOCK, at cost:
Beginning of year (102,997) (89,361) (88,946)
Cost of 174,550 shares acquired
(349,087 shares - 1999 and 24,640 shares - 1998) (5,600) (14,094) (1,063)
Cost of 111,085 shares sold
(32,243 shares - 1999 and 47,296 shares - 1998) 1,577 458 648
End of year (107,020) (102,997) (89,361)
TOTAL STOCKHOLDERS' EQUITY $ 532,254 493,805 577,933
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year-ended December 31
2000 1999 1998
OPERATING ACTIVITIES
Net income $ 49,083 45,045 48,512
Adjustments to reconcile net income to
net cash from operating activities:
Amortization of investment premium, net 4,867 2,061 2,398
Depreciation 6,093 5,265 5,153
Policy acquisition costs capitalized (35,775) (39,553) (46,011)
Amortization of deferred acquisition costs 26,828 31,261 36,201
Realized investment (gains) losses 3,871 (2,860) (11,426)
Changes in assets and liabilities:
Future policy benefits (8,270) 12,375 25,855
Accumulated contract values (8,246) (10,182) (12,264)
Other policy liabilities (3,076) 14,867 6,842
Income taxes payable and deferred 8,147 (14,748) (11,399)
Other, net 22,819 18,449 (718)
NET CASH PROVIDED 66,341 61,980 43,143
INVESTING ACTIVITIES
Purchases of investments:
Fixed maturities available for sale (415,189) (654,943) (644,087)
Fixed maturities held to maturity (3,304) (3,354) -
Equity securities available for sale (22,134) (43,130) (28,047)
Sales of fixed maturities available for sale 369,027 406,785 372,930
Maturities and principal paydowns
of security investments:
Fixed maturities available for sale 115,557 173,990 216,247
Fixed maturities held to maturity 24,539 10,913 30,453
Equity securities available for sale 44,158 22,644 28,043
Purchases of other investments (138,947) (36,300) (78,298)
Sales, maturities and principal
paydowns of other investments 53,990 59,655 60,500
Dispositions of insurance blocks - net cash paid - (5,162) (13,250)
NET CASH PROVIDED (USED) 27,697 (68,902) (55,509)
FINANCING ACTIVITIES
Proceeds from borrowings 58,445 95,850 1,100
Repayment of borrowings (86,425) (26,350) (1,100)
Policyowner contract deposits 137,901 148,993 175,421
Withdrawals of policyowner contract deposits (198,474) (181,367) (187,028)
Cash dividends to stockholders (12,037) (11,841) (11,153)
Disposition (acquisition) of treasury stock, net (2,412) (12,771) 962
NET CASH PROVIDED (USED) (103,002) 12,514 (21,798)
Increase (decrease) in cash (8,964) 5,592 (34,164)
Cash at beginning of year 22,355 16,763 50,927
CASH AT END OF YEAR $ 13,391 22,355 16,763
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables are generally stated in thousands, except per share data)
SIGNIFICANT ACCOUNTING POLICIES
Organization
Kansas City Life Insurance Company is a Missouri domiciled stock life insurance
company which, with its affiliates, is licensed to sell insurance products in 49
states and the District of Columbia. The Company offers a diversified portfolio
of individual insurance, annuity and group products distributed primarily
through numerous general agencies. In recent years, the Company's new business
activities have been concentrated in interest sensitive and variable products.
Basis of Presentation
The accompanying consolidated financial statements have been prepared on the
basis of accounting principles generally accepted in the United States (GAAP)
and include the accounts of Kansas City Life Insurance Company and its
subsidiaries, principally Sunset Life Insurance Company of America (Sunset Life)
and Old American Insurance Company (Old American). Significant intercompany
transactions have been eliminated in consolidation. Certain reclassifications
have been made to prior year results to conform with the current year's
presentation. GAAP requires management to make certain estimates and assumptions
which affect amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
Recognition of Revenues
Traditional life insurance products include whole life insurance, term life
insurance and certain annuities. Premiums for these products are recognized as
revenues when due. Accident and health insurance premiums are recognized as
revenues over the terms of the policies. Revenues for universal life and
flexible annuity products are amounts assessed against contract values for cost
of insurance, policy administration and surrenders, as well as amortization of
deferred front-end contract charges.
Future Policy Benefits
For traditional life insurance products, reserves have been computed by a net
level premium method based upon estimates at the time of issue for investment
yields, mortality and withdrawals. These estimates include provisions for
experience less favorable than actually expected. Investment yield assumptions
for new issues are graded down and range from 7.25 percent to5.25 percent.
Mortality assumptions are based on standard mortality tables. The 1975-1980
Select and Ultimate Basic Table is used for business issued since 1977.
Reserves and claim liabilities for accident and health insurance include
estimated unpaid claims and claims incurred but not reported. For traditional
life and accident and health insurance, benefits and claims are charged to
expense in the period incurred.
Liabilities for universal life and flexible annuity products represent
accumulated contract values, without reduction for potential surrender charges,
and deferred front-end contract charges which are amortized over the term of the
policies. Benefits and claims are charged to expense in the period incurred net
of related accumulated contract values. Interest on accumulated contract values
is credited to contracts as earned. Crediting rates for universal life insurance
and flexible annuity products ranged from 4.00 percent to 6.75 percent (3.85
percent to 6.50 percent - 1999 and 3.85 percent to 7.25 percent - 1998).
Withdrawal assumptions for all products are based on corporate experience.
Policy Acquisition Costs
The costs of acquiring new business, principally commissions, certain policy
issue and underwriting expenses and certain variable agency expenses, are
deferred. For traditional life products, deferred acquisition costs are
amortized in proportion to premium revenues over the premium-paying period of
related policies, using assumptions consistent with those used in computing
benefit reserves. Acquisition costs for interest sensitive and variable products
are amortized over a period not exceeding 30 years in proportion to estimated
gross profits arising from interest spreads and charges for mortality, expenses
and surrenders that are expected to be realized over the term of the contracts.
The amortization is adjusted retrospectively when estimates of current or future
gross profits to be realized from a block of business are revised. This asset is
also adjusted for the impact on estimated gross profits of net unrealized gains
and losses on securities.
Value of Purchased Insurance in Force
The value of purchased insurance in force arising from the acquisition of a life
insurance subsidiary and a block of life insurance business is being amortized
in proportion to projected future premium revenues or gross profits. Such
amortization is included in insurance operating expenses. If these projections
should change, the amortization is adjusted prospectively. This asset was
increased $8,523,000 ($9,313,000 - 1999 and $9,609,000 - 1998) for accrual of
interest and reduced $16,326,000 ($18,008,000 - 1999 and $17,194,000 - 1998) for
amortization. The increase for accrual of interest for the life insurance
subsidiary was calculated using a 13.0 percent interest rate for the life block
and a 7.0 percent rate for the accident and health block and, on the acquired
block, a 7.0 percent interest rate on the traditional life portion and a 5.4
percent rate on the interest sensitive portion. Total accumulated accrual of
interest and amortization equal $62,942,000 and $97,941,000, respectively. The
value of purchased insurance inforce is adjusted for the impact on estimated
gross profits of net unrealized gains and losses on securities. Based upon
current conditions and assumptions as to future events, the Company expects that
the amortization will be between 6 and 8 percent of the asset's current carrying
amount in each of the next five years.
Separate Accounts
These accounts arise from the sale of variable life insurance and annuity
products. Their assets are legally segregated and are not subject to the claims
which may arise from any other business of the Company. These assets are
reported at fair value since the underlying investment risks are assumed by the
policyholders. Therefore the related liabilities are recorded at amounts equal
to the underlying assets. Investment income and gains or losses arising from
separate accounts accrue directly to the policyholders and are, therefore, not
included in investment earnings in the accompanying consolidated income
statement. Revenues to the Company from separate accounts consist principally of
contract maintenance charges, administrative fees and mortality and risk
charges.
Participating Policies
Participating business at year end approximates 11 percent of the consolidated
life insurance in force. The amount of dividends to be paid is determined
annually by the Board of Directors. Provision has been made in the liability for
future policy benefits to allocate amounts to participating policyholders on the
basis of dividend scales contemplated at the time the policies were issued.
Additional provisions have been made for policyholder dividends in excess of the
original scale which have been declared by the Board of Directors.
Investments
Securities held to maturity and short-term investments are stated at cost
adjusted for amortization of premium and accrual of discount. Securities
available for sale are stated at fair value. Unrealized gains and losses on
securities available for sale are reduced by deferred income taxes and related
adjustments to deferred acquisition costs and the value of purchased insurance
in force, and are included in accumulated other comprehensive income.
Mortgage loans are stated at cost adjusted for amortization of premium and
accrual of discount less an allowance for possible losses. A loan is considered
impaired if it is probable that contractual amounts due will not be collected.
An allowance for possible impairment losses is based upon the loan's market
price, or the fair value of the underlying collateral on a net realizable basis.
Loans in foreclosure and loans considered to be impaired are placed on a
non-accrual status. Other real estate investments are carried at depreciated
cost. Real estate joint ventures are valued at cost adjusted for the Company's
equity in earnings since acquisition. Policy loans are carried at cost less
payments received. Premiums and discounts on fixed maturity securities are
amortized over the life of the related security as an adjustment to yield using
the effective interest method. Realized gains and losses on disposals of
investments, determined by the specific identification method, are included in
investment revenues.
Federal Income Taxes
Income taxes have been provided using the liability method. Under that method,
deferred tax assets and liabilities are determined based on the differences
between their financial reporting and their tax bases and are measured using the
enacted tax rates.
Income Per Share
Due to the Company's capital structure and lack of other potentially dilutive
securities, there is no difference between basic and diluted earnings per common
share for any of the years or periods reported. The weighted average number of
shares outstanding during the year was 12,033,725 shares (12,316,220 shares -
1999 and 12,394,104 shares - 1998). The actual number of shares outstanding at
year end was 12,021,477 (12,084,942 - 1999).
Statutory Information and
Stockholder Dividends Restriction
The Company's earnings, unassigned surplus (retained earnings) and stockholders'
equity, on the statutory basis used to report to regulatory authorities, follow.
2000 1999 1998
Net gain from operations $ 45,730 41,902 35,185
Net income 42,265 42,012 36,152
Unassigned surplus
at December 31 311,804 281,254 257,853
Stockholders' equity
at December 31 248,014 219,875 209,246
Stockholder dividends may not exceed statutory unassigned surplus. Additionally,
under Missouri law, the Company must have the prior approval of the Missouri
Director of Insurance in order to pay a dividend exceeding the greater of
statutory net gain from operations for the preceding year or 10 percent of
statutory stockholders' equity at the end of the preceding year. The maximum
payable in 2001 without prior approval is $45,730,000. The Company believes
these statutory limitations impose no practical restrictions on its dividend
payment plans.
As of January 1, 2001, the Company will adopt new statutory codification
guidelines as promulgated by the National Association of Insurance Commissioners
(NAIC). The net effect to both net income and surplus is expected to be
immaterial.
The Company is required to deposit a defined amount of assets with state
regulatory authorities. Such assets had an aggregate carrying value of
$18,000,000 ($21,000,000 - 1999 and $18,000,000 - 1998).
Comprehensive Income (Loss)
Comprehensive income is comprised of net income and other comprehensive income
which includes unrealized gains or losses on securities available for sale and
unfunded pension liabilities as shown below.
Unrealized Unfunded
Gain (Loss) Pension
on Securities Liability Total
2000:
Unrealized holding gains
arising during the year $ 9,422 9,422
Less: Realized losses included
in net income (6,467) (6,467)
Net unrealized gains 15,889 15,889
Increase in unfunded
pension liability - (8,871) (8,871)
Effect on deferred
acquisition costs (1,145) (1,145)
Deferred income taxes (5,163) 3,105 (2,058)
Other comprehensive
income (loss) $ 9,581 (5,766) 3,815
1999:
Unrealized holding losses
arising during the year $ (172,801) (172,801)
Less: Realized losses included
in net income (2,527) (2,527)
Net unrealized losses (170,274) (170,274)
Decrease in unfunded
pension liability - 554 554
Effect on deferred
acquisition costs 8,858 8,858
Deferred income taxes 56,495 (194) 56,301
Other comprehensive
income (loss) $ (104,921) 360 (104,561)
Unrealized Unfunded
Gain (Loss) Pension
on Securities Liability Total
1998:
Unrealized holding gains
arising during the year $ 33,261 33,261
Less: Realized gains included
in net income 9,360 9,360
Net unrealized gains 23,901 23,901
Increase in unfunded
pension liability - (9,348) (9,348)
Effect on deferred
acquisition costs (680) (680)
Deferred income taxes (8,127) 3,272 (4,855)
Other comprehensive
income (loss) $ 15,094 (6,076) 9,018
The accumulated balances related to each component of accumulated other
comprehensive income follow.
Change in
Unrealized Unfunded
Gain (Loss) Pension
on Securities Liability Total
December 31, 1998 $ 51,542 (6,076) 45,466
Other comprehensive
income (loss) for 1999 (104,921) 360 (104,561)
December 31, 1999 (53,379) (5,716) (59,095)
Other comprehensive
income (loss) for 2000 9,581 (5,766) 3,815
December 31, 2000 $ (43,798) (11,482) (55,280)
REINSURANCE
2000 1999 1998
Life insurance in force (in millions):
Direct $ 24,120 23,616 23,261
Ceded (6,514) (5,483) (4,488)
Assumed 2,818 3,131 3,380
Net $ 20,424 21,264 22,153
Premiums:
Life insurance:
Direct $ 120,908 127,805 128,584
Ceded (27,818) (29,255) (26,748)
Assumed 6,105 5,536 6,674
Net $ 99,195 104,086 108,510
Accident and health:
Direct $ 54,769 56,723 54,022
Ceded (10,128) (14,087) (11,581)
Net $ 44,641 42,636 42,441
Contract charges arise generally from directly issued business. However contract
charges also arise from a block of business assumed during 1997 as described
below. Ceded benefit recoveries were $49,883,000 ($49,687,000 - 1999 and
$57,048,000 - 1998).
Old American has two coinsurance agreements. One agreement reinsures certain
whole life policies issued by Old American prior to December 1, 1986. These
policies had a face value of $103,901,000 as of this year end. The reserve for
future policy benefits ceded under this agreement was $44,331,000 ($46,741,000 -
1999). The second agreement ceded $10.4 million of home health care reserves in
October 1998.
In 1997, Kansas City Life acquired a block of traditional life and universal
life-type products. As of this year end, the block had $2.8 billion of life
insurance in force ($3.1 billion - 1999). The block generated life insurance
premiums of $5,544,000 ($5,788,000 - 1999). Additionally, in November 1999, the
Company ceded its group long-term disability reserves, totaling $5.2 million.
The maximum retention on any one life is $350,000 for ordinary life plans and
$100,000 for group coverage. A contingent liability exists with respect to
reinsurance, which may become a liability of the Company in the unlikely event
that the reinsurers should be unable to meet obligations assumed under
reinsurance contracts.
PROPERTY AND EQUIPMENT
2000 1999
Land $ 766 766
Home office complex 21,444 21,404
Furniture and equipment 34,741 32,258
56,951 54,428
Less accumulated depreciation (36,250) (32,418)
$ 20,701 22,010
Property and equipment are stated at cost and depreciated using the
straight-line method. The home office is depreciated over 25 to 50 years and
furniture and equipment over 3 to 10 years, their estimated useful lives.
NOTES PAYABLE
2000 1999
Federal Home Loan Bank loan with
various maturities and a weighted
average variable interest rate,
currently 6.63 percent, secured
by specified securities $ 41,520 55,000
Commerce Bank unsecured revolving
credit loan agreement providing a
$20,000,000 line of credit with a
variable interest rate, currently
6.95 percent - 2,500
UMB Bank unsecured revolving credit
loan agreements providing a
$40,000,000 line of credit with a
variable interest rate, currently
6.95 percent - 12,000
$ 41,520 69,500
As a member of the Federal Home Loan Bank with a capital investment of
$14,937,000, the Company has the ability to borrow up to twenty times its
capital investment, or $298,734,000, when collateralized from the bank. The
Company earned a 7.00 percent average rate on the capital investment in the bank
for 2000. All borrowing is used to enhance investment strategies. Interest paid
on all borrowings equaled $2,146,000 ($1,135,000 - 1999 and $717,000 - 1998).
FAIR VALUE OF
FINANCIAL INSTRUMENTS
The carrying amounts for cash, short-term investments and policy loans as
reported in the accompanying balance sheet approximate their fair values. The
fair values for securities are based on quoted market prices, where available.
For those securities not actively traded, fair values are estimated using values
obtained from independent pricing services or, in the case of private
placements, are estimated by discounting expected future cash flows using a
current market rate applicable to the yield, credit quality and maturity of the
investments. Fair values for mortgage loans are based upon discounted cash flow
analyses using an interest rate assumption 2 percent above the comparable U.S.
Treasury rate.
Fair values for the Company's liabilities under investment-type insurance
contracts, included with accumulated contract values for flexible annuities and
with other policyholder funds for supplementary contracts without life
contingencies, are estimated to be their cash surrender values.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
The carrying amounts and fair values of the financial instruments follow.
2000 1999
Carrying Fair Carrying Fair
Amount Value Amount Value
Investments:
Securities available
for sale $2,028,426 2,028,426 2,115,183 2,115,183
Securities held
to maturity 80,572 80,463 107,606 107,570
Mortgage loans 396,731 409,000 340,704 328,973
Liabilities:
Individual and
group annuities $668,233 652,898 743,438 724,908
Supplementary
contracts without
life contingencies 20,761 20,761 21,216 21,216
The following Investments Note provides further details regarding the
investments above.
INVESTMENTS
Investment Revenues
Major categories of investment revenues are summarized as follows.
2000 1999 1998
Investment income:
Fixed maturities $ 156,117 157,766 154,213
Equity securities 9,678 9,378 6,583
Mortgage loans 29,478 27,608 26,024
Real estate 10,563 9,907 9,587
Policy loans 7,852 7,959 8,098
Short-term 3,025 3,639 4,832
Other 3,914 3,709 3,948
220,627 219,966 213,285
Less investment expenses (13,492) (12,284) (10,883)
$ 207,135 207,682 202,402
Realized gains (losses):
Fixed maturities $ (12,614) (2,714) 8,052
Equity securities 517 126 1,360
Mortgage loans 2,970 1,500 -
Real estate 4,316 3,684 2,014
Other 940 264 -
$ (3,871) 2,860 11,426
Unrealized Gains and Losses
Unrealized gains (losses) on the Company's securities
follow.
2000 1999 1998
Available for sale:
End of year $ (70,758) (86,647) 83,627
Effect on deferred
acquisition costs 3,381 4,526 (4,332)
Deferred income taxes 23,579 28,742 (27,753)
$ (43,798) (53,379) 51,542
Increase (decrease) in
net unrealized gains
during the year:
Fixed maturities $ 9,697 (99,595) 18,701
Equity securities (116) (5,326) (3,607)
$ 9,581 (104,921) 15,094
Held to maturity:
End of year $ (109) (36) 8,011
Increase (decrease) in
net unrealized gains
during the year $ (73) (8,047) 2,177
Securities
The amortized cost and fair value of investments in securities at this year end
follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
Bonds:
U.S. government $ 45,050 1,539 221 46,368
Public utility 290,415 2,143 10,726 281,832
Corporate 1,233,304 11,359 72,392 1,172,271
Mortgage-backed 381,224 5,138 2,051 384,311
Other 47,581 1,109 60 48,630
Redeemable
preferred stocks 745 8 8 745
Fixed maturities 1,998,319 21,296 85,458 1,934,157
Equity securities 100,866 2,141 8,738 94,269
2,099,185 23,437 94,196 2,028,426
Bonds held to maturity:
Public utility 12,474 817 18 13,273
Corporate 62,947 1,123 2,308 61,762
Other 5,151 277 - 5,428
80,572 2,217 2,326 80,463
$ 2,179,757 25,654 96,522 2,108,889
The amortized cost and fair value of investments in securities at last year end
follow.
Gross
Amortized Unrealized Fair
Cost Gains Losses Value
Available for sale:
Bonds:
U.S. government $ 47,264 170 607 46,827
Public utility 270,618 1,938 11,098 261,458
Corporate 1,405,241 7,119 78,468 1,333,892
Mortgage-backed 299,933 5,522 3,480 301,975
Other 55,537 217 1,556 54,198
Redeemable
preferred stocks 865 12 12 865
Fixed maturities 2,079,458 14,978 95,221 1,999,215
Equity securities 122,371 1,916 8,319 115,968
2,201,829 16,894 103,540 2,115,183
Bonds held to maturity:
Public utility 18,101 743 45 18,799
Corporate 83,429 1,282 2,127 82,584
Other 6,076 117 6 6,187
107,606 2,142 2,178 107,570
$ 2,309,435 19,036 105,718 2,222,753
The Company does not hold any non-income producing fixed maturity securities.
The distribution of the fixed maturity securities' contractual maturities at
this year end follows. However, expected maturities may differ from these
contractual maturities since borrowers may have the right to call or prepay
obligations.
Amortized Fair
Cost Value
Available for sale:
Due in one year or less $ 32,978 30,380
Due after one year through five years 479,318 472,312
Due after five years through ten years 349,413 335,202
Due after ten years 755,386 711,952
Mortgage-backed bonds 381,224 384,311
$ 1,998,319 1,934,157
Held to maturity:
Due in one year or less $ 20,809 20,877
Due after one year through five years 35,990 37,512
Due after five years through ten years 22,275 20,802
Due after ten years 1,498 1,272
$ 80,572 80,463
Sales of investments in securities available for sale, excluding normal
maturities and calls, follow.
2000 1999 1998
Proceeds $ 392,548 428,425 422,241
Gross realized gains 7,292 9,455 12,512
Gross realized losses 13,541 10,371 5,234
The Company does not hold securities of any corporation and its affiliates which
exceeded 10 percent of stockholders' equity.
No derivative financial instruments are employed.
Mortgage Loans
The Company holds no non-income producing mortgage loans ($1,528,000 - 1999).
Mortgage loans are carried net of a valuation reserve of $4,030,000 ($7,000,000
- - 1999).
The mortgage portfolio is diversified geographically and by property type as
follows.
2000 1999
Carrying Fair Carrying Fair
Amount Value Amount Value
Geographic region:
East north central $ 28,139 28,612 29,470 28,250
Mountain 79,430 81,995 69,522 67,325
Pacific 137,559 141,781 123,581 119,375
West south central 58,847 61,521 30,708 30,071
West north central 71,921 73,799 71,030 68,703
Other 24,865 25,322 23,393 22,249
Valuation reserve (4,030) (4,030) (7,000) (7,000)
$ 396,731 409,000 340,704 328,973
2000 1999
Carrying Fair Carrying Fair
Amount Value Amount Value
Property type:
Industrial $ 258,195 265,770 229,103 221,036
Retail 18,699 19,436 19,510 19,515
Office 107,534 111,024 81,540 78,310
Other 16,333 16,800 17,551 17,112
Valuation reserve (4,030) (4,030) (7,000) (7,000)
$ 396,731 409,000 340,704 328,973
The Company has commitments which expire in 2001 to originate mortgage loans of
$15,122,000.
No mortgage loans were foreclosed upon and transferred to real estate
investments during the year (none - 1999 and $1,181,000 - 1998).
No mortgage loans were acquired in the sale of real estate assets during the
year (none - 1999 and $2,025,000 - 1998).
Real Estate
Detail concerning the Company's real estate investments follows.
2000 1999
Penntower office building, at cost:
Land $ 1,106 1,106
Building 18,649 18,582
Less accumulated depreciation (11,477) (10,881)
Foreclosed real estate, at lower of
cost or net realizable value 2,090 4,655
Other investment properties, at cost:
Land 11,050 6,110
Buildings 37,958 36,710
Less accumulated depreciation (14,933) (14,271)
$ 44,443 42,011
Investment real estate, other than foreclosed properties, is depreciated on a
straight-line basis. Penntower office building is depreciated over 60 years and
all other properties from 10 to 35 years. Foreclosed real estate is carried net
of a valuation allowance of $625,000 ($1,519,000 - 1999) to reflect net
realizable value.
The Company held non-income producing real estate equaling $5,236,000
($3,483,000 - 1999).
PENSIONS AND OTHER
POSTRETIREMENT BENEFITS
The Company has pension and other postretirement benefit plans covering
substantially all its employees. The defined benefits pension plan covers
employees who were age 55 or over with at least 15 years of vested service at
December 31, 1997. This plan's benefits are based on years of service and the
employee's compensation during the last five years of employment. Employees have
a cash balance account consisting of credits to the account based upon an
employee's years of service and compensation and interest credits. The closure
of Sunset Life's office in 1999 and significant retirements at Kansas City Life
resulted in the recognition of settlement and curtailment costs of $3,562,000
that year. The postretirement medical plans for the employees, full-time agents,
and their dependents are contributory with contributions adjusted annually. The
Company pays these medical costs as due and the plan incorporates cost-sharing
features. The postretirement life insurance plan is noncontributory with level
annual payments over the participants' expected service periods. The plan covers
only those employees with at least one year of service as of December 31, 1997.
The benefits in this plan are frozen using the employees' years of service and
compensation as of December 31, 1997. The tables at the right outline the plans'
funded status and their impact on the financial statements.
Noncontributory defined contribution retirement plans for general agents and
eligible sales agents provide supplemental payments based upon earned agency
first year individual life and annuity commissions. Contributions to these plans
were $143,000 ($143,000 - 1999 and $134,000 - 1998). A noncontributory deferred
compensation plan for eligible agents based upon earned first year commissions
is also offered. Contributions to this plan were $583,000 ($609,000 - 1999 and
$724,000 - 1998).
Savings plans for eligible employees and agents match employee contributions up
to 6 percent of salary and agent contributions up to 2.5 percent of prior year
paid commissions. Contributions expensed to the plan were $1,425,000 ($1,468,000
- - 1999 and $1,485,000 - 1998). Effective in 1998, the Company may contribute an
additional profit sharing amount up to 4 percent of salary depending upon
corporate profits. The Company made a profit sharing contribution of 4 percent
for 2000 equaling $1,098,000 (none - 1999 and 1998).
A noncontributory trusteed employee stock ownership plan covers substantially
all salaried employees. No contributions have been made to this plan since 1992.
Pension Benefits Other Benefits
2000 1999 2000 1999
Accumulated benefit obligation $ 98,273 88,405 - -
Change in plan assets:
Fair value of plan assets at beginning of year $ 85,240 102,869 1,403 1,614
Return on plan assets 4,033 934 74 82
Company contributions 4,000 2,400 - -
Benefits paid (5,832) (20,963) (41) (293)
Fair value of plan assets at end of year$ 87,441 85,240 1,436 1,403
Change in projected benefit obligation:
Benefit obligation at beginning of year $ 98,351 110,547 16,942 18,808
Service cost 1,913 2,760 530 626
Interest cost 7,365 7,673 1,144 1,200
Curtailment - 469 - (1,043)
Settlement - 5,375 - -
Net (gain) loss from past experience 395 (3,921) (1,641) (2,008)
Benefits paid (5,935) (24,552) (649) (641)
Benefit obligation at end of year $ 102,089 98,351 16,326 16,942
Plan underfunding $ (14,648) (13,111) (14,890) (15,539)
Unrecognized net (gain) loss 28,291 26,404 (1,020) 557
Unrecognized prior service cost (6,500) (7,147) - -
Unrecognized net transition asset (311) (517) - -
Prepaid (accrued) benefit cost $ 6,832 5,629 (15,910) (14,982)
Amounts recognized in the
consolidated balance sheet:
Accrued benefit liability $ (10,833) (3,165) (15,910) (14,982)
Accumulated other comprehensive income 17,665 8,794 - -
Net amount recognized $ 6,832 5,629 (15,910) (14,982)
Weighted average assumptions:
Discount rate 7.50% 7.75 7.50 7.75
Expected return on plan assets 8.75 8.75 5.50 5.50
Rate of compensation increase 4.50 4.50 - -
The assumed growth rate of health care costs has a significant effect on the
amounts reported as the table below demonstrates.
One Percentage Point
Change in the Growth Rate
Increase Decrease
Service and interest cost components $ 318 (263)
Postretirement benefit obligation 2,972 (2,317)
The components of the net periodic benefits cost follow.
Pension Benefits Other Benefits
2000 1999 1998 2000 1999 1998
Service cost $ 1,912 2,760 2,746 530 626 615
Interest cost 7,365 7,673 7,650 1,144 1,200 1,194
Expected return on plan assets (7,211) (9,067) (8,539) (78) (88) (90)
Amortization of:
Unrecognized net (gain) loss 1,687 1,014 1,152 (20) 52 76
Unrecognized prior service cost (647) (647) (769) - - -
Unrecognized net transition asset (206) (206) (206) - - -
Net periodic benefits cost $ 2,900 1,527 2,034 1,576 1,790 1,795
For measurement purposes, a 10 percent annual increase in the per capita cost of
covered health care benefits was assumed todecrease gradually to 6 percent in
2004 and thereafter.
SEGMENT INFORMATION
Kansas City Life Sunset Old
Individual Group Life American Total
2000:
Revenues from external customers $ 110,339 56,267 28,272 74,765 269,643
Investment revenues 155,420 767 34,456 16,492 207,135
Segment operating income 32,601 831 10,438 7,729 51,599
Other significant noncash items:
Increase (decrease) in policy reserves 49,560 (389) 17,721 6,924 73,816
Amortization of deferred
acquisition costs 11,437 - 5,138 10,253 26,828
Amortization of the value of
purchased insurance in force 4,305 - - 3,498 7,803
Interest expense 2,177 - 1 5 2,183
Income tax expense 12,172 356 3,751 3,142 19,421
Segment assets 2,696,884 10,948 531,393 407,036 3,646,261
Expenditures for other long-lived assets 2,640 40 - 15 2,695
1999:
Revenues from external customers $ 113,399 53,311 26,750 76,091 269,551
Investment revenues 158,017 1,083 33,617 14,965 207,682
Segment operating income (loss) 30,622 (898) 8,049 5,413 43,186
Other significant noncash items:
Increase in policy reserves 60,072 681 16,411 8,042 85,206
Amortization of deferred
acquisition costs 12,443 - 7,765 11,053 31,261
Amortization of the value of
purchased insurance in force 5,128 - - 3,567 8,695
Interest expense 1,148 - - - 1,148
Income tax expense (benefit) 12,931 (385) 3,898 2,574 19,018
Segment assets 2,679,521 16,107 528,708 396,948 3,621,284
Expenditures for other long-lived assets 3,742 214 3 298 4,257
1998:
Revenues from external customers $ 112,898 52,537 28,794 80,001 274,230
Investment revenues 155,428 1,146 31,878 13,950 202,402
Segment operating income (loss) 27,918 (985) 8,954 5,198 41,085
Other significant noncash items:
Increase in policy reserves 57,581 535 16,269 10,042 84,427
Amortization of deferred
acquisition costs 16,861 - 8,323 11,017 36,201
Amortization of the value of
purchased insurance in force 4,660 - - 2,925 7,585
Interest expense 717 - - - 717
Income tax expense (benefit) 12,997 (422) 4,314 2,548 19,437
Segment assets 2,627,568 16,215 538,254 395,377 3,577,414
Expenditures for other long-lived assets 2,658 259 97 69 3,083
Enterprise-Wide Disclosures
2000 1999 1998
Revenues from external customers by line of business:
Variable life insurance and annuities $ 16,181 11,153 6,928
Interest sensitive products 93,602 97,720 101,680
Traditional individual insurance products 92,078 97,616 103,171
Group life and disability products 51,758 49,106 47,780
Group ASO services 4,509 4,205 4,716
Other 11,515 9,751 9,955
Total $ 269,643 269,551 274,230
Company operations have been classified and summarized into the four reportable
segments above. The segments, while generally classified along Company lines,
are based upon distribution method, product portfolio and target market. The
Parent Company was divided into two segments. The Kansas City Life - Individual
segment consists of sales of variable life and annuities, interest sensitive
products and traditional life insurance products by a career general agency
sales force. The Kansas City Life - Group segment consists of sales of group
life, disability and dental products and administrative services only (ASO) by
the Company's career general agency sales force and appointed group agents. The
Sunset Life segment consists of sales of interest sensitive and traditional
products by personal producing general agents. The Old American segment markets
whole life final expense products to seniors through a general agency sales
force.
Separate investment portfolios are maintained for each of the companies.
However, investments are allocated to the group segment based upon its cash
flows. Its investment revenue is modeled using the year of investment method.
Home office functions are fully integrated for the three companies in order to
maximize economies of scale. Therefore, operating expenses are allocated to the
segments based upon internal cost studies which are consistent with industry
cost methodologies.
The totals at left agree to the selected financial data which reconciles to the
consolidated financial statements. Intersegment revenues are not material. The
Company operates solely in the United States and no individual customer accounts
for 10 percent or more of the Company's revenue.
FEDERAL INCOME TAXES
A reconciliation of the Federal income tax rate and the actual tax rate
experienced is shown below.
2000 1999 1998
Federal income tax rate 35 % 35 35
Special tax credits (6) (5) (6)
Other permanent differences (1) - -
Actual income tax rate 28 % 30 29
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities are presented below.
2000 1999
Deferred tax assets:
Basis differences between tax and
GAAP accounting for investments $ 18,493 26,774
Future policy benefits 50,404 49,133
Employee retirement benefits 14,579 11,990
Other 7,670 9,413
Gross deferred tax assets 91,146 97,310
Deferred tax liabilities:
Capitalization of policy acquisition
costs, net of amortization 47,235 44,809
Property and equipment, net 3,708 3,841
Value of insurance in force 30,449 33,102
Other 884 842
Gross deferred tax liabilities 82,276 82,594
Net deferred tax asset $ 8,870 14,716
A "valuation allowance" must be established for any portion of the deferred tax
asset which is believed not to be realizable. In management's opinion, it is
more likely than not that the Company will realize the benefit of the net
deferred tax asset and, therefore, no valuation allowance has been established.
Federal income taxes paid for the year were $17,364,000 ($17,884,000 - 1999 and
$20,164,000 - 1998).
Policyholders' surplus, which is frozen under the Deficit Reduction Act of 1984,
is $40,500,000 for Kansas City Life, $2,800,000 for Sunset Life and $13,700,000
for Old American. The Companies do not plan to distribute their policyholders'
surplus. Consequently, the possibility of such surplus becoming subject to tax
is remote, and no provision has been made in the financial statements for taxes
thereon. Should the balance in policyholders' surplus become taxable, the tax
computed at current rates would approximate $20,000,000.
Income taxed on a current basis is accumulated in "shareholders' surplus" and
can be distributed to stockholders without tax to the Company. Shareholders'
surplus equals $399,775,000 for Kansas City Life, $89,935,000 for Sunset Life
and $66,657,000 for Old American.
QUARTERLY CONSOLIDATED
FINANCIAL DATA (unaudited)
First Second Third Fourth
2000:
Total revenues $ 120,513 117,874 118,332 116,188
Net income $ 13,118 13,722 14,576 7,667
Per common share:
Net income $ 1.09 1.14 1.21 .64
1999:
Total revenues $ 120,040 117,038 123,667 119,348
Net income $ 12,442 7,495 13,422 11,686
Per common share:
Net income $ 1.00 .61 1.09 .96
CONTINGENT LIABILITIES
The life insurance industry, including the Company and certain of its
subsidiaries, has been subject to increased litigation pursued on behalf of
purported classes of insurance purchasers questioning the conduct of insurers
and their agents' marketing practices. The Company believes that the action
described at right is part of this trend.
In a complaint filed in March 1998, Sunset Life and one of its agents was sued
for unspecified compensatory and punitive damages alleging various forms of
deceit, breach of fiduciary duty, and negligence in connection with the sale of
a universal life insurance policy as a replacement for an existing policy.
Subsequently, the complaint was amended to seek class action status and to add a
claim under California's Business and Professions Code S17200 which authorizes
individual plaintiffs to sue on behalf of the public to remedy specific
delineated alleged unfair business practices, and to seek declaratory and
injunctive relief. Sunset Life obtained a dismissal of the breach of fiduciary
duty claim and the class action allegations, but the trial court refused to
dismiss the S17200 allegations. All parties appealed and the court of appeals
refused to overrule the trial court's failure to dismiss the S17200 claims and
remanded the case for further discovery and proof regarding the class action
allegations in the complaint. In the course of discovery, the court has ordered
the disclosure of the names of all individuals who purchased universal life
insurance policies from Sunset Life in replacement transactions from 1984 to the
present and of all individuals who purchased Sunset Life universal life policies
during that period and whose policies became under-funded. These individuals are
currently being contacted, pursuant to court order, to determine whether they
are willing to discuss this action with either the counsel for plaintiff or
Sunset Life. It is expected that this contact will create further litigation.
Plaintiff has filed a motion for certification as a class action and the hearing
is presently scheduled in May 2001. Management denies the allegations, including
the existence of a legitimate class and the existence of a uniform unfair
business practice capable of resolution under section S17200, and intends to
defend this matter vigorously. However, no assurances can be given regarding the
outcome of this lawsuit and accordingly management cannot estimate its effect on
the consolidated financial statements.
In addition to the above, the Company and certain of its subsidiaries are
defendants in, or subject to, other claims or legal actions that arose in the
ordinary course of business. Some of these lawsuits arose in jurisdictions that
permit punitive damages disproportionate to the actual damages alleged. Although
no assurances can be given and no determinations can be made at this time as to
the outcome of any of these lawsuits or proceedings, the Company and its
subsidiaries believe that there are meritorious defenses for these claims and
are defending them vigorously. In management's opinion the amounts ultimately
paid in these suits, if any, would have no material effect on the Company's
consolidated results of operations and financial position.
REPORTS OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Kansas City Life Insurance Company
We have audited the accompanying consolidated balance sheet of Kansas City
Life Insurance Company and subsidiaries (the Company) as of December 31, 2000,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the year ended December 31, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kansas City
Life Insurance Company and subsidiaries at December 31, 2000, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
/s/ KPMG LLP
Kansas City, Missouri
January 17, 2001
To the Board of Directors and Stockholders
of Kansas City Life Insurance Company
We have audited the accompanying consolidated balance sheets of Kansas City
Life Insurance Company and subsidiaries (the Company) as of December 31, 1999,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the two years in the period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kansas City
Life Insurance Company and subsidiaries at December 31, 1999, and the
consolidated results of their operations and their cash flows for each of the
two years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Kansas City, Missouri
January 24, 2000
STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
Kansas City Life Insurance Company
3520 Broadway
Post Office Box 219139
Kansas City, Missouri 64121-9139
Telephone: (816) 753-7000
Fax: (816) 753-4902
Internet: http://www.kclife.com
E-mail: kclife@kclife.com
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders will be held at
9 a.m. Thursday, April 19, 2001, at Kansas City Life's corporate
headquarters.
TRANSFER AGENT
Cheryl Keefer, Assistant Secretary
Kansas City Life Insurance Company
Post Office Box 219139
Kansas City, Missouri 64121-9139
10-K REQUEST
Stockholders may request a free copy of Kansas City Life's Form 10-K, as
filed with the Securities and Exchange Commission, by writing to Secretary,
Kansas City Life Insurance Company.
SECURITY HOLDERS
As of February 5, 2001, Kansas City Life had approximately 698 security
holders, including individual participants in security position listings.
STOCK AND DIVIDEND INFORMATION
Stock Quotation Symbol
Over-the-Counter-KCLI
Bid Dividend
High Low Paid
(per share)
2000:
First quarter $ 35.63 22.13 $ .25
Second quarter 31.00 23.63 .25
Third quarter 35.38 26.13 .25
Fourth quarter 35.31 29.00 .25
$1.00
1999:
First quarter $ 43.82 39.25 $ .24
Second quarter 42.75 43.00 .24
Third quarter 52.25 34.50 .24
Fourth quarter 40.00 32.75 .24
$0.96
The above has been restated to reflect a
two-for-one stock split in June 1999.
A quarterly dividend of $.27 per share was paid February 20, 2001.
Over-the-counter market quotations are compiled according to Company
records and may reflect inter-dealer prices, without markup, markdown or
commission and may not necessarily represent actual transactions.
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT FINANCIAL STATEMENTS
Twelve Months, 2000 Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Net Assets
December 31, 2000
Market
Assets Value Cost
------------ ------
Investments: (in thousands)
Federated Insurance Series:
American Leaders Fund II - 243,668 shares at a net asset value (NAV) of $20.52 per share $ 5,000 4,913
High Income Bond Fund II - 134,959 shares at a NAV of $8.46 per share 1,142 1,379
International Small Company Fund II - 6,316 shares at a NAV of $7.93 per share 50 55
Prime Money Fund II - 4,574,501 shares at a NAV of $1.00 per share 4,575 4,575
MFS Variable Insurance Trust:
Research Series - 283,285 shares at a NAV of $20.80 per share 5,893 5,435
Emerging Growth Series - 403,539 shares at a NAV of $28.84 per share 11,638 10,452
Total Return Series - 115,116 shares at a NAV of $19.59 per share 2,255 1,985
Bond Series - 63,078 shares at a NAV of $11.32 per share 714 696
Global Governments Series - 11,676 shares at a NAV of $10.01 per share 117 116
Utilities Series - 247,734 shares at a NAV of $23.57 per share 5,838 5,256
American Century Variable Portfolios:
VP Capital Appreciation - 118,200 shares at a NAV of $15.78 per share 1,865 1,632
VP International - 410,570 shares at a NAV of $10.23 per share 4,200 3,900
VP Value - 69,782 shares at a NAV of $6.67 per share 465 415
VP Income and Growth - 117,241 shares at a NAV of $7.11 per share 833 893
Dreyfus Variable Investment Fund:
Appreciation Portfolio - 130,362 shares at a NAV of $38.91 per share 5,073 4,765
Small Cap Portfolio - 158,756 shares at a NAV of $40.30 per share 6,398 7,965
Dreyfus Stock Index Fund - 482,741 shares at a NAV of $34.00 per share 16,413 16,375
The Dreyfus Socially Responsible Growth Fund - 32,030 shares at a NAV of $34.47 per share 1,104 1,193
JP Morgan Series Trust II:
U.S. Disciplined Equity Portfolio - 48,480 shares at a NAV of $14.90 per share 722 801
Small Company Portfolio - 61,647 shares at a NAV of $14.38 per share 887 964
Franklin Templeton Variable Products Series Fund
Franklin Real Estate Fund - 463 shares at a NAV of $17.36 per share 8 8
Franklin Small Cap Fund - 8,986 shares at a NAV of $21.14 per share 190 219
Templeton Developing Markets Securities Fund - 3,461 shares at a NAV of $5.22 per share 18 19
Templeton International Securities Fund C21- 39,473 shares at a NAV of $18.67 per share 737 777
Calamos Advisors Trust:
Convertible Portfolio - 80,020 shares at a NAV of $12.30 per share 984 985
A I M Variable Insurance Funds
V.I. Dent Demographic Trends Fund - 23,340 shares at a NAV of $8.21 per share 192 226
V.I. New Technology Fund - 3,664 shares at a NAV of $18.53 per share 68 101
V.I. Value - 5,267 shares at a NAV of $27.31 per share 144 157
Seligman Portfolio, Inc.
Communications and Information Portfolio - 10,299 shares at a NAV of $14.80 per share 153 212
Capital Portfolio - 10,573 shares at a NAV of $24.68 per share 261 324
------------ -------
Total Assets $ 77,937 76,793
============ =======
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Net Assets
December 31, 2000
VUL SVUL
Number Unit Number Unit Market
Net Assets of Units Value of Units Value Value
---------- -------- ---------- --------- --------
(in thousands)
Federated Insurance Series:
American Leaders Fund II 212,701 $19.36 65,262 $13.50 $ 5,000
High Income Bond Fund II 83,018 $11.72 17,253 9.79 1,142
International Small Company Fund II 5,466 8.24 608 8.25 50
Prime Money Fund II 290,934 12.19 88,785 11.59 4,575
MFS Variable Insurance Trust:
Research Series 245,185 20.50 59,689 14.53 5,893
Emerging Growth Series 376,782 26.03 95,573 19.14 11,638
Total Return Series 108,449 17.83 23,003 13.98 2,255
Bond Series 45,452 12.37 12,829 11.82 714
Global Governments Series 10,658 10.91 57 10.35 117
Utilities Series 197,191 24.53 53,742 18.64 5,838
American Century Variable Portfolios:
VP Capital Appreciation 107,184 16.06 9,213 15.61 1,865
VP International 176,214 21.04 30,886 15.96 4,200
VP Value 64,948 6.93 2,236 6.96 465
VP Income and Growth 60,903 7.04 57,188 7.08 833
Dreyfus Variable Investment Fund:
Appreciation Portfolio 274,494 15.44 56,634 14.72 5,073
Small Cap Portfolio 360,122 15.13 71,215 13.33 6,398
Dreyfus Stock Index Fund 853,939 15.78 200,445 14.66 16,413
The Dreyfus Socially Responsible Fund, 29,625 35.44 1,517 35.60 1,104
Inc.
J.P. Morgan Series Trust II:
Equity Portfolio 28,595 16.32 15,585 16.39 722
Small Company Portfolio 51,962 14.95 7,293 15.02 887
Franklin Templeton Variable Products Series Fund:
Franklin Real Estate Fund 706 10.70 45 10.71 8
Franklin Small Cap 20,435 7.79 3,961 7.79 190
Templeton Developing Markets Securities Fund 2,150 8.33 20 8.33 18
Templeton International Securities Fund 33,263 21.29 1,339 21.39 737
Calamos: Advisors Trust
Convertible Portfolio 68,487 12.84 8,163 12.89 984
A I M Variable Insurance Funds
V. I. Dent Demographic Trends Fund 25,269 7.31 926 7.32 192
V. I. New Technology Fund 9,247 5.82 2,410 5.83 68
V. I. Value Fund 13,704 8.34 3,533 8.35 144
Seligman Portfolios, Inc.
Communications and Information Portfolio 20,762 6.11 4,190 6.11 153
Captial Portfolio 28,332 7.87 4,838 7.87 261
--------
Total Net Assets 77,937
========
Kansas City Life Variable Life Separate Account
Statement of Operations
Year ended December 31, 2000 (except as noted)
(in thousands)
Federated Insurance Series
--------------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
--------------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 34 112 - 162
Capital Gains Distributions 104 - - -
--------------------------------------------------------
Total Income 138 112 - 162
--------------------------------------------------------
Expenses:
Mortality and Expense Fees 35 10 - 25
Contract Expense Charges 425 101 1 934
--------------------------------------------------------
Total Expenses 460 111 1 959
--------------------------------------------------------
Investment Income (Loss) (322) 1 (1) (797)
--------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) (13) (51) - -
Unrealized Appreciation (Depreciation) (5) (166) (4) -
--------------------------------------------------------
Net Gain (Loss) on Investments (18) (217) (4) -
--------------------------------------------------------
Change in Net Assets from Operations $ (340) (216) (5) (797)
--------------------------------------------------------
MFS Variable Insurance Trust
------------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
------------------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 2 - 41 26 3 36
Capital Gains Distributions 298 536 39 - - 268
-----------------------------------------------------------
Total Income 300 536 80 26 3 304
-----------------------------------------------------------
Expenses:
Mortality and Expense Fees 44 92 15 5 1 35
Contract Expense Charges 508 1,065 215 76 13 475
-----------------------------------------------------------
Total Expenses 552 1,157 230 81 14 510
-----------------------------------------------------------
Investment Income (Loss) (252) (621) (150) (55) (11) (206)
-----------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 65 146 8 (3) (1) 14
Unrealized Appreciation (Depreciation) (633) (2,746) 182 23 2 (73)
-----------------------------------------------------------
Net Gain (Loss) on Investments (568) (2,600) 190 20 1 (59)
-----------------------------------------------------------
Change in Net Assets from Operations $ (820) (3,221) 40 (35) (10) (265)
-----------------------------------------------------------
American Century Variable Portfolios
--------------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
--------------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ - 3 4 1
Capital Gains Distributions 29 54 9 -
--------------------------------------------------------
Total Income 29 57 13 1
--------------------------------------------------------
Expenses:
Mortality and Expense Fees 12 30 3 3
Contract Expense Charges 143 331 43 57
--------------------------------------------------------
Total Expenses 155 361 46 60
--------------------------------------------------------
Investment Income (Loss) (126) (304) (33) (59)
--------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 34 55 (3) -
Unrealized Appreciation (Depreciation) (5) (750) 68 (45)
--------------------------------------------------------
Net Gain (Loss) on Investments 29 (695) 65 (45)
--------------------------------------------------------
Change in Net Assets from Operations $ (97) (999) 32 (104)
--------------------------------------------------------
Dreyfus Variable Investment Fund
--------------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
--------------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 27 19 124 9
Capital Gains Distributions 47 2,387 216 -
--------------------------------------------------------
Total Income 74 2,406 340 9
--------------------------------------------------------
Expenses:
Mortality and Expense Fees 36 42 116 8
Contract Expense Charges 422 482 1,896 97
--------------------------------------------------------
Total Expenses 458 524 2,012 105
--------------------------------------------------------
Investment Income (Loss) (384) 1,882 (1,672) (96)
--------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 53 56 214 3
Unrealized Appreciation (Depreciation) (150) (1,834) (1,768) (125)
--------------------------------------------------------
Net Gain (Loss) on Investments (97) (1,778) (1,554) (122)
--------------------------------------------------------
Change in Net Assets from Operations $ (481) 104 (3,226) (218)
--------------------------------------------------------
JP Morgan Franklin Templeton Variable Products
---------------------- -------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
---------------------- -------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 2 1 - - - 8
Capital Gains Distributions 7 13 - - - 53
--------------------- --------------------------------------
Total Income 9 14 - - - 61
--------------------- --------------------------------------
Expenses:
Mortality and Expense Fees 3 6 - - - 5
Contract Expense Charges 59 63 - 3 - 51
--------------------- --------------------------------------
Total Expenses 62 69 - 3 - 56
--------------------- --------------------------------------
Investment Income (Loss) (53) (55) - (3) - 5
-------------------- --------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) (1) - - (2) - (1)
Unrealized Appreciation (Depreciation) (49) (87) 1 (23) (1) (58)
---------------------- -------------------------------------
Net Gain (Loss) on Investments (50) (87) 1 (25) (1) (59)
---------------------- -------------------------------------
Change in Net Assets from Operations $ (103) (142) 1 (28) (1) (54)
---------------------- -------------------------------------
Calamos A I M Variable Insurance Seligman Portfolios
Funds
------------ -------------------------- -------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
------------ -------------------------- -------------------- ----------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 14 - - - - - 628
Capital Gains Distributions 16 - - 5 16 14 4,111
---------- --------------------------- -------------------- ---------
Total Income 30 - - 5 16 14 4,739
Expenses:
4 92 - - 2 (1) 623
Contract Expense Charges 49 5 2 3 3 5 7,527
---------- --------------------------- ------------------- ----------
Total Expenses 53 97 2 3 5 4 8,150
---------- --------------------------- ------------------- ----------
Investment Income (Loss) (23) (97) (2) 2 11 10 (3,411)
---------- --------------------------- -------------------- ---------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 1 (22) (3) (1) - (14) 534
Unrealized Appreciation (Depreciation) (10) (33) (26) (9) (45) (53) (8,422)
---------- --------------------------- -------------------- ---------
Net Gain (Loss) on Investments (9) (55) (29) (10) (45) (67) (7,888)
---------- --------------------------- -------------------- ---------
Change in Net Assets from Operations $ (32) (152) (31) (8) (34) (57) (11,299)
---------- --------------------------- -------------------- ---------
* For the period August 29, 2000 (inception date) through December 31, 2000.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Operations
Year ended December 31, 2000 (except as noted)
(in thousands)
Federated Insurance Series
----------------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
----------------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 7 13 - 51
Capital Gains Distributions 20 - - -
----------------------------------------------------------
Total Income 27 13 - 51
----------------------------------------------------------
Expenses:
Mortality and Expense Fees 5 1 - 5
Contract Expense Charges 100 30 - 1,279
----------------------------------------------------------
Total Expenses 105 31 - 1,284
----------------------------------------------------------
Investment Loss (78) (18) - (1,233)
----------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) (4) (4) - -
Unrealized Appreciation (Depreciation) 12 (26) (1) -
----------------------------------------------------------
Net Gain (Loss) on Investments 8 (30) (1) -
----------------------------------------------------------
Change in Net Assets from Operations $ (70) (48) (1) (1,233)
----------------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (410) (264) (6) (2,030)
==========================================================
MFS Variable Insurance Trust
-------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
-------------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ - - 6 5 - 7
Capital Gains Distributions 50 97 5 - - 55
-------------------------------------------------------
Total Income 50 97 11 5 - 62
-------------------------------------------------------
Expenses:
Mortality and Expense Fees 5 12 2 1 - 5
Contract Expense Charges 113 209 42 35 - 126
-------------------------------------------------------
Total Expenses 118 221 44 36 - 131
-------------------------------------------------------
Investment Loss (68) (124) (33) (31) - (69)
-------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 28 65 (1) - - 14
Unrealized Appreciation (Depreciation) (133) (550) 30 8 - (37)
-------------------------------------------------------
Net Gain (Loss) on Investments (105) (485) 29 8 - (23)
-------------------------------------------------------
Change in Net Assets from Operations $ (173) (609) (4) (23) - (92)
-------------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (993) (3,830) 36 (58) (10) (357)
=======================================================
American Century Variable Portfolios
----------------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
----------------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ - 1 - 2
Capital Gains Distributions 1 8 1 -
----------------------------------------------------------
Total Income 1 9 1 2
----------------------------------------------------------
Expenses:
Mortality and Expense Fees 1 3 - 2
Contract Expense Charges 16 44 4 30
----------------------------------------------------------
Total Expenses 17 47 4 32
----------------------------------------------------------
Investment Loss (16) (38) (3) (30)
----------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 18 - (1) (1)
Unrealized Appreciation (Depreciation) (20) (113) 3 (33)
----------------------------------------------------------
Net Gain (Loss) on Investments (2) (113) 2 (34)
----------------------------------------------------------
Change in Net Assets from Operations $ (18) (151) (1) (64)
----------------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (115) (1,150) 31 (168)
==========================================================
Dreyfus Variable Investment Fund
----------------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
----------------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 6 3 30 -
Capital Gains Distributions 9 418 47 -
----------------------------------------------------------
Total Income 15 421 77 -
----------------------------------------------------------
Expenses:
Mortality and Expense Fees 5 5 20 -
Contract Expense Charges 113 76 515 17
----------------------------------------------------------
Total Expenses 118 81 535 17
----------------------------------------------------------
Investment Loss (103) 340 (458) (17)
----------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 21 25 148 -
Unrealized Appreciation (Depreciation) (43) (351) (471) (5)
----------------------------------------------------------
Net Gain (Loss) on Investments (22) (326) (323) (5)
----------------------------------------------------------
Change in Net Assets from Operations $ (125) 14 (781) (22)
----------------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (606) 118 (4,007) (240)
==========================================================
JP Morgan Franklin Templeton Variable Products
----------------------- ------------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
----------------------- ------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 2 - - - - -
Capital Gains Distributions 5 2 - - 1 1
------------------------ -----------------------------------------
Total Income 7 2 - - 1 1
------------------------ -----------------------------------------
Expenses:
Mortality and Expense Fees 1 1 - - - -
Contract Expense Charges 52 15 - 2 - 4
----------------------- ------------------------------------------
Total Expenses 53 16 - 2 - 4
----------------------- ------------------------------------------
Investment Loss (46) (14) - (2) - (3)
----------------------- ------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) - - - - - -
Unrealized Appreciation (Depreciation) (30) (17) - (6) - (1)
Net Gain (Loss) on Investments (30) (17) - (6) - (1)
----------------------- ------------------------------------------
Change in Net Assets from Operations$ (76) (31) - (8) - (4)
----------------------- ------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (179) (173) 1 (36) (1) (58)
======================= ==========================================
Calamos A I M Variable Insurance Seligman Portfolios
Funds
----------- -------------------------- ------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
----------- -------------------------- ------------------- --------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 2 - - - - - 135
Capital Gains Distributions 2 - - 1 3 2 727
---------- -------------------------- ------------------- --------
Total Income 4 - - 1 3 2 862
---------- -------------------------- ------------------- --------
Expenses:
Mortality and Expense Fees - - - - - - 74
Contract Expense Charges 10 - 1 1 1 2 2,837
---------- -------------------------- ------------------- --------
Total Expenses 10 - 1 1 1 2 2,911
---------- -------------------------- ------------------- --------
Investment Loss (6) - (1) - 2 - (2,049)
---------- -------------------------- ------------------- --------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) - - - - - - 308
Unrealized Appreciation (Depreciation) (2) (1) (7) (4) (15) (11) (1,824)
---------- -------------------------- ------------------- --------
Net Gain (Loss) on Investments (2) (1) (7) (4) (15) (11) (1,516)
---------- -------------------------- ------------------- --------
Change in Net Assets from Operations $ (8) (1) (8) (4) (13) (11) (3,565)
---------- -------------------------- ------------------- --------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (40) (153) (39) (12) (47) (68) (14,864)
========== =========================== ================== ========
* For the period August 29, 2000 (inception date) through December 31, 2000.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Changes in Net Assets
Year ended December 31, 2000 (except as noted)
(in thousands)
Federated Insurance Series
----------------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
----------------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (322) 1 (1) (797)
Realized Gain (Loss) (13) (51) - -
Unrealized Appreciation (Depreciation) (5) (166) (4) -
----------------------------------------------------------
Change in Net Assets from Operations (340) (216) (5) (797)
Deposits 1,012 242 5 13,503
Payments and Withdrawals:
Death Benefits 5 4 - -
Withdrawals 217 45 3 65
Transfers (in) out (5) 43 (48) 12,405
----------------------------------------------------------
Payments and Withdrawals 217 92 (45) 12,470
----------------------------------------------------------
Net Assets:
Net Increase 455 (66) 45 236
Beginning of Year 3,664 1,039 - 3,310
----------------------------------------------------------
End of Year $ 4,119 973 45 3,546
----------------------------------------------------------
MFS Variable Insurance Trust
---------------------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
---------------------------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (252) (621) (150) (55) (11) (206)
Realized Gain (Loss) 65 146 8 (3) (1) 14
Unrealized Appreciation (Depreciation) (633) (2,746) 182 23 2 (73)
--------------------------------------------------------------------
Change in Net Assets from Operations (820) (3,221) 40 (35) (10) (265)
Deposits 1,309 2,441 493 149 25 1,114
Payments and Withdrawals:
Death Benefits 27 13 18 - - 15
Withdrawals 196 333 47 44 1 89
Transfers (in) out (576) (2,496) 19 (22) (50) (1,226)
-------------------------------------------------------------------
Payments and Withdrawals (353) (2,150) 84 22 (49) (1,122)
-------------------------------------------------------------------
Net Assets:
Net Increase 842 1,370 449 92 64 1,971
Beginning of Year 4,183 8,439 1,485 470 52 2,866
-------------------------------------------------------------------
End of Year $ 5,025 9,809 1,934 562 116 4,837
-------------------------------------------------------------------
American Century Variable Portfolios
---------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
---------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (126) (304) (33) (59)
Realized Gain (Loss) 34 55 (3) -
Unrealized Appreciation (Depreciation) (5) (750) 68 (45)
---------------------------------------------------
Change in Net Assets from Operations (97) (999) 32 (104)
Deposits 340 849 112 157
Payments and Withdrawals:
Death Benefits 2 2 - -
Withdrawals 31 152 3 5
Transfers (in) out (731) (1,254) (104) (91)
---------------------------------------------------
Payments and Withdrawals (698) (1,100) (101) (86)
---------------------------------------------------
Net Assets:
Net Increase 941 950 245 139
Beginning of Year 780 2,757 205 289
---------------------------------------------------
End of Year $ 1,721 3,707 450 428
---------------------------------------------------
Dreyfus Variable Investment Fund
---------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
---------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (384) 1,882 (1,672) (96)
Realized Gain (Loss) 53 56 214 3
Unrealized Appreciation (Depreciation) (150) (1,834) (1,768) (125)
--------------------------------------------------
Change in Net Assets from Operations (481) 104 (3,226) (218)
Deposits 1,071 1,240 4,766 229
Payments and Withdrawals:
Death Benefits 14 13 23 -
Withdrawals 116 157 463 5
Transfers (in) out (155) (507) (1,154) (565)
--------------------------------------------------
Payments and Withdrawals (25) (337) (668) (560)
--------------------------------------------------
Net Assets:
Net Increase 615 1,681 2,208 571
Beginning of Year 3,624 3,768 11,267 479
--------------------------------------------------
End of Year $ 4,239 5,449 13,475 1,050
--------------------------------------------------
JP Morgan Franklin Templeton Variable Products
------------------------ ------------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
------------------------ ------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (53) (55) - (3) - 5
Realized Gain (Loss) (1) - - (2) - (1)
Unrealized Appreciation (Depreciation) (49) (87) 1 (23) (1) (58)
------------------------ -----------------------------------------
Change in Net Assets from Operations (103) (142) 1 (28) (1) (54)
Deposits 169 144 - 28 3 120
Payments and Withdrawals:
Death Benefits - - - - - -
Withdrawals 6 3 - 8 - 2
Transfers (in) out (280) (532) (7) (167) (16) (385)
------------------------ -----------------------------------------
Payments and Withdrawals (274) (529) (7) (159) (16) (383)
------------------------ -----------------------------------------
Net Assets:
Net Increase 340 531 8 159 18 449
Beginning of Year 127 246 - - - 259
------------------------ -----------------------------------------
End of Year $ 467 777 8 159 18 708
------------------------ -----------------------------------------
Calamos A I M Variable Insurance Seligman Portfolios
Funds
----------- -------------------------- -------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
----------- -------------------------- -------------------- ----------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (23) (97) (2) 2 11 10 (3,411)
Realized Gain (Loss) 1 (22) (3) (1) - (14) 534
Unrealized Appreciation (Depreciation) (10) (33) (26) (9) (45) (53) (8,422)
----------- -------------------------- -------------------- ----------
Change in Net Assets from Operations (32) (152) (31) (8) (34) (57) (11,299)
Deposits 113 59 17 17 23 53 29,803
Payments and Withdrawals:
Death Benefits - - - - - - 136
Withdrawals 9 - - - 3 8 2,011
Transfers (in) out (547) (278) (68) (105) (141) (235) 722
----------- -------------------------- -------------------- ----------
Payments and Withdrawals (538) (278) (68) (105) (138) (227) 2,869
----------- -------------------------- -------------------- ----------
Net Assets:
Net Increase 619 185 54 114 127 223 15,635
Beginning of Year 260 - - - - - 49,569
----------- -------------------------- -------------------- ----------
End of Year $ 879 185 54 114 127 223 65,204
----------- -------------------------- -------------------- ----------
* For the period August 29, 2000 (inception date) through December 31, 2000.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Changes in Net Assets
Year ended December 31, 2000 (except as noted)
(in thousands)
Federated Insurance Series
--------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
--------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (78) (18) - (1,233)
Realized Gain (Loss) (4) (4) - -
Unrealized Appreciation (Depreciation) 12 (26) (1) -
---------------------------------------------------
Change in Net Assets from Operations (70) (48) (1) (1,233)
Deposits 297 92 1 4,493
Payments and Withdrawals:
Death Benefits - - - -
Withdrawals 42 19 - -
Transfers (in) out (136) 26 (5) 3,107
---------------------------------------------------
Payments and Withdrawals (94) 45 (5) 3,107
---------------------------------------------------
Net Assets:
Net Increase 321 (1) 5 153
Beginning of Year 560 170 - 876
---------------------------------------------------
End of Year 881 169 5 1,029
---------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 5,000 1,142 50 4,575
===================================================
MFS Variable Insurance Trust
---------------------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
---------------------------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (68) (124) (33) (31) - (69)
Realized Gain (Loss) 28 65 (1) - - 14
Unrealized Appreciation (Depreciation) (133) (550) 30 8 - (37)
--------------------------------------------------------------------
Change in Net Assets from Operations (173) (609) (4) (23) - (92)
Deposits 333 611 118 111 - 375
Payments and Withdrawals:
Death Benefits - - - - - -
Withdrawals 115 135 68 3 - 102
Transfers (in) out (90) (646) 7 91 (1) (328)
--------------------------------------------------------------------
Payments and Withdrawals 25 (511) 75 94 (1) (226)
--------------------------------------------------------------------
Net Assets:
Net Increase 135 513 39 (6) 1 509
Beginning of Year 733 1,316 282 158 - 492
--------------------------------------------------------------------
End of Year 868 1,829 321 152 1 1,001
--------------------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 5,893 11,638 2,255 714 117 5,838
====================================================================
American Century Variable Portfolios
-------------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
-------------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (16) (38) (3) (30)
Realized Gain (Loss) 18 - (1) (1)
Unrealized Appreciation (Depreciation) (20) (113) 3 (33)
-------------------------------------------------------
Change in Net Assets from Operations (18) (151) (1) (64)
Deposits 44 108 10 89
Payments and Withdrawals:
Death Benefits - - - -
Withdrawals 40 84 - 14
Transfers (in) out (96) (377) 8 (273)
-------------------------------------------------------
Payments and Withdrawals (56) (293) 8 (259)
-------------------------------------------------------
Net Assets:
Net Increase 82 250 1 284
Beginning of Year 62 243 14 121
-------------------------------------------------------
End of Year 144 493 15 405
-------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 1,865 4,200 465 833
=======================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
-------------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (103) 340 (458) (17)
Realized Gain (Loss) 21 25 148 -
Unrealized Appreciation (Depreciation) (43) (351) (471) (5)
-------------------------------------------------------
Change in Net Assets from Operations (125) 14 (781) (22)
Deposits 346 206 1,418 51
Payments and Withdrawals:
Death Benefits - - - -
Withdrawals 53 107 460 -
Transfers (in) out 73 (297) (54) (12)
-------------------------------------------------------
Payments and Withdrawals 126 (190) 406 (12)
-------------------------------------------------------
Net Assets:
Net Increase 95 410 231 41
Beginning of Year 739 539 2,707 13
-------------------------------------------------------
End of Year 834 949 2,938 54
-------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 5,073 6,398 16,413 1,104
=======================================================
JP Morgan Franklin Templeton Variable Products
------------------------ ------------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
------------------------ ------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (46) (14) - (2) - (3)
Realized Gain (Loss) - - - - - -
Unrealized Appreciation (Depreciation) (30) (17) - (6) - (1)
--------------------------------------------------------------
Change in Net Assets from Operations (76) (31) - (8) - (4)
Deposits 177 39 - 5 - 11
Payments and Withdrawals:
Death Benefits - - - - - -
Withdrawals 22 - - - - -
Transfers (in) out (60) (102) - (34) - (17)
--------------------------------------------------------------
Payments and Withdrawals (38) (102) - (34) - (17)
--------------------------------------------------------------
Net Assets:
Net Increase 139 110 - 31 - 24
Beginning of Year 116 - - - - 5
--------------------------------------------------------------
End of Year 255 110 - 31 - 29
--------------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 722 887 8 190 18 737
==============================================================
Calamos A I M Variable Insurance Seligman Portfolios
Funds
----------- -------------------------- -------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
----------- -------------------------- -------------------- ----------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (6) - (1) - 2 - (2,049)
Realized Gain (Loss) - - - - - - 308
Unrealized Appreciation (Depreciation) (2) (1) (7) (4) (15) (11) (1,824)
Change in Net Assets from Operations (8) (1) (8) (4) (13) (11) (3,565)
----------------------------------------------------------------------
Deposits 27 - 2 4 2 5 8,975
Payments and Withdrawals:
Death Benefits - - - - - - -
Withdrawals 3 - - - - - 1,267
Transfers (in) out (83) (8) (20) (30) (37) (44) 562
----------------------------------------------------------------------
Payments and Withdrawals (80) (8) (20) (30) (37) (44) 1,829
----------------------------------------------------------------------
Net Assets:
Net Increase 99 7 14 30 26 38 3,581
Beginning of Year 6 - - - - - 9,152
----------------------------------------------------------------------
End of Year 105 7 14 30 26 38 12,733
----------------------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 984 192 68 144 153 261 77,937
======================================================================
* For the period August 29, 2000 (inception date) through December 31, 2000.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Operations
Year ended December 31, 1999 (except as noted)
(in thousands)
Federated Insurance Series
--------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
--------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 27 69 - 75
Capital Gains Distributions 270 6 - -
---------------------------------------------------
Total Income 297 75 - 75
---------------------------------------------------
Expenses:
Mortality and Expense Fees 28 8 - 15
Contract Expense Charges 427 124 - 715
---------------------------------------------------
Total Expenses 455 132 - 730
---------------------------------------------------
Investment Income (Loss) (158) (57) - (655)
---------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 20 (3) - -
Unrealized Appreciation (Depreciation) (137) (49) - -
---------------------------------------------------
Net Gain (Loss) on Investments (117) (52) - -
---------------------------------------------------
Change in Net Assets from Operations $ (275) (109) - (655)
---------------------------------------------------
MFS Variable Insurance Trust
----------------------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
----------------------------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 6 - 24 9 2 22
Capital Gains Distributions 33 - 44 1 - 110
----------------------------------------------------------------------
Total Income 39 - 68 10 2 132
----------------------------------------------------------------------
Expenses:
Mortality and Expense Fees 30 43 12 4 - 19
Contract Expense Charges 432 589 221 72 8 293
----------------------------------------------------------------------
Total Expenses 462 632 233 76 8 312
----------------------------------------------------------------------
Investment Income (Loss) (423) (632) (165) (66) (6) (180)
----------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 108 183 11 (1) - 19
Unrealized Appreciation (Depreciation) 620 3,205 (43) (13) (3) 470
----------------------------------------------------------------------
Net Gain (Loss) on Investments 728 3,388 (32) (14) (3) 489
----------------------------------------------------------------------
Change in Net Assets from Operations$ 305 2,756 (197) (80) (9) 309
----------------------------------------------------------------------
American Century Variable Portfolios
-------------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
-------------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ - - - -
Capital Gains Distributions - - - -
-------------------------------------------------------
Total Income - - - -
-------------------------------------------------------
Expenses:
Mortality and Expense Fees 4 15 1 -
Contract Expense Charges 59 195 9 9
-------------------------------------------------------
Total Expenses 63 210 10 9
-------------------------------------------------------
Investment Income (Loss) (63) (210) (10) (9)
-------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 7 30 - -
Unrealized Appreciation (Depreciation) 255 1,002 (19) 14
-------------------------------------------------------
Net Gain (Loss) on Investments 262 1,032 (19) 14
-------------------------------------------------------
Change in Net Assets from Operations $ 199 822 (29) 5
-------------------------------------------------------
Dreyfus Variable Investment Fund
-------------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
-------------------------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 20 2 95 -
Capital Gains Distributions 13 - 83 16
-------------------------------------------------------
Total Income 33 2 178 16
-------------------------------------------------------
Expenses:
Mortality and Expense Fees 24 27 75 1
Contract Expense Charges 355 415 1,328 10
-------------------------------------------------------
Total Expenses 379 442 1,403 11
-------------------------------------------------------
Investment Income (Loss) (346) (440) (1,225) 5
-------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 41 8 177 2
Unrealized Appreciation (Depreciation) 218 604 1,223 40
-------------------------------------------------------
Net Gain (Loss) on Investments 259 612 1,400 42
-------------------------------------------------------
Change in Net Assets from Operations $ (87) 172 175 47
-------------------------------------------------------
JP Morgan Franklin Templeton Variable Products
------------------------ ---------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
------------------------ ---------------------------------------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 1 - - - - -
Capital Gains Distributions 18 4 - - - -
------------------------ ---------------------------------------
Total Income 19 4 - - - -
------------------------ ---------------------------------------
Expenses:
Mortality and Expense Fees 1 - - - - -
Contract Expense Charges 6 3 - - - 5
------------------------ ---------------------------------------
Total Expenses 7 3 - - - 5
------------------------ ---------------------------------------
Investment Income (Loss) 12 1 - - - (5)
------------------------ ---------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) - - - - - -
Unrealized Appreciation (Depreciation) 1 27 - - - 20
------------------------ ---------------------------------------
Net Gain (Loss) on Investments 1 27 - - - 20
------------------------ ---------------------------------------
Change in Net Assets from Operations $ 13 28 - - - 15
------------------------ ---------------------------------------
Calamos A I M Variable Insurance Seligman Portfolios
Funds
----------- -------------------------- -------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
----------- -------------------------- -------------------- ----------
Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 3 - - - - - 355
Capital Gains Distributions - - - - - - 598
Total Income 3 - - - - - 953
----------- -------------------------- -------------------- ----------
Expenses:
Mortality and Expense Fees - - - - - - 307
Contract Expense Charges 3 - - - - - 5,278
----------- -------------------------- -------------------- ----------
Total Expenses 3 - - - - - 5,585
----------- -------------------------- -------------------- ----------
Investment Income (Loss) - - - - - - (4,632)
----------- -------------------------- -------------------- ----------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) - - - - - - 602
Unrealized Appreciation (Depreciation) 10 - - - - - 7,445
----------- -------------------------- -------------------- ----------
Net Gain (Loss) on Investments 10 - - - - - 8,047
----------- -------------------------- -------------------- ----------
Change in Net Assets from Operations $ 10 - - - - - 3,415
----------- -------------------------- -------------------- ----------
* For the period May 3, 1999 (inception date) through December 31, 1999.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Operations
Year ended December 31, 1999 (except as noted)
(in thousands)
Federated Insurance Series
--------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
--------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 3 6 - 30
Capital Gains Distributions 25 - - -
--------------------------------------------------
Total Income 28 6 - 30
--------------------------------------------------
Expenses:
Mortality and Expense Fees 2 1 - 4
Contract Expense Charges 74 15 - 1,234
--------------------------------------------------
Total Expenses 76 16 - 1,238
--------------------------------------------------
Investment Loss (48) (10) - (1,208)
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) (1) - - -
Unrealized Appreciation (Depreciation) (12) (3) - -
--------------------------------------------------
Net Gain (Loss) on Investments (13) (3) - -
--------------------------------------------------
Change in Net Assets from Operations $ (61) (13) - (1,208)
--------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (336) (122) - (1,863)
==================================================
MFS Variable Insurance Trust
-----------------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
-----------------------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 2 - 3 3 - 2
Capital Gains Distributions 4 - 7 - - 13
---------------------------------------------------------------
Total Income 6 - 10 3 - 15
---------------------------------------------------------------
Expenses:
Mortality and Expense Fees 3 4 2 1 - 2
Contract Expense Charges 86 122 36 38 - 51
---------------------------------------------------------------
Total Expenses 89 126 38 39 - 53
---------------------------------------------------------------
Investment Loss (83) (126) (28) (36) - (38)
---------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 4 11 1 1 - 4
Unrealized Appreciation (Depreciation) 109 457 (5) (5) - 68
---------------------------------------------------------------
Net Gain (Loss) on Investments 113 468 (4) (4) - 72
---------------------------------------------------------------
Change in Net Assets from Operations $ 30 342 (32) (40) - 34
---------------------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ 335 3,098 (229) (120) (9) 343
===============================================================
American Century Variable Portfolios
-------------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
-------------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 1 - - -
Capital Gains Distributions - - - -
-------------------------------------------------------
Total Income 1 - - -
-------------------------------------------------------
Expenses:
Mortality and Expense Fees - 1 - -
Contract Expense Charges 11 34 3 11
-------------------------------------------------------
Total Expenses 11 35 3 11
-------------------------------------------------------
Investment Loss (10) (35) (3) (11)
-------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) - 1 1 -
Unrealized Appreciation (Depreciation) 22 86 (2) 5
-------------------------------------------------------
Net Gain (Loss) on Investments 22 87 (1) 5
-------------------------------------------------------
Change in Net Assets from Operations $ 12 52 (4) (6)
-------------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ 211 874 (33) (1)
========================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
-------------------------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ 4 - 23 -
Capital Gains Distributions 2 - 19 -
-------------------------------------------------------
Total Income 6 - 42 -
-------------------------------------------------------
Expenses:
Mortality and Expense Fees 3 2 12 -
Contract Expense Charges 89 68 369 -
-------------------------------------------------------
Total Expenses 92 70 381 -
-------------------------------------------------------
Investment Loss (86) (70) (339) -
-------------------------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) 5 4 9 -
Unrealized Appreciation (Depreciation) 44 84 326 -
-------------------------------------------------------
Net Gain (Loss) on Investments 49 88 335 -
-------------------------------------------------------
Change in Net Assets from Operations $ (37) 18 (4) -
-------------------------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ (124) 190 171 47
========================================================
JP Morgan Franklin Templeton Variable Products
------------------------ ----------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
------------------------ ----------------------------------------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ - - - - - -
Capital Gains Distributions 2 - - - - -
------------------------ ----------------------------------------
Total Income 2 - - - - -
------------------------ ----------------------------------------
Expenses:
Mortality and Expense Fees - - - - - -
Contract Expense Charges 15 - - - - -
------------------------ ----------------------------------------
Total Expenses 15 - - - - -
------------------------ ----------------------------------------
Investment Loss (13) - - - - -
------------------------ ----------------------------------------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) - - - - - -
Unrealized Appreciation (Depreciation) - - - - - -
------------------------ ----------------------------------------
Net Gain (Loss) on Investments - - - - - -
------------------------ ----------------------------------------
Change in Net Assets from Operations $ (13) - - - - -
------------------------ ----------------------------------------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ - 28 - - - 15
======================== ========================================
Calamos A I M Variable Insurance Seligman Portfolios
Funds
------------ -------------------------- -------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
------------ -------------------------- -------------------- --------
Survivorship Variable Universal Life:
Investment Income:
Income:
Dividend Distributions $ - - - - - - 77
Capital Gains Distributions - - - - - - 72
---------- -------------------------- -------------------- --------
Total Income - - - - - - 149
---------- -------------------------- -------------------- --------
Expenses:
Mortality and Expense Fees - - - - - - 37
Contract Expense Charges 2 - - - - - 2,258
---------- -------------------------- -------------------- --------
Total Expenses 2 - - - - - 2,295
---------- -------------------------- -------------------- --------
Investment Loss (2) - - - - - (2,146)
---------- -------------------------- -------------------- --------
Realized and Unrealized Gain on Investments:
Realized Gain (Loss) - - - - - - 40
Unrealized Appreciation (Depreciation) - - - - - - 1,174
---------- -------------------------- -------------------- --------
Net Gain (Loss) on Investments - - - - - - 1,214
---------- -------------------------- -------------------- --------
Change in Net Assets from Operations $ (2) - - - - - (932)
---------- -------------------------- -------------------- --------
Total Survivorship & Variable Universal Life -
Change in Net Assets from Operations $ 8 - - - - - 2,483
========== ========================== ==================== ========
* For the period May 3, 1999 (inception date) through December 31, 1999.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Changes in Net Assets
Year ended December 31, 1999 (except as noted)
(in thousands)
Federated Insurance Series
--------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
--------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (158) (57) - (655)
Realized Gain (Loss) 20 (3) - -
Unrealized Appreciation (Depreciation) (137) (49) - -
--------------------------------------------------
Change in Net Assets from Operations (275) (109) - (655)
--------------------------------------------------
Deposits 1,156 373 - 10,447
Payments and Withdrawals:
Death Benefits - - - -
Withdrawals 115 100 - 280
Transfers (in) out (594) (18) - 7,796
--------------------------------------------------
Payments and Withdrawals (479) 82 - 8,076
--------------------------------------------------
Net Assets:
Net Increase 1,360 182 - 1,716
Beginning of Year 2,304 857 - 1,594
--------------------------------------------------
End of Year $ 3,664 1,039 - 3,310
--------------------------------------------------
MFS Variable Insurance Trust
------------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
------------------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (423) (632) (165) (66) (6) (180)
Realized Gain (Loss) 108 183 11 (1) - 19
Unrealized Appreciation (Depreciation) 620 3,205 (43) (13) (3) 470
------------------------------------------------------------
Change in Net Assets from Operations 305 2,756 (197) (80) (9) 309
Deposits 1,220 1,667 487 159 21 782
Payments and Withdrawals:
Death Benefits - 2 3 - - 1
Withdrawals 216 331 106 22 - 55
Transfers (in) out (10) (1,068) (169) (89) (5) (341)
------------------------------------------------------------
Payments and Withdrawals 206 (735) (60) (67) (5) (285)
------------------------------------------------------------
Net Assets:
Net Increase 1,319 5,158 350 146 17 1,376
Beginning of Year 2,864 3,281 1,135 324 35 1,490
------------------------------------------------------------
End of Year $ 4,183 8,439 1,485 470 52 2,866
------------------------------------------------------------
American Century Variable Portfolios
-------------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
-------------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (63) (210) (10) (9)
Realized Gain (Loss) 7 30 - -
Unrealized Appreciation (Depreciation) 255 1,002 (19) 14
-------------------------------------------------------
Change in Net Assets from Operations 199 822 (29) 5
-------------------------------------------------------
Deposits 155 622 52 55
Payments and Withdrawals:
Death Benefits - 2 - -
Withdrawals 33 42 - -
Transfers (in) out (94) (166) (182) (229)
-------------------------------------------------------
Payments and Withdrawals (61) (122) (182) (229)
-------------------------------------------------------
Net Assets:
Net Increase 415 1,566 205 289
Beginning of Year 365 1,191 - -
-------------------------------------------------------
End of Year $ 780 2,757 205 289
-------------------------------------------------------
Dreyfus Variable Investment Fund
-------------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
-------------------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ (346) (440) (1,225) 5
Realized Gain (Loss) 41 8 177 2
Unrealized Appreciation (Depreciation) 218 604 1,223 40
-------------------------------------------------------
Change in Net Assets from Operations (87) 172 175 47
Deposits 1,099 1,380 4,276 48
Payments and Withdrawals:
Death Benefits - - 2 -
Withdrawals 104 88 206 2
Transfers (in) out (1,029) 63 (2,353) (386)
-------------------------------------------------------
Payments and Withdrawals (925) 151 (2,145) (384)
-------------------------------------------------------
Net Assets:
Net Increase 1,937 1,401 6,596 479
Beginning of Year 1,687 2,367 4,671 -
-------------------------------------------------------
End of Year $ 3,624 3,768 11,267 479
-------------------------------------------------------
JP Morgan Franklin Templeton Variable Products
------------------------ ------------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
------------------------ ------------------------------------------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ 12 1 - - - (5)
Realized Gain (Loss) - - - - - -
Unrealized Appreciation (Depreciation) 1 27 - - - 20
------------------------ ------------------------------------------
Change in Net Assets from Operations 13 28 - - - 15
Deposits 31 21 - - - 28
Payments and Withdrawals:
Death Benefits - - - - - -
Withdrawals - - - - - -
Transfers (in) out (83) (197) - - - (216)
------------------------ ------------------------------------------
Payments and Withdrawals (83) (197) - - - (216)
------------------------ ------------------------------------------
Net Assets:
Net Increase 127 246 - - - 259
Beginning of Year - - - - - -
------------------------ ------------------------------------------
End of Year $ 127 246 - - - 259
------------------------ ------------------------------------------
Calamos A I M Variable Insurance Seligman Portfolios
Funds
------------ -------------------------- -------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
------------ -------------------------- -------------------- ----------
Variable Universal Life:
Change in Net Assets from Operations:
Investment Income (Loss) $ - - - - - - (4,632)
Realized Gain (Loss) - - - - - - 602
Unrealized Appreciation (Depreciation) 10 - - - - - 7,445
------------ -------------------------- -------------------- ----------
Change in Net Assets from Operations 10 - - - - - 3,415
------------ -------------------------- -------------------- ----------
Deposits 8 - - - - - 24,087
Payments and Withdrawals:
Death Benefits - - - - - - 10
Withdrawals - - - - - - 1,700
Transfers (in) out (242) - - - - - 388
------------ -------------------------- -------------------- ----------
Payments and Withdrawals (242) - - - - - 2,098
------------ -------------------------- -------------------- ----------
Net Assets:
Net Increase 260 - - - - - 25,404
Beginning of Year - - - - - - 24,165
------------ -------------------------- -------------------- ----------
End of Year $ 260 - - - - - 49,569
------------ -------------------------- -------------------- ----------
* For the period May 3, 1999 (inception date) through December 31, 1999.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Statement of Changes in Net Assets
Year ended December 31, 1999 (except as noted)
(in thousands)
Federated Insurance Series
--------------------------------------------------
High
American Income Int'l * Prime
Leaders Bond Small Money
Fund II Fund II Company Fund II
--------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (48) (10) - (1,208)
Realized Gain (Loss) (1) - - -
Unrealized Appreciation (Depreciation) (12) (3) - -
--------------------------------------------------
Change in Net Assets from Operations (61) (13) - (1,208)
Deposits 205 38 - 3,940
Payments and Withdrawals:
Death Benefits - - - -
Withdrawals - - - -
Transfers (in) out (213) (86) - 2,325
--------------------------------------------------
Payments and Withdrawals (213) (86) - 2,325
--------------------------------------------------
Net Assets:
Net Increase 357 111 - 407
Beginning of Year 203 59 - 469
--------------------------------------------------
End of Year 560 170 - 876
--------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 4,224 1,209 - 4,186
==================================================
MFS Variable Insurance Trust
-------------------------------------------------------------
Emerging Total Global
Research Growth Return Bond Gov'ts Utilities
Series Series Series Series Series Series
-------------------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (83) (126) (28) (36) - (38)
Realized Gain (Loss) 4 11 1 1 - 4
Unrealized Appreciation (Depreciation) 109 457 (5) (5) - 68
-------------------------------------------------------------
Change in Net Assets from Operations 30 342 (32) (40) - 34
Deposits 237 349 90 109 - 132
Payments and Withdrawals:
Death Benefits - - - - - -
Withdrawals 1 - 11 - - 12
Transfers (in) out (135) (268) (52) (37) - (213)
-------------------------------------------------------------
Payments and Withdrawals (134) (268) (41) (37) - (201)
-------------------------------------------------------------
Net Assets:
Net Increase 401 959 99 106 - 367
Beginning of Year 332 357 183 52 - 125
-------------------------------------------------------------
End of Year 733 1,316 282 158 - 492
-------------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 4,916 9,755 1,767 628 52 3,358
=============================================================
American Century Variable Portfolios
-------------------------------------------------------
VP VP
Capital VP VP Income
Apprec Int'l Value & Growth
-------------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (10) (35) (3) (11)
Realized Gain (Loss) - 1 1 -
Unrealized Appreciation (Depreciation) 22 86 (2) 5
-------------------------------------------------------
Change in Net Assets from Operations 12 52 (4) (6)
Deposits 25 95 8 36
Payments and Withdrawals:
Death Benefits - - - -
Withdrawals - - - -
Transfers (in) out - (24) (10) (91)
-------------------------------------------------------
Payments and Withdrawals - (24) (10) (91)
-------------------------------------------------------
Net Assets:
Net Increase 37 171 14 121
Beginning of Year 25 72 - -
-------------------------------------------------------
End of Year 62 243 14 121
-------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 842 3,000 219 410
=======================================================
Dreyfus Variable Investment Fund
-------------------------------------------------------
Small
Apprec. Cap Stock Socially
Portfolio Portfolio Index Responsible
-------------------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (86) (70) (339) -
Realized Gain (Loss) 5 4 9 -
Unrealized Appreciation (Depreciation) 44 84 326 -
-------------------------------------------------------
Change in Net Assets from Operations (37) 18 (4) -
Deposits 251 182 972 1
Payments and Withdrawals:
Death Benefits - - - -
Withdrawals 1 1 - -
Transfers (in) out (231) (50) (666) (12)
-------------------------------------------------------
Payments and Withdrawals (230) (49) (666) (12)
-------------------------------------------------------
Net Assets:
Net Increase 444 249 1,634 13
Beginning of Year 295 290 1,073 -
-------------------------------------------------------
End of Year 739 539 2,707 13
-------------------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 4,363 4,307 13,974 492
=======================================================
JP Morgan Franklin Templeton Variable Products
------------------------ ------------------------------------------
Small Real *
Equity Company Estate Small * Developing* Int'l
Portfolio Portfolio Fund Cap Markets Fund
------------------------ ------------------------------------------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (13) - - - - -
Realized Gain (Loss) - - - - - -
Unrealized Appreciation (Depreciation) - - - - - -
------------------------ ------------------------------------------
Change in Net Assets from Operations (13) - - - - -
Deposits 50 - - - - 1
Payments and Withdrawals:
Death Benefits - - - - - -
Withdrawals - - - - - -
Transfers (in) out (79) - - - - (4)
------------------------ ------------------------------------------
Payments and Withdrawals (79) - - - - (4)
------------------------ ------------------------------------------
Net Assets:
Net Increase 116 - - - - 5
Beginning of Year - - - - - -
------------------------ ------------------------------------------
End of Year 116 - - - - 5
------------------------ ------------------------------------------
Total Survivorship & Variable Universal Life -
End of Year $ 243 246 - - - 264
======================== ==========================================
Calamos A I M Variable Insurance Seligman Portfolios
Funds
------------ -------------------------- -------------------
Dent *
Convertible Demo New * Value* Comm * Capital *
Portfolio Trends Technology Fund Info Portfolio Total
------------ -------------------------- -------------------- ----------
Survivorship Variable Universal Life:
Change in Net Assets from Operations:
Investment Loss $ (2) - - - - - (2,146)
Realized Gain (Loss) - - - - - - 40
Unrealized Appreciation (Depreciation) - - - - - - 1,174
------------ -------------------------- -------------------- ----------
Change in Net Assets from Operations (2) - - - - - (932)
Deposits 8 - - - - - 6,729
Payments and Withdrawals:
Death Benefits - - - - - - -
Withdrawals - - - - - - 26
Transfers (in) out - - - - - - 154
------------ -------------------------- -------------------- ----------
Payments and Withdrawals - - - - - - 180
------------ -------------------------- -------------------- ----------
Net Assets:
Net Increase 6 - - - - - 5,617
Beginning of Year - - - - - - 3,535
------------ -------------------------- -------------------- ----------
End of Year 6 - - - - - 9,152
------------ -------------------------- -------------------- ----------
Total Survivorship & Variable Universal Life -
End of Year $ 266 - - - - - 58,721
============ ========================== ==================== ==========
* For the period May 3, 1999 (inception date) through December 31, 1999.
See accompanying Notes to Financial Statements
Kansas City Life Variable Life Separate Account
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Organization
Kansas City Life Variable Life Separate Account, marketed as Century II Variable
Universal Life and Century II Survivorship Variable Universal Life, (the
Account) is a separate account of Kansas City Life Insurance Company (KCL). The
Account is registered as a unit investment trust under the Investment Company
Act of 1940, as amended. Under applicable insurance law, the assets and
liabilities of the Account are clearly identified and distinguished from KCL's
other assets and liabilities. The portion of the Accounts' assets applicable to
the variable annuity contracts is not chargeable with liabilities arising out of
any other business KCL may be conducting.
All deposits received by the Account have been directed by the contract owners
into subaccounts of nine series-type mutual funds, as listed below, or into
KCL's Fixed Account.
Federated Insurance Series
American Leaders Fund II Long-term growth of capital and income by investing primarily in equity securities of
large companies that are in the top 25 percent of their industry sectors
High Income Bond Fund II High current income by investing in high-yield, lower-rated corporate bonds (also known as
"junk bonds")
International Small Company Long-term growth of capital by investing in equity securities of
Fund II smaller foreign companies
Prime Money Fund II Current income with stability of principal and liquidity by investing in short-term,
high-quality fixed income securities
MFS Variable Insurance Trust
Research Series Long-term growth of capital and future income by investing in common stocks of companies
having favorable prospects for long-term growth
Emerging Growth Series Long-term growth of capital by investing in common stocks of emerging growth companies
Total Return Series Income and opportunities for growth of capital and income by investing in a combination of
equity and fixed income securities
Bond Series Current income and protection of shareholders' capital by investing in fixed income
securities
Global Governments Series Income and capital appreciation by investing in U.S. and foreign governments securities
Utilities Series Capital growth and current income by investing in equity and debt securities of domestic
and foreign companies in the utilities industry
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)
American Century Variable Portfolios
VP Capital Appreciation Capital growth by investing in common stocks of growing companies
VP International Capital growth by investing in stocks of growing foreign companies
VP Value Long-term capital growth and income by investing in stocks of companies believed to be
undervalued
VP Income and Growth Capital growth by investing in common stocks primarily from the largest 1,500 publicly
traded U.S. companies
Dreyfus Variable Investment Fund
Appreciation Portfolio Long-term capital growth and income by investing in common stocks of large "blue chip"
companies
Small Cap Portfolio Capital appreciation by investing in common stock of small U.S. and foreign companies
Dreyfus Stock Index Fund Match the total return of the Standard & Poor's (S&P) 500 Composite Stock Price Index by
investing in all 500 stocks in the S&P 500 in proportion to their weighting in the index
The Dreyfus Socially Responsible Capital growth and current income by investing in common stocks
Growth Fund, Inc. of companies that meet traditional investment standards and
conduct their business in a manner that contributes to the enhancement of the qualify of
life in America
J.P. Morgan Series Trust II
U.S. Disciplined Equity Portfolio High total return by investing in large and medium U.S. companies, with industry weighting
similar to those of the S&P 500
Small Company Portfolio High total return by investing in small and medium U.S. companies, as typically
represented by the Russell 2000 Index
Franklin Templeton Variable Products Series Fund
Franklin Real Estate Fund Capital appreciation and current income by investing in securities of companies operating
in the real estate industry
Franklin Small Cap Fund Long-term capital growth by investing in equity securities of small U.S. companies
Templeton Developing Markets Long-term capital appreciation by investing in emerging market Equity Securities Fund
equity securities
Templeton International Securities Long-term capital growth by investing in equity securities of
Fund companies located outside the U.S.
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)
Calamos Advisors Trust
Convertible Portfolio Current income and capital appreciation by investing in a diversified portfolio of
convertible securities
A I M Variable Insurance Funds
V.I. Dent Demographic Long-term growth of capital by investing in securities of companies
Trends Fund that are likely to benefit from changing demographic, economic and lifestyle trends
V.I. New Technology Fund Long-term growth of capital by investing at least 65% of its total
net assets in equity securities of technology and science
companies
V.I. Value Fund Long-term growth of capital and income by investing in equity securities of companies
believed to be undervalued
Seligman Portfolios, Inc.
Communications and Information Capital gain by investing in securities of companies operating in
Portfolio the communications, information and related industries
Capital Portfolio Capital appreciation by investing in common stocks of medium-sized U.S. companies
displaying a proven track record and strong management
Use of Estimates
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reinvestment of Dividends
Interest and dividend income and capital gains distributions paid by the mutual
funds to the Account are reinvested in additional shares of each respective
subaccount. Capital gains distributions are recorded as income on the date
earned.
Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the operations
of KCL, which is taxed as a life insurance company under the Internal Revenue
Code. As a result, the net asset values of the subaccounts are not affected by
federal income taxes on income distributions received by the subaccounts.
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)
Investment Valuation
Investments in mutual fund shares are carried in the statement of net assets at
quoted market value (NAV of the underlying mutual fund). The average cost method
is used to determine realized gains and losses. Transactions are recorded on a
trade date basis.
The aggregate cost of purchases and proceeds from sales were as follows:
Cost of Proceeds
2000: Purchases from Sales
(in thousands)
American Leaders Fund II $ 2,723 1,937
High Income Bond Fund II 1,015 835
International Small Company 77 22
Prime Money Fund II 26,516 26,127
MFS Research Series 3,320 1,669
MFS Emerging Growth Series 8,516 3,549
MFS Total Return Series 965 697
MFS Bond Series 453 394
MFS Global Governments Series 86 23
MFS Utilities Series 3,840 1,278
ACI VP Capital Appreciation 1,479 483
ACI VP International 3,587 1,580
ACI VP Value 365 185
ACI VP Income and Growth 952 450
Dreyfus Appreciation Portfolio 2,688 1,858
Dreyfus Small Cap Portfolio 5,895 1,701
Dreyfus Stock Index Fund 11,553 7,237
Dreyfus Socially Responsible Growth Fund 1,028 289
JP Morgan U.S. Disciplined Equity Portfolio 793 233
JP Morgan Small Company Portfolio 918 172
Franklin Real Estate Fund 9 0
Franklin Small Cap Fund 281 60
Templeton Developing Markets Securities Fund 32 13
Templeton International Securities Fund 650 116
Calamos Convertible Portfolio 966 238
A I M V.I. Dent Demographic Trends Fund 478 230
A I M V.I. New Technology Fund 123 19
A I M V.I. Value 260 102
Seligman Capital Portfolio 356 17
Seligman Communications and Information Portfolio 387 176
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)
Cost of Proceeds
1999: Purchases from Sales
(in thousands)
American Leaders Fund II $ 3,411 1,564
High Income Bond Fund II 910 562
Prime Money Fund II 23,544 21,421
MFS Research Series 2,437 1,558
MFS Emerging Growth Series 4,598 2,337
MFS Total Return Series 1,149 664
MFS Bond Series 458 188
MFS World Governments Series 39 19
MFS Utilities Series 2,177 995
ACI VP Capital Appreciation 377 209
ACI VP International 1,375 757
ACI VP Value 306 67
ACI VP Income and Growth 480 89
Dreyfus Capital Appreciation Portfolio 3,675 1,602
Dreyfus Small Cap Portfolio 2,798 1,848
Dreyfus Stock Index Fund 11,267 4,772
Dreyfus Socially Responsible Fund 603 153
JP Morgan Equity Portfolio 427 185
JP Morgan Small Company Portfolio 226 7
Templeton International Fund 254 10
Calamos Convertible Portfolio 264 8
2. Variable Life Contract Charges
KCL deducts an administrative fee for each contract of $26 per month for the
first 12 months and $6 per month thereafter. An additional deduction of $20 per
month is made for the 12 contract months following an increase in specified
amount. A deduction for insurance costs also is made monthly and is based on the
insured's attained age, sex, risk class, specified amount, supplemental benefit,
rider benefits, contract value and the number of completed policy years.
Mortality and expense risks assumed by KCL are compensated for by a fee
equivalent to an annual rate of 0.9 percent of the asset value of each contract.
A premium expense charge for premium taxes of 2.25 percent of premium receipts
is deducted from each premium receipt prior to their transfer to the separate
accounts. Other charges are deducted from each contract when certain events
occur, such as the seventh fund transfer in a contract year.
A contingent deferred sales charge is assessed against certain withdrawals
during the first 15 years of the contract. During 2000, $900,000 ($654,000 -
1999) was assessed in surrender charges and other contract charges totaled
$8,149,000 ($5,585,000 - 1999).
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)
3. Survivorship Variable Life Contract Charges
KCL deducts a monthly administrative fee for each contract of $7.50 plus $.02
per $1,000 of the total amount insured per month for all contracts. An
additional fee of $12.50 per month is charged for the first five contract years.
A deduction for insurance costs also is made monthly and is based on the
insured's attained age, sex, risk class, total amount insured, any optional
benefits, or any additional benefits provided by riders, contract value and the
number of completed policy years. Mortality and expense risks assumed by KCL are
compensated for by a fee equivalent to 0.625 percent of the average daily net
assets of each contract.
A sliding premium expense charge, which varies by contract year for the first 20
years, is deducted from each target and excess premium payment.
In addition, a 4.85 percent premium processing charge is deducted from each
premium payment for all contract years. Other charges are deducted from each
contract when certain events occur, such as the seventh fund transfer in a
contract year.
The plan has no contingent deferred sales charge. During 2000, other contract
charges totaled $2,910,000 ($2,295,000 - 1999).
Report of Independent Auditors
The Contract Owners
Kansas City Life Variable Life Separate Account
and
The Board of Directors
Kansas City Life Insurance Company
We have audited the accompanying statements of operations and changes in net
assets of Kansas City Life Variable Life Separate Account (the Account)
(comprised of the individual subaccounts as indicated therein) for the year
ended December 31, 1999, except for those individual series operating for
portions of such period as disclosed in the financial statements. These
financial statements are the responsibility of Kansas City Life Insurance
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of December 31, 1999 by
correspondence with the transfer agents. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statements presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and changes in net assets of
Kansas City Life Variable Life Separate Account for period described above in
conformity with accounting principles generally accepted in the United States.
/s/Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
March 31, 2000
Independent Auditors' Report
The Contract Owners
Kansas City Life Variable Life Separate Account
and
The Board of Directors
Kansas City Life Insurance Company:
We have audited the accompanying statement of net assets of Kansas City Life
Variable Life Separate Account (the Account) (comprised of the individual
subaccounts as indicated therein) as of December 31, 2000 and the related
statements of operations and changes in net assets for the year then ended,
except for those individual series operating for portions of such period as
disclosed in the financial statements. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kansas City Life Variable Life
Separate Account as of December 31, 2000 and the results of its operations and
its changes in net assets for the years for the periods described above in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
April 6, 2001
- -------------------------------------
Do not grade between Years 10-11
- -------------------------------------
Year
- -------------------------------------
1 100%
- -------------------------------------
2 87%
- -------------------------------------
3 79%
- -------------------------------------
4 70%
- -------------------------------------
5 60%
- -------------------------------------
6 50%
- -------------------------------------
7 40%
- -------------------------------------
8 30%
- -------------------------------------
9 20%
- -------------------------------------
10 10%
- -------------------------------------
11+ 0%
- -------------------------------------
Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section.
The By-Laws of Kansas City Life Insurance Company provide, in part, in Article XII:
1. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the Company, by reason of the fact that he or she is or was a Director, Officer or employee of the Company, or is or was serving at the request of the Company as a Director, Officer or employee of another company, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
2. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the company to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer or employee of the company, or is or was serving at the request of the company as a director, officer or employee of another company, partnership, joint venture, trust or other enterprise against expenses, including attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the company unless and only to the extent that the court in which the action or suit was brought determines upon application that, despite the adjudication of liability and in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
Missouri law authorizes Missouri corporations to provide indemnification to directors, officers and other persons.
Kansas City Life owns a directors and officers liability insurance policy covering liabilities that directors and officers of Kansas City Life and its subsidiaries and affiliates may incur in acting as directors and officers.
Insofar as indemnification for liability arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Kansas City Life Insurance Company hereby represents that the fees and charges deducted under the Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Kansas City Life Insurance Company.
This Registration Statement comprises the following papers and documents: The
facing sheet.
The prospectus consisting of 140 pages.
Undertaking to file reports.
Rule 484 undertaking.
Representations relating to fees and charges.
The signatures.
Written consents of the following persons:
(a) Gary K. Hoffman
(b) Mark A. Milton, Senior Vice President and Actuary
(c) KPMG LLP Consent
(d) Ernst & Young LLP Consent
The following exhibits, corresponding to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
1.A. (1) Resolutions of the Board of Directors of Kansas City Life Insurance
Company establishing the Kansas City Life Variable Life Separate
Account.1
(2) Not applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Kansas City Life Insurance
Company and Sunset Financial Services, Inc.1
(b) Not applicable.
(c) Schedule of Sales Commissions. 7
(4) Not applicable.
(5) (a) Specimen Contract Form.7
(b) Contract Split Option Rider.3
(c) Joint First to Die Term Life Insurance Rider.3
(d) Joint Survivorship Four-Year Term Life Insurance Rider.3
(6) (a) Articles of Incorporation of Bankers Life Association of
Kansas City.1
(b) Restated Articles of Incorporation of Kansas City Life
Insurance Company.1
(c) By-Laws of Kansas City Life Insurance Company.1
(7) Not applicable.
(8) (a) Agreement between Kansas City Life Insurance Company, MFS Variable
Insurance Trust, and Massachusetts Financial Services Company.1
(b) Agreement between Kansas City Life Insurance Company, TCI
Portfolios, Inc. and Investors Research Corporation.1
(c) Agreement between Kansas City Life Insurance Company, Insurance
Management Series, and Federated Securities Corp.1
(d) Agreement between Kansas City Life Insurance Company and each of
Dreyfus Variable Investment Fund, The Dreyfus Socially
Responsible Growth Fund, Inc., and Dreyfus Life and Annuity Index
Fund, Inc.3
(e) Agreement between Kansas City Life Insurance Company and J.P.
Morgan Series Trust II. 4
(f) Amended and Restated Agreement between Kansas City Life Insurance
Company and each of Calamos Insurance Trust, Calamos Asset
Management, Inc. and Calamos Financial Services, Inc.5
(g) Form of Participation Agreement between Kansas City Life
Insurance Company and each of Franklin Templeton Variable
Insurance Products Trust and Franklin Templeton Distributors,
Inc. 6
(h) Amendment to Participation Agreement between Kansas City Life
Insurance Company and each of Dreyfus Variable Investment Fund,
The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus
Life and Annuity Index Fund, Inc.
(d/b/a Drefus Stock Index Fund). 4
(i) Agreement between Kansas City Life Insurance Company, Insurance
Management Series, and Federated Securities Corp. 6
(j) Form of Participation Agreement by and among AIM Variable
Insurance Funds, Inc. AIM Distributors, Inc. and Kansas City Life
Insurance Company. 6
(k) Form of Participation Agreement between Kansas City Life
Insurance Company and Seligman Portfolios, Inc. Seligman
Advisors, Inc. 6
(9) Not Applicable.
(10) Application Form.1
(11) Memorandum describing issuance, transfer, and redemption procedures.
B. Not applicable.
C. Not applicable.
2. Opinion and consent of Gary K. Hoffman, as to the legality of the
securities being registered.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Mark A. Milton, Vice President and Actuary, as to
actuarial matters pertaining to the securities being registered.
7. (a) Consent of Ernst & Young LLP.
(b) Consent of Sutherland, Asbill & Brennan LLP.
(c) Consent of Gary K. Hoffman. See Exhibit 2.
(d) Consent of KPMG LLP.
- ----------------------
1 Incorporated herein by reference to the Form S-6 Registration Statement
(File No. 033-95354) for Kansas City Life Variable Life Separate Account
filed on August 2, 1995.
2 Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form N-4 Registration statement (File No. 033-89984) for Kansas City Life
Variable Annuity Separate Account filed on August 25, 1995.
3 Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement (File No. 333-25443) for Kansas City
Variable Life Separate Account filed on July 15, 1997
4 Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form S-6 Registration Statement (File No. 33-95354) for Kansas City
Variable Life Separate Account filed on April 19, 1999.
5 Incorporated herein by reference to Post-Effective Amendment No. 2 to the
Form S-6 Registration Statement (File No. 333-25443) for Kansas City
Life Variable Life Separate Account filed on April 29, 1999.
6 Incorporated herein by reference to Post-Effective Amendment No. 7 to the
Form N-4 Registration Statement (File No. 33-89984) for Kansas City Life
Variable Annuity Separate Account filed on August 28, 2000.
7 Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement (File No. 333-69508) for Kansas City Life
Variable Life Separate Account filed on September 17, 2001.
Pursuant to the requirements of the Securities Act of 1933, the Registrant, Kansas City Life Variable Life Separate Account, has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Kansas City and the State of Missouri on the 28th day of December, 2001.
Kansas City Life Variable Life
Separate Account
-----------------------------
Registrant
(SEAL)
Kansas City Life Insurance Company
------------------------------
Depositor
Attest: /s/ Cheryl Keefer By: /s/ R. Philip Bixby
Cheryl Keefer R. Philip Bixby, President, CEO, and
Vice Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, Pre-Effective Amendment No. 1 to the Registration Statement has been signed below by the following persons in the capacities indicated on the date(s) set forth below.
Signature Title Date
/s/ R. Philip Bixby President, CEO, Vice Chairman December 28, 2001
R. Philip Bixby of the Board
/s/ Richard L. Finn Senior Vice President, Finance December 28, 2001
Richard L. Finn and Director
(Principal Financial Officer)
/s/John K. Koetting Vice President and Controller December 28, 2001
John K. Koetting (Principal Accounting Officer)
/s/ J. R. Bixby Chairman of the Board and
J. R. Bixby Director December 28, 2001
/s/ Walter E. Bixby Director December 28, 2001
W. E. Bixby
/s/ Daryl D. Jensen Director December 28, 2001
Daryl D. Jensen
C. John Malacarne Director December 28, 2001
/s/Jack D. Hayes Director December 28, 2001
Jack D. Hayes
/s/Webb R. Gilmore Director December 28, 2001
Webb R. Gilmore
/s/ Warren J. Hunzicker, M.D. Director December 28, 2001
Warren J. Hunzicker, M.D.
Michael J. Ross Director December 28, 2001
/s/Elizabeth T. Solberg Director December 28, 2001
Elizabeth T. Solberg
E. Larry Winn Jr. Director December 28, 2001
/s/ Nancy Bixby Hudson Director December 28, 2001
Nancy Bixby Hudson
/s/William R. Blessing Director December 28, 2001
William R. Blessing
/s/Cecil R. Miller Director December 28, 2001
Cecil R. Miller
DECEMBER 2001
DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES FOR CONTRACTS
PURSUANT TO RULE 6e-3(T)(b)(12)(iii)
FOR FLEXIBLE PREMIUM SURVIVORSHIP LIFE INSURANCE CONTRACTS
ISSUED BY
KANSAS CITY LIFE INSURANCE COMPANY
This document sets forth the current administrative procedures that will be followed by Kansas City Life Insurance Company (“Kansas City Life”) in connection with its issuance of individual flexible Premium variable survivorship life insurance contracts (the “Contracts”), the transfer of assets held thereunder, and the redemption by Contract owners (the “Owners”) of their interests in those Contracts. Capitalized terms used herein have the same meaning as in the prospectus for the Contract that is included in the current registration statement on Form S-6 for the Contract as filed with the Securities and Exchange Commission (“Commission” or “SEC”).
I. Procedures Relating to Purchase and Issuance of the Contracts and Acceptance of Premiums
A. Offer of the Contracts, Applications, Initial Net Premiums, and Issuance of the Contracts
1. Offer of the Contracts. The Contracts will be offered and sold for Premiums pursuant to established Premium schedules and underwriting standards in accordance with state insurance laws. Premiums for the Contracts and related insurance charges will not be the same for all Owners selecting the same amount and type of Death Benefit. Insurance is based on the principle of pooling and distribution of mortality risks, which assumes that each Owner pays a Premium and related insurance charges commensurate with the Insureds’ mortality risk as actuarially determined utilizing factors such as Age, sex, level of Total Sum Insured, health and occupation of each Insured. A uniform Premium and insurance charges for all Insureds would discriminate unfairly in favor of those Insureds representing greater risk. Although there will be no uniform insurance charges for all Insureds, there will be a uniform insurance rate for all Insureds of the same risk class and same Total Sum Insured. A description of the Monthly Deduction under the Contract, which includes charges for cost of insurance and for optional benefits and/or riders, is in Appendix A to this memorandum.
2. Application. To purchase a Contract, the Owner must complete an application and submit it through an authorized Kansas City Life agent. An application will not be deemed to be complete unless all required information, including without limitation, age, sex and medical and other background information on each proposed Insured, has been provided in the application.
If the applicant is eligible for temporary insurance coverage, a temporary insurance agreement (“TIA”) should also accompany the application. The TIA provides temporary insurance coverage prior to the date when all underwriting and other requirements have been met and the application has been approved, with certain limitations, as long as an initial Premium accompanies the TIA. In accordance with Kansas City Life’s underwriting rules, temporary life insurance coverage may not exceed $250,000. The TIA may not be in effect for more than 60 days. At the end of the 60 days, the TIA coverage terminates and the initial Premium will be returned to the applicant.
3. Payment of Minimum Initial Premium and Determination of Contract Date. With the TIA, the applicant must pay an initial Premium at the time of application that is at least equal to two months of Guaranteed Monthly Premium (one month of Guaranteed Monthly Premium is required for Contracts when Premiums will be made under a pre-authorized payment or combined billing arrangement). The minimum initial Premium required depends on a number of factors, such as the Age, sex and risk class of the proposed Insureds, the Total Sum Insured, any optional benefits and riders selected and the Planned Premiums the Owner proposes to make. (See “Planned Premium,” below.)
In general, when applications are submitted with the required Premium (and the Premium is submitted in “good order”) the Contract Date will be the same as that of the TIA. For Contracts where the required Premium is not accepted at the time of application or Contracts where values are applied to the new Contract from another contract, the Contract Date will be the approval date plus up to seven days. There are several exceptions, described below.
Contract Date Calculated to Be 29th, 30th or 31st of Month
No Contracts will be given a Contract Date of the 29th, 30th or 31st of the month. When values are applied to the new Contract from another contract and the Contract Date would be calculated to be one of these dates, the Contract Date will be the 28th of the month. In all other situations in which the Contract Date would be calculated to be the 29th, 30th or 31st of the month, the Contract Date will be set to the 1st of the next month.
Pre-Authorized Check Payment Plan (PAC) or Combined Billing (CB) --Premium with ApplicationIf PAC or CB is requested and the initial Premium is taken with the application, the Contract Date will be the date of approval. CB is a billing where multiple Kansas City Life contracts are billed together.
Government Allotment (GA) and Federal Allotment (FA) If GA or FA is requested on the application and an initial Premium is taken with the application, the Contract Date will be the date of approval. If GA or FA is requested and no initial Premium is received, the Contract Date will be the date we receive a full monthly allotment.
Kansas City Life may specify the form in which a Premium must be made in order for the Premium to be in “good order.” Ordinarily, a check will be deemed to be in “good order” upon receipt, although Kansas City Life may require that the check first be converted into federal funds. In addition, for a Premium to be received in “good order,” it must be accompanied by all required supporting documentation, in whatever form required.
An initial Premium will not be accepted from applicants that are not eligible for TIA coverage. Coverage under the Contract begins on the Contract Date, and Kansas City Life will deduct Contract charges as of the Contract Date.
The Contract Date is determined by these guidelines except, as provided for under state insurance law, the Owner may be permitted to backdate the Contract to preserve insurance age (and receive a lower cost of insurance rate). In no case may the Contract Date be more than six months prior to the date the application was completed. Monthly Deduction will be charged from the Contract Date. If coverage under an existing Kansas City Life insurance contract is being replaced, that contract will be terminated and values will be transferred on the date when all underwriting and other requirements have been met and the application has been approved. (For a discussion of underwriting requirements, see “Underwriting Requirements” below). Kansas City Life will deduct contract charges as of the Contract Date.
4. Underwriting Requirements. Kansas City Life requires satisfactory evidence of the proposed Insureds’ insurability, which may include a medical examination of the proposed Insureds. The available issue ages are 20 through 85 for each Insured. There are four risk classes available: preferred nontobacco user, standard nontobacco user, preferred tobacco user, tobacco user. Age is determined on the Contract Date based on each Insured’s age last birthday. The minimum Total Sum Insured is $200,000. The minimum Specified Amount is $100,000. The minimum Additional Insurance Amount is $10,000 and the maximum Additional Insurance Amount at the time of issue is four times the Specified Amount. This coverage may increase to a maximum of 8 times the Specified Amount after issue. Acceptance of an application depends on Kansas City Life’s underwriting rules, and Kansas City Life reserves the right to reject an application.
5. Determination of Owner of the Contract. The Owner of the Contract may exercise all rights provided under the Contract. The Insureds are the Owner, unless a different Owner is named inthe application. The Owner may by Written Notice name a contingent Owner or a new Owner while at least one Insured is living. Unless a contingent Owner has been named, on the death of the last surviving Owner, ownership of the Contract passes to the estate of the last surviving Owner. The Owner may also be changed prior to both Insureds’ deaths by Written Notice satisfactory to Kansas City Life.
B. Payment and Acceptance of Additional Premiums
1. General. Additional unscheduled Premiums can be made at any time while the Contract is in force. Kansas City Life has the right to limit the number and amount of such Premiums, subject to the procedures described below. A loan repayment must be clearly marked as such or it will be credited as a Premium.
2. Procedures for Accepting Additional Premiums.Premiums must be made by check payable to Kansas City Life Insurance Company or by any other method that Kansas City Life deems acceptable. Kansas City Life may specify the form in which a Premium must be made in order for the Premium to be in “good order.” Ordinarily, a check will be deemed to be in good order upon receipt, although Kansas City Life may require that the check first be converted into federal funds. In addition, for a Premium to be received in “good order,” it must be accompanied by all required supporting documentation, in whatever form required.
Total Premiums paid may not exceed Premium limitations for life insurance set forth in the Internal Revenue Code. Kansas City Life will monitor Contracts and will notify the Owner if a Premium exceeds this limit and will cause the Contract to violate the definition of insurance. The owner may choose to take a refund of the portion of the Premium that is determined to be in excess of applicable limitations, or the Owner may submit an application to increase the Additional Insurance Amount, subject to our underwriting requirements. (See “Underwriting Requirements” above.) Kansas City Life will monitor Contracts and will attempt to notify the Owner on a timely basis if Premiums paid under a Contract exceed the “7-Pay Test” as set forth in the Internal Revenue Code and, therefore, the Contract is in jeopardy of becoming a modified endowment contract.
3. Planned Premiums. When applying for a Contract, the Owner selects a plan for paying level Premiums at specified intervals, e.g., quarterly, semi-annually, or annually. If the Owner elects, Kansas City Life will also arrange for payment of Planned Premiums on a special monthly or quarterly basis under a pre-authorized payment arrangement. The Owner is not required to pay Premiums in accordance with these plans; rather, the Owner can pay more or less than planned or skip a Planned Premium entirely. Each Premium after the initial Premium must be at least $25. Kansas City Life may increase this minimum limit 90 days after sending the Owner a Written Notice of such increase. Subject to the limits described above, the Owner can change the amount and frequency of Planned Premiums by sending Written Notice to the Home Office. Kansas City Life, however, reserves the right to limit the amount of any increase in planned Premium.
4. Guaranteed Payment Period and Guaranteed Monthly Premium.A Guaranteed Payment Period is the period during which Kansas City Life guarantees that the Contract will not lapse if the amount of total Premiums paid is greater than or equal to the sum of: (1) the accumulated Guaranteed Monthly Premium in effect on each prior Monthly Anniversary Day, and (2) additional Premium amounts to cover the total amount of any partial surrenders taken and the Loan Balance under the Contract. The Guaranteed Payment Period is three years following the Contract Date.
The Guaranteed Monthly Premium is shown in the Contract. The Guaranteed Monthly Premium varies by the risk class, issue age, and sex of each insured. Additional Premiums for substandard ratings and optional benefits and/or riders are included in the Guaranteed Monthly Premium. However, if changes are made to the optional benefits and/or rider coverage amounts in the first 3 contract years, Kansas City Life will recalculate the Guaranteed Monthly Premium and will notify the Owner of the new Guaranteed Monthly Premium and amend the Owner’s Contract to reflect the change.
5. Guaranteed Minimum Death Benefit Option and Guaranteed Minimum Death Benefit Option Premium.The optional Guaranteed Minimum Death Benefit Option is available only at issue. This option is not available if Coverage Option B is elected or if the Joint First to Die Rider is issued with the Contract. If this option has been elected, it guarantees payment of the Specified Amount (less any Loan Balance and any past due charges) upon the death of the last surviving Insured, regardless of the Contract’s investment performance, provided that the Guaranteed Minimum Death Benefit Option Premium requirement is met. The Guaranteed Minimum Death Benefit Option does not guarantee any Additional Insurance Amount.
The Guaranteed Minimum Death Benefit Option Premium is the amount, which guarantees that the Guaranteed Minimum Death Benefit Option will remain in effect. The Guaranteed Minimum Death Benefit Option Premium requirement is met if, on each Monthly Anniversary Day:
If the Guaranteed Minimum Death Benefit Option Premium requirement is not met, the Guaranteed Minimum Death Benefit Option is in default. A 61-day notice period begins on the day Kansas City Life mails the notice that the Guaranteed Minimum Death Benefit Option is in default and the amount of Premium required to maintain the Guaranteed Minimum Death Benefit Option. The default Premium will be the amount by which the cumulative Guaranteed Minimum Death Benefit Option Premium plus any Loan Balance is greater than the cumulative paid Premium. The Guaranteed Minimum Death Benefit Option will terminate if sufficient Premium is not paid by the end of the notice period.
If the policy contains any Additional Insurance Amount coverage or any optional benefits and/or riders, then in addition to testing the Guaranteed Minimum Death Benefit Option Premium requirement as outlined above, the Contract Value will be tested to ensure that the policy is funded at a sufficient level to support the Additional Insurance Amount or other optional benefits and/or riders. On each Monthly Anniversary Day the Cash Surrender Value will be tested to determine if it is sufficient to cover the Monthly Deduction. If not, a 61-day notice period begins on the day Kansas City Life mails notice of the default Premium amount. The default Premium will be equal to the payment which would be sufficient to provide a Cash Surrender Value equal to three Monthly Deduction. If we do not receive payment at least equal to the default Premium by the end of the notice period, we will terminate the Additional Insurance Amount and other optional benefit riders.
There is no charge for this option during the first 10 Contract Years. Beginning in Contract Year 11 a monthly charge per $1,000 of Specified Amount at issue will apply. The Guaranteed Minimum Death Benefit Option is not available for Coverage Option B Contracts, for Contracts on which the Additional Insurance Amount exceeds or is scheduled to exceed the Specified Amount or for Contracts which include the Joint First to Die Rider. The Guaranteed Minimum Death Benefit Option will terminate upon your request, if the Coverage Option is changed to B or if the amount of the Additional Insurance Amount is increased to more than the Specified Amount.
The Guaranteed Minimum Death Benefit Option may be reactivated within two years of termination of such option. Reactivation requires: (1) written notice to restore the option, (2) evidence of insurability of the Insureds satisfactory to us, unless Reactivation is requested within one year after the beginning of the notice period; and (3) payment of the amount by which the cumulative Guaranteed Minimum Death Benefit Option Premium plus Loan Balance exceeds the cumulative paid Premiums on the date of Reactivation. On the Monthly Anniversary Day on which the Reactivation takes effect, Kansas City Life will deduct from the Contract Value any unpaid Guaranteed Minimum Death Benefit Option charges. Kansas City Life reserves the right to deny Reactivation of the Guaranteed Minimum Death Benefit Option more than once during the life of the Contract.
6. Premiums Upon Increase in Additional Insurance Amount. Depending on the Contract Value at the time of an increase in the Additional Insured Amount and the amount of the increase requested, an additional Premium may be necessary or a change in the amount of Planned Premiums may be advisable.
7. Premiums to Prevent Lapse. If the Guaranteed Minimum Death Benefit Option has been elected, the Specified Amount is guaranteed to remain in force as long as the Guaranteed Minimum Death Benefit Option Premium requirement is met on each Monthly Anniversary Day. However, while failure to meet the Guaranteed Minimum Death Benefit Option Premium requirement will cause the Guaranteed Minimum Death Benefit Option to terminate, such failure will not necessarily cause the Contract to lapse. Riders are not guaranteed by the Guaranteed Minimum Death Benefit Option and will terminate if the Cash Surrender Value becomes negative.
a. During the Guaranteed Payment Period. The Contract will lapse and a Grace Period will start if there is not enough Cash Surrender Value in your Contract to cover the Monthly Deduction; and the Premiums paid are less than required to guarantee lapse won’t occur during the Guaranteed Payment Period. If lapse occurs, the Premium you must pay to keep the Contract in force will be equal to the lesser of the amount to guarantee the Contract won’t lapse during the Guaranteed Payment Period less the accumulated Premiums you have paid; and enough Premium to increase the Cash Surrender Value to at least the amount of three Monthly Deduction.
b. After the Guaranteed Payment Period. The Contract lapses and a Grace Period starts if the Cash Surrender Value is not enough to cover the Monthly Deduction. To prevent the Contract from terminating you must pay enough Premium to increase the Cash Surrender Value to at least the amount of three Monthly Deduction. You must make this payment before the end of the Grace Period.
If the Guaranteed Minimum Death Benefit Option has not been elected or has been removed, a grace period starts if the Cash Surrender Value on a Monthly Anniversary Day will not cover the Monthly Deduction. A Premium sufficient to provide a Cash Surrender Value equal to three Monthly Deduction must be paid during the grace period to keep the Contract in force.
8. Grace Period. The grace period is a 61-day period to pay sufficient Premiums to prevent lapse. Kansas City Life will send notice of the Premium amount required to be paid during the grace period to the Owner’s last known address and the address of any assignee of record. The grace period will begin when the notice is sent. The Contract will remain in force during the grace period. If the last surviving Insured should die during the grace period, the Death Benefit proceeds will still be payable to the Beneficiary, although the amount paid will reflect a reduction for the Monthly Deduction due on or before the date of the last surviving Insured’s death (and for any Loan Balance). If the grace period Premium has not been paid before the grace period ends, the Contract will lapse. It will have no value and no benefits will be payable. A grace period also may begin if Loan Balance becomes excessive.
C. Allocation and Crediting of Initial and Additional Premiums
1. The Separate Account, Subaccounts, and Fixed Account.The variable benefits under the Contract are supported by the Kansas City Life Variable Life Separate Account (the “Variable Account”). The Variable Account currently consists of 30 Subaccounts, the assets of which are used to purchase shares of a designated corresponding mutual fund portfolio that is part of one of the following Funds: MFS Variable Insurance Trust (“MFS Trust”), American Century Variable Portfolios Inc. (“American Century Variable Portfolios”), Federated Insurance Series, Federated Global Investment Management Corp., Dreyfus Variable Investment Fund, Dreyfus Stock Index Fund, The Dreyfus Socially Responsible Growth Fund, Inc., J.P. Morgan Series Trust II, Franklin Templeton Variable Insurance Products Trust, Calamos Advisors Trust, AIM Variable Insurance Fund and Seligman Portfolios, Inc. Each fund is registered under the Investment Company Act of 1940 as an open-end management investment company. Owners also may allocate Contract Value to Kansas City Life’s general account (the “Fixed Account”). Additional Subaccounts may be added from time to time to invest in portfolios of MFS Trust, American Century Variable Portfolios, Federated Insurance Series, Federated Global Investment Management Corp., Dreyfus Variable Investment Fund, Dreyfus Stock Index Fund, The Dreyfus Socially Responsible Growth Fund, Inc, J.P. Morgan Series Trust II, Templeton Variable Insurance Products Trust, Calamos Advisors Trust, AIM Variable Insurance Fund and Seligman Portfolios, Inc. or any other investment company.
2. Allocations Among the Accounts. Net Premiums and Contract Value are allocated to the Subaccounts and the Fixed Account in accordance with the following procedures.
a. General. In the Contract application, the Owner specifies the percentage of a Net Premium to be allocated to each Subaccount and to the Fixed Account. The sum of the allocations must equal 100%, and Kansas City Life reserves the right to limit the number of Subaccounts to which Premiums may be allocated, although the number of Subaccounts to which Net Premiums may be allocated will never be less than fifteen. The Owner can change the allocation percentages at any time, subject to these rules, by sending Written Notice to the Home Office. Changes in allocation may also be made by telephone if a proper authorization has been provided. The change will apply to Premiums received with or after receipt of notice.
b. Allocation of Initial Net Premium. On the Allocation Date, the initial Net Premium will be allocated to the Money Market subaccount. The Allocation Date is the later of the date when all underwriting and other requirements have been met and an application has been approved, or the date the initial Premium is received in “good order” at the Home Office. Kansas City Life may specify the form in which a Premium must be made in order for the Premium to be in “good order.” Ordinarily, a check will be deemed to be in “good order” upon receipt, although Kansas City Life may require that the check first be converted into federal funds. In addition, for a Premium to be received in “good order,” it must be accompanied by all required supporting documentation, in whatever form required. If any additional Premiums are received in “good order” before the Reallocation Date (as defined below), the corresponding Net Premiums also will be allocated to the Money Market Subaccount. On the Reallocation Date, Contract Value in the Money Market Subaccount will be allocated to the Subaccounts and to the Fixed Account based on the Net Premium allocation percentages specified in the application. The Reallocation Date is 30 days after the Allocation Date.
c. Allocation of Additional Premiums.Premiums received on or after the Reallocation Date will be credited to the Contract and the Net Premiums will be invested as requested on the Valuation Day they are received at Kansas City Life’s Home Office, except if additional underwriting is required. Premiums requiring additional underwriting will not be credited to the Contract until underwriting has been completed and the Premium has been accepted. (See “Underwriting Requirements” above). If the additional Premium is rejected, Kansas City Life will return the Premium immediately, without any adjustment for investment experience.
II. Transfers Among Accounts
A. Transfer Privilege
1. General. After the Reallocation Date, the Owner may transfer all or part of an amount in the Subaccount(s) to another Subaccount(s) or to the Fixed Account, or transfer a part of an amount in the Fixed Account to the Subaccount(s), subject to the restrictions described below. Kansas City Life will make the transfer on the Valuation Day that it receives Written Notice requesting such transfer. Transfers may also be made by telephone, facsimile, or electronic mail if the proper authorization has been provided.
2. General Restrictions on Transfer Privilege. The minimum transfer amount is the lesser of $250 or the entire amount in that Subaccount or the Fixed Account. A transfer request that would reduce the amount in a Subaccount or the Fixed Account below $250 will be treated as a transfer request for the entire amount in that Subaccount or the Fixed Account. There is no limit on the number of transfers that can be made among Subaccounts or to the Fixed Account. However, only one transfer may be made from the Fixed Account each Contract Year. (For a description of those restrictions, see “Restrictions on Transfers from Fixed Account,” below.) The first six transfers during each Contract Year are free. Any unused free transfers do not carry over to the next Contract Year. Kansas City Life will assess a $25 Transfer Processing Fee for the seventh and each subsequent transfer during a Contract Year. For the purpose of assessing the fee, each Written Request (or telephone, facsimile or electronic mail request) is considered to be one transfer, regardless of the number of Subaccounts or the Fixed Account affected by the transfer. The processing fee will be deducted from the amount being transferred or from the remaining Contract Value, according to the Owner’s instructions.
An excessive number of transfers, including short-term “market timing” transfers, may adversely affect the performance of the underlying Fund in which a Subaccount invests. If, in our sole opinion, a pattern of excessive transfers develops, we have the right not to process a transfer request. We also reserve the right not to process a transfer request when the sale or purchase of shares of a Fund is not reasonably practicable due to actions taken or limitations imposed by the Fund.
3. Restrictions on Transfers from Fixed Account. One transfer each Contract Year is allowed from the Fixed Account to any or all of the Subaccounts. The amount transferred from the Fixed Account may not exceed 25% of the unloaned Fixed Account Value on the date of transfer, unless the balance after the transfer is less than $250, in which case Kansas City Life will transfer the entire amount.
B. Dollar Cost Averaging Plan
1. General. The Dollar Cost Averaging Plan, if elected, enables the Owner to transfer systematically and automatically, on a monthly basis for a period of 3 to 36 months, specified dollar amounts from the Federated Prime Money Fund II Subaccount to other Subaccounts. At least $250 must be transferred from the Federated Prime Money Fund II Subaccount each month. The required amounts may be allocated to the Federated Prime Money Fund II Subaccount through initial or subsequent Premiums or by transferring amounts into the Federated Prime Money Fund II Subaccount from the other Subaccounts or from the Fixed Account (which may be subject to certain restrictions).
2. Election and Operation of the Program. The Owner may elect this plan at the time of application by completing the authorization on the application or at any time after the Contract is issued by properly completing the election form and returning it to Kansas City Life. The election form allows the Owner to specify the number of months for the Dollar Cost Averaging Plan to be in effect. Changes may be made in dollar cost averaging by telephone, facsimile, or electronic mail if proper authorization has been provided. Dollar cost averaging transfers will commence on the next Monthly Anniversary Day on or next following the Reallocation Date or the date the Owner requests. Dollar cost averaging will terminate at the completion of the designated number of months, when the value of the Federated Prime Money Fund II Subaccount is completely depleted, or the day Kansas City Life receives Written Notice instructing Kansas City Life to cancel the Dollar Cost Averaging Plan.
Transfers made from the Money Market Subaccount for the Dollar Cost Averaging Plan will not count toward the six transfers permitted each Contract Year without imposing the Transfer Processing Fee.
C. Portfolio Rebalancing Plan
1. General. The Owner may elect to have the accumulated balance of each Subaccount redistributed to equal a specified percentage of the Variable Account Value. This will be done on a quarterly basis at three-month intervals from the Monthly Anniversary Day on which the Portfolio Rebalancing Plan commences.
2. Election and Operation of the Plan. The Owner may elect this plan at the time of application by completing the authorization on the application or at any time after the Contract is issued by properly completing the election form and returning it to us. If elected, this plan automatically adjusts the Owner’s portfolio mix to be consistent with the allocation most recently requested. The redistribution will not count toward the six transfers permitted each Contract Year without imposing the Transfer Processing Fee. Changes may be made in the Portfolio Rebalancing Plan if proper authorization has been provided. If the Dollar Cost Averaging Plan has been elected and has not been completed, the Portfolio Rebalancing Plan will commence on the Monthly Anniversary Day following the termination of the Dollar Cost Averaging Plan. Portfolio rebalancing will terminate when you request any transfer or the day Kansas City Life receive Written Notice instructing us to cancel the Portfolio Rebalancing Plan. If the Contract Value is negative at the time portfolio rebalancing is scheduled, the redistribution will not be completed.
Portfolio rebalancing will terminate when the Owner requests any transfer unless the Owner authorizes a change in allocation at that time or the day Kansas City Life receives written notice instructing Kansas City Life to cancel the plan.
III. Redemption Procedures: Full and Partial Surrenders, Maturity Benefit, Death Benefits, and Loans
A. “Free-Look” Period
The Owner may cancel the Contract for a refund during the “Free-Look” Period. This period expires 10 days after the Owner receives the Contract. If the Owner decides to cancel the Contract, the Owner must return it by mail or other delivery method to the Home Office or to the authorized Kansas City Life agent who sold it. Immediately after mailing or delivery, the Contract will be deemed void. Within seven calendar days after Kansas City Life receives the returned Contract, Kansas City Life will refund Premiums paid. In some states Kansas City Life may be required to refund the greater of Contract Value or Premiums paid.
B. Surrendering the Contract for Cash Surrender Value
The Owner may surrender the Contract at any time for its Cash Surrender Value by submitting a Written Request to the Home Office. Kansas City Life may require return of the Contract. A surrender charge may apply. A surrender request will be processed as of the date the Owner’s Written Request and all required documents are received. Payment will generally be made within seven calendar days. The Cash Surrender Value may be taken in one lump sum or it may be applied to a payment option. The Owner’s Contract will terminate and cease to be in force if it is surrendered for one lump sum. It cannot later be reinstated.
C. Partial Surrenders
1. General. The Owner may make partial surrenders under the contract at any time, subject to the conditions below. The Owner must submit a Written Request to the Home Office. Each partial surrender must be at least $500. The partial surrender amount may not exceed the Cash Surrender Value, less $300. A Partial Surrender Fee will be assessed on a partial surrender. This charge will be deducted from the Owner’s Contract Value in addition to the amount requested to be surrendered and will be considered part of the surrender (together, “partial surrender amount”). As of the date Kansas City Life receives a Written Request for a partial surrender, the Contract Value will be reduced by the partial surrender amount.
2. Allocation of Partial Surrender Among the Accounts. When the Owner requests a partial surrender, the Owner can direct how the partial surrender amount will be deducted from Contract Value in the Subaccounts and Fixed Account. If the Owner provides no directions, the partial surrender amount will be deducted from Contract Value in the Subaccounts and Fixed Account on a pro-rata basis.
3. Effect of Partial Surrender on Death Benefit. If Coverage Option A or L is in effect, Kansas City Life will reduce the Contract Value by the partial surrender amount. The Total Sum Insured will be reduced by the partial surrender amount minus the excess, if any, of the Death Benefit over the Total Sum Insured at the time the partial surrender is made. If the partial surrender amount is less than the excess of the Death Benefit over the Total Sum Insured, the Total Sum Insured will not be reduced. If Coverage Option B is in effect Kansas City Life will reduce the Contract Value by the partial surrender amount. Kansas City Life reserves the right to reject a partial surrender request if the partial surrender would reduce the Total Sum Insured below the minimum amount for which the Contract would be issued under Kansas City Life’s then-current rules, as interpreted by Kansas City Life.
4. Date Partial Surrender Requests Are Processed. Partial surrender requests will be processed as of the date the Owner’s Written Request is received in good order, and generally will be paid within seven calendar days. A Written Request for a partial surrender will be deemed to be good order when, among other things, all required supporting documentation has been received.
D. Surrender Charge
During the first 10 Contact Years, a Surrender Charge will be deducted from the Contract Value if the Contract is completely surrendered or lapses. The Surrender Charge is based on the Specified Amount at issue. We calculate this charge by multiplying the Surrender Charge for the applicable Ages and sex of each Insured by the Surrender Charge percentages. We then multiply this amount by the Specified Amount, divided by 1,000. The total Surrender Charge will not exceed the maximum Surrender Charge set forth in the Contract.
Any Surrender Charge deducted upon lapse is credited back to the Contract Value upon reinstatement. The Surrender Charge on the date of reinstatement will be the same as it was on the date of lapse. For purposes of determining the Surrender Charge on any date after reinstatement, the period the Contract was lapsed will not count.
The Surrender Charges calculated are applicable at the end of each Contract Year. After the first Contract Year, we will pro rate the surrender charges between Contract Years. However, after the end of the 10th Contract Year, there will be no Surrender Charge.
E. Partial Surrender Fee
Kansas City Life will deduct an administrative charge upon a partial surrender. This charge is the lesser of 2% of the amount surrendered or $25. This charge will be deducted from the Contract Value in addition to the amount requested to be surrendered and will be considered to be part of the partial surrender amount.
F. Redemptions for Monthly Deduction
On the Allocation Date, Kansas City Life will deduct a Monthly Deduction for the Contract Date and each Monthly Anniversary that has occurred prior to or on the Allocation Date. (The Monthly Deduction is described in Appendix A.) Subsequent Monthly Deduction will be made as of each Monthly Anniversary Day thereafter. The Owner’s Contract Date is the date used to determine the Owner’s Monthly Anniversary Day. The Monthly Deduction consists of (1) monthly expense charges, (2) cost of insurance charges, and (3) any charges for optional benefits and/or riders. The Monthly Deduction is deducted from the Variable Accounts and Fixed Account pro rata on the basis of the portion of Contract Value in each account on the Monthly Anniversary Day.
G. Death Benefits
As long as the Contract remains in force, Kansas City Life will pay the Death Benefit Proceeds upon receipt at the Home Office of proof of the death of the last surviving Insured that Kansas City Life deems satisfactory. Kansas City Life may also require proof of the death of the Insured who died first and may require return of the Contract. The Death Benefit will be paid in a lump sum generally within seven calendar days of receipt of satisfactory proof or, if elected, under a payment option. The Death Benefit will be paid to the Beneficiary.
As described below, Kansas City Life will pay Death Benefit proceeds through the Generations Legacy Account. The Generations Legacy Account is an interest-bearing checking account at Generations Bank, an affiliate of Kansas City Life. Interest accrues daily and is paid monthly in the Generations Legacy Account. A Contract Owner or Beneficiary (whichever applicable) has immediate and full access to Death Benefit Proceeds by writing a check on the account. We pay interest on Death Benefit Proceeds from the date of death to the date the Generations Legacy Account is opened.
We will pay Death Benefit Proceeds through the Generations Legacy Account when the Death Benefit Proceeds are paid to an individual.
1. Amount of Death Benefit Proceeds. The Death Benefit Proceeds payable upon the death of the last surviving Insured are equal to the sum of: (1) the greater of: (a) the Death Benefit under the Coverage Option selected, calculated as of the date of the last surviving Insured’s death, or (b) the Corridor Death Benefit; and (2) an amount equal to any benefits provided by all option benefits or riders, plus any Premiums received after the date of death, minus any Loan Balance on that date, and, if the death occurred during a grace period, minus any past due Monthly Deduction. A minimum Death Benefit may be provided under the Guaranteed Minimum Death Benefit Option. If all or part of the Death Benefit proceeds are paid in one sum, Kansas City Life will pay interest on this sum as required by applicable state law from the date of receipt of due proof of the last surviving Insured’s death to the date of payment.
2. Coverage Options. The Contract Owner may choose one of three Coverage Options, which will be used to determine the Death Benefit. Under Option A, the Death Benefit is equal to the Total Sum Insured on the date of death of the last surviving Insured. Under Option B, the Death Benefit is the Total Sum Insured on the date of death of the last surviving Insured plus the Contract Value on the date of such death. Under Coverage Option L, the Death Benefit will be the sum of: (1) the Total Sum Insured on the date of death of the last surviving Insured; and (2) the Contract Value on the Contract Anniversary preceding the death of the last surviving Insured multiplied by the applicable Option L Death Benefit Percentage less the Total Sum Insured on that Contract Anniversary. If the amount in (2) of the Option L Death Benefit calculation is less than zero then the Option L Death Benefit will be equal to the amount calculated in (1).
3. Corridor Death Benefit. The purpose of the Corridor Death Benefit is to ensure that the amount of insurance we provide meets the definition of life insurance under the Internal Revenue Code. We calculate the Corridor Death Benefit by multiplying the Contract Value by the appropriate corridor percentage. The corridor percentages vary by Age, sex, risk class, Specified Amount, Additional Insurance Amount, the number of years coverage has been in effect and any applicable optional benefits or riders.
4. Initial Total Sum Insured and Coverage Option. The Initial Total Sum Insured is set at the time the Contract is issued. The Owner may change the Total Sum Insured from time to time, as discussed below. The Owner selects the Coverage Option when the Owner applies for the Contract. The Owner also may change the Coverage Option, as discussed below.
5. Changes in Coverage Option. Kansas City Life has the right to require that no change in Coverage Option occur during the first Contract Year and that no more than one coverage option change can be made in any 12-month period. Coverage Option L is only available at issue. After any change, the Total Sum Insured must be at least $200,000 and the Specified Amount must be at least $100,000. The effective date of the change will be the Monthly Anniversary Day following the date Kansas City Life approves the Owner’s application for change.
If the Coverage Option is B or L, it may be changed to A. The Total Sum Insured will not change. If the Coverage Option is A or L, it may be changed to B subject to evidence of insurability satisfactory to Kansas City Life. (See “Underwriting Requirements,” above.) The new Total Sum Insured will be the greater of the Total Sum Insured less the Contract Value as of the date of change or $25,000. If the Coverage Option is changed to B, the Guaranteed Minimum Death Benefit Option, if in effect, will terminate.
Kansas City Life has the right to decline any Coverage Option change request that Kansas City Life determines would cause the Contract to not qualify as life insurance under applicable tax laws.
6. Increases in the Additional Insurance Amount.Increases to the Additional Insurance Amount may be made either through scheduled annual increases requested and through unscheduled increases requested at any other time of the Owner’s choosing. The maximum Additional Insurance Amount coverage is four times the Specified Amount at issue. This coverage may increase to a maximum of eight times the Specified Amount after issue under scheduled annual increases.
Scheduled increases to the Additional Insurance Amount, subject to Kansas City Life’s approval, may be based on a flat amount annual increase or a percentage annual increase. Available percentage increases range from 0-25% of the Additional Insurance Amount. The percentage increase will be based on the specified percentage of the Additional Insurance Amount at the time the scheduled increase occurs. Available amounts for a flat amount increase may not exceed a dollar amount equal to 25% of the Additional Insurance Amount at issue. The Guaranteed Minimum Death Benefit Option will not be available if the Additional Insurance Amount is, or is scheduled to, exceed the Specified Amount.
The Owner may request increases to the Additional Insurance Amount other than the annual, scheduled increases available at issue. Kansas City Life reserves the right to require that no increases in Additional Insurance Amount occur during the first Contract Year and that no more than one increase be made in any 12-month period.
Any requested, unscheduled increase in the Additional Insurance Amount must be at least $10,000 and an application must be submitted. Kansas City Life will require satisfactory evidence of insurability. In addition, the Insureds’ attained Age must be less than the current maximum issue Age for the Contracts, as determined by Kansas City Life from time to time. A change in Planned Premiums may be advisable.
The increase in the Additional Insurance Amount will become effective on the Monthly Anniversary Day on or next following the date the request for the increase is received and approved. If the Additional Insurance Amount is increased to be greater than the Specified Amount, the Guaranteed Minimum Death Benefit Option, if applicable, will terminate. In addition, if the Guaranteed Minimum Death Benefit Option is in force and if the Cash Surrender Value is at any time insufficient to pay monthly deduction for the Contract, the Additional Insurance Amount and riders will terminate in order to preserve the Guaranteed Minimum Death Benefit Option.
7. Decreases in Total Sum Insured.The Owner may request a decrease in the Total Sum Insured. When a decrease in Total Sum Insured is made, Kansas City Life will first reduce any amount of Additional Insurance Amount remaining and only then reduce the Specified Amount. If the Specified Amount is decreased, the Guaranteed Minimum Death Benefit Option coverage amount will be decreased by the same amount. Under certain circumstances, a partial surrender will result in a decrease in the Total Sum Insured.
Kansas City Life reserves the right to require that no decreases occur during the first Contract Year and that no more than one decrease be made in any 12-month period.
Kansas City Life reserves the right to require that the Total Sum Insured after any decrease be at least $200,000 and the Specified Amount must be at least $100,000. The Owner must provide written notice to the Home Office of his intention to decrease the Total Sum Insured. The effective date of the decrease will be the Monthly Anniversary Day following the date Kansas City Life approves the Owner’s request for a decrease.
Decreasing the Total Sum Insured may have the effect of decreasing monthly Cost of Insurance Charges. However, a decrease in the Total Sum Insured will not decrease the Guaranteed Monthly Premium, Guaranteed Minimum Death Benefit Option Premium, or the Surrender Charges.
H. Loans
1. When Loans are Permitted. Prior to the death of the last Insured to die, the Owner may borrow against the Contract at any time by submitting a Written Request to the Home Office, provided that the Cash Surrender Value of the Contract is greater than zero. Loans may also be made by telephone if the appropriate election has been made at the time of application or proper authorization has been provided to us. The maximum loan amount is equal to the Contract’s Cash Surrender Value on the effective date of the loan less loan interest to the next Contract Anniversary. Contract loans will be processed as of the date the Owner’s Written Request is received and approved. Loan proceeds generally will be sent to the Owner within seven calendar days.
2. Interest. Kansas City Life will charge interest on any Loan Balance at an annual rate of 6.0%. Interest is due and payable at the end of each Contract Year while a loan is outstanding. If interest is not paid when due, the amount of the interest is added to the loan and becomes part of the Loan Balance.
3. Loan Collateral. When a Contract loan is made, an amount sufficient to secure the loan is transferred out of the Subaccounts and the unloaned value in the Fixed Account and into the Contract’s Loan Account. A loan will have no immediate effect on the Contract Value, but the Cash Surrender Value will be reduced immediately by the amount transferred to the Loan Account. The Owner may specify the Variable Accounts and/or Fixed Account from which collateral will be transferred. If no allocation is specified, collateral will be transferred from each Subaccount and from the unloaned value in the Fixed Account in the same proportion that the Contract Value in each Subaccount and the unloaned value in the Fixed Account bears to the total Contract Value in those accounts on the date that the loan is made. An amount of Cash Surrender Value equal to any due and unpaid loan interest will also be transferred to the Loan Account on each Contract Anniversary. Due and unpaid interest will be transferred from each Subaccount and the unloaned value in the Fixed Account in the same proportion that each Subaccount Value and the unloaned value in the Fixed Account Value bears to the total unloaned Contract Value.
The Loan Account will be credited with interest at an effective annual rate of not less than 4%. Interest earned on the Loan Account will be added to the Fixed Account.
4. Preferred Loan Provision. Beginning in the eleventh Contract Year, a preferred loan may be requested. The maximum amount available for a preferred loan is the Contract Value less Premiums paid and may not exceed the maximum loan amount. The amount in the Loan Account securing the preferred loan will be credited with interest at an effective annual rate of 6.0%. The preferred loan provision is not guaranteed.
5. Loan Repayment.The Owner may repay all or part of the Owner’s Loan Balance at any time while the Insured is living and the Contract is in force. Kansas City Life has the right to require that each loan repayment be at least $50.00. Loan repayments must be sent to the Home Office and will be credited as of the date received. A loan repayment must be clearly marked as “loan repayment” or it will be credited as a Premium. When a loan repayment is made, Contract Value in the Loan Account in an amount equal to the repayment is transferred from the Loan Account to the Subaccounts and the unloaned value in the Fixed Account. Unless specified otherwise by the Owner, loan repayment amounts will be transferred to the Subaccounts and the unloaned value in the Fixed Account according to the Premium allocation instructions in effect at that time.
6. Reduction in Death Benefit. If the Death Benefit becomes payable while a loan is outstanding, the Loan Balance will be deducted in calculating the Death Benefit Proceeds.
7. Default.If the Loan Account Value exceeds the Contract Value less any applicable Surrender Charge on any Valuation Day, the Contract will be in default. The Owner, and any assignee of record, will be sent notice of the default. The Owner will have a 61-day grace period to submit sufficient payment to avoid termination of coverage under the Contract. The notice will specify the amount that must be repaid to prevent termination.
I. Payment Options
The Contract offers a variety of ways of receiving proceeds payable under the Contract, such as on surrender, death or maturity, other than in a lump sum. These payment options are summarized below. The Owner may apply proceeds of $2,000 or more which are payable under this Contract to any of the following options:
1. Option 1 - Interest Payments. Kansas City Life will make interest payments to the payee annually or monthly as elected. Interest on the proceeds will be paid at the guaranteed rate of 3.0% per year and may be increased by additional interest paid annually. The proceeds and any unpaid interest may be withdrawn in full at any time.
2. Option 2 - Installments of a Specified Amount. Kansas City Life will make annual or monthly payments until the proceeds plus interest are fully paid. Interest on the proceeds will be paid at the guaranteed rate of 3.0% per year and may be increased by additional interest. The present value of any unpaid installments may be withdrawn at any time.
3. Option 3 - Installments For a Specified Period. Payment of the proceeds may be made in equal annual or monthly payments for a specified number of years. Interest on the proceeds will be paid at the guaranteed rate of 3.0% per year and may be increased by additional interest. The present value of any unpaid installments may be withdrawn at any time.
4. Option 4 - Life Income.Kansas City Life will pay an income during the payee’s lifetime. You also may choose a minimum guaranteed payment period or an installment refund option as part of your life income payment option. The minimum guaranteed payment period guarantees that life income payments will continue after death until payments have been paid for the full guaranteed payment period selected. The installment refund option guarantees that life income payments will continue after death until the total income payments received equal the amount of proceeds applied when the option was initially selected.
5. Option 5 - Joint and Survivor Income.Kansas City Life will pay an income during the lifetime of two persons and will continue to pay the same income as long as either person is living. The minimum guaranteed payment period will be ten years.
6. Minimum Amounts. Kansas City Life reserves the right to pay the total amount of the Contract in one lump sum, if less than $2000. If payments are less than $50, payments may be made less frequently at Kansas City Life’s option. If Kansas City Life has available at the time a payment option is elected options or rates on a more favorable basis than those guaranteed, the more favorable benefits will apply.
7. Choice of Options. You may choose an option by written notice during the Insured's lifetime. If a payment option is not in effect at the Insured's death, the beneficiary may make a choice.
J. Delay in Redemptions or Transfers
Kansas City Life will ordinarily pay any Death Benefit Proceeds, loan proceeds, partial surrender proceeds, or full surrender proceeds within seven calendar days after receipt at the Home Office of all the documents required for such a payment. Other than the Death Benefit, which is determined as of the date of death, the amount will be determined as of the date of receipt of required documents. However, Kansas City Life may delay making a payment or processing a transfer request if (1) the New York Stock Exchange is closed for other than a regular holiday or weekend, trading is restricted by the SEC, or the SEC declares that an emergency exists as a result of which the disposal or valuation of Variable Account assets is not reasonably practicable; or (2) the SEC by order permits postponement of payment to protect Kansas City Life’s Contract Owners.
K. Telephone, Facsimile and Electronic Mail Transfer, Premium Allocation Changes and Loan Privileges
1. Election of the Program. Transfers, changes in Premium allocation, changes in Dollar Cost Averaging, changes in Portfolio Rebalancing, and loan requests will be based upon instructions given by telephone, facsimile or electronic mail, provided the proper authorization has been provided to Kansas City Life. Kansas City Life reserves the right to suspend telephone, facsimile or electronic mail transfers, Premium allocation and/or loan privileges at any time, for any reason, if it deems such suspension to be in the best interests of Contract Owners.
2. Procedures Employed to Confirm Genuineness of Telephone,Facsimile and Electronic Mail Transfer, Premium Allocation Changes and Loan Privileges Instructions. Kansas City Life will employ reasonable procedures to confirm that instructions communicated by telephone, facsimile or electronic mail are genuine, and if Kansas City Life follows those procedures it will not be liable for any losses due to unauthorized or fraudulent instructions. Kansas City Life may be liable for such losses if it does not follow those reasonable procedures. The procedures Kansas City Life will follow for telephone, facsimile or electronic mail transfers, Premium allocation changes and loans include requiring some form of personal identification prior to acting on instructions received, providing written confirmation of the transaction, and making a tape recording of the instructions given by telephone.
APPENDIX A
On the Allocation Date, Kansas City Life will deduct Monthly Deduction for the Contract Date and each Monthly Anniversary that has occurred prior to or on the Allocation Date. Subsequent Monthly Deduction will be made as of each Monthly Anniversary Day thereafter. The Contract Date is the date used to determine Monthly Anniversary Day. The Monthly Deduction consists of (1) Monthly Expense Charges, (2) cost of insurance charges, and (3) any optional benefit charges, as described below. The Monthly Deduction is deducted from the Variable Accounts and Fixed Account pro rata on the basis of the portion of Contract Value in each account on the Monthly Anniversary Day.
Monthly Expense Charge.
(1) a monthly expense charge of $7.50 for all Contract Years.
(2) A Monthly Per Thousand of Specified Amount Charge based on the issue age of the youngest insured. (See chart below)
Current
- ----------------------------------------------------------------------------
Years 1-10
- ----------------------------------------------------------------------------
Youngest Insured Monthly Per Youngest Monthly Per
Issue Age Thousand of Insured Issue Thousand of
Specified Amount Age Specified Amount
- -------------------- ------------------ ----------------- ------------------
20-29 $0.07 50-59 $0.18
- -------------------- ------------------ ----------------- ------------------
30-39 $0.09 60-69 $0.28
- -------------------- ------------------ ----------------- ------------------
40-49 $0.14 70+ $0.35
- ----------------------------------------------------------------------------
Years 11+ $0.00
- ----------------------------------------------------------------------------
The guaranteed maximum charge is $0.35 Monthly Per Thousand of Specified Amount for all ages and durations.
The Monthly Expense Charge reimburses Kansas City Life for expenses incurred in the administration of the Contracts and the Variable Account. Such expenses include but are not limited to: underwriting and issuing the Contract, confirmations, annual reports and account statements, maintenance of Contract records, maintenance of Variable Account records, administrative personnel costs, mailing costs, data processing costs, legal fees, accounting fees, filing fees, the costs of other services necessary for Contract Owner servicing and all accounting, valuation, regulatory and updating requirements. The Guaranteed Monthly Expense Charge is guaranteed not to increase.
Cost of Insurance Charge. This charge compensates Kansas City Life for the expense of providing insurance coverage. Kansas City Life may make a profit from this charge. Any profit may be used to finance distribution expenses. The charge depends on a number of variables and therefore will vary from Contract to Contract and from Monthly Anniversary Day to Monthly Anniversary Day. For any Contract, the cost of insurance on a Monthly Anniversary Day is calculated by multiplying the current cost of insurance rate for the Insureds by the net amount at risk for that Monthly Anniversary Day.
The net amount at risk on a Monthly Anniversary Day is the difference between the Death Benefit (see “Coverage Options,”), discounted with one month of interest and the Contract Value, as calculated on that Monthly Anniversary Day before the cost of insurance charge is taken. The interest rate used to discount the Death Benefit is the monthly equivalent of 4% per year.
The cost of insurance rate for a Contract on a Monthly Anniversary Day is based on each Insureds’ Age, sex, number of completed Contract Years, Total Sum Insured and risk class, and therefore varies from time to time. Kansas City Life currently places each Insured in the following classes, based on underwriting: Standard Tobacco User, Standard Nontobacco User, Preferred Nontobacco User and Preferred Tobacco User. The Insureds may be placed in a substandard risk class, which involves a higher mortality risk than the Standard Tobacco User or Standard Nontobacco User classes.
Kansas City Life places the each Insured in a risk class when the Contract is given underwriting approval, based on Kansas City Life’s underwriting of the application. When an increase in Additional Insurance Amount is requested, Kansas City Life conducts underwriting before approving the increase to determine the risk class that will apply to the increase. If the risk class for the increase has lower cost of insurance rates than the existing risk class, the lower rates will apply to the entire Total Sum Insured. If the risk class for the increase has higher cost of insurance rates than the existing class, the higher rates will apply only to the increase in Additional Insurance Amount, and the existing risk class will continue to apply to the existing Total Sum Insured.
Kansas City Life guarantees that the cost of insurance rates used to calculate the monthly Cost of Insurance Charge will not exceed the maximum cost of insurance rates set forth in the Contract. The guaranteed rates for standard and preferred risk classes are based on the 1980 Commissioners’ Standard Ordinary Mortality Tables, Male or Female, Smoker or Nonsmoker Mortality Rates (“1980 CSO Tables”). The guaranteed rates for substandard classes are based on multiples of or additives to the 1980 CSO Tables.
Kansas City Life’s current cost of insurance rates may be less than the guaranteed rates that are set forth in the Contract. Current cost of insurance rates will be determined based on Kansas City Life’s expectations as to future mortality experience. These rates may change from time to time.
Cost of insurance rates (whether guaranteed or current) for one or both Insureds in a nontobacco user standard class are lower than rates for one or both Insureds of the same age and sex in a tobacco user standard class. Cost of insurance rates (whether guaranteed or current) for one or both Insureds in a nontobacco user or tobacco user standard risk class are lower than rates for one or both Insureds of the same age, sex and tobacco user class in a substandard risk class.
Guaranteed Minimum Death Benefit Option Charge. There is no charge for the Guaranteed Minimum Death Benefit Option in the first ten Contract Years. Beginning in Contract Year 11, the charge will be $.01 per $1,000 on a current basis and $.03 per $1,000 on a guaranteed basis. This charge will be based on the Specified Amount and will be deducted monthly.
Reduced Charges for Eligible Groups. The charges otherwise applicable may be reduced with respect to Contracts issued to a class of associated individuals or to a trustee, employer or similar entity where Kansas City Life anticipates that the sales to the members of the class will result in lower than normal Premium expense charge and Monthly Deduction from Contract Value. These reductions will be made in accordance with our rules in effect at the time of the application for a Contract. The factors Kansas City Life will consider in determining the eligibility of a particular group for reduced charges and the level of the reduction are as follows: the nature of the association and its organizational framework, the method by which sales will be made to the members of the class, the facility with which Premiums will be collected from the associated individuals and the association capabilities with respect to administrative tasks, the anticipated persistency of the Contract, the size of the class of associated individuals and the number of years it has been in existence and any other such circumstances which justify a reduction in sales or administrative expenses. Any reduction will be reasonable and will apply uniformly to all prospective Contract purchases in the class and will not be unfairly discriminatory to the interest of any Contract holder.
Optional Benefits and/or Riders. The following optional benefits are available and may be added to the Contract. Monthly charges for these optional benefits will be deducted from Contract Value as part of the Monthly Deduction. All of these benefits may not be available in all states.
Contract Split Option Rider
Issue Ages: 20-75
| This rider allows the Owner to split the Contract equally into two individual policies, one on the life of each Insured. This split option will be offered without evidence of insurability under the conditions that the request is made as the result of either (1) the divorce of the two Insureds; or (2) as a result of a change in the Unlimited Federal Estate Tax marital deduction or a reduction in the maximum Federal Estate Tax bracket rate to a rate below 25%. Specific other conditions must also be met in order to qualify. When this option is exercised, the existing Contract will be terminated. The new contracts will be based on the Insureds’ Age, sex, and based on risk class at the time of issue of the original Contract. This rider will terminate at the older Insured’s age 80. The rider will also terminate if the Owner elects to keep the Guaranteed Minimum Death Benefit Option in effect after it is determined that funding is not adequate to cover these rider charges. |
Joint First to Die Term Life Insurance Rider
Issue Ages: 20-85
| This rider covers the Insureds under the Contract and provides yearly renewable term coverage on the first Insured to die on or before the older Insured’s age 100 and while this rider is in force. Coverage amounts may differ between the two Insureds, but the maximum coverage equals the Total Sum Insured and the minimum coverage equals $10,000. The coverage amounts for each Insured under this rider may be increased (subject to insurability) or decreased. The Owner may also choose at issue a schedule for the coverage to decrease annually. The scheduled decreases may be based on the percentage of the coverage amount ranging up to 25% of the rider coverage amount or may be a flat dollar amount. If this rider is elected, the Guaranteed Minimum Death Benefit Option is not available on the Contract. |
Joint Survivorship Four-Year Term Life Insurance Rider
Issue Ages: 20-85
| This rider provides renewable one-year level term insurance and expires at the end of the fourth contract anniversary year of the rider. The term insurance provides a death benefit payable at the death of the last surviving Insured. The minimum coverage is $100,000 and the maximum coverage is equal to the Total Sum Insured. The rider will also terminate if the Owner elects to keep the Guaranteed Minimum Death Benefit Option in effect after it is determined that funding is not adequate to cover these rider charges. |
Bonus on Contract Value in the Variable Account
A bonus may be credited to the Contract on each Monthly Anniversary Day following the Contract Date. The monthly bonus applies to Contracts with a Total Sum Insured of $5,000,000 and above and equals an annual rate of 0.125% of the Contract Value in each Subaccount of the Variable Account. We pay these bonus amounts out of savings we derive from the higher values of the contract. We do not guarantee that we will pay the bonus.