Registration No. ___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUST REGISTERED ON
FORM N-8B-2
PRINCIPAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
711 High Street
Des Moines, Iowa 50309
(Address of Depositor's Principal Executive Offices)
Traci L. Weldon
Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50309
(Name and Address of agent for service
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Telephone Number, Including Area Code: (515) 247-5111
- --------------------------------------------------------------------------------
Please send copies of all communications to
J. SUMNER JONES
Jones & Blouch
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007-0805
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Title and Amount of Securities: Survivorship Flexible Premium Variable Universal
Life Insurance Policy. (Pursuant to Rule 24F-2 under the Investment Company Act
of 1940, the Registrant elects to register an indefinite amount of securities
being registered.)
Amount of Filing Fee: No fee required.
Approximate date of proposed public offering: As soon as practicable after the
effective date of the Registration Statement.
----------------------------------
The Registrant hereby amends its Registration Statement under the Securities Act
of 1933 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 this Registration
Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
PRINCIPAL LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
Registration Statement on Form S-6
Cross Reference Sheet
Items of
Form N-8B-2 Captions in Prospectus
1.............. Cover Page
2.............. Cover Page
3.............. Not Applicable
4.............. Distribution of the Policy
5.............. Principal Life Insurance Company Variable Life
Separate Account
6(a)........... Not Applicable
6(b)........... Not Applicable
7.............. Not Required
8.............. Not Required
9.............. Legal Proceedings
10(a).......... Ownership, Beneficiary, Assignment
10(b).......... Calculation of Accumulated Value; Unit Values; Net
Investment Factor; Valuations in Connection with a
Policy; Participating Policy
10(c), 10(d)... Summary (Transfers; Policy Loans; Loan Accounts;
Surrenders, Charges and Deductions; Death Benefits and
Proceeds; Maturity Proceeds)
10(e).......... Summary (Premiums, Termination and Reinstatement);
Policy Termination and Reinstatement (Policy
Termination; Reinstatement)
10(f).......... Other Matters (Voting Rights)
10(g)(1),
10(g)(2),
10(h)(1),
10(h)(2)....... Principal Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion or Substitution of Investments)
10(g)(3),
10(g)(4),
10(h)(3),
10(h)(4)....... Not Applicable
10(i).......... Principal Life Insurance Company Variable Life
Separate Account, The Policy (Policy Values); General
Provisions (Addition, Deletion or Substitution of
Investments); General Provisions (Optional Insurance
Benefits); Federal Tax Matters
11............. Principal Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion or Substitution of Investments)
12(a).......... Cover page
12(b).......... Not Applicable
12(c).......... Principal Life Insurance Company Variable Life
Separate Account; The Funds
12(d).......... Distribution of the Policy
12(e).......... Principal Life Insurance Company Variable Life
Separate Account
13(a).......... Principal Life Insurance Company Variable Life
Separate Account; Charges and Deductions
13(b), 13(c),
13(d), 13(e),
13(f), 13(g)... Summary (Charges and Deductions); Charges and
Deductions
14............. The Policy (To buy a Policy); Distribution of the
Policy
15............. Summary (Premiums); The Policy (Payment of Premiums;
Premium Limitations; Allocation of Premiums)
16............. Summary (The Policy); Principal Life Insurance Company
Variable Life Separate Account; The Policy (Policy
Values); General Provisions (Addition, Deletion or
Substitution of Investments)
17(a), 17(b),
17(c).......... Captions referenced under Items 10(c), 10(d), 10(e),
and 10(i) above
18(a).......... Summary (Policy Value); The Policy (Policy Values)
18(b).......... Summary (Policy Value); The Policy (Policy Values)
18(c).......... Summary (Policy Loans); The Policy (Policy Values;
Policy Loans; Loan Account)
18(d).......... Not Applicable
19............. Other Matters (Voting Rights; Statement of Values)
20(a), 20(b)... Principal Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion or Substitution of Investments); Other
Matters (Voting Rights)
20(c), 20(d),
20(e), 20(f)... Not Applicable
21(a), 21(b)... Summary (Policy Loans); The Policy (Policy Values;
Policy Loans)
21(c).......... Summary (Policy Value; Policy Loans); The Policy
(Policy Values; Policy Loans)
22............. General Provisions (The Contract; Incontestability)
23............. Not Applicable
24............. Summary
25............. The Company
26............. Summary (Investment Account); The Policy (Investment
Account Transfers)
27............. The Company
28............. Officers and Directors of Principal Life
Insurance Company
29............. The Company
30............. Not Applicable
31............. Not Applicable
32............. Not Applicable
33............. Not Applicable
Survivorship Flexible Premium Variable Universal Life Insurance Policy
This survivorship flexible premium variable universal life insurance policy (the
"Policy") offered by this Prospectus, is issued by Principal Life Insurance
Company (the "Company"). It is designed to provide lifetime insurance protection
and maximum flexibility with premium payments and death benefits. As a policy
owner, you may, within limits, vary the frequency and amount of premium payments
and increase or decrease the face amount of the life insurance benefit under the
Policy. This flexibility allows you to provide for changing life insurance needs
within a single policy.
The Policy provides:
o a death benefit payable upon the death of the surviving insured;
o policy loans; and
o a net surrender value which may be accessed by a partial or total
surrender of the Policy.
Policy values are accumulated on a fixed basis or vary with the investment
performance of the division of the Principal Life Insurance Company Variable
Life Separate Account (Separate Account) to which you have allocated policy
values. Each division invests in an investment portfolio of an open-end,
management investment company (mutual fund). The mutual fund prospectuses that
are attached to the Policy prospectus describe the investment objective,
policies and risks of the investment choices. You may choose from:
Principal Variable Contracts Fund, Inc. Fidelity Variable Insurance Products Fund II:
Aggressive Growth Account Contrafund Portfolio
Asset Allocation Account Fidelity Variable Insurance Products Fund:
Balanced Account Equity-Income Portfolio
Bond Account Fidelity Variable Insurance Products Fund:
Capital Value Account High Income Portfolio
Government Securities Account Putnam Variable Trust Global Asset Allocation Fund
Growth Account Putnam Variable Trust Vista Fund
International Account Putnam Variable Trust Voyager Fund
International SmallCap Account
MicroCap Account
MidCap Account
MidCap Growth Account
Money Market Account
Real Estate Account
SmallCap Account
SmallCap Growth Account
SmallCap Value Account
Stock Index 500 Account
Utilities Account
As in the case of other life insurance policies, it may not be advantageous to
purchase this Policy as a replacement for, or in addition to, existing insurance
coverage.
This Policy is not a deposit or obligation of, nor is it guaranteed or endorsed
by any bank, credit union, broker-dealer or other financial institution. It is
not federally insured by the Federal Reserve Board, the FDIC or any other
agency. The contract involves investment risk, including possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus should be read carefully and retained for future reference. A
current prospectus for each of the mutual funds must accompany this prospectus
and should be read in conjunction with this prospectus.
The date of this prospectus is __________________.
TABLE OF CONTENTS
GLOSSARY.................................................................... 4
SUMMARY..................................................................... 5
The Policy............................................................. 5
Premiums............................................................... 6
Policy Value........................................................... 6
Investment Account..................................................... 6
Fixed Account.......................................................... 7
Transfers.............................................................. 7
Policy Loans........................................................... 7
Loan Account........................................................... 7
Surrenders............................................................. 7
Charges and Deductions................................................. 7
Death Benefits and Proceeds............................................ 8
Maturity Proceeds...................................................... 9
Adjustment Options..................................................... 9
Termination and Reinstatement.......................................... 9
Ten Day Examination Offer.............................................. 9
THE COMPANY................................................................. 9
PRINCIPAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT............. 9
THE FUNDS................................................................... 10
THE POLICY.................................................................. 14
To Buy a Policy........................................................ 14
Payment of Premiums.................................................... 14
Premium Limitations.................................................... 15
Allocation of Premiums................................................. 15
Ten Day Examination Offer.............................................. 15
Policy Values.......................................................... 16
Investment Account Transfers........................................... 17
Fixed Account Transfers................................................ 17
Automatic Portfolio Rebalancing (APR).................................. 18
Policy Loans........................................................... 18
Loan Account........................................................... 19
Surrenders............................................................. 19
DEATH BENEFITS AND RIGHTS................................................... 20
Death Proceeds......................................................... 20
Death Benefit Options.................................................. 20
Change in Death Benefit Option......................................... 22
Adjustment Options..................................................... 22
CHARGES AND DEDUCTIONS...................................................... 22
Premium Expense Charge................................................. 23
Monthly Policy Charge.................................................. 23
Cost of Insurance Charge............................................... 23
Administration Charge.................................................. 24
Mortality and Expense Risk Charge...................................... 24
Transaction Charge..................................................... 24
Surrender Charge....................................................... 25
Other Charges.......................................................... 25
THE FIXED ACCOUNT........................................................... 25
POLICY TERMINATION AND REINSTATEMENT........................................ 26
Policy Termination..................................................... 26
Reinstatement............................................................... 27
OTHER MATTERS............................................................... 27
Voting Rights.......................................................... 27
Statement of Values.................................................... 28
Services Available by Telephone........................................ 28
GENERAL PROVISIONS.......................................................... 29
The Contract........................................................... 29
Optional Insurance Benefits............................................ 29
Misstatement of Age or Gender.......................................... 30
Assignment............................................................. 30
Ownership.............................................................. 30
Beneficiary............................................................ 31
Benefit Instructions................................................... 31
Benefit Payment Options................................................ 31
Rights to Exchange Policy.............................................. 31
Non-Participating Policy............................................... 31
Incontestability....................................................... 31
Suicide................................................................ 32
Delay of Payments...................................................... 32
Addition, Deletion or Substitution of Investments...................... 32
DISTRIBUTION OF THE POLICY.................................................. 33
OFFICERS AND DIRECTORS OF PRINCIPAL MANAGEMENT CORPORATION.................. 33
OFFICERS AND DIRECTORS OF PRINCIPAL LIFE INSURANCE COMPANY.................. 34
STATE REGULATION............................................................ 35
FEDERAL TAX MATTERS......................................................... 35
Tax Status of the Company and the Separate Account.......................... 35
Charges for Taxes...................................................... 35
Diversification Standards.............................................. 36
IRS Definition of Life Insurance....................................... 36
Modified Endowment Contract Status..................................... 36
Policy Surrenders and Partial Surrenders............................... 36
Policy Loans and Loan Interest......................................... 37
Corporate Alternative Minimum Taxes.................................... 37
Exchange or Assignment of Policies..................................... 37
Withholding............................................................ 37
Other Tax Issues....................................................... 37
EMPLOYEE BENEFIT PLANS...................................................... 37
LEGAL OPINIONS.............................................................. 37
LEGAL PROCEEDINGS........................................................... 37
REGISTRATION STATEMENT...................................................... 38
OTHER VARIABLE INSURANCE CONTRACTS.......................................... 38
Reservation of Rights.................................................. 38
YEAR 2000................................................................... 38
INDEPENDENT AUDITORS........................................................ 38
CUSTOMER INQUIRIES.......................................................... 38
FINANCIAL STATEMENTS........................................................ 38
APPENDIX A.................................................................. 39
APPENDIX B TARGET PREMIUMS.................................................. 44
The Policy offered by this prospectus may not be available in all states. This
prospectus is not an offer to sell, or solicitation of an offer to buy, the
Policy in states in which the offer or solicitation may not be lawfully made. No
person is authorized to give any information or to make any representation in
connection with this Policy other than those contained in this prospectus.
GLOSSARY
adjustment date - the monthly date on or next following the Company's approval
of a requested adjustment.
attained age - for each insured, it is the insured's age on the birthday on or
preceding the last policy anniversary.
business day - any date that the New York Stock Exchange is open for trading and
trading is not restricted.
division - a part of the Separate Account which invests in shares of a mutual
fund.
effective date - the date on which all requirements for issuance of a Policy
have been satisfied.
Fixed Account - that part of the policy value that reflects value in the General
Account of the Company.
General Account - assets of the Company other than those allocated to any of our
Separate Accounts.
insureds - the persons named as the "insureds" on the application for the
Policy. The insureds may or may not be the owners.
Investment Account - that part of the policy value that reflects your investment
in one of the divisions of the Separate Account.
Loan Account - that part of the policy value that reflects the value transferred
from the Investment Account(s) and/or Fixed Account as collateral for a policy
loan.
monthly date - the day of the month which is the same day as the policy date.
Example: If the policy date is September 5, 1999, the first monthly date is
October 5, 1999.
monthly policy charge - the amount subtracted from the policy value on each
monthly date equal to the sum of the cost of insurance and of additional
benefits provided by any rider plus the monthly administration charge and
mortality and expense risks charge in effect on the monthly date.
mutual fund - a registered open-end investment company, or a separate investment
account or portfolio thereof, in which a division of the Separate Account
invests.
net premium - the gross premium less the deductions for the premium expense
charge. It is the amount of premium allocated to the Investment Accounts and/or
Fixed Account.
net surrender value - policy value minus any surrender charge minus any policy
loans and unpaid loan interest.
notice - any form of communication received in our home office which provides
the information we need which may be in writing or another manner which we
approve in advance.
owner - the person, including joint owner, who owns all the rights and
privileges of this contract.
policy date - the date from which monthly dates, policy years and policy
anniversaries are determined.
policy value - an amount equal to the Fixed Account value plus the Investment
Account value(s) plus the Loan Account value.
policy year - the one-year period beginning on the policy date and ending one
day before the policy anniversary and any subsequent one year period beginning
on a policy anniversary.
Example: If the policy date is September 5, 1999, the first policy year
ends on September 4, 2000. The first policy anniversary falls on September
5, 2000.
premium expense charge - the charge deducted from premium payments to cover a
sales charge, state and local premium taxes and federal taxes.
prorated basis - in the proportion that the value of a particular Investment
Account or the Fixed Account bears to the total value of all Investment Accounts
and the Fixed Account.
surrender value - policy value minus any surrender charge.
surviving insured - the insured who is living at the death of the other insured.
If both insureds die simultaneously, then the term "surviving insured" means the
younger of the two insureds.
target premium - a premium amount which is used to determine the maximum sales
charge that is included as part of the premium expense charge and any applicable
surrender charge under a Policy. Target premiums are provided in Appendix B.
unit - the accounting measure used to calculate the value of the Separate
Account divisions.
valuation date - the date as of which the net asset value of a mutual fund is
determined.
valuation period - the period of time between determination of net asset value
on one valuation date and the next valuation date.
written request - actual delivery to the Company at our home office of a written
notice or request, signed and dated, on a form we supply or approve.
Your notices may be mailed to us at:
Principal Life Insurance Company
P O Box____________
Des Moines, Iowa ___________
SUMMARY
This prospectus describes a survivorship flexible variable universal life policy
offered by the Company. This is a brief summary of the Policy's features. More
detailed information follows later in this prospectus.
The Policy
The Policy is designed to provide you with:
o insurance protection covering two individuals,
o a death benefit payable at the death of the surviving insured, and
o flexibility in:
o the amount and frequency of premium payments (subject to certain
limitations), and o the amount of life insurance proceeds payable under
the Policy.
You may allocate your net premium payments to divisions of the Separate Account
and/or the Fixed Account. Currently, there are twenty-five divisions available
to you. Not all divisions are available in all states. A current list of
divisions available in your state may be obtained from a sales representative or
our home office. Each division invests in shares of an account of a mutual fund
as follows:
Division: the division invests in:
- -------- ------------------------
Principal Variable Contracts Fund, Inc
Aggressive Growth Aggressive Growth Account
Asset Allocation Asset Allocation Account
Balanced Balanced Account
Bond Bond Account
Capital Value Capital Value Account
Government Securities Government Securities Account
Growth Growth Account
International International Account
International SmallCap International SmallCap Account
MicroCap MicroCap Account
MidCap MidCap Account
MidCap Growth MidCap Growth Account
Money Market Money Market Account
Real Estate Real Estate Account
SmallCap SmallCap Account
SmallCap Growth SmallCap Growth Account
SmallCap Value SmallCap Value Account
Stock Index 500 Stock Index 500 Account
Utilities Utilities Account
Fidelity Contrafund Fidelity VIP II Contrafund Portfolio
Fidelity Equity-Income Fidelity VIP Equity-Income Portfolio
Fidelity High Income Fidelity VIP High Income Portfolio
Putnam Global Asset Allocation Putnam VT Global Asset Allocation Fund
Putnam Vista Putnam VT Vista Fund
Putnam Voyager Putnam VT Voyager Fund
Premiums
The Company guarantees that the Policy will stay in force if you have paid
enough premium to meet the grace period provision (see THE POLICY - Payment of
Premiums).
Your net premiums are allocated to divisions of the Separate Account and/or the
Fixed Account. Your initial net premium is allocated to the Money Market
division at the end of the valuation date we receive the premium. Twenty-one
days after the effective date of the Policy, the money is reallocated using your
allocation instructions (see THE POLICY - Allocation of Premiums).
Policy Value
Your Policy value is:
o value(s) of your Investment Account(s)
o plus value of your Fixed Account
o plus value of your Loan Account.
Investment Account
An Investment Account is set up for each division to which you allocate a
portion of your net premium. The value of an Investment Account reflects the
investment experience of the division that you choose.
Fixed Account
The Company guarantees that net premiums allocated to the Fixed Account earn
interest at a guaranteed rate. In no event will the guaranteed interest rate be
less than 3% compounded annually.
Transfers
You may transfer amounts between the Investment Accounts and/or the Fixed
Account subject to certain limitations. Transfers in and out of the Fixed
Account are subject to specific limitations described in THE POLICY - Fixed
Account Transfers.
We reserve the right to charge a transfer fee on each unscheduled transfer after
the 12th such transfer in a policy year. The fee will not be more than $25 per
unscheduled transfer.
Policy Loans
You may borrow against your policy value any time the Policy has a net surrender
value. The minimum amount of a loan is $500.
Loan Account
When you take a policy loan, we establish a Loan Account. An amount equal to the
amount of the policy loan is transferred to the Loan Account from your
Investment Accounts and/or Fixed Account. Interest is paid on the amount in the
Loan Account.
Surrenders (total and partial)
Total Surrender
o You may surrender your Policy and receive the net surrender value.
o We calculate the net surrender value as of the date we receive your
written request.
o A surrender charge is imposed on total surrenders within ten years of
the policy date (another date may apply if the Policy has been
reinstated or the face amount increased).
Partial Surrender
o After the second policy year, you may request a partial surrender of
the net surrender value.
o The minimum amount of partial surrender is $500.
o The total of your partial surrenders during a policy year may not be
greater than 75% of the net surrender value (as of the date of the
request for the first partial surrender in that policy year).
o Surrenders are taken from premiums paid into the Policy on a last-in,
first-out basis.
o Partial surrenders are limited to no more than two in each policy year.
Charges and Deductions
Premium Expense Charge
Deductions from premiums during each of the first ten years (and with respect to
premiums made because of a face amount increase, during the first ten years
after the increase) equal:
o sales load of 5.0% of premiums paid which are less than or equal to
target premiums (2.0% of premiums in excess of target premiums)
o plus 2.20% for state and local taxes
o plus 1.25% for federal taxes.
Deductions after the first ten policy years (and after ten years of a face
amount increase) include:
o sales load of 2.0% of premiums paid
o plus 2.20% for state and local taxes
o plus 1.25% for federal taxes.
Surrender Charges
A surrender charge is imposed on Policy termination or total surrender during
the first ten policy years (and ten years after an increase in the face amount)
(see CHARGES AND DEDUCTIONS - Surrender Charge).
Surrender charge percentage. The surrender charge during any policy year is
equal to the number of target premiums from the table below multiplied by the
applicable surrender charge percentage also shown below:
Joint Equivalent Age (JEA)
on policy or Number of
adjustment date target premiums
-------------------------- ---------------
75 or less 1.00
76 through 85 0.90
86 or greater 0.75
Surrender Charge Percentage Table
---------------------------------
Number of years since policy date The following percentage of
and/or the adjustment date surrender charge is payable
--------------------------------- ---------------------------
1 through 5 100.00%
6 95.24
7 85.71
8 71.43
9 52.38
10 28.57
11 and later 00.00
The surrender charge on a face amount increase is calculated by multiplying the
increase in target premium due to the face increase by the applicable number of
target premiums from the table above. This result is multiplied by the
applicable surrender charge percentage from the above table to get the increase
in surrender charges for all years.
Monthly Policy Charges
o Administration charge:
o The current monthly administration charge is $8.00 per month.
o An additional monthly administration charge is imposed in the
first ten policy years (and ten years after an increase in the
face amount) of $.07 per $1,000 of face amount. The charge of $.07
per $1,000 of face amount is increased by $.005 per $1,000 for
each insured that is classified as a smoker.
o Cost of insurance charge.
o Mortality and expense risks charge:
o in the first nine policy years, 0.80% of your Investment Accounts
per year;
o after the ninth policy year, 0.30% of your Investment Accounts
per year.
o Supplemental benefit rider(s) charge(s).
Other Charges
o Transaction charge of the lesser of $25 or 2% of the amount surrendered
for each partial surrender.
o Investment managementfees and other operating expenses for the fund
underlying the Investment Accounts.
Death Benefits and Proceeds
The death proceeds are paid to the beneficiary(ies) when the surviving insured
dies. Death proceeds are calculated as of the date of death of the surviving
insured. The amount of the death proceeds is:
o the death benefit plus interest (as explained in DEATH BENEFITS AND
RIGHTS - Death Proceeds);
o plus proceeds from any benefit riders on the life of the surviving
insured;
o minus policy loans and unpaid loan interest; o minus any overdue
monthly policy charges.
The Policy provides for two death benefit options - a level amount and a
variable amount. You choose an option on your application. Subject to certain
conditions, you may change your option after the Policy has been issued.
Death proceeds are paid in cash or applied under a benefit payment option. We
pay interest on the death proceeds from the date of death of the surviving
insured until the date of payment or application under a benefit payment option.
Maturity Proceeds
If either insured is living on the maturity date, we will pay you (the owner) an
amount equal to the death proceeds as described above. The Policy then
terminates. Maturity proceeds are paid in cash lump sum or applied under a
benefit payment option.
Adjustment Options
You may send us a written request to increase or decrease the face amount of the
Policy. No request is approved if the Policy is in a grace period or if monthly
policy charges are being waived under a rider.
The minimum amount of a face amount increase is $100,000 and is subject to our
underwriting guidelines in effect at the time you request the increase.
You may only request a decrease in face amount:
o after the second policy anniversary, and
o if the request does not decrease the face amount below $100,000.
Termination and Reinstatement
The Policy terminates when:
o you make a total policy surrender;
o death proceeds are paid;
o maturity proceeds are paid; or
o you do not make planned periodic premium payment or additional premium
payments (after the expiration of a 61-day grace period).
Subject to certain conditions, you may reinstate a Policy that terminated
because insufficient values.
Ten Day Examination Offer (Free-look Provision)
o You may return the Policy during the free-look period that is
generally 10 days but may be longer in certain states.
o We return either all premiums paid or the policy value, whichever
is required by applicable state law.
THE COMPANY
The Company is a stock life insurance company with its home office at: Principal
Financial Group, Des Moines, Iowa 50306. It is authorized to transact life and
annuity business in all of the United States and the District of Columbia. The
Company is a wholly owned subsidiary of a mutual insurance holding company named
"Principal Mutual Holding Company."
In 1879, the Company was incorporated under Iowa law as a mutual life insurance
company named Bankers Life Association. It changed its name to Bankers Life
Company in 1911 and then to Principal Mutual Life Insurance Company in 1986. The
name change to Principal Life Insurance Company and reorganization into a mutual
holding company structure took place in 1998.
PRINCIPAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
The Separate Account was established under Iowa law on November 2, 1987. It was
then registered as a unit investment trust with the Securities and Exchange
Commission ("SEC"). This registration does not involve SEC supervision of the
investments or investment policies of the Separate Account.
The income, gains, and losses, whether or not realized, of the Separate Account
are credited to or charged against the Separate Account without regard to other
income, gains, or losses of the Company. Obligations arising from the Policy,
including the promise to make benefit option payments, are our general corporate
obligations. However, the Policy provides that the portion of the Separate
Account's assets equal to the reserves and other liabilities under the Policy
are not charged with any liabilities arising out of any other business of the
Company.
There currently are twenty-five divisions in the Separate Account available to
you. The assets of each division invest in a corresponding account of a mutual
fund. New accounts may be added and made available. Accounts may also be
eliminated from the Separate Account.
THE FUNDS
The funds are mutual funds registered under the Investment Company Act of 1940
as open-end diversified management investment companies. The funds provide the
investment vehicle for the Separate Account. A full description of the funds,
their investment objectives, policies and restrictions, charges and expenses and
other operational information is contained in the attached prospectuses (which
should be read carefully before investing). Additional copies of these documents
are available from a sales representative or our home office.
The following is a brief summary of the investment objectives of each division:
Division Division Invests In Investment Advisor Investment Objective
-------- ------------------- ------------------ --------------------
Aggressive Growth Aggressive Growth Account Morgan Stanley through a to provide long-term capital appreciation
sub-advisory agreement by investing primarily in growth-oriented
common stocks of medium and large
capitalization U.S. corporations and, to
a limited extent, foreign corporations.
Asset Allocation Asset Allocation Account Morgan Stanley through a to generate a total investment return
sub-advisory agreement consistent with the preservation of
capital. The Account intends to pursue a
flexible investment policy in seeking to
achieve this investment objective.
Balanced Balanced Account Invista Capital Management, Inc. to generate a total return consisting of
through a sub-advisory agreement current income and capital appreciation
while assuming reasonable risks in
furtherance of this objective.
Bond Bond Account Principal Life Insurance Company to provide as high a level of income as
is consistent with preservation of
capital and prudent investment risk.
Capital Value Capital Value Account Invista Capital Management, Inc. to provide long-term capital appreciation
through a sub-advisory agreement and secondarily is growth of investment
income. The Account seeks to achieve its
investment objectives through the
purchase primarily of common stocks, but
the Account may invest in other
securities.
Government Securities Government Securities Invista Capital Management, Inc. to seek a high level of current income,
Account through a sub-advisory agreement liquidity and safety of principal. The
Account seeks to achieve its objective
through the purchase of obligations
issued or guaranteed by the United States
Government or its agencies, with emphasis
on Government National Mortgage
Association Certificates ("GNMA
Certificates"). Account shares are not
guaranteed by the United States
Government.
Growth Growth Account Invista Capital Management, Inc. to seek growth of capital. The Account
through a sub-advisory agreement seeks to achieve its objective through
the purchase primarily of common stocks,
but the Account may invest in other
securities.
International International Account Invista Capital Management, Inc. to seek long-term growth of capital by
through a sub-advisory agreement investing in a portfolio of equity
securities domiciled in any of the
nations of the world.
International SmallCap International SmallCap Invista Capital Management, Inc. seeks long-term growth of capital. The
Account through a sub-advisory agreement Account will attempt to achieve its
objective by investing primarily in
equity securities of non-United States
companies with comparatively smaller
market capitalizations.
MicroCap MicroCap Account Goldman Sachs Asset seeks long-term growth of capital. The
Management through a Account will attempt to achieve its
sub-advisory agreement objective by investing primarily in value
and growth oriented companies with small
market capitalizations, generally less
than $700 million.
MidCap MidCap Account Invista Capital Management, Inc. to achieve capital appreciation by
through a sub-advisory agreement investing primarily in securities of
emerging and other growth-oriented
companies.
MidCap Growth MidCap Growth Account Dreyfus Corporation through a seeks long-term growth of capital. The
sub-advisory agreement Account will attempt to achieve its
objective by investing primarily in
growth stocks of companies with market
capitalizations in the $1 billion to $10
billion range.
Money Market Money Market Account Principal Life Insurance Company to seek as high a level of current income
available from short-term securities as
is considered consistent with
preservation of principal and maintenance
of liquidity by investing all of its
assets in a portfolio of money market
instruments.
Real Estate Real Estate Account Principal Life Insurance Company seeks to generate a high total return.
The Account will attempt to achieve its
objective by investing primarily in
equity securities of companies
principally engaged in the real estate
industry.
SmallCap SmallCap Account Invista Capital Management, Inc. seeks long-term growth of capital. The
through a sub-advisory agreement Account will attempt to achieve its
objective by investing primarily in
equity securities of both growth and
value oriented companies with
comparatively smaller market
capitalizations.
SmallCap Growth SmallCap Growth Account Berger Associates through a seeks long-term growth of capital. The
sub-advisory agreement Account will attempt to achieve its
objective by investing primarily in
equity securities of small growth
companies with market capitalization of
less than $1 billion.
SmallCap Value SmallCap Value Account JP Morgan Asset Management, Inc. seeks long-term growth of capital. The
through a sub-advisory agreement Account will attempt to achieve its
objective by investing primarily in
equity securities of small growth
companies with value characteristics and
market capitalizations of less than
$1 billion.
Stock Index 500 Stock Index 500 Invista Capital Management, Inc. seeks long-term growth of capital. The
Account through a sub-advisory agreement Account attempts to mirror the investment
results of the Standard & Poor's Stock
Index.
Utilities Utilities Account; Invista Capital Management, Inc. seeks to provide current income and
through a sub-advisory agreement long-term growth of income and capital.
The Account will attempt to achieve its
objective by investing primarily in
equity and fix-income securities of
companies in the public utilities
industry.
Fidelity Contrafund Fidelity VIP II Contrafund Fidelity Management and seeks long-term capital appreciation.
Portfolio Research Company
Fidelity Fidelity VIP Equity-Income Fidelity Management and seeks reasonable income by
Equity-Income Portfolio Research Company investing primarily in income-producing
equity securities.
Fidelity High Income Fidelity VIP High Income Fidelity Management and seeks a high level of current income by
Portfolio Research Company investing primarily in high yielding,
lower quality, fixed income securities,
while also considering growth of capital.
Putnam Global Asset Putnam VT Global Asset Putnam Investment seeks a high level of long-term total
Allocation Allocation Fund Management, Inc. return consistent with preservation of
capital.
Putnam Vista Putnam VT Vista Fund Putnam Investment seeks capital appreciation.
Management, Inc.
Putnam Voyager Putnam VT Voyager Fund Putnam Investment seeks capital appreciation.
Management, Inc.
Principal Management Corporation (the "Manager") has executed agreements with
various sub-advisors. Under those sub-advisory agreements, the sub-advisor
agrees to assume the obligations of the Manager to provide investment advisory
services for a specific Account. For these services, each sub-advisor is paid a
fee by the Manager.
Account: Balanced, Capital Value, Government Securities, Growth,
International, International SmallCap, MidCap, SmallCap, Stock Index
500 and Utilities
Sub-Advisor: Invista Capital Management, Inc. Invista is a subsidiary
of Principal Life Insurance Company that makes it an affiliate of the
Manager. Invista has managed investments for institutional investors,
including Principal Life, since 1985. As of December 31, 1998, it
managed assets of approximately $_______ billion. Invista's address is
1800 Hub Tower, 699 Walnut, Des Moines, Iowa 50309.
Account: Aggressive Growth and Asset Allocation
Sub-Advisor: Morgan Stanley Dean Witter Investment Management Inc.
MSAM, with principal offices at 1221 Avenue of the Americas, New York,
NY 10020, provides a broad range of portfolio management services to
customers in the U.S. and abroad. At December 31, 1998, MSAM managed
investments totaling approximately $_____ billion, including
approximately $_____ billion under active management and $______
billion as Named Fiduciary or Fiduciary Advisor.
Account: MicroCap
Sub-Advisor: Goldman Sachs Asset Management. Goldman Sach's address is
1 New York Plaza, 42nd Floor, New York, NY 10004. It is a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"). Goldman
Sachs provides a wide range of fully discretionary investment advisory
services quantitatively driven and active managed U.S. and
international equity portfolios, U.S. and global fixed income
portfolios, commodity and currency products, and money market mutual
funds.
Account: MidCap Growth
Sub-Advisor: The Dreyfus Corporation, located at 200 Park Avenue, New
York, NY 10166, was formed in 1947. The Dreyfus Corporation is a
wholly-owned subsidiary of Mellon Bank, N.A. which is a wholly-owned
subsidiary of Mellon Bank Corporation. As of ________ the Dreyfus
Corporation managed or administered approximately $___ billion in
assets for approximately _____ million investor accounts nationwide.
Account: SmallCap Growth
Sub-Advisor: Berger Associates. Berger's address is 210 University
Boulevard, Suite 900, Denver, CO 80206. It serves as investment
advisor, sub-advisor, administrator or sub-administrator to mutual
funds and institutional investors. Kansas City Southern Industries,
Inc. ("KCSI") owns approximately 87% of Berger. KCSI is a publicly
traded holding company with principal operations in rail
transportation, through its subsidiary the Kansas City Southern Railway
Company, and financial asset management businesses.
Account: SmallCap Value
Sub-Advisor: J.P. Morgan Asset Management. Morgan, with principal
offices at 522 Fifth Avenue, New York, NY 10036 is a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan") a bank
holding company. J.P. Morgan, through Morgan and its other
subsidiaries, offers a wide range of services to governmental,
institutional, corporate and individual customers and acts as
investment advisory to individual and institutional customers. As of
December 31, 1998, J.P. Morgan and its subsidiaries had total combined
assets under management of approximately $_____ billion.
The Company purchases and sells fund shares for the Separate Account at their
net asset value without any sales or redemption charge. The Separate Account has
divisions that correspond to interests in the Investment Accounts. The assets of
each Investment Account are separate from the others. An Investment Account's
performance has no effect on the investment performance of any other Investment
Account.
The annual expenses of Investment Accounts (as a percentage of average net
assets) as of December 31, 1998 were:
Management Other Total Account
Account Fees Expenses Annual Expenses
------- --------- -------- ---------------
Aggressive Growth
Asset Allocation
Balanced
Bond
Capital Value
Government Securities
Growth
International
International SmallCap
MicroCap
MidCap
MidCap Growth
Money Market
Real Estate
SmallCap
SmallCap Growth
SmallCap Value
Stock Index 500
Utilities
Fidelity Contrafund
Fidelity Equity-Income
Fidelity High Income
Putnam Global Asset Allocation
Putnam Vista
Putnam Voyager
THE POLICY
The descriptions that follow are based on provisions of the Policy offered by
this prospectus.
To Buy a Policy
A completed application and required supplements must be submitted to us through
an agent or broker selling the Policy.
The minimum face amount of a Policy when originally issued is $100,000. We
reserve the right to increase or decrease the minimum face amount.
To issue a Policy, we require at least one insured to be age 85 or younger as of
the policy date. Neither insured may be older than age 90 as of the policy date.
Other underwriting restrictions may apply.
Applicants for the Policy must:
o furnish satisfactory evidence of insurability of both insureds, and
o meet our insurance underwriting guidelines and suitability rules.
If you want insurance coverage to start at the time the application is
submitted, you must send a payment of at least the required minimum initial
premium amount with your completed application. The required minimum initial
premium amount is shown on the policy illustration. If this amount is submitted
with the application, a conditional receipt is given to you. The receipt
acknowledges the initial payment and details any interim conditional insurance
coverage.
We reserve the right to reject any application or related premium if we
determine that our underwriting guidelines, suitability rules or procedures have
not been met.
Policy Date
If we issue a Policy, a policy date is determined. Policies may not be dated on
the 29th, 30th or 31st of any month. Your policy date is shown on the current
data pages.
Upon specific request and our approval, your Policy may be backdated. The policy
date may not be more than six months prior to the date of application (or
shorter period if required by state law). Payment of minimum monthly premium is
required for the backdated period. Monthly policy charges are deducted from the
policy value for the backdated period.
Effective Date
The policy date and the effective date are the same unless:
o a backdated policy date is requested, or
o a Policy is applied for on a COD basis or the application was not
accompanied by a payment of at least the minimum monthly premium, or
o additional premiums are required (the effective date is the date we
receive, review and accept the required premium), or
o application amendments are required (the effective date is the date we
receive, review and accept amendments).
The insurance coverage does not take effect until you actually receive the
Policy. If both insureds were to die before the owner actually receives the
Policy, there is no coverage under the Policy (coverage is determined solely
under the terms of conditional receipt, if any).
Payment of Premiums
The amount and frequency of your premium payments affects the policy value, the
net surrender value and how long the Policy remains in force. After the initial
premium, you may determine the amount and timing of subsequent premium payments
within certain restrictions. The minimum monthly premium is shown on the current
data pages for your Policy. You must pay premiums to us at our home office.
If the net surrender value on any monthly date is less than the monthly policy
charge, a 61-day grace period begins. However, during the first 60 policy
months, the Policy will stay in force if (a minus b) is greater than or equal to
(c) where:
o (a) is the sum of the premiums paid;
o (b) is the sum of all existing policy loans, unpaid loan interest,
partial surrenders and transaction charges; and
o (c) is the sum of the
minimum monthly premiums since the policy date to the most recent
monthly date.
After the first 60 policy months, making premium payments under your planned
periodic premium schedule does not guarantee that your Policy will stay in force
unless:
o your Policy's net surrender value is at least equal to the monthly
policy charge on the current monthly date, or
o the death benefit guarantee rider is in effect.
We send premium reminder notices to you if you establish an annual, semiannual
or quarterly premium payment schedule. Preauthorized withdrawals may be set up
on a monthly basis (to allow us to automatically deduct premium payments from
your checking or other financial institution account). You may also make
unscheduled payments to us at our home office or by payroll deduction (where
permitted by state law and approved by us).
Premium Limitations
In no event may the total of all premiums paid, both scheduled and unscheduled,
be more than the current maximum premium payments allowed for life insurance
under the Internal Revenue Code (the "Code"). If you make a premium payment that
would result in total premiums more than the current maximum limitation, we only
accept that portion of the payment that makes total premiums equal the maximum.
Any excess will be returned and no further premiums are accepted until allowed
by the current maximum premium limitations.
Allocation of Premiums
Your initial net premium (and other premiums we receive prior to the effective
date and twenty days after the effective date) are allocated to the Money Market
division at the end of the valuation date we receive the premium. Twenty-one
days after the effective date, the money is reallocated to the divisions of the
Separate Account and/or to the Fixed Account according to your instructions. If
the twenty-first day is not a business day, the transfer will occur on the first
business day following the twenty-first day from the effective date.
Example: The effective date of your policy is February 1st. Your net
premium is allocated to the Money Market division at the
end of the valuation period we receive the premium. At the
close of business on February 21st, the net premium is
reallocated to the Investment Account and/or Fixed Account
that you selected.
Premium payments received after the twenty-day period are allocated to the
Investment Accounts or to the Fixed Account according to your instructions. For
each division and the Fixed Account, the allocation percentage must be zero or a
whole number not less than 10. The total of all the percentages for the
divisions and the Fixed Account must equal 100. The percentage allocation for
future premium payments may be changed, without charge, at any time by sending a
written request to us or, if telephone privileges apply, calling us at
1-800-__________. The allocation changes are effective at the end of the
valuation period in which your new instructions are received.
Ten Day Examination Offer (Free-Look Provision)
Under state law, you have the right to return the Policy for any reason during
the free-look period and receive your premiums paid. (If you apply for your
Policy in California, the amount refunded is described below). Your request to
return the Policy must be in writing. The request and the Policy must be mailed
to us or returned to the agent (as determined by the postmark) no later than the
last day of the free-look period as shown below.
The free-look period is the later of:
o 10 days* after the Policy is delivered to you,
o 10 days* after a written notice is delivered or mailed to you which
tells about the cancellation right, or
o 45 days after you complete the application.
*Different free-look periods apply if your Policy is issued in:
o California and you are age 60 and over (30 day free-look period);
o Colorado (15 day free-look period); or
o Idaho or North Dakota (20 day free-look period).
If you applied for your Policy in California, the amount refunded is:
o the policy value as of the date we receive your written request for
cancellation,
o plus the premium expense charge(s) deducted from the premium,
o plus the monthly policy charge(s) deducted from the policy value.
NOTE:
o See GENERAL PROVISIONS - Delay of Payments.
o If the purchase of this Policy is a replacement for another life
insurance policy or an annuity contract, different free-look periods
may apply. We reserve the right to keep the initial premium payment in
the Money Market division longer than 20 days to correspond to the
free-look periods of a particular state's replacement requirements.
Policy Values
Your policy value is equal to the sum of the values in your Investment Accounts,
Fixed Account and Loan Account (see THE FIXED ACCOUNT and THE POLICY - Loan
Account). There is no guaranteed minimum Investment Account value. Its value
reflects the investment experience of the Investment Accounts that you choose.
It also reflects your premium payments, partial surrenders, policy loans and the
Policy expenses deducted from the Separate Account.
It is possible that the investment performance could cause a loss of the entire
amount allocated to the Investment Accounts. Without additional premium payments
or investments in the Fixed Account or a death benefit guarantee rider, this
could result in no death benefit upon the surviving insured's death.
At the end of any valuation period, your value in an Investment Account is:
o the number of units you have in a division
o multiplied by the value of a unit in the division.
The number of units is the total of units purchased by allocations to the
division from:
o your initial premium payment (less premium expense charges);
o plus subsequent premium payments (less premium expense charges);
o plus transfers from another division or the Fixed Account
minus units sold:
o for partial surrenders from the division;
o as part of a transfer to another division, the Fixed Account or the
Loan Account; and
o to pay monthly policy charges and fees.
Unit values are calculated each valuation date. To calculate the unit value of a
division, the unit value from the previous valuation date is multiplied by the
divisions' net investment factor for the current valuation period. The number of
units does not change due to a change in unit value.
The net investment factor measures the performance of each division. The net
investment factor for a valuation period is calculated as follows:
[{share price of the underlying mutual fund account at the end of the
valuation period before that day's transactions
plus
per share amount of the dividend (or other distribution) made by the
mutual fund account during the valuation period}
divided by
share price of the underlying mutual fund account at the end of the
previous valuation period after that day's transactions].
When an investment owned by an Account pays a dividend, the dividend increases
the net asset value of a share of the Account as of the date the dividend is
recorded. As the net asset value of a share of an Account increases, the unit
value of the corresponding division also reflects an increase. Payment of a
dividend under these circumstances does not increase the number of units you own
in the Account.
Investment Account Transfers
You may request an unscheduled transfer or set up a periodic transfer by sending
or faxing (1-__________) us a written request or calling us if telephone
privileges apply (1-800-_________). You must specify the dollar amount or
percentage to transfer from each Investment Account. In states where allowed, we
reserve the right to reject transfer instructions from someone providing them
for multiple Policies for which he or she is not the owner.
You may not make a transfer to the Fixed Account if:
o a transfer has been made from the Fixed Account to an Investment
Account within six months, or
o immediately after the transfer, the Fixed Account value would be more
than $1,000,000 (without our prior approval).
Unscheduled Transfers You may make unscheduled transfers from an Investment
Account to another Investment Account or to the Fixed Account. The transfer is
made, and values determined, as of the end of the valuation period in which we
receive your request.
o The transfer amount must be equal or greater than the lesser of $100 or
the value of your Investment Account(s).
o We reserve the right to charge a
transfer fee on each unscheduled transfer after the 12th such transfer
in a policy year. The fee will not be more than $25 per unscheduled
transfer.
Scheduled Transfers (dollar cost averaging (DCA)) You may elect to have
automatic transfers made on a periodic basis.
o The amount of the transfer is:
o the dollar amount you select (minimum of the lesser of $100 or the
value of the Investment Account), or
o a percentage of the Investment Account value as of the date you
specify (other than the 29th, 30th or 31st).
o You select the transfer date (other than the 29th, 30th or 31st) and
the transfer frequency (annually, semi-annually, quarterly or monthly).
o If the selected date is not a valuation date, the transfer is completed
on the next valuation date.
o The value of the Investment Account must be equal to or more than
$2,500 when your scheduled transfers begin.
o Transfers continue until your interest in the Investment Account has
a zero balance or we receive notice to stop them.
o We reserve the right to limit the number of Separate Account divisions
from which simultaneous transfers are made. In no event will it ever
be less than two.
Fixed Account Transfers
Transfers from your investment in the Fixed Account to your Investment
Account(s) are subject to certain limitations. You may transfer amounts by
making either a scheduled or unscheduled Fixed Account transfer. You may not
make both a scheduled and unscheduled Fixed Account transfer in the same policy
year. In states where allowed, we reserve the right to reject transfer
instructions from someone providing them for multiple Policies for which he or
she is not the owner.
Unscheduled Tranfers You may make one unscheduled Fixed Account transfer to an
Investment Account(s) within the 30 day period following the policy date and
each policy anniversary. The transfer is made, and values determined, as of the
end of the valuation period in which we receive your request.
o You must specify the dollar amount or percentage to be transferred (not
to exceed 25% of the Fixed Account value as of the latter of the policy
date or the most recent policy anniversary).
o The minimum transfer amount must be equal to or greater than the lesser
of $100 or the entire value of your Fixed Account if less.
Scheduled Transfers (dollar cost averaging (DCA)) You may make scheduled
transfers on a monthly basis from the Fixed Account to your Investment
Account(s) as follows:
o The value of your Fixed Account must be equal to or more than $2,500
when your scheduled transfers begin. We reserve the right to change
this amount but it will never be more than $10,000.
o The amount of the transfer is:
o the dollar amount you select (minimum of $50), or
o a percentage of the Fixed Account value (the maximum amount of the
transfer is 2% of the Fixed Account value as of the specified date)
as of the date you specify which may be:
o the later of the policy date or most recent policy anniversary
date, or
o the date the Company receives your request.
o Transfers occur on a date you specify (other than the 29th, 30th or
31st of any month).
o If the selected date is not a valuation date, the transfer is completed
on the next valuation date.
Scheduled transfers continue until your value in the Fixed Account has a zero
balance or we receive your notice to stop them. You may change the amount of the
transfer once each policy year by sending us a written request or calling us if
telephone privileges apply (1-800-_________). If you stop the transfers, you may
not start them again until six months after the last scheduled transfer.
Automatic Portfolio Rebalancing (APR)
APR allows you to maintain a specific percentage of your policy value in your
Investment Accounts over time.
EXAMPLE: You may choose to rebalance so that 50% of your policy values
are in the Bond division and 50% in the Capital Value
division. At the end of the specified period, market changes
may have caused 60% of your value to be in the Bond division
and 40% in the Capital Value division. By rebalancing, units
from the Bond division are sold and applied to purchase units
in the Capital Value division so that 50% of the policy values
are once again invested in each division.
o You may elect APR at the time of application or after the Policy has
been issued.
o APR transfers:
o do not begin until the expiration of the free-look period;
o are done without charge (and are not counted as unscheduled
transfers when determining any transfer fee);
o may be done on the frequency you specify:
o quarterly APR transfers may be done on a calendar year or
policy year basis,
o semiannual or annual APR transfers may only be done on a policy
year basis.
o may be done, if telephone privileges apply, by calling us at
1-800-___________, mailing us your written request or faxing your
request to us at 1-800-_______.
o The transfers are made at the end of the next valuation period after we
receive your instruction.
o APR is not available:
o for values in the Fixed Account, or
o if you have scheduled transfers from the same Investment Accounts.
Policy Loans
While your Policy is in effect and has a net surrender value, you may borrow
money from us with the Policy as the security for the policy loan.
o The minimum policy loan is $500.
o The maximum amount you may borrow is 90% of the net surrender value as
of the date we process the policy loan.
o If telephone privileges apply, you may request a policy loan of $5,000
or less by calling us at 1-800-__________. If you do not have
telephone privileges or are requesting a policy loan of more than
$5,000, your request must be made in writing.
o Generally, policy loan proceeds are sent within five business days from
the date we receive your request (see GENERAL PROVISIONS - Delay of
Payments).
o Requests for policy loans from any joint owner are binding on all
joint owners.
Loan Account
When a policy loan is taken, an amount equal to the loan is transferred from
your Investment Account(s) and Fixed Account to your Loan Account. Loan Accounts
are part of our General Account. You may instruct us on the proportions to be
taken from your accounts. If you do not provide such instruction, the loan
amount is withdrawn in the same proportion as the allocation used for the most
recent monthly policy charge. Any loan interest due and unpaid is transferred in
the same manner.
Your Loan Account earns interest from the date of transfer. During the first ten
policy years, the loan account interest rate is 6% per year. After the tenth
policy year, the loan account interest rate is 7.75% per year.
You pay interest on your policy loan at the annual rate of 8%. Interest accrues
daily and is due and payable at the end of the policy year. If interest is not
paid when due, it is added to the loan amount. Adding unpaid interest to the
policy loan amount causes additional amounts to be withdrawn from your Fixed
Account and/or Investment Account(s) and transferred to the Loan Account.
Withdrawals are made in the same proportions as described above.
Policy loans and unpaid loan interest reduce your net surrender value. If the
net surrender value is less than the monthly policy charges on a monthly date,
the 61-day grace period provision applies (see POLICY TERMINATION AND
REINSTATEMENT - Policy Termination).
Whilethe Policy is in force and before the surviving insured dies, policy loans
and loan interest may be repaid as follows:
o policy loans may be repaid totally or in part;
o repayments are allocated to the Investment Account(s) and Fixed Account
in the proportions used for allocation of premium payments; and
o payments that we receive that are not designated as premium payments
are applied as loan repayments if a policy loan is outstanding.
A policy loan generally has a permanent effect on policy values. If a policy
loan had not been made, the policy value would reflect the investment experience
of the Investment Account(s) and the interest credited to the Fixed Account. In
addition, policy loans and unpaid loan interest are subtracted from:
o death proceeds at the death of the surviving insured;
o surrender value upon total surrender or termination of a Policy; and
o maturity proceeds payable at maturity.
Surrenders
You must send us a written request for any surrender. The request must be signed
by all owners, irrevocable beneficiary(ies) if any and any assignees.
Total surrender You may surrender the Policy on or before the maturity date
while the Policy is in effect. You receive the net surrender value at the end of
the valuation period during which we receive your surrender request. The net
surrender value is the total of the values of your Investment Accounts plus your
Fixed Account plus your Loan Account minus any applicable surrender charge,
policy loans and unpaid loan interest (see CHARGE AND DEDUCTIONS - Surrender
Charge).
o The written consent of all collateral assignees and irrevocable
beneficiaries must be obtained prior to surrender.
o We reserve the right to require you to return the Policy to us prior to
making any payment though this does not affect the amount of the cash
surrender value.
o If the total surrender is within ten years of the policy date or a face
amount increase a surrender charge is imposed.
Partial surrender After the second policy anniversary and prior to the maturity
date, you may surrender a part of the Fixed Account and/or Investment Account
value by sending us a written request. The surrender is effective at the end of
the valuation period during which we receive your written request for surrender.
You may not request more than two partial surrenders in each policy year.
The minimum amount of a partial surrender is $500. The total of your two partial
surrenders during a policy year may not be greater than 75% of the net surrender
value (as of the date of the request for the first partial surrender in that
policy year).
You pay a transaction fee on each partial surrender. The fee is the lesser of
$25 or two percent of the amount surrendered. It is withdrawn in the same
proportion as your monthly policy charge allocation.
Your policy value is reduced by the amount of the surrender and the transaction
fee. We surrender units from the Investment Account divisions and/or Fixed
Account to equal the dollar amount of the surrender request and transaction fee.
The surrender is deducted from your Fixed Account value and/or your Investment
Account(s) according to the surrender allocation percentages you specify. If
surrender allocation percentages are not specified, we use your monthly policy
charge allocation percentages. The amount surrendered is taken from the premiums
paid on a last-in, first-out basis. No surrender charge is imposed on a partial
surrender.
If Option 1 death benefit is in effect and a partial surrender is made, the face
amount of the policy is also reduced by the amount of the surrender and the
transaction fee. Total and partial surrenders from the Policy are generally paid
within five business days of our receipt of your written request for surrender.
Certain delays in payment are permitted (see GENERAL PROVISIONS - Delay of
Payments).
DEATH BENEFITS AND RIGHTS
Death Proceeds
While the Policy remains in force and before the maturity date, we pay death
proceeds upon the death of the surviving insured. If both insureds die
simultaneously, then surviving insured shall mean the younger of the two
insureds. No benefit is paid on the first death of an insured unless such
benefit exists under a rider.
o You must notify us of the first death of an insured as soon as possible
after it occurs. (This facilitates the timely payment of death proceeds
at the death of the surviving insured and may affect the status of any
riders.)
o We must receive proof of the deaths of both insureds and all other
required documents.
o Payments are made to your named beneficiary(ies) under your designated
death benefit option (see GENERAL PROVISIONS Beneficiary).
The payments are made in cash lump sum or under a benefit payment option
selected by the beneficiary(ies). Death proceeds are calculated as of the date
of the surviving insured's death and include:
o death benefit described below;
o plus proceeds from any benefit rider on the surviving insured's life;
o minus policy loans and unpaid loan interest;
o minus any overdue monthly policy charges if the surviving insured died
during a grace period;
o plus interest on the death proceeds from date of death of the surviving
insured until date of payment or application under a benefit payment
option. (We determine the interest rate that is not less than the rate
required by state law.)
Death Benefit Option
You choose death benefit Option 1 or Option 2 at the time of application.
Option 1 (level amount option). The death benefit is the greater of the Policy's
current face amount or the policy value on the date of death of the surviving
insured multiplied by the applicable percentage. The applicable percentage is
250% if the younger insured is age 40 or below and the percentage declines with
increasing ages. The death benefit remains level unless the applicable
percentage of policy value exceeds the current face amount (in which case the
death benefit varies as the policy value varies).
Illustration of Option 1. Assume that the younger insured is under age 40 and
that there is no loan amount and that the policy face amount is $500,000.
Under Option 1, the death benefit must be equal or greater than 250% of the
policy value. If the policy value is more than $200,000, the death benefit is
greater than $500,000. Each additional dollar added to the policy value above
$200,000 increases the death benefit by $2.50. If the policy value exceeds
$200,000 and increases by $100 because of investment performance or premium
payments, the death benefit increases by $250.
Similarly, if the policy value exceeds $200,000, each dollar taken out of the
policy value reduces the death benefit by $2.50. For example, if the policy
value is reduced from $500,000 to $450,000 because of partial surrenders,
charges or negative investment performance, the death benefit is reduced from
$1,250,000 to $1,125,000. However, if at any time the policy value multiplied by
the applicable percentage is less than the face amount, the death benefit equals
the current face amount of the Policy.
The applicable percentage lowers as the younger insured's age increases. If the
current age of the younger insured in the illustration is 50 (rather than age
40), the applicable percentage would be 185%. The death benefit would not be
greater than the $500,000 face amount unless the policy value exceeded $270,270
rather than $200,000. Each dollar added to or taken from the policy value
changes the death benefit by $1.85 (rather than $2.50).
Option 2 (variable amount option). The death benefit is equal to the greater of
the current face amount plus the policy value on the date of death of the
surviving insured or the policy value on the date of death of the surviving
insured multiplied by the applicable percentage.
Illustration of Option 2. Assume that the younger insured is under age 40 and
that there is no loan amount and that the policy face amount is $500,000.
Under Option 2, the death benefit is the face amount plus the policy value on
the date of death of the surviving insured. For example, a policy with a policy
value of $100,000 has a death benefit of $600,000 ($500,000 plus $100,000); a
policy value of $300,000 has a death benefit of $800,000 ($500,000 plus
$300,000). The death benefit however must be at least 250% of the policy value.
As a result, if the policy value exceeds $333,334, the death benefit is greater
than the face amount plus policy value. Each additional dollar of policy value
above $333,334 increases the death benefit by $2.50. If the policy value exceeds
$333,334 and increases by $100 because of investment performance or premium
payments, the death benefit increases by $250.
If the policy value exceeds $333,334, each dollar taken out of the policy value
reduces the death benefit by $2.50. For example, the policy value is reduced
from $400,000 to $340,000 because of partial surrenders, charges or negative
investment performance, the death benefit is reduced from $1,000,000 to
$850,000. However, if the policy value multiplied by the applicable percentage
is less than the policy face amount plus the policy value, then the death
benefit is the current face amount plus the policy value on the date of death of
the surviving insured.
The applicable percentage lowers as the younger insured's age increases. If the
current age of the younger insured in the illustration is 50 (rather than age
40), the applicable percentage would be 185%. The death benefit would be the sum
of the policy value plus $500,000 unless the policy value exceeded $588,237
rather than $333,334. Each dollar added to or taken from the policy value
changes the death benefit by $1.85 (rather than $2.50).
APPLICABLE PERCENTAGES*
(For ages not shown, the applicable percentages decrease by a pro rata
portion for each full year.)
Younger insured's attained age percentage
------------------------------ ----------
40 and under 250
45 215
50 185
55 150
60 130
65 120
70 115
75 through 90 105
95 and older 101
*We reserve the right, where allowed by law, to change or delete the
percentages as required by changes to the Code.
Change in Death Benefit Option
You may change the death benefit option on or after the second policy
anniversary. Up to two changes are allowed per policy year. Your request must be
made in writing and approved by us. The effective date of the change will be the
monthly date that coincides with or next follows our approval. Changing the
death benefit option changes the future cost of insurance.
If you change from Option 1 to Option 2, the new face amount is the old face
amount decreased by the policy value (as of the effective date of the change).
The change is not allowed if it would result in a face amount of less than
$100,000. A change from Option 1 to Option 2 may require evidence of
insurability for the new death benefit if required by our underwriting
guidelines in place at the time of your request.
If you change from Option 2 to Option 1, the new face amount is the old face
amount increased by the policy value (as of the effective date of the change). A
change from Option 2 to Option 1 does not require evidence of insurability.
Adjustment Options
Increase in policy face amount. You may request an increase at any time provided
that the policy is not in a grace period, and monthly policy charges are not
being waived under a rider. The minimum increase in face amount is $100,000. A
face amount increase request made in the first 60 policy months will increase
the minimum monthly premium for the remainder of the 60 months.
The request must be made on an adjustment application. The application must be
signed by the owner(s) and the insureds.
We will approve your request if:
o both insureds are alive at the time of your request; and
o the attained age of the older insured is age 90 or less and of the
younger insured is 85 or less at the time of the request; and
o we receive evidence satisfactory to us that at least one of the
insureds is insurable under our underwriting guidelines in place at the
time of your request.
The increase in face amount is in a risk classification determined by us. The
adjustment is effective on the monthly date on or next following our approval of
your request. No free-look period applies to an increase in face amount.
We calculate an "adjustment conditional receipt premium deposit" based on your
request for an increase. If you make a payment with your adjustment application
of at least as much as the adjustment conditional receipt premium deposit, we
issue a conditional receipt. The conditional receipt shows receipt of the
payment and outlines any interim insurance coverage.
Any payment made with the adjustment application is held in our General Account
without interest. If we approve the adjustment, on the effective date of the
adjustment, the amount of the premium payment being held minus the premium
expense charge, is moved to the Investment Accounts and/or Fixed Account. Your
current premium allocation percentages are used to make this allocation.
Decrease in policy face amount. After the first two policy years, you may
request a decrease in the policy face amount as follows:
o the request must be made on an adjustment application;
o the application must be signed by both the owner(s) and the insured(s);
o the policy is not in a grace period;
o monthly policy charges are not being waived under a waiver rider; and
o the decrease may not reduce the policy face amount below $100,000.
CHARGES AND DEDUCTIONS
We make certain charges and deductions to support operation of the Policy and
the Separate Account. Some charges are deducted from premium payments when they
are received. Other charges are deducted on a monthly basis while others are
deducted at the time a Policy is surrendered or terminated. Fees for
administrative expenses are also charged on certain transfers and all partial
surrenders.
Premium Expense Charge
When we receive your premium payment, we deduct a premium expense charge.
Deductions from premiums during each of the first ten years and with respect to
premiums made because of a face amount increase, during the first ten years
after the increase equal:
o sales load of 5.0% of premiums paid which are less than or equal to
target premiums (2.0% of premiums in excess of target premiums) (See
Appendix B for additional information on target premiums.)
o plus 2.20% for state and local taxes
o plus 1.25% for federal taxes.
Deductions from premiums after the tenth policy year (and after ten years of a
face amount increase) equal:
o sales load of 2.0% of premiums made
o plus 2.20% for state and local taxes
o plus 1.25% for federal taxes.
The sales load is intended to pay us for distribution expenses. These expenses
include commissions paid to registered representatives, printing of prospectuses
and sales literature, and advertising. Sales loads charged in any policy year
are not necessarily related to actual distribution expenses incurred in that
year. We expect that the majority of these expenses are incurred in the early
years of a Policy and that any deficit is made up during the life of the Policy.
If distribution expenses are more than the sales load (including the sales load
portion of the surrender charge), the deficit is made up from our other assets
or surplus in our General Account.
Monthly Policy Charge
The monthly policy charge is intended to cover certain charges and expenses
incurred in connection with the Policy. Deductions are made up of:
o a charge for the cost of insurance;
o a charge for any optional benefit added by rider(s);
o a monthly administration charge; and
o a mortality and expense risks charge.
On the policy date and each monthly date thereafter, we deduct the charge from
your policy value in the Investment Accounts and/or Fixed Account (but not your
Loan Account). The deduction is made using your current monthly policy charge
allocation percentages.Your allocation percentages may be:
o the same as allocation percentages for premium payments;
o determined on a prorated basis; or
o determined by any other allocation method which we agree upon.
The allocation percentage for each Investment Account and/or the Fixed Account
must be zero or a whole number not less than 10. The total of the allocation
percentages must equal 100. Allocation percentages may be changed without
charge. A request for an allocation change is effective on the date we receive
the request. If we cannot follow your instructions because of insufficient value
in any Investment Account and/or the Fixed Account, the monthly policy charge is
deducted on a prorated basis.
Cost of Insurance Charge
Your monthly cost of insurance charge is (a) multiplied by (b minus c) where:
o (a) is the cost of insurance rate described below divided by 1,000;
o (b) is the death benefit at the beginning of the policy month, divided
by 1.0024663 (the sum of one plus the monthly guaranteed fixed account
interest rate); and
o (c) is the policy value at the beginning of the policy month calculated
as if the monthly policy charge was zero.
The cost of insurance rate is based on the gender*, issue age, duration since
issue, smoking status, and risk classification of each insured. We determine the
rate based on our expectation as to mortality experience. Changes in the cost of
insurance rates apply to all individuals of the same age, gender* and risk
classification. The rate will never exceed the rate shown in the Table of
Guaranteed Maximum Cost of Insurance Rates in the Policy. The guaranteed maximum
cost of insurance rate is based on the gender*, attained age and risk
classification of each insured.
Different cost of insurance rates may apply to face amount increases. The cost
of insurance for the increase is based on each insured's gender*, issue age,
duration since issue, smoking status, and risk classification at the time of the
increase. The guaranteed maximum cost of insurance rate for the increase is
based on each insured's gender*, attained age and risk classification at the
time of the increase.
* The cost of insurance rate for Policies issued in states which require
unisex pricing or in connection with employment related insurance and
benefit plans is not based on the gender of the insured.
Administration Charge
1) Current charges
o The current monthly administration charge is $8.00 per month.
o An additional monthly administration charge is imposed in the first ten
policy years (and ten years after an increase in the face amount) of
$.07 per $1,000 of face amount. The charge of $.07 per $1,000 of face
amount is increased by $.005 per $1,000 for each insured that is
classified as a smoker.
2) Guaranteed administration charges
In all policy years, the guaranteed maximum monthly administration charge is
$8.00 per month plus ($.08 per $1,000 of face amount). The charge of $.08 per
$1,000 of face amount is increased by $.005 per $1,000 for each insured that is
classified as a smoker.
The monthly administration charge reimburses us for the administrative expenses
of the Policy and the Separate Account. Administration expenses do not include
the cost of selling the Policy. They do include the costs of: processing
applications; conducting medical examinations; determining insurability;
establishing and maintaining records; processing death benefit claims and policy
changes, reporting and overhead. We do not expect to collect more from the
administration charges than our actual accumulated expenses.
Mortality and Expense Risks Charge
The mortality risk we assume is that insureds may live for a shorter period of
time than we estimate. As a result, we would have to pay a greater amount in
death benefits than we collect in premium payments. The expense risk we assume
is that expenses incurred in issuing and administering the policy are greater
than we estimated. The Company expects to make a profit from this charge to the
extent it is not needed to provide benefits and pay expenses under the Policies.
Each month during the first nine policy years, we deduct a charge for these
risks at an annual rate of 0.80% of your Investment Account(s). Each month
thereafter, we deduct a charge at an annual rate of 0.30% of your Investment
Account(s).
We reserve the right to increase the annual rate but guarantee that the maximum
annual rate will not exceed 0.80%. If we increase the annual rate, the increase
will only apply to policies issued on or after the date of the increase.
Transaction Charge
A transaction fee of the lesser of $25 or 2% of the surrender amount applies to
each partial surrender. The fee is withdrawn in the same proportion as the
allocation used for the most recent monthly policy charge.
We reserve the right to charge a transfer fee on each unscheduled transfer after
the 12th such transfer in a policy year. The fee will not be more than $25 per
unscheduled transfer.
Surrender Charge
Surrender charges vary based on the target premium of the policy and the
premiums paid. The charge applies only during the first ten policy years unless
there is a face amount increase. A face amount increase has its own surrender
charge period that begins on the adjustment date. The total surrender charge on
the policy is the sum of the surrender charges for the face amount at issue and
each face amount increase. The surrender charge is not affected by any decrease
in face amount or any change in face amount resulting from a change of death
benefit options.
The surrender charge compensates us for expenses relating to the sale of the
Policy. These include commissions, advertising and printing of prospectuses and
sales literature. The surrender charge also reimburses us for expenses incurred
in issuing the Policy. These expenses include processing the application
(primarily underwriting) and setting up records. This charge is intended to
cover the average anticipated issue expenses for all Policies. There may not be
a direct relationship between the amount of the charge for any given Policy and
the amount of expenses attributable to that Policy.
The surrender charge on an early surrender or Policy lapse is significant. As a
result, you should purchase a Policy only if you have the financial capacity to
keep it in force for a substantial period of time.
Surrender charge percentage. The surrender charge during any policy year is
equal to the number of target premiums from the table below multiplied by the
applicable surrender charge percentage also shown below:
Joint Equivalent Age (JEA)
on policy or Number of
adjustment date target premiums
-------------------------- ---------------
75 or less 1.00
76 through 85 0.90
86 or greater 0.75
Surrender Charge Percentage Table
---------------------------------
Number of years since policy date The following percentage of
and/or the adjustment date surrender charge is payable
--------------------------------- ---------------------------
1 through 5 100.00%
6 95.24
7 85.71
8 71.43
9 52.38
10 28.57
11 and later 00.00
The surrender charge on a face amount increase is calculated by multiplying the
increase in target premium due to the face increase by the applicable number of
target premiums from the table above. This result is multiplied by the
applicable surrender charge percentage from the above table to get the increase
in surrender charges for all years.
Other Charges
The Investment Accounts represent shares of divisions of the Separate Account.
The assets of each division are used to purchase shares in a corresponding
mutual fund at net asset value. The net asset value of the mutual fund reflects
management fees and operating expenses already deducted from the assets of the
fund. Current management fees and operating expenses for each mutual fund are
shown in the section entitled THE FUNDS.
THE FIXED ACCOUNT
You may allocate net premiums and transfers from your Investment Account(s) to
the Fixed Account. The Fixed Account is part of our General Account. Because of
exemptions and exclusions contained in the Securities Act of 1933 and the
Investment Company Act of 1940, the Fixed Account has not been registered under
these acts. Neither the Fixed Account nor any interest in it is subject to the
provisions of these acts. As a result the SEC has not reviewed the disclosures
in this prospectus relating to the Fixed Account. However, disclosures relating
to the Fixed Account are subject to generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses. You may obtain more information regarding the Fixed
Account from our home office or from a sales representative.
Our obligations with respect to the Fixed Account are supported by our General
Account. Subject to applicable law, we have sole discretion over the investment
of assets in the General Account.
We guarantee that net premiums allocated to the Fixed Account accrue interest
daily at an effective annual rate of 3% compounded annually. We may, in our sole
discretion, credit interest at a higher rate.
The mortality and expense risks charge is not imposed on amounts in the Fixed
Account. The value of your Fixed Account on any valuation day is:
o net premiums allocated to the Fixed Account
o plus transfers from the Investment Account(s)
o plus interest credited to the Fixed Account
o minus surrenders, surrender charges and monthly policy charges
o minus transaction fees allocated to the Fixed Account
o minus transfers to the Loan Account
o minus transfers to the Separate Account.
POLICY TERMINATION AND REINSTATEMENT
Policy Termination
You must make an initial minimum premium payment to have coverage under the
Policy.
If the net surrender value on any monthly date is less than the monthly policy
charge, a 61-day grace period begins. However, during the first 60 policy
months, the Policy will stay in force if (a minus b) is greater than or equal to
(c) where:
o (a) is the sum of the premiums paid;
o (b) is the sum of all existing policy loans, unpaid loan interest,
partial surrenders and transactions charges; and
o (c) is the sum of the minimum monthly premiums since the policy date
to the most recent monthly date.
After the first 60 policy months, making premium payments under your planned
periodic premium schedule does not guarantee that your Policy will stay in force
unless:
o your Policy's net surrender value is at least equal to the monthly
policy charge on the current monthly date, or
o the death benefit guarantee rider is in effect.
GracePeriod. The grace period begins when we send you a notice of pending
lapse. The notice:
o is mailed to your last known post office address;
o shows the minimum payment required to keep the Policy in force; and
o shows the 61-day period during which we will accept the required
payment.
If you are in a grace period, the minimum payment is equal to (a) plus (b)
divided by (c) where:
o (a) is the amount by which the surrender charge is more than the policy
value on the monthly date at the start of the grace period before the
monthly policy charge is deducted,
o (b) is three monthly policy charges, and
o (c) is one minus the maximum premium expense charge percentage (see
CHARGES AND DEDUCTIONS - Premium Expense Charge).
This payment is intended to a) reimburse us for the monthly policy charges
during the grace period, and b) provide enough policy value to pay the monthly
policy charge on the first monthly date after the grace period. To cover past
due policy charges, if the grace period ends before we receive the minimum
payment, we keep any remaining value in the Policy.
Due to possible adverse market fluctuations, there is no guarantee that the
amount requested at the beginning of the grace period is enough to pay the
monthly policy charges as they are processed. If the net surrender value is not
at least as much as the monthly policy charge on any monthly date, a new 61-day
grace period starts.
The Policy is in force during a grace period. If we do not receive the required
payment, the Policy terminates as of the monthly date on or immediately
preceding the start of the grace period. If the surviving insured dies during a
grace period, policy proceeds are reduced by:
o all monthly policy charges due and unpaid at the death of the surviving
insured, and
o any policy loans and unpaid loan interest.
The Policy also terminates when:
o you make a total policy surrender;
o death proceeds are paid; and
o maturity proceeds are paid.
When the Policy terminates, all of the owners' policy rights and privileges end.
Reinstatement
Subject to certain conditions, you may reinstate a Policy that terminated
because of insufficient value. The Policy may only be reinstated:
o prior to the maturity date and while at least one insured is alive;
o upon our receipt of satisfactory evidence of insurability (according to
our underwriting guidelines then in effect);
o if you make a payment of a reinstatement premium which is equal to
(a) plus (b) divided by (c) where:
(a) is the amount by which the surrender charge is more than the policy
value on the monthly date at the start of the grace period before the
monthly policy charge is deducted,
(b) is three monthly policy charges, and
(c) is one minus the maximum premium expense charge percentage (see
CHARGES AND DEDUCTIONS - Premium Expense Charge).
o if the application for reinstatement is mailed to us within three years
of the Policy termination (in some states, we must provide a longer
period of time for Policy reinstatement); and
o if a policy loan or loan interest was unpaid when the Policy
terminated, the policy loan must be reinstated or repaid (loan interest
is not collected for the period the Policy was terminated).
We do not require payment of monthly policy charges during the period the Policy
was terminated. Reinstatement is effective on the next monthly date following
our approval of the reinstatement application. Premiums received with your
reinstatement application are held without interest until the reinstatement
date. They are allocated to your selected Investment Accounts and/or Fixed
Account on the reinstatement date. We will use the premium allocation
percentages in effect at the time of termination of the Policy unless you
provide new allocation instructions. The reinstated Policy has the same policy
date as the original Policy. Your rights and privileges as owner(s) are restored
upon reinstatement.
If you reinstate your Policy and then it is totally surrendered, a surrender
charge may be imposed. The charge, if any, is calculated based on the number of
years the Policy was in force. The period of time during which the Policy was
terminated is not credited toward the number of policy years to make this
calculation.
OTHER MATTERS
Voting Rights
We vote Investment Account shares held in the Separate Account at shareholder
meetings. We follow the voting instructions received from people having the
voting interest in the Account shares.
You have a voting interest under a Policy. You have one vote for each $100 of
policy value in the Investment Accounts. Fractional votes are allocated for
amounts less than $100. The number of votes on which you have the right to
instruct us is determined as of a date established by the mutual fund for
setting the shareholders eligible to vote.
According to procedures adopted by the mutual fund, voting instructions are
solicited by a written proxy statement before a shareholder meeting. We vote
other Account shares, for which no voting instructions are received, in the same
proportion as the shares for which we receive voting instructions. Account
shares held in our General Account are voted in proportion to instructions that
are received with respect to the participating contracts.
If we determine, under applicable law, that Account shares need not be voted
according to the instructions received, we may vote Account shares held in the
Separate Account in our own right.
We may, when required by state insurance regulatory authorities, disregard
voting instructions. This may be done if the instructions would require shares
to be voted to:
o change a subclassification or investment objective of the Account, or
o disapprove an investment advisory contract of the fund or Account, or
o approve changes initiated by an owner in the investment policy or
investment advisor of the Account or mutual fund if we reasonably
disapprove of the changes.
The change would be disapproved only if:
o the proposed change is contrary to state law;
o prohibited by state regulatory authorities; or
o we determine the change is inconsistent with the investment objectives
of the mutual fund.
If we disregard voting instructions, a summary of the action and the reason for
the actions will be included in the next semiannual report from the underlying
fund to owners.
Statement of Values
You receive an annual statement at the end of each policy year. The statement
will show:
o current death benefit;
o current policy value and surrender value;
o all premiums paid since the last statement;
o all charges since the last statement;
o any policy loans and unpaid loan interest;
o any partial surrenders since the last statement;
o the number of units and unit value;
o total value of each of your Investment Accounts and the Fixed Account;
o designated beneficiary(ies); and
o all riders included in the Policy.
You will also receive a statement as of the end of each calendar quarter. At any
time, you may request a current statement by telephoning 1-800-_______________.
We also send you the reports required by the Investment Company Act of 1940.
Services Available by Telephone
Telephone Instructions. Unless you decline telephone privileges, instructions
for the following transactions may be given to us via the telephone:
o policy loans (loan proceeds are only mailed to the owner's address of
record);
o changes in allocations of future premium payments;
o changes in allocation of the monthly policy charge;
o changes to your APR instructions;
o changes to your DCA instructions; and
o provide instructions for unscheduled Investment Account and/or Fixed
Account transfers.
Telephone instructions:
o may be given by calling us at 1-800-___________ between ____ a.m. and
______ p.m. Central Time on any day that the New York Stock Exchange is
open;
o must be received by us before the close of the New York Stock Exchange
(generally 3:00 p.m. Central Time) to be effective the day you call;
o are effective the next valuation day if not received until after the
close of the New York Stock Exchange; and
o from one joint owner are binding on all joint owners.
Although neither the Separate Account nor the Company is responsible for the
authenticity of telephone transaction requests, the Separate Account and the
Company reserve the right to refuse telephone orders. You are liable for a loss
resulting from a fraudulent telephone order that we reasonably believe is
genuine. We use reasonable procedures to assure instructions are genuine. If the
procedures are not followed, we may be liable for loss due to unauthorized or
fraudulent transactions. The procedures include: recording all telephone
instructions, requesting personal identification information (name, phone
number, social security number, birth date, etc.) and sending written
confirmation to the owner's address of record.
Direct Dial. You may receive information about your policy from our Direct Dial
system between ______ a.m. and ________ p.m. Central Time, Monday through
Saturday. The Direct Dial number is 1-800-____________. Through this automated
system, you can:
o obtain information about unit values and policy values,
o initiate certain changes to your policy, and
o change your personal identification number.
Instructions from one joint owner are binding on all joint owners.
GENERAL PROVISIONS
The Contract
The entire contract is made up of applications, amendments, riders and
endorsements attached to the Policy, current data pages, copies of any
supplemental applications, amendments, endorsements and revised Policy or data
pages which are mailed to you. No statement, unless made in an application, is
used to void a Policy (or void an adjustment in the case of an adjustment
application). Only our corporate officers can agree to change or waive any
provisions of a Policy. Any change or waiver must be in writing and signed by an
officer of the Company.
Optional Insurance Benefits
Subject to certain conditions, you may add one or more supplemental benefits to
your Policy. These include:
four year term insurance rider policy split option rider
single life term insurance rider enhanced death benefit rider
extended coverage rider death benefit guarantee rider
Detailed information concerning supplemental benefits may be obtained from an
authorized agent or our home office. Not all supplemental benefits are available
in all states. The cost, if any, of an optional insurance benefit is deducted as
part of your monthly policy charge.
Death Benefit Guarantee Rider (also known as the "no lapse guarantee"). This
rider provides that if the rider premium is paid, the Policy does not lapse even
if the net surrender value is not enough to pay the monthly policy charges on a
monthly date. This rider is automatically made a part of the policy if the
planned periodic premium is equal to or greater than the death benefit guarantee
premium.
The death benefit (no lapse) guarantee premium requirement is met if:
o the sum of all premiums paid
o minus any partial surrenders
o minus any policy loans and unpaid loan interest
is at least as much as the death benefit guarantee monthly premiums since the
policy date to the most recent monthly date. Your most recent death benefit (no
lapse) guarantee premium is shown on your current data page.
The death benefit (no lapse) guarantee premium is based on the issue age, gender
(where permitted by law) and risk classification of each insured. The monthly
death benefit (no lapse) guarantee premium is considered to be zero for any
month that deductions are being waived. This premium may change if:
o the Policy face amount is changed,
o the death benefit option is changed,
o a rider is added or deleted, or
o an adjustment is made to your Policy.
As a result of a change, an additional premium may be required to satisfy the
new death benefit (no lapse) guarantee premium.
If on any monthly date, the death benefit (no lapse) guarantee premium
requirement is not met, we send you a notice stating the premium required to
reinstate the rider. If the premium required to maintain the guarantee is not
received in our home office before the expiration of the 61-day grace period
(which begins when the notice is mailed), the death benefit (no lapse) guarantee
is no longer in effect and the rider is terminated. If the rider terminates, it
may not be reinstated.
Extended Coverage Rider This rider allows, under certain conditions, the Policy
to remain in force until the death of the surviving insured - with a death
benefit being paid rather than maturing the Policy.
Misstatement of Age or Gender
If the age or, where applicable, gender of either of the insureds has been
misstated, we adjust the death benefit payable under your Policy to reflect the
amount that would have been payable at the correct ages and gender.
Assignment
You may assign your Policy. Each assignment is subject to any payments made or
action taken by the Company prior to our notification of the assignment. We
assume no responsibility for the validity of any assignment.
An assignment must be made in writing and filed with us at our home office. The
irrevocable beneficiary(ies), if any, must authorize any assignment in writing.
Your rights, as well as those of the beneficiary(ies), are subject to any
assignment on file with us.
Ownership
You may change your ownership designation at any time. Your request must be in
writing and approved by us. After approval, the change is effective as of the
date you signed the request for change. We reserve the right to require that you
send us the Policy so that we can record the change.
Unless changed, the owner(s) is as named in the application. The owner(s) may
exercise every right and privilege of the Policy, subject to the rights of any
irrevocable beneficiary(ies) and any assignee(s).
All rights and privileges of ownership of a Policy end if the Policy is
surrendered, death or maturity proceeds are paid, or if the grace period ends
without our receiving the payment required to keep the Policy in force. The
rights and privileges end as of the monthly date on or immediately preceding the
start of the grace period.
If an owner dies before the Policy terminates, the surviving owner(s), if any,
succeed to that person's ownership interest, unless otherwise specified. If all
owners die before the policy terminates, the Policy passes to the estate of the
last surviving owner.
With our consent, you may specify a different arrangement for contingent
ownership.
Beneficiary
You have the right to name a beneficiary(ies) and contingent beneficiary(ies).
This may be done as part of the application process or by sending us a written
request. Unless you have named an irrevocable beneficiary, you may change your
beneficiary designation by sending us a written request. After approval, the
change is effective as of the date you signed the request for change. We reserve
the right to require that you send us the Policy so that we can record the
change.
If no beneficiary(ies) survives the death of the surviving insured, the death
proceeds are paid to the owner(s) or the estate of the owner (s) in equal
percentages unless otherwise specified.
Benefit Instructions
While either insured is alive, you may give us instructions for payment of death
proceeds under one of the benefit options of the Policy. The instructions or
changes to the instructions must be in writing. If you change the
beneficiary(ies), prior benefit instructions are revoked.
Benefit Payment Options
While the surviving insured is alive, you may arrange for death proceeds to be
paid in a lump sum or under one of the benefit payment options. These choices
are also available if the Policy is surrendered or matures.
o Option A - Special Benefit Arrangement
A specially designed benefit option may be arranged with our approval.
o Option B - Proceeds left at interest
We hold the amount of the benefit on deposit. Interest payments are
made annually, semiannually, quarterly or monthly as selected.
o Option C - Fixed Income
We pay income of a fixed amount for a fixed period (not exceeding 30
years).
o Option D - Life Income
We pay income during a person's lifetime. A minimum guaranteed period
may be used.
o Option E - Joint and Survivor Life Income
We pay income during the lifetime of two people and continue until the
death of the survivor. This option includes a minimum guaranteed period
of 10 years.
o Option F - Joint and Two-thirds Survivor Life Income
We pay an income during the lifetime of two people and two-thirds of
the original amount during the remaining lifetime of the survivor.
Interest at a rate set by us, but never less than required by state law, applies
to:
o determine the payment under Option B, and
o any interest in excess of the guaranteed minimum is added to payments
under Option C.
Right to Exchange Policy
During the first 24 months after the policy date (except during a grace period),
you have the right to make an irrevocable, one-time election to transfer all of
your Investment Account values to the Fixed Account. No charge is imposed on
this transfer.
Your request must be in writing and be signed by the owner(s). The request must
be postmarked or delivered to our home office before the end of the 24-month
period. The transfer is effective when we receive your written request.
Non-Participating Policy
The Policies do not share in any divisible surplus of the Company.
Incontestability
We will not contest the insurance coverage provided by the Policy, except for
any increases in face amount, after the Policy has been in force during the
lifetime of either insured for a period of two years from the policy date. Any
face amount increase has its own two-year contestability period that begins on
the effective date of the adjustment. The time limit in the incontestability
period does not apply to fraudulent mistrepresentations.
Suicide
Death proceeds are not paid if either insured dies by suicide, while sane or
insane, within two years of the policy date (or two years from the date of face
amount increase with respect to such increase). In the event of the suicide of
either insured within two years of the policy date, our only liability is a
refund of premiums paid, without interest, minus any policy loans and unpaid
loan interest and partial surrenders. In the event of suicide within two years
of a face amount increase, our only liability with respect to that increase is a
refund of the cost of insurance for the increase. If the suicide occurs at the
death of the first insured, this amount will be paid to the owner(s) of the
Policy. If the suicide occurs at the death of the surviving insured, this amount
will be paid to the beneficiary(ies).
Delay of Payments
Payment due to exercise of your rights under the free-look provision,
surrenders, policy loans, death or maturity proceeds, and transfers to or from
an Investment Account are generally made within five days after we receive your
instructions in a form acceptable to us. This period may be shorter where
required by law. However, payment of any amount upon return of the Policy, total
or partial surrender, policy loan, death, maturity or the transfer to or from a
division of the Separate Account may be deferred during any period when the
right to sell mutual fund shares is suspended as permitted under provisions of
the Investment Company Act of 1940 (as amended).
The right to sell shares may be suspended during any period when:
o trading on the New York Stock Exchange is restricted as determined by
the SEC or when the Exchange is closed for other than weekends and
holidays, or
o an emergency exists, as determined by the SEC, as a result of which:
o disposal by a fund of securities owned by it is not reasonably
practicable;
o it is not reasonably practicable for a fund to fairly determine
the value of its net assets; or o the SEC permits suspension
for the protection of security holders.
If payments are delayed and your instruction is not canceled by your written
instruction, the amount of the transaction is determined the first valuation
date following the expiration of the permitted delay. The transaction is made
within five days thereafter.
In addition, payments on surrenders attributable to a premium payment made by
check may be delayed up to 15 days. This permits payment to be collected on the
check.
Addition, Deletion or Substitution of Investments
We reserve the right to make certain changes if, in our judgement, they best
serve your interests or are appropriate in carrying out the purpose of the
Policy. Any changes are made only to the extent and in the manner permitted by
applicable laws. Also, when required by law, we will obtain your approval of the
changes and approval from any appropriate regulatory authority. Approvals may
not be required in all cases. Examples of the changes we may make include:
o transfer assets in any division to another division or to the Fixed
Account;
o add, combine or eliminate divisions in the Separate Account; or
o substitute the shares of an Investment Account for the Investment
Account shares in any division:
o if shares of an Investment Account are no longer available for
investment; or
o if in our judgement, investment in an Investment Account becomes
inappropriate considering the purposes of the Separate Account.
If we eliminate or combine existing divisions or transfer assets from one
division to another, you may change allocation percentages and transfer any
value in an affected division to another Investment Account(s) and/or the Fixed
Account without charge. You may exercise this exchange privilege until the
latter of 60 days after a) the effective date of the change, or b) the date you
receive notice of the options available. You may only exercise this right if you
have an interest in the affected division(s)
DISTRIBUTION OF THE POLICY
We intend to sell the Policies in all jurisdictions where we are licensed. The
Policies will be sold by licensed insurance agents who are also registered
representatives of broker-dealers registered with the SEC under the Securities
Exchange Act of 1934 who are members of the National Association of Securities
Dealers, Inc. (NASD).
The Policies will be distributed by the general distributor, Princor Financial
Services Corporation (Princor), which is an affiliate of ours. Princor is a
securities broker-dealer registered with the SEC and a member of the NASD. The
Policies may also be sold through other broker-dealers authorized by Princor and
applicable law to do so. Registered representatives of such broker-dealers may
be paid on a different basis than described below.
For Policies sold through Princor, commissions generally will be no more than
50% of premium received in the first policy year or the first year following an
adjustment up to the planned periodic premium (not to exceed target premium). In
addition, a commission of up to 3% of premium above the lesser of planned
periodic or target premium received in the first policy year (or first year
following an adjustment) may be paid. In the second through tenth years
following the policy date (or adjustment date), commissions range from 0% to 2%
of premiums received. A service fee of up to 2% is paid on premiums received
after the second policy year. Expense allowances may be paid to agents and
brokers based on premiums received.
OFFICERS AND DIRECTORS OF PRINCIPAL MANAGEMENT CORPORATION
The officers and directors of the investment advisor, Principal Management
Corporation, are shown below. This list includes some of the same people
(designated by *), who are serving in the same capacities as officers and
directors of the underwriter, Princor Financial Services Corporation. The
principal business address for each officer and director is: Principal Financial
Group, Des Moines, Iowa 50392.
* JOHN E. ASCHENBRENNER Director
CRAIG R. BARNES Vice President
* CRAIG L. BASSETT Treasurer
* MICHAEL J. BEER Senior Vice President and Chief Operating Officer
* MARY L. BRICKER Assistant Corporate Secretary
* DAVID J. DRURY Director
* ARTHUR S. FILEAN Vice President
* PAUL N. GERMAIN Vice President - Mutual Fund Operations
* ERNEST H. GILLUM Vice President - Compliance and Product Development
* THOMAS J. GRAF Director
* J. BARRY GRISWELL Chairman of the Board and Director
* JOYCE N. HOFFMAN Vice President and Corporate Secretary
* STEPHAN L. JONES Director and President
* ELLEN Z. LAMALE Director
* GREGG R. NARBER Director
* RICHARD L. PREY Director
* LAYNE A. RASMUSSEN Controller - Mutual Funds
* ELIZABETH R. RING Controller
* MICHAEL J. ROUGHTON Counsel
* JEAN B. SCHUSTEK Product Compliance Officer - Registered
Products
DEWAIN A. SPARRGROVE Vice President
OFFICERS AND DIRECTORS OF PRINCIPAL LIFE INSURANCE COMPANY
Principal Life Insurance Company is managed by a Board of Directors. The
directors and executive officers of the Company, their positions with the
Company, including Board Committee memberships, and their principal occupation
during the last five years, are as follows:
Executive Officers (other than Directors):
JOHN EDWARD ASCHENBRENNER Senior Vice President
PAUL FRANCIS BOGNANNO Senior Vice President
CHARLES ROBERT DUNCAN Senior Vice President
DENNIS PAUL FRANCIS Senior Vice President
THOMAS JEFFERSON GAARD Senior Vice President
MICHAEL HARRY GERSIE Senior Vice President
THOMAS JOHN GRAF Senior Vice President
ROBB BRYAN HILL Senior Vice President
GREGG ROSS NARBER Senior Vice President and General Counsel
MARY AGNES O'KEEFE Senior Vice President
RICHARD LEO PREY Senior Vice President
ROBERT ALLEN SLEPICKA Senior Vice President
NORMAN RAUL SORENSEN Senior Vice President
CARL CHANSON WILLIAMS Senior Vice President and Chief Information Officer
Directors:
Name, Positions and Offices Principal Occupation During Last 5 Years
- ------------------------------------------------------------------------------------
RUTH MARGARET DAVIS President and Chief Executive Officer, The Pymatuning Group, Inc.
Director
Member, Nominating Committee
DAVID JAMES DRURY Chairman and Chief Executive Officer, Principal Life Insurance Company since
Director January 1995. President and Chief Executive Officer from 1994 - 1995; President from
Chairman of the Board 1993-1994; Executive Vice President from 1992 - 1993.
Chair, Executive Committee
CHARLES DANIEL GELATT, JR. President, NMT Corporation.
Director
Member, Executive Committee
Chair, Human Resources
Committee
JOHN BARRY GRISWELL President, Principal Life Insurance Company since March 1998. Executive Vice
Director President 1996 - 1998. Senior Vice President 1988 - 1996.
GERALD DAVID HURD Retired. Chairman and Chief Executive Officer, Principal Life Insurance Company 1989
Director 1994.
Member, Executive and
Nominating Committees
CHARLES SAMUEL JOHNSON Chairman, President and Chief Executive Officer, Pioneer Hi-Bred International,
Director Inc. since December 1996. President and Chief Executive Officer 1995 - 1996.
Member, Audit Committee President and Chief Operating Officer 1995. Executive Vice President 1993 - 1995.
WILLIAM TURNBALL KERR Chairman, President & Chief Executive Officer, Meredith Corporation since January
Director 1998. President and Chief Executive Officer, 1997-1998. President and Chief Operating
Member, Executive Committee and Officer 1994-1997. Prior thereto, Executive Vice President.
Chair, Nominating Committee
LEE LIU Chairman of the Board, Alliant Corporation since April 1998. Chairman and Chief
Director Executive Officer, IES Industries, Inc., November 1996-April 1998. Prior thereto,
Member, Executive and Human Chairman, President and Chief Executive Officer.
Resources Committees
VICTOR HENDRIK LOEWENSTEIN Managing Partner, Egon Zehnder International
Director
Member, Audit Committee
RONALD DALE PEARSON Chairman, President and Chief Executive Officer, Hy-Vee, Inc.
Director
Member, Human Resources
Committee
JOHN ROY PRICE Managing Director, The Chase Manhattan Corporation since April 1996. Prior thereto,
Director Director, Chemical Banking Corporation.
Member, Nominating Committee
DONALD MITCHELL STEWART President, The College Board.
Director
Member, Human Resources
Committee
ELIZABETH EDITH TALLETT President & CEO of Dioscor, Inc. since 1996. Also, President and Chief Executive Officer
Director Ellard Pharmaceuticals, Inc. since 1997 and Chairman of Humascan, Inc. since
Chair, Audit Committee 1998. President and Chief Executive Officer, Transcell Technologies, Inc. 1992 - 1996.
DEAN DICKSON THORNTON Retired since 1993. Prior thereto President, Boeing Commercial Airplane Group.
Director
Member, Audit Committee
FRED WILLIAM WEITZ President, Chairman of the Board and Chief Executive Officer, Essex Meadows, Inc. since
Director 1995. Prior thereto, President, Chairman of the Board, and Chief Executive Officer,
Member, Human Resources The Weitz Corporation and its subsidiaries.
Committee
STATE REGULATION
The Company is subject to the laws of the State of Iowa governing insurance
companies and to regulation by the Insurance Department of the State of Iowa. An
annual statement in a prescribed form must be filed by March 1 in each year
covering our operations for the preceding year and our financial condition on
December 31 of the prior year. Our books and assets are subject to examination
by the Commissioner of Insurance of the State of Iowa or her representatives at
all times. A full examination of our operations is conducted periodically by the
National Association of Insurance Commissioners. Iowa law and regulations also
prescribe permissible investments, but this does not involve supervision of the
investment management or policy of the Company.
In addition, we are subject to the insurance laws and regulations of other
states and jurisdictions where we are licensed to operate. Generally, the
insurance departments of these states and jurisdictions apply the laws of the
state of domicile in determining the field of permissible investments.
FEDERAL TAX MATTERS
The following description is a general summary of the tax rules, primarily
related to federal income taxes, which in our opinion are currently in effect.
These rules are based on laws, regulations and interpretations that are subject
to change at any time. This summary is not comprehensive and is not intended as
tax advice. While we reserve the right to change the Policy to assure it
continues to qualify as life insurance for tax purposes, we cannot make any
guarantee regarding the future tax treatment of any Policy. You should consult a
qualified tax adviser about the tax implications of taking action under a
Policy.
Tax Status of the Company and the Separate Account
We are taxed as an insurance company under subchapter L of the Code. The
Separate Account is not a separate taxable entity. Its operations are taken into
account by us in determining our tax liability. All Separate Account investment
income and realized net capital gains are reinvested and taken into account in
determining policy values and are automatically applied to increase the book
reserves associated with the Policies.
Charges for Taxes
We impose a federal tax charge equal to 1.25% of premiums received under the
Policy to compensate us for the federal income tax liability we incur by reason
of receiving those premiums. We believe that this charge is reasonable in
relation to the increased tax burden the Company incurs as a result of Section
848 of the Code. No other charge is currently made to the Separate Account for
federal income taxes of the Company that may be attributable to the Separate
Account. Periodically, we review the appropriateness of charges to the Separate
Account for federal income taxes. In the future, a charge may be made for
federal income taxes incurred by us and attributable to the Separate Account. In
addition, depending on the method of calculating interest on policy values
allocated to the Fixed Account, a charge may be imposed for the Policy's share
of our federal income taxes attributable to the Fixed Account.
Under current law, we may incur state or local taxes (in addition to premium
taxes) in several states. At present, these taxes are not significant. If there
is a material change attributable to state or local taxes, we reserve the right
to charge the Separate Account for the portion of taxes, if any, attributable to
the Separate Account.
Diversification Standards
The Policy should qualify as a life insurance contract as long as the underlying
investments for the Policy satisfy diversification requirements of Section
817(h) of the Code.
IRS Definition of Life Insurance
The Policy should qualify as a life insurance contract as long as it satisfies
certain tests under Sections 7702 of the Code.
o The Policy qualifies if it satisfies a cash value accumulation test or
a guideline premium requirement and falls within a
cash value corridor.
o If at any time a premium is paid which would result in total premiums
exceeding the current maximum premium allowed, we only accept that
portion of the premium which would make the total premiums equal the
maximum.
Modified Endowment Contract Status
Section 7702A of the Code sets forth a classification of life insurance policies
known as "Modified Endowment Contracts." Policy loans and partial surrenders
from a policy that is classified as a modified endowment contract are taxable as
ordinary income to the owner in an amount equal to the lesser of the amount of
the loan/partial surrender or the excess of policy value over the owner's
investment in the Policy. Additionally, taxable distributions are subject to a
federal income tax penalty of 10% unless the payment is:
o made after the owner attains age 59 1/2;
o attributable to the taxpayer becoming disabled; or
o part of a series of substantially equal periodic payments (made not
less frequently than annually) made for the life or life expectancy of
the taxpayer.
Modified endowment contract classification may be avoided by limiting the amount
of premiums paid under the Policy. If you contemplate a large premium payment
under this Policy, and you wish to avoid modified endowment contract status, you
may contact us before making the payment and we will tell you the maximum amount
which can be paid into the Policy before it would become a modified endowment
contract.
Policy Surrenders and Partial Surrenders
A surrender or lapse of the Policy may have income tax consequences. Upon
surrender, the owner(s) is not taxed on the cash surrender value except for the
amount, if any, that exceeds the gross premiums paid less the untaxed portion of
any prior surrenders. The amount of any policy loan, upon surrender or lapse, is
added to the cash surrender value and treated, for this purpose, as if it had
been received. A loss incurred upon surrender is generally not deductible. The
tax consequences of a surrender may differ if the proceeds are received under
any income payment settlement option.
A total surrender of the Policy will, and a partial surrender may, be included
in your gross income to the extent that the distribution exceeds your investment
in the Policy. Partial surrenders generally are not taxable unless the total of
such surrenders exceeds total premiums paid to the date of partial surrender
less the untaxed portion of any prior partial surrenders. During the first 15
policy years, an amount may be taxable prior to your tax-free recovery of your
investment in the Policy if the partial surrender results in or is necessitated
by a reduction in death benefits. A qualified tax advisor should be consulted
regarding the tax consequences of any partial surrender during the first 15
policy years.
The increase in policy value of the Policy is not included in gross income
unless and until there is a total surrender or partial surrender under the
Policy. A complete surrender of the Policy will, and a partial surrender may, be
included in your gross income to the extent the distribution exceeds your
investment in the Policy. Transfers between the Investment Accounts and/or the
Fixed Account are not considered as distributions from the Policy and would not
be considered taxable income.
Policy Loans and Loan Interest
Loans received under the Policy are generally recognized as loans for tax
purposes and are not considered to be distributions subject to tax. Interest
paid to us as a result of a policy loan may or may not be deductible depending
on a number of factors. Due to the complexity of these factors, you should
consult a competent tax advisor as to the deductibility of interest paid on
policy loans. If the Policy is a modified endowment contract, a policy loan is
taxable to an amount equal to the lesser of the amount of the loan or the excess
of policy value over the owner's investment in the Policy.
Corporate Alternative Minimum Tax
Ownership of a Policy by certain corporations may affect the owner's exposure to
the corporate alternative minimum tax. In determining whether it is subject to
alternative minimum tax, the corporate owner must make two computations. First,
the corporation must take into account a portion of the current year's increase
in the built-in gain in its corporate owned policies. Second, the corporation
must take into account a portion of the amount by which the death benefits
received under any Policy exceed the sum of a) the premiums paid on that Policy
in the year of death, and b) the corporation's basis in the Policy (as measured
for alternative minimum tax purposes) as of the end of the corporation's tax
year immediately preceding the year of death. The corporate alternative minimum
tax does not apply to S Corporations. Such tax also does not apply to "Small
Corporations" as defined by Secition 55(c) of the Code. Corporations with gross
receipts of $5,000,000 or less for their first taxable year after 1996, with
gross receipts not exceeding $7,500,000 after the first taxable year, will meet
this definition.
Exchange or Assignment of Policies
A change of policy, or an exchange or assignment of a Policy may have tax
consequences. An assignment or exchange may result in taxable income to the
transferring owner. For complete information with respect to policy assignments
and exchanges, a qualified tax advisor should be consulted.
Withholding
Withholding is generally required on certain taxable distributions under
insurance contracts. In the case of periodic payments, the withholding is at
graduated rates. With respect to non-periodic distributions, withholding is a
flat rate of 10%. You may elect to have either non-periodic or periodic payments
made without withholding except if your tax identification number has not been
furnished to us or if the IRS has notified us that the number you furnished is
incorrect.
Other Tax Issues
Federal estate taxes and state and local estate, inheritance and other taxes may
become due depending on applicable law and your circumstances or the
circumstances of the policy beneficiary(ies) if you or the insured dies. Any
person concerned about the estate implications of the Policy should consult a
competent tax advisor.
EMPLOYEE BENEFIT PLANS
The United States Supreme Court has held that optional annuity benefits under a
qualified deferred compensation plan cannot vary on the basis of gender. Polices
are available for use in connection with employment related insurance or benefit
plans which do not vary between male and female insured of a particular age and
underwriting classification. A competent tax advisor should be consulted on
these matters.
LEGAL OPINIONS
Legal matters applicable to the issue and sale of the Policies, including our
right to issue Policies under Iowa Insurance Law, have been passed upon by Gregg
R. Narber, Senior Vice President and General Counsel.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Separate Account is a party
or which would materially affect the Separate Account.
REGISTRATION STATEMENT
This prospectus omits some information contained in the registration statement
that we have filed with the SEC. Statements contained in this prospectus are
summaries of the contents of the Policy and other legal documents.
OTHER VARIABLE INSURANCE CONTRACTS
The Company currently offers other variable life contracts that participate in
the Separate Account. In the future, we may designate additional group or
individual variable annuity contracts as participating in the Separate Account.
Reservation of Rights
The Company reserves the right to amend or terminate the special plans described
in this prospectus. Such plans include preauthorized premium payments, dollar
cost averaging (DCA) and automatic portfolio rebalancing (APR). In addition, we
reserve the right to charge a transfer fee of no more than $25 for each
unscheduled transfer after the 12th such transfer in a policy year. You would be
notified of any such action to the extent required by law.
YEAR 2000
The Year 2000 information will be added by amendment.
INDEPENDENT AUDITORS
The financial statements of the Principal Life Insurance Company Variable Life
Separate Account and the consolidated financial statements of the Principal
Financial Group(R) (comprised of Principal Life Insurance Company and its
subsidiaries) are included in this prospectus. Those statements have been
audited by Ernst & Young LLP, independent auditors, 801 Grand Avenue, Des
Moines, Iowa 50309, for the periods indicated in their reports.
CUSTOMER INQUIRIES
Your questions should be directed to: Survivorship Flexible Premium Variable
Universal Life, Principal Financial Group, P.O. Box ________, Des Moines, Iowa
_____-_______, 1-800- _____________________.
FINANCIAL STATEMENTS
The financial statements of the Company will be added by amendment.
APPENDIX A
The following tables illustrate how the policy value, surrender value and death
proceeds of the Policy may change with the investment experience of the
Investment Accounts. The tables show how these amounts in the Policy issued to
insureds with a given joint equivalent age (JEA) varies over time if planned
periodic premiums are paid annually and if the investment return of the assets
in the Investment Accounts were a uniform, gross, after-tax, annual rate of 0%,
6% or 12%. The death benefits and values would be different from those shown if
the return averaged 0%, 6% or 12%, but fluctuated above and below those averages
during the year. Both death benefit option 1 and option 2 are illustrated.
The illustrations reflect a hypothetical Policy issued to a 55 year-old male
nonsmokers and a 50 year-old female non-smoker. llustrations for younger males
or females would be more favorable than those presented. Illustrations for older
males or smokers would be less favorable.
o Illustrations 1 and 3 reflect current administrative and cost of
insurance charges.
o Illustrations 2 and 4 reflect the guaranteed maximum administration
and cost of insurance charges.
The illustrations reflect all Policy charges including:
o deductions from premiums for sales load and state and federal taxes;
o monthly administration charges;
o cost of insurance charge;
o mortality and expense risks charge; and
o contingent deferred sales load that may be deducted if the Policy were
fully surrendered or lapsed.
In addition, the illustrations reflect the average fees and expenses of the
Investment Accounts. The average fees and expenses of the Accounts may decrease
or increase in the future. Such a change would make the operating expenses
actually incurred by an Account differ from the average rate used in the
illustrations.
The illustrations are based on the assumption that:
o payments are made according to the $16,000 annual target premium
schedule;
o no values are allocated to the Fixed Account;
o no changes are made to the death benefit option or face amount;
o no policy loans and/or partial surrenders are made; and
o no riders are in effect.
Upon request, we will prepare a comparable illustration based upon the proposed
insureds' actual age, gender, smoking status, risk classification and desired
Policy features.
In advertisements or sales literature for the Policies that include performance
data for one of more of the Investment Accounts, we may include policy values,
surrender values and death benefit figures computed using the same methods that
were used in creating the following illustrations. However, the actual average
total rate of return for the specific Investment Account(s) will be used instead
of the hypothetical rates used in the following illustrations. This information
may be shown in the form of graphs, charts, tables and examples. It may include
data for periods prior to the offering of the Policy for an Account that has had
performance during such prior period (with policy charges assumed to be equal to
current charges for any period(s) prior to the offering of the Policy).
Illustration 1 PRINCIPAL LIFE INSURANCE COMPANY Initial Face Amount $1,000,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE Death Benefit Option 1
PLANNED PREMIUM $16,000 MALE AGE 55 PREFERRED NON-SMOKER, FEMALE AGE 50 PREFERRED NON-SMOKER
ASSUMING CURRENT CHARGES
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 13,646 $ 14,493 $ 15,339
2 34,440 1,000,000 1,000,000 1,000,000 26,956 29,487 32,120
3 52,962 1,000,000 1,000,000 1,000,000 39,910 44,982 50,466
4 72,410 1,000,000 1,000,000 1,000,000 52,487 60,972 70,512
5 92,831 1,000,000 1,000,000 1,000,000 64,663 77,450 92,405
6 114,272 1,000,000 1,000,000 1,000,000 76,412 94,408 116,308
7 136,786 1,000,000 1,000,000 1,000,000 87,723 111,851 142,420
8 160,425 1,000,000 1,000,000 1,000,000 98,860 130,064 171,234
9 185,246 1,000,000 1,000,000 1,000,000 109,815 149,073 203,024
10 211,309 1,000,000 1,000,000 1,000,000 121,186 169,746 239,278
11 238,674 1,000,000 1,000,000 1,000,000 133,525 192,574 280,669
12 267,408 1,000,000 1,000,000 1,000,000 145,697 216,499 326,552
13 297,578 1,000,000 1,000,000 1,000,000 157,693 241,565 377,415
14 329,257 1,000,000 1,000,000 1,000,000 169,492 267,811 433,794
15 362,520 1,000,000 1,000,000 1,000,000 181,076 295,284 496,294
20 555,508 1,000,000 1,000,000 1,078,791 239,814 457,281 929,993
25 801,815 1,000,000 1,000,000 1,769,408 287,978 658,707 1,653,652
30 1,116,173 1,000,000 1,000,000 3,001,207 313,136 911,582 2,858,293
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
0% 6% 12%
(-.78% Net) (5.22% Net) (11.22% Net)
$ 4,146 $4,993 $ 5,839
17,456 19,987 22,620
30,410 35,482 40,966
42,987 51,472 61,012
55,163 67,950 82,905
67,365 85,360 107,261
79,581 103,709 134,278
92,074 123,278 164,448
104,839 144,096 198,048
118,472 167,032 236,564
133,525 192,574 280,669
145,697 216,499 326,552
157,693 241,565 377,415
169,492 267,811 433,794
181,076 295,284 496,294
239,814 457,281 929,993
287,978 658,707 1,653,652
313,136 911,582 2,858,293
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed
to be a representation of past or future investment results. Actual investment
results may be more or less than those shown. The death benefit, accumulated
value and surrender value for a policy would be different from those shown if
actual rates of investment return applicable to the policy averaged 0%, 6% or
12% over a period of years, but also fluctuated above or below that average for
individual policy years. The death benefit, accumulated value and surrender
value for a policy would also be different from those shown, depending on the
investment allocations made to the investment divisions of the separate account
and the different rates or return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 6% or 12%, but varied
above or below that average for individual divisions. No representations can be
made that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
Illustration 2 PRINCIPAL LIFE INSURANCE COMPANY Initial Face Amount $1,000,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE Death Benefit Option 1
PLANNED PREMIUM $16,000 MALE AGE 55 PREFERRED NON-SMOKER, FEMALE AGE 50 PREFERRED NON-SMOKER
ASSUMING GUARANTEED CHARGES
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 13,527 $ 14,370 $ 15,212
2 34,440 1,000,000 1,000,000 1,000,000 26,719 29,236 31,854
3 52,962 1,000,000 1,000,000 1,000,000 39,558 44,597 50,045
4 72,410 1,000,000 1,000,000 1,000,000 52,021 60,447 69,921
5 92,831 1,000,000 1,000,000 1,000,000 64,085 76,779 91,626
6 114,272 1,000,000 1,000,000 1,000,000 75,724 93,584 115,322
7 136,786 1,000,000 1,000,000 1,000,000 86,907 110,849 141,186
8 160,425 1,000,000 1,000,000 1,000,000 97,604 128,561 169,417
9 185,246 1,000,000 1,000,000 1,000,000 107,779 146,705 200,234
10 211,309 1,000,000 1,000,000 1,000,000 117,976 166,083 235,048
11 238,674 1,000,000 1,000,000 1,000,000 127,876 186,275 273,590
12 267,408 1,000,000 1,000,000 1,000,000 137,122 206,964 315,931
13 297,578 1,000,000 1,000,000 1,000,000 145,623 228,102 362,468
14 329,257 1,000,000 1,000,000 1,000,000 153,269 249,631 413,660
15 362,520 1,000,000 1,000,000 1,000,000 159,938 271,487 470,040
20 555,508 1,000,000 1,000,000 1,000,000 173,552 383,442 857,285
25 801,815 1,000,000 1,000,000 1,615,713 131,562 491,837 1,510,012
30 1,116,173 1,000,000 2,717,176 577,969 2,587,787
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
0% 6% 12%
(-.78% Net) (5.22% Net) (11.22% Net)
$ 4,027 $4,870 $ 5,712
17,219 19,736 22,354
30,058 35,097 40,545
42,521 50,947 60,421
54,585 67,279 82,126
66,676 84,536 106,275
78,764 102,706 133,044
90,818 121,776 162,631
102,803 141,729 195,257
115,262 163,369 232,333
127,876 186,275 273,590
137,122 206,964 315,931
145,623 228,102 362,468
153,269 249,631 413,660
159,938 271,487 470,040
173,552 383,442 857,285
131,562 491,837 1,510,012
577,969 2,587,787
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed
to be a representation of past or future investment results. Actual investment
results may be more or less than those shown. The death benefit, accumulated
value and
surrender value for a policy would be different from those shown if actual rates
of investment return applicable to the policy averaged 0%, 6% or 12% over a
period of years, but also fluctuated above or below that average for individual
policy years. The death benefit, accumulated value and surrender value for a
policy would also be different from those shown, depending on the investment
allocations made to the investment divisions of the separate account and the
different rates or return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 6% or 12%, but varied
above or below that average for individual divisions. No representations can be
made that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
Illustration 3 PRINCIPAL LIFE INSURANCE COMPANY Initial Face Amount $1,000,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE Death Benefit Option 2
PLANNED PREMIUM $16,000 MALE AGE 55 PREFERRED NON-SMOKER, FEMALE AGE 50 PREFERRED NON-SMOKER
ASSUMING CURRENT CHARGES
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
-----------------------------------------------------------------------------------------------------------------------------
1 $ 16,800 $1,013,645 $1,014,492 $1,015,338 $ 13,645 $ 14,492 $ 15,338
2 34,440 1,026,950 1,029,481 1,032,113 26,950 29,481 32,113
3 52,962 1,039,890 1,044,960 1,050,441 39,890 44,960 50,441
4 72,410 1,052,439 1,060,916 1,070,446 52,439 60,916 70,446
5 92,831 1,064,566 1,077,332 1,092,261 64,566 77,332 92,261
6 114,272 1,076,237 1,094,186 1,116,029 76,237 94,186 116,029
7 136,786 1,087,433 1,111,470 1,141,922 87,433 111,470 141,922
8 160,425 1,098,440 1,129,491 1,170,454 98,440 129,491 170,454
9 185,246 1,109,251 1,148,270 1,201,886 109,251 148,270 201,886
10 211,309 1,120,458 1,168,666 1,237,681 120,458 168,666 237,681
11 238,674 1,132,609 1,191,161 1,278,492 132,609 191,161 278,492
12 267,408 1,144,571 1,214,690 1,323,647 144,571 214,690 323,647
13 297,578 1,156,327 1,239,282 1,373,596 156,327 239,282 373,596
14 329,257 1,167,853 1,264,964 1,428,829 167,853 264,964 428,829
15 362,520 1,179,122 1,291,758 1,489,885 179,122 291,758 489,885
20 555,508 1,236,636 1,450,183 1,913,868 236,636 450,183 913,868
25 801,815 1,280,334 1,638,820 2,607,998 280,334 638,820 1,607,998
30 1,116,173 1,291,024 1,843,182 3,727,763 291,024 843,182 2,727,763
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
0% 6% 12%
(-.78% Net) (5.22% Net) (11.22% Net)
- ---------------------------------------------
$ 4,145 $4,992 $ 5,838
17,450 19,981 22,613
30,390 35,460 40,941
42,939 51,416 60,946
55,066 67,832 82,761
67,190 85,139 106,982
79,291 103,328 133,780
91,654 122,705 163,668
104,275 143,294 196,910
117,743 165,951 234,967
132,609 191,161 278,492
144,571 214,690 323,647
156,327 239,282 373,596
167,853 264,964 428,829
179,122 291,758 489,885
236,636 450,183 913,868
280,334 638,820 1,607,998
291,024 843,182 2,727,763
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed
to be a representation of past or future investment results. Actual investment
results may be more or less than those shown. The death benefit, accumulated
value and surrender value for a policy would be different from those shown if
actual rates of investment return applicable to the policy averaged 0%, 6% or
12% over a period of years, but also fluctuated above or below that average for
individual policy years. The death benefit, accumulated value and surrender
value for a policy would also be different from those shown, depending on the
investment allocations made to the investment divisions of the separate account
and the different rates or return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 6% or 12%, but varied
above or below that average for individual divisions. No representations can be
made that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
Illustration 4 PRINCIPAL LIFE INSURANCE COMPANY Initial Face Amount $1,000,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE Death Benefit Option 2
PLANNED PREMIUM $16,000 MALE AGE 55 PREFERRED NON-SMOKER, FEMALE AGE 50 PREFERRED NON-SMOKER
ASSUMING CURRENT CHARGES
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Annual Investment Return of Annual Investment Return of
End of Accumulated 0% 6% 12% 0% 6% 12%
Year Premiums (1) (-.78% Net) (5.22% Net) (11.22% Net) (-.78% Net) (5.22% Net) (11.22% Net)
1 $ 16,800 $1,013,526 $1,014,369 $1,015,212 $13,526 $ 14,369 $ 15,212
2 34,440 1,026,714 1,029,230 1,031,847 26,714 29,230 31,847
3 52,962 1,039,538 1,044,575 1,050,020 39,538 44,575 50,020
4 72,410 1,051,974 1,060,391 1,069,855 51,974 60,391 69,855
5 92,831 1,063,989 1,076,661 1,091,484 63,989 76,661 91,484
6 114,272 1,075,550 1,093,364 1,115,045 75,550 93,364 115,045
7 136,786 1,086,617 1,110,469 1,140,689 86,617 110,469 140,689
8 160,425 1,097,150 1,127,942 1,168,577 97,150 127,942 168,577
9 185,246 1,107,099 1,145,743 1,198,877 107,099 145,743 198,877
10 211,309 1,116,989 1,164,634 1,232,924 116,989 164,634 232,924
11 238,674 1,126,484 1,184,154 1,270,356 126,484 184,154 270,356
12 267,408 1,135,205 1,203,929 1,311,116 135,205 203,929 311,116
13 297,578 1,143,032 1,223,840 1,355,427 143,032 223,840 355,427
14 329,257 1,149,825 1,243,739 1,403,514 149,825 243,739 403,514
15 362,520 1,155,425 1,263,450 1,455,603 155,425 263,450 455,603
20 555,508 1,159,229 1,351,485 1,784,935 159,229 351,485 784,935
25 801,815 1,098,039 1,389,085 2,250,504 98,039 389,085 1,250,504
30 1,116,173 1,293,118 2,864,115 293,118 1,864,115
Surrender Value (2)
Assuming Hypothetical Gross
Annual Investment Return of
0% 6% 12%
(-.78% Net) (5.22% Net) (11.22% Net)
$ 4,026 $ 4,869 $ 5,712
17,214 19,730 22,347
30,038 35,075 40,520
42,474 50,891 60,355
54,489 67,161 81,984
66,502 84,316 105,998
78,475 102,326 132,547
90,364 121,157 161,791
102,123 140,767 193,901
114,275 161,920 230,210
126,484 184,154 270,356
135,205 203,929 311,116
143,032 223,840 355,427
149,825 243,739 403,514
155,425 263,450 455,603
159,229 351,485 784,935
98,039 389,085 1,250,504
293,118 1,864,115
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
The death benefit, accumulated value and surrender value will differ if premiums
are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed
to be a representation of past or future investment results. Actual investment
results may be more or less than those shown. The death benefit, accumulated
value and surrender value for a policy would be different from those shown if
actual rates of investment return applicable to the policy averaged 0%, 6% or
12% over a period of years, but also fluctuated above or below that average for
individual policy years. The death benefit, accumulated value and surrender
value for a policy would also be different from those shown, depending on the
investment allocations made to the investment divisions of the separate account
and the different rates or return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 6% or 12%, but varied
above or below that average for individual divisions. No representations can be
made that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
APPENDIX B
TARGET PREMIUMS
The target premiums for the Policy are based on the joint equivalent age (JEA)
of the insureds. The JEA takes into account the gender*, age, smoking status and
risk classification of each insured. The calculation is as follows:
1. Start with the unadjusted individual ages of insured #1 and insured #2.
Call this (X1) and (X2) respectively.
2. Take each individual age and adjust for gender.
-if Male the gender adjustment is 0
-if Female the gender adjustment is minus 5
-if Unisex rating is used, the gender adjustment is minus 2
3. Take resulting individual ages from step 2 and adjust for smokers if
applicable.
-if Male Smoker the smoker adjustment is plus 3
-if Female Smoker the smoker adjustment is plus 2
-if Unisex Smoker the smoker adjustment is plus 3
4. Take resulting individual ages from step 3 and adjust for substandard
table ratings, if any.
-if table A rating then add 2
-if table B rating then add 4
-if table C rating then add 6
-if table D rating then add 8
-if table E rating then add 10
-if table F rating then add 12
-if table G rating then add 14
-if table H rating then add 15
-if rating is higher than table H then add 16.
5. The result of step 4 is the adjusted individual ages of insured #1 and
insured #1. Call this (X1A) and (X2A) respectively.
6. If (X1A) is greater than 100 then set (X1A) equal to 100.
7. If (X1B) is greater than 100 then set (X1B) equal to 100.
8. Take the difference between (X1A) and (X1B). Call this (XDIFF).
9. Look up (XDIFF) on the table below to find out what to add on to
youngest adjusted age.
XDIFF ADD ON
0 0
1 to 2 1
3 to 4 2
5 to 6 3
7 to 9 4
10 to 12 5
13 to 15 6
16 to 18 7
19 to 23 8
24 to 28 9
29 to 34 10
35 to 39 11
40 to 44 12
45 to 47 13
48 to 50 14
51 to 53 15
54 to 56 16
57 to 60 17
61 to 64 18
65 to 69 19
70 to 75 20
76 to 85 21
10. The JEA (Joint Equivalent Age) is equal to the Minimum of (X1A) and
(X1B) plus ADD ON from the table above.
Example:
Male Nonsmoker age 45 table rating A, Female Smoker age 57.
1. (X1) = 45 and (X2) = 57
2. (X1) = 45 + 0 = 45; and (X2) = 57 - 5 = 52
3. (X1) = 45 + 0 = 45; and (X2) = 52 + 2 = 54
4. (X1) = 45 + 2 = 47; and (X2) = 54 + 0 = 54
5. (XIA) = 47; (X2A) = 54
6. (XIA) is not greater than 100
7. (XIB) is not greater than 100
8. (XDIFF) = (X2A) - (X1A) = 54 - 47 = 7
9. ADD ON = 4
10. JEA = minimum of (XIA) and (X2A) + ADD ON = 47 + 4 = 51
SVUL Target Premium Rates per $1000 of Face
JEA Target JEA Target
less than 20 2.78 61 21.67
20 2.78 62 22.98
21 2.87 63 24.23
22 2.95 64 25.41
23 3.03 65 26.52
24 3.13 66 27.56
25 3.22 67 28.56
26 3.32 68 29.53
27 3.41 69 30.45
28 3.52 70 31.36
29 3.62 71 32.27
30 3.73 72 33.17
31 3.84 73 34.08
32 3.96 74 35.02
33 4.07 75 35.97
34 4.24 76 36.95
35 4.42 77 37.95
36 4.60 78 38.94
37 4.79 79 39.96
38 4.99 80 40.99
39 5.20 81 42.00
40 5.41 82 42.00
41 5.64 83 42.00
42 5.87 84 42.00
43 6.11 85 42.00
44 6.51 86 42.00
45 6.93 87 42.00
46 7.38 88 42.00
47 7.86 89 42.00
48 8.38 90 42.00
49 8.93 greater than 90 42.00
50 9.50
51 10.12
52 10.78
53 11.49
54 12.54
55 13.68
56 14.92
57 16.22
58 17.58
59 18.94
60 20.32
* The cost of insurance rate for Policies issued in states which require
unisex pricing or in connection with employment related insurance and
benefit plans is not based on the gender of the insured.
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter adopted under the authority conferred in that
section.
UNDERTAKING PURSUANT TO RULE 484
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter had been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26 OF THE INVESTMENT COMPANY ACT OF 1940
Principal Mutual Life Insurance Company represents the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Company.
REPRESENTATIONS PURSUANT TO RULE 6e-3(T) This filing is made
pursuant to Rules 6c-3 and 6e-3(T) under the Investment Company Act of 1940.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940, with respect to the Policies described in the
prospectus. Registrant makes the following representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The level of the mortality and expense risks charge is within
the range of industry practice for comparable contracts.
(3) The Registrant has concluded that there is a reasonable
likelihood that the distribution financing arrangement for the
Variable Life Separate Account will benefit the separate account
and policyowners, and it will keep and make available to the
Commission on request a memorandum setting forth the basis for
this representation.
(4) The Variable Life Separate Account will invest only in
management investment companies which have undertaken to have a
board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
The methodology used to support the representation made in paragraph (2) above
is based upon an analysis of the mortality and expense risks charges contained
in other variable life insurance policies, including scheduled and flexible
premium products. Registrant undertakes to keep and make available to the
Commission on request the documents used to support the representation in
paragraph (2) above.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The prospectus, consisting of 38 pages;
The undertaking to file reports;
The undertaking pursuant to Rule 484;
Representations pursuant to Rule 6e-3(T);
The signatures;
Written consents of the following persons:
Ernst & Young LLP
The following exhibits
1. Copies of all exhibits required by paragraph A of the
instructions as to exhibits in Form N-8B-2 are set forth
below under designations based on such instructions
1.A1 Resolution of Executive Committee of Board of Directors of
Principal Mutual Life Insurance Company establishing the
Variable Life Separate Account
1.A3A.a Distribution Agreement between Princor Financial Services
Corporation and Principal Mutual Life Insurance Company
1.A3B.a Form of Selling Agreement**
1.A3B.b Registered Representative Agreement
1.A3C Schedule of sales commissions**
1.A5.a Form of Policy
1.A5.a.i Four Year Term Insurance Rider
1.A5.a.ii Policy Split Option Rider
1.A5.a.iii Single Life Term Insurance Rider
1.A5.a.iv Enhanced Death Benefit Rider
1.A5.b Form of Policy (Unisex)
1.A5.b.i Four Year Term Insurance Rider
1.A5.b.ii Policy Split Option Rider (Unisex)
1.A5.b.iii Single Life Term Insurance Rider
1.A5.b.iv Enhanced Death Benefit Rider
1.A6.a Articles of Incorporation, as Amended of Principal
Life Insurance Company
1.A6.b By-laws of Principal Life Insurance Company
1.A10.a Form of Application**
1.A10.b Form of Supplemental Application**
2. Opinion and consent of G. R. Narber, Senior Vice President
and General Counsel
3. No financial statements will be omitted from the prospectus
pursuant to Instruction 1(b) or (c) or Part I
4. Not applicable
5. Not applicable
6. Consent of Ernst & Young LLP**
7. Description of Issuance, Transfer and Redemption Procedures
Pursuant to Rule 6e-3(T)(b)(12)(iii)
8. Powers of Attorney of Directors of Principal Life
Insurance Company
9. Opinion and Consent of Jeff Fitch, FSA, MAAA
- ---------------------------------
** To be filed by Amendment.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
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 Des Moines, and the state of Iowa, on the 29th day
of January, 1999.
PRINCIPAL LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: PRINCIPAL LIFE INSURANCE COMPANY
(Depositor)
/s/ David J. Drury
By ______________________________________________
David J. Drury
Chairman and Chief Executive Officer
Attest:
/s/ Joyce N. Hoffman
- -----------------------------------
Joyce N. Hoffman
Vice President and
Corporate Secretary
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Signature Title Date
/s/ D. J. Drury Chairman and January 29, 1999
- -------------------- Chief Executive Officer
D. J. Drury
/s/ D. C. Cunningham Vice President and January 29, 1999
- -------------------- Controller (Principal
D. C. Cunningham Accounting Officer)
/s/ M. H. Gersie Senior Vice President January 29, 1999
- -------------------- (Principal Financial
M. H. Gersie Officer)
(R. M. Davis)* Director January 29, 1999
- --------------------
R. M. Davis
(C. D. Gelatt, Jr.)* Director January 29, 1999
- --------------------
C. D. Gelatt, Jr.
(J. B. Griswell)* Director January 29, 1999
- --------------------
J. B. Griswell
(G. D. Hurd)* Director January 29, 1999
- --------------------
G. D. Hurd
(C. S. Johnson)* Director January 29, 1999
- --------------------
C. S. Johnson
(W. T. Kerr)* Director January 29, 1999
- --------------------
W. T. Kerr
(L. Liu)* Director January 29, 1999
- --------------------
L. Liu
(V. H. Loewenstein)* Director January 29, 1999
- --------------------
V. H. Loewenstein
(R. D. Pearson)* Director January 29, 1999
- --------------------
R. D. Pearson
(J. R. Price)* Director January 29, 1999
- --------------------
J. R. Price, Jr.
(D. M. Stewart)* Director January 29, 1999
- --------------------
D. M. Stewart
(E. E. Tallett)* Director January 29, 1999
- --------------------
E. E. Tallett
(D. D. Thornton)* Director January 29, 1999
- --------------------
D. D. Thornton
(F. W. Weitz)* Director January 29, 1999
- --------------------
F. W. Weitz
*By /s/ David J. Drury
------------------------------------
David J. Drury
Chairman and Chief Executive Officer
Pursuant to Powers of Attorney
Previously Filed or Included Herein
EXHIBITS
EXHIBIT INDEX
Page Number in
Sequential Numbering
Exhibit No. Description Where Exhibit Can Be Found
1.A1 Resolution of Executive Committee 12
of Board of Directors of Depositor
establishing Variable Life Separate
Account
1.A3A.a Distribution Agreement Between 17
Depositor and Principal Underwriter
1.A3B.a Form of Selling Agreement *
1.A3B.b Registered Representative Agreement 19
1.A3C Schedule of Sales Commissions *
1.A5.a Form of Policy 22
1.A5.a.i Four Year Term Insurance Rider 38
1.A5.a.ii Policy Split Option Rider 39
1.A5.a.iii Single Life Term Insurance Rider 41
1.A5.a.iv Enhanced Death Benefit Rider 42
1.A5.b Form of Policy (Unisex) 43
1.A5.b.i Four Year Term Insurance Rider 59
1.A5.b.ii Policy Split Option Rider (Unisex) 60
1.A5.b.iii Single Life Term Insurance Rider 62
1.A5.b.iv Enhanced Death Benefit Rider 63
1.A6.a Articles of Incorporation of the Depositor 64
1.A6.b By-laws of the Depositor 68
1.A10.a Form of Application *
1.A10.b Form of Supplemental Application *
2 Opinion and consent of G. R. Narber 77
Senior Vice President and General Counsel
6 Consent of Ernst & Young LLP *
7 Description of Issuance, Transfer and Redemption 78
Procedures Pursuant to Rule 6e-3(T)(b)(12)(iii)
8 Powers of Attorney of Directors of 87
Principal Mutual Life Insurance
Company.
9 Opinion and Consent of Jeff Fitch, FSA, MAAA 93
* To be filed by Amendment.