-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fk2MzK5dv6mTDuyJZD0PF3tWL9eGYCFjMNFZQzC/rAnDOoj7XBATXPUtx5saypCD LEd/YoHEkpDV6Vr4ic4zPw== 0000950150-01-500253.txt : 20010430 0000950150-01-500253.hdr.sgml : 20010430 ACCESSION NUMBER: 0000950150-01-500253 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20010427 EFFECTIVENESS DATE: 20010427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARMERS ANNUITY SEPARATE ACCOUNT A CENTRAL INDEX KEY: 0001089912 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 910335750 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 333-85183 FILM NUMBER: 1613014 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-09547 FILM NUMBER: 1613015 BUSINESS ADDRESS: STREET 1: FARMERS NEW WORLD LIFE INSURANCE CO STREET 2: 3003 77TH AVENUE S E CITY: MERCER ISLAND STATE: WA ZIP: 98040 BUSINESS PHONE: 98040 MAIL ADDRESS: STREET 1: FARMERS NEW WORLD LIFE INSURANCE CO STREET 2: 3003 77TH AVENUE S E CITY: MERCER ISLAND STATE: WA ZIP: 98040 485BPOS 1 a71651e485bpos.txt FORM N-4, POST EFFECTIVE AMENDMENT NO. 2 1 As filed with the Securities and Exchange Commission on April 27, 2001 Registration Nos. 333-85183 and 811-09547 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ================================================================================ FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. _____ [ ] Post-Effective Amendment No. 2 [X] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] Amendment No. 3 [X] FARMERS ANNUITY SEPARATE ACCOUNT A ---------------------------------- (Exact Name of Registrant) FARMERS NEW WORLD LIFE INSURANCE COMPANY ---------------------------------------- (Name of Depositor) 3003 - 77th Avenue, S.E., Mercer Island, Washington 98040 --------------------------------------------------------- (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including Area Code: -------------------------------------------------- (206) 232-8400 Name and Address of Agent for Service: Copy to: John R. Patton, FLMI, FLHC, CLU, ChFC Stephen E. Roth, Esq. Assistant Vice President and Secretary Sutherland Asbill & Brennan LLP Farmers New World Life Insurance Company 1275 Pennsylvania Avenue, N.W. 3003 - 77th Avenue, S.E. Washington, D.C. 20004-2415 Mercer Island, Washington 98040 It is proposed that this filing will become effective: [ ] Immediately upon filing pursuant to paragraph (b) of Rule 485 [X] On May 1, 2001, pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a) of Rule 485 [ ] On pursuant to paragraph (a) of Rule 485 ------------------- Title of securities being registered: Units of interest in a separate account under individual flexible premium variable annuity contracts. 2 PROSPECTUS MAY 1, 2001 Farmers Variable Annuity Individual Flexible Premium Variable Annuity issued by Farmers New World Life Insurance Company through the Farmers Annuity Separate Account A Home Office 3003 - 77th Avenue, S.E. Mercer Island, Washington 98040 Telephone: (206) 232-8400 Service Center P.O. Box 724208 Atlanta, Georgia 31139 1-877-376-8008 (toll free) 8:00 a.m. to 6:00 p.m. Eastern Time The Farmers Variable Annuity Contract (the "Contract") has 31 funding choices - one fixed account (paying a guaranteed minimum fixed rate of interest) and 30 subaccounts. The subaccounts invest in the following 30 portfolios: Calvert Variable Series, Inc. - - Calvert Social Small Cap Growth Portfolio Dreyfus Variable Investment Fund - Service Class Shares - - Quality Bond Portfolio - - Small Cap Portfolio The Dreyfus Socially Responsible Growth Fund, Inc. - Service Class Shares Fidelity Variable Insurance Products Funds ("VIP") - Service Class Shares - - Fidelity VIP Growth Portfolio - - Fidelity VIP Index 500 Portfolio - - Fidelity VIP Mid Cap Portfolio Franklin Templeton Variable Insurance Products Trust - Class 2 Shares - - Franklin Small Cap Fund - - Templeton Asset Strategy Fund - - Templeton Developing Markets Securities Fund Goldman Sachs Variable Insurance Trust - - Goldman Sachs Capital Growth Fund - - Goldman Sachs CORESM Small Cap Equity Fund - - Goldman Sachs Mid Cap Value Fund Janus Aspen Series - - Janus Aggressive Growth Portfolio (Service Shares) - - Janus Balanced Portfolio (Service Shares) - - Janus Capital Appreciation Portfolio (Institutional Shares) PIMCO Variable Insurance Trust - Administrative Class Shares - - PIMCO Foreign Bond Portfolio - - PIMCO Low Duration Bond Portfolio Scudder Variable Series I (formerly Scudder Variable Life Investment Fund) - - Scudder Bond Portfolio (Class A Shares) - - Scudder Global Discovery Portfolio (Class A Shares) - - Scudder Growth and Income Portfolio (Class A Shares) - - Scudder International Portfolio (Class A Shares) - - Scudder Money Market Portfolio Scudder Variable Series II (formerly Kemper Variable Series) - - Scudder Government Securities Portfolio - - Scudder High Yield Portfolio - - Scudder Small Cap Growth Portfolio - - SVS Dreman High Return Equity Portfolio WM Variable Trust - Class 2 Shares - - WM Equity Income Fund - - WM Mid Cap Stock Fund - - WM Small Cap Stock Fund Variable annuity contracts involve certain risks, and you may lose some or all of your investment. - - The investment performance of the portfolios in which the subaccounts invest will vary. - - We do not guarantee how any of the portfolios will perform. - - The Contract is not a deposit or obligation of any bank, and no bank endorses or guarantees the Contract. - - Neither the U.S. Government nor any federal agency insures your investment in the Contract. The SEC has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Anyone who tells you otherwise is committing a federal crime. 3 This prospectus must be accompanied or preceded by a current prospectus for each of the portfolios listed above. PLEASE READ THIS PROSPECTUS CAREFULLY BEFORE INVESTING, AND KEEP IT FOR FUTURE REFERENCE. IT CONTAINS IMPORTANT INFORMATION ABOUT THE FARMERS VARIABLE ANNUITY. To learn more about the Contract, you may want to read the Statement of Additional Information dated May 1, 2001(known as the "SAI"). For a free copy of the SAI, contact us at: Farmers New World Life Insurance Company SERVICE CENTER P.O. Box 724208 Atlanta, Georgia 31139 1-877-376-8008 (toll free) We have filed the SAI with the U.S. Securities and Exchange Commission ("SEC") and have incorporated it by reference into this prospectus. (It is legally a part of this prospectus.) The SAI's table of contents appears at the end of this prospectus. The SEC maintains an Internet website (http://www.sec.gov) that contains the SAI and other information about us. You may also read and copy these materials at the SEC's public reference room in Washington, D.C. Call 1-800-SEC-0330 for information about the SEC's public reference room. 4 TABLE OF CONTENTS Glossary.................................................................... 1 Highlights.................................................................. 3 The Contract.............................................................. 3 How to Invest............................................................. 3 Cancellation - The Right To Examine Period................................ 4 Investment Options........................................................ 4 Transfers................................................................. 5 Automatic Asset Rebalancing Program....................................... 6 Dollar Cost Averaging Program............................................. 6 Access to Your Money...................................................... 6 Standard Death Benefit.................................................... 6 Guaranteed Minimum Death Benefit.......................................... 7 Fees and Charges.......................................................... 7 Annuity Provisions........................................................ 8 Guaranteed Retirement Income Benefit...................................... 9 Federal Tax Status........................................................ 9 Inquiries................................................................. 9 Fee Table................................................................... 11 Examples...................................................................16 Condensed Financial Information........................................... 20 About Farmers New World Life Insurance Company and the Variable Account..... 20 Farmers New World Life Insurance Company.................................. 20 Farmers Annuity Separate Account A........................................ 21 The Portfolios.............................................................. 21 Investment Objectives of the Portfolios................................... 22 Availability of the Portfolios............................................ 24 The Pay-In Period........................................................... 25 Purchasing a Contract..................................................... 25 Cancellation - The 10 Day Right to Examine Period......................... 25 Designating Your Investment Options....................................... 25 Tax-Free `Section 1035' Exchanges......................................... 26 Additional Premium Payments............................................... 26 Your Contract Value......................................................... 27 Variable Account Value.................................................... 27 Transfers Between Investment Options........................................ 28 Automatic Asset Rebalancing Program....................................... 29 Third Party Transfers..................................................... 29 Excessive Trading Limits.................................................. 30 Dollar Cost Averaging Program............................................. 30 Telephone Transfers....................................................... 30 Transfer Fee.............................................................. 31 Access to Your Money........................................................ 31 Surrenders................................................................ 31 Partial Withdrawals....................................................... 32 Systematic Withdrawal Plan................................................ 33 Death Benefits.............................................................. 33 Death Benefits Before the Annuity Start Date.............................. 33 Guaranteed Minimum Death Benefit.......................................... 34 Distribution Upon Death................................................... 35 Death Benefits on or After the Annuity Start Date......................... 36 -i- 5 Fees and Charges............................................................ 29 Mortality and Expense Risk Charge......................................... 29 Asset-Based Administration Charge......................................... 29 Transfer Fee.............................................................. 29 Surrender Charge.......................................................... 29 Records Maintenance Charge................................................ 31 Portfolio Management Fees and Expenses.................................... 32 Premium Taxes............................................................. 32 Other Taxes............................................................... 32 The Payout Period........................................................... 32 The Annuity Start Date.................................................... 32 Annuity Options........................................................... 32 Determining the Amount of Your Annuity Payment............................ 33 Fixed Annuity Payments.................................................... 33 Guaranteed Annuity Tables................................................. 33 Description of Annuity Options............................................ 34 Guaranteed Retirement Income Benefit........................................ 34 The Fixed Account........................................................... 36 Fixed Account Value....................................................... 37 Fixed Account Transfers................................................... 37 Investment Performance of the Subaccounts................................... 37 Voting Rights............................................................... 39 Federal Tax Matters......................................................... 39 Taxation of Non-Qualified Contracts....................................... 39 Taxation of Qualified Contracts........................................... 41 Other Tax Issues.......................................................... 42 Our Income Taxes.......................................................... 42 Possible Tax Law Changes.................................................. 42 Other Information........................................................... 42 Payments.................................................................. 42 Modification.............................................................. 43 Distribution of the Contracts............................................. 43 Legal Proceedings......................................................... 44 Reports to Owners......................................................... 44 State Variations.......................................................... 44 Inquiries................................................................. 44 Financial Statements...................................................... 44 Statement of Additional Information Table of Contents..................... 45 Appendix A.................................................................. A-1 -ii- 6 GLOSSARY ================================================================================ For your convenience, we are providing a glossary of the special terms we use in this prospectus. ACCUMULATION UNIT An accounting unit we use to calculate subaccount values during the pay-in period. It measures the net investment results of each of the subaccounts. ANNUITANT You are the annuitant, unless you state otherwise in your application. Before any annuity payments begin, the annuitant is the person (or persons) on whose life (or lives) the Contract is issued. When annuity payments begin, the annuitant is a person during whose lifetime we may make payments under one of the annuity options. You may select joint annuitants. ANNUITY START DATE The date when we will begin to pay annuity payments to you or a person you designate under the annuity option you selected. BENEFICIARY The person you select to receive the death benefit if you or the last surviving annuitant die before the annuity start date. CASH VALUE The Contract Value minus any applicable surrender charge, records maintenance charge, and premium tax. COMPANY (WE, US, OUR, FARMERS) Farmers New World Life Insurance Company. CONTRACT MONTH, YEAR OR ANNIVERSARY A month, year or anniversary as measured from the issue date. CONTRACT VALUE The sum of the amounts you have accumulated under the Contract. It is equal to the money you have under the Contract in the variable account and the fixed account. FINAL ANNUITY DATE The Contract anniversary when the oldest annuitant is age 95. FIXED ACCOUNT An option to which you can direct your money under the Contract. It provides a guarantee of principal and interest. The assets supporting the fixed account are held in our general account and are not part of, or dependent on, the investment performance of the variable account. FIXED ACCOUNT VALUE Your Contract Value in the fixed account. FREE WITHDRAWAL AMOUNT An amount you can withdraw each Contract year as a partial withdrawal without incurring a surrender charge. FUNDS Investment companies that are registered with the SEC. This Contract allows you to invest in the portfolios of the funds that are listed on the front page of this prospectus. GENERAL ACCOUNT The account containing all of Farmers' assets, other than those held in its separate accounts. HOME OFFICE The address of our Home Office is 3003 - 77th Avenue, S.E., Mercer Island, Washington 98040. ISSUE DATE The date on which we credit the initial premium payment to your Contract. It is also the date when, depending on your state of residence, we allocate your premium(s) either entirely to the fixed account, or to the fixed account and the subaccounts you selected on your application. NET INVESTMENT FACTOR The factor we use to determine the value of an accumulation unit at the end of each valuation period. We determine the net investment factor separately for each subaccount. -1- 7 PAY-IN PERIOD The period that begins when we issue your Contract and ends on the annuity start date. During the pay-in period, earnings accumulate on a tax-deferred basis until you take money out. PAYOUT PERIOD The period beginning on the annuity start date during which you or the person you designate will receive annuity payments. PORTFOLIO A separate investment portfolio of a fund. Each subaccount invests exclusively in one portfolio of a fund. PREMIUM PAYMENT Amount you pay to us for the Contract. When we use the term "premium payment" in this prospectus, it means a premium payment less any applicable premium taxes. QUALIFIED CONTRACT A Contract issued in connection with a retirement plan that qualifies for special federal income tax treatment under the Tax Code. SERVICE CENTER The address of the Service Center is P.O. Box 724208, Atlanta, Georgia 31139. McCamish Systems, L.L.C. Insurance Administrators is the administrator of the Contract. You can call the Service Center office toll-free at 1-877-376-8008. SUBACCOUNT A subdivision of the variable account that invests exclusively in shares of one portfolio of a fund. The investment performance of each subaccount is linked directly to the investment performance of the portfolio in which it invests. SURRENDER The termination of a Contract at the option of the owner. TAX CODE The Internal Revenue Code of 1986, as amended. VALUATION DAY/BUSINESS DAY Each day that the New York Stock Exchange ("NYSE") is open for trading. Farmers New World Life Insurance Company is open to administer the Contract on each day the NYSE is open. VALUATION PERIOD The period of time over which we determine the change in the value of the subaccounts in order to price accumulation units. Each valuation period begins at the close of normal trading on the NYSE (currently 4:00 p.m. Eastern time, 1:00 p.m. Pacific Time) on each Valuation Day and ends at the close of normal trading on the NYSE on the next Valuation Day. VARIABLE ACCOUNT Farmers Annuity Separate Account A. It is a separate investment account divided into subaccounts, each of which invests in a corresponding portfolio of a designated fund. VARIABLE ACCOUNT VALUE The portion of the total value of your Contract that is allocated to the subaccounts of the variable account. WRITTEN NOTICE The written notice you must sign and send to us to request or exercise your rights as owner under the Contract. To be complete, it must: (1) be in a form we accept; (2) contain the information and documentation that we determine is necessary, and (3) be received at our Service Center. YOU (YOUR, OWNER) The person(s) entitled to exercise all rights as owner under the Contract. -2- 8 HIGHLIGHTS ================================================================================ These highlights provide only a brief overview of the more important features of the Contract. More detailed information about the Contract appears later in this prospectus. PLEASE READ THE REMAINDER OF THIS PROSPECTUS CAREFULLY. THE CONTRACT An annuity is a contract between you (the Contract owner) and an insurance company (Farmers) in which you agree to make one or more payments to us and, in return, we agree to pay a series of payments to you at a later date. The Farmers Variable Annuity Contract is a special kind of annuity that is: - FLEXIBLE PREMIUM - you may add premium payments at any time. - TAX-DEFERRED - you generally do not have to pay taxes on earnings until you take money out by surrender, partial cash withdrawals, or we make annuity payments to you, or we pay the death benefit. - VARIABLE - you can direct your premium into any of 30 subaccounts. Each subaccount invests exclusively in a single portfolio of a fund. The money you invest in the subaccounts will fluctuate daily based on the performance of the portfolios. You bear the investment risk on the amounts you invest in the subaccounts. You can also direct money to the fixed account. Amounts in the fixed account earn interest annually at a fixed rate that is guaranteed by us never to be less than 3%, and may be more. We guarantee the interest, as well as principal, on money placed in the fixed account. The Contract allows you to select on your application, for an additional fee: - the optional Guaranteed Minimum Death Benefit, and/or - the optional Guaranteed Retirement Income Benefit. These riders may not be available in all states, and may vary by state. Like all deferred annuities, the Contract has two phases: the "pay-in" period and the "payout" period. During the pay-in period, you can allocate money to any combination of investment alternatives. Any earnings on your investments accumulate tax-deferred. The payout period begins once you start receiving regular annuity payments from the Contract. The Contract allows you to receive annuity payments under one of three fixed annuity payment options. Unless you opt for the Guaranteed Retirement Income Benefit, the money you can accumulate during the pay-in period will directly determine the dollar amount of any annuity payments you receive. This Contract cannot be offered in any state where it is not lawful to make such offer. HOW TO INVEST You may obtain a Contract application from your Farmers agent who is also a licensed registered representative. You may purchase the Contract with a single payment of $500 or more. We will not issue a Contract if you are older than age 90 on the issue date. You can pay additional premiums of $500 or more ($50 or more if you authorize us to draw on an account by check or electronic debit) at any time before the annuity start date. You must send all premium -3- 9 payments to the Service Center in Atlanta, Georgia at the address listed on the front cover of this prospectus. We may limit the total premium(s) paid to us during any Contract year. CANCELLATION - THE RIGHT TO EXAMINE PERIOD You may return your Contract to us for a refund within 10 days after you receive it. In most states, the amount of the refund will be the total premiums we have received, plus (or minus) any gains (or losses) in the amounts you invested in the subaccounts. If state law requires a return of premium, we will refund the greater of your original premium or the Contract Value on the date we receive the returned Contract at our Home Office at the address shown on the front page of this prospectus. If you purchase a qualified Contract, we will return the premium(s) paid. If your state requires us to return your premium or if you have purchased a qualified Contract, we will place your premium(s) in the fixed account for the number of days in your state's right to examine period, plus 10 days. We will pay the refund within 7 calendar days after we receive the Contract. The Contract will then be deemed void. In some states you may have more than 10 days to return the Contract. INVESTMENT OPTIONS You may invest your money in any of 30 portfolios by directing it into the corresponding subaccount. The portfolios now available to you under the Contract are: Calvert Variable Series, Inc. Janus Aspen Series - Calvert Social Small Cap Growth Portfolio - Janus Aggressive Growth Portfolio (Service Shares) - Janus Balanced Portfolio (Service Shares) Dreyfus Variable Investment Fund - Service Class Shares - Janus Capital Appreciation Portfolio (Institutional Shares) - Quality Bond Portfolio - Small Cap Portfolio PIMCO Variable Insurance Trust - Administrative Class Shares The Dreyfus Socially Responsible Growth Fund, Inc. - Service Shares - PIMCO Foreign Bond Portfolio - PIMCO Duration Bond Portfolio Fidelity Variable Insurance Products Funds ("VIP") - Service Class Shares Scudder Variable Series I (formerly Scudder Variable Life - Fidelity VIP Growth Portfolio Investment Fund) - Fidelity VIP Index 500 Portfolio - Scudder Bond Portfolio (Class A Shares)
-4- 10 - Fidelity VIP Mid Cap Portfolio - Scudder Global Discovery Portfolio (Class A Shares) - Scudder Growth and Income Portfolio (Class A Shares) Franklin Templeton Variable Insurance Products Trust - Class 2 Shares - Scudder International Portfolio (Class A Shares) - Franklin Small Cap Fund - Scudder Money Market Portfolio - Templeton Asset Strategy Fund - Templeton Developing Markets Securities Fund Scudder Variable Series II (formerly Kemper Variable Series) - Scudder Government Securities Portfolio Goldman Sachs Variable Insurance Trust - Scudder High Yield Portfolio - Goldman Sachs Capital Growth Fund - Scudder Small Cap Growth Portfolio - Goldman Sachs CORE(SM) Small Cap Equity Fund - SVS Dreman High Return Equity Portfolio - Goldman Sachs Mid Cap Value Fund WM Variable Trust - Class 2 Shares - WM Equity Income Fund - WM Mid Cap Stock Fund - WM Small Cap Stock Fund
EACH ALLOCATION TO A SUBACCOUNT OR THE FIXED ACCOUNT MUST BE AT LEAST $500. Each subaccount invests exclusively in shares of one portfolio of a fund. Each portfolio's assets are held separately from the other portfolios and each portfolio has separate investment objectives and policies. The portfolios are described in their own prospectuses that accompany this prospectus. The value of your investment in the subaccounts will fluctuate daily based on the investment results of the portfolios in which you invest, and on the fees and charges we deduct. DEPENDING ON MARKET CONDITIONS, YOU CAN GAIN OR LOSE MONEY IN ANY OF THE SUBACCOUNTS. WE RESERVE THE RIGHT TO OFFER OTHER INVESTMENT CHOICES IN THE FUTURE. You may also direct your money to the fixed account and receive a guaranteed rate of return. Money you place in the fixed account will earn interest for one-year periods at a fixed rate that we guarantee to be not less than 3.0%. TRANSFERS You have the flexibility to transfer assets within your Contract. At any time during the pay-in period and after the Right to Examine Period, you may transfer amounts among the subaccounts and between the fixed account and the subaccounts. Certain restrictions apply: - transfers must be at least $100, or the total value in a subaccount or fixed account, if less; - Contract Value remaining in a subaccount or the fixed account must be at least $500, or we will transfer the total value; - only one transfer may be made from the fixed account each Contract year. The transfer must be made during the 30 days following a Contract anniversary; and - transfers cannot be made from any subaccount to the fixed account during the 6 month period following any transfer from the fixed account into one or more subaccounts. -5- 11 You may make 12 free transfers each Contract year. We impose a $25 charge per transfer on each transfer after the twelfth during a Contract year. Transfers made under the asset rebalancing or dollar cost averaging programs do not count toward the 12 free transfers. AUTOMATIC ASSET REBALANCING PROGRAM Under the automatic asset rebalancing program, we will automatically transfer amounts among the subaccounts on a quarterly basis so that the allocation of your Contract Value matches the percentages you specify. DOLLAR COST AVERAGING PROGRAM The dollar cost averaging program permits you to systematically transfer (on each monthly anniversary of the issue date) a set dollar amount from the fixed account to up to 8 subaccounts. Dollar cost averaging is available only during the pay-in period. The minimum transfer amount is $100. Access to Your Money During the pay-in period, you may receive a cash withdrawal of part of your cash value once each calendar quarter. You may also fully withdraw all your value from the Contract and receive its cash value. This is called a surrender. Partial withdrawals are subject to the following conditions: - the minimum amount you can withdraw is $100; and - you may not make a partial withdrawal if the withdrawal plus the surrender charge would cause the Contract Value to fall below $500. Surrenders and partial withdrawals may be subject to a surrender charge. In any Contract year, you may withdraw a portion of your Contract Value, called the free withdrawal amount, without incurring a surrender charge. We offer a systematic withdrawal plan whereby, after the first Contract year, you may receive periodic payments of at least $100 on a monthly basis during the pay-in period. You may have to pay federal income taxes on any money you fully or partially withdraw from the Contract, and a 10% federal penalty tax if you take a withdrawal before you reach 59 1/2 years old. Access to amounts held in qualified Contracts may be restricted or prohibited. Standard Death Benefit We will pay a death benefit to the beneficiary on the death of either any owner or the last surviving annuitant before the annuity start date. If you do not select the Guaranteed Minimum Death Benefit on your application and if an annuitant (including an owner who is an annuitant) dies before his or her 80th birthday, the death benefit equals the standard death benefit, which is the greater of: - the Contract Value on the later of the date that we receive due proof of death and the date when we receive the beneficiary's instructions on payment method; or -6- 12 - the minimum death benefit. The minimum death benefit equals the sum of all premiums paid, minus proportional reductions for withdrawals. In all other cases, the death benefit equals the Contract Value determined on the later of the date that we receive due proof of death and the date when we receive the beneficiary's instructions on payment method. Guaranteed Minimum Death Benefit The Guaranteed Minimum Death Benefit provides an enhanced death benefit in the event of the death of the last surviving annuitant before the annuity start date. This benefit is payable on the death of an owner only if that owner is the last surviving annuitant. You may select the Guaranteed Minimum Death Benefit only on your Contract application. We will deduct an additional daily charge from the subaccounts at an annual rate of 0.25% for this benefit. On the death of the last surviving annuitant, the Guaranteed Minimum Death Benefit will equal the greatest of the following: - the standard death benefit described above; - premiums you paid accumulated daily with interest compounded at 4% per year until the earlier of: (i) the date of death, or (ii) the Contract anniversary on or next following the last surviving annuitant's 80th birthday; minus proportional reductions for withdrawals; or - the Greatest Anniversary Value on any Contract anniversary through the earlier of the date of death or the Contract anniversary on or next following the last surviving annuitant's 80th birthday, minus proportional reductions for withdrawals. A different death benefit calculation applies if the last surviving annuitant dies after the Contract anniversary on or next following the annuitant's 80th birthday. See "Death Benefits." Fees and Charges MORTALITY AND EXPENSE RISK CHARGE. We will deduct a daily mortality and expense risk charge from your value in the subaccounts at an annual rate of 0.95% (1.20% if you select either the Guaranteed Minimum Death Benefit or the Guaranteed Retirement Income Benefit; 1.45% if you choose both benefits). ASSET-BASED ADMINISTRATIVE CHARGE. We will deduct a daily administrative charge from your value in each subaccount at an annual rate of 0.20%. RECORDS MAINTENANCE CHARGE. We deduct a Records Maintenance Charge of $30 from your Contract Value on the last valuation day of each Contract year during the pay-in period, on the date when the Contract is surrendered, and on the annuity start date. We will waive this charge if your Contract Value is $50,000 or more on the date the charge would be assessed. TRANSFER FEE. You may make 12 free transfers each Contract year. We impose a $25 charge per transfer on each transfer after the twelfth during a Contract year before the annuity start date. SURRENDER CHARGE. During the pay-in period, you may withdraw all or part of your cash value before your death. Certain withdrawals may be taken without payment of any surrender charge. Other withdrawals are subject to surrender charges. -7- 13 We calculate the surrender charge from the date you made the premium payment(s) being withdrawn. The surrender charge applies during the entire seven year period following each premium payment, and will vary depending on the number of years since you made the premium payment(s) being withdrawn.
NUMBER OF COMPLETE YEARS FROM DATE OF PREMIUM PAYMENT: 0 1 2 3 4 5 6 7+ --------------------------------------------------- SURRENDER CHARGE: 7% 6% 5% 5% 4% 3% 2% 0
In determining surrender charges, we will treat your premium payments as being withdrawn in the order in which we received them - that is on a first-in, first-out basis. We do not assess a surrender charge on: - the death benefit; - on the withdrawal of premium payments you paid us more than seven years ago; - on withdrawals that qualify under the waiver of surrender charge riders as extended hospitalization or confinement to a skilled nursing facility or terminal illness (see "Surrender Charge"); or - on the free withdrawal amount. Each Contract year, you may withdraw the free withdrawal amount which is an amount up to the greater of: - Contract Value minus the excess of total premiums over prior withdrawals that were previously assessed a surrender charge; or - 10% of the Contract Value determined at the time the withdrawal is requested. PREMIUM TAXES. We will deduct state premium taxes, which currently range from 0% up to 3.5%, if your state requires us to pay the tax. If applicable, we will make the deduction either: (a) from premium payments as we receive them, (b) from your Contract Value upon surrender or partial withdrawal, (c) on the annuity start date, or (d) upon payment of a death benefit. PORTFOLIO MANAGEMENT FEES AND EXPENSES. Each portfolio deducts portfolio management fees and expenses from the amounts you have invested in the portfolios through the subaccounts. You pay these fees and expenses indirectly. In addition, some portfolios deduct 12b-1 fees and service fees. For 2000, these charges ranged from 0.44% to 1.81% annually. See the Fee Table in this Prospectus and the prospectuses for the portfolios. COMPENSATION. For information concerning compensation paid for the sale of the Contracts, see "Distribution of the Contracts." Annuity Provisions ANNUITY OPTIONS. The Contract allows you to receive income payments under one of three fixed annuity options beginning on the annuity start date you select. The latest annuity start date you may select is the Contract anniversary when the oldest annuitant is age 95. You may receive income payments for a specific period of time, or for life with or without a guaranteed number of payments. -8- 14 We will use your cash value (less any applicable premium taxes) on the annuity start date to calculate the amount of your income payments under the annuity option you choose. Guaranteed Retirement Income Benefit The Guaranteed Retirement Income Benefit provides a minimum guaranteed lifetime fixed income benefit in the form of fixed monthly annuity payments, once the Contract has been in force for at least 10 Contract years. You may select the Guaranteed Retirement Income Benefit only on your Contract application. We will deduct an additional daily charge from the subaccounts at an annual rate of 0.25% for this benefit. The amount of income payments we will pay under the Guaranteed Retirement Income Benefit is determined by applying the income base (less applicable taxes) to the guaranteed annuity table rates in your Contract for the annuity option you select. On the annuity start date, the amount of income payments we will pay under the Contract will be the greater of: - the dollar amount determined under the Guaranteed Retirement Income Benefit; and - the dollar amount determined by applying the Contract's cash value to the income benefits, annuity options and annuity tables described in your Contract. The income base under the Guaranteed Retirement Income Benefit equals the greater of: (i) premiums you paid accumulated daily with interest compounded at 5.00% per year through the earlier of the annuity start date and the Contract anniversary on or next following the oldest joint annuitant's 80th birthday, with a proportional reduction for withdrawals; and (ii) the Greatest Anniversary Value for the Contract anniversaries through the earlier of the annuity start date and the Contract anniversary on or next following the oldest joint annuitant's 80th birthday, with a proportional reduction for withdrawals Federal Tax Status Generally, a Contract's earnings are not taxed until you take them out. For federal tax purposes, if you take money out during the pay-in period, including a surrender or partial withdrawal payment, earnings come out first and are taxed as ordinary income. If you are younger than 59 1/2 when you take money out, you also may be charged a 10% federal penalty tax on earnings. The annuity payments you receive during the payout phase are considered partly a return of your original investment so that part of each payment is not taxable as income until the "investment in the contract" has been fully recovered. Death benefits are taxable and generally are included in the income of the recipient as follows: if received under an annuity option, death benefits are taxed in the same manner as annuity payouts; if not received under an annuity option (for instance, if paid out in a lump sum), death benefits are taxed in the same manner as a surrender or full withdrawal. Different tax consequences may apply for a qualified Contract. For a further discussion of the federal tax status of variable annuity contracts, see "Federal Tax Status." Inquiries If you need additional information, please contact us at: -9- 15 Service Center P.O. Box 724208 Atlanta, Georgia 31139 1-877-376-8008 (toll-free) 8:00 a.m. to 6:00 p.m. Eastern Time -10- 16 Fee Table ================================================================================ The purpose of the Fee Table is to help you understand the various costs and expenses that you will pay directly and indirectly by investing in the subaccounts. The Fee Table shows the historic fees and expenses for each portfolio for the fiscal year ended December 31, 2000, except as stated in the footnotes. Expenses for the portfolios are not fixed or specified under the terms of the Contract. Actual portfolio expenses in future years may be higher or lower than the figures stated below. YOUR TRANSACTION EXPENSES
Sales Charge Imposed on Premium Payments................... None Maximum Surrender Charge (as a percentage of your premium payment) (1)............ 7.0% Transfer Fee............................................... No fee for the first 12 transfers in a Contract year; then $25 per additional transfer RECORDS MAINTENANCE CHARGE (2)..................................... $30
VARIABLE ACCOUNT ANNUAL EXPENSES (as a percentage of average daily net assets in the subaccounts) With Both the Guaranteed Minimum Death Benefit AND the Guaranteed Retirement Income Benefit Mortality and Expense Risk Charge....................................................... 1.45% Administrative Expenses................................................................. 0.20% Total Variable Account Annual Expenses.................................................. 1.65% With Either the Guaranteed Minimum Death Benefit OR the Guaranteed Retirement Income Benefit Mortality and Express Risk Charge....................................................... 1.20% Administrative Expenses................................................................. 0.20% Total Variable Account Annual Expenses.................................................. 1.40% With Standard Death Benefit Only Mortality and Expense Risk Charge....................................................... 0.95% Administrative Expenses................................................................. 0.20% Total Variable Account Annual Expenses.................................................. 1.15%
-11- 17 ANNUAL PORTFOLIO EXPENSES (as a percentage of average daily net assets in the subaccounts after fee waivers and expense reimbursements)
TOTAL MANAGEMENT 12b-1 SERVICE OTHER ANNUAL NAME OF PORTFOLIO FEES FEES FEES EXPENSES EXPENSES - ----------------- ---------- ----- ------- -------- -------- Calvert Variable Series, Inc.(3) Calvert Social Small Cap Growth Portfolio 1.00% 0.00% 0.00% 0.61% 1.61% Dreyfus Variable Investment Fund (Service Class Shares)(4) Quality Bond Portfolio 0.65% 0.25% 0.00% 0.07% 0.97% Small Cap Portfolio 0.75% 0.25% 0.00% 0.03% 1.03% The Dreyfus Socially Responsible Growth Fund, Inc. (Service Class Shares)(4) 0.75% 0.25% 0.00% 0.03% 1.03% Fidelity Variable Insurance Products Funds ("VIP") (Service Class Shares)(5) Fidelity VIP Growth Portfolio 0.57% 0.10% 0.00% 0.09% 0.76% Fidelity VIP Index 500 Portfolio(6) 0.24% 0.10% 0.00% 0.10% 0.44% Fidelity VIP Mid Cap Portfolio 0.57% 0.10% 0.00% 0.17% 0.84% Franklin Templeton Variable Insurance Products Trust (Class 2 Shares)(7) Franklin Small Cap Fund(8) 0.49% 0.25% 0.00% 0.28% 1.02% Templeton Asset Strategy Fund 0.60% 0.25% 0.00% 0.22% 1.07% Templeton Developing Markets Securities Fund 1.25% 0.25% 0.00% 0.31% 1.81% Goldman Sachs Variable Insurance Trust(9) Goldman Sachs Capital Growth Fund 0.75% 0.00% 0.00% 0.25% 1.00% Goldman Sachs CORE(SM) Small Cap Equity Fund 0.75% 0.00% 0.00% 0.25% 1.00% Goldman Sachs Mid Cap Value Fund 0.80% 0.00% 0.00% 0.25% 1.05% Janus Aspen Series(10) Janus Aggressive Growth Portfolio (Service 0.65% 0.25% 0.00% 0.02% 0.92% Shares) Janus Balanced Portfolio (Service Shares) 0.65% 0.25% 0.00% 0.02% 0.92% Janus Capital Appreciation Portfolio 0.65% 0.00% 0.00% 0.02% 0.67% (Institutional Shares) PIMCO Variable Insurance Trust (Administrative Class Shares)(11) PIMCO Foreign Bond Portfolio 0.25% 0.00% 0.15% 0.51% 0.91% PIMCO Low Duration Bond Portfolio 0.25% 0.00% 0.15% 0.25% 0.65% Scudder Variable Series I(12) Scudder Bond Portfolio (Class A Shares) 0.48% 0.00% 0.00% 0.10% 0.58% Scudder Global Discovery Portfolio (Class A 0.95% 0.00% 0.00% 0.30% 1.25% Shares)(13) Scudder Growth and Income Portfolio (Class A 0.48% 0.00% 0.00% 0.08% 0.56% Shares) Scudder International Portfolio (Class A Shares) 0.82% 0.00% 0.00% 0.14% 0.96% Scudder Money Market Portfolio 0.37% 0.00% 0.00% 0.09% 0.46% Scudder Variable Series II(14) Scudder Government Securities Portfolio 0.55% 0.00% 0.00% 0.05% 0.60% Scudder High Yield Portfolio 0.60% 0.00% 0.00% 0.08% 0.68% Scudder Small Cap Growth Portfolio 0.65% 0.00% 0.00% 0.07% 0.72% SVS Dreman High Return Equity Portfolio(15) 0.75% 0.00% 0.00% 0.09% 0.84% WM Variable Trust (Class 2 Shares)(16) WM Equity Income Fund 0.63% 0.25% 0.00% 0.18% 1.06%
-12- 18
TOTAL MANAGEMENT 12b-1 SERVICE OTHER ANNUAL NAME OF PORTFOLIO FEES FEES FEES EXPENSES EXPENSES - ----------------- ---------- ----- ------- -------- -------- WM Mid Cap Stock Fund 0.75% 0.25% 0.00% 0.11% 1.11% WM Small Cap Stock Fund 0.86% 0.25% 0.00% 0.07% 1.18%
(1) We do not assess a surrender charge on death benefit payments. We do assess a surrender charge if you surrender your Contract, partially withdraw its cash value, or annuitize under the Contract while surrender charges are applicable. (2) We will also deduct the Records Maintenance Charge on the annuity start date or the date you surrender your Contract. We waive this fee for Contracts with a Contract Value of $50,000 or more on the date the fee is assessed. (3) "Other Expenses" for the Calvert Social Small Cap Growth Portfolio reflect an indirect fee. Total Annual Expenses after reduction for fees paid indirectly would be 1.26% for this portfolio. -13- 19 (4) The Fees shown for the Dreyfus portfolios are for the fiscal year ended December 31, 2000, except that they have been restated to reflect the 12b-1 Fee for the Service Class Shares. The 12b-1 Fees deducted from the Service Class Shares of these portfolios are paid to Farmers for certain administrative and account maintenance services provided by Farmers to Contract owners investing in those portfolios. Other Expenses for the Service Share Class are based on other expenses for the Initial Share Class for the past fiscal year. See the accompanying prospectus for more details. (5) Actual Total Annual Expenses for Service Class shares of the Fidelity VIP Growth and Mid Cap Portfolios were lower than those shown in the Fee Table because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying prospectus for the Fidelity VIP Funds for details. (6) Total Annual Expenses for Service Class shares of the Fidelity VIP Index 500 Portfolio are based on estimated expenses. (7) Class 2 shares of Franklin Templeton Variable Insurance Products Trust have a distribution plan or "Rule 12b-1 Plan" which is paid to Farmers for certain administrative and account maintenance services provided by Farmers to Contract owners investing in this Fund. The Rule 12b-1 Plan is described in the portfolios' prospectus. Because these fees are paid out of Class 2's assets on an on-going basis, over time these fees will increase the cost of an investment, and may cost more than paying other types of sales charges. (8) Total Annual Expenses for the Franklin Small Cap Fund differ from the ratio of expenses to average net assets shown in the Financial Highlights table included in that Fund's Annual Report to shareholders for the fiscal year ended December 31, 2000 because they have been restated due to a new management agreement effective May 1, 2000. The manager for the Franklin Small Cap Fund has agreed in advance to make an estimated reduction of 0.04% in its fee to reflect reduced services resulting from the Fund's investment in a Franklin Templeton money fund. This reduction is required by the Fund's Board of Trustees and an order of the Securities and Exchange Commission. Without this reduction, Total Annual Expenses are estimated to be 1.06%. -14- 20 (9) Goldman Sachs Asset Management, the investment adviser, has voluntarily agreed to reduce or limit certain other expenses (excluding management fees, taxes, interest, brokerage fees, litigation, indemnification, and other extraordinary expenses) to the extent such expenses exceed the percentage stated in the Fee Table (as calculated per annum based on each fund's respective daily net assets). Without the limitations described above, Fund expenses for the fiscal year ended December 31, 2000 would have been: Capital Growth Fund: Management Fees, 0.75%, Other Expenses, 1.09%, and Total Annual Expenses, 1.84%; CORESM Small Cap Equity: Management Fees, 0.75%, Other Expenses, 0.80%, Total Annual Expenses 1.55%; Mid Cap Value: Management Fees 0.80%, Other Expenses, 0.42%, Total Annual Expenses, 1.22%. The investment adviser may discontinue or modify any limitations in the future at its discretion. (10) The expense figures shown for the Janus Aspen Portfolios are based upon expenses for the fiscal year ended December 31, 2000, restated to reflect a reduction in the management fee. (11) For the PIMCO Foreign Bond Portfolio, "Other Expenses" reflects a 0.50% administrative fee and 0.01% of interest expense, so that the ratio of net expenses to average net assets excluding interest expense is 0.90%. (12) Effective 5/1/01, Scudder Variable Life Investment Fund is renamed Scudder Variable Series I. (13) During fiscal year 2000, the investment adviser for the Scudder Global Discovery Portfolio waived a portion of its management fee. Without the waiver, the Management Fee for that portfolio for the fiscal year ended December 31, 2000 would have been 0.98%, Other Expenses, 0.30% and Total Annual Expenses, 1.28%. The investment adviser may discontinue or modify this waiver in the future. Pursuant to their respective agreements with Scudder Variable Series I, the investment manager and the accounting agent have agreed, for the one-year period commencing on May 1, 2001, to limit their respective fees and to reimburse other expenses to the extent necessary to limit total operating expenses of the Scudder Global Discovery (Class A Shares) to 1.25%. (14) Effective 5/1/01, Kemper Variable Series is named Scudder Variable Series II and the Portfolios are re-branded from Kemper and KVS to Scudder and SVS. (15) Pursuant to their respective agreements with Scudder Variable Series II, the investment manager and the accounting agent have agreed, for the one year period commencing on May 1, 2001, to limit their respective fees and to reimburse other expenses to the extent necessary to limit total operating expense of the SVS Dreman High Return Equity Portfolio to 0.87%. (16) The expense figures shown for the WM Variable Trust are based upon expenses for the fiscal year ended December 31, 2000, restated to reflect the elimination of an administrative fee. The initial shareholder of Class 2 Shares has approved a distribution plan under which payments of 12b-1 fees are expected, upon Trustee approval, to be made to Farmers for certain administrative and account maintenance services -15- 21 provided by Farmers to Contract owners investing in these portfolios. The distribution plan is described in the portfolios' prospectus and statement of additional information. EXAMPLES The purpose of the following Examples is to assist you in understanding the expenses that you would pay over time. The Examples are based on the actual charges and expenses for the variable account and for each portfolio for the fiscal year ended December 31, 2000, as stated in the Fee Table. These examples assume that the fee waivers/reimbursements will continue for the length of the time shown in the examples. -16- 22
Example 1 Example 2 - --------- --------- Example 1 below shows the dollar amount of Example 2 has the same assumptions as expenses that you would bear directly or Example 1, except that you selected indirectly if you: neither the Guaranteed Minimum Death Benefit nor Guaranteed Retirement Income - - invested $1,000 in a subaccount; Benefit, resulting in total variable account expenses of 1.15%. - - earned a 5% annual return on your investment; - - fully surrendered your Contract, or began receiving annuity payments, with applicable surrender charges deducted; and - - selected both the optional Guaranteed Minimum Death Benefit (with an annual charge of 0.25%) and the optional Guaranteed Retirement Income Benefit (with an annual charge of 0.25%), resulting in total variable account expenses of 1.65%.
ASSUMES YOU SURRENDER OR ANNUITIZE THE CONTRACT EXAMPLE 1 EXAMPLE 2 SUBACCOUNT 1 YEAR 3 YEARS 1 YEAR 3 YEARS - ---------- ------ ------- ------ ------- Calvert Variable Series, Inc. Calvert Social Small Cap Growth Portfolio 94 149 89 135 Dreyfus Variable Investment Fund (Service Class Shares) Quality Bond Portfolio 88 131 83 117 Small Cap Portfolio 89 133 84 119 The Dreyfus Socially Responsible Growth Fund, Inc. (Service Class Shares) Dreyfus Socially Responsible Growth Fund 89 133 84 119 Fidelity Variable Insurance Products Funds ("VIP") (Service Class Shares) Fidelity VIP Growth Portfolio 86 125 81 111 Fidelity VIP Index 500 Portfolio 83 116 78 101 Fidelity VIP Mid Cap Portfolio 87 127 82 113 Franklin Templeton Variable Insurance Products Trust (Class 2 Shares) Franklin Small Cap Fund 88 133 84 118 Templeton Asset Strategy Fund 89 134 84 120 Templeton Developing Markets Securities Fund 96 155 91 141 Goldman Sachs Variable Insurance Trust Goldman Sachs Capital Growth Fund 88 132 84 118 Goldman Sachs CORE(SM) Small Cap Equity Fund 88 132 84 118 Goldman Sachs Mid Cap Value Fund 89 133 84 119 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 88 130 83 115 Janus Balanced Portfolio (Service Shares) 88 130 83 115 Janus Capital Appreciation Portfolio (Institutional Shares) 85 123 80 108 PIMCO VARIABLE INSURANCE TRUST (Administrative Class Shares) PIMCO Foreign Bond Portfolio 87 129 83 115 PIMCO Low Duration Bond Portfolio 85 122 80 108
-17- 23
ASSUMES YOU SURRENDER OR ANNUITIZE THE CONTRACT EXAMPLE 1 EXAMPLE 2 SUBACCOUNT 1 YEAR 3 YEARS 1 YEAR 3 YEARS - ---------- ------ ------- ------ ------- Scudder Variable Series I (formerly Scudder Variable Life Investment Fund) Scudder Bond Portfolio (Class A Shares) 84 120 80 105 Scudder Global Discovery Portfolio (Class A Shares) 91 139 86 125 Scudder Growth and Income Portfolio (Class A Shares) 84 119 79 105 Scudder International Portfolio (Class A Shares) 88 131 83 117 Scudder Money Market Portfolio 83 117 78 102 Scudder Variable Series II (formerly Kemper Variable Series) Scudder Government Securities Portfolio 85 121 80 106 Scudder High Yield Portfolio 85 123 81 108 Scudder Small Cap Growth Portfolio 86 124 81 110 SVS Dreman High Return Equity Portfolio 87 127 82 113 WM VARIABLE TRUST (Class 2 Shares) WM Equity Income Fund 89 134 84 119 WM Mid Cap Stock Fund 89 135 85 121 WM Small Cap Stock Fund 90 137 85 123
-18- 24 Example 3 Example 4 - --------- --------- Example 3 has the same assumptions as Example 1, Example 4 has the same assumptions as Example except that you decided not to surrender your 3, except that you selected neither the Contract or begin receiving annuity payments. optional Guaranteed Minimum Death Benefit nor Surrender charges are not deducted. Like Example the optional Guaranteed Retirement Income 1, we assume that you selected both the optional Benefit, resulting in total variable annuity Guaranteed Minimum Death Benefit (with an annual expenses of 1.15%. charge of 0.25%) and the Guaranteed Retirement Income Benefit (with an annual charge of 0.25%), resulting in total variable account expenses of 1.65%.
ASSUMES YOU DO NOT SURRENDER OR ANNUITIZE THE CONTRACT EXAMPLE 3 EXAMPLE 4 SUBACCOUNT 1 YEAR 3 YEARS 1 YEAR 3 YEARS - ---------- ------ ------- ------ ------- Calvert Variable Series, Inc. Calvert Social Small Cap Growth Portfolio 34 104 29 89 Dreyfus Variable Investment Fund (Service Class Shares) Quality Bond Portfolio 28 85 23 70 Small Cap Portfolio 28 87 23 72 The Dreyfus Socially Responsible Growth Fund, Inc. (Service Class Shares) Dreyfus Socially Responsible Growth Fund 28 87 23 72 Fidelity Variable Insurance Products Funds ("VIP") (Service Class Shares) Fidelity VIP Growth Portfolio 26 79 21 64 Fidelity VIP Index 500 Portfolio 23 69 17 54 Fidelity VIP Mid Cap Portfolio 27 81 22 66 Franklin Templeton Variable Insurance Products Trust (Class 2 Shares) Franklin Small Cap Fund 28 87 23 72 Templeton Asset Strategy Fund 29 88 24 73 Templeton Developing Markets Securities Fund 36 110 31 95 Goldman Sachs Variable Insurance Trust Goldman Sachs Capital Growth Fund 28 86 23 71 Goldman Sachs CORE(SM) Small Cap Equity Fund 28 86 23 71 Goldman Sachs Mid Cap Value Fund 29 88 24 73 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 27 84 22 69 Janus Balanced Portfolio (Service Shares) 27 84 22 69 Janus Capital Appreciation Portfolio 25 76 20 61 (Institutional Shares) PIMCO Variable Insurance Trust (Administrative Class Shares) PIMCO Foreign Bond 27 84 22 69 PIMCO Low Duration Bond 25 76 20 61 Scudder Variable Series I (formerly Scudder Variable Life Investment Fund) Scudder Bond Portfolio (Class A Shares) 24 74 19 58 Scudder Global Discovery Portfolio (Class A 31 94 26 79 Shares) Scudder Growth and Income Portfolio (Class A 24 73 19 58 Shares) Scudder International Portfolio (Class A Shares) 28 85 23 70 Scudder Money Market Portfolio 23 70 18 55 Scudder Variable Series II (formerly Kemper Variable Series)
-19- 25
ASSUMES YOU DO NOT SURRENDER OR ANNUITIZE THE CONTRACT EXAMPLE 3 EXAMPLE 4 SUBACCOUNT 1 YEAR 3 YEARS 1 YEAR 3 YEARS - ---------- ------ ------- ------ ------- Scudder Government Securities Portfolio 24 74 19 59 Scudder High Yield Portfolio 25 77 20 62 Scudder Small Cap Growth Portfolio 25 78 20 63 SVS Dreman High Return Equity Portfolio 27 81 22 66 WM VARIABLE TRUST (Class 2 Shares) WM Equity Income Fund 29 88 24 73 WM Mid Cap Stock Fund 29 89 24 75 WM Small Cap Stock Fund 30 92 25 77
The examples assume that you made no transfers. The examples also do not take into account any premium taxes. The examples reflect the Records Maintenance Charge of $30 as an annual charge of 0.13% which we calculated by dividing the total Records Maintenance Charges expected to be collected during a year by an assumed average investment of $23,000 in the Contract. PLEASE REMEMBER THAT THE EXAMPLES ARE SIMPLY ILLUSTRATIONS AND DO NOT REPRESENT PAST OR FUTURE EXPENSES. Your actual expenses may be higher or lower than those shown in the examples. Similarly your rate of return may be more or less than the 5% assumed in the examples. Condensed Financial Information We have included in Appendix A a financial history of the three sets of accumulation unit values for the subaccounts that reflect the three levels of Variable Account Annual Expenses available under the Contract. ABOUT FARMERS NEW WORLD LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT ================================================================================ Farmers New World Life Insurance Company Farmers New World Life Insurance Company ("Farmers") is the stock life insurance company issuing the Contract. Farmers is located at 3003 - 77th Avenue, S.E., Mercer Island, Washington 98040, and was incorporated under Washington law on February 21, 1910. Farmers established the variable account to support the investment options under this Contract and under other variable annuity contracts Farmers may issue. Farmers' general account supports the fixed account under the Contract. -20- 26 Farmers is a direct wholly-owned subsidiary of Farmers Group, Inc. ("FGI"). FGI is a stock holding and management company. The ultimate controlling parents of FGI are Allied Zurich p.l.c., a United Kingdom company, and Zurich Allied AG, a Swiss company. Allied Zurich p.l.c. and Zurich Allied AG are traded in certain European markets, but are not publicly traded in the U.S. Farmers markets a broad line of individual life insurance products, including universal life, term life and whole life insurance and annuity products (predominately flexible premium deferred annuities). Farmers currently is licensed to sell insurance in 43 states and the District of Columbia. The states where Farmers is not licensed are Alaska, Florida, Louisiana, New Hampshire, New York, North Carolina, and Vermont. Farmers Annuity Separate Account A We established the Farmers Annuity Separate Account A (the "variable account") as a variable account under Washington insurance law on April 6, 1999. The variable account will receive and invest premium payments paid under the Contracts and under other variable annuity contracts we may issue in the future. Although the assets in the variable account are our property, the portion of the assets in the variable account that are attributable to variable annuity contracts are not chargeable with the liabilities arising out of any other business that we may conduct. All obligations arising under the Contracts are our general corporate obligations. Income, gains and losses, whether or not realized, from assets allocated to the variable account are credited to or charged against the variable account without regard to our other income, gains or losses. We have the right to transfer to our general account any assets of the variable account that are in excess of such reserves and other liabilities. The variable account is divided into 30 subaccounts. Additional subaccounts may be available in the future. Each subaccount invests exclusively in shares of a single portfolio of a fund. The income, gains and losses, whether or not realized, from the assets allocated to each subaccount are credited to or charged against that subaccount without regard to income, gains or losses from any other subaccount. The variable account has been registered with the SEC as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") and meets the definition of a separate account under the federal securities laws. Registration with the SEC does not involve supervision of the management or investment practices or policies of the variable account, the funds or of us by the SEC. The variable account is also subject to the laws of the State of Washington which regulate the operations of insurance companies domiciled in Washington. THE PORTFOLIOS ================================================================================ Each subaccount of the variable account invests exclusively in shares of a designated portfolio of a fund. Shares of each portfolio are purchased and redeemed at net asset value, without a sales charge. -21- 27 Each fund available under the Contract is registered with the SEC under the 1940 Act as an open-end, management investment company. The assets of each portfolio are separate from the assets of any other portfolio, and each portfolio has separate investment objectives and policies. As a result, each portfolio operates as a separate investment portfolio and the income or losses of one portfolio has no effect on the investment performance of any other portfolio. Each of the portfolios is managed by an investment adviser registered with the SEC under the Investment Advisers Act of 1940, as amended. Each investment adviser is responsible for the selection of the investments of the portfolio. These investments must be consistent with the investment objective, policies and restrictions of that portfolio. Some of the portfolios have been established by investment advisers that manage retail mutual funds sold directly to the public having similar names and investment objectives to the portfolios available under the Contract. While some of the portfolios may be similar to, and may in fact be modeled after, publicly traded mutual funds, you should understand that the portfolios are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and any similarly named portfolio may differ substantially from the portfolios available through this Contract. An investment in a subaccount, or in any portfolio, including the Money Market Portfolio, is not insured or guaranteed by the U.S. Government and there can be no assurance that the Money Market Portfolio will be able to maintain a stable net asset value per share. Investment Objectives of the Portfolios The investment objective of each portfolio is summarized below. NO ONE CAN PROMISE THAT ANY PORTFOLIO WILL MEET ITS INVESTMENT OBJECTIVES. Amounts you have allocated to the subaccounts may grow in value, decline in value, or grow less than you expect, depending on the investment performance of the portfolios in which those subaccounts invest. You bear the investment risk that those portfolios possibly will not meet their investment objectives. You can find more detailed information, including a description of risks, fees and expenses of each portfolio, in the prospectuses for the portfolios which accompany this prospectus. CERTAIN PORTFOLIOS HAVE SIMILAR INVESTMENT OBJECTIVES. YOU SHOULD CAREFULLY READ THE PROSPECTUSES FOR THE PORTFOLIOS BEFORE YOU INVEST.
PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER - --------- ------------------------------------------- Calvert Social Small Cap Seeks to achieve long-term capital appreciation by Growth Portfolio investing primarily in the equity securities of companies that have small market capitalizations. Investment adviser is Calvert Asset Management Company, Inc. The sub-advisor is Awad Asset Management, Inc. Dreyfus VIF Quality Bond Seeks to maximize current income as is consistent with Portfolio (Service Class) the preservation of capital and the maintenance of liquidity. Investment adviser is The Dreyfus Corporation. Dreyfus VIF Small Cap Seeks to maximize capital appreciation. Investment adviser is The Portfolio (Service Class) Dreyfus Corporation. The Dreyfus Socially Seeks to provide capital growth, with current income as a secondary Responsible Growth Fund, goal. Investment adviser is The Dreyfus Corporation. The sub-adviser Inc. (Service Class) is NCM Capital Management Group, Inc. Fidelity VIP Growth Seeks to achieve capital appreciation. Investment adviser is Fidelity Portfolio (Service Class) Management & Research Company. The sub-advisor is Fidelity Management & Research Company, Inc. Fidelity VIP Index 500 Seeks investment results that correspond to the total Portfolio (Service Class) return of common stocks publicly traded in the United States, as represented by the Standard & Poor's 500(SM)
-22- 28
PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER - --------- ------------------------------------------- Index. Investment adviser is Fidelity Management & Research Company. The sub-adviser is Deutsche Asset Management, Inc. Fidelity VIP Mid Cap Seeks long-term growth of capital. Investment adviser is Fidelity Portfolio (Service Class) Management & Research Company. The sub-advisor is Fidelity Management & Research Company (U.K.), Inc. Franklin Small Cap Fund Seeks long-term capital growth. Investment adviser is Franklin (Class 2) Advisers, Inc. Templeton Asset Strategy Seeks high total return. Investment adviser is Templeton Investment Fund (Class 2) Counsel, LLC. Templeton Developing Seeks long-term capital appreciation. Investment adviser is Templeton Markets Securities Fund Asset Management Ltd. (Class 2) Goldman Sachs Capital Seeks long-term growth of capital. Investment adviser is Goldman Sachs Growth Fund Asset Management. Goldman Sachs CORE(SM) Seeks long-term growth of capital. Investment adviser is Goldman Sachs Small Cap Equity Fund Asset Management. Goldman Sachs Mid Cap Seeks long-term capital appreciation. Investment adviser is Goldman Value Fund Sachs Asset Management. Janus Aggressive Growth Seeks long-term growth of capital. Investment adviser is Janus Portfolio (Service) Capital. Janus Balanced Portfolio Seeks long-term capital growth, consistent with preservation of capital (Service) and balanced by current income. Investment adviser is Janus Capital. JANUS CAPITAL APPRECIATION Seeks long-term growth of capital. Investment adviser is Janus Capital. PORTFOLIO (INSTITUTIONAL) PIMCO Foreign Bond Seeks maximum total return, consistent with preservation of capital and Portfolio (Administrative prudent investment management. Investment adviser is Pacific Class) Investment Management Company LLC. PIMCO Low Duration Bond Seeks maximum total return, consistent with preservation of capital and Portfolio (Administrative prudent investment management. Investment adviser is Pacific Class) Investment Management Company LLC. Scudder* Bond Portfolio Seeks to provide a high level of income consistent with a high quality (Class A) portfolio of debt securities. Investment adviser is Zurich Scudder Investments, Inc. Scudder* Global Discovery Seeks above-average capital appreciation over the long term by Portfolio (Class A) investing primarily in equity securities of small companies located throughout the world. Investment adviser is Zurich Scudder Investments, Inc. Scudder* Growth and Income Seeks long-term growth of capital, current income and growth of income. Portfolio (Class A) Investment adviser is Zurich Scudder Investments, Inc. Scudder* International Seeks long-term growth of capital primarily through diversified Portfolio (Class A) holdings of marketable foreign equity investments. Investment adviser is Zurich Scudder Investments, Inc. Scudder* Money Market Seeks to maintain stability of capital and, consistent therewith, to Portfolio maintain the liquidity of capital and to provide current income. Investment adviser is Zurich Scudder Investments, Inc. Scudder** GOVERNMENT Seeks high current income consistent with preservation of capital. SECURITIES PORTFOLIO Investment adviser is Zurich Scudder Investments, Inc. Scudder** HIGH YIELD Seeks to provide a high level of current income. Investment adviser is PORTFOLIO Zurich Scudder Investments, Inc. Scudder** SMALL CAP GROWTH Seeks maximum appreciation of investors' capital. Investment adviser is PORTFOLIO Zurich Scudder Investments, Inc. SVS** DREMAN HIGH RETURN Seeks to achieve a high rate of total return. Investment adviser is EQUITY PORTFOLIO Zurich Scudder Investments, Inc; investment sub-adviser is Dreman Value Management L.L.C.
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PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER - --------- ------------------------------------------- WM Equity Income Fund Seeks to provide a relatively high level of current income while (Class 2 Shares) achieving long-term growth of income and capital. The investment adviser is WM Advisors, Inc. WM Mid Cap Stock Fund Seeks to provide long-term capital appreciation. The investment (Class 2 Shares) adviser is WM Advisors, Inc. WM Small Cap Stock Fund Seeks long-term capital appreciation. The investment adviser is WM (Class 2 Shares) Advisors, Inc.
* formerly Scudder Variable Life Investment Fund ** formerly Kemper Variable Series or KVS Availability of the Portfolios We cannot guarantee that each portfolio will always be available for investment through the Contracts. We reserve the right, subject to applicable law, to make additions to, deletions from, or substitutions for the shares of a portfolio that are held in the variable account. New or substitute portfolios may have different fees and expenses and their availability may be limited to certain classes of purchasers. If the shares of a portfolio are no longer available for investment or if, in our judgment, further investment in any portfolio should become inappropriate, we may redeem the shares of that portfolio and substitute shares of another portfolio. We will not substitute any shares without notice and prior approval of the SEC and state insurance authorities, to the extent required by the 1940 Act or other applicable law. We also reserve the right in our sole discretion to establish additional subaccounts, or eliminate or combine one or more subaccounts. Subject to obtaining any approvals or consents required by law, the assets of one or more subaccounts may also be transferred to any other subaccount if, in our sole discretion, conditions warrant. Additional information regarding the substitutions of investments and resolving conflicts among funds may be found in the SAI. -24- 30 THE PAY-IN PERIOD ================================================================================ The pay-in period begins when we issue your Contract and continues until the annuity start date. The pay-in period will also end if you surrender your Contract, or a death benefit is payable, before the payout period. Purchasing a Contract You may purchase a Contract with a premium payment of $500 or more. The first premium payment is the only one we require you to make. To purchase a Contract, you must complete an application and send it with your premium to us through one of our authorized agents who is also a registered representative. Contracts may be sold to or in connection with retirement plans that qualify for special tax treatment. Who Should Purchase the Contract? We have designed this Contract for people seeking long-term tax deferred accumulation of assets, generally for retirement. This includes persons who have maximized their use of other retirement savings methods, such as 401(k) plans and individual retirement accounts. The tax-deferred feature is most attractive to people in higher federal and state income tax brackets. You should not buy this Contract if you are looking for a short-term investment or if you cannot take the risk of getting back less money than you put in. If you are purchasing the Contract through a tax favored arrangement, including IRAs, Roth IRAs, SIMPLE IRAs, and SEP IRAs, you should carefully consider the costs and benefits of the Contract (including annuity income benefits) before purchasing the Contract, since the tax favored arrangement itself provides for tax sheltered growth. We will not issue you a Contract if you are older than age 90 on the issue date. Cancellation - The 10 Day Right to Examine Period You have the right to cancel the Contract for any reason within 10 days after you receive it. In some jurisdictions, this period may be longer than 10 days. To cancel the Contract, you must send it to our Home Office at Mercer Island, Washington, before the end of the right to cancel period. In most states, the amount of the refund will be the total premiums we have received, plus (or minus) any gains (or losses) in the amounts you invested in the subaccounts. If state law requires a return of premium, we will refund the greater of your original premium(s) or the Contract Value on the date we receive the Contract at our Home Office at the address shown on the front page of this prospectus. If you purchase a qualified Contract, we will return the premium(s) paid. If your state requires us to return your premium or if you have purchased a qualified Contract, we will place your premium(s) in the fixed account for the number of days in your state's right to examine period, plus 10 days. We will credit your premium(s) placed in the fixed account with interest at the current fixed account interest rates. We will pay the refund within 7 calendar days after we receive the Contract. The Contract will then be deemed void. Designating Your Investment Options When you complete your application, you will give us instructions on how to allocate your first premium payment among the 30 subaccounts and the fixed account. The amount you direct -25- 31 to a particular subaccount and/or to the fixed account must be in whole percentages from 1% to 100% of the premium payment, and must equal at least $500. If your application is complete and your premium payment has been received at the Service Center, we will issue your Contract within two business days of its receipt, and credit your initial premium payment to your Contract. If your application is incomplete, we will contact you and seek to complete it within five business days. If we cannot complete your application within five business days after we receive it, we will return your premium payment, unless you expressly permit us to keep it. We will credit the payment as soon as we receive all necessary application information. The date we credit your initial premium payment to your Contract is the issue date. In most states, on the issue date we will allocate your initial premium to the subaccounts and the fixed account as you specified on your application. If your state requires us to return your initial premium(s) in the event you exercise your right to cancel the Contract, or if you purchase a qualified Contract, we will allocate the initial premium(s) to the fixed account on the issue date. While held in the fixed account, your premium(s) will be credited with interest at current fixed account rates. The premium(s) will remain in the fixed account for the number of days in your state's right to examine period, plus 10 days. On the first valuation day on or after that period, we will reallocate all Contract Value from the fixed account to the subaccounts and fixed account as you selected on the application. We may reject any application or premium payment for any reason permitted by law. Tax-Free `Section 1035' Exchanges You can generally exchange one annuity for another in a `tax-free exchange' under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both contracts carefully. Remember that if you exchange another contract for the one described in this prospectus, you might have to pay a surrender charge on your old contract. There will be a new surrender charge period for this Contract. Other charges may be higher (or lower) and the benefits may be different. If the exchange does not qualify for Section 1035 treatment, you may have to pay federal income and penalty taxes on the exchange. You should not exchange another contract for this one unless you determine, after knowing all the facts, that the exchange is in your best interest and not just better for the person trying to sell you the Contract (that person will generally earn a commission if you buy this Contract through an exchange or otherwise). Additional Premium Payments There are no requirements on how many premium payments to make. You determine the amount and timing of each additional premium payment, except that premium payments must be at least $500 ($50 if you authorize us to draw on an account by check or electronic debit). You may make premium payments at any time until the earliest of: (a) the annuity start date; (b) the date you fully withdraw all Contract Value; or (c) the date you reach age 70 1/2 for qualified Contracts (other than Roth IRAs and rollovers and transfers). We will not accept total premium payments in excess of the cumulative premium limit that is specified on your Contract specification page. The Tax Code may also limit the amount of premiums you may make. We will credit any additional premium payments you make to your Contract at the accumulation unit value next computed at the end of the valuation day on which we receive them at the -26- 32 Service Center. Our valuation day usually closes at 4:00 p.m. Eastern Time (1:00 p.m. Pacific Time). If we receive your premium payments after the close of a valuation day, we will calculate and credit them as of the end of the next valuation day. We will direct your premium payment to the subaccounts and/or the fixed account according to your written instructions in effect at the time we receive it at the Service Center. However, you may direct individual premium payments to a specific subaccount and/or to the fixed account without changing your instructions. You may change your instructions at any time by sending us a written request or by telephone authorization. Changing your allocation instructions will not change the way existing Contract Value is apportioned among the subaccounts or the fixed account. THE VALUE OF YOUR CONTRACT INVESTED IN A SUBACCOUNT WILL VARY WITH THE INVESTMENT PERFORMANCE OF THAT SUBACCOUNT. YOU BEAR THE ENTIRE INVESTMENT RISK FOR AMOUNTS YOU ALLOCATE TO THE SUBACCOUNTS. YOU SHOULD PERIODICALLY REVIEW YOUR PREMIUM PAYMENT ALLOCATION INSTRUCTIONS IN LIGHT OF MARKET CONDITIONS AND YOUR OVERALL FINANCIAL OBJECTIVES. YOUR CONTRACT VALUE ================================================================================ Variable Account Value Your variable account value will reflect the investment experience of the selected subaccounts, any premium payments paid, any surrenders or partial withdrawals, any transfers, and any charges assessed in connection with the Contract. There is no guaranteed minimum variable account value. CALCULATING VARIABLE ACCOUNT VALUE Your variable account value is determined at the end of each valuation day. The value will be the total of your Contract's value in each of the subaccounts. We determine your Contract's value in each subaccount by multiplying that subaccount's unit value for the relevant valuation period by the number of accumulation units of that subaccount allocated to the Contract. NUMBER OF ACCUMULATION UNITS Any amounts you allocate or transfer to the subaccounts will be converted into subaccount accumulation units. We determine the number of accumulation units to be credited to your Contract by dividing the dollar amount being allocated or transferred to a subaccount by the accumulation unit value for that subaccount at the end of the valuation day during which the amount was allocated or transferred. The number of accumulation units in any subaccount will be increased at the end of the valuation day by: -27- 33 - any premium payments allocated to the subaccount during the current valuation day; and - by any amounts transferred to the subaccount from another subaccount or from the fixed account during the current valuation day. Any amounts transferred, surrendered or deducted from a subaccount will be processed by canceling or liquidating accumulation units. The number of accumulation units to be canceled is determined by dividing the dollar amount being removed from a subaccount by the accumulation unit value for that subaccount at the end of the valuation day during which the amount was removed. The number of accumulation units in any subaccount will be decreased at the end of the valuation day by: - any amounts transferred (including any applicable transfer fee) from that subaccount to another subaccount or to the fixed account on that valuation day; - any amounts withdrawn or surrendered (including any applicable surrender charges and premium taxes) on that valuation day; and - the Records Maintenance Charge, if assessed on that valuation day. ACCUMULATION UNIT VALUE The accumulation unit value for each subaccount's first valuation day was set at the amount shown in Appendix A. The accumulation unit value for each subaccount is recalculated at the end of each valuation day by multiplying the accumulation unit value at the end of the immediately preceding valuation day by the Net Investment Factor for the valuation day for which the value is being determined. The new accumulation unit value reflects the investment performance of the underlying portfolio, and the daily deduction of: (i) the mortality and expense risk charge, (ii) any charge for enhanced benefit riders, and (iii) the daily administrative charge during each valuation period. We determine a separate accumulation unit value for each subaccount. We will also determine separate sets of accumulation unit value reflecting the costs of the Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit. The formula for computing the Net Investment Factor is in the Statement of Additional Information. TRANSFERS BETWEEN INVESTMENT OPTIONS ================================================================================ After the right to examine period has expired and before the annuity start date, you may transfer all or part of the amount in a subaccount or the fixed account to another subaccount or the fixed account, subject to the restrictions described below. -28- 34 The minimum amount that you may transfer is $100 or your total value in that subaccount, if less. If you request a transfer that would reduce the amount in a subaccount or fixed account below $500, we will transfer the entire amount in the subaccount. You may make one transfer from the fixed account to the subaccounts each Contract year during the 30 days following a Contract anniversary. We measure a Contract year from the anniversary of the issue date. You may not make a transfer into the fixed account during the six months following any transfer you make out of the fixed account to any subaccount(s). Transfers will be processed based on the accumulation unit values determined at the end of the valuation day on which we receive your written request or telephone authorization to transfer, provided we receive the request at our Service Center before the close of our valuation day, usually 4:00 p.m. Eastern Time (1:00 p.m. Pacific Time). If we receive your request after the close of our valuation day, we will process the transfer request using the accumulation unit value for the next valuation day. There currently is no limit on the number of transfers that you can make among subaccounts or to the fixed account. We may suspend or modify this transfer privilege at any time. Automatic Asset Rebalancing Program The automatic asset rebalancing program permits you to maintain the percentage of the Contract Value allocated to each subaccount at a pre-set level. Under the program, automatic transfers are made among the subaccounts on a quarterly basis so that your Contract Value is reallocated to match the percentages you specify. Asset rebalancing is consistent with maintaining your allocation of investments among market segments, although it is accomplished by reducing your Contract Value allocated to the better performing segments. Transfers under this program are not subject to the $100 minimum transfer limitation. We will not charge a transfer fee for asset rebalancing. You may not include the fixed account in the asset rebalancing program. We may change, terminate, limit or suspend automatic asset rebalancing at any time. You may elect automatic asset rebalancing on your application or you may enroll in automatic asset rebalancing at any time by submitting a request to the Service Center. You may cancel your participation in the program at any time. Automatic asset rebalancing is not available after the annuity start date. We may suspend or modify this automatic asset rebalancing program at any time. THIRD PARTY TRANSFERS If you authorize a third party to transact transfers on your behalf, we will honor their transfer instructions, so long as they comply with our administrative systems, rules and procedures, which we may modify or rescind at any time. We take no responsibility for any third party asset allocation program. PLEASE NOTE that any fees and charges assessed for third party asset allocation services are separate and distinct from the Contract fees and charges set forth in this prospectus. We neither recommend nor discourage the use of asset allocation services. -29- 35 EXCESSIVE TRADING LIMITS We reserve the right to limit transfers in any Contract year, or to refuse any transfer request for a Contract owner if: - we believe, in our sole discretion, that excessive trading by the Contract owner, or a specific transfer request, or a group of transfer requests, may have a detrimental effect on the accumulation unit values of any subaccount or the share prices of any portfolio or would be detrimental to other Contract owners; or - we are informed by one or more portfolios that they intend to restrict the purchase of portfolio shares because of excessive trading or because they believe that a specific transfer or group of transfers would have a detrimental effect on the price of portfolio shares. We may apply the restrictions in any manner reasonably designed to prevent transfers that we consider disadvantageous to other Contract owners. Dollar Cost Averaging Program Under the dollar cost averaging program, you may authorize us to transfer a fixed dollar amount at monthly intervals from the fixed account to one or more subaccounts. You may designate up to eight subaccounts to receive the transfers. The fixed dollar amount will purchase more accumulation units of a subaccount when their value is lower and fewer units when their value is higher. Over time, the cost per unit averages out to be less than if all purchases of units had been made at the highest value and greater than if all purchases had been made at the lowest value. The dollar cost averaging method of investment reduces the risk of making purchases only when the price of accumulation units is high. It does not assure a profit or protect against a loss in declining markets. Dollar cost averaging is only available during the pay-in period. You may cancel your participation in the program at any time. You may enroll in the dollar cost averaging program at any time by submitting a request to the Service Center. We make transfers on the same day of every month as your issue date. We must receive the form at least 5 valuation days before the transfer date, for your transfers to begin on that date. When you enroll in the dollar cost averaging program, your total Contract Value in the fixed account must be at least equal to the amount you designate to be transferred on each transfer date. Transfers from the fixed account must be at least $100. Transfers under the dollar cost averaging program will not occur unless the balance in the fixed account is at least as large as the amount designated to be transferred. We may suspend or modify this dollar cost averaging program at any time. TELEPHONE TRANSFERS Unless you notify us on your application or in writing that you do not want the ability to make transfers by telephone, generally you will have the ability to make a transfer by giving us instructions over the telephone. (In some states you may have to elect telephone transfers.) You may use your telephone to authorize a transfer from one subaccount or the fixed account to another subaccount or the fixed account, to change the allocation instructions for future investments, and/or to change asset rebalancing and dollar cost averaging programs. -30- 36 We will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. If we follow such procedures we will not be liable for any losses due to unauthorized or fraudulent instructions. We may be liable for such losses if we do not follow those reasonable procedures. The procedures that we may follow for telephone transfers include: - providing you with a written confirmation of all transfers made according to telephone instructions, - requiring a form of personal identification prior to acting on instructions received by telephone, and - tape recording instructions received by telephone. We will process any telephone transfer order that is completely received at the Service Center before the NYSE closes (usually 4:00 p.m. Eastern time). We cannot guarantee that telephone transactions will always be available. For example, our Service Center may be closed during severe weather emergencies or there may be interruptions in telephone service beyond our control. If the volume of calls is unusually high, we might not have someone immediately available to receive your order. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. We reserve the right to modify, restrict, suspend or eliminate the transfer privileges (including the telephone transfer facility) at any time, for any class of Contracts, for any reason. Transfer Fee We will impose a transfer fee of $25 for the thirteenth and each subsequent transfer request you make per Contract year. Transfers you make pursuant to the asset rebalancing and dollar cost averaging programs do not count toward your 12 free transfers. See "Fees and Charges." ACCESS TO YOUR MONEY ================================================================================ Surrenders At any time before the annuity start date, you may surrender your Contract for its cash value. The cash value is equal to : - the Contract Value; minus - any applicable surrender charges; minus - any premium taxes not previously deducted; minus - the Records Maintenance Charge unless waived. -31- 37 The cash value will be determined at the accumulation unit value next determined as of the close of business on the day we receive your written request for surrender at the Service Center, unless you specify a later date in your request. If we receive your written request after the close of our business day, usually 4:00 p.m. Eastern Time, we will determine the surrender value as of the next business day. The cash value will be paid in a lump sum unless you request payment under an annuity option. A surrender may have adverse federal income tax consequences, including a penalty tax. See "Federal Tax Consequences." Partial Withdrawals Once each calendar quarter before the annuity start date, you may request a withdrawal of part of your cash value. Partial withdrawals are subject to the following conditions: - the minimum amount you can withdraw is $100; and - you may not make a partial withdrawal if the withdrawal plus the surrender charge would cause the Contract Value to fall below $500. We will withdraw the amount you request from the Contract Value as of the valuation day on which we receive your written request for the partial withdrawal at our Service Center, provided we receive it before the close of our business day, usually 4:00 p.m. Eastern Time. If we receive your request after the close of our business day, we will make the withdrawal as of the next business day. We will then reduce the amount remaining in the Contract by any applicable surrender charge plus the dollar amount we sent to you. You may specify how much you wish to withdraw from each subaccount and/or the fixed account. If you do not specify, or if you do not have sufficient assets in the subaccounts or fixed account you specified to comply with your request, we will make the partial withdrawal on a pro rata basis from the fixed account and those subaccounts in which you are invested. We will base the pro rata reduction on the ratio that the value in each subaccount and the fixed account has to the entire Contract Value before the partial withdrawal. Remember, any partial withdrawal you take will reduce your Contract Value, and will proportionally reduce the minimum death benefit by the amount of the withdrawals plus any charges. See "Death Benefits." If you elected the Guaranteed Minimum Death Benefit, a partial withdrawal will proportionally reduce the Greatest Anniversary Value and the amount of premiums (plus interest) being accumulated at 4% annually. Likewise, if you elected the Guaranteed Retirement Income Benefit, a partial withdrawal will proportionally reduce the Income Base. The impact of a proportional reduction on these benefits depends, in part, upon the relative amount of your Contract Value at the time of the withdrawal. Under proportional reductions, if the amount of the death benefit or Income Base is greater than the Contract Value at the time of the partial withdrawal, then the reduction in the death benefit or Income Base will be greater than the dollar amount of the withdrawal (including any charges). For this reason, if a death benefit is paid, or the Income Base is calculated, after you have taken a partial withdrawal, the possibility exists that the total amount of the death benefit or Income Base will be less than the total premium payments you have paid. See "Death Benefits" and "Guaranteed Retirement Income Benefit." INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE. Your right to make surrenders and partial withdrawals is also subject to any restrictions imposed by applicable law or employee benefit plan. -32- 38 See "Surrender Charges" for an explanation of the surrender charges that may apply. Systematic Withdrawal Plan After your first Contract year, you can elect to receive regular payments from your Contract Value during the pay-in period. You instruct us to withdraw selected amounts from the fixed account or any of the subaccounts. We will make these withdrawals on a monthly basis. You must complete an enrollment form and send it to the Service Center. You may terminate the systematic withdrawal plan at any time. There are some limitations to the systematic withdrawal plan: - withdrawals must be at least $100; - you must have a minimum balance at least equal to the amount you want to withdraw; - we will deduct a surrender charge from any amount you withdraw in excess of your free withdrawal amount; and - you may not take a systematic withdrawal if the withdrawal plus the surrender charge would cause the Contract Value to fall below $500. Income taxes and tax penalties may apply to the amount withdrawn. We may suspend or modify the systematic withdrawal plan at any time. DEATH BENEFITS ================================================================================ Only one death benefit will be payable under this Contract. Upon payment of the death benefit proceeds, the Contract will terminate. DEATH BENEFITS BEFORE THE ANNUITY START DATE We will pay a death benefit to the beneficiary if any of the following occurs during the pay-in period: - the owner or any joint owner dies, or - the last surviving annuitant dies. If any owner is a non-natural person, then the death of any annuitant will be treated as the death of an owner. -33- 39 STANDARD DEATH BENEFIT If you have not selected the Guaranteed Minimum Death Benefit on your application, and if an annuitant (including an owner who is an annuitant) dies before his or her 80th birthday, the death benefit equals the greater of: - the Contract Value on the later of the date that we receive due proof of death and the date when we receive the beneficiary's instructions on payment method at the Service Center; or - the minimum death benefit. The minimum death benefit equals the sum of all premiums, minus proportional reductions for withdrawals. In all other cases, the death benefit equals the Contract Value determined on the later of the date that we receive due proof of death and the date when we receive the beneficiary's instructions on payment method. Such other cases include the death of an annuitant who has attained his or her 80th birthday, or the death of an owner who is not an annuitant. The proportional reduction in the minimum death benefit equals: - the minimum death benefit immediately prior to the withdrawal; multiplied by - the ratio of the amount you withdraw (including any charges) to the Contract Value immediately before the withdrawal. GUARANTEED MINIMUM DEATH BENEFIT On your Contract application, you may select the Guaranteed Minimum Death Benefit. Under this benefit, the death benefit payable in the event of the last surviving annuitant's death is enhanced as described below. This death benefit is only payable during the pay-in period and is not available after the annuity start date. No Guaranteed Minimum Death Benefit is ever payable if a non-annuitant owner dies; this benefit is only payable on the death of an owner if that owner is the last surviving annuitant. If you select this option, we will deduct an additional charge equal, on an annual basis, to 0.25% of the average net assets you have invested in the subaccounts. Under the Guaranteed Minimum Death Benefit, the death benefit we will pay upon the death of the last surviving annuitant is the greatest of the following: 1. the standard death benefit as described above; 2. premiums you paid accumulated daily with interest compounded at a rate of 4% per year through the earlier of (i) the date of death, or (ii) the Contract anniversary on or next following the last surviving annuitant's 80th birthday, minus proportional reductions for withdrawals; or -34- 40 3. the Greatest Anniversary Value on any contract anniversary through the earlier of the date of death or the Contract anniversary on or next following the last surviving annuitant's 80th birthday, minus proportional reductions for withdrawals. The Greatest Anniversary Value is calculated as follows: an anniversary value is defined for each eligible Contract anniversary as the Contract Value on that anniversary, increased by premiums accepted since that anniversary and proportionately reduced for withdrawals since that anniversary. The largest such anniversary value is the Greatest Anniversary Value. If the last surviving annuitant dies after the Contract anniversary coincident with or next following that annuitant's 80th birthday and before the annuity start date, the amounts calculated under 2 and 3 will be increased by premiums received and proportionately reduced for withdrawals since that anniversary. If the last surviving annuitant was older than 80 on the issue date, then no death benefit will be payable under 2 or 3 above. The proportional reductions for withdrawals are determined independently for 2 and 3 above. The proportional reduction for each withdrawal is equal to the product of: - the death benefit available under the item being considered (either 2 or 3) immediately prior to the withdrawal, and - the ratio of the amount withdrawn (including any charges) to the Contract Value immediately before the withdrawal. The Guaranteed Minimum Death Benefit will end when the Contract ends or you send a signed request to terminate it to the Service Center. If you terminate the rider, we will no longer deduct the 0.25% additional rider charge from the subaccounts. In determining the death benefit, we will also subtract any applicable premium and withholding taxes not previously deducted. The Guaranteed Minimum Death Benefit may not be available in all states, and it may vary by state. Distribution Upon Death If a death benefit is payable before the annuity start date, we will pay the death benefit in a lump sum, unless we consent to another arrangement within 90 days of receiving due proof of death. In all events, death benefit distributions will be made from the Contract in accordance with Section 72(s) of the Tax Code. If any owner dies before the annuity start date, the death benefit must be distributed to the beneficiaries within five years after the date of death or distributed over the life (or period not exceeding the life expectancy) of the beneficiary, provided that such distributions begin within one year of the owner's death. A new settlement agreement will be drawn up and the original Contract will terminate. The payments under this agreement will be fixed and guaranteed. If you have named two or more beneficiaries, then the provisions of this section shall apply independently to each beneficiary. -35- 41 If the sole beneficiary is the surviving spouse of the deceased owner, the spouse may elect to continue the Contract (in lieu of receiving the death benefit) with the surviving spouse as the sole owner but not the annuitant. On the death of the surviving spouse, we will pay a death benefit. If the Contract is continued with the Guaranteed Minimum Death Benefit rider in effect, the spouse should consider terminating the rider, as the Guaranteed Minimum Death Benefit cannot be paid on the death of the surviving spouse. If an owner is a non-natural person, then each annuitant will be treated as an owner for purposes of distributing the death benefit, and any death of an annuitant will be treated as the death of the owner for purposes of these requirements. Moreover, if the annuitant is also an owner, then the death of such annuitant will also be treated as the death of an owner. DEATH BENEFITS ON OR AFTER THE ANNUITY START DATE If an annuitant dies on or after the annuity start date, we will pay any remaining guaranteed payments to the beneficiary as provided in the annuity option selected. If you are not the annuitant and you die while an annuitant is still living, we will continue to pay the income payments for the annuitant's lifetime in the same manner as before your death. FEES AND CHARGES ================================================================================ Mortality and Expense Risk Charge As compensation for assuming mortality and expense risks, we deduct a daily mortality and expense risk charge from your net assets in the subaccounts. The charge is equal, on an annual basis, to 0.95% of average daily net assets you have invested in the subaccounts. The mortality risk we assume is that annuitants may live for a longer period of time than estimated when we established the guarantees in the Contract. Because of these guarantees, each annuitant is assured that longevity will not have an adverse effect on the annuity payments received. The mortality risk that we assume also includes a guarantee to pay a death benefit if the annuitant dies before the annuity start date. The expense risk that we assume is the risk that the administrative fees and transfer fees (if imposed) may be insufficient to cover actual future expenses. We may use any profits from this charge to pay the costs of distributing the Contracts. If you choose either the Guaranteed Minimum Death Benefit or the Guaranteed Retirement Income, we will deduct an additional daily fee from your value in the subaccounts at an annual rate of 0.25% of average daily net assets you have invested in the subaccounts. If you choose both benefits, the additional daily fee will increase to an annual rate of 0.50%. See "Fee Table." ASSET-BASED ADMINISTRATION CHARGE We deduct a daily asset-based administration charge from each subaccount to help reimburse us for our administrative costs, such as owner inquiries, changes in allocations, owner reports, -36- 42 Contract maintenance costs and data processing costs. This charge is equal, on an annual basis, to 0.20% of your average daily net assets in the subaccounts. This charge is designed to help compensate us for the cost of administering the Contracts and the variable account. TRANSFER FEE A transfer fee of $25 will be imposed for the thirteenth and each subsequent transfer during a Contract year. Any unused free transfers do not carry over to the next Contract year. Each written or telephone request would be considered to be one transfer, regardless of the number of subaccounts affected by the transfer. Transfers you make through our asset rebalancing and dollar cost averaging programs do not count toward your twelve free transfers. We deduct the transfer fee from the amount transferred. SURRENDER CHARGE We do not deduct a charge for sales expenses from premium payments at the time premium payments are paid to us. However, we will deduct a surrender charge, if applicable, if you surrender your Contract or partially withdraw cash value before the annuity start date, or if you annuitize your Contract. We do not assess a surrender charge on withdrawals made if the Contract terminates due to your death or the death of the last surviving annuitant. As a general rule, the surrender charge equals a percentage of the premium payments withdrawn that: (a) we have held for less than seven years; and (b) are not eligible for a free withdrawal. The surrender charge applies during the entire seven year period following each premium payment. The applicable percentage depends on the number of years since you made the premium payment being withdrawn, as shown on this chart:
Number of Completed Years from the Surrender Charge Date of Premium Payments Percentage ---------------------------------- ---------------- 0 7% 1 6% 2 5% 3 5% 4 4% 5 3% 6 2% 7 and later 0%
-37- 43 In determining surrender charges, we will deem premiums to be surrendered in the order in which they were received - that is, on a first-in, first-out basis. Because surrender charges are based on the date each premium payment is made, you may be subject to a surrender charge, even though the Contract may have been issued many years earlier. We will not apply the Surrender Charge Percentage to an amount greater than the current Contract Value minus the Free Withdrawal Amount if the Contract Value is less than your total premium payments due to negative investment performance. When you request a withdrawal, you will be sent a check in the amount you requested (if available), less applicable tax withholding. If a surrender charge applies, your Contract Value will be reduced by the dollar amount we send you, plus the surrender charge. The surrender charge is deducted pro-rata from all subaccounts and the fixed account in which the Contract is invested based on the remaining Contract Value in each subaccount and the fixed account, unless you request otherwise. FREE WITHDRAWAL AMOUNT In any Contract year before the annuity start date, you may withdraw a portion of your Contract Value once each calendar quarter without incurring a surrender charge. This amount is called the free withdrawal amount. Each Contract year, the free withdrawal amount is an amount up to the greater of: - Contract Value minus the excess of total premiums over prior withdrawals that were previously assessed a surrender charge; or - 10% of the Contract Value determined at the time the withdrawal is requested. Any premium that has been held by us for more than seven years will be subject to a 0% Surrender Charge Percentage. EXAMPLE OF SURRENDER CHARGE CALCULATION This example is for a Contract issued on July 1, 2000 with a $10,000 premium paid on the issue date. No subsequent premiums are paid. The owner wishes to withdraw $4,000 on September 15, 2003. Suppose the Contract Value is $12,700 on that date, before the withdrawal. The free withdrawal amount is the larger of (a) and (b): (a) $12,700 - $10,000 = $2,700 (b) (10%)($12,700) = $1,270 The free withdrawal amount is $2,700. The remaining portion of the withdrawal is subject to a surrender charge. Since this amount represents the withdrawal of premium paid between 3 and 4 years ago, the surrender charge percentage is 5%. The surrender charge is calculated as follows: ($4,000 - $2,700)(5%) = $65 -38- 44 In this example, the owner wishes to fully surrender the Contract in year 3. The surrender charge is calculated as follows: ($12,700 - $2,700)(5%)/1.05 = $476.19 The owner would receive $12,700 - $476.19 - $30 = $12,193.81. Assume the same facts but Contract Value declined to $8,000. The free withdrawal amount is the larger of (a) and (b): (a)$8,000 - $10,000 = $-2,000 (b)(10%)($8,000) = $800 The surrender charge is calculated as follows: ($8,000 - $800)(5%)/1.05 = $342.86 The owner would receive $8,000 - $342.86 - $30 = $7,627.14 Free withdrawals may be subject to the 10% federal penalty tax if made before you reach age 59 1/2. They also may be subject to federal income tax. WAIVER OF SURRENDER CHARGE RIDERS If state law permits and subject to certain restrictions, we will automatically issue two riders with your Contract. As described in these riders, we will waive the surrender charge: - after an annuitant (who is under age 75) has been confined in a hospital or skilled heath care facility continuously for at least 90 days; or - (after one year from the effective date of the rider) if an annuitant is diagnosed with a terminal illness after we issue the Contract and is expected to live for 12 months or less, up to an aggregate maximum withdrawal of $250,000. RECORDS MAINTENANCE CHARGE At the end of each Contract year before the annuity start date, we will deduct a records maintenance charge of $30 from your Contract Value as partial reimbursement for our administrative expenses relating to the Contract. We will deduct the fee from each subaccount and the fixed account based on the proportion that the value in each subaccount and the fixed account bears to the total Contract Value. We will also deduct this charge on the annuity start date, or the date you surrender the Contract. We will not deduct this fee after annuity payments have begun. We also currently waive deduction of the charge for Contracts whose Contract Value is $50,000 or more on the date of assessment. PORTFOLIO MANAGEMENT FEES AND EXPENSES Each portfolio deducts portfolio management fees and expenses from the amounts you have invested in the portfolios through the subaccounts. You pay these fees and expenses indirectly. In addition, some portfolios deduct 12b-1 fees and service -39- 45 fees. For 2000, total portfolio fees and charges ranged from 0.44% to 1.81%. See the Fee Table in this Prospectus and the prospectuses for the portfolios. We (and our affiliates) receive compensation from certain investment advisers and/or administrators (and/or an affiliate thereof) of the portfolios in connection with administrative or other services we provide and cost savings experienced by the investment advisers, administrators or affiliate. Such compensation may range from 0.10% to 0.25% and is based on a percentage of assets of the particular portfolios attributable to the Contract, and in some cases, other contracts issued by Farmers (or its affiliates). We also receive the service fees and all or a portion of the 12b-1 fees deducted from portfolio assets as reimbursement for providing certain services permitted under the fund's 12b-1 plan. Some advisers, administrators, or portfolios may pay us more than others. PREMIUM TAXES Various states and other governmental entities charge a premium tax on annuity contracts issued by insurance companies. Premium tax rates currently range up to 3.5%, depending on the state. We are responsible for paying these taxes. If applicable, we will deduct the cost of such taxes from the value of your Contract either: - from premium payments as we receive them, - from Contract Value upon surrender or partial withdrawal, o on the annuity start date, or - upon payment of a death benefit. Other Taxes Currently, no charge is made against the variable account for any federal, state or local taxes (other than premium taxes) that we incur or that may be attributable to the variable account or the Contracts. We may, however, deduct such a charge in the future, if necessary. The Payout Period ================================================================================ The Annuity Start Date The annuity start date is the day that the payout period begins under the annuity option you have selected. If you own a Contract that is not a qualified Contract, you must select the annuity start date on which you will begin to receive annuity payments. The annuity start date can be no later than the final annuity date (the Contract anniversary when the oldest annuitant is age 95). In the case of an IRA that satisfies Tax Code section 408, the annuity start date must be no later than April 1 of the calendar year following the year in which you reach age 70 1/2 and the payment must be made in a specified form or manner. Roth IRAs under section 408A of the Tax Code do not require distributions at any time prior to your death; the annuity start date for Roth IRAs can be no later than the final annuity date. -40- 46 ANNUITY OPTIONS You must chose an annuity option on or before the annuity start date. The annuity option you select will affect the dollar amount of each annuity payment you receive. You may select or change your annuity option on or before the annuity start date while the annuitant is living by sending a written request signed by you and/or your beneficiary, as appropriate, to our Home Office. You may choose one of the annuity options described below or any other annuity option being offered by us as of the annuity start date. The annuity options we currently offer provide for fixed annuity payments. You may elect to receive annuity payments on a monthly, quarterly, semi-annual or annual basis. If you do not specify the frequency of payment, we will pay you monthly. The first payment under any option will be made on the day of the month you request (subject to our agreement) and will begin in the month immediately following the annuity start date. We will make subsequent payments on the same day of each subsequent period in accordance with the payment interval and annuity option you select. If you do not select an annuity option by the final annuity date, we will apply the Contract Value under the Second Option, Life Income with a 10 year guarantee period, as described below. A beneficiary may have the death benefit paid as an annuity under one of the annuity options. Determining the Amount of Your Annuity Payment On the annuity start date, we will use the cash value to calculate your annuity payments under the annuity option you select. Cash value is your Contract Value minus any applicable surrender charges, records maintenance fee, and premium tax. For qualified Contracts, distributions must satisfy certain requirements specified in the Tax Code. FIXED ANNUITY PAYMENTS Fixed annuity payments are periodic payments that we make to the annuitant. The amount of the fixed annuity payment is fixed and guaranteed by us. The amount of each payment depends on: - the form and duration of the annuity option you choose; - the age of the annuitant; - the sex of the annuitant (if applicable); - the amount of your Cash Value on the annuity start date; and - the applicable guaranteed annuity tables in the Contract. The guaranteed annuity tables in the Contract are based on a minimum guaranteed interest rate of 2.5%. We may, in our sole discretion, make annuity payments in an amount based on a higher interest rate. GUARANTEED ANNUITY TABLES The guaranteed annuity tables in your Contract show the minimum dollar amount of the first monthly payment for each $1,000 applied under the first, second and third annuity options. Under -41- 47 the first or second options, the amount of each payment will depend upon the adjusted age and sex of the annuitant at the time we are due to pay the first payment. Under the third option, the amount of each payment will depend upon the sex of both annuitants and their adjusted ages at the time we are due to pay the first payment. The adjusted age of the annuitant is determined by calculating the age at the nearest birthday of the annuitant on the annuity start date and subtracting a number that depends on the year in which the annuity start date belongs:
Annuity Start Date Adjusted Age is Age Minus ------------------ ------------------------- Before 2001 0 Years 2001 to 2010 1 Year 2011 to 2020 2 Years 2021 to 2030 3 Years 2031 to 2040 4 Years After 2040 5 Years
Once you have selected an annuity option, you may not change that election with respect to any annuitant if annuity payments have begun. After the annuity start date, the Contract no longer participates in the variable account. DESCRIPTION OF ANNUITY OPTIONS FIRST OPTION - LIFE INCOME.* We will make payments for the annuitant's lifetime. We will stop making monthly payments with the last payment due prior to the annuitant's death. SECOND OPTION - LIFE INCOME WITH A GUARANTEE PERIOD. We will make payments for the annuitant's lifetime, with the guarantee that we will make payments for at least 10 or 20 years. You select either the 10 or 20 year guarantee period. THIRD OPTION - JOINT AND SURVIVOR LIFE ANNUITY.* Under this option, we will make annuity payments so long as two annuitants are alive. After the death of one of the annuitants, we will continue to make payments for the lifetime of the surviving annuitant, although the amount of the payment may change. We will stop making monthly payments with the last payment due before the last surviving annuitant's death. The amount of each payment will be determined from the tables in the Contract that apply to the particular option using the annuitant's age (and if applicable, sex or adjusted age). Other options may be available. - --------------- * IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE ANNUITANT DIES (OR ANNUITANTS DIE) BEFORE THE DUE DATE OF THE SECOND PAYMENT OR TO RECEIVE ONLY TWO ANNUITY PAYMENTS IF THE ANNUITANT DIES (OR ANNUITANTS DIE) BEFORE THE DUE DATE OF THE THIRD PAYMENT, AND SO ON. -42- 48 Guaranteed Retirement Income Benefit ================================================================================ We offer an optional Guaranteed Retirement Income Benefit under this Contract. Here are some terms you will need to know before reading this section: - THE GUARANTEED ANNUITY RATES are the rates contained in your Contract under "Guaranteed Annuity Tables." - INCOME BASE equals the greater of: (i) premiums you paid accumulated daily with interest compounded at 5.00% per year through the earlier of the annuity start date and the Contract anniversary on or next following the oldest joint annuitant's 80th birthday, with a proportional reduction for withdrawals; and (ii) the Greatest Anniversary Value for the Contract anniversaries through the earlier of the annuity start date and the Contract anniversary on or next following the oldest joint annuitant's 80th birthday, with a proportional reduction for withdrawals. In determining the income base when the oldest joint annuitant is over 80 on the annuity start date, the income base on the Contract anniversary coincident with or next following the annuitant's 80th birthday is increased by any premiums received and proportionately reduced by any withdrawals since that anniversary. The proportional reductions for withdrawals are determined independently for (i) and (ii) above. The PROPORTIONAL REDUCTION for each withdrawal (for purposes of the Guaranteed Retirement Income Benefit) equals: - the income base under the item being considered (either (i) or (ii) above) immediately prior to the withdrawal; MULTIPLIED BY - the ratio of the amount withdrawn (including charges) to the Contract Value immediately prior to the withdrawal. * * * The Guaranteed Retirement Income Benefit provides a minimum fixed annuity guaranteed lifetime income to the annuitant once the Contract has been in force for ten Contract years. You must select the Guaranteed Retirement Income Benefit on your initial Contract application. You may discontinue the Guaranteed Retirement Income Benefit at any time by sending notice to the Service Center. Once you discontinue the Guaranteed Retirement Income Benefit, you may not select it again. -43- 49 If you select the Guaranteed Retirement Income Benefit, we will deduct an additional daily charge on each valuation day from the subaccounts at an annual rate of 0.25% of the average daily net assets you have invested in the subaccounts. See "Fees and Charges." You may choose to receive the Guaranteed Retirement Income Benefit on the annuity start date, if all of the following conditions are met: - You choose an annuity option that provides payments for the lifetime of - or more annuitants with payments guaranteed for a period not to exceed 10 years; - You select an annuity start date that is on or after the 10th Contract anniversary; - You select an annuity start date that occurs within 30 days following a Contract anniversary; - The annuity start date is before the annuitant's 91st birthday and after the annuitant's 60th birthday. If the annuitant is younger than 44 on the issue date, the annuity start date must be after the 15th Contract anniversary. If you do not meet these conditions, you lose the benefit of the Rider. The amount of minimum income payments we will pay under the Guaranteed Retirement Income Benefit is determined by applying the income base (less applicable taxes) to the guaranteed annuity rates in your Contract for the annuity option you select. On the annuity start date, the income payments we will pay under the Contract will equal the greater of: - the dollar amount determined by applying the income base (under the Guaranteed Retirement Income Benefit) to the guaranteed annuity rates in the Contract; and - the dollar amount determined by applying the Contract's cash value to the income benefits, annuity options and current annuity tables as described in your Contract. We will pay the Guaranteed Retirement Income Benefit for the life of a single annuitant, or the lifetimes of two annuitants. If we pay the Guaranteed Retirement Income Benefit for the life of two annuitants, then we will use the age of the oldest joint annuitant to determine the income base. THE GUARANTEED RETIREMENT INCOME BENEFIT GUARANTEES A MINIMUM INCOME THAT IS BASED ON CONSERVATIVE ACTUARIAL FACTORS. The income guaranteed under the Guaranteed Retirement Income Benefit by applying the income base to the Contract's guaranteed annuity tables may, under some circumstances, be less than the income that would be provided by applying the Contract's cash value to current annuity factors (i.e., the income you would receive if you did not purchase the Guaranteed Retirement Income Benefit). Depending on market conditions and the build-up in your Contract's cash value, you may decide not to annuitize under the rider. When buying the Guaranteed Retirement Income Benefit, you take the risk that you may pay for the rider's insurance but never receive the benefit. The Guaranteed Retirement Income Benefit may not be available in all states, and it may vary by state. -44- 50 THE FIXED ACCOUNT ================================================================================ You may allocate some or all of your premium payments and transfer some or all of your Contract Value to the fixed account. The fixed account offers a guarantee of principal, after deductions for fees and expenses. We also guarantee that you will earn interest at a rate of a least 3% per year on amounts in the fixed account. The fixed account is part of our general account. Our general account supports our insurance and annuity obligations. Because the fixed account is part of the general account, we assume the risk of investment gain or loss on this amount. All assets in the general account are subject to our general liabilities from business operations. The fixed account may not be available in all states. The fixed account is not registered with the SEC under the Securities Act of 1933 (the "1933 Act"). Neither the fixed account nor our general account have been registered as an investment company under the 1940 Act. Therefore, neither our general account, the fixed account, nor any interests therein are generally subject to regulation under the 1933 Act or the 1940 Act. The disclosures relating to the fixed account which are included in this prospectus are for your information and have not been reviewed by the SEC. However, such disclosures may be subject to certain generally applicable provisions of federal securities laws relating to the accuracy and completeness of statements made in prospectuses. Fixed Account Value On each valuation period (before the annuity start date), the fixed account value is equal to: - the total of premiums allocated to the fixed account; minus - any applicable premium taxes; plus - amounts transferred from the subaccounts; increased by - any credited interest; and decreased by - any transfers and withdrawals from the fixed account, and by any charges deducted from the fixed account. We intend to credit the fixed account with interest at current rates in excess of the minimum guaranteed rate of 3%, but we are not obligated to do so. We have no specific formula for determining current interest rates. The fixed account value will not share in the investment performance of our general account. Because we, in our sole discretion, anticipate changing the current interest rate from time to time, different allocations you make to the fixed account will be credited with different current interest rates. You assume the risk that interest credited to amounts in the fixed account may not exceed the minimum 3% guaranteed rate. We reserve the right to change the method of crediting interest from time to time, provided that such changes do not reduce the guaranteed rate of interest below 3% per year or shorten the period for which the interest rate applies to less than one year (except for the year in which such amount is received or transferred). -45- 51 We allocate amounts from the fixed account for partial withdrawals, transfers to the subaccounts, or charges on a last in, first out basis ("LIFO") for the purpose of crediting interest. FIXED ACCOUNT TRANSFERS GENERAL A transfer charge of $25 will be imposed for the thirteenth and each subsequent request you make to transfer Contract Value from one or more subaccounts to the fixed account (or to one or more subaccounts) during a single Contract year before the annuity start date. Before the annuity start date, you may make one transfer each Contract year during the 30 days following a Contract anniversary from the fixed account to one or more of the subaccounts. You may not make transfers from any subaccount to the fixed account during the six months following any transfer you make from the fixed account to any subaccount, or after you begin to receive annuity payments. PAYMENT DEFERRAL We have the right to defer payment of any surrender, partial withdrawal, or transfer from the fixed account for up to six months from the date we receive your written request at the Service Center. During such deferral, we will continue to credit interest at the current guaranteed interest rate for the fixed account. INVESTMENT PERFORMANCE OF THE SUBACCOUNTS ================================================================================ The Company periodically advertises performance of the subaccounts and portfolios. We may disclose at least four different kinds of performance. First, we may disclose standard total return figures for the subaccounts that reflect the deduction of all charges under the Contract, including the mortality and expense charge, any charge for optional benefits, the annual records maintenance charge and the surrender charge. These figures are based on the actual historical performance of the subaccounts since their inception. Second, we may disclose total return figures on a non-standard basis. This means that the data may be presented for different time periods and different dollar amounts. The data will not be reduced by the surrender charge or by charges for optional benefits currently assessed under the Contract. We will only disclose non-standard performance data if it is accompanied by standard total return data. Third, we may present historic performance data for the portfolios since their inception reduced by all fees and charges under the Contract, although we may not deduct the surrender charge or the charges for optional benefits in some cases. Such adjusted historic performance includes data that precedes -46- 52 the inception dates of the subaccounts, but is designed to show the performance that would have resulted if the Contract had been available during that time. Fourth, we may include in our advertising and sales materials, tax deferred compounding charts and other hypothetical illustrations, which may include comparisons of currently taxable and tax deferred investment programs, based on selected tax brackets. We may provide illustrations of hypothetical Contract expenses and values during the accumulation period, based on hypothetical rates of return that are not guaranteed. In advertising and sales literature (including illustrations), the performance of each subaccount may be compared with the performance of other variable annuity issuers in general or to the performance of particular types of variable annuities investing in mutual funds, or portfolios of mutual funds with investment objectives similar to the subaccount. Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technologies ("CDA"), Variable Annuity Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar") are independent services which monitor and rank the performance of variable annuity issuers in each of the major categories of investment objectives on an industry-wide basis. Lipper's and Morningstar's rankings include variable life insurance issuers as well as variable annuity issuers. VARDS rankings compare only variable annuity issuers. The performance analyses prepared by Lipper, CDA, VARDS and Morningstar rank or illustrate such issuers on the basis of total return, assuming reinvestment of distributions, but do not take sales charges, redemption fees, or certain expense deductions at the variable account level into consideration. In addition, VARDS prepares risk rankings, which consider the effects of market risk on total return performance. This type of ranking provides data as to which funds provide the highest total return within various categories of funds defined by the degree of risk inherent in their investment objectives. Advertising and sales literature may also compare the performance of each subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used measure of stock performance. This unmanaged index assumes the reinvestment of dividends but does not reflect any "deduction" for the expense of operating or managing an investment portfolio. Other independent ranking services and indices may also be used as a source of performance comparison. We may also report other information including the effect of systematic withdrawals, systematic investments and tax-deferred compounding on a subaccount's investment returns, or returns in general. We may illustrate this information by using tables, graphs, or charts. All income and capital gains derived from subaccount investments are reinvested and can lead to substantial long-term accumulation of assets, provided that the subaccount investment experience is positive. VOTING RIGHTS ================================================================================ -47- 53 We are the legal owner of the portfolio shares held in the subaccounts. However, when a portfolio is required to solicit the votes of its shareholders through the use of proxies, we believe that current law requires us to solicit you and other contract owners as to how we should vote the portfolio shares held in the subaccounts. If we determine that we no longer are required to solicit your votes, we may vote the shares in our own right. When we solicit your vote, the number of votes you have will be calculated separately for each subaccount in which you have an investment. The number of your votes is based on the net asset value per share of the portfolio in which the subaccount invests. It may include fractional shares. Before the annuity start date, you hold a voting interest in each subaccount to which the Contract Value is allocated. If you have a voting interest in a subaccount, you will receive proxy materials and reports relating to any meeting of shareholders of the portfolio in which that subaccount invests. If we do not receive timely voting instructions for portfolio shares, we will vote those shares in proportion to the voting instructions we receive. Instructions we receive to abstain on any item will reduce the total number of votes being cast on a matter. For further details as to how we determine the number of your votes, see the SAI. FEDERAL TAX MATTERS ================================================================================ The following discussion is general in nature and is not intended as tax advice. Each person concerned should consult a competent tax adviser. No attempt is made to consider any applicable state tax or other tax laws. We believe that our Contracts will qualify as annuity contracts for federal income tax purposes and the following discussion assumes that they will so qualify. Further information on the tax status of the Contract can be found in the SAI under the heading "Tax Status of the Contracts." When you invest in an annuity contract, you usually do not pay taxes on your investment gains until you withdraw the money - generally for retirement purposes. In this way, annuity contracts have been recognized by the tax authorities as a legitimate means of deferring tax on investment income. If you invest in a variable annuity as part of an IRA, Roth IRA, SIMPLE IRA or SEP IRA program, your Contract is called a Qualified Contract. If your annuity is independent of any formal retirement or pension plan, it is called a Non-Qualified Contract. We believe that if you are a natural person you will not be taxed on increases in the Contract Value of your Contract until a distribution occurs or until annuity payments begin. (The agreement to assign or pledge any portion of a Contract's accumulation value generally will be treated as a distribution.) When annuity payments begin on a Non-Qualified Contract, you will be taxed only on -48- 54 the investment gains you have earned and not on the payments you made to purchase the Contract. Generally, withdrawals from your annuity should only be made once the annuitant reaches age 59 1/2, dies or is disabled, otherwise a tax penalty of ten percent of the amount treated as income could be applied against any amounts included in income, in addition to the tax otherwise imposed on such amount. Taxation of Non-Qualified Contracts NON-NATURAL PERSON If a non-natural person (such as a corporation or a trust) owns a non-qualified annuity contract, the owner generally must include in income any increase in the excess of the accumulation value over the investment in the contract (generally, the premiums or other consideration paid for the contract) during the taxable year. There are some exceptions to this rule and a prospective owner that is not a natural person should discuss these with a tax adviser. The following discussion generally applies to Contracts owned by natural persons. WITHDRAWALS When a withdrawal from a Non-Qualified Contract occurs, the amount received will be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the accumulation value immediately before the distribution over the Owner's investment in the contract (generally, the premiums or other consideration paid for the Contract, reduced by any amount previously distributed from the Contract that was not subject to tax) at that time. In the case of a surrender under a Non-Qualified Contract, the amount received generally will be taxable only to the extent it exceeds the Owner's investment in the contract. PENALTY TAX ON CERTAIN WITHDRAWALS In the case of a distribution from a Contract, there may be imposed a federal tax penalty equal to ten percent of the amount treated as income. In general, however, there is no penalty on distributions: - made on or after the taxpayer reaches age 59 1/2; - made on or after the death of an Owner; - attributable to the taxpayer's becoming disabled; or - made as part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer. Other exceptions may apply under certain circumstances and special rules may apply in connection with the exceptions enumerated above. Additional exceptions apply to distributions from a Qualified Contract. You should consult a tax adviser with regard to exceptions from the penalty tax. ANNUITY PAYMENTS Although tax consequences may vary depending on the annuity option elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is taxed as ordinary income. The non-taxable portion of an annuity payment is generally determined in a manner that is designed to allow you to recover your investment in the contract ratably on a tax-free basis over the expected stream of annuity payments, as determined when annuity payments start. Once your investment in the contract has been fully recovered, however, the full amount of each annuity payment is subject to tax as ordinary income. -49- 55 TAXATION OF DEATH BENEFIT PROCEEDS Amounts may be distributed from a Contract because of your death or the death of the annuitant. Generally, such amounts are includible in the income of the recipient as follows: (i) if distributed in a lump sum, they are taxed in the same manner as a surrender of the Contract, or (ii) if distributed under an annuity option, they are taxed in the same way as annuity payments. TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT A transfer or assignment of ownership of a Contract, the designation of an annuitant or payee other than an owner, the selection of certain annuity start dates, or the exchange of a Contract may result in certain tax consequences to you that are not discussed herein. An Owner contemplating any such transfer, assignment, designation or exchange, should consult a tax adviser as to the tax consequences. WITHHOLDING Annuity distributions are generally subject to withholding for the recipient's federal income tax liability. Recipients can generally elect, however, not to have tax withheld from distributions. MULTIPLE CONTRACTS All non-qualified defined annuity contracts that are issued by us (or our affiliates) to the same Owner during any calendar year are treated as one annuity contract for purposes of determining the amount includible in such Owner's income when a taxable distribution occurs. FURTHER INFORMATION We believe that the contracts will qualify as annuity contracts for Federal income tax purposes and the above discussion is based on that assumption. Further details can be found in the Statement of Additional Information under the heading ?Tax Status of the Contracts.? TAXATION OF QUALIFIED CONTRACTS The tax rules that apply to Qualified Contracts vary according to the type of retirement plan and the terms and conditions of the plan. Your rights under a Qualified Contract may be subject to the terms of the retirement plan itself, regardless of the terms of the Qualified Contract. Adverse tax consequences may result if you do not ensure that contributions, distributions and other transactions with respect to the Contract comply with the law. INDIVIDUAL RETIREMENT ANNUITIES, (IRAs), as defined in Section 408 of the Tax Code, permit individuals to make annual contributions of up to the lesser of $2,000 or 100% of the compensation included in your income for the year. The contributions may be deductible in whole or in part, depending on the individual's income. Distributions from certain pension plans may be "rolled over" into an IRA on a tax-deferred basis without regard to these limits. Amounts in the IRA (other than nondeductible contributions) are taxed when distributed from the IRA. A 10% penalty tax generally applies to distributions made before age 59 1/2, unless certain exceptions apply. The Internal Revenue Service has reviewed the Contract and its traditional IRA and SIMPLE IRA riders and has issued an opinion letter approving the use of the Contract and the riders as a traditional IRA and a SIMPLE IRA. The Internal Revenue Service has not addressed in a ruling of general applicability whether a death -50- 56 benefit provision such as the optional Guaranteed Minimum Death Benefit provision in the Contract comports with IRA qualification requirements. SIMPLE IRAs, permit certain small employers to establish SIMPLE plans as provided by Section 408(p) of the Code, under which employees may elect to defer to a SIMPLE IRA a percentage of compensation up to $6,000 (as increased for cost of living adjustments). The sponsoring employer is required to make matching or non-elective contributions on behalf of the employees. Distributions from SIMPLE IRAs are subject to the same restrictions that apply to IRA distributions and are taxed as ordinary income. Subject to certain exceptions, premature distributions prior to age 59 1/2 are subject to a 10% penalty tax, which is increased to 25% if the distribution occurs within the first two years after the commencement of the employee's participation in the plan. ROTH IRAs, as described in Tax Code section 408A, permit certain eligible individuals to make non-deductible contributions to a Roth IRA in cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA is generally subject to tax and other special rules apply. The Owner may wish to consult a tax adviser before combining any converted amounts with any other Roth IRA contributions, including any other conversion amounts from other tax years. Distributions from a Roth IRA generally are not taxed, except that, once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA. A 10% penalty tax may apply to amounts attributable to a conversion from an IRA if they are distributed during the five taxable years beginning with the year in which the conversion was made. SEP IRAs, as described in Tax Code section 408(k), permit employers to make contributions to IRAs on behalf of their employees. SEP IRAs generally are subject to the same tax rules and limitations regarding distributions as IRAs, and they are subject to additional requirements regarding plan participation and limits on contributions. OTHER TAX ISSUES Qualified Contracts have minimum distribution rules that govern the timing and amount of distributions. You should consult a tax adviser for more information about these distribution rules. Distributions from Qualified Contracts generally are subject to withholding for the Owner's federal income tax liability. The withholding rate varies according to the type of distribution and the Owner's tax status. The Owner will be provided the opportunity to elect to not have tax withheld from distributions. OUR INCOME TAXES At the present time, we make no charge for any federal, state or local taxes (other than the charge for state and local premium taxes) that we incur that may be attributable to the investment divisions (that is, the subaccounts) of the variable account or to the Contracts. We do have the right in the future to make additional charges for any such tax or other economic burden resulting from the application of the tax laws that we determine is attributable to the investment divisions of the variable account or the Contracts. -51- 57 Under current laws in several states, we may incur state and local taxes (in addition to premium taxes). These taxes are not now significant and we are not currently charging for them. If they increase, we may deduct charges for such taxes. Possible Tax Law Changes Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contracts could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Contract. We have the right to modify the Contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity contract owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend the above discussion as tax advice. Other Information ================================================================================ Payments During the pay-in period, we will usually pay you any surrender, partial withdrawal, or death benefit payment within seven calendar days after we receive all the required information. The required information includes your written request, any information or documentation we reasonably need to process your request, and, in the case of a death benefit, receipt and filing of due proof of death. However, we may suspend or postpone payments during any period when: - the New York Stock Exchange is closed, other than customary weekend and holiday closings; - trading on the New York Stock Exchange is restricted as determined by the SEC; - the SEC determines that an emergency exists that would make the disposal of securities held in the variable account or the determination of the value of the variable account's net assets not reasonably practicable; or - the SEC permits, by order, the suspension or postponement of payments for your protection. If a recent check or draft has been submitted, we have the right to delay payment until we have assured ourselves that the check or draft has been honored. We have the right to defer payment for a surrender, partial withdrawal, death benefit or transfer from the fixed account for up to six months from the date we receive your written request. MODIFICATION Upon notice to you, we may modify the Contract to: -52- 58 - permit the Contract or the variable account to comply with any applicable law or regulation issued by a government agency; - assure continued qualification of the Contract under the Tax Code or other federal or state laws relating to retirement annuities or variable annuity contracts; - reflect a change in the operation of the variable account; or - provide additional investment options. In the event of most such modifications, we will make appropriate endorsement to the Contract. Distribution of the Contracts We have entered into a distribution agreement with Farmers Financial Solutions, LLC ("FFS") for the distribution and sale of the Contracts. Pursuant to this agreement, FFS serves as principal underwriter for the Contracts. FFS, a Nevada limited liability company organized in 2000, is affiliated with Farmers through Farmers' parent which provides management-related services to the parent companies of FFS. FFS is located at 2423 Galena Avenue, Simi Valley, California 93065. FFS is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "1934 Act"), as well as with the securities commissions in the states in which it operates, and is a member of the National Association of Securities Dealers, Inc. (the "NASD"). FFS offers the Contracts through its registered representatives who are registered with the NASD and with the states in which they do business. More information about FFS and its registered persons is available at http://www.nasdr.com or by calling 1-800-289-9999. You also can obtain an investor brochure from NASD Regulation describing its Public Disclosure Program. Registered representatives with FFS are also licensed as insurance agents in the states in which they do business and are appointed with Farmers. We pay sales commissions to FFS for the sale of the Contracts by its registered persons. Sales commissions may vary, but are expected not to exceed 7.0% of premium payments. We pay compensation either as a percentage of premium payments at the time we receive them, as a percentage of Contract Value on an ongoing basis, or in some cases, a combination of both. We may pay lower compensation on sales to owners at older ages. FFS may enter into selling agreements with other broker-dealers registered under the 1934 Act to sell the Contracts. Under these agreements, the commissions paid to broker-dealers will not exceed those described above. Because registered persons of FFS who sell the Contracts are also agents of Farmers, they are eligible for various cash benefits, such as production incentive bonuses, insurance benefits, and expense allowances, and non-cash compensation programs that Farmers offers to its agents, such as conferences, trips, prizes, and awards. FFS and its managers may also sponsor incentive programs for registered persons. Other payments may be made for other services that do not directly involve the sale of the Contracts. These -53- 59 services may include the recruitment and training of personnel, production of promotional literature, and similar services. We intend to recoup commissions and other sales expenses through fees and charges imposed under the Contract. Commissions paid on the Contract, including other incentives or payments, are not charged directly to the Contract owners or the Variable Account. We offer the Contracts to the public on a continuous basis. We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering at any time. LEGAL PROCEEDINGS Like other life insurance companies, we are involved in lawsuits. These actions are in various stages of discovery and development, and some seek punitive as well as compensatory damages. While it is not possible to predict the outcome of such matters with absolute certainty, we believe that the ultimate disposition of these proceedings should not have a material adverse effect on the financial position of Farmers New World Life Insurance Company. In addition, we are, from time to time, involved as a party to various governmental and administrative proceedings. There are no pending or threatened lawsuits that will materially impact the variable account. REPORTS TO OWNERS Before the annuity start date, we will mail a report to you at least annually at your last known address of record. The report will state the Contract Value (including the Contract Value in each subaccount and the fixed account) of the Contract, and any further information required by any applicable law or regulation. Contract owners will also receive confirmations of each financial transaction, such as premium payments, transfers, partial withdrawals, loans and surrenders, as well as quarterly statements. STATE VARIATIONS Any state variations in the Contract are covered in a special Contract form for use in that state. This Prospectus provides a general description of the Contract. Your actual Contract and any endorsements or riders are the controlling documents. If you would like to review a copy of your Contract and its endorsements and riders, if any, contact our Service Center. INQUIRIES Inquiries regarding your Contract may be made by calling or writing to us at the Service Center. -54- 60 FINANCIAL STATEMENTS The audited balance sheets for Farmers as of December 31, 2000 and 1999, and the related statements of income, comprehensive income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000, as well as the Independent Auditors' Report, are contained in the SAI. Our financial statements should be considered only as bearing on our ability to meet our obligations under the Contracts. They should not be considered as bearing on the investment performance of the assets held in the variable account. The audited financial statements for the Variable Account as of December 31, 2000, and for the period then ended, as well as the Independent Auditor's Report, are contained in the SAI. -55- 61 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS The SAI contains additional information about the Contract and the variable account. You can obtain the SAI (at no cost) by writing to us at the address shown on the front cover or by calling 1 (877) 376-8008. The following is the Table of Contents for the SAI.
Page ---- ADDITIONAL CONTRACT PROVISIONS..................................................................... 1 The Contract............................................................................... 1 Incontestability........................................................................... 1 Incorrect Age or Sex....................................................................... 1 Nonparticipation........................................................................... 1 Waiver of Surrender Charge Riders.......................................................... 2 Tax Status of the Contracts................................................................ 2 CALCULATION OF SUBACCOUNT AND ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA......................... 3 Money Market Subaccount Yields............................................................. 3 Other Subaccount Yields.................................................................... 5 Average Annual Total Returns for the Subaccounts........................................... 6 Non-Standard Subaccount Total Returns...................................................... 6 Adjusted Historic Portfolio Performance Data............................................... 7 Effect of the Records Maintenance Charge on Performance Data............................... 7 HISTORIC PERFORMANCE DATA.......................................................................... 7 General Limitations........................................................................ 7 Tables of Subaccount Performance Figures................................................... 7 Time Periods Before the Date the Variable Account Commenced Operations..................... 14 Tables of Adjusted Historic Total Return Quotations........................................ 14 NET INVESTMENT FACTOR.............................................................................. 21 ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.................................................. 21 RESOLVING MATERIAL CONFLICTS............................................................... 22 VOTING RIGHTS...................................................................................... 22 SAFEKEEPING OF VARIABLE ACCOUNT ASSETS............................................................. 22 DISTRIBUTION OF THE CONTRACTS...................................................................... 23 LEGAL MATTERS...................................................................................... 24 EXPERTS.............................................................................................24 OTHER INFORMATION...................................................................................24 FINANCIAL STATEMENTS................................................................................24
-56- 62 Appendix A Condensed Financial Information The following condensed financial information shows accumulation unit values for each subaccount for the period since the subaccount started operation. An accumulation unit value is the unit we use to calculate the value of your interest in a subaccount. Each subaccount has 3 sets of accumulation unit values that reflect the three levels of Variable Account Annual Expenses available under the Contract. The accumulation unit value does not reflect the deduction of other charges such as the Record Maintenance Charge that we subtract from your Contract Value by redeeming units. The data is obtained from the audited financial statement of the variable account that can be found in the SAI. No Optional Benefits Elected (Total Variable Account Annual Expenses of 1.15% of the daily net assets of the subaccount) Franklin Templeton Variable Insurance Products Trust: Templeton Developing Markets Securities Fund (Class 2 Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 8.31 6.94 2,550
* Inception date of the subaccount was 8/4/00. Janus Aspen Series: Janus Capital Appreciation Portfolio (Institutional Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 9.30 6.85 188,188
* Inception date of the subaccount was 4/7/00. PIMCO Variable Insurance Trust: PIMCO Foreign Bond Portfolio (Administrative Class Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 10.14 10.55 3,630
* Inception date of the subaccount was 6/7/00. A-1 63 PIMCO Variable Insurance Trust: PIMCO Low Duration Bond Portfolio (Administrative Class Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 9.98 10.55 14,840
* Inception date of the subaccount was 5/15/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Bond Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 9.86 10.79 19,543
* Inception date of the subaccount was 5/15/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Growth and Income Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 9.98 9.41 73,574
* Inception date of the subaccount was 4/7/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder International Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 9.72 7.88 18,553
* Inception date of the subaccount was 4/7/00. A-2 64 Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Money Market Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 10.10 10.40 4,853
* Inception date of the subaccount was 6/7/00. Scudder Variable Series II (formerly Kemper Variable Series): Scudder Government Securities Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 10.12 10.84 22,310
* Inception date of the subaccount was 4/7/00. Scudder Variable Series II (formerly Kemper Variable Series): Scudder High Yield Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 9.77 9.11 555
* Inception date of the subaccount was 6/7/00. Scudder Variable Series II (formerly Kemper Variable Series): Scudder Small Cap Growth Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 8.79 6.48 14,693
* Inception date of the subaccount was 4/7/00. A-3 65 Scudder Variable Series II (formerly Kemper Variable Series): SVS Dreman High Return Equity Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 10.41 13.52 36,779
* Inception date of the subaccount was 4/7/00. One Optional Benefit Elected (Either the Guaranteed Minimum Death Benefit OR the Guaranteed Retirement Income Benefit) (Total Variable Account Annual Expenses of 1.40% of the daily net assets of the subaccount) Franklin Templeton Variable Insurance Products Trust: Templeton Developing Markets Securities Fund (Class 2 Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 8.30 6.93 8,991
* Inception date of the subaccount was 8/4/00. Janus Aspen Series: Janus Capital Appreciation Portfolio (Institutional Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ----------------- ------------------- ------------------ 2000* 9.30 6.84 175,932
* Inception date of the subaccount was 4/7/00. PIMCO Variable Insurance Trust: PIMCO Foreign Bond Portfolio (Administrative Class Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.13 10.53 1,720
* Inception date of the subaccount was 6/7/00. A-4 66 PIMCO Variable Insurance Trust: PIMCO Low Duration Bond Portfolio (Administrative Class Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.98 10.53 8,053
* Inception date of the subaccount was 5/15/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Bond Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.86 10.77 11,600
* Inception date of the subaccount was 5/15/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Growth and Income Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.98 9.39 65,137
* Inception date of the subaccount was 4/7/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder International Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.72 7.87 18,493
* Inception date of the subaccount was 4/7/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Money Market Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.09 10.38 5,925
* Inception date of the subaccount was 6/7/00. A-5 67 Scudder Variable Series II (formerly Kemper Variable Series): Scudder Government Securities Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.12 10.82 12,478
* Inception date of the subaccount was 4/7/00. Scudder Variable Series II (formerly Kemper Variable Series): Scudder High Yield Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.77 9.09 1,892
* Inception date of the subaccount was 6/7/00. Scudder Variable Series II (formerly Kemper Variable Series): Scudder Small Cap Growth Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 8.79 6.47 25,641
* Inception date of the subaccount was 4/7/00. Scudder Variable Series II (formerly Kemper Variable Series): SVS Dreman High Return Equity Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.41 13.49 34,696
* Inception date of the subaccount was 4/7/00. A-6 68 Both Optional Benefits Elected (the Guaranteed Minimum Death Benefit AND the Guaranteed Retirement Income Benefit) (Total Variable Account Annual Expenses of 1.65% of the daily net assets of the subaccount) Franklin Templeton Variable Insurance Products Trust: Templeton Developing Markets Securities Fund (Class 2 Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 8.30 6.92 494
* Inception date of the subaccount was 8/4/00. Janus Aspen Series: Janus Capital Appreciation Portfolio (Institutional Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.30 6.83 51,770
* Inception date of the subaccount was 4/7/00. PIMCO Variable Insurance Trust: PIMCO Foreign Bond Portfolio (Administrative Class Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.13 10.52 726
* Inception date of the subaccount was 6/7/00. PIMCO Variable Insurance Trust: PIMCO Low Duration Bond Portfolio (Administrative Class Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.97 10.51 4,101
* Inception date of the subaccount was 5/15/00. A-7 69 Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Bond Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.85 10.75 5,644
* Inception date of the subaccount was 5/15/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Growth and Income Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.98 9.38 25,212
* Inception date of the subaccount was 4/7/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder International Portfolio (Class A Shares)
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.72 7.86 8,381
* Inception date of the subaccount was 4/7/00. Scudder Variable Series I (formerly Scudder Variable Life Investment Fund): Scudder Money Market Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.09 10.36 140
* Inception date of the subaccount was 6/7/00. A-8 70 Scudder Variable Series II (formerly Kemper Variable Series): Scudder Government Securities Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.12 10.80 6,451
* Inception date of the subaccount was 4/7/00. Scudder Variable Series II (formerly Kemper Variable Series): Scudder High Yield Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 9.76 9.07 0
* Inception date of the subaccount was 6/7/00. Scudder Variable Series II (formerly Kemper Variable Series): Scudder Small Cap Growth Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 8.79 6.46 8,376
* Inception date of the subaccount was 4/7/00. Scudder Variable Series II (formerly Kemper Variable Series): SVS Dreman High Return Equity Portfolio
Accumulation unit Number of value at the Accumulation unit accumulation units beginning of the value at the end of outstanding at the period the year end of the year ---------------- ------------------- ------------------ 2000* 10.41 13.47 13,715
* Inception date of the subaccount was 4/7/00. A-9 71 STATEMENT OF ADDITIONAL INFORMATION for the FARMERS VARIABLE ANNUITY Individual Flexible Premium Variable Annuity Contract Issued Through FARMERS ANNUITY SEPARATE ACCOUNT A Offered by FARMERS NEW WORLD LIFE INSURANCE COMPANY 3003 - 77th Avenue, S.E. Mercer Island, Washington 98040 (206) 232-8400 SERVICE CENTER: P.O. Box 724208 Atlanta, Georgia 31139 1-877-376-8008 (toll free) 8:00 a.m. to 6:00 p.m. Eastern Time This Statement of Additional Information expands upon subjects discussed in the current Prospectus for the Farmers Variable Annuity individual flexible premium variable annuity contract offered by Farmers New World Life Insurance Company. You may obtain a copy of the Prospectus for the Contract dated May 1, 2001 by calling 1-877-376-8008 or by writing to our SERVICE CENTER at P.O. Box 724208, Atlanta, Georgia 31139. This Statement incorporates terms used in the current Prospectus for each Contract. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR YOUR CONTRACT AND THE PORTFOLIOS. The date of this Statement of Additional Information is May 1, 2001. 72 TABLE OF CONTENTS
Page ---- Additional Contract Provisions............................................................. 1 The Contract....................................................................... 1 Incontestability................................................................... 1 Incorrect Age or Sex............................................................... 1 Nonparticipation................................................................... 1 Waiver of Surrender Charge Riders.................................................. 2 Tax Status of the Contracts........................................................ 2 Calculation of Subaccount and Adjusted Historic Portfolio Performance Data................. 3 Money Market Subaccount Yields..................................................... 3 Other Subaccount Yields............................................................ 4 Average Annual Total Returns for the Subaccounts................................... 5 Non-Standard Subaccount Total Returns.............................................. 6 Adjusted Historic Portfolio Performance Data....................................... 7 Effect of the Records Maintenance Charge on Performance Data....................... 7 Historic Performance Data.................................................................. 7 General Limitations................................................................ 7 Tables Of Subaccount Performance Figures........................................... 7 Time Periods Before The Date The Variable Account Commenced Operations............. 13 Tables Of Adjusted Historic Total Return Quotations................................ 14 Net Investment Factor...................................................................... 21 Addition, Deletion or Substitution of Investments.......................................... 22 Resolving Material Conflicts............................................................... 22 Voting Rights.............................................................................. 22 Safekeeping of Variable Account Assets..................................................... 23 Distribution of the Contracts.............................................................. 23 Legal Matters.............................................................................. 24 Experts.................................................................................... 24 Other Information.......................................................................... 24 Financial Statements....................................................................... 25
-i- 73 ADDITIONAL CONTRACT PROVISIONS THE CONTRACT The entire contract consists of the Contract, the signed application attached at issue, any attached amendments and supplements to the application, and any attached riders and endorsements. In the absence of fraud, we consider all statements in the application to be representations and not warranties. We will not use any statement to contest a claim unless that statement is in an attached application or in an amendment or supplement to the application attached to the Contract. Any change in the Contract or waiver of its provisions must be in writing and signed by one of our officers. No other person - no agent or registered representative - has authority to change or waive any provision of the Contract. Upon notice to you, we may modify the Contract if necessary to: - permit the Contract or the variable account to comply with any applicable law or regulation that a governmental agency issues; or - assure continued qualification of the Contract under the Tax Code or other federal or state laws relating to retirement annuities or variable annuity contracts; or - effect a change in the operation of the variable account or to provide additional investment options. In the event of such modifications, we will make the appropriate endorsement to the Contract. INCONTESTABILITY We will not contest the Contract after the issue date. INCORRECT AGE OR SEX We may require proof of age, sex, and right to payments before making any life annuity payments. If the age or sex (if applicable) of the annuitant has been stated incorrectly, then we will determine the annuity start date and the amount of the annuity payments by using the correct age and sex. After the annuity start date, any adjustment for underpayment will be paid immediately. Any adjustment for overpayment will be deducted from future payments. We will make adjustments for overpayments or underpayments with interest at the rate then in use to determine the rate of payments. NONPARTICIPATION The Contract does not participate in our surplus earnings or profits. We will not pay dividends on the Contract. 1 74 WAIVER OF SURRENDER CHARGE RIDERS If available in the state where the Contract is issued, your Contract will include riders that will waive surrender charges on a single withdrawal if: - the annuitant is under age 75 at the time of withdrawal, the annuitant is confined in a hospital or skilled nursing facility continuously for at least 90 days and remains confined at the time of the surrender request, and the annuitant was not confined to a hospital or nursing facility within 6 months of the issue date. - the annuitant is diagnosed with a terminal illness after the Contract is issued and is expected to live for 12 months or less, the withdrawal is $250,000 or less, and the withdrawal occurs no sooner than one year after the rider is issued. There is no additional charge for the issuance of these waiver of surrender charge riders. These riders may not be available in all states. TAX STATUS OF THE CONTRACTS Tax law imposes several requirements that variable annuities must satisfy in order to receive the tax treatment normally accorded to annuity contracts. Diversification Requirements. The Tax Code requires that the investments of each investment division of the variable account underlying the Contracts be "adequately diversified" in order for the Contracts to be treated as annuity contracts for Federal income tax purposes. It is intended that each investment division, through the fund in which it invests, will satisfy these diversification requirements. Owner Control. In certain circumstances, owners of variable annuity contracts have been considered for Federal income tax purposes to be the owners of the assets of the variable account supporting their contracts due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets. There is little guidance in this area, and some features of our Contracts, such as the flexibility of an owner to allocate premiums and transfer amounts among the investment divisions of the variable account, have not been explicitly addressed in published rulings. While we believe that the Contracts do not give Owners investment control over variable account assets, we reserve the right to modify the Contracts as necessary to prevent an Owner from being treated as the Owner of the variable account assets supporting the Contract. Required Distributions. In order to be treated as an annuity contract for Federal income tax purposes, section 72(s) of the Tax Code requires any Non-Qualified Contract to contain certain provisions specifying how your interest in the Contract will be distributed in the event of the death of a holder of the Contract. Specifically, section 72(s) requires that (a) if any Owner dies on or after the annuity starting date, but prior to the time the entire interest in the Contract has been distributed, the entire interest in the Contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such Owner's death; and (b) if any owner dies prior to the annuity start date, the entire interest in the Contract will be distributed within five years after the date of such 2 75 Owner's death. These requirements will be considered satisfied as to any portion of an Owner's interest which is payable to or for the benefit of a designated beneficiary and which is distributed over the life of such designated beneficiary or over a period not extending beyond the life expectancy of that beneficiary, provided that such distributions begin within one year of the Owner's death. The designated beneficiary refers to a natural person designated by the owner as a beneficiary and to whom ownership of the Contract passes by reason of death. However, if the designated beneficiary is the surviving spouse of the deceased Owner, the Contract may be continued with the surviving spouse as the new owner. The Non-Qualified Contracts contain provisions that are intended to comply with these Tax Code requirements, although no regulations interpreting these requirements have yet been issued. We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. Other rules may apply to Qualified Contracts. CALCULATION OF SUBACCOUNT AND ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA We may advertise and disclose historic performance data for the subaccounts, including yields, standard annual total returns, and nonstandard measures of performance of the subaccounts. Such performance data will be computed, or accompanied by performance data computed, in accordance with the SEC defined standards. MONEY MARKET SUBACCOUNT YIELDS Advertisements and sales literature may quote the current annualized yield of the Money Market subaccount for a seven-day period in a manner that does not take into consideration any realized or unrealized gains or losses, or income other than investment income, on shares of the Money Market Portfolio. We compute this current annualized yield by determining the net change (not including any realized gains and losses on the sale of securities, unrealized appreciation and depreciation, and income other than investment income) at the end of the seven-day period in the value of a hypothetical subaccount under a Contract having a balance of one unit of the Money Market subaccount at the beginning of the period. We divide that net change in subaccount value by the value of the hypothetical subaccount at the beginning of the period to determine the base period return. Then we annualize this quotient on a 365-day basis. The net change in account value reflects (i) net income from the Money Market portfolio in which the hypothetical subaccount invests; and (ii) charges and deductions imposed under the Contract that are attributable to the hypothetical subaccount. These charges and deductions include the per unit charges for the records maintenance charge, the mortality and expense risk charge for the standard death benefit (and the mortality and expense risk charge for the Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit) and the asset-based administration charge. For purposes of calculating current yields for a Contract, we use an average per unit records maintenance charge based on the $30 records maintenance charge. 3 76 We calculate the current yield by the following formula: Current Yield = ((NCS - ES)/UV) X (365/7) Where: NCS = the net change in the value of the Money Market Portfolio (not including any realized gains or losses on the sale of securities, unrealized appreciation and depreciation, and income other than investment income) for the seven-day period attributable to a hypothetical subaccount having a balance of one subaccount unit. ES = per unit charges deducted from the hypothetical subaccount for the seven-day period. UV = the unit value for the first day of the seven-day period. We may also disclose the effective yield of the Money Market subaccount for the same seven-day period, determined on a compounded basis. We calculate the effective yield by compounding the unannualized base period return by adding one to the base return, raising the sum to a power equal to 365 divided by 7, and subtracting one from the result. 365/7 Effective Yield = (1 + ((NCS-ES)/UV)) - 1 Where: NCS = the net change in the value of the Money Market portfolio (not including any realized gains or losses on the sale of securities, unrealized appreciation and depreciation, and income other than investment income) for the seven-day period attributable to a hypothetical subaccount having a balance of one subaccount unit. ES = per unit charges deducted from the hypothetical subaccount for the seven-day period. UV = the unit value for the first day of the seven-day period. The Money Market subaccount yield is lower than the Money Market portfolio's yield because of the charges and deductions that the Contract imposes. The current and effective yields on amounts held in the Money Market subaccount normally fluctuate on a daily basis. Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return. The Money Market subaccount's actual yield is affected by changes in interest rates on money market securities, average portfolio maturity of the Money Market Portfolio, the types and quality of securities held by the Money Market Portfolio and that Portfolio's operating expenses. We may also present yields on amounts held in the Money Market subaccount for periods other than a seven-day period. Yield calculations do not take into account the Surrender Charge that we assess on certain withdrawals of Contract Value. OTHER SUBACCOUNT YIELDS Sales literature or advertisements may quote the current annualized yield of one or more of the subaccounts (except the Money Market subaccount) under the Contract for 30-day or one-month 4 77 periods. The annualized yield of a subaccount refers to income that the subaccount generates during a 30-day or one-month period and is assumed to be generated during each period over a 12-month period. We compute the annualized 30-day yield by: 1. dividing the net investment income of the portfolio attributable to the subaccount units, less subaccount expenses attributable to the Contract for the period, by the maximum offering price per unit on the last day of the period; 2. multiplying the result by the daily average number of units outstanding for the period; 3. compounding that yield for a 6-month period; and 4. multiplying the result by 2. Expenses of the subaccount include the records maintenance charge, the asset-based administration charge and the mortality and expense risk charge for the standard death benefit (and the mortality and expense risk charge for the Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit). The yield calculation assumes that we deduct the records maintenance charge at the end of each Contract Year. For purposes of calculating the 30-day or one-month yield, we divide an average records maintenance charge collected by the average Contract Value in the subaccount to determine the amount of the charge attributable to the subaccount for the 30-day or one-month period. We calculate the 30-day or one-month yield by the following formula: Yield = 2 X ((((NI - ES)/(U X UV)) + 1)(to the power of 6) - 1) Where: NI = net income of the portfolio for the 30-day or one-month period attributable to the subaccount's units. ES = charges deducted from the subaccount for the 30-day or one-month period. U = the average number of units outstanding. UV = the unit value at the close of the last day in the 30-day or one-month period. The yield for the subaccount is lower than the yield for the corresponding portfolio because of the charges and deductions that the Contract imposes. The yield on the amounts held in the subaccounts normally fluctuates over time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. The types and quality of securities that a portfolio holds and its operating expenses affect the corresponding subaccount's actual yield. Yield calculations do not take into account the Surrender Charge that we assess on certain withdrawals of Contract Value. AVERAGE ANNUAL TOTAL RETURNS FOR THE SUBACCOUNTS Sales literature or advertisements may quote average annual total returns for one or more of the subaccounts for various periods of time. If we advertise total return for the Money Market Subaccount, then those advertisements and sales literature will include a statement that yield more closely reflects current earnings than total return. 5 78 When a subaccount has been in operation for 1, 5, and 10 years, respectively, we will provide the average annual total return for these periods. We may also disclose average annual total returns for other periods of time. Standard average annual total returns represent the average annual compounded rates of return that would equate an initial investment of $1,000 under a Contract to the redemption value of that investment as of the last day of each of the periods. Each period's ending date for which we provide total return quotations will be for the most recent calendar quarter-end practicable, considering the type of the communication and the media through which it is communicated. We calculate the standard average annual total returns using subaccount unit values that we calculate on each valuation day based on the performance of the subaccount's underlying portfolio, the deductions for the mortality and expense risk charge for the standard death benefit (and in some cases, the mortality and expense risk charge for the Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit), the asset-based administration charge and the records maintenance charge. The calculation reflects the deduction of the records maintenance charge by assuming a uniform reduction in the yield or total return which is determined by calculating the average impact of the records maintenance charge on in-force contracts. We calculate the standard total return by the following formula: TR = ((ERV/P)(to the power of 1/N)) - 1 Where: TR = the average annual total return net of subaccount recurring charges. ERV = the ending redeemable value (minus any applicable Surrender Charge and records maintenance charge) of the hypothetical subaccount at the end of the period. P = a hypothetical initial payment of $1,000. N = the number of years in the period. NON-STANDARD SUBACCOUNT TOTAL RETURNS Sales literature or advertisements may quote average annual total returns for the subaccounts that do not reflect any Surrender Charges. We calculate such nonstandard total returns in exactly the same way as the average annual total returns described above, except that we replace the ending redeemable value of the hypothetical subaccount for the period with an ending value for the period that does not take into account any Surrender Charges. We may disclose cumulative total returns in conjunction with the standard formats described above. We calculate the cumulative total returns using the following formula: CTR = (ERV/P) - 1 Where: CTR = the cumulative total return net of subaccount recurring charges for the period. ERV = the ending redeemable value of the hypothetical investment at the end of the period. P = a hypothetical single payment of $1,000. 6 79 ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA Sales literature or advertisements may quote adjusted yields and total returns for the portfolios since their inception reduced by some or all of the fees and charges under the Contract. Such adjusted historic portfolio performance may include data that precedes the inception dates of the subaccounts. This data is designed to show the performance that would have resulted if the Contract had been in existence during that time. We will disclose nonstandard performance data only if we disclose the standard performance data for the required periods. EFFECT OF THE RECORDS MAINTENANCE CHARGE ON PERFORMANCE DATA The Contract provides for the deduction of a $30.00 records maintenance charge at the end of each Contract year from the fixed account and the subaccounts. We will waive this charge if your Contract Value is $50,000 or more on the date the charge is assessed. We deduct the charge from each account based on the proportion that the value of each such account bears to the total Contract Value. The calculation reflects the deduction of the records maintenance charge by assuming a uniform reduction in the yield or total return which is determined by calculating the average impact of the records maintenance charge on in-force contracts. HISTORIC PERFORMANCE DATA GENERAL LIMITATIONS The funds have provided the portfolios' performance data. We derive the subaccount performance data from the data that the funds provide. In preparing the tables below, we relied on the funds' data. While we have no reason to doubt the accuracy of the figures provided by the funds, we have not verified those figures. TABLES OF SUBACCOUNT PERFORMANCE FIGURES The following charts show the historical performance data for the Subaccounts since each Subaccount started operations. These figures are not an indication of future performance of the subaccounts. Some of the figures reflect the waiver of advisory fees and reimbursement of other expenses for part or all of the periods indicated. 7 80 - -------------------------------------------------------------------------------- TABLE 1 STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000 (1) SURRENDER CHARGES DEDUCTED (ASSUMES CONTRACT IS SURRENDERED OR ANNUITIZED) AVERAGE ANNUAL TOTAL RETURN (2) - -------------------------------------------------------------------------------- WITH STANDARD DEATH BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.15%)
- ----------------------------------------------------------------------------------------------------- Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ----------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ----------------------------------------------------------------------------------------------------- Calvert Social Small Cap Growth Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Quality Bond Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Small Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- Franklin Small Cap Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Asset Strategy Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities Fund 8/4/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ----------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs CORE(SM) Small Cap Equity Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ----------------------------------------------------------------------------------------------------- Janus Aggressive Growth Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Balanced Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Capital Appreciation Portfolio (Institutional Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- PIMCO Foreign Bond Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- PIMCO Low Duration Bond Portfolio 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ----------------------------------------------------------------------------------------------------- Scudder Bond Portfolio (Class A Shares) 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Global Discovery Portfolio (Class A Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Scudder Growth and Income Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder International Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Money Market Portfolio (3) 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ----------------------------------------------------------------------------------------------------- Scudder Government Securities Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder High Yield Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Small Cap Growth Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SVS Dreman High Return Equity Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- WM VARIABLE TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- WM Equity Income Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Mid Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Small Cap Stock Fund 5/1/01 N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000 (1) WITH EITHER GUARANTEED MINIMUM DEATH BENEFIT OR GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.40%)
- ----------------------------------------------------------------------------------------------------- Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ----------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ----------------------------------------------------------------------------------------------------- Calvert Social Small Cap Growth Portfolio 5/1/01 N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------
8 81 - -------------------------------------------------------------------------------- STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000 (1) WITH EITHER GUARANTEED MINIMUM DEATH BENEFIT OR GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.40%)
- ----------------------------------------------------------------------------------------------------- Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ----------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Quality Bond Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Small Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- Franklin Small Cap Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Asset Strategy Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities Fund 8/4/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ----------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs CORE(SM) Small Cap Equity Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ----------------------------------------------------------------------------------------------------- Janus Aggressive Growth Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Balanced Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Capital Appreciation Portfolio (Institutional Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- PIMCO Foreign Bond Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- PIMCO Low Duration Bond Portfolio 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ----------------------------------------------------------------------------------------------------- Scudder Bond Portfolio (Class A Shares) 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Global Discovery Portfolio (Class A Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Scudder Growth and Income Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder International Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Money Market Portfolio (3) 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ----------------------------------------------------------------------------------------------------- Scudder Government Securities Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Kemper High Yield Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Small Cap Growth Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SVS Dreman High Return Equity Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- WM VARIABLE TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- WM Equity Income Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Mid Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Small Cap Stock Fund 5/1/01 N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000(1) WITH BOTH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.65%)
- ----------------------------------------------------------------------------------------------------- Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ----------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ----------------------------------------------------------------------------------------------------- Calvert Social Small Cap Growth Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Quality Bond Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Small Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 5/1/01 N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------
9 82 - -------------------------------------------------------------------------------- STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000 (1) WITH BOTH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.65%)
- ----------------------------------------------------------------------------------------------------- Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ----------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- Franklin Small Cap Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Asset Strategy Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities Fund 8/4/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ----------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs CORE(SM) Small Cap Equity Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ----------------------------------------------------------------------------------------------------- Janus Aggressive Growth Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Balanced Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Capital Appreciation Portfolio (Institutional Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- PIMCO Foreign Bond Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- PIMCO Low Duration Bond Portfolio 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ----------------------------------------------------------------------------------------------------- Scudder Bond Portfolio (Class A Shares) 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Global Discovery Portfolio (Class A Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Scudder Growth and Income Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder International Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Money Market Portfolio (3) 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ----------------------------------------------------------------------------------------------------- Scudder Government Securities Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder High Yield Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Small Cap Growth Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SVS Dreman High Return Equity Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- WM VARIABLE TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- WM Equity Income Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Mid Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Small Cap Stock Fund 5/1/01 N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------
(1) Standard total return includes changes in share price, reinvestment of dividends, and capital gains. The performance figures: (1) represent past performance and neither guarantee nor predict future investment results; (2) assume an initial hypothetical investment of $1,000 as required by the SEC for the standardized returns; (3) reflects the deduction of either 1.15% (for the Standard Death Benefit), 1.40% (for the election of either the Guaranteed Minimum Death Benefit or the Guaranteed Retirement Income Benefit), or 1.65% (for the election of both Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit) in annual variable account charges and a $30 records maintenance charge, and (4) the applicable Surrender Charge. The impact of the records maintenance charge on investment returns will vary depending on the size of the Contract and is reflected as an annual charge of 0.13% of subaccount assets based on an assumed average investment of $23,000 in the Contract. The investment return and value of a Contract will fluctuate so that a Contract, when surrendered, may be worth more or less than the amount of the purchase payments. (2) Total returns reflect the fact that certain investment advisers waived all or part of the advisory fee or reimbursed the portfolio for a portion of its expenses. Without the waivers and reimbursements, total returns would have been lower. (3) An investment in the Money Market Portfolio is neither insured nor guaranteed by the U.S. Government and there can be no assurance that the Money Market Portfolio will maintain a stable $1.00 share price. Yield more closely reflects current earnings of the Money Market Portfolio than its total return. 10 83 - -------------------------------------------------------------------------------- TABLE 2 NON-STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000 (1) SURRENDER CHARGES NOT DEDUCTED (ASSUMES CONTRACT IS NOT SURRENDERED OR ANNUITIZED) AVERAGE ANNUAL TOTAL RETURN (2) - -------------------------------------------------------------------------------- WITH STANDARD DEATH BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.15%)
- ----------------------------------------------------------------------------------------------------- Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ----------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ----------------------------------------------------------------------------------------------------- Calvert Social Small Cap Growth Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Quality Bond Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Small Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- Franklin Small Cap Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Asset Strategy Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities Fund 8/4/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ----------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs CORE(SM) Small Cap Equity Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ----------------------------------------------------------------------------------------------------- Janus Aggressive Growth Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Balanced Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Janus Capital Appreciation Portfolio 4/7/00 N/A N/A N/A % (Institutional Shares) - ----------------------------------------------------------------------------------------------------- PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ----------------------------------------------------------------------------------------------------- PIMCO Foreign Bond Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- PIMCO Low Duration Bond Portfolio 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE INVESTMENT FUND) - ----------------------------------------------------------------------------------------------------- Scudder Bond Portfolio (Class A Shares) 5/15/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Global Discovery Portfolio (Class A Shares) 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- Scudder Growth and Income Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder International Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Money Market Portfolio (3) 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ----------------------------------------------------------------------------------------------------- Scudder Government Securities Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder High Yield Portfolio 6/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- Scudder Small Cap Growth Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- SVS Dreman High Return Equity Portfolio 4/7/00 N/A N/A N/A % - ----------------------------------------------------------------------------------------------------- WM VARIABLE TRUST (CLASS 2 SHARES) - ----------------------------------------------------------------------------------------------------- WM Equity Income Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Mid Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ----------------------------------------------------------------------------------------------------- WM Small Cap Stock Fund 5/1/01 N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- NON-STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000 (1) WITH EITHER GUARANTEED MINIMUM DEATH BENEFIT OR GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.40%)
- ------------------------------------------------------------------------------------------------------ Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------ Calvert Social Small Cap Growth Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------
11 84 - -------------------------------------------------------------------------------- NON-STANDARD SUBACCOUNT TOTAL RETURN AS OF DECEMBER 31, 2000 (1) WITH EITHER GUARANTEED MINIMUM DEATH BENEFIT OR GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.40%)
- ------------------------------------------------------------------------------------------------------ Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ Quality Bond Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Small Cap Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ Fidelity VIP Growth Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Fidelity VIP Index 500 Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Fidelity VIP Mid Cap Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) - ------------------------------------------------------------------------------------------------------ Franklin Small Cap Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Templeton Asset Strategy Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Templeton Developing Markets Securities Fund 8/4/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------ Goldman Sachs Capital Growth Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Goldman Sachs CORE(SM) Small Cap Equity Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Goldman Sachs Mid Cap Value Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------ Janus Aggressive Growth Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Janus Balanced Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Janus Capital Appreciation Portfolio (Institutional Shares) 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ PIMCO Foreign Bond Portfolio 6/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO Low Duration Bond Portfolio 5/15/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ------------------------------------------------------------------------------------------------------ Scudder Bond Portfolio (Class A Shares) 5/15/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder Global Discovery Portfolio (Class A Shares) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Scudder Growth and Income Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder International Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder Money Market Portfolio (3) 6/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ------------------------------------------------------------------------------------------------------ Scudder Government Securities Portfolio 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder High Yield Portfolio 6/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder Small Cap Growth Portfolio 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ SVS Dreman High Return Equity Portfolio 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ WM VARIABLE TRUST (CLASS 2 SHARES) - ------------------------------------------------------------------------------------------------------ WM Equity Income Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ WM Mid Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ WM Small Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- NON-STANDARD SUBACCOUNT TOTAL RETURNS AS OF DECEMBER 31, 2000 (1) WITH BOTH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.65%)
- ------------------------------------------------------------------------------------------------------ Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------ Calvert Social Small Cap Growth Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ Quality Bond Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Small Cap Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ Fidelity VIP Growth Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------
12 85 - -------------------------------------------------------------------------------- NON-STANDARD SUBACCOUNT TOTAL RETURNS AS OF DECEMBER 31, 2000 (1) WITH BOTH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.65%)
- ------------------------------------------------------------------------------------------------------ Life of Subaccount 1 Year 5 Year 10 Year Subaccount SUBACCOUNT Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ Fidelity VIP Index 500 Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Fidelity VIP Mid Cap Portfolio 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) - ------------------------------------------------------------------------------------------------------ Franklin Small Cap Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Templeton Asset Strategy Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Templeton Developing Markets Securities Fund 8/4/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------ Goldman Sachs Capital Growth Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Goldman Sachs CORE(SM) Small Cap Equity Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Goldman Sachs Mid Cap Value Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------ Janus Aggressive Growth Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Janus Balanced Portfolio (Service Shares) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Janus Capital Appreciation Portfolio (Institutional Shares) 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ PIMCO Foreign Bond Portfolio 6/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO Low Duration Bond Portfolio 5/15/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ------------------------------------------------------------------------------------------------------ Scudder Bond Portfolio (Class A Shares) 5/15/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder Growth and Income Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder Global Discovery Portfolio (Class A Shares) 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ Scudder International Portfolio (Class A Shares) 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder Money Market Portfolio (3) 6/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ------------------------------------------------------------------------------------------------------ Scudder Government Securities Portfolio 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder High Yield Portfolio 6/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ Scudder Small Cap Growth Portfolio 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ SVS Dreman High Return Equity Portfolio 4/7/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------ WM VARIABLE TRUST (CLASS 2 SHARES) - ------------------------------------------------------------------------------------------------------ WM Equity Income Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ WM Mid Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------ WM Small Cap Stock Fund 5/1/01 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------
(1) Non-Standard total return includes changes in share price, reinvestment of dividends, and capital gains. The performance figures: (1) represent past performance and neither guarantee nor predict future investment results; (2) assume an initial hypothetical investment of $1,000 as required by the SEC for the standardized returns; (3) reflects the deduction of either 1.15% (for the Standard Death Benefit), 1.40% (for the election of either the Guaranteed Minimum Death Benefit or the Guaranteed Retirement Income Benefit), or 1.65% (for the election of both Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit) in annual variable account charges and a $30 records maintenance charge, but (4) not any Surrender Charge. The impact of the records maintenance charge on investment returns will vary depending on the size of the Contract and is reflected as an annual charge of 0.13% of subaccount assets based on an assumed average investment of $23,000 in the Contract. The investment return and value of a Contract will fluctuate so that a Contract, when surrendered, may be worth more or less than the amount of the purchase payments. (2) Total returns reflect the fact that certain investment advisers waived all or part of the advisory fee or reimbursed the portfolio for a portion of its expenses. Without the waivers and reimbursements, total returns would have been lower. (3) An investment in the Money Market Portfolio is neither insured nor guaranteed by the U.S. Government and there can be no assurance that the Money Market Portfolio will maintain a stable $1.00 share price. Yield more closely reflects current earnings of the Money Market Portfolio than its total return. TIME PERIODS BEFORE THE DATE THE VARIABLE ACCOUNT COMMENCED OPERATIONS The variable account may also disclose non-standardized total return for time periods before the variable account commenced operations. This performance data is based on the actual performance of the portfolios since their inception, adjusted to reflect the effect of the current level of charges that apply to the subaccounts under the Contract. 13 86 TABLES OF ADJUSTED HISTORIC TOTAL RETURN QUOTATIONS The tables below set out the adjusted historic total returns for the portfolios for various periods as of December 31, 2000. This performance data is based on the actual performance of the portfolios since their inception, adjusted to reflect the effect of the current level of charges that apply to the subaccounts under the Contract. - -------------------------------------------------------------------------------- TABLE 1 ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000 (1) SURRENDER CHARGES DEDUCTED (ASSUMES CONTRACT IS SURRENDERED OR ANNUITIZED) AVERAGE ANNUAL TOTAL RETURN (2) - -------------------------------------------------------------------------------- WITH STANDARD DEATH BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.15%)
- ------------------------------------------------------------------------------------------------------ Life of Portfolio 1 Year 5 Year 10 Year Portfolio PORTFOLIO Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------ Calvert Social Small Cap Growth Portfolio 3/15/95 % - ------------------------------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) (3) - ------------------------------------------------------------------------------------------------------ Quality Bond Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------ Small Cap Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------ DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) (3) 10/7/93 % - ------------------------------------------------------------------------------------------------------ FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) (4) - ------------------------------------------------------------------------------------------------------ Fidelity VIP Growth Portfolio 10/9/86 % - ------------------------------------------------------------------------------------------------------ Fidelity VIP Index 500 Portfolio 8/27/92 % - ------------------------------------------------------------------------------------------------------ Fidelity VIP Mid Cap Portfolio 12/28/98 % - ------------------------------------------------------------------------------------------------------ FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) (5) - ------------------------------------------------------------------------------------------------------ Franklin Small Cap Fund 11/1/95 % - ------------------------------------------------------------------------------------------------------ Templeton Asset Strategy Fund 8/24/88 % - ------------------------------------------------------------------------------------------------------ Templeton Developing Markets Securities Fund 3/4/96 % % N/A % - ------------------------------------------------------------------------------------------------------ GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------ Goldman Sachs Capital Growth Fund 4/30/98 % - ------------------------------------------------------------------------------------------------------ Goldman Sachs CORE(SM) Small Cap Equity Fund 2/13/98 % - ------------------------------------------------------------------------------------------------------ Goldman Sachs Mid Cap Value Fund 5/1/98 % - ------------------------------------------------------------------------------------------------------ JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------ Janus Aggressive Growth Portfolio (Service Shares) (6) 9/13/93 % - ------------------------------------------------------------------------------------------------------ Janus Balanced Portfolio (Service Shares) (6) 9/13/93 % - ------------------------------------------------------------------------------------------------------ Janus Capital Appreciation Portfolio (Institutional Shares) 5/1/97 % N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ PIMCO Foreign Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO Low Duration Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ------------------------------------------------------------------------------------------------------ Scudder Bond Portfolio (Class A Shares) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Global Discovery Portfolio (Class A Shares) 5/1/96 % - ------------------------------------------------------------------------------------------------------ Scudder Growth and Income Portfolio (Class A Shares) 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------ Scudder International Portfolio (Class A Shares) 5/1/87 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Money Market Portfolio (7) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ------------------------------------------------------------------------------------------------------ Scudder Government Securities Portfolio 9/3/87 % % % % - ------------------------------------------------------------------------------------------------------ Scudder High Yield Portfolio 4/6/82 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Small Cap Growth Portfolio 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------ SVS Dreman High Return Equity Portfolio 5/4/98 % N/A N/A % - ------------------------------------------------------------------------------------------------------ WM VARIABLE TRUST (CLASS 2 SHARES) (8) - ------------------------------------------------------------------------------------------------------ WM Equity Income Fund 4/28/98 % - ------------------------------------------------------------------------------------------------------ WM Mid Cap Stock Fund 5/1/00 % - ------------------------------------------------------------------------------------------------------ WM Small Cap Stock Fund 1/12/94 % - ------------------------------------------------------------------------------------------------------
14 87 - -------------------------------------------------------------------------------- ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000(1) WITH EITHER GUARANTEED MINIMUM DEATH BENEFIT OR GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.40%)
- ------------------------------------------------------------------------------------------------------ Life of Portfolio 1 Year 5 Year 10 Year Portfolio PORTFOLIO Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------ Calvert Social Small Cap Growth Portfolio 3/15/95 % - ------------------------------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES)(3) - ------------------------------------------------------------------------------------------------------ Quality Bond Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------ Small Cap Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------ DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES)(3) 10/7/93 % - ------------------------------------------------------------------------------------------------------ FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES)(4) - ------------------------------------------------------------------------------------------------------ Fidelity VIP Growth Portfolio 10/9/86 % - ------------------------------------------------------------------------------------------------------ Fidelity VIP Index 500 Portfolio 8/27/92 % - ------------------------------------------------------------------------------------------------------ Fidelity VIP Mid Cap Portfolio 12/28/98 % - ------------------------------------------------------------------------------------------------------ FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES)(5) - ------------------------------------------------------------------------------------------------------ Franklin Small Cap Fund 11/1/95 % - ------------------------------------------------------------------------------------------------------ Templeton Asset Strategy Fund 8/24/88 % - ------------------------------------------------------------------------------------------------------ Templeton Developing Markets Securities Fund 3/4/96 % % N/A % - ------------------------------------------------------------------------------------------------------ GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------ Goldman Sachs Capital Growth Fund 4/30/98 % - ------------------------------------------------------------------------------------------------------ Goldman Sachs CORE(SM) Small Cap Equity Fund 2/13/98 % - ------------------------------------------------------------------------------------------------------ Goldman Sachs Mid Cap Value Fund 5/1/98 % - ------------------------------------------------------------------------------------------------------ JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------ Janus Aggressive Growth Portfolio (Service Shares)(6) 9/13/93 % - ------------------------------------------------------------------------------------------------------ Janus Balanced Portfolio (Service Shares)(6) 9/13/93 % - ------------------------------------------------------------------------------------------------------ Janus Capital Appreciation Portfolio (Institutional Shares) 5/1/97 % N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ PIMCO Foreign Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO Low Duration Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ------------------------------------------------------------------------------------------------------ Scudder Bond Portfolio (Class A Shares) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Global Discovery Portfolio (Class A Shares) 5/1/96 % - ------------------------------------------------------------------------------------------------------ Scudder Growth and Income Portfolio (Class A Shares) 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------ Scudder International Portfolio (Class A Shares) 5/1/87 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Money Market Portfolio(7) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ------------------------------------------------------------------------------------------------------ Scudder Government Securities Portfolio 9/3/87 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Kemper High Yield Portfolio 4/6/82 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Kemper Small Cap Growth Portfolio 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------ SVS Dreman High Return Equity Portfolio 5/4/98 % N/A N/A % - ------------------------------------------------------------------------------------------------------ WM VARIABLE TRUST (CLASS 2 SHARES)(8) - ------------------------------------------------------------------------------------------------------ WM Equity Income Fund 4/28/98 % - ------------------------------------------------------------------------------------------------------ WM Mid Cap Stock Fund 5/1/00 % - ------------------------------------------------------------------------------------------------------ WM Small Cap Stock Fund 1/12/94 % - ------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000(1) WITH BOTH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.65%)
- ------------------------------------------------------------------------------------------------------ Life of Portfolio 1 Year 5 Year 10 Year Portfolio PORTFOLIO Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------ Calvert Social Small Cap Growth Portfolio 3/15/95 % - ------------------------------------------------------------------------------------------------------
15 88 - -------------------------------------------------------------------------------- ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000 (1) WITH BOTH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.65%)
- ------------------------------------------------------------------------------------------------------ Life of Portfolio 1 Year 5 Year 10 Year Portfolio PORTFOLIO Start Date (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) (3) - ------------------------------------------------------------------------------------------------------ Quality Bond Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------ Small Cap Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------ DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) (3) 10/7/93 % - ------------------------------------------------------------------------------------------------------ FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) (4) - ------------------------------------------------------------------------------------------------------ Fidelity VIP Growth Portfolio 10/9/86 % - ------------------------------------------------------------------------------------------------------ Fidelity VIP Index 500 Portfolio 8/27/92 % - ------------------------------------------------------------------------------------------------------ Fidelity VIP Mid Cap Portfolio 12/28/98 % - ------------------------------------------------------------------------------------------------------ FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) (5) - ------------------------------------------------------------------------------------------------------ Franklin Small Cap Fund 11/1/95 % - ------------------------------------------------------------------------------------------------------ Templeton Asset Strategy Fund 8/24/88 % - ------------------------------------------------------------------------------------------------------ Templeton Developing Markets Securities Fund 3/4/96 % % N/A % - ------------------------------------------------------------------------------------------------------ GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------ Goldman Sachs Capital Growth Fund 4/30/98 % - ------------------------------------------------------------------------------------------------------ Goldman Sachs CORE(SM) Small Cap Equity Fund 2/13/98 % - ------------------------------------------------------------------------------------------------------ Goldman Sachs Mid Cap Value Fund 5/1/98 % - ------------------------------------------------------------------------------------------------------ JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------ Janus Aggressive Growth Portfolio (Service Shares) (6) 9/13/93 % - ------------------------------------------------------------------------------------------------------ Janus Balanced Portfolio (Service Shares) (6) 9/13/93 % - ------------------------------------------------------------------------------------------------------ Janus Capital Appreciation Portfolio (Institutional Shares) 5/1/97 % N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------ PIMCO Foreign Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------ PIMCO Low Duration Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ------------------------------------------------------------------------------------------------------ Scudder Bond Portfolio (Class A Shares) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Global Discovery Portfolio (Class A Shares) 5/1/96 % - ------------------------------------------------------------------------------------------------------ Scudder Growth and Income Portfolio (Class A Shares) 5/2/94 % % % % - ------------------------------------------------------------------------------------------------------ Scudder International Portfolio (Class A Shares) 5/1/87 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Money Market Portfolio (7) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------ SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ------------------------------------------------------------------------------------------------------ Scudder Government Securities Portfolio 9/3/87 % % % % - ------------------------------------------------------------------------------------------------------ Scudder High Yield Portfolio 4/6/82 % % % % - ------------------------------------------------------------------------------------------------------ Scudder Small Cap Growth Portfolio 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------ SVS Dreman High Return Equity Portfolio 5/4/98 % N/A N/A % - ------------------------------------------------------------------------------------------------------ WM VARIABLE TRUST (CLASS 2 SHARES) (8) - ------------------------------------------------------------------------------------------------------ WM Equity Income Fund 4/28/98 % - ------------------------------------------------------------------------------------------------------ WM Mid Cap Stock Fund 5/1/00 % - ------------------------------------------------------------------------------------------------------ WM Small Cap Stock Fund 1/12/94 % - ------------------------------------------------------------------------------------------------------
(1) Total return includes changes in share price, reinvestment of dividends, and capital gains. The performance figures: (1) represent past performance and neither guarantee nor predict future investment results; (2) assume an initial hypothetical investment of $1,000 as required by the SEC for the standardized returns; (3) reflects the deduction of either 1.15% (for the Standard Death Benefit), 1.40% (for the election of either the Guaranteed Minimum Death Benefit or the Guaranteed Retirement Income Benefit), or 1.65% (for the election of both Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit) in annual variable account charges and a $30 records maintenance charge, and (4) the applicable Surrender Charge. The impact of the records maintenance charge on investment returns will vary depending on the size of the Contract and is reflected as an annual charge of 0.13% of subaccount assets based on an assumed average investment of $23,000 in the Contract. The investment return and value of a Contract will fluctuate so that a Contract, when surrendered, may be worth more or less than the amount of the purchase payments. (2) Total returns reflect that certain investment advisers waived all or part of the advisory fee or reimbursed the portfolio for a portion of its expenses. Otherwise, total returns would have been lower. (3) The performance of the Dreyfus VIF portfolios and the Dreyfus Socially Responsible Growth Fund, Inc. reflects the performance of each portfolio's Service Class Shares (12b-1 fees of 0.25% deducted) from their inception (12/31/00), and the performances of the Initial Class shares of each portfolio from their inception (8/31/90, 8/31/90, and 10/7/93, respectively) until 12/31/00, adjusted to deduct the 12b-1 fee of 0.25%. 16 89 (4) The performance of the Fidelity VIP portfolios reflects the performance of each portfolio's Service Class shares (12b-1 fee of 0.10% deducted) from their inception (11/3/97, 7/7/00, and 12/28/98, respectively) until 12/31/00, and the performance of the Initial Class of shares from their inception (10/9/86, 8/27/92, and 12/28/98, respectively) until the inception of the Service Class shares, adjusted to deduct the 12b-1 fee of 0.10%. (5) The performance of the Franklin Templeton VIP Funds reflects the performance of each portfolio's Class 2 shares (12b-1 fee of 0.25% deducted) from their inception (11/6/99, 5/1/97, and 5/1/97, respectively), and the performance of Class 1 shares from their inception (11/1/95, 8/24/88, and 3/4/96, respectively) until the inception of Class 2 shares, adjusted to deduct the 12b-1 fee of 0.25%. (6) The performance of the Janus Aggressive Growth Portfolio and the Janus Balanced Portfolio reflects the performance of each portfolio's Service Shares (12b-1 fees of 0.25% deducted) from their inception (12/31/99) until 12/31/00, and the performance of the Institutional Shares of each portfolio from their inception (9/13/93) until 12/31/99, adjusted to deduct the 12b-1 fees of 0.25% (7) An investment in the Money Market Portfolio is neither insured nor guaranteed by the U.S. Government and there can be no assurance that the Money Market Portfolio will maintain a stable $1.00 share price. Yield more closely reflects current earnings of the Money Market Portfolio than its total return. (8) Because Class 2 shares of the WM Variable Trust were not available as of 12/31/00, the performance of the WM Variable Trust Funds reflects the performance of Class 1 shares from their inception (4/28/98, 5/1/00 and 1/12/94, respectively) until 12/31/00, adjusted to deduct the 12b-1 fee of 0.25%.
- ------------------------------------------------------------------------------------------------------- TABLE 2 ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000(1) SURRENDER CHARGES NOT DEDUCTED (ASSUMES CONTRACT IS NOT SURRENDERED OR ANNUITIZED) AVERAGE ANNUAL TOTAL RETURN(2) - ------------------------------------------------------------------------------------------------------- WITH STANDARD DEATH BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.15%) - ------------------------------------------------------------------------------------------------------- Portfolio 1 5 10 Life of PORTFOLIO Start Date Year Year Year Portfolio (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------- Calvert Social Small Cap Growth Portfolio 3/15/95 % - ------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES)(3) - ------------------------------------------------------------------------------------------------------- Quality Bond Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------- Small Cap Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES)(3) 10/7/93 % - ------------------------------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES)(4) - ------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 10/9/86 % - ------------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio 8/27/92 % - ------------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio 12/28/98 % - ------------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES)(5) - ------------------------------------------------------------------------------------------------------- Franklin Small Cap Fund 11/1/95 % - ------------------------------------------------------------------------------------------------------- Templeton Asset Strategy Fund 8/24/88 % - ------------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities Fund 3/4/96 % % N/A % - ------------------------------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund 4/30/98 % - ------------------------------------------------------------------------------------------------------- Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 % - ------------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 5/1/98 % - ------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------- Janus Aggressive Growth Portfolio (Service 9/13/93 % Shares)(6) - ------------------------------------------------------------------------------------------------------- Janus Balanced Portfolio (Service Shares)(6) 9/13/93 % - ------------------------------------------------------------------------------------------------------- Janus Capital Appreciation Portfolio 5/1/97 % N/A N/A % (Institutional Shares) - ------------------------------------------------------------------------------------------------------- PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------- PIMCO Foreign Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------- PIMCO Low Duration Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ------------------------------------------------------------------------------------------------------- Scudder Bond Portfolio (Class A Shares) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Global Discovery Portfolio (Class A 5/1/96 % Shares) - ------------------------------------------------------------------------------------------------------- Scudder Growth and Income Portfolio (Class A 5/2/94 % % N/A % Shares) - ------------------------------------------------------------------------------------------------------- Scudder International Portfolio (Class A Shares) 5/1/87 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Money Market Portfolio(7) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - -------------------------------------------------------------------------------------------------------
17 90
- ------------------------------------------------------------------------------------------------------- TABLE 2 ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000(1) SURRENDER CHARGES NOT DEDUCTED (ASSUMES CONTRACT IS NOT SURRENDERED OR ANNUITIZED) AVERAGE ANNUAL TOTAL RETURN(2) - ------------------------------------------------------------------------------------------------------- WITH STANDARD DEATH BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.15%) - ------------------------------------------------------------------------------------------------------- Portfolio 1 5 10 Life of PORTFOLIO Start Date Year Year Year Portfolio (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------- Scudder Government Securities Portfolio 9/3/87 % % % % - ------------------------------------------------------------------------------------------------------- Scudder High Yield Portfolio 4/6/82 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Small Cap Growth Portfolio 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------- SVS Dreman High Return Equity Portfolio 5/4/98 % N/A N/A % - ------------------------------------------------------------------------------------------------------- WM VARIABLE TRUST (CLASS 2 SHARES)(8) - ------------------------------------------------------------------------------------------------------- WM Equity Income Fund 4/28/98 % - ------------------------------------------------------------------------------------------------------- WM Mid Cap Stock Fund 5/1/00 % - ------------------------------------------------------------------------------------------------------- WM Small Cap Stock Fund 1/12/94 % - -------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------- ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000(1) WITH EITHER GUARANTEED MINIMUM DEATH BENEFIT OR GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.40%) - ------------------------------------------------------------------------------------------------------- Portfolio 1 5 10 Life of PORTFOLIO Start Date Year Year Year Portfolio (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------- Calvert Social Small Cap Growth Portfolio 3/15/95 % - ------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES)(3) - ------------------------------------------------------------------------------------------------------- Quality Bond Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------- Small Cap Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES)(3) 10/7/93 % - ------------------------------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES)(4) - ------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 10/9/86 % - ------------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio 8/27/92 % - ------------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio 12/28/98 % - ------------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES)(5) - ------------------------------------------------------------------------------------------------------- Franklin Small Cap Fund 11/1/95 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------- Templeton Asset Strategy Fund 8/24/88 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities Fund 3/4/96 % % N/A % - ------------------------------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund 4/30/98 % - ------------------------------------------------------------------------------------------------------- Goldman Sachs CORE(SM) Small Cap Equity Fund 2/13/98 % - ------------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 5/1/98 % - ------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------- Janus Aggressive Growth Portfolio (Service Shares)(6) 9/13/93 % - ------------------------------------------------------------------------------------------------------- Janus Balanced Portfolio (Service Shares)(6) 9/13/93 % - ------------------------------------------------------------------------------------------------------- Janus Capital Appreciation Portfolio (Institutional Shares) 5/1/97 % N/A N/A % - ------------------------------------------------------------------------------------------------------- PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------- PIMCO Foreign Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------- PIMCO Low Duration Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND - ------------------------------------------------------------------------------------------------------- Scudder Bond Portfolio (Class A Shares) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Global Discovery Portfolio (Class A Shares) 5/1/96 % - ------------------------------------------------------------------------------------------------------- Scudder Growth and Income Portfolio (Class A Shares) 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------- Scudder International Portfolio (Class A Shares) 5/1/87 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Money Market Portfolio(7) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ------------------------------------------------------------------------------------------------------- Scudder Government Securities Portfolio 9/3/87 % % % % - ------------------------------------------------------------------------------------------------------- Scudder High Yield Portfolio 4/6/82 % % % % - -------------------------------------------------------------------------------------------------------
18 91
- ------------------------------------------------------------------------------------------------------- ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000(1) WITH EITHER GUARANTEED MINIMUM DEATH BENEFIT OR GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.40%) - ------------------------------------------------------------------------------------------------------- Portfolio 1 5 10 Life of PORTFOLIO Start Date Year Year Year Portfolio (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Scudder Small Cap Growth Portfolio 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------- SVS Dreman High Return Equity Portfolio 5/4/98 % N/A N/A % - ------------------------------------------------------------------------------------------------------- WM VARIABLE TRUST (CLASS 2 SHARES)(8) - ------------------------------------------------------------------------------------------------------- WM Equity Income Fund 4/28/98 % - ------------------------------------------------------------------------------------------------------- WM Mid Cap Stock Fund 5/1/00 % - ------------------------------------------------------------------------------------------------------- WM Small Cap Stock Fund 1/12/94 % - -------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------- ADJUSTED HISTORIC PORTFOLIO TOTAL RETURN AS OF DECEMBER 31, 2000(1) WITH BOTH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT (TOTAL VARIABLE ACCOUNT ANNUAL EXPENSES: 1.65%) - ------------------------------------------------------------------------------------------------------- Portfolio 1 5 10 Life of PORTFOLIO Start Date Year Year Year Portfolio (%) (%) (%) (%) - ------------------------------------------------------------------------------------------------------- CALVERT VARIABLE SERIES, INC. - ------------------------------------------------------------------------------------------------------- Calvert Social Small Cap Growth Portfolio 3/15/95 % - ------------------------------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES)(3) - ------------------------------------------------------------------------------------------------------- Quality Bond Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------- Small Cap Portfolio 8/31/90 % - ------------------------------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES)(3) 10/7/93 % - ------------------------------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES)(4) - ------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 10/9/86 % - ------------------------------------------------------------------------------------------------------- Fidelity VIP Index 500 Portfolio 8/27/92 % - ------------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio 12/28/98 % - ------------------------------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES)(5) - ------------------------------------------------------------------------------------------------------- Franklin Small Cap Fund 11/1/95 % - ------------------------------------------------------------------------------------------------------- Templeton Asset Strategy Fund 8/24/88 % - ------------------------------------------------------------------------------------------------------- Templeton Developing Markets Securities Fund 3/4/96 % % N/A % - ------------------------------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund 4/30/98 % - ------------------------------------------------------------------------------------------------------- Goldman Sachs CORE(SM) Small Cap Equity Fund 2/13/98 % - ------------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 5/1/98 % - ------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES - ------------------------------------------------------------------------------------------------------- Janus Aggressive Growth Portfolio (Service Shares)(6) 9/13/93 % - ------------------------------------------------------------------------------------------------------- Janus Balanced Portfolio (Service Shares)(6) 9/13/93 % - ------------------------------------------------------------------------------------------------------- Janus Capital Appreciation Portfolio (Institutional Shares) 5/1/97 % N/A N/A % - ------------------------------------------------------------------------------------------------------- PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) - ------------------------------------------------------------------------------------------------------- PIMCO Foreign Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------- PIMCO Low Duration Bond Portfolio 2/16/99 % N/A N/A % - ------------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES I (FORMERLY SCUDDER VARIABLE LIFE INVESTMENT FUND) - ------------------------------------------------------------------------------------------------------- Scudder Bond Portfolio (Class A Shares) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Global Discovery Portfolio (Class A Shares) 5/1/96 % - ------------------------------------------------------------------------------------------------------- Scudder Growth and Income Portfolio (Class A Shares) 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------- Scudder International Portfolio Class A Shares) 5/1/87 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Money Market Portfolio(7) 7/16/85 % % % % - ------------------------------------------------------------------------------------------------------- SCUDDER VARIABLE SERIES II (FORMERLY KEMPER VARIABLE SERIES) - ------------------------------------------------------------------------------------------------------- Scudder Government Securities Portfolio 9/3/87 % % % % - ------------------------------------------------------------------------------------------------------- Scudder High Yield Portfolio 4/6/82 % % % % - ------------------------------------------------------------------------------------------------------- Scudder Small Cap Growth Portfolio 5/2/94 % % N/A % - ------------------------------------------------------------------------------------------------------- SVS Dreman High Return Equity Portfolio 5/4/98 % N/A N/A % - ------------------------------------------------------------------------------------------------------- WM VARIABLE TRUST (CLASS 2 SHARES)(8) - ------------------------------------------------------------------------------------------------------- WM Equity Income Fund 4/28/98 % N/A N/A % - ------------------------------------------------------------------------------------------------------- WM Mid Cap Stock Fund 5/1/00 N/A N/A N/A % - ------------------------------------------------------------------------------------------------------- WM Small Cap Stock Fund 1/12/94 % % N/A % - -------------------------------------------------------------------------------------------------------
19 92 (1) Total return includes changes in share price, reinvestment of dividends, and capital gains. The performance figures: (1) represent past performance and neither guarantee nor predict future investment results; (2) assume an initial hypothetical investment of $1,000 as required by the SEC for the standardized returns; (3) reflects the deduction of either 1.15% (for the Standard Death Benefit), 1.40% (for the election of either the Guaranteed Minimum Death Benefit or the Guaranteed Retirement Income Benefit), or 1.65% (for the election of both Guaranteed Minimum Death Benefit and the Guaranteed Retirement Income Benefit) in annual variable account charges and a $30 records maintenance charge, and (4) the applicable Surrender Charge. The impact of the records maintenance charge on investment returns will vary depending on the size of the Contract and is reflected as an annual charge of 0.13% of subaccount assets based on an assumed average investment of $23,000 in the Contract. The investment return and value of a Contract will fluctuate so that a Contract, when surrendered, may be worth more or less than the amount of the purchase payments. 20 93 (2) Total returns reflect that certain investment advisers waived all or part of the advisory fee or reimbursed the portfolio for a portion of its expenses. Otherwise, total returns would have been lower. (3) The performance of the Dreyfus VIF portfolios and the Dreyfus Socially Responsible Growth Fund, Inc. reflects the performance of each portfolio's Service Class Shares (12b-1 fees of 0.25% deducted) from their inception (12/31/00), and the performances of the Initial Class shares of each portfolio from their inception (8/31/90, 8/31/90, and 10/7/93, respectively) until 12/31/00, adjusted to deduct the 12b-1 fee of 0.25%. (4) The performance of the Fidelity VIP portfolios reflects the performance of each portfolio's Service Class shares (12b-1 fee of 0.10% deducted) from their inception (11/3/97, 7/7/00, and 12/28/98, respectively) until 12/31/00, and the performance of the Initial Class of shares from their inception (10/9/86, 8/27/92, and 12/28/98, respectively) until the inception of the Service Class shares, adjusted to deduct the 12b-1 fee of 0.10%. (5) The performance of the Franklin Templeton VIP Funds reflects the performance of each portfolio's Class 2 shares (12b-1 fee of 0.25% deducted) from their inception (11/6/99, 5/1/97, and 5/1/97, respectively), and the performance of Class 1 shares from their inception (11/1/95, 8/24/88, and 3/4/96, respectively) until the inception of Class 2 shares, adjusted to deduct the 12b-1 fee of 0.25%. (6) The performance of the Janus Aggressive Growth Portfolio and the Janus Balanced Portfolio reflects the performance of each portfolio's Service Shares (12b-1 fees of 0.25% deducted) from their inception (12/31/99) until 12/31/00, and the performance of the Institutional Shares of each portfolio from their inception (9/13/93) until 12/31/99, adjusted to deduct the 12b-1 fees of 0.25% (7) An investment in the Money Market Portfolio is neither insured nor guaranteed by the U.S. Government and there can be no assurance that the Money Market Portfolio will maintain a stable $1.00 share price. Yield more closely reflects current earnings of the Money Market Portfolio than its total return. (8) Because Class 2 shares of the WM Variable Trust were not available as of 12/31/00, the performance of the WM Variable Trust Funds reflects the performance of Class 1 shares from their inception (4/28/98, 5/1/00 and 1/12/94, respectively) until 12/31/00, adjusted to deduct the 12b-1 fee of 0.25%. NET INVESTMENT FACTOR The net investment factor is an index that measures the investment performance of a subaccount from one valuation day to the next. Each subaccount has its own net investment factor, which may be greater or less than one. The net investment factor for each subaccount equals the fraction obtained by dividing (X) by (Y) minus (Z) where: (X) is the net result of: 1. the net asset value per portfolio share held in the subaccount at the end of the current valuation day; plus 2. the per share amount of any dividend or capital gain distribution on portfolio shares held in the subaccount during the current valuation day; less 3. the per share amount of any capital loss, realized or unrealized, on portfolio shares held in the subaccount during the current valuation day. (Y) equals the net asset value per portfolio share held in the subaccount as of the end of the immediately preceding valuation day. (Z) equals charges and fees deducted from the subaccount. These consist of: 1. the percentage charge for mortality and expense risk on that valuation day; 2. the percentage charge for administrative costs on that valuation day; and 3. the percentage charge for any other charges, fees and expenses for riders, endorsements, or supplemental benefits attached to your Contract, including 21 94 the Guaranteed Minimum Death Benefit Rider and the Guaranteed Retirement Income Benefit Rider. ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS In the event of any substitution or change of the underlying portfolios, we may (by appropriate endorsement, if necessary) change the Contract to reflect the substitution or change. If we consider it to be in the best interest of Owners and Annuitants, and subject to any approvals that may be required under applicable law, the variable account may be operated as a management investment company under the 1940 Act, it may be deregistered under that Act if registration is no longer required, it may be combined with other of our variable accounts, or the assets may be transferred to another variable account. In addition, we may, when permitted by law, restrict or eliminate any voting rights you have under the Contracts. RESOLVING MATERIAL CONFLICTS The funds currently sell shares to registered separate accounts of insurance companies other than us to support other variable annuity contracts and variable life insurance contracts. In addition, our other separate accounts and separate accounts of other affiliated life insurance companies may purchase some of the funds to support other variable annuity or variable life insurance contracts. Moreover, qualified retirement plans may purchase shares of some of the funds. As a result, there is a possibility that an irreconcilable material conflict may arise between your interests as a Contract owner and the interests of persons owning other contracts investing in the same funds. There is also the possibility that a material conflict may arise between the interests of owners generally, or certain classes of owners, and participating qualified retirement plans or participants in such retirement plans. We currently do not foresee any disadvantages to you that would arise from the sale of fund shares to support variable life insurance contracts or variable annuity contracts of other companies or to qualified retirement plans. However, the management of each fund will monitor events related to its fund in order to identify any material irreconcilable conflicts that might possibly arise as a result of such fund offering its shares to support both variable life insurance contracts and variable annuity contracts, or support the variable life insurance contracts and/or variable annuity contracts issued by various affiliated and unaffiliated insurance companies. In addition, the management of the funds will monitor the funds in order to identify any material irreconcilable conflicts that might possibly arise as a result of the sale of its shares to qualified retirement plans, if applicable. In the event of such a conflict, the management of the appropriate fund would determine what action, if any, should be taken in response to the conflict. In addition, if we believe that the response of the funds to any such conflict does not sufficiently protect you, then we will take our own appropriate action, including withdrawing the variable account's investment in such funds, as appropriate. VOTING RIGHTS We determine the number of votes you may cast by dividing your Contract Value in a subaccount by the net asset value per share of the portfolio in which that subaccount invests. We determine the number of votes available to you as of the same date that the fund establishes for determining shareholders eligible to vote at the relevant meeting of the portfolio's shareholders. We will solicit voting instructions by sending you written materials before the fund's meeting in accordance with the fund's procedures. 22 95 SAFEKEEPING OF VARIABLE ACCOUNT ASSETS We hold the title to the assets of the variable account. The assets are kept physically segregated and held separate and apart from our general account assets and from the assets in any other separate account. We maintain records of all purchases and redemptions of portfolio shares held by each of the subaccounts. Additional protection for the assets of the variable account is provided by a blanket fidelity bond issued by Federal Insurance Company to Farmers Group, Inc., providing aggregate coverage of $30,000,000 (subject to a $500,000 deductible) for all officers and employees of Farmers Group, Inc. DISTRIBUTION OF THE CONTRACTS We have entered into a distribution agreement with Farmers Financial Solutions, LLC ("FFS") for the distribution and sale of the Contracts. Pursuant to this agreement, FFS serves as principal underwriter for the Contracts. FFS, a Nevada limited liability company organized in 2000, is affiliated with Farmers through Farmers' parent which provides management-related services to the parent companies of FFS. FFS is located at 2423 Galena Avenue, Simi Valley, California 93065. FFS is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "1934 Act"), as well as with the securities commissions in the states in which it operates, and is a member of the National Association of Securities Dealers, Inc. (the "NASD"). FFS offers the Contracts through its registered representatives who are registered with the NASD and with the states in which they do business. More information about FFS and its registered persons is available at http://www.nasdr.com or by calling 1-800-289-9999. You also can obtain an investor brochure from NASD Regulation describing its Public Disclosure Program. Registered representatives with FFS are also licensed as insurance agents in the states in which they do business and are appointed with Farmers. We pay sales commissions to FFS for the sale of the Contracts by its registered persons. Sales commissions may vary, but are expected not to exceed 7.0% of premium payments. We pay compensation either as a percentage of premium payments at the time we receive them, as a percentage of Contract Value on an ongoing basis, or in some cases, a combination of both. We may pay lower compensation on sales to owners at older ages. FFS may enter into selling agreements with other broker-dealers registered under the 1934 Act to sell the Contracts. Under these agreements, the commissions paid to broker-dealers will not exceed those described above. Because registered persons of FFS who sell the Contracts are also agents of Farmers, they are eligible for various cash benefits, such as production incentive bonuses, insurance benefits, and expense allowances, and non-cash compensation programs that 23 96 Farmers offers to its agents, such as conferences, trips, prizes, and awards. FFS and its managers may also sponsor incentive programs for registered persons. Other payments may be made for other services that do not directly involve the sale of the Contracts. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. We intend to recoup commissions and other sales expenses through fees and charges imposed under the Contract. Commissions paid on the Contract, including other incentives or payments, are not charged directly to the Contract owners or the Variable Account. During the fiscal year 2000, we paid FFS $383,021.91 in underwriting commissions. We paid Investment Brokerage Services, Inc. ("IBS"), the principal underwriter for the Contracts from inception of the Variable Account through September 11, 2000, $75,669.22, in underwriting commissions during that period. We offer the Contracts to the public on a continuous basis. We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering at any time. LEGAL MATTERS M. Douglas Close, Vice President and General Counsel, Farmers New World Life Insurance Company, has passed upon all matters relating to Washington law pertaining to the Contracts, including the validity of the Contracts and the Company's authority to issue the Contracts. Sutherland Asbill & Brennan LLP of Washington, DC has provided advice on certain matters relating to the federal securities laws. EXPERTS The financial statements included in the Statement of Additional Information have been audited by Deloitte & Touche LLP, independent auditors, 700 Fifth Avenue, Suite 4500, Seattle, Washington, 98104-5044, as stated in their reports appearing in the Statement of Additional Information in the registration statement, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. OTHER INFORMATION We have filed a registration statement with the SEC under the Securities Act of 1933, as amended, with respect to the Contracts discussed in this Statement of Additional Information. The Statement of Additional Information does not include all of the information set forth in the registration statement, amendments and exhibits. Statements contained in this Statement of Additional Information concerning the content of the Contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, you should refer to the instruments filed with the SEC. 24 97 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) ================================================================================ FARMERS ANNUITY SEPARATE ACCOUNT A FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000, AND FOR THE PERIODS THEN ENDED, AND INDEPENDENT AUDITORS' REPORT DELOITTE & TOUCHE LLP 98 INDEPENDENT AUDITORS' REPORT Board of Directors Farmers New World Life Insurance Company Mercer Island, Washington We have audited the accompanying statement of assets and liabilities of the Capital Appreciation Portfolio of the Janus Aspen Series; the Bond, Growth and Income, International, and Money Market portfolios of the Scudder Variable Life Investment Fund; the Small Cap Growth, Kemper-Dreman High Return Equity, Government Securities, and High Yield portfolios of the Kemper Variable Series; the Foreign Bond and Low Duration Bond portfolios of the PIMCO Variable Insurance Trust; and the Developing Markets Securities Fund of the Franklin Templeton Variable Insurance Products Trust of Farmers New World Life Insurance Company's Farmers Annuity Separate Account A as of December 31, 2000, and the related statements of operations and changes in net assets for the periods then ended of the Capital Appreciation Portfolio of the Janus Aspen Series; the Bond, Growth and Income, International, and Money Market portfolios of the Scudder Variable Life Investment Fund; the Small Cap Growth, Kemper-Dreman High Return Equity, Government Securities, and High Yield portfolios of the Kemper Variable Series; the Foreign Bond and Low Duration Bond of the PIMCO Variable Insurance Trust; and the Developing Markets Securities Fund of the Franklin Templeton Variable Insurance Products Trust of Farmers New World Life Insurance Company's Farmers Annuity Separate Account A. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit procedures included confirmations of securities owned as of December 31, 2000, by correspondence with the account custodians. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Capital Appreciation Portfolio of the Janus Aspen Series; the Bond, Growth and Income, International, and Money Market portfolios of the Scudder Variable Life Investment Fund; the Small Cap Growth, Kemper-Dreman High Return Equity, Government Securities, and High Yield portfolios of the Kemper Variable Series; the Foreign Bond and Low Duration Bond portfolios of the PIMCO Variable Insurance Trust; and the Developing Markets Securities Fund of the Franklin Templeton Variable Insurance Products Trust of Farmers New World Life Insurance Company's Farmers Annuity Separate Account A as of 99 December 31, 2000, and the results of their operations and changes in their net assets for the periods then ended in conformity with accounting principles generally accepted in the United States of America. April 23, 2001 Seattle, Washington 2 100 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) FARMERS ANNUITY SEPARATE ACCOUNT A STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2000 ================================================================================
Investment Due to at net asset (from) general ASSETS value account Total - ------ ---------- --------------- ---------- Allocation to sub-accounts investing in Janus Aspen Series: Capital Appreciation Portfolio, 108,142 shares (cost $3,214,100) $2,897,128 $ 6,405 $2,890,723 Allocation to sub-accounts investing in Kemper Variable Series: Government Securities Portfolio, 390,791 shares (cost $457,394) 467,379 1,097 466,282 High Yield Portfolio, 26,502 shares (cost $24,255) 24,286 58 24,228 Small Cap Growth Portfolio, 155,146 shares (cost $365,150) 335,794 772 335,022 Kemper-Dreman High Return Equity Portfolio, 1,081,356 shares (cost $1,069,371) 1,164,912 2,459 1,162,453 Allocation to sub-accounts investing in PIMCO Variable Insurance Trust: Low Duration Bond Portfolio, 30,308 shares (cost $296,414) 297,629 707 296,922 Foreign Bond Portfolio, 7,251 shares (cost $68,269) 68,156 162 67,994 Allocation to sub-accounts investing in Scudder Variable Life Investment Fund: Money Market Portfolio, 119,492 shares (cost $119,492) 119,492 284 119,208 Growth and Income Portfolio, 151,152 shares (cost $1,601,476) 1,568,958 3,335 1,565,623 International Portfolio, 26,537 shares (cost $381,303) 378,412 835 377,577 Bond Portfolio, 61,449 shares (cost $408,215) 417,241 991 416,250 Allocation to sub-accounts investing in Franklin Templeton Variable Insurance Products Trust: Developing Markets Securities Fund, 16,958 shares (cost $95,102) 88,520 210 88,310 ---------- NET ASSETS REPRESENTING EQUITY OF POLICYOWNERS $ 7,810,592 ==========
See notes to financial statements. 3 101 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) FARMERS ANNUITY SEPARATE ACCOUNT A STATEMENT OF OPERATIONS PERIODS ENDED DECEMBER 31, 2000 ================================================================================
Janus Aspen Series Kemper Variable Series ------------------- ---------------------------------------------- Capital Government High Small Cap Appreciation Securities Yield Growth Portfolio (a) Portfolio (a) Portfolio (b) Portfolio (a) ------------------- ------------ ------------ ------------ INVESTMENT INCOME: Dividends $ 15,111 $ -- $ -- $ -- Charges from Farmers New World Life Company: Mortality and expense risk (6,879) (1,110) (58) (797) ------------ ------------ ------------ ------------ Net investment income (loss) 8,232 (1,110) (58) (797) REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from sales of investments: Proceeds from sales 49,252 7,166 4 16,639 Cost of investments sold 59,782 7,166 4 22,321 ------------ ------------ ------------ ------------ Net realized gains (losses) (10,530) (5,682) Change in unrealized gains (losses) (316,973) 9,985 31 (29,356) ------------ ------------ ------------ ------------ Net gains (losses) on investments (327,503) 9,985 31 (35,038) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ (319,271) $ 8,875 $ (27) $ (35,835) ============ ============ ============ ============ Scudder Kemper Variable Life Variable Series PIMCO Variable Insurance Trust Investment Fund ------------------- ------------------------------ --------------- Kemper-Dreman Low Duration Foreign Money High Return Bond Bond Market Equity Portfolio(a) Portfolio (c) Portfolio (b) Portfolio (b) ------------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends $ -- $ 2,397 $ 1,421 $ 961 Charges from Farmers New World Life Company: Mortality and expense risk (2,766) (707) (162) (284) ------------ ------------ ------------ ------------ Net investment income (loss) (2,766) 1,690 1,259 677 REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from sales of investments: Proceeds from sales 19,727 4,411 836 54,697 Cost of investments sold 20,321 4,412 839 54,697 ------------ ------------ ------------ ------------ Net realized gains (losses) (594) (1) (3) -- Change in unrealized gains (losses) 95,541 1,215 (112) -- ------------ ------------ ------------ ------------ Net gains (losses) on investments 94,947 1,214 (115) -- ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 92,181 $ 2,904 $ 1,144 $ 677 ============ ============ ============ ============ Franklin Templeton Variable Insurance Scudder Variable Life Investment Fund Products Trust ------------------------------------------------ -------------------- Growth and Developing Income International Bond Markets Portfolio (a) Portfolio (a) Portfolio (c) Securities Fund (d) ------------- ------------- ------------- ------------------- INVESTMENT INCOME: Dividends $ 11 $ 6 $ -- $ -- Charges from Farmers New World Life Company: Mortality and expense risk (3,725) (898) (991) (210) ------------ ------------ ------------ ------------ Net investment income (loss) (3,714) (892) (991) (210) REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from sales of investments: Proceeds from sales 28,436 6,674 6,095 2,530 Cost of investments sold 30,287 7,346 6,095 3,094 ------------ ------------ ------------ ------------ Net realized gains (losses) (1,851) (672) -- (564) Change in unrealized gains (losses) (32,517) (2,892) 9,027 (6,582) ------------ ------------ ------------ ------------ Net gains (losses) on investments (34,368) (3,564) 9,027 (7,146) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ (38,082) $ (4,456) $ 8,036 $ (7,356) ============ ============ ============ ============
(a) For the period beginning April 7, 2000, and ended December 31, 2000 (b) For the period beginning June 7, 2000, and ended December 31, 2000 (c) For the period beginning May 15, 2000, and ended December 31, 2000 (d) For the period beginning August 4, 2000, and ended December 31, 2000 See notes to financial statements. 4 102 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) FARMERS ANNUITY SEPARATE ACCOUNT A STATEMENT OF CHANGES IN NET ASSETS PERIODS ENDED DECEMBER 31, 2000 ================================================================================
Janus Aspen Series Kemper Variable Series ------------------ ----------------------------------------------------------------------- Capital Government High Small Cap Kemper-Dreman Appreciation Securities Yield Growth High Return Portfolio (a) Portfolio (a) Portfolio (b) Portfolio (a) Equity Portfolio(a) ------------- ------------- ------------- ------------- ------------------- OPERATIONS: Net investment income (loss) $ 8,232 $ (1,110) $ (58) $ (797) $ (2,766) Net realized losses (10,530) (5,682) (594) Change in unrealized gains (losses) (316,973) 9,985 31 (29,356) 95,541 ------------- ------------- ------------- ------------- ------------- Change in net assets resulting from operations (319,271) 8,875 (27) (35,835) 92,181 CAPITAL TRANSACTIONS: Deposits 1,206,833 257,508 17,472 111,617 468,741 Benefit payments -- -- -- Payments on termination (474) (289) (9) (298) Contract maintenance charges -- -- -- Transfers among the sub-accounts and with the Fixed Account, net 2,003,635 200,188 6,783 259,249 601,829 ------------- ------------- ------------- ------------- ------------- Change in net assets resulting 3,209,994 457,407 24,555 370,857 1,070,272 ------------- ------------- ------------- ------------- ------------- INCREASE IN NET ASSETS 2,890,723 466,282 24,228 335,022 1,162,453 NET ASSETS AT BEGINNING OF PERIOD ------------- ------------- ------------- ------------- ------------- NET ASSETS AT END OF PERIOD $ 2,890,723 $ 466,282 $ 24,228 $ 335,022 $ 1,162,453 ============= ============= ============= ============= ============= PIMCO Variable Insurance Trust Scudder Variable Life Investment Fund ------------------------------- -------------------------------------------------- Low Duration Foreign Money Growth and Bond Bond Market Income International Portfolio (c) Portfolio (b) Portfolio (b) Portfolio (a) Portfolio (a) ------------- ------------- ------------- ------------- ------------- OPERATIONS: Net investment income (loss) $ 1,690 $ 1,259 $ 677 $ (3,714) $ (892) Net realized losses (1) (3) (1,851) (672) Change in unrealized gains (losses) 1,215 (112) (32,517) (2,892) 9,027 ------------- ------------- ------------- ------------- ------------- Change in net assets resulting from operations 2,904 1,144 677 (38,082) (4,456) CAPITAL TRANSACTIONS: Deposits 174,804 38,706 78,023 697,589 153,267 Benefit payments Payments on termination (169) (46) (395) (24) Contract maintenance charges Transfers among the sub-accounts and with the Fixed Account, net 119,383 28,191 40,508 906,510 228,790 ------------- ------------- ------------- ------------- ------------- Change in net assets resulting 294,018 66,851 118,531 1,603,704 382,033 ------------- ------------- ------------- ------------- ------------- INCREASE IN NET ASSETS 296,922 67,995 119,208 1,565,622 377,577 NET ASSETS AT BEGINNING OF PERIOD ------------- ------------- ------------- ------------- ------------- NET ASSETS AT END OF PERIOD $ 296,922 $ 67,995 $ 119,208 $ 1,565,622 $ 377,577 ============= ============= ============= ============= ============= Franklin Templeton Variable Insurance Products Trust --------------------------- Developing Bond Markets Portfolio (c) Securities Fund (d) ------------- ------------------- OPERATIONS: Net investment income (loss) $ (991) $ (210) Net realized losses (564) Change in unrealized gains (losses) 9,027 (6,582) ------------- ------------- Change in net assets resulting from operations 8,036 (7,356) CAPITAL TRANSACTIONS: Deposits 237,320 18,882 Benefit payments (268) Payments on termination Contract maintenance charges Transfers among the sub-accounts and with the Fixed Account, net 171,162 76,784 ------------- ------------- Change in net assets resulting 408,214 95,666 ------------- ------------- INCREASE IN NET ASSETS 416,250 88,310 NET ASSETS AT BEGINNING OF PERIOD ------------- ------------- NET ASSETS AT END OF PERIOD $ 416,250 $ 88,310 ============= =============
(a) For the period beginning April 7, 2000, and ended December 31, 2000 (b) For the period beginning June 7, 2000, and ended December 31, 2000 (c) For the period beginning May 15, 2000, and ended December 31, 2000 (d) For the period beginning August 4, 2000, and ended December 31, 2000 See notes to financial statements. 5 103 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) FARMERS ANNUITY SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS PERIODS ENDED DECEMBER 31, 2000 ================================================================================ NOTE 1: THE COMPANY Farmers Annuity Separate Account A (the Account), a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940, is a Separate Account of Farmers New World Life Insurance Company (the Company). The assets of the Account are legally segregated from those of the Company. The Company is a wholly owned subsidiary of Farmers Group, Inc. (FGI). FGI is a stock holding and management company whose parent is Zurich Financial Services Group. During the period ended December 31, 2000, the Company began issuing a variable annuity product with optional riders for guaranteed minimum death benefit and guaranteed retirement income benefit. The deposits collected for these contracts are invested at the direction of the contractholders in the sub-accounts that comprise the Account. Absent any contract provisions wherein the Company contractually guarantees either a minimum return or account value to the beneficiaries of the contractholders in the form of a death benefit, the contractholders bear the investment risk that the sub-accounts may not meet their stated objectives. The sub-accounts invest in the following underlying mutual fund portfolios (collectively, the Funds): JANUS ASPEN SERIES Capital Appreciation Portfolio KEMPER VARIABLE SERIES Government Securities Portfolio High Yield Portfolio Small Cap Growth Portfolio Kemper-Dreman High Return Equity Portfolio PIMCO VARIABLE INSURANCE TRUST Low Duration Bond Portfolio Foreign Bond Portfolio SCUDDER VARIABLE LIFE INVESTMENT FUND Money Market Portfolio Growth and Income Portfolio International Portfolio Bond Portfolio FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST Developing Markets Securities Fund The Company owns the assets in the Account and is obligated to pay all benefits under the policies the Company issues. The Company provides insurance and administrative services to the contractholders for a fee. The Company also maintains a fixed account (Fixed Account), to which contractholders may direct their deposits and receive a fixed rate of return. The Company has sole discretion to invest the assets of the Fixed Account, subject to applicable law. 6 104 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. VALUATION OF INVESTMENT ASSETS: Investments consist of shares of the Funds and are stated at fair value based on quoted market prices at the close of business on the last trading day of the year. REALIZED GAINS AND LOSSES: Realized gains and losses represent the difference between the proceeds from sales of shares and the cost of such shares, which are determined using the specific identified cost method. Trades are made to generate the greatest loss or smallest gain. FEDERAL INCOME TAXES: The Account qualifies as a segregated asset account as defined in the Internal Revenue Code (the Code). As such, the operations of the Account are included in the tax return of the Company. The Company is taxed as a life insurance company under the Code. No federal income taxes are allocable to the Account as the Account did not generate taxable income. DIVIDENDS: Dividends consist of ordinary income and realized gain distributions declared by the Funds, are recognized on the ex-dividend date, and are reinvested in the Funds. NOTE 3: EXPENSES MORTALITY AND EXPENSE RISK CHARGE: The Company assumes mortality and expense risks related to the operations of the Account and deducts charges daily. The mortality and expense risk charge covers insurance benefits available with the contracts and certain expenses of the contracts. It also covers the risk that the current charges will not be sufficient in the future to cover the cost of administering the contract. At the contractholder's discretion, additional options may be purchased for an additional charge. SURRENDER CHARGE: The Company will deduct a surrender charge if, during the pay-in period, the policyholder fully surrenders the policy. The surrender charge in some cases may be significant. Under some circumstances, the level of surrender charges might result in no contract value available for payout. ASSET-BASED ADMINISTRATION CHARGE: The Company will deduct a daily asset-based administration charge from each sub-account to help reimburse for administrative charges. 7 105 NOTE 4: PURCHASES AND SALES OF INVESTMENTS The costs of purchase and sales of investments for the fiscal year ended December 31, 2000, were as follows:
Purchases Sales ---------- ---------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio $3,273,882 $ 49,251 KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 464,560 7,167 High Yield Portfolio 24,260 4 Small Cap Growth Portfolio 387,471 16,639 Kemper-Dreman High Return Equity Portfolio 1,089,692 19,726 PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 300,826 4,411 Foreign Bond Portfolio 69,108 836 SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 174,188 54,697 Growth and Income Portfolio 1,631,762 28,436 International Portfolio 388,650 6,674 Bond Portfolio 414,310 6,096 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 98,196 2,530 ---------- ---------- $8,316,905 $ 196,467 ========== ==========
8 106 NOTE 5: UNIT VALUES
Net assets Units --------------------- Expense as a Sub-account outstanding Units Total % of average Total start date December 31, 2000 value value net assets return ----------- ----------------- ------ ----------- ----------- ------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 04/07/00 415,890 $ 6.95 $ 2,890,723 .24% (11.04)% KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 04/07/00 41,239 $11.31 466,282 .24 1.90 High Yield Portfolio 06/07/00 2,447 $ 9.90 24,228 .24 (.11) Small Cap Growth Portfolio 04/07/00 48,710 $ 6.88 335,022 .24 (10.70) Kemper-Dreman High Return Equity Portfolio 04/07/00 85,190 $13.65 1,162,453 .24 7.93 PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 05/15/00 26,994 $11.00 296,922 .24 .98 Foreign Bond Portfolio 06/07/00 6,076 $11.19 67,994 .24 1.68 SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 06/07/00 10,918 $10.92 119,208 .24 .57 Growth and Income Portfolio 04/07/00 163,923 $ 9.55 1,565,623 .24 (2.43) International Portfolio 04/07/00 45,427 $ 8.31 377,577 .24 (1.18) Bond Portfolio 05/15/00 36,787 $11.32 416,250 .24 1.93 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 08/04/00 12,035 $ 7.34 88,310 .24 (8.33)
9 107 NOTE 6: UNITS ISSUED AND REDEEMED INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY WITH STANDARD DEATH BENEFIT UNIT ACTIVITY DURING 2000 -------------------------
Initial Sub-account accumulation Units Units start date unit value issued redeemed ----------- ----------- ----------- ----------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 04/07/00 $ 9.30 194,307 (6,119) KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 04/07/00 10.12 22,692 (382) High Yield Portfolio 06/07/00 9.77 556 (1) Small Cap Growth Portfolio 04/07/00 8.79 14,809 (116) Kemper-Dreman High Return Equity Portfolio 04/07/00 10.41 37,460 (681) PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 05/15/00 9.98 15,083 (243) Foreign Bond Portfolio 06/07/00 10.14 3,692 (62) SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 06/07/00 10.10 10,160 (5,307) Growth and Income Portfolio 04/07/00 9.98 74,855 (1,281) International Portfolio 04/07/00 9.72 19,190 (637) Bond Portfolio 05/15/00 9.86 19,884 (341) FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 08/04/00 8.31 2,556 (6) Units Accumulation outstanding unit value December 31, 2000 December 31, 2000 ----------------- ----------------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 188,188 $ 6.85 KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 22,310 10.84 High Yield Portfolio 555 9.11 Small Cap Growth Portfolio 14,693 6.48 Kemper-Dreman High Return Equity Portfolio 36,779 13.52 PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 14,840 10.55 Foreign Bond Portfolio 3,630 10.55 SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 4,853 10.40 Growth and Income Portfolio 73,574 9.41 International Portfolio 18,553 7.88 Bond Portfolio 19,543 10.79 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 2,550 6.94
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY WITH GUARANTEED MINIMUM DEATH BENEFIT UNIT ACTIVITY DURING 2000 -------------------------
Initial Sub-account accumulation Units Units start date unit value issued redeemed ------------- ------------- ------------- ------------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 04/07/00 $ 9.30 55,356 (103) KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 04/07/00 10.12 7,261 (12) High Yield Portfolio 06/07/00 9.77 1,174 Small Cap Growth Portfolio 04/07/00 8.79 11,732 (4) Kemper-Dreman High Return Equity Portfolio 04/07/00 10.41 16,673 (431) PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 05/15/00 9.98 4,986 (5) Foreign Bond Portfolio 06/07/00 10.13 1,199 SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 06/07/00 10.09 1,374 Growth and Income Portfolio 04/07/00 9.98 25,624 (132) International Portfolio 04/07/00 9.72 11,915 (80) Bond Portfolio 05/15/00 9.86 7,426 (5) FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 08/04/00 8.30 2,951 (7) Units Accumulation outstanding unit value December 31, 2000 December 31, 2000 ----------------- ----------------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 55,253 $ 6.84 KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 7,249 10.82 High Yield Portfolio 1,174 9.09 Small Cap Growth Portfolio 11,728 6.47 Kemper-Dreman High Return Equity Portfolio 16,242 13.49 PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 4,981 10.53 Foreign Bond Portfolio 1,199 10.53 SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 1,374 10.38 Growth and Income Portfolio 25,492 9.39 International Portfolio 11,835 7.87 Bond Portfolio 7,421 10.77 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 2,944 6.93
10 108 INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY WITH GUARANTEED RETIREMENT BENEFIT UNIT ACTIVITY DURING 2000 -------------------------
Initial Sub-account accumulation Units Units start date unit value issued redeemed ----------- ------------ ----------- ----------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 04/07/00 $ 9.30 121,778 (1,099) KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 04/07/00 10.12 5,667 (438) High Yield Portfolio 06/07/00 9.77 718 Small Cap Growth Portfolio 04/07/00 8.79 14,250 (337) Kemper-Dreman High Return Equity Portfolio 04/07/00 10.41 19,039 (585) PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 05/15/00 9.98 3,337 (265) Foreign Bond Portfolio 06/07/00 10.13 616 (95) SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 06/07/00 10.09 4,551 Growth and Income Portfolio 04/07/00 9.98 40,181 (536) International Portfolio 04/07/00 9.72 6,687 (29) Bond Portfolio 05/15/00 9.86 4,586 (407) FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 08/04/00 8.30 6,403 (356) Units Accumulation outstanding unit value December 31, 2000 December 31, 2000 ----------------- ----------------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 120,679 $ 6.84 KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 5,229 10.82 High Yield Portfolio 718 9.09 Small Cap Growth Portfolio 13,913 6.47 Kemper-Dreman High Return Equity Portfolio 18,454 13.49 PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 3,072 10.53 Foreign Bond Portfolio 521 10.53 SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 4,551 10.38 Growth and Income Portfolio 39,645 9.39 International Portfolio 6,658 7.87 Bond Portfolio 4,179 10.77 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT Developing Markets Securities 6,047 6.93
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY WITH GUARANTEED MINIMUM DEATH BENEFIT AND GUARANTEED RETIREMENT INCOME BENEFIT UNIT ACTIVITY DURING 2000: --------------------------
Initial Sub-account accumulation Units Units start date unit value issued redeemed ------------- ------------- ------------- ------------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 04/07/00 $ 9.30 59,666 (7,896) KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 04/07/00 10.12 7,426 (975) High Yield Portfolio 06/07/00 9.76 Small Cap Growth Portfolio 04/07/00 8.79 10,825 (2,449) Kemper-Dreman High Return Equity Portfolio 04/07/00 10.41 15,449 (1,734) PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 05/15/00 9.97 4,809 (708) Foreign Bond Portfolio 06/07/00 10.13 773 (47) SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 06/07/00 10.09 140 Growth and Income Portfolio 04/07/00 9.98 28,606 (3,394) International Portfolio 04/07/00 9.72 8,929 (548) Bond Portfolio 05/15/00 9.85 6,506 (862) FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT: Developing Markets Securities Fund 08/04/00 8.30 494 Units Accumulation outstanding unit value December 31, 2000 December 31, 2000 ----------------- ----------------- JANUS ASPEN SERIES SUB-ACCOUNT: Capital Appreciation Portfolio 51,770 $ 6.83 KEMPER VARIABLE SERIES SUB-ACCOUNTS: Government Securities Portfolio 6,451 10.80 High Yield Portfolio 9.07 Small Cap Growth Portfolio 8,376 6.46 Kemper-Dreman High Return Equity Portfolio 13,715 13.47 PIMCO VARIABLE INSURANCE TRUST SUB-ACCOUNTS: Low Duration Bond Portfolio 4,101 10.51 Foreign Bond Portfolio 726 10.52 SCUDDER VARIABLE LIFE INVESTMENT FUND SUB-ACCOUNTS: Money Market Portfolio 140 10.36 Growth and Income Portfolio 25,212 9.38 International Portfolio 8,381 7.86 Bond Portfolio 5,644 10.75 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST SUB-ACCOUNT Developing Markets Securities 494 6.92
11 109 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) ================================================================================ FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, and 1998, AND INDEPENDENT AUDITORS' REPORT DELOITTE & TOUCHE LLP 110 INDEPENDENT AUDITORS' REPORT Board of Directors Farmers New World Life Insurance Company Mercer Island, Washington We have audited the accompanying balance sheets of Farmers New World Life Insurance Company (a wholly owned subsidiary of Farmers Group, Inc.) (the Company) as of December 31, 2000 and 1999, and the related statements of income, comprehensive income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, these financial statements present fairly, in all material respects, the financial position of Farmers New World Life Insurance Company at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. February 12, 2001 Seattle, Washington 111 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) BALANCE SHEETS (in thousands) DECEMBER 31, 2000 AND 1999 ================================================================================
2000 1999 ---------- ---------- ASSETS INVESTMENTS (Notes 2 and 3): Fixed maturities available-for-sale: Bonds, at fair value (cost: $3,677,147 and $3,791,785) $3,692,444 $3,684,255 Redeemable preferred stocks, at fair value (cost: $29,649 and $64,176) 30,646 64,855 Equity securities available-for-sale: Nonredeemable preferred stocks, at fair value (cost: $11,128 and $1,153) 11,500 1,158 Common stocks, at fair value (cost: $241,781 and $123,567) 212,428 127,556 Mortgage loans on real estate, net of allowance for losses 36,984 35,834 Investment real estate, net of accumulated depreciation and allowance for losses 89,426 66,672 Surplus notes and certificates of contribution of the P&C Group (Note 4) 502,500 119,000 Policy loans 218,162 201,687 Joint ventures 9,930 6,662 S&P 500 call options, at fair value (cost: $29,696 and $19,521) 26,271 32,718 ---------- ---------- Total investments 4,830,291 4,340,397 CASH AND CASH EQUIVALENTS 64,484 93,035 ACCRUED INVESTMENT INCOME 62,906 53,975 OTHER RECEIVABLES 20,823 18,608 DEFERRED POLICY ACQUISITION COSTS 537,981 550,908 VALUE OF BUSINESS ACQUIRED (Note 5) 300,141 328,718 PROPERTY AND EQUIPMENT, net of accumulated depreciation of $9,610 and $8,842 14,970 14,351 OTHER ASSETS: Securities lending collateral (Note 6) 335,968 262,425 Other assets 8,326 3,740 Separate accounts 8,423 ---------- ---------- Total other assets 352,717 266,165 ---------- ---------- TOTAL $6,184,313 $5,666,157 ========== ==========
See notes to financial statements. 112 ================================================================================
2000 1999 ----------- ----------- LIABILITIES AND STOCKHOLDER'S EQUITY POLICY LIABILITIES AND ACCRUALS: Future policy benefits $ 3,574,594 $ 3,412,452 Policy claims 32,509 28,396 ----------- ----------- Total policy liabilities and accruals 3,607,103 3,440,848 OTHER POLICYHOLDER FUNDS AND DIVIDENDS 141,547 83,479 ACCRUED EXPENSES AND OTHER LIABILITIES: Securities lending liability (Note 6) 335,968 262,425 Death benefit liability 42,010 45,423 Other liabilities 70,847 74,636 Separate accounts 8,423 ----------- ----------- Total accrued expenses and other liabilities 457,248 382,484 INCOME TAXES (Note 7): Current 18,496 10,006 Deferred 101,057 93,970 ----------- ----------- Total income taxes 119,553 103,976 ----------- ----------- Total liabilities 4,325,451 4,010,787 CONTINGENCIES (Note 8) STOCKHOLDER'S EQUITY: Common stock, $1 par value - Authorized, 25,000,000 shares; issued and outstanding, 6,600,000 shares 6,600 6,600 Additional paid-in capital 994,246 994,246 Accumulated other comprehensive loss, net of deferred tax benefit of $6,723 and $24,965 (12,486) (46,363) Retained earnings (Note 9) 870,502 700,887 ----------- ----------- Total stockholder's equity 1,858,862 1,655,370 ----------- ----------- TOTAL $ 6,184,313 $ 5,666,157 =========== ===========
2 113 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) STATEMENTS OF INCOME (in thousands) YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 ================================================================================
2000 1999 1998 --------- -------- --------- REVENUES: Net premiums earned (Note 10) $ 228,519 $209,683 $ 173,229 Universal life and annuity policy charges 214,504 210,639 206,393 Net investment income (Note 2) 321,989 307,674 293,770 Net realized investment gains (losses) (Note 2) 39,856 24,159 (13,473) Other income 181 36 707 --------- -------- --------- Total revenues 805,049 752,191 660,626 BENEFITS AND EXPENSES: Death and other benefits 141,759 137,798 133,984 Future policy benefits 76,327 52,200 23,711 Interest credited to policyholders 162,888 157,831 150,618 Underwriting, acquisition, and insurance expenses: Amortization of deferred policy acquisition costs 85,908 83,187 68,997 Amortization of value of business acquired 22,849 19,394 23,897 Net commissions 3,881 13,520 18,972 General insurance expenses and taxes 51,431 44,077 38,659 --------- -------- --------- Total benefits and expenses 545,043 508,007 458,838 --------- -------- --------- Income before provision for income taxes 260,006 244,184 201,788 PROVISION (BENEFIT) FOR INCOME TAXES (Note 7): Current 105,294 85,426 70,690 Deferred (14,903) 553 496 --------- -------- --------- Total provision for income taxes 90,391 85,979 71,186 --------- -------- --------- NET INCOME $ 169,615 $158,205 $ 130,602 ========= ======== =========
See notes to financial statements. 3 114 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) STATEMENTS OF COMPREHENSIVE INCOME (in thousands) YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 ================================================================================
2000 1999 1998 --------- --------- --------- NET INCOME $ 169,615 $ 158,205 $ 130,602 OTHER COMPREHENSIVE INCOME, net of tax: Unrealized holding gains (losses) on securities: Unrealized holding gains (losses) on securities, net of tax provision (benefit) of $31,986, $(96,564), and $7,921 59,402 (179,334) 14,711 Reclassification adjustment for (gains) losses included in net income, net of tax provision (benefit) of $434, $(1,749), and $357 (805) 3,249 (662) --------- --------- --------- Net unrealized holding gains (losses) on securities, net of tax provision (benefit) of $31,552, $(94,815), and $7,565 58,597 (176,085) 14,049 Effect of the change in net unrealized gains and losses on other insurance accounts, net of tax provision (benefit) of $(13,311), $28,332, and $(1,949) (24,720) 52,617 (3,619) --------- --------- --------- COMPREHENSIVE INCOME $ 203,492 $ 34,737 $ 141,032 ========= ========= =========
See notes to financial statements. 4 115 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) STATEMENTS OF STOCKHOLDER'S EQUITY (in thousands) YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 ================================================================================
Accumulated other Additional comprehensive Total Common paid-in income Retained stockholder's stock capital (loss) earnings equity ------- --------- ------------- --------- ------------- BALANCE, January 1, 1998 $ 6,600 $ 994,246 $ 66,675 $ 412,080 $ 1,479,601 Net income 130,602 130,602 Unrealized gains on available-for-sale investments arising during the period, net of tax of $7,921 14,711 14,711 Reclassification adjustment for gains included in net income, net of tax of $(357) (662) (662) Change in effect of unrealized losses on other insurance accounts, net of tax of $(1,949) (3,619) (3,619) ------- --------- --------- --------- ----------- BALANCE, December 31, 1998 6,600 994,246 77,105 542,682 1,620,633 Net income 158,205 158,205 Unrealized losses on available-for-sale investments arising during the period, net of tax of $(96,564) (179,334) (179,334) Reclassification adjustment for losses included in net income, net of tax, of $1,749 3,249 3,249 Change in effect of unrealized gains on other insurance accounts, net of tax of $28,332 52,617 52,617 ------- --------- --------- --------- ----------- BALANCE, December 31, 1999 6,600 994,246 (46,363) 700,887 1,655,370 Net income 169,615 169,615 Unrealized gains on available-for-sale investments arising during the period, net of tax of $31,986 59,402 59,402 Reclassification adjustment for gains included in net income, net of tax of $434 (805) (805) Change in effect of unrealized losses on other insurance accounts, net of tax of $(13,311) (24,720) (24,720) ------- --------- --------- --------- ----------- BALANCE, December 31, 2000 $ 6,600 $ 994,246 $ (12,486) $ 870,502 $ 1,858,862 ======= ========= ========= ========= ===========
See notes to financial statements. 5 116 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) STATEMENTS OF CASH FLOWS (in thousands) YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 ================================================================================
2000 1999 1998 --------- ----------- --------- OPERATING ACTIVITIES: Net income $ 169,615 $ 158,205 $ 130,602 Adjustments to reconcile net income to net cash provided by operating activities: Universal life type contracts: Deposits received 302,774 302,424 299,007 Withdrawals (263,643) (253,228) (241,765) Interest credited 76,006 71,386 67,585 Realized investment losses (gains) (39,856) (24,159) 13,473 Amortization of deferred policy acquisition costs and VOBA 108,757 102,581 92,894 Deferred income tax expense (benefit) (14,903) 553 496 Depreciation 1,260 2,606 2,544 Cash provided (used) by changes in operating assets and liabilities: Federal income taxes payable 8,490 5,826 4,180 Deferred policy acquisition costs (105,283) (99,568) (93,047) Life insurance policy liabilities 81,135 55,478 27,802 Other policyholder funds 58,068 26,121 (2,714) Other 13,237 12,768 31,758 --------- ----------- --------- Net cash provided by operating activities 395,657 360,993 332,815 INVESTING ACTIVITIES: Purchase of bonds and stocks available-for-sale (904,259) (1,322,589) (660,918) Proceeds from sales or maturities of bonds and stocks available-for-sale 944,436 953,106 458,364 Mortgage loan collections 4,800 18,421 36,839 Purchase of investment real estate (25,287) (20,640) (908) Proceeds from sale of investment real estate 6,651 10,565 8,557 Increase in policy loans (16,475) (16,475) (19,317) Purchase of capital assets (7,174) (2,508) (572) Purchase of surplus notes and certificates of contribution of the P&C Group (383,500) (119,000) Purchase of options (10,175) (8,216) (7,855) Other (3,549) 1,891 320 --------- ----------- --------- Net cash used by investing activities (394,532) (386,445) (304,490) FINANCING ACTIVITIES: Annuity contracts: Deposits received 163,111 157,468 144,793 Withdrawals (255,615) (194,187) (202,244) Interest credited 62,828 91,422 82,930 --------- ----------- --------- Net cash provided (used) by financing activities (29,676) 54,703 25,479 --------- ----------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (28,551) 29,251 53,804 CASH AND CASH EQUIVALENTS: Beginning of year 93,035 63,784 9,980 --------- ----------- --------- End of year $ 64,484 $ 93,035 $ 63,784 ========= =========== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Income taxes $ 92,860 $ 82,047 $ 41,250 Interest 23 125 945 Cash received during year for: Income tax refunds 0 832 Interest 0 293,572 Dividends 0 5,650
See notes to financial statements. 6 117 FARMERS NEW WORLD LIFE INSURANCE COMPANY (a wholly owned subsidiary of Farmers Group, Inc.) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 ================================================================================ NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE COMPANY: The accompanying financial statements include the accounts of Farmers New World Life Insurance Company (the Company), a wholly owned subsidiary of Farmers Group, Inc. (FGI), whose ultimate parent is Zurich Financial Services Group. FGI, a management services insurance holding company, is attorney-in-fact for three inter-insurance exchanges and their subsidiaries (the Exchanges) and owns a reinsurance company, Farmers Re. In March 2000, the Exchanges acquired Foremost Corporation of America and its subsidiaries (Foremost), a prominent writer of manufactured homes, recreational vehicles and other specialty lines. References to the P&C Group are to the three inter-insurance exchanges (the Exchanges) and their subsidiaries, Farmers Texas County Mutual Insurance Company, Foremost County Mutual Company and Foremost Lloyds of Texas. In December 1988, BATUS Inc. (BATUS), a subsidiary of B.A.T Industries p.l.c. (B.A.T), acquired 100% ownership of FGI and its subsidiaries for $5,212,619,000 in cash, including related expenses, through its wholly owned subsidiary, BATUS Financial Services. Immediately thereafter, BATUS Financial Services was merged into FGI. The acquisition was accounted for as a purchase and, accordingly, the acquired assets and liabilities were recorded in the Company's balance sheet based on their estimated fair values at December 31, 1988. At the time of purchase, a portion of the purchase price, $530,076,000, was assigned to the Company's value of business acquired (VOBA), which represented an actuarial determination of the expected profits from the business in-force at the date of B.A.T's acquisition of FGI. The amount so assigned is being amortized over its actuarially determined useful life with the unamortized amount included in value of business acquired in the accompanying balance sheets. In September 1998, the financial services businesses of B.A.T, which included the Company, were merged with Zurich Insurance Company (ZIC). The businesses of ZIC and the financial services businesses of B.A.T were transferred to Zurich Group Holding (ZGH), formerly known as Zurich Financial Services, a Swiss company with headquarters in Zurich, Switzerland. This merger was accounted for by ZGH as a pooling of interests under International Accounting Standards. NATURE OF OPERATIONS: The Company concentrates its activities in the individual life insurance and annuity markets. Principal lines of business include traditional and universal whole life products, as well as term life insurance. Additionally, the Company issues flexible and single premium deferred annuities, single premium immediate annuities, equity-indexed annuities, and structured settlements. Beginning in 2000, the Company added variable universal life and variable annuity products and the Farmers Level Term 2000 plans to its product line. The Company and the Exchanges operate using federally registered trade names, including Farmers Insurance Group of Companies(R), Farmers Insurance Group(R), and Farmers(R). In addition, the Company and the P&C Group distribute their respective insurance products through a common network of direct writing agents and district managers. As of December 31, 2000, this network consisted of approximately 15,000 direct writing agents and approximately 500 district managers, each of whom is an independent contractor. The size, efficiency, and scope of this agency force have made it a major factor in the P&C 7 118 Group's and the Company's growth. Each direct writing agent is required to first submit business to the insurers in the Farmers Insurance Group of Companies within the classes and lines of business written by such insurers. To the extent that such insurers decline such business or do not underwrite it, the direct writing agents may offer the business to other insurers. The Company is currently licensed in 43 states, primarily in the western, midwestern, and southwestern regions of the United States. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION: Premiums for traditional life, structured settlement contracts involving life contingencies (SSILC), and accident and health insurance products are recognized as revenues when due from policyholders. Policy withdrawal, maintenance, and other charges are recognized as income when earned. Revenues associated with universal life and variable universal life products consist of policy charges for the cost of insurance, policy administration fees, surrender charges, and investment income on assets allocated to support policyholder account balances on deposit. Revenues for deferred fixed and variable annuity products and structured settlement contracts not involving life contingencies (SSNILC) consist of surrender charges, investment income on assets allocated to support policyholder account balances on deposit, and administrative charges for equity-indexed annuities. Consideration received for interest-sensitive insurance, SSNILC, and annuity products is recorded as a liability when received. INVESTMENTS: The Company has classified all investments in fixed maturities and equity securities as available-for-sale and reports them on the balance sheet at fair value with unrealized gains and losses, net of tax, excluded from earnings and reported as accumulated other comprehensive income, a component of stockholder's equity. As of December 31, 2000, 1999 and 1998, there were no securities designated as held-to-maturity or trading. Realized gains (losses) on sales, redemptions, and write-downs of investments are determined based on the net book value of individual investments. Investment real estate consists of properties purchased for investment and properties acquired through foreclosure and is carried at the lower of cost less accumulated depreciation of $29,369,000 in 2000, $27,292,000 in 1999, or market. Depreciation is provided on a straight-line basis over 35 years, the estimated life of the properties. The Company follows the provisions of Statement of Financial Accounting Standards (SFAS) No. 118 (amending SFAS No. 114), Accounting by Creditors for Impairment of a Loan, which requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral, if the loan is collateral dependent. No material amounts were recognized for impaired loans in the periods presented. DEFERRED POLICY ACQUISITION COSTS: The costs of acquiring new traditional life business, principally first-year commissions and other expenses for policy underwriting and issuance (which are primarily related 8 119 to and vary with the production of new business), are deferred and amortized proportionately over the estimated period during which the related premiums will be recognized as income, based on the same assumptions that are used for computing the liabilities for future policy benefits. Policy acquisition costs for universal life and variable universal life and deferred fixed and variable annuity products are deferred and amortized in relation to the present value of expected gross profits on the policies. Deferred Policy Acquisition Costs (DAC) include amounts associated with the unrealized gains and losses recorded as other comprehensive income, a component of stockholder's equity. Accordingly, DAC is increased or decreased for the impact of estimated future gross profits as if net unrealized gains or losses on securities had been realized at the balance sheet date. Net unrealized gains or losses on securities within other comprehensive income also reflect this impact. VALUE OF BUSINESS ACQUIRED: The present value of the business acquired in the 1988 merger with B.A.T is being amortized as the life insurance business in-force at the time of the merger declines. PROPERTY AND EQUIPMENT: Depreciation of property and equipment has been provided using the straight-line method with estimated useful lives of 10 to 45 years for buildings and improvements and five years for furniture and equipment. LONG-LIVED ASSETS: In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, long-lived assets and certain identifiable intangibles to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No such impairments have occurred. SEPARATE ACCOUNTS: In April 2000, the Company began issuing variable universal life and deferred variable annuity contracts. The assets and liabilities held in the Separate Accounts (the Accounts) are legally segregated from the general assets of the Company. The assets held in the Accounts are comprised of investments in 12 sub-accounts. Each sub-account invests exclusively in shares of a designated portfolio of a fund. Shares of each portfolio are purchased and redeemed at net asset value, without a sales charge. Any dividends and distributions from a portfolio are reinvested at net asset value in shares of that same portfolio. The deposits collected for variable contracts are invested at the direction of the contractholders in the sub-accounts that comprise the Accounts. Absent any contract provisions wherein the Company contractually guarantees either a minimum return or account value, the contractholders bear the investment risk that the sub-accounts may not meet their stated objectives. The sub-accounts invest in the underlying mutual fund portfolios (collectively, the Funds). The assets of the Accounts are carried at fair value. The Accounts' liabilities represent the contractholders' claims to the related assets and are carried at the fair value of the assets. Investment income and realized capital gains and losses of the Accounts accrue directly to the contractholders and, therefore, are not included in the Company's statements of income and comprehensive income. Revenues to the Company from the Accounts consist of administration, surrender, and mortality and expense fees. POLICY LIABILITIES AND ACCRUALS: Liabilities for future policy benefits for traditional life policies are computed principally on a net level premium method reflecting estimated future investment yields, mortality, morbidity, and withdrawals. Interest rate assumptions range from 2.25% to 8.75% depending upon the year of issue. Mortality is calculated principally on select and ultimate tables in common usage in the industry, modified for Company experience, and withdrawals are estimated based primarily on experience. 9 120 Liabilities for future policy benefits on universal life and variable universal life and deferred fixed and variable annuity products are determined under the retrospective deposit method and consist principally of policy values before any surrender charges. Liabilities for future policy benefits on SSNILC are recorded when the payments are received. Unpaid policy claims include claims in the course of settlement and a provision for claims incurred but not reported, based on past experience. LIFE SALES MANAGEMENT SERVICES: Fees charged to the Company by FGI for sales and marketing services were $21,027,000, $21,750,000, and $21,187,000 in 2000, 1999, and 1998, respectively, and are accounted for as deferred policy acquisition costs except for advertising expenses, which are expensed as incurred, of $1,837,000, $1,814,000, and $1,336,000 in 2000, 1999, and 1998, respectively. STATEMENTS OF CASH FLOWS: For purposes of reporting cash flows, the Company considers short-term investments purchased with an initial maturity of three months or less to be cash equivalents. ACCOUNTING PRONOUNCEMENTS: In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. This SOP, effective for financial statements issued for periods beginning after December 15, 1998, applies to all nongovernmental entities and establishes the rules for capitalizing or expensing software costs developed or obtained for internal use. During 2000 and 1999, the Company capitalized $11,372,000 and $6,724,000 in accordance with this SOP, respectively. In 1998, the Financial Accounting Standards Board (FASB) released SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement, effective for financial statements of public and nonpublic entities issued for fiscal years beginning after June 15, 1999, and deferred until June 15, 2000, by SFAS No. 137, Deferral of Effective Date of FASB Statement No. 133, establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts) and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at market value. The Company does not expect the adoption of this statement to have a material impact on its financial statements. S&P 500 call options, which are considered derivatives under SFAS No. 133, are already measured and recorded at market value. 10 121 NOTE 2: INVESTMENTS INVESTMENT INCOME: The sources of investment income for the years ended December 31 are as follows (in thousands):
2000 1999 1998 -------- -------- -------- Bonds $264,433 $270,191 $257,422 Common and preferred stocks 4,399 5,737 8,123 Mortgage loans on real estate 3,892 5,060 8,789 Investment real estate 12,058 9,415 9,907 Policy loans 15,881 14,436 12,993 Surplus notes and certificate of contribution 27,533 7,259 2,279 of the P&C Group Short-term investments 4,566 4,814 2,991 Other 1,814 2,899 4,924 -------- -------- -------- Gross investment income 334,576 319,811 307,428 Less investment expenses 12,587 12,137 13,658 -------- -------- -------- Net investment income $321,989 $307,674 $293,770 ======== ======== ========
The Company's investment expenses included approximately $321,000, $737,000, and $1,143,000 in 2000, 1999, and 1998, respectively, that were paid to its parent company, FGI. In June 1998, the Company's investment management was transferred to Zurich Scudder Investments, Inc. (ZSI), formerly known as Scudder Kemper Investments, Inc., an indirect subsidiary of Zurich. In 2000 and 1999, approximately $1,608,000 and $1,469,000, respectively, of the Company's investment expenses were paid to ZSI. REALIZED GAINS (LOSSES): Realized investment gains (losses) for the years ended December 31 are as follows (in thousands):
2000 1999 1998 -------- -------- -------- Bonds $ (9,597) $ 17,558 $(15,126) Redeemable preferred stocks 2,688 450 25 Common stocks 32,783 4,589 117 Investment real estate 13,982 1,562 1,393 Other 118 -------- -------- -------- $ 39,856 $ 24,159 $(13,473) ======== ======== ========
Properties acquired through foreclosure were $16,614,000 and $18,805,000 at December 31, 2000 and 1999, respectively. During 2000 and 1999, the Company recorded $470,000 and $386,000 in realized gains and $15,000 and $1,114,000 in realized losses on the sale of real estate acquired through foreclosure, respectively. During the year ended December 31, 2000, the Company eliminated the $3,263,000 allowance for real estate losses that was maintained as of December 31, 1999 and 1998, as a result of an evaluation of the exposure to loss. 11 122 UNREALIZED GAINS (LOSSES) ON EQUITY SECURITIES: Gross unrealized gains (losses) pertaining to nonredeemable preferred stocks and common stocks stated at fair value as of December 31 are as follows (in thousands):
Gains Losses Net -------- -------- -------- 2000: Nonredeemable preferred stocks $ 439 $ (67) $ 372 Common stocks 10,539 (39,892) (29,353) -------- -------- -------- $ 10,978 $(39,959) (28,981) ======== ======== Less deferred federal income taxes 10,143 -------- $(18,838) ======== 1999: Nonredeemable preferred stocks $ 97 $ (92) $ 5 Common stocks 11,350 (7,361) 3,989 -------- -------- -------- $ 11,447 $ (7,453) 3,994 ======== ======== Less deferred federal income taxes (1,398) -------- $ 2,596 ========
12 123 UNREALIZED GAINS (LOSSES) ON FIXED MATURITIES: Amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of fixed maturities as of December 31 are as follows (in thousands):
Gross Gross Estimated Amortized unrealized unrealized fair cost gains losses value ---------- --------- ----------- ---------- 2000: Fixed maturities available-for-sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 210,305 $ 3,087 $ (1,020) $ 212,372 Obligations of states and political subdivisions 34,335 785 (2) 35,118 Debt securities issued by foreign governments 53,382 1,515 (1,260) 53,637 Corporate securities 1,695,881 30,450 (38,465) 1,687,866 Mortgage-backed securities 1,683,244 32,699 (12,492) 1,703,451 ---------- --------- ----------- ---------- 3,677,147 68,536 (53,239) 3,692,444 Redeemable preferred stock 29,649 1,577 (580) 30,646 ---------- --------- ----------- ---------- $3,706,796 $ 70,113 $ (53,819) $3,723,090 ========== ========= =========== ========== 1999: Fixed maturities available-for-sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 350,845 $ 553 $ (20,033) $ 331,365 Obligations of states and political subdivisions 314,988 3,105 (5,420) 312,673 Debt securities issued by foreign governments 62,214 5,336 (1,045) 66,505 Corporate securities 1,223,504 6,957 (47,222) 1,183,239 Mortgage-backed securities 1,840,234 8,758 (58,519) 1,790,473 ---------- --------- ----------- ---------- 3,791,785 24,709 (132,239) 3,684,255 Redeemable preferred stock 64,176 1,347 (668) 64,855 ---------- --------- ----------- ---------- $3,855,961 $ 26,056 $ (132,907) $3,749,110 ========== ========= =========== ==========
13 124 MATURITIES OF FIXED MATURITIES: The amortized cost and estimated fair value of fixed maturities classified as available-for-sale by contractual maturity at December 31, 2000, are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties:
Amortized Estimated cost fair value ---------- ---------- Fixed maturities available-for-sale: Due in one year or less $ 245,303 $ 242,313 Due after one year through five years 598,685 595,488 Due after five years through 10 years 587,750 591,072 Due after 10 years 562,165 560,120 ---------- ---------- 1,993,903 1,988,993 Mortgage-backed securities 1,683,244 1,703,451 Preferred stock with characteristics of debt securities 29,649 30,646 ---------- ---------- $3,706,796 $3,723,090 ========== ==========
In determining estimated fair value, management obtains quotations from independent sources who make markets in similar securities, generally broker/dealers. Unless representative trades of securities actually occurred at December 31, 2000, these quotes are generally estimates of market value based on an evaluation of appropriate factors, such as trading in similar securities, yields, credit quality, coupon rate, maturity, type of issue, and other market data. SALE AND IMPAIRMENT OF DEBT SECURITIES: The gross gains, gross losses, proceeds from sales, and write-downs of debt securities for the years ended December 31 are as follows (in thousands):
Gross Gross Write- gains losses Proceeds downs -------- --------- --------- -------- 2000 $ 17,644 $ (24,554) $ 732,155 $(22,429) 1999 35,321 (17,313) 910,601 1998 11,742 (468) 458,247 (26,356)
14 125 NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The carrying value and estimated fair value of assets and liabilities as of December 31 are as follows (in thousands):
Estimated Carrying fair value value ---------- ---------- 2000: Assets: Cash and cash equivalents $ 64,484 $ 64,484 Fixed maturities available-for-sale 3,723,090 3,723,090 Non-redeemable preferred stock available-for-sale 11,500 11,500 Common stock available-for-sale 212,428 212,428 Mortgage loans 36,984 41,815 Surplus notes and certificates of contribution 502,500 502,500 of the P&C Group Policy loans 218,162 226,304 Joint ventures 9,930 12,676 S&P call options 26,271 26,271 Separate accounts 8,423 8,423 Liabilities: Future policy benefits - Deferred annuities 1,510,908 1,467,806 Separate accounts 8,423 8,423 1999: Assets: Cash and cash equivalents $ 93,035 $ 93,035 Fixed maturities available-for-sale 3,749,110 3,749,110 Non-redeemable preferred stock available-for-sale 1,158 1,158 Common stock available-for-sale 127,556 127,556 Mortgage loans 35,834 43,818 Surplus notes of the P&C Group 119,000 119,000 Policy loans 201,687 199,166 Joint ventures 6,662 5,137 S&P call options 32,718 32,718 Liabilities: Future policy benefits - Deferred annuities 1,531,412 1,481,098
The following methods and assumptions were used to estimate the fair value of financial instruments as of December 31, 2000 and 1999: CASH AND CASH EQUIVALENTS: The carrying amounts of these items are reasonable estimates of their fair value. 15 126 FIXED MATURITIES, REDEEMABLE AND NONREDEEMABLE PREFERRED STOCK, AND COMMON STOCK: The estimated fair values of bonds, redeemable and nonredeemable preferred stock, and common stock are based upon quoted market prices, dealer quotes, and prices obtained from independent pricing services. MORTGAGE LOANS: The estimated fair value of the mortgage loan portfolio is determined by discounting the estimated future cash flows, using a year-end market rate which is applicable to the yield, credit quality, and average maturity of the composite portfolio. POLICY LOANS: The estimated fair value of policy loans is determined by discounting future cash flows using the current rates at which similar loans would be made. SURPLUS NOTES AND CERTIFICATES OF CONTRIBUTION OF THE P&C GROUP: The carrying amounts of these items are a reasonable estimate of their fair market value. JOINT VENTURES: The estimated fair value of the joint ventures is based on quoted market prices, current appraisals, and independent pricing services. S&P 500 CALL OPTIONS: S&P 500 call options are purchased as hedges against the interest liabilities generated on the equity-indexed annuity products. These call options are carried at an estimated fair value based on stock price, strike price, time to expiration, interest rates, dividends, and volatility using the methodology of the Black-Scholes option pricing formula. FUTURE POLICY BENEFITS - DEFERRED ANNUITIES: The estimated fair values are based on the currently available cash surrender value, similar to the demand deposit liabilities of depository institutions. SEPARATE ACCOUNTS: Amounts are carried at market value for financial statement purposes. NOTE 4: SURPLUS NOTES AND CERTIFICATES OF CONTRIBUTION OF THE P&C GROUP The Company owns multiple surplus notes issued by the P&C Group. During the year 2000, the Company purchased $296,000,000 of certificates of contribution of the P&C Group which bear interest at 7.85% annually and are payable in full no later than March 2010. The Company recognized interest income of $17,526,000 on this note in 2000. Another note, in the amount of $87,500,000, was purchased in August 2000. This surplus note bears interest at 8.50% annually and is payable in full no later than March 2005. The Company recognized interest income of $2,748,000 on this note in 2000. Another note, in the amount of $119,000,000, was purchased in September 1998. This surplus note bears interest at 6.10% annually and is payable in full no later than October 2001. The Company recognized interest income of $7,259,000, $7,259,000 and $2,279,000 on this note in 2000, 1999, and 1998, respectively. Conditions governing repayment of the amounts are outlined in the certificates of contribution and the surplus notes. Generally, repayment may be made only when the surplus balance of the issuer reaches a specified level, and then only after approval is granted by the issuer's governing Board and the appropriate state insurance regulatory department. 16 127 NOTE 5: VALUE OF BUSINESS ACQUIRED The changes in the VOBA were as follows (in thousands) as of December 31:
2000 1999 1998 --------- --------- --------- Balance, beginning of year $ 328,718 $ 334,442 $ 359,146 Amortization related to operations (51,648) (50,392) (53,598) Interest accrued 28,799 30,998 29,701 Amortization related to net unrealized gains (losses) (5,728) 13,670 (807) --------- --------- --------- Balance, end of year $ 300,141 $ 328,718 $ 334,442 ========= ========= =========
Based on current conditions and assumptions as to future events, the Company expects to amortize the December 31, 2000, balance as follows: approximately 7.0% in 2001 and 2002, 8.0% in 2003, 2004, and 2005. The discount rate used to determine the amortization rate of the VOBA ranged from 12.5% to 7.5%. NOTE 6: SECURITY LENDING ARRANGEMENT The Company has entered into a security lending agreement with a lending agent. The agreement authorizes the agent to lend securities held in the Company's portfolio to a list of authorized borrowers. Concurrent with delivery of the securities, the borrower provides the Company with cash collateral equal to at least 102% of the market value of domestic securities and 105% of the market value of other securities subject to the loan. The securities are marked-to-market on a daily basis, and the collateral is adjusted on the next business day. The collateral is invested in highly liquid, fixed income assets with a maturity of less than one year. Income earned from the security lending arrangement is shared 25% and 75% between the agent and the Company, respectively. Income earned by the Company was $626,000, $798,000, and $899,000 in 2000, 1999, and 1998, respectively. As of December 31, 2000 and 1999, the Company recorded $335,968,000 and $262,425,000, respectively, of collateral in other assets and in accrued expenses and other liabilities. NOTE 7: INCOME TAXES The Company files a consolidated federal income tax return with Farmers Group, Inc. and its subsidiaries. The Company uses the asset and liability method of accounting for income taxes under SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years the differences are expected to be recovered or settled. A valuation allowance for deferred tax assets is recognized to the extent that utilization is not likely. 17 128 The components of the provision for income taxes are as follows (in thousands):
2000 1999 1998 --------- -------- ------- Current: Federal $ 104,187 $ 83,823 $69,601 State 1,107 1,603 1,089 --------- -------- ------- Total current 105,294 85,426 70,690 Deferred: Federal (14,253) 1,127 496 State (650) (574) --------- -------- ------- Total deferred (14,903) 553 496 --------- -------- ------- Total $ 90,391 $ 85,979 $71,186 ========= ======== =======
The table below reconciles the provision for income taxes computed at the U.S. statutory income tax rate of 35% to the Company's provision for income taxes (in thousands):
2000 1999 1998 -------- -------- -------- Expected tax expense $ 91,002 $ 85,464 $ 70,626 Tax-exempt investment income (1,070) (1,410) (1,705) State taxes 457 1,029 1,089 Other, net 2 896 1,176 -------- -------- -------- Reported income tax expense $ 90,391 $ 85,979 $ 71,186 ======== ======== ========
The tax effects of temporary differences that give rise to significant portions of the net deferred tax liabilities as of December 31 are presented in the following table (in thousands):
2000 1999 --------- --------- Deferred policy acquisition costs $ 234,762 $ 245,850 Future policy benefits (89,459) (115,336) Investments (33,601) (15,447) Valuation of investments in securities (6,723) (24,965) Depreciable assets 4,334 4,620 Other (8,256) (752) --------- --------- Net deferred tax liabilities $ 101,057 $ 93,970 ========= =========
There was no valuation allowance recognized for deferred tax assets in 2000 or 1999. NOTE 8: CONTINGENCIES The Company is subject to lawsuits arising from its normal business activities. These actions are in various stages of discovery and development, and some seek punitive as well as compensatory damages. In the opinion of management, the Company has not engaged in any conduct which should warrant the award of any material punitive or compensatory damages. Acting on the advice of counsel, the Company intends to defend 18 129 vigorously its position in each case, and management believes that, while it is not possible to predict the outcome of such matters with absolute certainty, ultimate disposition of these proceedings should not have a material adverse effect on the Company's financial position or results of operations. NOTE 9: REGULATORY MATTERS The Company, domiciled in Washington State, prepares its statutory financial statements in accordance with accounting practices prescribed by the Office of the Insurance Commissioner of the State of Washington (OIC). Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations, and general administrative rules. Statutory stockholder's equity was $1,090,597,000 and $989,615,000 as of December 31, 2000 and 1999, respectively. Statutory net income for the years ended December 31, 2000, 1999, and 1998, was $134,756,000, $114,909,000, and $98,796,000, respectively. Statutory unassigned surplus of $1,080,798,000 and $979,816,000 included in retained earnings at December 31, 2000 and 1999, respectively, is the amount held for the benefit of the stockholder. The entire amount in 2000 and 1999 is designated as stockholder's surplus for tax purposes and would not subject the Company to taxation if paid as a cash dividend. The maximum amount of dividends that can be paid to stockholders by state of Washington insurance companies without prior approval of the Insurance Commissioner is subject to restrictions relating to statutory surplus. The maximum dividend payout which could be made without prior approval is $135,563,000 in 2001. Dividends are determined by the Board of Directors. As of December 31, 2000 and 1999, the Company's risk-based capital exceeded the amount required by the OIC. The NAIC has developed the codification of statutory accounting practices (the Codification), which was effective on January 1, 2001. The State of Washington has adopted the Codification; however, there are conflicts between state law and the Codification. For example, the Codification admits deferred tax assets, whereas it appears that Washington will nonadmit these assets. In such instances, state law overrules the Codification. Management does not believe that the Codification would have a material effect on statutory surplus had it been adopted in the state of Washington as of December 31, 2000. NOTE 10: REINSURANCE The Company has ceded business under both yearly renewable-term contracts and coinsurance contracts. The policy benefit liabilities and unpaid claim amounts attributable to such business are stated as other receivables on the balance sheets. The carrying value of reinsurance receivables included in other receivables totaled approximately $15,173,000 and $10,846,000 at December 31, 2000 and 1999, respectively. The Company utilizes several reinsurers to minimize concentration of credit risk. The Company has established retention limits for automatic reinsurance ceded. The maximum retention on new issues is $2,000,000 per life for the Farmers Flexible Universal Life policy and $1,500,000 per life for all traditional policies except Farmers Yearly Renewable Term. The maximum retention on new issues is $800,000 per life for Farmers Yearly Renewable Term. The excess risk is reinsured with an outside reinsurer. Increases in policy benefit liabilities and claims expense are stated net of increases in future policy benefit liabilities and claims expenses applicable to reinsurance ceded. Death and other benefits expense is reduced by $6,602,000, $3,052,000, and $4,074,000 in 2000, 1999, and 1998, respectively, of reinsurance 19 130 recoveries. The Company is contingently liable with respect to reinsurance ceded in the event that a reinsurer is unable to meet its obligations under existing reinsurance agreements. Effective January 2000, the Company entered into a new co-insurance agreement with a reinsurer. The Company agreed to cede a significant portion of the risk of the Farmers Level Term 2000 policies. The co-insurance agreement cedes 90% of premium and risk. The effect of reinsurance on premiums and amounts earned for the years ended December 31 is as follows (in thousands):
2000 1999 1998 --------- --------- --------- Direct premiums $ 252,213 $ 214,557 $ 168,159 Reinsurance assumed 9,833 9,065 8,798 Reinsurance ceded (33,527) (13,939) (3,728) --------- --------- --------- Net premiums earned $ 228,519 $ 209,683 $ 173,229 ========= ========= =========
Premiums assumed from unaffiliated companies approximated $9,833,000, $9,065,000, and $8,798,000 in 2000, 1999, and 1998, respectively, which represent 4.3%, 4.3%, and 5.1%, of the net premiums earned in 2000, 1999, and 1998, respectively. Claims paid to unaffiliated companies on assumed reinsurance were approximately $9,131,000, $8,134,000, and $7,998,000 in 2000, 1999, and 1998, respectively. NOTE 11: EMPLOYEES' RETIREMENT PLANS The Company participates in FGI's two noncontributory defined benefit pension plans (the Regular Plan and the Restoration Plan). The Regular Plan covers substantially all employees of FGI, its subsidiaries, and the P&C Group who have reached age 21 and have rendered one year of service. Benefits are based on years of service and the employee's compensation during the last five years of employment. The Restoration Plan provides supplemental retirement benefits for certain key employees of FGI, its subsidiaries, and the P&C Group. FGI's policy is to fund the amount determined under the aggregate cost method, provided it does not exceed funding limitations. There has been no change in funding policy from prior years, and in 2000, a contribution of $18,689,000 was made to the Regular Plan. Assets of the Regular Plan are held by an independent trustee. Assets held are primarily in fixed maturity and equity investments. The principal liability is for annuity benefit payments of current and future retirees. Assets of the Restoration Plan are considered corporate assets of FGI and are held in a grantor trust. 20 131 Information regarding the Regular Plan's and the Restoration Plan's funded status is not developed separately for FGI, its subsidiaries, including the Company, and the P&C Group. The funded status of both plans as of December 1 (the latest date for which information is available) is as follows (in thousands):
2000 1999 ----------- ----------- Change in benefit obligation: Net benefit obligation at beginning of the year $ 803,894 $ 853,174 Service cost 27,262 29,395 Interest cost 65,023 58,469 Plan amendments 7,903 Actuarial losses (gains) 51,563 (111,100) Benefits paid (43,185) (33,948) ----------- ----------- $ 904,557 $ 803,893 =========== =========== Change in plan assets: Fair value of plan assets at beginning of the year $ 1,015,928 $ 924,301 Actual return on plan assets 21,594 124,380 Employer contributions 18,689 Benefits paid (41,912) (32,753) ----------- ----------- Fair value of plan assets at end of the year $ 1,014,299 $ 1,015,928 =========== =========== Funded status at end of the year $ 109,743 $ 212,034 Unrecognized net actuarial gain (147,236) (287,586) Unrecognized prior service cost 31,854 35,859 Unrecognized net transition asset (16,834) (21,510) ----------- ----------- Net amount recognized at end of the year $ (22,473) $ (61,203) =========== ===========
Upon B.A.T's purchase of FGI and its subsidiaries in 1988, FGI allocated part of the purchase price to its portion of the Regular Plan assets in excess of the projected benefit obligation at the date of acquisition. The asset is being amortized for the difference between FGI's net pension cost and amounts contributed to the plan. The unamortized balance as of December 31, 2000 and 1999, was $13,258,000 and $16,940,000, respectively. 21 132 Components of net periodic pension expense for FGI and its subsidiaries are as follows (in thousands):
2000 1999 1998 -------- -------- -------- Service costs $ 14,064 $ 15,126 $ 13,240 Interest costs 38,035 34,525 27,810 Return on plan assets (53,947) (49,000) (35,817) Amortization of: Transition obligation 987 955 1,365 Prior service cost 2,597 2,207 1,986 Actuarial gain (9,561) (2,445) (2,447) -------- -------- -------- Net periodic pension expense (credit) $ (7,825) $ 1,368 $ 6,137 ======== ======== ========
The Company's share of pension expense (credit) was $(1,188,000), $192,000, and $452,000 in 2000, 1999, and 1998, respectively. FGI uses the projected unit credit cost actuarial method for attribution of expense for financial reporting purposes. The interest cost and the actuarial present value of benefit obligations were computed using a weighted average interest rate of 7.75%, 8.00%, and 6.75% in 2000, 1999, and 1998, respectively; while the expected return on plan assets was computed using a weighted average interest rate of 9.50%, 9.25%, and 9.25% in 2000, 1999, and 1998, respectively. The weighted average rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation was 4.70%, 5.00%, and 4.50% in 2000, 1999, and 1998, respectively. FGI and its subsidiaries' postretirement benefits plan is a contributory defined benefit plan for employees who were retired or who were eligible for early retirement on January 1, 1995, and is a contributory defined dollar plan for all other employees retiring after January 1, 1995. Health benefits are provided for all employees who participated in the Company's group medical benefits plan for 10 years prior to retirement at age 55 or later. A life insurance benefit of $5,000 is provided at no cost to retirees who maintained group life insurance coverage for 10 years prior to retirement at age 55 or later. There are no assets separated and allocated to this plan. 22 133 The funded status of the entire plan, which includes FGI, its subsidiaries, and the P&C Group, at December 1 (the latest date for which information is available) was as follows (in thousands):
2000 1999 --------- -------- Change in benefit obligation: Net benefit obligation at beginning of the year $ 79,501 $ 80,367 Service cost 1,427 1,537 Interest cost 6,280 5,374 Plan participations' contributions 1,729 1,575 Actuarial loss (gain) 34,131 (5,892) Benefits paid (5,173) (3,460) --------- -------- Fair value of plan assets at end of the year $ 117,895 $ 79,501 ========= ======== Funded status at end of the year $(117,895) $(79,501) Unrecognized net actuarial gain 20,659 (14,070) Unrecognized net transition obligation 15,732 17,044 --------- -------- Accrued postretirement benefit cost $ (81,504) $(76,527) ========= ========
FGI and its subsidiaries' share of the accrued postretirement benefit cost was approximately $57,758,000 and $55,578,000 in 2000 and 1999, respectively. The unrecognized net transition obligation of $15,732,000 and $17,044,000 in 2000 and 1999, respectively, represents the remaining transition obligation of the P&C Group. Components of postretirement benefits expense for FGI and its subsidiaries are as follows (in thousands):
2000 1999 1998 ------- ------- ------- Service costs $ 736 $ 696 $ 636 Interest costs 3,786 3,263 2,527 Amortization of actuarial gain (361) (9) (435) ------- ------- ------- Net periodic expense $ 4,161 $ 3,950 $ 2,728 ======= ======= =======
The Company's share of this amount was approximately $245,000, $229,000, and $205,000 in 2000, 1999, and 1998, respectively. The weighted average interest rate used in the above benefit computations was 7.75%, 8.00%, and 6.75% in 2000, 1999, and 1998, respectively. Beginning in 1998, the initial medical inflation rate was 6.50% to be graded over a one-year period to 6.00% and level thereafter, and contribution levels from retirees were the same as applicable medical cost increases where defined benefits exist. The weighted average rate of increase in future compensation levels used in determining the actuarial present value of the accumulated benefit obligation was 4.70%, 5.00%, and 4.50% in 2000, 1999, and 1998, respectively. 23 134 A 1% increase or decrease in the medical inflation rate assumption would have resulted in the following (in thousands):
1% 1% increase decrease -------- -------- Effect on 2000 service and interest components of net periodic cost $ 161 $ (147) Effect on accumulated postretirement benefit obligation at December 31, 2000 2,279 (2,219)
NOTE 12: EMPLOYEES' PROFIT SHARING PLANS FGI and its subsidiaries have two profit sharing plans providing for cash payments to all eligible employees. The two plans, Cash Profit Sharing Plan (consisting of Cash and Quest for Gold Program in 2000 and 1999) and Deferred Profit Sharing Plan, provide for a maximum aggregate expense of 16.25% of FGI and its subsidiaries' consolidated annual pretax earnings, as adjusted. The Deferred Profit Sharing Plan, limited to 10% of pretax earnings, as adjusted, or 15% of the salary or wage paid or accrued to the eligible employee, provides for an annual contribution by FGI and its subsidiaries to a trust for eventual payment to employees as provided in the plan. The Cash Profit Sharing Plan and Quest for Gold Program provide for annual cash distributions to eligible employees. The Cash Profit Sharing Plan is limited to 5% of pretax earnings, as adjusted, or 5% of eligible employees' salaries or wages paid or accrued. The Quest for Gold Program is limited to 1.25% of pretax earnings, as adjusted, or 6% of eligible employees' salaries or wages paid or accrued. The Company's share of expense under these plans was $4,194,000, $4,120,000, and $4,069,000 in 2000, 1999, and 1998, respectively. NOTE 13: EQUITY-INDEXED ANNUITIES During 1997, the Company began selling an equity-indexed annuity product. At the end of its seven-year term, this product credits interest to the annuity participant at a rate based on a specified portion of the change in the value of the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), subject to a guaranteed annual minimum return. In order to hedge the interest liability generated on the annuities as the index rises, the Company purchases call options on the S&P 500 Index. The Company considers such call options to be held as a hedge. As of December 31, 2000 and 1999, the Company had call options with contract values of $94,535,000 and $65,229,000, respectively, and carrying values of $26,271,000 and $32,718,000, respectively. Hedge accounting is used to account for the call options as the Company believes that the options reduce the risk associated with increases in the account value of the annuities that result from increases in the S&P 500 Index. The call options effectively hedge the annuity contracts since they are both purchased and sold with identical parameters. Periodically, the value of the assets (S&P 500 call options) are matched to the potential liability (annuity contracts) to ensure the hedge has remained effective. The annuities were written based on a seven-year investment term, absent early termination by participants. Therefore, the anticipated hedge transaction (i.e., payment of interest to the policyholder at the end of the investment term and maturity of the call option) for each annuity is generally expected to occur in seven years or less. For the years ended December 31, 2000 and 1999, the amount of unrealized hedging gains (losses) was $(3,425,000) and $13,197,000, respectively. The call options are carried at estimated fair value. Unrealized gains and losses resulting from changes in the estimated fair value of the call options are recorded as an adjustment to the interest liability credited to policyholders. In addition, realized gains and losses from maturity or termination of the call options are offset against the interest credited to policyholders during the period incurred. Premiums paid on call options 24 135 are amortized to net investment income over the term of the contracts. There were no early terminations by annuity participants that led to maturities or sales of the S&P 500 call options during 2000 or 1999. The cash requirement of the call options consists of the initial premium paid to purchase the call options. Should a liability exist to the annuity participant at maturity of the annuity policy, the termination or maturity of the option contracts will generate positive cash flow to the Company. The appropriate amount of cash will then be remitted to the annuity participant based on the respective participation rate. The call options are generally expected to be held for a seven-year term, but can be terminated at any time. There are certain risks associated with the call options, primarily with respect to significant movements in the United States stock market and counterparty nonperformance. The Company believes that the counterparties to its call option agreements are financially responsible and that the counterparty risk associated with these transactions is minimal. NOTE 14: PARTICIPATING POLICIES Participating business, which consists of group business, comprised approximately 7.7% of total insurance in-force as of December 31, 2000 and 8.6% of the total insurance-in-force as of December 31, 1999. In addition, participating business represented 2.0%, of Farmers Life's premium income for years ended December 31, 2000 and 1999 and 2.1% for year-end December 31, 1998. The amount of dividends paid on participating business is determined by the Farmers Life Board of Directors and is paid annually on the policyholder's anniversary date. Amounts allocable to participating policyholders are based on published dividend projections or expected dividend scales. NOTE 15: OPERATING SEGMENTS The Company concentrates its activities in the individual life insurance and annuity markets. These activities are managed separately as each offers a unique set of product services. As a result, the Company comprises the following two reportable operating segments as defined in SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information: the life insurance segment and the annuity segment. The life insurance segment provides individual life insurance products, including universal life, variable universal life, term life, and whole life. The annuity segment provides flexible and single premium deferred annuities, single premium immediate annuities, variable annuities, and equity-indexed annuity products. The basis of accounting used by the Company's management in evaluating segment performance and determining how resources should be allocated is referred to as the Company's GAAP historical basis, which excludes the effects of the purchase accounting (PGAAP) adjustments related to the acquisition of FGI and the Company by B.A.T in December 1988 (Note 1). The Company accounts for intersegment transactions as if they were to third parties and, as such, records the transactions at current market prices. There were no intersegment revenues among the Company's two reportable operating segments for the years 2000, 1999, and 1998. The Company operates throughout the U.S. and does not earn revenues or hold assets in any foreign countries. 25 136 Information regarding the Company's reportable operating segments follows (in thousands):
Year ended December 31, 2000 ---------------------------- GAAP historical basis PGAAP adjustments Total ----------------------------------------- --------------------------------- PGAAP Life Annuities Total Life Annuities Total basis ----------- ----------- ----------- -------- -------- --------- ----------- Revenues $ 689,749 $ 116,218 $ 805,967(a) $ (600) $ (318) $ (918) $ 805,049 Investment income 218,982 115,858 334,840 (172) (92) (264) 334,576 Investment expenses (7,804) (4,129) (11,933) (428) (226) (654) (12,587) Net realized gains 39,856 39,856 39,856 Income before provision for taxes 243,804 24,979 268,783 (7,966) (811) (8,777) 260,006 Provision for income taxes 85,366 8,746 94,112 (3,377) (344) (3,721) 90,391 Assets 4,043,308 2,000,500 6,043,808 93,998 46,507 140,505(b) 6,184,313 Capital expenditures 7,174 7,174 7,174 Depreciation and amortization 95,861 8,553 104,414(c) 5,155 448 5,60(d) 110,017
(a) Revenues for the operating segments include net investment income and net realized gains (losses). (b) Amount includes PGAAP adjustments related to the DAC ($169,100,000 decrease) and VOBA ($300,100,000 increase) assets. (c) Amount includes the historical basis amortization associated with the DAC asset. (d) Amount includes PGAAP adjustments associated with the VOBA asset and reversal of amortization associated with the pre-1998 DAC assets.
Year ended December 31, 1999 ---------------------------- GAAP historical basis PGAAP adjustments Total ----------------------------------------- --------------------------------- PGAAP Life Annuities Total Life Annuities Total basis ----------- ----------- ----------- -------- -------- --------- ----------- Revenues $ 635,419 $ 118,044 $ 753,463 (a) $ (921) $ (351) $ (1,272) 51) $ 752,191 Investment income 202,258 118,502 320,760 (598) (351) (949) 319,811 Investment expenses (7,653) (4,484) (12,137) (12,137) Net realized gains 24,482 24,482 (323) (323) 24,159 Income before provision for taxes 246,963 26,326 273,289 (26,301) (2,804) (29,105) 244,184 Provision for income taxes 87,421 9,319 96,740 (9,724) (1,037) (10,761) 85,979 Assets 3,646,654 1,870,221 5,516,875 98,675 50,607 149,282(b) 5,666,157 Capital expenditures 2,508 2,508 2,508 Depreciation and amortization 69,727 7,924 77,651(c) 24,727 2,809 27,536(d) 105,187
(a) Revenues for the operating segments include net investment income and net realized gains (losses). (b) Amount includes PGAAP adjustments related to the DAC ($190,100,000 decrease) and VOBA ($328,700,000 increase) assets. (c) Amount includes the historical basis amortization associated with the DAC asset. (d) Amount includes PGAAP adjustments totalling $21,300,000 related to the amortization of the DAC and VOBA assets.
Year ended December 31, 1998 ---------------------------- GAAP historical basis PGAAP adjustments Total ----------------------------------------- --------------------------------- PGAAP Life Annuities Total Life Annuities Total basis ----------- ----------- ----------- -------- -------- --------- ----------- Revenues $ 544,390 $ 116,029 $ 660,419(a) $ 171 $ 36 $ 207 $ 660,626 Investment income 190,197 117,024 307,221 128 79 207 307,428 Investment expenses (8,457) (5,201) (13,658) (13,658) Net realized losses (13,473) (13,473) (13,473) Income before provision for taxes 173,576 26,033 199,609 1,895 284 2,179 201,788 Provision for income taxes 61,803 9,269 71,072 99 15 114 71,186 Assets 3,593,311 1,844,266 5,437,577 118,310 60,454 178,764(b) 5,616,341 Capital expenditures 572 572 572 Depreciation and amortization 88,146 8,572 96,718(c) (1,129) (151) (1,280(d) 95,438
(a) Revenues for the insurance operating segments include net investment income and net realized gains (losses). (b) Amount includes PGAAP adjustments related to the DAC ($168,300,000 decrease) and VOBA ($334,400,000 increase) assets. (c) Amount includes the historical basis amortization associated with the DAC asset. (d) Amount includes PGAAP adjustments related to the amortization of the DAC ($26,200,000 decrease) and VOBA ($23,900,000 increase) assets. 26 137 PART C ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS All required financial statements are included in Part B of this Registration Statement. (b) EXHIBITS (1) Certified resolution of the Board of Directors of Farmers New World Life Insurance Company (the "Company") authorizing establishment of Farmers Annuity Separate Account A (the "Separate Account").(2) (2) Not applicable. (3) (a) Distribution Agreement between Farmers New World Life Insurance Company and Investors Brokerage Services, Inc.(3) (b) Investors Brokerage Services, Inc. Registered Representative Agreement.(3) (c) Distribution Agreement between Farmers New World Life Insurance Company and Farmers Financial Solutions, LLC.(5) (d) Farmers Financial Solutions, LLC Registered Representative Agreement.(5) (4) (a) Revised Form of Contract for the Individual Flexible Premium Variable Annuity.(3) (b) Revised Guaranteed Minimum Death Benefit Rider.(3) (c) Revised Guaranteed Retirement Income Benefit Rider.(3) (d) Waiver of Surrender Charge Rider -- Terminal Illness.(3) (e) Waiver of Surrender Charge Rider -- Nursing Care.(3) (f) Savings Incentive Match Plan for Employees (SIMPLE) Individual Retirement Annuity Amendment Rider (20153).(3) (g) Individual Retirement Annuity Amendment Rider (20129).(3) (h) Roth Individual Retirement Annuity Endorsement (20181).(3) (5) (a) Form of Application for the Individual Flexible Premium Variable Annuity.(3) (b) Form of Variable Policy Application Supplement.(4) (c) Revised Variable Policy Application Supplement.(5) (6) (a) Articles of Incorporation of Farmers New World Life Insurance Company.(1) (b) By-Laws of Farmers New World Life Insurance Company.(1) (7) Not Applicable. (8) (a) Participation Agreement among Kemper Variable Series, Scudder Kemper Investments, Inc., Kemper Distributors, Inc. and Farmers New World Life Insurance Company.(4) (b) Participation Agreement between Scudder Variable Life Investment Fund and Farmers New World Life Insurance Company.(4) (c) Indemnification Agreement between Scudder Kemper Investments, Inc. and Farmers New World Life Insurance Company.(4) (d) Participation Agreement (Institutional Shares) among Janus Aspen Series, Janus Capital Corporation and Farmers New World Life Insurance Company.(4) (e) Participation Agreement among Farmers New World Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributors LLC.(4) C-1 138 (f) Participation Agreement among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and Farmers New World Life Insurance Company.(3) (g) Consulting Services Agreement between McCamish Systems, L.L.C. and Farmers New World Life Insurance Company.(3) (h) Form of Master Administration Agreement between McCamish Systems, L.L.C. and Farmers New World Life Insurance Company.(3) (i) Amendment No. 1 to Participation Agreement among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and Farmers New World Life Insurance Company.(5) (j) Amendment No. 2 to Participation Agreement among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and Farmers New World Life Insurance Company.(5) (k) Amendment No. 1 to Participation Agreement among Farmers New World Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributors LLC.(5) (l) Amendment No. 1 to Participation Agreement between Scudder Variable Life Investment Fund and Farmers New World Life Insurance Company.(5) (m) Participation Agreement among Calvert Variable Series, Inc., Calvert Distributors, Inc. and Farmers New World Life Insurance Company.(5) (n) Participation Agreement between Dreyfus Variable Investment Fund and the Dreyfus Socially Responsible Growth Fund, Inc. and Farmers New World Life Insurance Company. (o) Participation Agreement among Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co. and Farmers New World Life Insurance Company.(5) (p) Participation Agreement (Service Shares) among Janus Aspen Series, Janus Capital Corporation and Farmers New World Life Insurance Company.(5) (q) Participation Agreement among Variable Insurance Products Funds, Fidelity Distributors Corporation and Farmers New World Life Insurance Company.(5) (r) Participation Agreement among WM Variable Trust, WM Funds Distributor, Inc. and Farmers New World Life Insurance Company.(5) (9) Opinion and Consent of M. Douglas Close, Esq.(5) (10) (a) Consent of Sutherland Asbill & Brennan LLP.(5) (b) Consent of Deloitte & Touche LLP.(5) (11) No financial statements will be omitted from Item 23. (12) Not applicable. (13) Schedule of Performance Computations.(4)(5) (14) Not applicable. (15) Powers of Attorney.(2)(5) - --------------- (1) Incorporated herein by reference to the initial registration statement on Form S-6 for Farmers Variable Life Separate Account A filed with the SEC via EDGARLINK on July 29, 1999 (File No. 333-84023). C-2 139 (2) Incorporated herein by reference to the initial registration statement on Form N-4 for Farmers Annuity Separate Account A filed with the SEC via EDGARLINK on August 13, 1999 (File Nos. 333-85183 and 811-09547). (3) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the registration statement on Form N-4 for Farmers Annuity Separate Account A filed with the SEC via EDGARLINK on November 15, 1999 (File Nos. 333-85183 and 811-09547). (4) Incorporated herein by reference to Post-Effective Amendment No. 1 to the registration statement on Form N-4 for Farmers Annuity Separate Account A filed with the SEC via EDGARLINK on April 21, 2000 (File Nos. 333-85183 and 811-09547). (5) Filed herewith. ITEM 25. DIRECTORS AND OFFICERS OF FARMERS NEW WORLD LIFE INSURANCE COMPANY
Name and Principal Business Address Position and Office with Depositor - ----------------------------------- ---------------------------------- C. Paul Patsis(1) President, Chief Executive Officer, Chairman of the Board and Director Kathryn M. Callahan(1) Vice President, Actuary and Director David A. Demmon(1) Assistant Vice President, Treasurer and Director Michael W. Keller(1) Vice President and Director James I. Randolph(1) Vice President, Assistant Secretary and Director Sharylee Barnes, M.D.(1) Medical Director M. Douglas Close(2) Vice President and General Counsel Sharon D. Courlas, M.D.(1) Vice President and Medical Director Gerald A. Dulek(2) Assistant Vice President Gerald E. Faulwell(2) Vice President and Assistant Treasurer Laszlo G. Heredy(2) Vice President Doren E. Hohl(2) Assistant Secretary Paul F. Hott(1) Assistant Vice President Kathleen D. Katovich(2) Assistant Secretary Hubert L. Mountz(2) Assistant Treasurer Link R. Murphy, M.D.(3) Assistant Medical Director John R. Patton(1) Assistant Vice President and Secretary Christopher R. Pflug(2) Assistant Secretary Maryann M. Seltzer(2) Assistant Secretary
Principal business address is: 1. 3003 -- 77th Avenue, S.E., Mercer Island, WA 98040 2. 4680 Wilshire Blvd., Los Angeles, CA 90010 3. 2500 Farmers Way, Columbus, OH 43235 C-3 140 ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT ZURICH FINANCIAL SERVICES (SWITZERLAND) owns 100% of Zurich Group Holdings [Sw] owns 90% of Farmers Group, Inc. [US-NV] owns 100% of Farmers New World Life Insurance Company [US-WA] owns 95.2% of FIG Leasing Company, Inc. [US-CA] owns 100% of Farmers Services Corporation [US-NV] owns 100% of Farmers Value Added, Inc. [US-NV] owns 100% of Farmers Investment Research & Management, Inc. [US-NV] owns 100% of Farmers Reinsurance Company [US-CA] owns 100% of F.I.G. Travel [US-CA] owns 38% of Prematic Service Corporation [US-CA] owns 100% of Prematic Service Corporation [US-NV] owns 100% of Fire Underwriters Association [US-CA] owns 70% of F.I.G. Holding Company [US-CA] owns 1.7% of FIG Leasing Company, Inc. [US-CA] owns 9% of Prematic Service Corporation [US-CA] owns 100% of Truck Underwriters Association [US-CA] owns 30% of F.I.G. Holding Company [US-CA] owns 3.1% of FIG Leasing Corporation, Inc. [US-CA] owns 53% of Prematic Service Corporation [US-CA] owns 99+% of Zurich Insurance Company (see below) owns 100% of Allied Zurich Holdings Limited [CHANNEL ISLANDS] owns 10% of Farmers Group, Inc. [US-NV] (see above) owns 100% of British American Financial Services owns 100% of British American Financial Services Subsidiaries ZURICH INSURANCE COMPANY - UNITED STATES ZURICH INSURANCE COMPANY (ZURICH, SWITZERLAND) owns 100% Zurich Towers, Inc. [US - IL] owns 33% of 20th Century Asset Management Corporation Limited [India] owns 99+% of Zurich Life Insurance Company (Zurich, Switzerland) owns 14% of Provident Companies, Inc. *4 owns 100% of Provident Life and Accident Insurance Co. [US-TN] owns 100% of Provident Life and Casualty Insurance Co. owns 100% of Provident National Assurance Company [US-TN] owns 100% of The Paul Revere Corporation [US-MA] owns 100% of The Paul Revere Life Insurance Company [US-MA] owns 100% of The Paul Revere Protective Life Insurance Company [US-DE] owns 100% of The Paul Revere Variable Annuity Insurance Company [US-MA] owns 100% of - Zurich Holding Co. of America [US - DE] owns 100% Zurich Finance (USA) Inc. [US-DE] owns 100% Zurich American Brokerage Inc. [US-NY] owns 99.5% of UUBVI, Limited [BVI] owns 100% Zurich American Insurance Company [US - NY] owns 100% of Empire Fire & Marine Insurance Company [US - NY] owns 100% of Empire Indemnity Insurance Company [US - OK] Zurich Holding Company of America C-4 141 owns 99.9% Risk Enterprise Management Limited [US - DE] owns 100% Zurich American REIT Corporation [US - DE] owns 100% Zurich American Insurance Company [US - NY] owns 100% Steadfast Insurance Company [US - DE] owns 100% American Zurich Insurance Company [US - IL] owns 100% Zurich American Insurance Company of Illinois [US -IL] owns 100% American Guarantee & Liability Insurance Company [US - NY] owns 100% Diversified Specialty Risk, Inc. [US - TX] owns 100% Specialty Producer Group Inc. [US - DE] owns 100% Daniels-Head Insurance Agency Inc. [US - TX] owns 100% Daniels-Head Insurance Agency Inc. [US - KY] owns 100% Daniels-Head Insurance Agency Inc. [US - CA] owns 100% Daniels-Head Insurance Agency Inc. [US - NY] owns 100% Daniels-Head Insurance Agency Inc. [US - OH] owns 100% O'Connor West Insurance Agency Inc. Empire Fire & Marine Insurance Company owns 100% of Douglas Street Premium Finance Company of California [US - CA] owns 100% of Douglas Street Premium Finance Company [US - NE] owns 100% Minnesota Marketing Center, Inc. [US-MN] owns 51% of Truckwriters, Inc. [US - NE] owns Empire Fire & Marine Insurance Company owns 100% of Empire Management Services, Inc. [US - NE] owns 100% of Zurich Global Ltd. [Bda] owns 100% of Universal Underwriters Acceptance Corp. [US - KS] owns 100% of Universal Underwriters Service Corp. [US - MO] owns .50% of UUBVI, Limited [BVI] owns 100% of Universal Underwriters Service Corp. of Texas [US - TX] owns 100% of The Zurich Services Corporation [US - IL] owns 100% of Zurich American Brokerage, Inc. [US - NY] Zurich American Insurance Company [US-NY] owns 85% of Maryland Casualty Co. [US - MD] owns 100% Zurich Agency Services, Inc [US-TX] owns 100% of Assurance Company of America [US - NY] owns 100% of Maine Bonding & Casualty Company [US - ME] owns 100% of Maryland Insurance Company [US - TX] owns 100% of Zurich Insurance Agency [US - MD] owns 100% of Maryland Management Corporation [US - TX] Trust Agreements - Maryland Lloyds [US - TX] owns 100% of National Standard Insurance Company [US - TX] owns 100% of Northern Insurance Company of New York [US - NY] owns 100% of Steadfast Reinsurance Company, Ltd. [Bda] owns 100% of Valiant Insurance Company [US - IA] owns 100% of Fidelity & Deposit Company of Maryland [US - MD] Zurich American Insurance Company [US-NY] owns 100% of Colonial American Casualty & Surety Company [US - MD] owns 100% Mountbatten Holding, Inc. [US-PA] owns 100% The Mountbatten Surety Company, Inc [US-PA] owns 100% HMS Droadnought, Inc. [US-DE] Fidelity & Deposit Company of Maryland owns 100% of 300 St. Paul Corporation [US - MD] owns 51 % of Maryland Netherlands Credit Insurance Company [US - MD] C-5 142 Zurich American Insurance Company [US-NY] owns 100% of Universal Underwriters Insurance Company [US - MO] owns 100% of Universal Underwriters of Texas Insurance Company [US - TX] owns 100% of Mountain Insurance Agency [US - MA] owns 100% of Universal Underwriters Life Insurance Company [US - MO] owns 100% of Robert Hampson, Inc. [Canada] Zurich Holding Company of America [US-DE] owns 100% of ZKI Holding Corp. (*3) owns 32.85% of Scudder Kemper Investments, Inc. [US - DE] owns 100% Zurich Kemper Investments, Inc [US-DE] owns 50% of Kemper Distributors, Inc. [US-DE] owns 50% of Kemper Service Company [US-DE] owns 100% of ZKI Agency, Inc. [US - DL] owns 100% ZKI Agency of Alabama Inc. [US-AL] owns 100% of Scudder Investments (U.K.) Ltd owns 100% of Zurich Investment Management (C.I.) Limited [Channel Islands] owns 100% of Zurich Investment Management (Dublin) Limited (Ireland) owns 100% of Scudder Kemper Holdings (U.K.) Limited owns 100% of Scudder, Stevens & Clark Limited owns 100% Scudder Kemper Holdings [UK] Limited owns 100% of Scudder, Stevens & Clark Japan, Inc. owns 100% of Scudder, Stevens & Clark Asia Limited owns 100% of Scudder Canada Investor Services Limited owns 100% of Scudder, Stevens & Clark of Canada, Ltd. owns 100% Zurich Investment Management, Inc. [US-DE] owns 100% Scudder Investments AG owns 100% of Scudder, Stevens & Clark (Luxembourg) S.A. owns 100% of Scudder Trust (Cayman), Ltd. owns 100% of Scudder Cayman, Ltd. owns 100% of Scudder, Stevens & Clark Australia Limited owns 100% of Scudder, Stevens & Clark Corporation [US - DE] owns 100% of SS&C Overseas Corporation owns 49.75% of Scudder Trust Company owns 50% of Scudder Defined Contributions Services, Inc. owns 50% of Scudder Capital Stock Corporation owns 50% Kemper Distributors Inc. [US - DE] owns 50% of Scudder Capital Planning Corporation owns 50% of Scudder Investor Services, Inc. owns 100% of Scudder Insurance Agency Inc. (CA) [US - CA] owns 100% of Scudder Insurance Agency, Inc. owns 100% of Scudder Insurance Agency of New York, Inc. owns 100% of SIS Investment Corporation owns 50% of Scudder Brokerage Services, Inc. owns 50% of Scudder Service Corporation owns 1% of Scudder Realty Holdings (II) L.L.C. owns 100% of SRV Investment Corporation owns 100% of Scudder Realty Holdings Corporation owns 50% of Scudder Capital Planning Corporation owns 50% Kemper Service Company [US - DE] owns 50% of Scudder Capital Asset Corporation owns 50% of Scudder Fund Accounting Corporation C-6 143 owns 50% of SS&C Investment Corporation owns 50% of Scudder Investor Services, Inc. [US - MA] owns 50% of Scudder Brokerage Services, Inc. [US - DE] owns 50% of Scudder Capital Asset Corporation owns 49.75% of Scudder Trust Company owns 50% of Scudder Defined Contributions Services, Inc. owns 50% of Scudder Capital Stock Corporation owns 50% of Scudder Service Corporation owns 99% of Scudder Realty Holdings (II) L.L.C. owns 50% of Scudder Fund Accounting Corporation owns 50% of SS&C Investment Corporation owns 50% of AARP/Scudder Financial Management Company owns 100% of Korea Bond Fund Management Co., Limited owns 100% of Scudder Cayman L.A. Power II-P Ltd. owns 100% of Scudder Cayman L.A. Power II-C Ltd. owns 100% of SFA, Inc. Zurich Holding Company of America [US-DE] owns 36.6% of Scudder Kemper Investments, Inc. [US - DE] owns 71.67% of Kemper Corporation owns 100% of Federal Kemper Life Assurance Company [US - IL] owns 50% of KI/FKLA Rancho Realty, L.L.C. owns 30% of KL-75, L.L.C. owns 66.70% of KI/FKLA Ardenwood, L.L.C. owns 100% of Kemper Investors Life Insurance Company [US - IL] owns 100% of Investors Brokerage Services, Inc. [US - DE] owns 100% of Investors Brokerage Services Insurance Agency, Inc. [US - DE] owns 100% IBS Insurance Agency Inc of Ohio [US-OH] owns 100% of Investors Brokerage Services Insurance Agency, Inc. of Texas [US - TX](*1) owns 60.10% of KI/FLA San Leandro, L.L.C. owns 30% of KL-75, L.L.C. owns 33.30% of KI/FKLA Ardenwood, L.L.C. owns 50% of KI/FKLA Rancho Realty, L.L.C. owns 100% of Kemper Portfolio Corp. [US - DE] owns 100% of FKLA Realty Corporation [US - IL] owns 50% of Kemper Real Estate Management Company [US - DE] owns 75% of KLMLP, L.P. [US - DE] (*2) owns 100% Butterfield Financial Corporation [US-CA] owns 100% of Kemper/Lumbermens Properties, Inc. [US - DE] KADC, Inc [US-CA] owns 100% of Ardenwood Financial Corporation [US - CA] owns 100% of Zurich Life Insurance Company of America [US - IL] owns 100% of Zurich Direct, Inc. [US - IL] owns 33% of 20th Century Asset Management Corporation Limited [India] owns 100% of KFC Portfolio Corp. [US - DE] owns 100% of Kemper Real Estate, Inc. [US - DE] owns 100% of Kemper/Cymrot, Inc. [US - DE] owns 100% of Kemper/Cymrot Management, Inc. [US - GA] owns 100% of KILICO Realty Corporation [US - IL] KFC Portfolio Corp. owns 100% of KR CBDV [US - DE] owns 100% of Maunalua Associates, Inc. [US - HI] owns 100% of Pacific Homes, Inc. [US - HI] C-7 144 Kemper Corporation owns 66.67% of ZKS Real Estate Partners, L.L.C. [US - DE] Individual Shareholders own 20.86% of Scudder Kemper Investments, Inc. [US - DE] SKI Executive Defined Contribution Plan owns 9.66% of Scudder Kemper Investments, Inc. [US - DE] Fidelity Life Association, A Mutual Legal Reserve Company [US - IL] NOTES *1 = 100% owned by a Texas resident under contract with Investors Brokerage Services Insurance Agency, Inc. of Texas. *2 = KLMLP, L.P. is a Delaware limited partnership. Kemper Corporation's indirect ownership of KLMLP, L.P. is as follows: 29.7% KILICO Realty Corporation; 20.85% FKLA Realty Corporation; 1.5% Kemper Portfolio Corp; 22.5% KFC Portfolio Corp.; 0.3% Kemper Investors Life Insurance Company; and 0.15% Federal Kemper Life Assurance Company. *3 = Lumbermens Mutual Casualty Company owns the remaining 3.03% of ZKI Holding Corp. *4 = Zurich Insurance Company, together with various U.S. affiliates, owns 6,349,207 shares, or 14%, of the common stock of Provident Companies, Inc. Percentages reflect direct common stock ownership, except as noted. Except as noted, non-corporate (i.e., partnership) joint venture real estate investments by subsidiaries of Kemper Corporation and Fidelity Life Association are not shown. ZURICH CENTRE INVESTMENTS ZURICH INSURANCE COMPANY (ZURICH, SWITZERLAND) owns 65% of Zurich Centre Group Holdings, Limited [Bda] owns 43% of Zurich International (Bermuda) Ltd. [Bda.] owns 35% of Zurich Centre Group Holdings Limited [Bda] (ZC Advisors International [Bda] and ZC Advisors [US - NY] have advisory contracts with Zurich Centre Investments Limited [Bda] owns 100% of Centre Reinsurance Services (Bermuda) II Limited [Bda] owns 43% IPC GenPar (Bermuda) L.P. [Bda] owns 44% of Insurance GenPar (Bermuda), L.P. [Bda] owns 1% and serves as GP of Insurance Partners Offshore (Bermuda), L.P. owns 100% of ZC Sterling Holdings Limited [US - CA] owns 81% of ZC Sterling Insurance Agency [US - CA] owns 100% of Centre Reinsurance Holdings Limited [Bda] owns 100% of Centre Solutions (Bermuda) Limited [Bda] owns 50% of Advance Travel Holdings (Bermuda) Limited [Bda] owns 51% of Strategic Risk Management Holdings Limited [Bda] owns 100% SRM Brokers Limited [Bda] owns 100% of SRM Consultants Limited [Bda] owns 100% of Strategic Risk Management Limited [UK] owns 100% of Strategic Risk Management (Propriety) Limited (South Africa) owns 100% of SRM Managers Limited [Bda] owns 39.6% of Florida Select Insurance Holdings, Inc. [US - DE] owns 100% of Florida Select Insurance Co. [US - FL] owns 100% of Florida Select Insurance Agency [US - FL] Centre Solutions (Bermuda) Limited (Bda) owns non-voting common stock of Mendip Insurance & Reinsurance Company Limited [Bda] owns 100% of CP Holding Limited [BVI] owns 100% of Centre Reinsurance Representatives Limited [UK] owns 40% of Pacific Select Insurance Holding, Inc. [US - DE] C-8 145 owns 100% Pacific Select Insurance Co. [US - CA] owns 100% of Centre Investors I Limited [Bda] owns 100% of Centre Investors II Limited [Bda] owns 100% of Centre Investors III Limited [Bda] owns 33% of Golden Gate Reinsurance Company Limited [Bda] owns 100% of CRS III Limited [Bda] owns 100% Centre Representatives (Asia) Limited (Hong Kong) owns 16.1% of CAT Limited [Bda] owns 100% of Superior National Capital, L.P. [Bda] owns 100% of Centre Solutions (Australia) Limited [Aus] owns 100% of Centre Reinsurance Services (Bermuda) IV Limited [Bda] owns 100% of Finwas Financing (Bermuda) Limited [Bda] owns 100% of Centre Reinsurance Limited [Bda] Zurich Centre Group Holdings Limited (Bda) owns 100% of Centre Re Holdings Dublin [Ireland] owns 100% of Centre Reinsurance Holdings (Delaware II) Limited [US - DE] owns 100% Centre Solutions (Asia) Limited (Bda) CentreRe Holdings Dublin (Ireland) owns 100% Centre Finance Dublin International (Ireland) owns 100% Centre Investments Dublin (Ireland) Centre Reinsurance Holdings (Delaware II) Limited owns 100% of Centre Reinsurance Dublin [Ireland] owns 100% of Centre Reinsurance Holdings (Delaware) Limited [US - DE] owns 100% of Zurich Centre Group LLC (US-DE) owns 100% of Centre Reinsurance (US) Limited [Bda] owns 100% of Zurich Reinsurance Centre Holdings, Inc. [US - DE] owns 100% of ZC Property Management [US - DE] owns 100% of Zurich Reinsurance North America), Inc. [US - CT] owns 100% of ZC Insurance Company [US - NJ] owns 24% of Insurance Partners Advisors L.P. [US - DE] Centre Reinsurance Limited (Bda) owns 100% of ZC Specialties Insurance Company [US - TX] owns 100% of Constellation Reinsurance Company [US - NY] owns 100% of BDA/US Services Limited [US - DE] owns 100% of Centre Re Services, Inc. [US - NY] owns 100% of ZC Resource L.L.C. [US-DE] owns 100% of Zurich Centre Properties, Inc (US-CT) ZC Resource LLC [US-DE] owns 50% of Life Insurance Solutions LLC [US - DE] owns 50% of Advance Travel Holdings [Delaware] Limited [US - DE] owns 100% of Advance Travel Limited [US - DE] owns 49% of Claims Solutions Group [US-DE] owns 100% of Claims management Group [UK] Centre Reinsurance Limited [Bda] owns 100% of Bridge Re [Lux] owns 100% Centre Insurance International Company [Ireland] owns 100% of Centre Finance Dublin International [Ire] owns 100% of Centre Reinsurance International Company [Ire] owns 33% non-voting stock of International Insurance Advisors, Inc. [US - DE] owns 54% of Insurance Partners Offshore (Bermuda), L.P. [Bda] C-9 146 owns 100% of Anglo American Insurance Group Limited [Bda] owns 30% of International Insurance Advisors, Inc Zurich Centre Group Holdings Limited [Bda] owns 100% Advisors, Inc. owns 100% of Anglo American Insurance Holdings Limited [UK] owns 100% of Anglo American Underwriting Management Limited [UK] owns 100% of Anglo American Insurance Management Services Limited [UK] Centre Reinsurance Limited (Bda) owns 100% Centre Solutions Holdings II [Delaware] Limited (US-DE) owns 100% Centre Risk Advisors, Inc. [US-DE] owns 100% ZC Group LLC [US-DE] owns 100% Centre Solutions [US] Limited [Bda] owns 100% ZC Specialty Insurance Company [US-TX] owns 100% Centre Solutions Holdings [Delaware] Limited [US-DE] owns 100% Centre Insurance Company [US-DE] owns 100% of Anglo American Insurance Co. Limited [UK] owns 100% of Mercantile Indemnity Limited [UK] owns 100% of Anglo American Insurance Company (Bermuda) Limited [Bda] Centre Reinsurance Holdings Limited [Bda] owns 100% of CentreLine Reinsurance Limited [Bda] owns 100% of Mendip Insurance & Reinsurance Company Limited [Bda] owns 100% of Strategic Services Centre Limited [Bda] - f/k/a Gear, Inc. owns 100% of ZC Life Reinsurance Limited [Bda] owns 100% of Centre Life Holdings (Delaware) Limited [US - DE] owns 100% of Centre Life Reinsurance Limited [Bda] Zurich Centre Group Holdings Limited [Bda] owns 100% of Zurich Payroll Solutions Limited [US - DE] owns 94% of Cedar Hill Holdings, Inc. [US - DE] owns 100% of Cedar Hill Assurance Company [US - TX] owns 100% of ZCM Holdings (Bermuda) Limited [Bda] owns 100% ZCM Matched Funding (Bermuda) Limited [Bda] owns 100% of ZCM Asset Holding Company (Bermuda) Limited [Bda] owns 100% of Zurich Capital Markets (UK) Limited [UK] owns 100% of Zurich Capital Markets Inc. [US - DE] owns 100% of Zurich Capital Markets Securities Inc. [US - DE] owns 100% of ZCM Matched Funding Corp. [US - DE] owns 100% of Zurich Capital Markets Company [Ireland] owns 100% of Centre Financial Services Holdings Limited [Bda] owns 100% of Zurich Structured Finance, Inc. [US - DE] owns 100% Centre Kate Inc. 1 [US - DE] owns 100% Centre Kate Inc. 2 [US - DE] owns 47.125% of CentRe Mortgage Capital LLC [US - DE] owns 100% of National Mortgage Capital LLC [US - MD] owns 47.375% of CMC TEJV-1, LLC [US - DE] owns 100% of CTH Affordable Housing Corporation [US - DE] owns 100% of CTH Affordable Housing Investor, Inc. [US - DE] owns 100% of CTH MHP, L.L.C. [US - DE] owns 100% of CTH Special General Partner, Inc. [US - DE] owns 100% of CTH MHP II, Inc. [US - IL] owns 100% of CTH AHP Corporation [US - DE] C-10 147 owns 100% of CTH WNC, Inc. [US - IL] owns 100% of CTH Special General Partner II, Inc. [US - IL] 1% General Partner & 98% Limited Partner of JFS/ZSF 1997, L.P. [US - VA] owns 34.5% common stock & 100% preferred stock of Centre Trading Partners, L.P. [US - DE] owns 45% of Centre Trading Corporation [US - DE] owns 1% of Centre Trading Partners L.P. [US - DE] owns 49% of CMB Limited [Bda] owns 100% of Zurich Home Investments Limited [Bda] owns 100% of Centre Reinsurance Services (Delaware) Limited [US - DE] owns 44% of Insurance GenPar LP [US - DE] owns 100% and serves as GP of Insurance Partners LP [US - DE] CTH Affordable Housing Corporation owns 100% ZSF Appollo Corporation [US - IL] owns 100% CTH/Landmark SLP, Inc. [US - DE] owns 100% ZSF Landmark Corporation [US - IL] Zurich Centre Group Holdings Limited (Bda) owns 50% THIC Holdings Management Corporation owns 100% Centre Reinsurance Services (Bermuda) Limited (Bda) owns 100% Zurich S.F. Holdings Inc. (US-DE) owns 100% Sterling Forest LLC (US) ZURICH INSURANCE COMPANY (ZURICH, SWITZERLAND) owns 100% of Zurich International Service [Ire] owns 100% of Zurich International Services [Lxm] owns 100% of Marofinac [Mar] owns 13.23% of La Garantie Generale Marocaine (GGM) [Mar] owns 5% of Arab International Insurance Co. [Egy] owns 68.76% of La Garantie Generale Marocaine (GGM) [Mar] owns 80% of Zurich Life Assurance Company Ltd. [UK] owns 50% of Previservice S.p.A. [Ity] owns 67% of Genevoise Vie (Geneva Life Insurance Co.) [Sw] owns 0.923% of Zurich International [Blg] owns 10% of Zurich Eurolife S.A. [Lux] owns 100% of Turegum Immobilion AG [Sw] owns 100% of Assuricum Zurich [Sw] owns 99.87% of Zurich Leben (Life) Insurance Company [Sw] owns 15% of Alstadt Insurance Co. [Sw] owns 20% of Telsecur [Spn] owns 100% of Zurich-Leben PKB [Sw] owns 10% of Gestora [Spn] owns 5% of National Insurance Company (Runoff) [Lxm] owns 10% of Societe Jacquet [Blg] owns 90% of Zurich Life International Services, Ltd. [UK] owns 10% of Zurich life Insurance Company of Canada [Can] owns 20% of Zurich Life Assurance Company Ltd. [UK] owns 50% of Previservice S.p.A. [Ity] owns 32.6% of Genevoise Vie (Geneva Life Insurance Co.) [Sw] owns 99.075% of Zurich International [Blg] owns 10% of Consultores de Pensiones [Spn] owns 1% of ASSURYS Compagnie d'Assurances [Fra] owns 90% of Zurich Eurolife S.A. [Lux] C-11 148 owns 10% of Zurich Epargne Compagnie d'Assurances [Fra] owns 100% of Rud, Blass & Cie AG [Sw] owns 5% of National Insurance Company (Runoff) [Sau] owns 100% of Genevoise Generale (Geneva General Insurance Co.) [Sw] owns 10.32% of Zurich International (France) S.A. [Fra] owns 99.99% of S.G.E.A. [Fra] owns 2% of ASSURYS Compagnie d'Assurances [Fra] owns 20% of Zurich Epargne Compagnie d'Assurances [Fra] owns 80.77% of Danubio Compagnia di Assicurazioni S.p.A. owns 58.64% of Zurich International (France) S.A. [Fra] owns 96.99% of ASSURYS Compagnie d'Assurances [Fra] owns 69.99% of Zurich Epargne Compagnie d'Assurances [Fra] owns 99.87% of Alpina Insurance Co. [Sw] owns 10% of Alstadt Insurance Co. [Sw] owns 19.23% of Danubio Compagnia di Assicurazioni S.p.A. [Ity] owns 31.01% of Zurich International (France) S.A. [Fra] owns 74.95% of Alstadt Insurance Co. [Sw] owns 90% of Zurich Insurance Services [Bah] owns 99.46% of Zurich do Brazil [Brz] owns 32% of CAARS [Brz] owns 100% of Zurich-Anglo Seguradora S.A. [Brz] owns 60% of Zurich Asia Holdings Ltd. [Bda] owns 49% of Neango [Arg] owns 38.7% of ISIS [Arg] owns 100% of Turegum Insurance Co. [Sw] owns 33.3% of Zurich Holdings (UK) Ltd. [UK] owns 100% of Pilot Association [UK] owns 100% of Zurich Municipal Marketing Services, Ltd. [UK] owns 10% of Zurich Life International Services, Ltd. [UK] owns 100% of Zurich Re (UK) Ltd. [UK] owns 100% of Zurich International (UK) Ltd. [UK] owns 100% of General Surety Holding, Ltd. [UK] owns 100% of General Surety & Guarantee Co. [UK] owns 10% of Zurich Insurance Services [Bah] owns 5% of Saudi National Insurance Co., E.C. (SNIC) [Sau] owns 0.54% of Zurich do Brazil [Brz] owns 7.5% of Zurich Asia Holdings Ltd. [Bda] owns 62.5% of Zurich Insurance (Malaysia) Sdn Bhd. [Mal] owns 100% of Zurich Insurance (Guam) Inc. [Gua] owns 66.6% of Zurich Holdings (UK) Ltd. [UK] owns 100% of Zurich Investment Management AG [Sw] owns 100% of Zurich Versicherung - AG [Ger] owns 100% of Central Lloyd Verwaltungsges mbH [Ger] owns 42.7% of Iguazu Compania de Seguros [Arg] owns 0.7% of Zurich Iguazu Compania de Seguros de Retiro S.A. [Arg] owns 99.3% of Zurich Iguazu Compania de Seguros de Retiro S.A. [Arg] owns 100% of Zurich International de Venezuela [Ven] owns 30% of Zurich Chapultepec Compania de Seguros S.A. [Mex] owns 50% of ZBV Beratungs-u. Verkaufs - AG [Sw] owns 100% of HERA Vermogensverwaltung GmbH [Ger] owns 100% of Zurich - Agrippina Beteiligungs - Aktiengesellschaft (Deutschland) AG ZABAG [Ger] C-12 149 owns 16.7% of BFI Betieigungsges fur Industriewerte [Ger] owns 100% of Deutsche Allgemeine Leben Verischerung AG [Ger] owns 100% of Deutsche Allgemeine Verischerung AG [Ger] owns 100% of Zurich Rechtsschutz - Verischerungs - AG [Ger] owns 100% of Zurich Kautions - und Kredit - AG [Ger] owns 100% of Zurich International (Deutschland) [Ger] owns 100% of Zurich Kredit Service GmbH [Ger] owns 80% of Zurich Investmentges [Ger] owns 100% of Zurich Gesellschaft fur Vermogensanlagen [Ger] owns 98% of D. Kern Steuerberatung [Ger] owns 100% of TDG Tele-Dienste GmbH [Ber] owns 99.1% of Agrippina Versicherung [Ger] owns 99.275% of Paria Versicherung - AG [Ger] owns 100% of Anas Investment, Ltd. Dublin [Ire] owns 92.3% of Agrippina Ruckversicherung - AG [Ger] owns 98% of Agrippina Lebensversicherung - AG [Ger] owns 100% of Agrippina Rechtsschultzversicherung - AG [Ger] owns 100% of Banuud Kapital, mbH [Ger] owns 100% of Zurich International (Netherland) N.V. [Nth] owns 100% of Bastion B.V. [Nth] owns 100% of Zurich International (Italia) S.p.A. [Ity] owns 100% of Zurich Insurance Company, U.K. [UK] owns 49% of Zurich Insurance Company (Russia) [Rus] owns 100% of Fairfax House Securities Ltd. [UK] owns 100% of Sanatorio Zurbaran [Spn] owns 100% of Zurich Kosmos Versicherungen AG [Aus] owns 100% of LASSAL Mobilien-und Immobilienvermitungs-und Vetriebsservice GmbH [Aus] owns 15% of Garant Eurasco [Aus] owns 100% of Zurich Uberspieczenle Service Sp.z.o.o (Zurich Versicherung Service GmbH ) [Pol] owns 100% of Zurich Biztositasi Szolgaltato Kft. (Zurich Versicherung Service GmbH) [Hun] owns 99.99% of Inversiones Suizo Chilena [Chl] owns 73.15% of Compania de Seguros Chilena Generales (Chilean General Insurance) [Chl] owns 98.65% of Compnia de Seguros Chilena de Vida (Life Insurance Co.) [Chl] owns 2.38% of Compania de Seguros Chilena Generales (Chilean General Insurance) [Chl] owns 100% of CRESTA Schadenhilfe GmbH [Aus] owns 60% of Consultores de Pensiones [Spn] owns 98.37% of Zurich International (Espana) Compania [Spn] owns 20% of Consultores de Pensiones [Spn] owns 40% of Telsecur [Spn] owns 20% of Gestora [Spn] owns 10% of Consultores de Pensiones [Spn] owns 20% of Telsecur [Spn] owns 60% of Gestora [Spn] owns 100% of Caudal S.A. de Seguros y Reaseguros [Spn] owns 10% of Gestora [Spn] owns 20% of Telsecur [Spn] owns 36.5% of Sicurta 1879 Assicurazioni S.p.A. [Ity] owns 99.96% of SIAR (Societa Italiana Assicurazioni e Riassicurazionio) S.p.A. [Ity] owns 63.5% of Sicurta 1879 Assicurazioni S.p.A. [Ity] owns 42.51% of Minerva Vita Assicurazioni S.p.A. [Ity] owns 63.53% of Zeta Finanza S.p.A. [Ity] C-13 150 owns 63% of Zeasim [Ity] owns 100% of Zeta Fiduciaria [Ity] owns 100% of Zeta Fondi [Ity] owns 100% of Zetagest [Ity] owns 0.08% of Zetasim [Ity] owns 35% of ATAM [Ity] owns 50.02% of Minerva Assicurazioni S.p.A. [Iy] owns 24.95% of Minerva Vita Assicurazioni S.p.A. [Ity] owns 1.13% of Zeta Finanza S.p.A. [Ity] owns 35.71% of Edil-Spettacolo [Ity] owns 50% of Toscana Uno [Ity] owns 15.8% of Zeta Finanza S.p.A. [Ity] owns 63.11% of ATAM [Ity] owns 49.96% of Minerva Assicurazioni S.p.A. [Ity] owns 29.01% of Minerva Vita Assicurazioni S.p.A. [Ity] owns 19.54% of Zeta Finanza S.p.A. [Ity] owns 100% of Erbasei S.p.A. [Ity] owns 36.07% of Zetasim [Ity] owns 100% of Zurich Australian Insurance Holdings, Ltd. [Ast] owns 100% of Zurich Australian Staff Superannuation Pty. Ltd. [Ast] owns 25% of Zurich Australian Insurance Properties Pty. Ltd. [Ast] owns 100% of Zurich Australian Insurance Ltd. [Ast] owns 25% of Zurich Australian Insurance Properties Pty. Ltd. [Ast] owns 100% of Zurich Australian Life Insurance Ltd. owns 50% of Zurich Australian Insurance Properties Pty. Ltd. [Ast] owns 51% of National Accountancy Management Services Pty. Ltd. (NAMS) [Ast] owns 100% of Zurich Investment Management AG [Ast] owns 100% of Zurich Australian Auperannuation Pty. Ltd. [Ast] owns 100% of Zurich Properties Ltd. [Ast] owns 100% of Zurich Australian Workers Compensation Victoria Pty. Ltd. [Ast] owns 25% of Australian Insurance Systems Holdings Pty. Ltd. [Ast] owns 33.3% of Machinery Insurance Services Pty. Ltd. [Ast] owns 87.25% of Zurich Pacific Insurance Pty. Ltd. [Png] owns 100% of Zurich Australian Workers Compensation Ltd. [Ast] owns 50% of Associated marine Insurers [Ast] owns 100% of Zurich Canadian Holdings ltd. [Can] owns 50% of Multi Services Canada, Inc. [Can] owns 50% of World Travel Protection, Inc. [Can] owns 100% of Zurich Indemnity Company of Canada [Can] owns 50% of Zurich Canada Investment Management, Ltd. [Can] owns 100% of Zurich Life of Canada Holdings, Ltd. [Can] owns 100% of Zurich Life & Health Insurance Company [Can] owns 48.7% [Class A] of ZURMEX Canadian Holdings, Ltd. [Can] owns 90% of Zurich Life Insurance Company of Canada [Can] owns 100% of MICOBA Holdings Ltd. [Bah] owns 15.91% of MICO Equities Inc. [Phl] owns 100% of Malayan Insurance Company, Inc. [MICO] [Phl] owns 50% of Pan Malayan Insurance Company [Phl] owns 15.96% of First Nationwide Assurance Corporation [Phl] owns 11.51% of Eastern General Reinsurance Corp. [Phl] owns 70% of Malayan Zurich Insurance Company [Phl] C-14 151 owns 10.01% of Eastern General Reinsurance Corp. [Phl] owns 18.23% of Eastern General Reinsurance Corp. [Phl] owns 36.03% of First Nationwide Assurance Corporation [Phl] owns 99.99% of Asia-Pacific Reinsurance Co., Ltd. [B.V.I.] owns 51.37% of Eastern General Reinsurance Corp. [Phl] owns 47.98% of First Nationwide Assurance Corporation [Phl] owns 14.40% of MICO Equities Inc. [Phl] owns 99.99% of Malayan International Insurance Corporation, Ltd. [Bah] owns 100% of Malayan Insurance Co. (UK) Ltd. [UK] owns 100% of Malayan Insurance Co. (Hong Kong) Ltd. [Hkg] owns 80% of P.T. Zurich Insurance Indonesia [Ind] owns 70% of P.T. PSP Life Insurance Indonesia [Ind] owns 75% of Zurich Insurance Co. (Asia) Ltd. [Hkg] owns 100% of Zurich Insurance Company (Singapore) Pte. Ltd. [Sing] owns 30% of Malayan Zurich Insurance Company [Phl] ITEM 27. NUMBER OF CONTRACT OWNERS As of March 31, 2001, there were 613 Non-Qualified Contracts and 396 Qualified Contracts issued. ITEM 28. INDEMNIFICATION Under its By-laws, Farmers, to the full extent permitted by the Washington Business Corporation Act, will indemnify any person who was or is a party to any proceeding by reason of the fact that he or she is or was a director of Farmers, as provided below. By-laws of Farmers New World Life Insurance Company (as amended October 24, 1995) INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES SECTION 47. (a) RIGHT OF INDEMNITY. Each person who acts as a Director, officer or employee of the corporation shall be indemnified by the corporation for all sums which he becomes obligated to pay, (including counsel fees, expenses and court costs actually and necessarily incurred by him) in connection with any action, suit or proceeding in which he is made a party by reason of his being, or having been a Director, officer, or employee of the corporation, except in relation to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for bad faith or misconduct in the performance of his duties as such Director, officer or employee, and except any sum paid to the corporation in settlement of an action, suit or proceeding based upon bad faith or misconduct in the performance of his duties. (b) SCOPE OF INDEMNITY. The right of indemnification in this article provided shall inure to each Director, officer and employee of the corporation, whether or not he is such Director, officer or employee at the time he shall become obligated to pay such sums, and whether or not the claim asserted against him is based on matters which antedate the adoption of this article; and in the event of his death shall extend to his legal representatives. Each person who shall act as a Director, officer or employee of the corporation shall be deemed to be doing so in reliance upon such right of indemnification; and such right shall not be deemed exclusive of C-15 152 any other right to which any such person may be entitled, under any by-law, agreement, vote of stockholders, or otherwise. (c) DETERMINATION OF CLAIMS FOR INDEMNITY. The Board of Directors of the corporation, acting at a meeting at which a majority of the quorum is unaffected by self-interest (notwithstanding that other members of the quorum present but not voting may be so affected), shall determine the propriety and reasonableness of any indemnity claimed under this article, and such determination shall be final and conclusive. If, however, a majority of a quorum of the Board which is unaffected by self-interest and willing to act is not obtainable, the Board in its discretion may appoint from among the stockholders who are not Directors or officers or employees of the corporation, a committee of two or more persons to consider and determine any such question, and the determination of such committee shall be final and conclusive. RULE 484 UNDERTAKING Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITER (a) Farmers Financial Solutions, LLC is the registrant's principal underwriter. It is also the principal underwriter for Farmers Variable Life Separate Account A. (b) Officers and Directors of Farmers Financial Solutions, LLC, and their addresses, are as follows: C-16 153
Name and Principal Business Address Positions and Offices with the Underwriter ----------------------------------- ------------------------------------------ Brian S. Cohen President and Director(1) C. Paul Patsis Chairman of the Board, Vice President and Director(2) James E. Hansen Director(3) John H. Lynch Director(4) Gerald A. McElroy Director(5) Steven K. Klein Vice President and Chief Compliance Officer(1) Mark Peterson Vice President and Chief Marketing Officer(1) Doren E. Hohl Secretary(4) Jason Crawshaw Treasurer(1)
(1) The principal business address is 2423 Galena Avenue, Simi Valley, California 93065. (2) The principal business address is 3003 -- 77th Avenue, S.E. Mercer Island, Washington 98040. (3) The principal business address is 2840 Echo Hill Way, Orange, California 92867. (4) The principal business address is 4680 Wilshire Boulevard, Los Angeles, California 90010. (5) The principal business address is 79-050 Via Corta, LaQuinta, California 92253.
(c)(1) (2) (3) (4) (5) Name of Net Underwriting Principal Discounts and Compensation on Brokerage Underwriter Commissions Redemption Commissions Compensation - ----------- ---------------- --------------- ----------- ------------ Investors Brokerage Services, Inc. ("IBS")* N/A N/A $75,669.22 N/A Farmers Financial Solutions, LLC N/A N/A $383,021.91 N/A
*IBS served as principal underwriter for the registrant from inception of operations until September 11, 2000 ITEM 30. LOCATION OF BOOKS AND RECORDS All of the accounts, books, records or other documents required to be kept by Section 31(a) of the Investment Company Act of 1940 and rules thereunder, are maintained by Farmers New World Life Insurance Company at 3003 - -- 77th Avenue, S.E., Mercer Island, WA 98040 and by McCamish Systems, L.L.C. Insurance Administrators at 6425 Powers Ferry Road, Atlanta, GA 30339. ITEM 31. MANAGEMENT SERVICES All management contracts are discussed in Part A or Part B of this registration statement. C-17 154 ITEM 32. UNDERTAKINGS AND REPRESENTATIONS. (a) The registrant undertakes that it will file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for as long as purchase payments under the contracts offered herein are being accepted. (b) The registrant undertakes that it will include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a statement of additional information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove and send to Farmers New World Life Insurance Company for a statement of additional information. (c) The registrant undertakes to deliver any statement of additional information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request to the Company at the address or phone number listed in the prospectus. (d) The Company represents that in connection with its offering of the contracts as funding vehicles for retirement plans meeting the requirements of Section 403(b) of the Internal Revenue Code of 1986, it is relying on a no-action letter dated November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, and that paragraphs numbered (1) through (4) of that letter will be complied with. (e) The Company hereby represents that the fees and charges deducted under the Contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. C-18 155 As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Farmers Annuity Separate Account A, certifies that it meets the requirements of Securities Act Rule 485 (b) for effectiveness of this registration statement and has caused this Post-Effective Amendment No. 2 to its registration statement to be signed on its behalf, in the City of Mercer Island, and the State of Washington, on this 26 day of April, 2001. FARMERS ANNUITY SEPARATE ACCOUNT A (Registrant) Attest: /s/ James I. Randolph By: /s/ C. Paul Patsis ------------------------- ---------------------------- James I. Randolph C. Paul Patsis Vice President, Assistant President Secretary and Director Farmers New World Life Farmers New World Life Insurance Company Insurance Company By: FARMERS NEW WORLD LIFE INSURANCE COMPANY (Depositor) Attest: /s/ James I. Randolph By: /s/ C. Paul Patsis ------------------------- ---------------------------- James I. Randolph C. Paul Patsis Vice President, Assistant President Secretary and Director Farmers New World Life Farmers New World Life Insurance Company Insurance Company As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- - --------------------------- President, Chairman of the Board, April 26, 2001 C. Paul Patsis(*) Director and Chief Executive Officer - --------------------------- Assistant Vice President, April 26, 2001 David A. Demmon(*) Treasurer and Director (Principal Accounting Officer and Principal Financial Officer) - --------------------------- Vice President, Actuary and Director April 26, 2001 Kathryn M. Callahan(*)
C-19 156 - --------------------------- Vice President and Director April 26, 2001 Michael W. Keller(*) - --------------------------- Vice President, Assistant Secretary April 26, 2001 James I. Randolph(*) and Director /s/ C. Paul Patsis On April 26, 2001, as Attorney-in-Fact pursuant to powers - --------------------------- of attorney filed herewith or by previous amendment. (*) By: C. Paul Patsis
C-20 157 EXHIBIT INDEX Exhibit 3(c) Distribution Agreement between Farmers New World Life Insurance Company and Farmers Financial Solutions, LLC Exhibit 3(d) Farmers Financial Solutions, LLC Registered Representative Agreement Exhibit 5(c) Revised Variable Policy Application Supplement Exhibit 8(i) Amendment No. 1 to Participation Agreement among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and Farmers New World Life Insurance Company Exhibit 8(j) Amendment No. 2 to Participation Agreement among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and Farmers New World Life Insurance Company Exhibit 8(k) Amendment No. 1 to Participation Agreement among Farmers New World Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributors LLC Exhibit 8(l) Amendment No. 1 to Participation Agreement between Scudder Variable Life Investment Fund and Farmers New World Life Insurance Company Exhibit 8(m) Participation Agreement among Calvert Variable Series, Inc., Calvert Distributors, Inc. and Farmers New World Life Insurance Company Exhibit 8(n) Participation Agreement between Dreyfus Variable Investment Fund and the Dreyfus Socially Responsible Growth Fund, Inc. and Farmers New World Life Insurance Company Exhibit 8(o) Participation Agreement among Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co. and Farmers New World Life Insurance Company Exhibit 8(p) Participation Agreement (Service Shares) among Janus Aspen Series, Janus Capital Corporation and Farmers New World Life Insurance Company Exhibit 8(q) Participation Agreement among Variable Insurance Products Funds, Fidelity Distributors Corporation and Farmers New World Life Insurance Company Exhibit 8(r) Participation Agreement among WM Variable Trust, WM Funds Distributor, Inc. and Farmers New World Life Insurance Company Exhibit 9 Opinion and Consent of M. Douglas Close, Esq. Exhibit 10(a) Consent of Sutherland Asbill & Brennan LLP Exhibit 10(b) Consent of Deloitte & Touche LLP Exhibit 13 Schedule of Performance Computations Exhibit 15 Powers of Attorney
EX-99.3(C) 2 a71651ex99-3c.txt EXHIBIT 3(C) 1 EXHIBIT (3)(c) DISTRIBUTION AGREEMENT AGREEMENT made this Eleventh (11th) day of September 2000 by and between Farmers New World Life Insurance Company, a Washington corporation ("FNWL"), on its behalf and on behalf of each separate account identified in Schedule 1 hereto, and Farmers Financial Solutions, LLC ("Distributor"), a Nevada Limited Liability Company. WITNESSETH: WHEREAS, Distributor is a broker-dealer that engages in the distribution of variable insurance products and may engage in the distribution of other investment products; WHEREAS, FNWL desires to issue certain variable insurance products described more fully below to the public through Distributor acting as principal underwriter and distributor; and WHEREAS, FNWL and Distributor acknowledge that Distributor may distribute variable insurance products and other investment products for other companies. NOW, THEREFORE, in consideration of their mutual promises, FNWL and Distributor hereby agree as follows: 1. DEFINITIONS a. Contracts -- The class or classes of variable insurance products set forth on Schedule 2 to this Agreement as in effect at the time this Agreement is executed, and such other classes of variable insurance products that may be added to Schedule 2 from time to time in accordance with Section 10.b of this Agreement, and including any riders to such contracts and any other contracts offered in connection therewith. For this purpose and under this Agreement generally, a "class of Contracts" shall mean those Contracts issued by FNWL on the same policy form or forms and covered by the same Registration Statement. b. Registration Statement -- At any time that this Agreement is in effect, each currently effective registration statement filed with the SEC under the 1933 Act on a prescribed form, or currently effective post-effective amendment thereto, as the case may be, relating to a class of Contracts, including financial statements included in, and all exhibits to, such registration statement or post-effective amendment. For purposes of Section 8 of this Agreement, the term "Registration Statement" means any document which is or at any time was a Registration Statement within the meaning of this Section 1.b. c. Prospectus -- The prospectus included within a Registration Statement, except that, if the most recently filed version of the prospectus (including any supplements thereto) filed pursuant 1 2 to Rule 497 under the 1933 Act subsequent to the date on which a Registration Statement became effective differs from the prospectus included within such Registration Statement at the time it became effective, the term "Prospectus" shall refer to the most recently filed prospectus filed under Rule 497 under the 1933 Act, from and after the date on which it shall have been filed. For purposes of Section 8 of this Agreement, the term "any Prospectus" means any document which is or at any time was a Prospectus within the meaning of this Section 1.c. d. Fund -- An investment company in which the Separate Account invests. e. Variable Account -- A separate account supporting a class or classes of Contracts and specified on Schedule 1 as in effect at the time this Agreement is executed, or as it may be amended from time to time in accordance with Section 10.b of this Agreement. f. 1933 Act -- The Securities Act of 1933, as amended. g. 1934 Act -- The Securities Exchange Act of 1934, as amended. h. 1940 Act -- The Investment Company Act of 1940, as amended. i. SEC -- The Securities and Exchange Commission. j. NASD -- The National Association of Securities Dealers, Inc. k. Representative -- An individual who is an associated person of Distributor, as that term is defined in the 1934 Act. l. Application -- An application for a Contract. m. Premium -- A payment made under a Contract by an applicant or purchaser to purchase benefits under the Contract. 2. AUTHORIZATION AND APPOINTMENT a. Scope of Authority. FNWL hereby authorizes Distributor on an exclusive basis, and Distributor accepts such authority, subject to the registration requirements of the 1933 Act and the 1940 Act and the provisions of the 1934 Act and conditions herein, to be the distributor and principal underwriter for the sale of the Contracts to the public in each state and other jurisdiction in which the Contracts may lawfully be sold during the term of this Agreement. The Contracts shall be offered for sale and distribution at premium rates set from time to time by FNWL. Distributor shall use its best efforts to market the Contracts actively subject to compliance with applicable law, including the rules of the NASD. However, Distributor shall not be obligated to sell any specific number or amount of Contracts. Also, the parties acknowledge and agree that Distributor may distribute variable insurance products and other investment products for other 2 3 companies. Completed applications for Contracts shall be transmitted directly to FNWL, or as further designated by FNWL, for acceptance or rejection in accordance with the underwriting rules established by FNWL. b. Limits on Authority. Distributor shall act as an independent contractor and nothing herein contained shall constitute Distributor or its agents, officers or employees as agents, officers or employees of FNWL solely by virtue of their activities in connection with the sale of the Contracts hereunder. Distributor and its Representatives shall not have authority, on behalf of FNWL: to make, alter or discharge any Contract or other insurance policy or annuity entered into pursuant to a Contract; to waive any Contract forfeiture provision; to extend the time of paying any Premium; or to receive any monies or Premiums (except for the sole purpose of forwarding monies or Premiums to FNWL). Distributor shall not expend, nor contract for the expenditure of, the funds of FNWL. Distributor shall not possess or exercise any authority on behalf of FNWL other than that expressly conferred on Distributor by this Agreement. 3. SOLICITATION ACTIVITIES a. Representatives. No Representative shall solicit the sale of a Contract unless at the time of such solicitation such individual is duly registered with the NASD and duly licensed with all applicable state insurance and securities regulatory authorities, and is duly appointed as an insurance agent of FNWL. b. Solicitation Activities. All solicitation and sales activities engaged in by Distributor and its Representatives with respect to the Contracts shall be in compliance with all applicable federal and state securities laws and regulations, as well as all applicable insurance laws and regulations, and compliance manuals provided by FNWL. In particular, without limiting the generality of the foregoing: (1) Distributor, along with appropriate FNWL NASD registered principals, shall train, supervise and be solely responsible for the conduct of Representatives in their solicitation of applications and Premiums and distribution of the Contracts, and shall supervise their compliance with, applicable rules and regulations of any securities regulatory agencies that have jurisdiction over variable insurance product activities. (2) Neither Distributor nor any Representative shall offer, attempt to offer, or solicit Applications for, the Contracts or deliver the Contracts, in any state or other jurisdiction unless FNWL has notified Distributor that such Contracts may lawfully be sold or offered for sale in such state, and has not subsequently revised such notice. (3) Neither Distributor nor any Representative shall give any information or make any representation in regard to a class of Contracts in connection with the offer or sale of such class of Contracts that is not in accordance with the Prospectus for such class of Contracts, or in the 3 4 then-currently effective prospectus or statement of additional information for a Fund, or in current advertising materials for such class of Contracts authorized by FNWL. (4) All Premiums paid by check or money order that are collected by Distributor or any of its Representatives shall be remitted promptly, and in any event within two business days after receipt in full, together with any Applications, forms and any other required documentation, to FNWL. Checks or money orders in payment of Premiums shall be drawn to the order of "Farmers New World Life Insurance Company." If any Premium is held at any time by Distributor, Distributor shall hold such Premium in a fiduciary capacity and such Premium shall be remitted promptly, and in any event within two business days, to FNWL. Distributor acknowledges that all such Premiums, whether by check, money order or wire, shall be the property of FNWL. Distributor acknowledges that FNWL shall have the unconditional right to reject, in whole or in part, any Application or Premium. c. Suitability. FNWL and Distributor wish to ensure that the Contracts sold by Distributor will be issued to purchasers for whom the Contracts are suitable. Distributor shall require that the Representatives have reasonable grounds to believe that a recommendation to an applicant to purchase a Contract is suitable for that applicant. Distributor shall review all applications for suitability in accordance with Rule 2310 of the NASD Conduct Rules and interpretations and guidance relating thereto. FNWL will review all applications under the suitability standards set forth in variable life insurance regulations adopted by states where the Contracts are sold, and standards adopted by FNWL or as set forth in compliance and operational manuals. While not limited to the following, a determination of suitability shall be based on information furnished to a Representative after reasonable inquiry of the applicant concerning his or her financial status, retirement needs, reasons for purchasing a Contract, investment sophistication and experience, other securities holdings, investment objectives (including risk tolerance), investment time horizon and tax status. d. Representations and Warranties of Distributor. Distributor represents and warrants to FNWL that Distributor is and during the term of this Agreement shall remain registered as a broker-dealer under the 1934 Act, admitted as a member with the NASD, and duly registered under applicable state securities laws, and that Distributor is and shall remain during the term of this Agreement in compliance with Section 9(a) of the 1940 Act. 4. MARKETING MATERIALS a. Preparation and Filing. FNWL and Distributor shall together design and develop all promotional, sales and advertising material relating to the Contracts and any other marketing-related documents for use in the sale of the Contracts, subject to review and approval by Distributor of such material and documents in accordance with Rule 2210 of the NASD Conduct Rules. Distributor shall be responsible for filing such material with the NASD and any state securities regulatory authorities requiring such filings. FNWL shall be responsible for filing all promotional, sales or advertising material, as required, with any state insurance regulatory 4 5 authorities. FNWL shall be responsible for preparing the Contract forms and filing them with applicable state insurance regulatory authorities, and for preparing the Prospectuses and Registration Statements and filing them with the SEC and state regulatory authorities, to the extent required. The parties shall notify each other expeditiously of any comments provided by the SEC, NASD or any securities or insurance regulatory authority on such material, and will cooperate expeditiously in resolving and implementing any comments, as applicable. b. Use in Solicitation Activities. FNWL shall be responsible for furnishing Distributor with such Applications, Prospectuses and other materials for use by Distributor and Representatives in their solicitation activities with respect to the Contracts. FNWL shall notify Distributor of those states or jurisdictions which require delivery of a statement of additional information with a Prospectus to a prospective purchaser. Distributor or its Representatives shall not use any promotional, sales or advertising materials that have not been approved by FNWL. 5. COMPENSATION AND EXPENSES a. FNWL shall pay compensation for sales of the Contracts in accordance with Schedule 3 attached hereto. b. FNWL shall pay all expenses, except for commissions to Representatives, in connection with the variable products including, but not limited to, the preparation and filing of the Contracts, Registration Statements, and promotional materials. FNWL may pay forms of compensation to the Representatives as paying agent on behalf of Distributor and will maintain the books and records reflecting such payments in accordance with the requirements of the 1934 Act on behalf of Distributor. 6. COMPLIANCE a. Maintaining Registration and Approvals. FNWL shall be responsible for maintaining the registration of the Contracts with the SEC and any state securities regulatory authority with which such registration is required, and for gaining and maintaining approval of the Contract forms where required under the insurance laws and regulations of each state or other jurisdiction in which the Contracts are to be offered. b. Confirmations and 1934 Act Compliance. FNWL, or its appointed designee, as agent for Distributor, shall confirm to each applicant for and purchaser of a Contract in accordance with Rule 10b-10 under the 1934 Act acceptance of Premiums and such other transactions as are required by Rule 10b-10 or administrative interpretations thereunder. FNWL or its appointed designee, shall maintain and preserve books and records with respect to such confirmations in conformity with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act to the extent such requirements apply. The books, accounts and records of FNWL, the Variable Account and Distributor as to all transactions hereunder shall be maintained so as to disclose clearly and accurately the nature and details of the transactions. FNWL shall maintain, as agent for 5 6 Distributor, such books and records of Distributor pertaining to the offer and sale of the Contracts and required by the 1934 Act as may be mutually agreed upon by FNWL and Distributor, including but not limited to maintaining a record of Representatives and of the payment of commissions and other payments or service fees to Representatives. In addition, FNWL, or its appointed designee, as agent for Distributor, shall maintain and preserve such additional accounts, books and other records as are required of FNWL, and Distributor by the 1934 Act. FNWL, and its appointed designee, shall maintain all such books and records and hold such books and records on behalf of and as agent for Distributor whose property they are and shall remain, and acknowledges that such books and records are at all times subject to inspection by the SEC in accordance with Section 17(a) of the 1934 Act, NASD, and all other regulatory bodies having jurisdiction. c. Reports. Distributor shall cause FNWL to be furnished with such reports as FNWL may reasonably request for the purpose of meeting its reporting and record keeping requirements under the 1933 Act, the 1934 Act and the 1940 Act and regulations thereunder as well as the insurance laws of the State of Washington and any other applicable states or jurisdictions. d. Issuance and Administration of Contracts. FNWL, or its appointed designee shall be responsible for issuing the Contracts and administering the Contracts and the Variable Account, provided, however, that Distributor, and its designated Office(s) of Supervisory Jurisdiction and Branch Office(s) (the "Office(s)") shall have full responsibility for the securities activities of all persons employed by FNWL, engaged directly or indirectly in the Contract operations, and for the training, supervision and control of such persons to the extent of such activities. 7. INVESTIGATIONS AND PROCEEDINGS a. Cooperation. Distributor and FNWL shall cooperate fully in any securities or insurance regulatory investigation or proceeding or judicial proceeding arising in connection with the offering, sale or distribution of the Contracts distributed under this Agreement. Without limiting the foregoing, FNWL and Distributor shall notify each other promptly of any written customer complaint or any potentially serious customer complaint or notice of any regulatory investigation proceeding or judicial proceeding (or the likelihood of same) received by either party with respect to the Contracts. Distributor and FNWL agree to act in good faith and use their best business efforts to keep each other informed of matters which may result in serious and material customer complaints, regulatory investigations or proceedings or judicial proceedings. b. Customer Complaints. Distributor agrees that it will comply with the reporting requirements imposed by Section 3070 of the NASD Rules of Conduct with regard to the sales of the Contracts. Without limiting the foregoing, Distributor agrees to notify the NASD if Distributor or persons associated with the Distributor are the subject of any written customer complaint involving allegations of theft, forgery or misappropriation of funds or securities, or is the subject of any claim for damages by a customer, broker, or dealer which is settled for an amount exceeding $15,000. 6 7 8. INDEMNIFICATION a. By FNWL. FNWL shall indemnify and hold harmless Distributor and any officer, director, or employee of Distributor against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which Distributor and/or any such person may become subject, under any statute or regulation, any NASD or SEC rule or interpretation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (1) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, contained in any Registration Statement or in any Prospectus required to be filed by FNWL; provided that FNWL shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon information furnished in writing to FNWL by Distributor specifically for use in the preparation of any such Registration Statement or any amendment thereof or supplement thereto; or in any Prospectus required to be filed by FNWL; (2) result from any breach by FNWL of any provision of this Agreement. This indemnification agreement shall be in addition to any right of liability that FNWL may otherwise have; provided, however, that no person shall be entitled to indemnification pursuant to this provision if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the person seeking indemnification. b. By Distributor. Distributor shall indemnify and hold harmless FNWL and any officer, director, or employee of FNWL against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which FNWL and/or any such person may become subject under any statute or regulation, any NASD rule or interpretation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (1) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, in light of the circumstances in which they were made, contained in any Registration Statement or in any Prospectus required to be filed by FNWL; in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon information 7 8 furnished in writing by Distributor to FNWL specifically for use in the preparation of any such Registration Statement or any amendment thereof or supplement thereto, or in any Prospectus required to be filed by FNWL; (2) result from any breach by Distributor of any provision of this Agreement; (3) result from Distributor's own misconduct or negligence. This indemnification shall be in addition to any right of liability that Distributor may otherwise have; provided, however, that no person shall be entitled to indemnification pursuant to this provision if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the person seeking indemnification. c. General. Promptly after receipt by a party entitled to indemnification ("indemnified person") under this Section 8 of notice of the commencement of any action as to which a claim will be made against any person obligated to provide indemnification under this Section 8 ("indemnifying party"), such indemnified person shall notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, but failure to so notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to the indemnified person otherwise than on account of this Section 8. The indemnifying party will be entitled to participate in the defense of the indemnified person but such participation will not relieve such indemnifying party of the obligation to reimburse the indemnified person for reasonable legal and other expenses incurred by such indemnified person in defending theirself or itself. The indemnification provisions contained in this Section 8 shall remain operative in full force and effect, regardless of any termination of this Agreement. A successor by law of Distributor or FNWL, as the case may be, shall be entitled to the benefits of the indemnification provisions contained in this Section 8. 9. TERMINATION This Agreement shall terminate automatically if it is assigned by the Distributor or FNWL without the prior written consent of the other party. This Agreement may be terminated at any time for any reason by either party upon 60 days' written notice to the other party, without payment of any penalty. (The term "assigned" shall not include any transaction exempted from Section 15(b)(2) of the 1940 Act.) This Agreement may be terminated at the option of either party to this Agreement upon the other party's material breach of any provision of this Agreement or of any representation or warranty made in this Agreement, unless such breach has been cured within 10 days after receipt of notice of breach from the non-breaching party. Upon 8 9 termination of this Agreement, all authorizations, rights and obligations shall cease except the following: (1) the obligation to settle accounts hereunder, including commissions on Premiums subsequently received for Contracts in effect at the time of termination or issued pursuant to Applications received by FNWL prior to termination; (2) the provisions contained in Section 8 regarding Indemnification and, (3) the provisions contained in Section 3(b)(4) regarding the remittance of premiums. In the event of any termination for any reason, all books and records and sales or marketing materials held by Distributor being the property of FNWL, shall promptly be returned to FNWL free from any claim or retention of rights by Distributor. 10. MISCELLANEOUS a. Binding Effect. This Agreement shall be binding on and shall inure to the benefit of the respective successors and assigns of the parties hereto provided that neither party shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party. b. Schedules. The parties to this Agreement may amend Schedules 1 and 2 to this Agreement from time to time to reflect additions of any class of Contracts and Variable Accounts. The provisions of this Agreement shall be equally applicable to each such class of Contracts and each Variable Account that may be added to the Schedule, unless the context otherwise requires. FNWL and Distributor may modify Schedule 3 as mutually agreed in writing from time to time. Any other change in the terms or provisions of this Agreement shall be by written agreement between FNWL and Distributor. c. Rights, Remedies, etc, are Cumulative. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. Failure of either party to insist upon strict compliance with any of the conditions of this Agreement shall not be construed as a waiver of any of the conditions, but the same shall remain in full force and effect. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. d. Notices. All notices hereunder are to be made in writing and shall be given: if to FNWL, to: C. Paul Patsis, President Farmers New World Life Insurance Company 9 10 3003 77th Avenue S.E. Mercer Island, WA 98040 with a copy to: M. Douglas Close Vice President & General Counsel Farmers New World Life Insurance Company 4680 Wilshire Boulevard Los Angeles, CA 90010 if to Distributor, to: Brian Cohen, President Farmers Financial Solutions, LLC 2423 Galena Avenue Simi Valley, CA 93065 or such other address as such party may hereafter specify in writing. Each such notice to a party shall be either hand delivered or transmitted by registered or certified United States mail with return receipt requested, or by overnight mail by a nationally recognized courier, and shall be effective upon delivery. e. Interpretation; Jurisdiction. This Agreement constitutes the whole agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior oral or written understandings, agreements or negotiations between the parties with respect to such subject matter. No prior writings by or between the parties with respect to the subject matter hereof shall be used by either party in connection with the interpretation of any provision of this Agreement. This Agreement is made in the State of Washington, and all questions concerning its validity, construction or otherwise shall be determined under the laws of Washington without giving effect to principals of conflict of laws. f. Severability. This is a severable Agreement. In the event that any provision of this Agreement would require a party to take action prohibited by applicable federal or state law or prohibit a party from taking action required by applicable federal or state law, then it is the intention of the parties hereto that such provision shall be enforced to the extent permitted under the law, and, in any event, that all other provisions of this Agreement shall remain valid and duly enforceable as if the provision at issue had never been a part hereof. g. Section and Other Headings. The headings in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 10 11 h. Counterparts. This Agreement may be executed in two or more counterparts, each of which taken together shall constitute one and the same instrument. i. Regulation. This Agreement shall be subject to the provisions of the 1933 Act, 1934 Act and 1940 Act and the regulations thereunder and the rules and regulations of the NASD and SEC, from time to time in effect, including such exemptions from the 1940 Act as the SEC may grant, and the terms hereof shall be interpreted and construed in accordance therewith. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by such authorized officers on the date specified above. 11 12 FARMERS NEW WORLD LIFE INSURANCE COMPANY FNWL By: /s/ John R. Patton ---------------------------------------- Name: John R. Patton Title: Assistant Vice President & Secretary FARMERS FINANCIAL SOLUTIONS, LLC Distributor By: /s/ Brian Cohen ---------------------------------------- Name: Brian Cohen Title: President 12 13 SCHEDULE 1 For purposes of the Distribution Agreement between FNWL and Distributor entered into on the 11th day of September, 2000, the separate accounts are as follows: 1. Farmers Annuity Separate Account A 2. Farmers Variable Life Separate Account A 13 14 SCHEDULE 2 For purposes of the Distribution Agreement between FNWL and Distributor entered into on the 11th day of September, 2000, the variable products are as follows: 1. Farmers Variable Annuity 2. Farmers Variable Universal Life EX-99.3(D) 3 a71651ex99-3d.txt EXHIBIT 3(D) 1 EXHIBIT (3)(d) FARMERS FINANCIAL SOLUTIONS REGISTERED REPRESENTATIVE AGREEMENT This Agreement is entered into as of the _______ day of _____________, 20__, by and between Farmers Financial Solutions, LLC, a Nevada limited liability company ("Broker/Dealer") and ________________________________________ (Registered Representative ("RR")). WHEREAS, Broker/Dealer is a securities broker/dealer registered and qualified to transact business pursuant to rules and regulations promulgated by the Securities and Exchange Commission (the "SEC") and the National Association of Securities Dealers, Inc. (the "NASD") and certain state securities regulators; WHEREAS, RR is duly qualified and licensed to sell various securities products, including variable life insurance policies, variable annuity contracts and mutual funds (together, "Investment Products"); and WHEREAS, the parties mutually desire to enter into this Agreement so that RR may sell Investment Products on behalf of Broker/Dealer; NOW THEREFORE, in consideration of the mutual promises, covenants and conditions as hereinafter set forth, the parties hereto agree as follows: ARTICLE I AUTHORIZATION Broker/Dealer hereby authorizes RR to become one of its registered representatives and to execute securities transactions, including Investment Product sales, exclusively through it. RR hereby accepts that authorization. RR is not granted any exclusive geographic territory for Investment Product sales. ARTICLE II REGISTERED REPRESENTATIVE'S OBLIGATIONS SECTION 2.1 COMPLIANCE WITH LAWS, RULES, REGULATIONS, ETC. All RR's activities in connection with the offer and sale of Investment Products shall conform to the requirements of state and federal securities laws, rules, regulations and interpretive guidance, the Conduct Rules of the NASD, Securities and Exchange Commission, State Securities Regulators, and state insurance laws, rules, regulations and interpretive guidance. SECTION 2.2 LICENSING AND REGISTRATION. RR shall remain (a) registered with the NASD and any applicable state securities regulatory authority, if necessary, and (b) licensed as an insurance agent with authority to sell Investment Products in any state in which he or she will sell such Products. RR shall take all steps necessary to keep all such registrations and licenses in force during the term of this Agreement. SECTION 2.3 COMPLIANCE MANUAL. RR will familiarize himself with, and will comply with, all the requirements set forth in the RR Compliance Manual (the "Compliance Manual"), as it may be amended from time to time or supplemented by compliance memoranda from Broker/Dealer supervisory personnel. Without limiting the generality of the preceding sentence, 2 RR shall comply with the customer complaint procedures and the filing and recordkeeping requirements set forth in the Compliance Manual. SECTION 2.4 MATERIAL STATEMENTS OR OMISSIONS. RR will not (a) make any material statements, either oral or written, regarding Investment Products which are untrue or misleading, or (b) omit a material fact necessary in order to make any oral or written statements regarding Investment Products, in the light of the circumstances under which they were made, not misleading. SECTION 2.5 INVESTMENT PRODUCTS OFFERED. RR shall offer and sell only those Investment Products offered by Broker/Dealer, for which they are qualified and shall not engage in any private securities transactions without prior written approval from Broker/Dealer. SECTION 2.6 OUTSIDE ACTIVITIES FORM. RR shall complete the "Outside Business Activities Form" attached hereto as Exhibit A, and will update the Form as requested by Broker/Dealer or at any meeting and promptly when any significant additions or changes to the information disclosed on the Form arise, including new employers or sources of income, or significant changes in the amount of income from a previously specified source. SECTION 2.7 CHANGES TO FORM U-4. RR shall immediately notify Broker/Dealer of any changes of information in his or her registration on Form U-4, including any changes to his or her address or telephone number. SECTION 2.8 EDUCATION AND TRAINING MEETINGS. RR shall attend all mandatory educational and/or training meetings scheduled by Broker/Dealer. SECTION 2.9 SUPERVISION OF EMPLOYEES. RR shall take such steps as are necessary to ensure that none of his or her employees engage in any unauthorized securities activities. SECTION 2.10 AGENT INSPECTION AND AUDIT. RR shall permit Broker/Dealer and its designated representatives the right, at any reasonable time during normal business hours and without prior notice, to inspect, review and audit RR's business and records including but not limited to, interviewing and surveying RR's personnel and clients, reviewing bank and trust account records, applications and records of insurance. RR shall cooperate fully with the Broker/Dealer in any such inspection or audit. SECTION 2.11 INDEMNIFICATION. RR hereby agrees to indemnify, protect, defend and hold harmless Broker/Dealer, its successors, assigns, directors, officers, employees, agents and affiliates from and against any and all liabilities, obligations, losses, damages, claims, demands, proceedings, suits, actions, expenses (all of which are herein after referred to as "Claims"), including reasonable attorneys' fees and costs, incurred by Broker/Dealer in connection with the activities of RR hereunder, including, without limitation, the following: 1. Failure of any customer of RR (1) to make payment when due for securities, insurance products or advisory services purchased or to deliver when due securities sold for the account of the customer, (2) to meet any initial or any maintenance margin call, or (3) to fulfill his/her obligations to Broker/Dealer (whether or not such failure is within RR's control). 2. Any dishonest, fraudulent, negligent or criminal act or omission on the part of RR. 3. The breach by RR of any of his/her warranties or obligations under this Agreement. 4. Any liability arising from Broker/Dealer's guarantee of any signature with respect to transactions in the accounts of a customer of RR. 2 3 5. Any liability owed to any customer of RR or any loss suffered by any such customer. 6. Any delay by RR in transmitting an order. 7. Violation by RR of any applicable rule, regulation or policy of any Regulatory authority or any rule, regulation or policy of Broker/Dealer (including the Compliance Guide and the Compliance Memoranda). 8. Any unauthorized act, statement or transaction of RR which is the subject of a complaint, order, claim, charge or other document seeking redress against Broker/Dealer. 9. Any liability arising from outside activities engaged in by RR. 10. Any costs, fees or expenses incurred or paid by Broker/Dealer on behalf of RR or RR's customers. SECTION 2.12 ADVERTISEMENTS. RR shall not publish or use any advertisements or sales literature regarding Broker/Dealer or the securities, insurance products or advisory services offered through Broker/Dealer or Broker/Dealer's name in the telephone listing or directory, without the prior written approval of a Designated Supervisory Employee of Broker/Dealer. Nothing in any such approval shall be construed to make Broker/Dealer liable for the cost of any such listings or other media of advertising. SECTION 2.13 NOTIFICATION REQUIRED. RR shall immediately notify Broker/Dealer of: a. any action or fact which comes to his or her knowledge which may possibly constitute a violation of any law; b. any investigations or inquiries by governmental agencies; c. any judicial proceeding relating to RR's services hereunder; d. loss or suspension of RR's insurance license or securities registration to sell Investment Products; and e. any other events as required under the Compliance Manual. ARTICLE III NATURE OF THE RELATIONSHIP SECTION 3.1 INDEPENDENT CONTRACTOR. Nothing contained herein is intended or shall be construed to create the relationship of employer and employee; rather, the RR is an independent contractor for all purposes. The time to be expended by the RR is solely within the RR's discretion, and the persons to be solicited and the area wherein solicitation shall be conducted is at the election of the RR. The RR shall, as an independent contractor, exercise sole right to determine the time, place and manner in which the objectives of this Agreement are carried out, provided only that the RR conform to normal good business practices, the Code of Ethics as adopted by the Broker/Dealer and to all State and Federal laws governing the conduct of the Broker/Dealer and its RRs. SECTION 3.2 TAXES, ETC. Payments under the Federal Insurance Contribution Act, the Federal Unemployment Contributions Act, state and federal income tax, and state workmen's compensation shall be the sole responsibility of the RR. 3 4 SECTION 3.3 UNIQUE AGREEMENT. RR's agreement and relationship with the Broker/Dealer is unique and separate from any agreement the Broker/Dealer may have with any other person. RR's rights and obligations with respect to the Broker/Dealer are entirely dependent on this Agreement. SECTION 3.4 STATUS OF RR'S EMPLOYEES. RR acknowledges that any persons that he or she employs for assistance shall be an employee of RR, and not of Broker/Dealer. ARTICLE IV COMPENSATION SECTION 4.1 COMPENSATION SCHEDULE. RR's sole compensation as a registered representative from Broker/Dealer shall be in the form of compensation earned from Investment Product sales and service. The compensation schedule attached hereto as Exhibit B sets forth the compensation to be paid to RR for Investment Product sales. The compensation schedule may be revised with or without notice, at the sole discretion of Broker/Dealer, and any such updates or revisions may be published in RR guides and manuals, notices, bulletins or other Broker/Dealer literature. Commissions shall be paid in accordance with the schedule then in effect when the securities in question are issued. SECTION 4.2 WAIVER UNTIL BROKER/DEALER IN RECEIPT OF COMPENSATION. RR waives any right to compensation until Broker/Dealer is in receipt of such compensation from any issuing insurance company, distributor, or other investment sponsor. Compensation will be payable by Broker/Dealer or its parent or affiliated companies. SECTION 4.3 PAYMENT AFTER TERMINATION. If this Agreement is terminated and RR is subject to "disqualification," as that term is defined by the rules and bylaws of the NASD's, then no compensation will be paid to RR following the termination of this Agreement. If the Agreement is terminated and RR is not subject to "disqualification," compensation will be paid to RR that resulted from sales and servicing of Investment Products during the term of this Agreement. SECTION 4.4 PAYMENT AFTER TERMINATION DUE TO DEATH OR DISABILITY. If this Agreement is terminated by reason of the death or total disability of RR, Broker/Dealer shall pay to the legal representative of the deceased RR or to the former RR, as the case my be, all compensation which results from sales and servicing of Investment Products during the term of this Agreement. The compensation rate shall be the same rate the RR was receiving at the time of his or her death or disability. SECTION 4.5 SUSPENSION OF COMPENSATION -- REGULATORY ELEMENT/FIRM ELEMENT. If RR has failed to comply with the "Regulatory Element" of the NASD's continuing education requirements in a timely manner, his or her registration shall be deemed to be inactive. RR shall not receive any compensation from Investment Product sales, nor may he/she engage in any such sales activities during the time that RR's registration is deemed inactive. RR may not receive any service compensation during such time. SECTION 4.6 SUSPENSION OF COMPENSATION -- BROKER/DEALER DETERMINATION. In the event that RR has failed to comply with obligations imposed on him by Broker/Dealer under the terms of this Agreement or any other compliance, training or procedure manuals, Broker/Dealer may determine to refuse to pay RR for sales and servicing of Investment Products. SECTION 4.7 RIGHT OF OFFSET. The Broker/Dealer hereby reserves the right to offset any balances due the RR under this Agreement against any balances due from the RR whether under this Agreement, and to remit balances due the RR net of available offsets. In the event of such net remittance, the Broker/Dealer shall account for the same in such detail as reasonably allowed the RR to identify all balances settled. 4 5 SECTION 4.8 DECLINATION OR RESCISSION OF BUSINESS -- SHARING COMMISSIONS. This Agreement is subject to the right of Broker/Dealer to decline acceptance of or rescind any business not acceptable to it. It is understood that RR will not share any part of his/her commission with any person not duly a registered representative of the Broker/Dealer. SECTION 4.9 REFERRAL BUSINESS. If the sale of any of the products offered by the Broker/Dealer results from a referral, the commissions and service fees to the selling agent (RR) shall be eighty (80%) percent of the listed commissions and service fees. If the referring agent (RR) is properly licensed and contracted with the Broker/Dealer on the date any such sale is made, the referring agent (RR) shall receive twenty (20%) percent of the listed commissions and service fees. The RRs agree that the Broker/Dealer's determination as to whether the sale of any products resulted from a referral, shall be final and binding. Notwithstanding the foregoing, the selling agent and referring agent, assuming both are properly registered with the Broker/Dealer on the date of product sale, may agree to any other split of commissions they choose so long as both agree to it in writing and such agreement appears with the submitted original product application(s). ARTICLE V EXPENSES RR shall be solely responsible for all expenses related to Investment Product activities, including but not limited to, travel, entertainment, office expense, telephone, education, licensing, registration and renewal fees. ARTICLE VI CONFIDENTIALITY; PROPRIETARY MATERIALS SECTION 6.1 CONFIDENTIALITY. In the course of RR's duties, he or she may be handling financial, accounting, statistical and marketing information, customer lists, schedules and other confidential information relating to Broker/Dealer and its affiliates. All such information shall be kept confidential and shall not be disclosed, directly or indirectly, to third parties or used by RR in any way, either during the term of this Agreement or at any time thereafter, except as may be required in the course of his or her duties under this Agreement or as required by law. SECTION 6.2 RETURN OF MATERIALS. Upon termination of this Agreement, the RR will promptly deliver to Broker/Dealer, all material provided by Broker/Dealer without retaining any copies or excerpts thereof, including the Compliance Manual, any other manuals, compliance memoranda, prospectuses, statements of additional information, advertising, sales materials, business cards and letterhead. ARTICLE VII TERM, TERMINATION AND SURVIVABILITY SECTION 7.1 EFFECTIVE DATE AND TERM. The effective date of this Agreement is as first above written and shall continue until terminated by any party. SECTION 7.2 TERMINATION. This Agreement shall terminate effective immediately upon the termination of RR's Agent Appointment Agreement with the entities comprising the Farmers Insurance Group of Companies(R). This Agreement may be terminated in writing by either party at any time with or without cause. Such termination in writing shall be deemed effective as described in Section 9.5. SECTION 7.3 SURVIVABILITY. The agreements in Sections 4.3, 4.4, 6.1, 6.2 and Article VIII shall survive the termination of this Agreement. 5 6 ARTICLE VIII DISPUTE RESOLUTION The parties agree to attempt in good faith to resolve any dispute relating to this Agreement promptly by informal discussion. In the event the Broker/Dealer has issued a notice of termination or terminated this Agreement pursuant to Article VII above and RR disputes the right of the Broker/Dealer to terminate this Agreement, then such dispute shall be submitted to binding arbitration as set forth below. The parties shall then agree to arbitration in accordance with the then current rules pertaining to the NASD at Los Angeles, California. The place of the arbitration shall be at a mutually agreed upon place within the city limits of Los Angeles, California. Each party will bear, equally, the cost of any arbitration fees and each party will bear its own costs and expenses, including attorney's fees. The parties agree that no arbitrator, under this provision, may award emotional distress or punitive or exemplary damages and that any such award shall be deemed void and not binding upon any party. The parties further agree that, within 180 days after the effective date of termination, any and all claims as to any matter to be arbitrated under this paragraph must be made within the 180 day period or thereafter such claims are forever barred. ARTICLE IX DISCLOSURE TO ASSOCIATED PERSONS WHEN SIGNING FORM U-4 The Form U-4 contains a predispute arbitration clause. It is in item 5 on page 4 of the form U-4. You should read that clause now. Before signing the form U-4, you should understand the following: 1) You are agreeing to arbitrate any dispute, claim or controversy that may arise between you and your firm, or a customer, or any other person, that is required to be arbitrated under the rules of the self-regulatory organizations with which you are registering. This means you are giving up the right to sue a member, customer, or another associated person in court, including the right to a trial by jury, except as another associated person in court, including the right to a trial by jury, except as provided by the rules of the arbitration forum in which a claim is filed. 2) A claim alleging employment discrimination, including a sexual harassment claim, in violation of a statute is not required to be arbitrated under NASD rules. Such a claim may be arbitrated at the NASD only if the parties have agreed to arbitrate it, either before or after the dispute arose. The rules of other arbitration forums may be different. 3) Arbitration awards are generally final and binding; a party's ability to have a court reverse or modify an arbitration award is very limited. 4) The ability of the parties to obtain documents, witness statements and other discovery is generally more limited in arbitration than in court proceedings. 5) The arbitrators do not have to explain the reason(s) for their award. 6) The panel of arbitrators may include arbitrators who were or are affiliated with the securities industry, or public arbitrators, as provided by the rules of the arbitration forum in which a claim is filed. 7) The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court. 6 7 ARTICLE X MISCELLANEOUS SECTION 10.1 ASSIGNMENT. This Agreement is for the personal services of RR and RR may not transfer or assign this Agreement, or any right, benefit, interest, duty or obligation hereunder. Broker/Dealer may assign this Agreement. This Agreement will inure to the benefit of and be binding upon the parties and each of their successors. SECTION 10.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, between the parties, and no waiver, modification or change of any of its provisions will be valid unless in writing and signed by the parties hereto, or in the case of a waiver, by the party waiving compliance. SECTION 10.3 WAIVER. Failure of any party to enforce any provision of this Agreement will not constitute a course of conduct or waiver in the future of the right to enforce the same or any other provision. SECTION 10.4 SEVERABILITY. The parties to this Agreement desire and intend that the terms and conditions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each state or jurisdiction in which enforcement is sought. The parties agree specifically that, if any particular term or condition of this Agreement is adjudicated, or becomes by operation or law, invalid or unenforceable, this Agreement will be deemed amended to delete the portion that is adjudicated, or that becomes by operation of law, invalid or unenforceable, the deletion or reduction to apply only with respect to the operation of the term or condition, and the remainder of the Agreement to remain in full force and effect. A deletion or reduction resulting from any adjudication will apply only with respect to the operation of that term in the particular jurisdiction in which the adjudication is made. SECTION 10.5 NOTICE. Any notice, request, demand or other communication required or permitted hereunder will be in writing and will be delivered in one of the following manners: by personal delivery, which will be effective on the day so delivered; by registered or certified mail, which will be effective three days after mailing; by facsimile transmission, which will be effective when receipt is electronically acknowledged from the appropriate number below; or by a nationally recognized overnight delivery service guaranteeing next day delivery, which will be effective on the earlier of the second business day after timely delivery to such service or the day of actual delivery by such service. All notices to a party will be sent to the following addresses or to such other address or person as such party may designate by notice to each other party hereunder: (a) TO BROKER/DEALER: President Farmers Financial Solutions, LLC 2423 Galena Avenue Simi Valley, CA 93065 with a copy to : Vice President & General Counsel Farmers New World Life Insurance Company 4680 Wilshire Boulevard Los Angeles, CA 90010 7 8 (b) TO REGISTERED REPRESENTATIVE: ---------------------------------------- ---------------------------------------- ---------------------------------------- Phone: ---------------------------------- Fax: ------------------------------------ 10.6 GOVERNING LAW. The validity, enforceability, and interpretation of this Agreement shall be construed according to the laws of the State of California. 10.7 COUNTERPARTS. This Agreement may be executed simultaneously in counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. 10.8 HEADINGS. The headings in this Agreement are inserted for convenience only and will not constitute a part hereof. 10.9 FAMILY RIGHTS PROVISION. In the event of termination of the Agent Appointment Agreement and the Agent or Agent's heirs are permitted to sell all or any part of the agency to a member(s) of the agent's immediate family at any time, the Broker/Dealer will give consideration to transfer or assignment of the rights under the RR Agreement to the nominee(s), provided the nominee(s) are acceptable to the Broker/Dealer and capable of fulfilling the duties of the agreement within six (6) months after acceptable. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed as of the date and year first above written. FARMERS FINANCIAL SOLUTIONS, LLC By: ----------------------------------- (Signature) Name: --------------------------------- Title: -------------------------------- REGISTERED REPRESENTATIVE By: ----------------------------------- (Signature) ----------------------------------- (Print Name) 8 9 EXHIBIT A OUTSIDE ACTIVITIES FORM BROKER/DEALER It is hereby agreed by both Farmers Financial Solutions, LLC ("Broker/Dealer") and _______________________ ("Registered Representative" ("RR")) that the disclosures herein are not in conflict with the unique relationship existing between Broker/Dealer and Registered Rep, but are for the purpose of compliance with regulatory requirements. I. OTHER LICENSES AND REGISTRATIONS RR states that he or she currently holds the following licenses or certificates: (Circle, if applicable). 1. Life and Disability Insurance Agent 2. Fire and Casualty Insurance Agent 3. Real Estate Broker/Salesman 4. Registered Investment Adviser 5. Certified Financial Planner 6. Chartered Financial Consultant 7. Other (please describe): ---------------------------------------- If any of the aforementioned licenses or registrations generate income for you other than as a RR of Broker/Dealer or agent of any insurance company affiliate of Broker/Dealer, please provide an estimate of the weekly income and the name of any affiliated agency or firm: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- II. OTHER BUSINESS AFFILIATIONS Please provide the information requested below on any business affiliations you may have. Please remember to include in this section information on any classes of seminars you may teach or conduct related to insurance, securities, investment or other similar topics. RR states that his or her other business affiliations are: 1. Entity Name: ----------------------------------------------------- A. Type of Business: ------------------------------------------------ B. RR's Position or Relationship (e.g., owner, director, employee): ----------------------------------------------------- C. Percent Ownership of Business, if any: --------------------------- D. Hours per week: -------------------------------------------------- E. Income per week: ------------------------------------------------- 2. Entity Name: ----------------------------------------------------- 9 10 A. Type of Business: ------------------------------------------------ B. RR's Position or Relationship (e.g., owner, director, employee): ----------------------------------------------------- C. Percent Ownership of Business, if any: --------------------------- D. Hours per week: -------------------------------------------------- E. Income per week: ------------------------------------------------- 3. Entity Name: ------------------------------------------------------------- A. Type of Business: ------------------------------------------------ B. RR's Position or Relationship (e.g., owner, director, employee): ----------------------------------------------------- C. Percent Ownership of Business, if any: --------------------------- D. Hours per week: -------------------------------------------------- E. Income per week: ------------------------------------------------- RR agrees to notify Broker/Dealer promptly (and in any case, within fifteen (15) days) of any significant modifications to the information disclosed on this form, including new licenses or registrations, employers or sources of income, or significant changes in the amount of income from a source specified herein. Registered Representative: Broker/Dealer: By: By: ------------------------------- --------------------------------- Dated: Dated: ---------------------------- ------------------------------ 10 11 EXHIBIT B COMPENSATION SCHEDULE 11 12 ADDENDUM TO REGISTERED REPRESENTATIVE AGREEMENT FOR FARMERS DISTRICT MANAGERS This Addendum is attached to and is made a part of the Farmers District Manager's Registered Representative Agreement dated the _________ day of _________, 20__ by and between Farmers Financial Solutions, LLC, a Nevada limited liability company ("Broker/Dealer") and _________________________ Registered Representative ("RR") who also is a Farmers District Manager. Broker/Dealer appoints RR to act as a Managing and Supervising Representative ("MSR") of Broker/Dealer. MSR has no authority to bind Broker/Dealer or make any representations on behalf of Broker/Dealer except within the scope of RR's appointment as stated herein. MSR will manage, supervise and assist his or her agents who are registered representatives of Broker/Dealer in the sale of securities products and services that are made available by Broker/Dealer. MSR shall act as a Registered Representative and principal under the NASD rules and regulations, and MSR represents and warrants to Broker/Dealer that throughout the term of this Addendum he or she will be duly licensed as a Registered Representative and principal. MSR understands his or her role is to supervise Registered Representatives in his or her District and agrees not to independently solicit customers or write business except in working with his or her Registered Representatives. MSR shall be paid commissions on sales of securities products and services in accordance with the Farmers products/commission schedules which are in force from time-to-time for Farmers District Managers who become and act as registered principals of Broker/Dealer. MSR will be designated a principal of Broker/Dealer. MSR's duties will be directed by the Broker/Dealer operations and compliance manual, written supervisory procedures, and as may be advised by Broker/Dealer. MSR agrees to supervise Registered Representatives as signed to MSR's District for purposes of compliance with the rules and guidelines of Broker/Dealer and the applicable regulatory authorities. Responsibilities will include but are not limited to: - ADVERTISING -- Ensure that required advertising and correspondence has received approvals from Broker/Dealer Compliance Department. Work with Registered Representatives to ensure regulatory compliance as pertains to Broker/Dealer general advertising. - INTERNAL POLICIES -- Responsible for stating, distributing, and enforcing any internal policies and procedures. - RR SUPPORT STAFF -- Responsible for all clerical and administrative staff who are appointed relative to securities operations and activities. - TRADING ACTIVITY -- As required, review all new accounts, trades, logs and blotters either in person or by designation of another with Broker/Dealer consent. - SALES SUPERVISION -- Conduct periodic educational and motivational meetings with information pertaining to compliance, products, and other pertinent information. 12 13 Monitor sales practices with regard to such things as presentation skills, fact gathering, needs and risk assessment, and product recommendations. - ANNUAL MEETING -- Perform Annual Registered Representative Review and Branch Audit as required by NASD and Broker/Dealer. - RECORDKEEPING -- Maintain files and records as required. IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly executed as of the date and year first above written. FARMERS FINANCIAL SOLUTIONS, LLC By: -------------------------------------- (Signature) Name: ------------------------------------ Title: ----------------------------------- MANAGING AND SUPERVISORY REPRESENTATIVE By: -------------------------------------- (Signature) -------------------------------------- (Print Name) 13 EX-99.5(C) 4 a71651ex99-5c.txt EXHIBIT 5(C) 1 EXHIBIT 5(c) [LOGO] FARMERS LIFE INSURANCE VARIABLE POLICY APPLICATION SUPPLEMENT - -------------------------------------------------------------------------------- Proposed Insured:______________ Policy Number:______________ Plan:______________ Planned Premium: $_____________ Mode Payable: $_____________ PREMIUM ALLOCATION: (Choose One) Please see reverse for additional information [ ] I have elected the following asset allocation model: [ ] Income [ ] Income with Growth [ ] Balanced [ ] Growth with Income [ ] Growth OR [ ] My allocation of premiums is as follows: (All allocations must total 100%. $500 minimum per account.) - -------------------------------------------------------------------------------- - - CALVERT VARIABLE SERIES, INC. __% Social Small Cap Growth Portfolio - - DREYFUS (SERVICE CLASS SHARES) __% Socially Responsible Growth Fund, Inc. - - DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) __% Quality Bond Portfolio __% Small Cap Portfolio - - FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) __% VIP Growth Portfolio __% VIP Index 500 Portfolio __% VIP Mid Cap Portfolio - - FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) __% Franklin Small Cap Fund __% Templeton Asset Strategy Fund __% Templeton Developing Markets Securities Fund - - GOLDMAN SACHS VARIABLE INSURANCE TRUST __% Capital Growth Fund __% CORE(SM) Small Cap Equity Fund __% Mid Cap Value Fund - - JANUS ASPEN SERIES __% Aggressive Growth Portfolio (Service Shares) __% Balanced Portfolio (Service Shares) __% Capital Appreciation Portfolio (Institutional Shares) - - PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) __% Foreign Bond Portfolio __% Low Duration Bond Portfolio - - FIXED ACCOUNT __% Fixed Account - - SCUDDER VARIABLE SERIES I __% Bond Portfolio (Class A Shares) __% Global Discovery Portfolio (Class A Shares) __% Growth and Income Portfolio (Class A Shares) __% International Portfolio (Class A Shares) __% Money Market Portfolio - - SCUDDER VARIABLE SERIES II __% Government Securities Portfolio __% High Yield Portfolio __% Small Cap Growth Portfolio __% SVS Dreman High Return Equity Portfolio - - WM VARIABLE TRUST (CLASS 2 SHARES) __% Equity Income Fund __% Mid Cap Stock Fund __% Small Cap Stock Fund - -------------------------------------------------------------------------------- ELECTED FEATURES: [ ] I elect the Guaranteed Minimum Death Benefit Rider. (Variable Annuity only; where available.) [ ] I elect the Guaranteed Retirement Income Benefit. (Variable Annuity only; where available.) [ ] I elect Automatic Asset Rebalancing (AAR) among the chosen accounts (excluding fixed account). I elect to have the assets in the subaccounts moved to match the premium allocation elections. [ ] I elect to Dollar Cost Average (DCA) in the amount of $_________ ($100 minimum) per month from the fixed account. The starting balance of the fixed account must be at least equal to the requested transfer amount. Transfers will continue until the policy owner instructs otherwise; or until there is not enough money in the fixed account to make the transfer; whichever is earlier. This amount is to go to the following subaccounts ($100 minimum per subaccount, maximum of eight subaccounts): - -------------------------------------------------------------------------------- - - CALVERT VARIABLE SERIES, INC. __% Social Small Cap Growth Portfolio - - DREYFUS (SERVICE CLASS SHARES) __% Socially Responsible Growth Fund, Inc. - - DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) __% Quality Bond Portfolio __% Small Cap Portfolio - - FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) __% VIP Growth Portfolio __% VIP Index 500 Portfolio __% VIP Mid Cap Portfolio - - FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) __% Franklin Small Cap Fund __% Templeton Asset Strategy Fund __% Templeton Developing Markets Securities Fund - - GOLDMAN SACHS VARIABLE INSURANCE TRUST __% Capital Growth Fund __% CORE(SM) Small Cap Equity Fund __% Mid Cap Value Fund - - JANUS ASPEN SERIES __% Aggressive Growth Portfolio (Service Shares) __% Balanced Portfolio (Service Shares) __% Capital Appreciation Portfolio (Institutional Shares) - - PIMCO VARIABLE INSURANCE TRUST (ADMINISTRATIVE CLASS SHARES) __% Foreign Bond Portfolio __% Low Duration Bond Portfolio - - SCUDDER VARIABLE SERIES I __% Bond Portfolio (Class A Shares) __% Global Discovery Portfolio (Class A Shares) __% Growth and Income Portfolio (Class A Shares) __% International Portfolio (Class A Shares) __% Money Market Portfolio - - SCUDDER VARIABLE SERIES II __% Government Securities Portfolio __% High Yield Portfolio __% Small Cap Growth Portfolio __% SVS Dreman High Return Equity Portfolio - - WM VARIABLE TRUST (CLASS 2 SHARES) __% Equity Income Fund __% Mid Cap Stock Fund __% Small Cap Stock Fund - -------------------------------------------------------------------------------- FARMERS NEW WORLD LIFE INSURANCE COMPANY 3003 77th Avenue S.E., Merger Island, Washington 98040 / 206) 232-8400 Page 1 of 2 2 Suitability Information on Owner (print name of Owner if other than Insured: _________________________________________)
Income tax Net Worth Annual Earnings Rate (including residence) Financial Objectives Risk Tolerance - --------------- ---------- --------------------- -------------------- -------------- [ ] $0 - $50,000 [ ] 15% [ ] $0 - $150,000 [ ] Growth of assets over long term [ ] Conservative [ ] $50,001 - $100,000 [ ] 28% [ ] $150,001 - [ ] Increase current income [ ] Moderate [ ] $100,001 - $250,000 [ ] 31% $250,000 [ ] Combination of the above [ ] Aggressive [ ] over $250,000 [ ] 36% [ ] $250,001 - [ ] Other _________________________ [ ] 39% $500,000 [ ] over $500,000
TELEPHONE TRANSFER is authorized unless the following box is checked: [ ] I prefer NOT to authorize telephone transfers. Was a hypothetical sales illustration used during the sales process? [ ] Yes [ ] No (If "Yes," please submit a copy with the application.) I understand that THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY VARY UNDER THE SPECIFIED CONDITIONS. POLICY VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. ILLUSTRATIONS OF BENEFITS INCLUDING DEATH BENEFITS; POLICY VALUES; AND CASH SURRENDER VALUES; ARE AVAILABLE UPON REQUEST. I acknowledge receipt of the current prospectus for the policy and for the underlying funds representing the Premium Allocation options elected above. All statements and answers to the above questions are, to the best of my knowledge and belief, complete and true. I agree that they shall form a part of my application and that they shall be subject to the terms of the Acknowledgement & Authorization found in the application. All states except Kansas; North Dakota; Oregon; Texas; and Virginia: Any person who with intent to defraud or knowing that he/she is facilitating fraud against an insurer, submits an application or files a claim containing a false or deceptive statement is guilty of insurance fraud and/or may have violated state law. Dated at: ----------------------------- ----------------------------- City and State Signature of Proposed Insured Dated on: ----------------------------- ----------------------------- Month, Day, Year Signature of Owner (if other than Insured) ----------------------------- Signature of Agent or witness PREMIUM ALLOCATION: In some states (for a Variable Annuity) and in all states (for a Variable Life Policy), the initial premium payment will be allocated to the fixed account for the period described in the prospectus. TELEPHONE TRANSFER AUTHORIZATION: Telephone transfer among the subaccounts and the fixed account are subject to the conditions of the Telephone Transfer Agreement. By requesting this authorization, I, as Owner, agree and understand that: 1. Neither the Company nor its agents or representatives who act on its behalf shall be subject to any claim; loss; liability; cost; or expense; if it acts in good faith in following instructions pursuant to this authorization. 2. Transfer will be made subject to the conditions of the policy, administrative regulations of the Company, and the prospectus. 3. Transfers from a subaccount shall be based on the accumulation unit value next determined following receipt of a valid, complete, telephone transfer instruction. 4. This authorization shall continue in force until the earlier of receipt of written revocation from the Owner, or the Company discontinuing this privilege. I understand that as a condition of allowing telephone instructions to be made, the Company, at its sole option and without prior notice to the Owner, any person or representative, may record all or part of any telephone conversation containing such instructions. All terms are binding on my agents, heirs, and assignees. Telephone transfer is authorized unless the preference box is marked. Page 2 of 2 EX-99.8(I) 5 a71651ex99-8i.txt EXHIBIT 8(I) 1 EXHIBIT (8)(i) AMENDMENT TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. Farmers New World Life Company The participation agreement, dated as of May 15, 2000, by and among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and Farmers New World Life Company (the "Agreement") is hereby amended as follows: Section 4.4 of the Agreement is deleted in its entirety and replaced with the following provision: 4.4 At your option, we shall provide you, at our expense, with either (i) for each Contract owner who is invested through the Account in a subaccount corresponding to a Portfolio ("designated subaccount"), one copy of each of the following documents on each occasion that such document is required by law or regulation to be delivered to such Contract owner who is invested in a designated subaccount: the Trust's current prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, pertaining specifically to the Portfolios ("Designated Portfolio Documents"); or (ii) a camera ready copy of such Designated Portfolio Documents in a form suitable for printing and from which information relating to series of the Trust other than the Portfolios has been deleted to the extent practicable. In connection with clause (ii) of this paragraph, we will pay for proportional printing costs for such Designated Portfolio Documents in order to provide one copy for each Contract owner who is invested in a designated subaccount on each occasion that such document is required by law or regulation to be delivered to such Contract owner, and provided the appropriate documentation is provided and approved by us. We shall provide you with a copy of the Trust's current statement of additional information, including any amendments or supplements, in a form suitable for you to duplicate. The expenses of furnishing, including mailing, to Contract owners the documents referred to in this paragraph shall be borne by you. For each of the documents provided to you in accordance with clause (i) of this paragraph 4.4, we shall provide you, upon your request and at your expense, additional copies. In no event shall we be responsible for the costs of printing or delivery of Designated Portfolio Documents to potential or new Contract owners or the delivery of Designated Portfolio Documents to existing Contract owners. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date as of May 15, 2000. Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. - ---------------------------------------------------- ------------------------------------- By: /s/ Karen L. Skidmore By: /s/ Phil Kearns ---------------------------------------- ---------------------------------- Name: Karen L. Skidmore Name: Phil Kearns Title: Assistant Vice President Title: Vice President Farmers New World Life Company - ------------------------------ By: /s/ John R. Patton ---------------------------------------- Name: John R. Patton Title Assistant Vice President & Corporate Secretary
EX-99.8(J) 6 a71651ex99-8j.txt EXHIBIT 8(J) 1 EXHIBIT (8)(j) AMENDMENT TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. Farmers New World Life Insurance Company The participation agreement, dated as of May 15, 2000, by and among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and Farmers New World Life Insurance Company (the "Agreement") is hereby amended as follows: Schedules C, D, E and F of the Agreement are hereby deleted in their entirety and replaced with the Schedules C, D, E and F attached hereto, respectively. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date as of April 1, 2001.
Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. - ---------------------------------------------------- ------------------------------------- By: /s/ Karen L. Skidmore By: /s/ Philip J. Kearns ----------------------------------------- ---------------------------------- Name: Karen L. Skidmore Name: Philip J. Kearns Title: Assistant Vice President Title: Vice President Farmers New World Life Insurance Company - ---------------------------------------- By: /s/ John R. Patton ----------------------------------------- Name: John R. Patton Title: Assistant Vice President and Corporate Secretary
2 SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS
Franklin Templeton Variable Insurance Products Trust Investment Adviser - ---------------------------------------------------- ------------------ Franklin Small Cap Fund, Class 2 Franklin Advisers, Inc. Templeton Asset Strategy Fund, Class 2 Templeton Investment Counsel, LLC Templeton Developing Markets Securities Fund, Class 2 Templeton Asset Management, Ltd.
2 3 SCHEDULE D CONTRACTS OF THE COMPANY
CONTRACT 1 CONTRACT 2 ---------- ---------- CONTRACT/PRODUCT NAME Farmers Variable Annuity Farmers Flexible Premium Variable Life Policy REGISTERED (Y/N) Y Y SEC REGISTRATION NUMBER 333-85183 333-84023 REPRESENTATIVE FORM NUMBERS 2000-398 SEPARATE ACCOUNT NAME/DATE Farmers Annuity Farmers Variable Life ESTABLISHED Separate Account A/ Separate Account A/ April 6, 1999 April 6, 1999 SEC REGISTRATION NUMBER 811-09547 811-09507 PORTFOLIOS AND Franklin Small Cap Franklin Small Cap CLASSES-ADVISER Fund, Class 2--Franklin Fund, Class Advisers, Inc.; 2--Franklin Templeton Asset Advisers, Inc.; Strategy Fund, Templeton Asset Class 2--Templeton Strategy Fund, Investment Counsel, Class 2--Templeton LLC; Templeton Investment Counsel, Developing Markets LLC; Templeton Securities Fund, Developing Markets Class 2--Templeton Securities Fund, Asset Management, Ltd. Class 2--Templeton Asset Management, Ltd.
3 4 SCHEDULE E OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS CALVERT VARIABLE SERIES, INC. Social Small Cap Growth Portfolio DREYFUS VARIABLE INVESTMENT FUND Quality Bond Portfolio Small Cap Portfolio DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS VIP Growth Fidelity VIP Mid Cap FIDELITY VARIABLE INSURANCE PRODUCTS II FUND VIP II 500 Index GOLDMAN SACHS VARIABLE INSURANCE TRUST Capital Growth Fund CORE(SM) Small Cap Equity Fund Mid Cap Value Fund JANUS ASPEN SERIES Aggressive Growth Portfolio Balanced Portfolio Capital Appreciation Portfolio KEMPER VARIABLE SERIES Kemper Government Securities Portfolio Kemper High Yield Portfolio Kemper Small Cap Growth Portfolio KVS Dreman High Return Equity Portfolio PIMCO VARIABLE INSURANCE TRUST Foreign Bond Portfolio Low Duration Bond Portfolio SCUDDER VARIABLE LIFE INVESTMENT FUND Bond Portfolio Global Discovery Portfolio Growth and Income Portfolio International Portfolio Money Market Portfolio WM VARIABLE TRUST Equity Income Fund Mid Cap Stock Fund Small Cap Stock Fund 4 5 SCHEDULE F RULE 12b-1 PLANS COMPENSATION SCHEDULE Each Portfolio named below shall pay the following amounts pursuant to the terms and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan, stated as a percentage per year of Class 2's average daily net assets represented by shares of Class 2.
PORTFOLIO NAME MAXIMUM ANNUAL PAYMENT RATE - -------------- --------------------------- Franklin Small Cap Fund 0.25% Templeton Asset Strategy Fund 0.25% Templeton Developing Markets Fund 0.25%
AGREEMENT PROVISIONS If the Company, on behalf of any Account, purchases Trust Portfolio shares ("Eligible Shares") which are subject to a Rule 12b-1 plan adopted under the 1940 Act (the "Plan"), the Company may participate in the Plan. To the extent the Company or its affiliates, agents or designees (collectively "you") provide any activity or service which is primarily intended to assist in the promotion, distribution or account servicing of Eligible Shares ("Rule 12b-1 Services") or variable contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, "we") may pay you a Rule 12b-1 fee. "Rule 12b-1 Services" may include, but are not limited to, furnishing personal services to owners of Contracts which may invest in Eligible Shares ("Contract Owners"), education of Contract Owners, answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, or providing other services eligible for service fees as defined under NASD rules. Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the Compensation Schedule stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in the Portfolio's prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio's net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30) days after the end of the three-month periods ending in January, April, July and October. You shall furnish us with such information as shall reasonably be requested by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written 5 6 report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement ("Disinterested Trustees"). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares as provided in the Plan, on sixty (60) days' written notice, without payment of any penalty. The Plans may also be terminated by any act that terminates the Underwriting Agreement between the Underwriter and the Trust, and/or the management or administration agreement between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule F relating to the Plans will also terminate. You agree that your selling agreements with persons or entities through whom you intend to distribute Contracts will provide that compensation paid to such persons or entities may be reduced if a Portfolio's Plan is no longer effective or is no longer applicable to such Portfolio or class of shares available under the Contracts. Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Trust. The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule F, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the Contracts. 6 EX-99.8(K) 7 a71651ex99-8k.txt EXHIBIT 8(K) 1 EXHIBIT (8)(k) AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT AMONG FARMERS NEW WORLD LIFE INSURANCE COMPANY, PIMCO VARIABLE INSURANCE TRUST, AND PIMCO FUNDS DISTRIBUTORS LLC This Amendment No. 1 to the Participation Agreement dated March 16, 2000 (the "Agreement") between Farmers New World Life Insurance Company (the "Company"), PIMCO Variable Insurance Trust (the "Fund"), and PIMCO Funds Distributors LLC (the "Underwriter") is effective as of April 1, 2000. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agreement. WHEREAS, the Company, the Fund, and the Underwriter have entered into the Agreement to provide for the purchase by the Company, on behalf of one or more of its segregated asset accounts ("Accounts"), of shares of beneficial interest of the several series ("Portfolios") of the Fund; WHEREAS, the Fund, effective April 1, 2000, may offer shares of its Portfolios in two classes, designated "Institutional Class" shares and "Administrative Class" shares; WHEREAS, the shares of the Portfolios offered prior to April 1, 2000 have been designated as Administrative Class shares; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund and the Underwriter agree that the final WHEREAS clause in the Agreement be amended to read as follows: "WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase Administrative Class shares in the Portfolios listed in Schedule A hereto, as it may be amended from time to time by mutual written agreement (the "Designated Portfolios") on behalf of the Account to fund the aforesaid Contracts, and the Underwriter is authorized to sell such shares to the Account at net asset value;" This Amendment No. 1 may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 2 FARMERS NEW WORLD LIFE INSURANCE COMPANY By its authorized officer By: /s/ John R. Patton ----------------------------------------- Name: John R. Patton Title: AVP & Corp. Secretary Date: 10/24/00 PIMCO VARIABLE INSURANCE TRUST By its authorized officer By: /s/ Brent Harris ----------------------------------------- Name: Brent Harris Title: Chairman Date: 10/4/00 PIMCO FUNDS DISTRIBUTORS LLC By its authorized officer By: /s/ Newt Schott ----------------------------------------- Name: Newt Schott Title: Executive Vice President Date: 9/25/00 EX-99.8(L) 8 a71651ex99-8l.txt EXHIBIT 8(L) 1 EXHIBIT (8)(l) SCUDDER VARIABLE LIFE INVESTMENT FUND PARTICIPATION AGREEMENT AMENDMENT AMENDMENT NO. 1 The Participation Agreement by and between SCUDDER VARIABLE LIFE INVESTMENT FUND and Farmers New World Life Insurance Company dated April 14, 2000 (the "Agreement") is hereby amended as follows: Schedule B is revised to read: SCHEDULE B PORTFOLIOS Money Market Portfolio Global Discovery Portfolio (Class A Shares) Growth and Income Portfolio (Class A Shares) International Portfolio (Class A Shares) Bond Portfolio (Class A Shares) IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and on its behalf by its duly authorized representative as of April 2, 2001. FARMERS NEW WORLD LIFE INSURANCE COMPANY By: /s/ John R. Patton ------------------------------------- Name: John R. Patton Title: Secretary SCUDDER VARIABLE LIFE INVESTMENT FUND By: /s/ Linda C. Coughlin ------------------------------------- Name: Linda C. Coughlin Title: President EX-99.8(M) 9 a71651ex99-8m.txt EXHIBIT 8(M) 1 EXHIBIT (8)(m) CALVERT VARIABLE SERIES, INC. PARTICIPATION AGREEMENT THIS AGREEMENT is made this 28th day of March, 2001, among CALVERT VARIABLE SERIES, INC., an open-end management investment company organized under the laws of the State of Maryland ("CVS"), CALVERT DISTRIBUTORS, INC. ("CDI"), the principal underwriter of CVS, organized under the laws of the State of Delaware, and FARMERS NEW WORLD LIFE INSURANCE COMPANY, a life insurance company organized under the laws of the State of Washington (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be amended from time to time (the "Accounts"). W I T N E S S E T H: WHEREAS, CVS is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and has registered its shares under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, CVS desires to act as an investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts to be offered by insurance companies that have entered into participation agreements with CVS (the "Participating Insurance Companies"); and WHEREAS, CVS issues shares of beneficial interest, divided into several series of shares, each series representing an interest in a particular managed portfolio of securities and other assets (the "Portfolios"); and WHEREAS, CVS has received an order from the SEC granting Participating Insurance Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of CVS to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies and certain qualified pension and retirement plans (the "Shared Funding Exemptive Order"); and WHEREAS, Calvert Asset Management Company, Inc. (the "Adviser") is duly registered as an investment adviser under the Investment Advisers Act of 1940 and any applicable state securities laws; and WHEREAS, CDI is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and 2 WHEREAS, the Company desires to utilize shares of one or more Portfolios as an investment vehicle for variable life insurance and/or variable annuity contracts (collectively, the "Contracts") funded by the Accounts; and NOW THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I. Sale of CVS Shares 1.1. CVS shall make shares of its Portfolios available to the Accounts at the net asset value next computed after receipt of such purchase order by CVS (or its agent), as established in accordance with the provisions of the then current prospectus of CVS. Shares of a particular Portfolio of CVS shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Board of Directors of CVS (the "Directors") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Directors acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 1.2. CVS will redeem any full or fractional shares of any Portfolio when requested by the Company on behalf of an Account at the net asset value next computed after receipt by CVS (or its agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus of CVS. 1.3. For the purposes of Sections 1.1 and 1.2, CVS hereby appoints the Company as its agent for the limited purpose of receiving and accepting purchase and redemption orders resulting from investment in and payments under the Contracts. Receipt by the Company shall constitute receipt by CVS provided that (i) such orders are received by the Company in good order prior to the time the net asset value of each Portfolio is priced in accordance with its prospectus and (ii) CVS receives notice of such orders by telephone by 11:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which CVS calculates its net asset value pursuant to the Rules of the SEC. 1.4. Purchase orders that are transmitted to CVS in accordance with Section 1.3 shall be paid for by the Company no later than 12:00 noon New York time on the same Business Day that CVS receives notice of the order. CVS shall pay and transmit the proceeds of redemption orders that are transmitted to CVS in accordance with Section 1.3 no later than 12:00 noon New York time on the same Business Day that CVS receives notice of the redemption, except that CVS reserves the right to postpone payment upon redemption consistent with Section 22(e) of the 1940 Act and any rules thereunder. Payments for such purchase orders will be made net of any redemptions received on the same day as the purchase. Payments shall be made in federal funds transmitted by wire. 2 3 1.5. Issuance and transfer of CVS's shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Shares ordered from CVS will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. CVS shall fax to the Company at (206) 236-6645 a copy of a detailed transaction report and a transaction history report on the Business Day following each trade. By agreement between CVS and the Company, CVS may provide the reports to the Company using other medium. 1.6. CVS shall furnish prompt notice to the Company of any income dividends or capital gain distributions payable on CVS's shares at least five (5) Business Days prior to the ex-dividend date. On the ex-dividend date or, if not a Business Day on the first Business Day thereafter, CVS shall furnish the Company the actual amount of dividend or distribution payable per share. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of that Portfolio. CVS shall, on the date of issuance or if not a Business Day on the first Business Day thereafter, notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.7. CVS shall fax the closing net asset value per share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the closing net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 6:30 p.m. New York time. Any material error in the calculation or reporting of the closing net asset value per share shall be reported immediately upon discovery to the Company. In such event the Company shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct closing net asset value per share and CVS or CDI shall bear the cost of correcting such errors. Any error of a lesser amount shall be corrected in the next Business Day's net asset value per share. 1.8. Each Business Day, the Company shall send CVS a fax listing its orders for purchasing and redeeming Portfolio shares (as a follow-up to the earlier telephonic trade instructions). Later that day, CVS shall send the Company at (206) 236-6645 a fax confirming such orders and listing the closing net asset value for the prior Business Day. By agreement between CVS and the Company, CVS may send this information to the Company using other medium. 1.9. CVS agrees that its shares will be sold only to Participating Insurance Companies and their separate accounts and to certain qualified pension and retirement plans to the extent permitted by the Exemptive Order. No shares of any Portfolio will be sold directly to the general public. The Company agrees that CVS shares will be used only for the purposes of funding the Contracts and Accounts listed in Schedule A, as amended from time to time. 1.10. CVS agrees that all Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding to those contained in Section 2.8 and Article IV of this Agreement. 3 4 ARTICLE II. Obligations of the Parties 2.1. CVS shall prepare and be responsible for filing with the SEC and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses, profiles (if any) and statements of additional information of CVS. CVS shall bear the costs of registration and qualification of its shares, preparation and filing of the documents listed in this Section 2.1. and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.2. At the option of the Company, CVS shall either (a) provide the Company (at the Company's expense) with as many copies of CVS's current prospectus, profile (if any), annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company shall reasonably request; or (b) provide the Company with a camera ready copy of such documents in a form suitable for printing. CVS shall provide the Company with a copy of its statement of additional information in a form suitable for duplication by the Company. CVS shall also provide the Company with such other assistance as is reasonably necessary in order for the Company once each year (or as often as is required by the SEC) to have the prospectus for the Contracts and the prospectus or profile (if any) for the Portfolios printed together in one document. The prospectus, profile (if any) and statement of additional information provided by CVS shall relate either to all Portfolios of CVS or only selected Portfolios of CVS, as the Company shall reasonably request. CVS (at its expense) shall provide the Company with copies of any CVS-sponsored proxy materials in such quantity as the Company shall reasonably require for distribution to Contract owners. 2.3. The Company shall bear the costs of printing and distributing CVS's prospectus, profile (if any), statement of additional information, shareholder reports and other shareholder communications to owners of and applicants for policies for which CVS is serving or is to serve as an investment vehicle. The Company shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. The Company assumes sole responsibility for ensuring that such materials are delivered to Contract owners in accordance with applicable federal and state securities laws. CDI agrees to pay the Company a fee for reimbursement for the printing and administrative processing of CVS Portfolio shares based on attached Schedule B. 2.4. The Company shall furnish, or cause to be furnished, to CVS (or its designee), a copy of the Contract prospectus and statement of additional information in which CVS or CDI is first named prior to the filing of such document with the SEC. The Company shall furnish, or shall cause to be furnished, to CVS (or its designee) a copy of each subsequent Contract prospectus and statement of additional information in which CVS or CDI is named concurrently with the filing of such document with the SEC provided that there are no material changes in disclosure related to CVS or CDI. CVS may, in its reasonable discretion, request that the Company modify any references to CVS or CDI in subsequent filings. The Company shall furnish, or shall cause to be furnished, to CVS (or its designee), each piece of sales literature or other promotional material in which CVS or CDI is named, at least five Business Days prior to its use or concurrently with the filing of such document with the NASD, whichever is greater. 4 5 No such material shall be used if CVS (or its designee) reasonably objects to such use within five Business Days after receipt of such material. 2.5. CVS shall furnish, or cause to be furnished, to the Company (or its designee), a copy of any initial CVS prospectus and statement of additional information in which the Company is first named prior to the filing of such document with the SEC. CVS shall furnish, or shall cause to be furnished, to the Company (or its designee) a copy of each subsequent CVS prospectus, profile (if any) and statement of additional information in which the Company is named concurrently with the filing of such document with the SEC provided that there are no material changes in disclosure related to the Company. The Company may, in its reasonable discretion, request that CVS modify any references to the Company in subsequent filings. CVS shall furnish, or shall cause to be furnished to the Company (or its designee) each piece of sales literature or other promotional material in which the Company is named, at least five Business Days prior to its use or concurrently with the filing of such document with the NASD, whichever is greater. No such material shall be used if the Company (or its designee) reasonably objects to such use within five Business Days after receipt of such material. 2.6. The Company shall not give any information or make any representations or statements on behalf of CVS or CDI or concerning CVS or CDI in connection with the sale of the Contracts other than information or representations contained in and accurately derived from the registration statement, prospectus or profile (if any) for CVS shares (as such registration statement, profile (if any) and prospectus may be amended or supplemented from time to time), reports of CVS, CVS-sponsored proxy statements, or in sales literature or other promotional material approved by CVS or its designee or CDI, except as required by legal process or regulatory authorities or with the written permission of CVS or its designee or CDI. 2.7. Neither CVS nor CDI shall give any information or make any representations or statements on behalf of the Company or concerning the Company, the Accounts or the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the written permission of the Company. 2.8. CVS or CDI will provide the Company with as much advance notice as is reasonably practicable of any material change affecting the Portfolios (including, but not limited to, any material change in its registration statement or prospectus affecting the Portfolios and any proxy solicitation sponsored by CVS or CDI affecting the Portfolios) and consult with the Company in order to implement any such change in an orderly manner, recognizing the expenses of changes and attempting to minimize such expenses by implementing them in conjunction with regular annual updates of the prospectus for the Contracts. 2.9. CVS and CDI agree to maintain a blanket fidelity bond or similar coverage for the benefit of CVS in an amount not less than the minimal coverage required by Section 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time under the 1940 Act. 5 6 2.10. So long as, and to the extent that the SEC interprets the 1940 Act to require passthrough voting privileges for variable Contract owners, the Company will provide pass-through voting privileges to owners of policies whose cash values are invested, through the Accounts, in shares of CVS. CVS shall require all Participating Insurance Companies to calculate voting privileges in the same manner and the Company shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by CVS. With respect to each Account, the Company will vote shares of CVS held by the Account and for which no timely voting instructions from Contract owners are received as well as shares it owns that are held by that Account, in the same proportion as those shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for CVS shares held by Contract owners without the prior written consent of CVS, which consent may be withheld in CVS's sole discretion, except in the event that the Company determines, in reliance on an opinion of counsel, that a proxy proposal would result in a violation of applicable insurance laws. 2.11. CVS shall use its best efforts to maintain qualification of each Portfolio as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended ("Code") and shall notify the Company immediately upon having a reasonable basis for believing that a Portfolio has ceased to so qualify or that it might not so qualify in the future. CVS and CDI acknowledge that compliance with Subchapter M is an essential element of compliance with Section 817(h). 2.12. Each Portfolio of CVS shall comply with the requirements of Section 817(h) of the Code and the regulations issued thereunder relating to the diversification requirements for variable life insurance policies and variable annuity contracts, and CVS shall notify the Company immediately upon having a reasonable basis for believing that any Portfolio has ceased or might cease to comply. In addition, CVS will immediately take all steps necessary to adequately diversify the Portfolio to achieve compliance. 2.13. At the request of the Company, CVS shall provide the Company or its designee with reports certifying compliance with the aforesaid Section 817(h) diversification and Subchapter M qualification requirements on a quarterly basis. 2.14. CVS shall provide monthly statements of account as of the end of each month for all of the Company's accounts by the fifteenth (15th) Business Day of the following month. ARTICLE III. Representations 3.1. The Company represents that it is an insurance company duly organized and in good standing under the laws of the State of Washington and that it has legally and validly established each Account as a segregated asset account under such law on the date set forth in Schedule A. 6 7 3.2. The Company represents that each of the Accounts (1) has been registered as a unit investment CVS in accordance with the provisions of the 1940 Act or, alternatively (2) has not been registered in proper reliance upon an exclusion from registration under the 1940 Act. 3.3. The Company represents that the Contracts or interests in the Accounts (1) are or, prior to issuance, will be registered as securities under the 1933 Act or, alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws. 3.4. CVS represents and warrants that it is duly organized and validly existing under the laws of the State of Maryland. 3.5. CVS represents and warrants that CVS shares offered and sold pursuant to this Agreement are registered under the 1933 Act and CVS is registered under the 1940 Act. CVS shall amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. CVS shall register and qualify its shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by CVS. 3.6. CVS represents and warrants that the investments of each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Code and the rules and regulations thereunder. 3.7. CDI represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. CDI further represents that it will sell and distribute CVS' shares in accordance with the laws of the State of Delaware and all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 3.8. CDI represents and warrants that the Adviser is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the Adviser shall perform its obligations for CVS in compliance in all material respects with the laws of the State of Maryland and any applicable state and federal securities laws. 3.9. Each party will keep confidential any information acquired as a result of this Agreement regarding the business and affairs of the other parties to this Agreement and their affiliates. 3.10. In addition, CVS and CDI shall not, directly or indirectly, disclose or use any nonpublic personal information regarding the consumers or customers of the Company (as the terms "consumer" and "customer" are defined in Rule 3(g) and 3(j), respectively, of Regulation S-P of the Securities and Exchange Commission) ("Confidential Information"), other than to carry out the functions contemplated by this Agreement. The foregoing obligation of confidentiality shall not extend to any portion of the Confidential Information that is, or 7 8 becomes, generally available to the general public from: (a) federal, State or local governmental records, (b) widely distributed media, or (c) disclosures to the general public that are required to be made by federal, State or local law. ARTICLE IV. Potential Conflicts 4.1. The parties acknowledge that CVS's shares may be made available for investment to other Participating Insurance Companies. In such event, the Board of Directors of CVS (the "Directors") will monitor CVS for the existence of any material irreconcilable conflict between the interests of the contract owners of all Participating Insurance Companies. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Directors shall promptly inform the Company if they determine that an irreconcilable material conflict exists and the implications thereof. 4.2. The Company agrees to promptly report any potential or existing conflicts of which it is aware to the Directors. The Company will assist the Directors in carrying out their responsibilities under the Shared Funding Exemptive Order by providing the Directors with all information reasonably necessary for the Directors to consider any issues raised including, but not limited to, information as to a decision by the Company to disregard Contract owner voting instructions. 4.3. If it is determined by a majority of the Directors, or a majority of the disinterested the Directors, that a material irreconcilable conflict exists that affects the interests of Contract owners, the Company shall, in cooperation with other Participating Insurance Companies whose contract owners are also affected, at its expense and to the extent reasonably practicable (as determined by the Directors) take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, which steps could include: (a) withdrawing the assets allocable to some or all of the Accounts from CVS or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of CVS, or submitting the question of whether or not such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (b) establishing a new registered management investment company or managed separate account. 4.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or 8 9 would preclude a majority vote, the Company may be required, at CVS's election, to withdraw the affected Account's investment in CVS and terminate this Agreement with respect to such Account; provided, however that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested the Directors. Any such withdrawal and termination must take place within six (6) months after CVS gives written notice that this provision is being implemented. Until the end of such six (6) month period, CVS shall continue to accept and implement orders by the Company for the purchase and redemption of shares of CVS. 4.5. If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account's investment in CVS and terminate this Agreement with respect to such Account within six (6) months after the Directors inform the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested the Directors. Until the end of such six (6) month period, CVS shall continue to accept and implement orders by the Company for the purchase and redemption of shares of CVS. 4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of the disinterested the Directors shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Company be required to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contact owners materially adversely affected by the irreconcilable material conflict. In the event that the Directors determine that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in CVS and terminate this Agreement within six (6) months after the Directors inform the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested the Directors. 4.7. The Company shall at least annually submit to the Directors such reports, materials or data as the Directors may reasonably request so that the Directors may fully carry out the duties imposed upon them by the Exemptive Order, and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Directors. 4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Exemptive Order) on terms and conditions materially different from those contained in the Exemptive Order, then CVS and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable. 9 10 ARTICLE V. Indemnification 5.1. Indemnification By the Company. The Company agrees to indemnify and hold harmless CVS, CDI, and each of their directors, officers, employees and agents and each person, if any, who controls CVS or CDI within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a registration statement, prospectus or profile (if any) for the Contracts or in the Contracts themselves or in sales literature generated or approved by the Company on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, "Company Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Company by or on behalf of CVS or CDI for use in Company Documents or otherwise for use in connection with the sale of the Contracts or CVS shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from CVS Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or CVS shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in CVS Documents as defined in Section 5.2(a) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to CVS or CDI by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company. 10 11 5.2. Indemnification By CDI. CDI agrees to indemnify and hold harmless the Company and each of its directors, officers, employees and agents and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of CDI) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for CVS (or any amendment or supplement thereto), (collectively, "CVS Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to CVS by or on behalf of the Company for use in CVS Documents or otherwise for use in connection with the sale of the Contracts or CVS shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of CVS or persons under its control, with respect to the sale or acquisition of the Contracts or CVS shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Company by or on behalf of CVS; or (d) arise out of or result from any failure by CVS or CDI to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by CVS or Adviser in this Agreement or arise out of or result from any other material breach of this Agreement by CVS or Adviser (including a failure whether unintentional, or in good faith, or otherwise, to comply with the diversification and other qualification requirements specified in Article II of this agreement). 5.3. None of the parties to this Agreement shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise from such Indemnified Party's willful misfeasance, bad faith or negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 11 12 5.4. None of the parties to this Agreement shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the other parties in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim or shall not relieve that party from any liability which it may have to the Indemnified Party in the absence of Sections 5.1 and 5.2. 5.5. In case any such action is brought against the Indemnified Parties, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from the indemnifying party to the Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. ARTICLE VI. Termination 6.1. This Agreement shall terminate as to the sale and issuance of new Contracts: (a) at the option of any party, for any reason upon ninety (90) days advance written notice to the other parties, unless a shorter time period is agreed to in writing by the parties to this Agreement; (b) at the option of the Company, upon one week advance written notice to CVS, if CVS shares are not reasonably available to meet the requirements of the Contracts as determined by the Company; (c) at the option of the Company, immediately upon institution of formal proceedings against CVS, CDI, or the Adviser by the NASD, SEC, or any other regulatory body that are deemed by the Company to materially affect the performance of the obligations under this Agreement; (d) at the option of CVS or CDI, immediately upon institution of formal proceedings against the broker-dealer or broker-dealers marketing the Contracts, the Accounts, or the Company by the NASD, SEC, or any other regulatory body that are deemed by CVS or CDI to materially affect the performance of the obligations under this Agreement; (e) upon the requisite vote of Contract owners having an interest in CVS, or SEC approval of an application pursuant to Section 26(b) of the 1940 Act, to substitute for CVS's 12 13 shares the shares of another investment company in accordance with the terms of the applicable Contacts. The Company will give sixty (60) days written notice to CVS of any proposed application or vote to replace CVS's shares. CVS, the Adviser, and CDI shall cooperate with the Company in connection with such application; (f) upon assignment (as defined in Section 2(a)(4) of the 1940 Act) of the Agreement, unless made with the written consent of all other parties hereto; (g) if CVS's shares are not registered, issued or sold in conformance with Federal law or such law precludes the use of CVS's shares as an underlying investment medium for Contracts issued or to be issued by the Company. Prompt notice shall be given by each party should such situation occur; (h) by any party to the Agreement upon a determination by a majority of the Directors of CVS, or a majority of its disinterested Directors, that an irreconcilable material conflict exists; (i) at the option of CVS or CDI if the Contracts cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code or if the Contracts are not registered, issued or sold in accordance with applicable state and/or federal law; (j) if the need for substitution of the shares of another investment company, pursuant to Section 26(b) of the 1940 Act, arises out of CVS's failure to be registered, issued or sold in conformance with federal law, including applicable tax law, the expenses of obtaining such order shall be reimbursed by CVS or CDI. CVS, the Adviser, and CDI shall cooperate with the Company in connection with such application; or (k) at the option of the Company by prior written notice to CVS with respect to any Portfolio in the event that such Portfolio ceases to qualify as a Regulated Investment Company under Subchapter M or fails to comply with the Section 817(h) diversification requirements specified in Article II hereof, or if the Company reasonably believes that such Portfolio may fail to so qualify or comply. 6.2. Notwithstanding any termination of this Agreement, CVS shall, at the option of the Company, continue to make available additional shares of CVS (or any Portfolio) pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement provided that the Company continues to pay the costs set forth in Section 2.3. 6.3. The provisions of Articles III and V shall survive the termination of this Agreement, and the provisions of Article IV and Section 2.10 shall survive the termination of this Agreement as long as shares of CVS are held on behalf of Contract owners in accordance with Section 6.2. Specifically, without limitation, the owners of any existing Contracts shall be permitted to transfer or reallocate investment under the Contracts, redeem investments in any Portfolio and/or invest in CVS upon the making of additional premium payments under the existing Contracts. 13 14 ARTICLE VII. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to CVS: Calvert Distributors, Inc. 4550 Montgomery Avenue, Suite 1000N Bethesda, Maryland 20814 Attention: Legal Department with a copy to: Christine Teske Calvert Distributors, Inc. 4550 Montgomery Avenue, Suite 1000N Bethesda, Maryland 20814 If to the Company: Farmers New World Life Insurance Company 3007 - 77th Avenue, S.E. Mercer Island, Washington 98040 Attention: C. Paul Patsis, President with a copy to: M. Douglas Close Vice President and General Counsel Farmers New World Life Insurance Company 4680 Wilshire Boulevard Los Angeles, California 90010 ARTICLE VIII. Unregistered Separate Accounts Pursuant to Section 12(d)(1)(E) of the 1940 Act, the Company will comply with the following conditions for it to hold shares of any Portfolio in one or more unregistered separate accounts: 14 15 8.1. The Company represents that either the Company or the principal underwriter of any unregistered separate account holding Portfolio shares is a broker or dealer registered under the 1934 Act or is controlled (as defined in the 1940 Act) by a broker or dealer registered under the 1934 Act. 8.2. The Company will not hold any other investment security (as defined in Section 3 of the 1940 Act) in the corresponding subaccount of an unregistered separate account that holds shares of a Portfolio. 8.3. The Company will seek instructions from holders of interests in an unregistered separate account holding Portfolio shares with regard to the voting of all proxies solicited in connection with a Portfolio and will vote those proxies only in accordance with those instructions, or the Company will vote Portfolio shares held in its unregistered separate accounts in the same proportion as the vote of all of the Portfolio's other shareholders. 8.4. The Company will not substitute another security for shares of a Portfolio held in an unregistered separate account unless the Securities and Exchange Commission approves the substitution in the manner provided in Section 26 of the 1940 Act. ARTICLE IX. Miscellaneous 9.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 9.2. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 9.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 9.4. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of State of Maryland. 9.5. Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 9.6. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 9.7. The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect. 15 16 9.8. Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written approval of the other party. 9.9. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. 16 17 IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written. FARMERS NEW WORLD LIFE INSURANCE COMPANY By: /s/ C. Paul Patsis -------------------------------------- Name: C. Paul Patsis Title: President CALVERT VARIABLE SERIES, INC. By: /s/ Ronald M. Wolfsheimer -------------------------------------- Name: Ronald M. Wolfsheimer Title: Treasurer CALVERT DISTRIBUTORS, INC. By: /s/ Craig Cloyed -------------------------------------- Name: Craig Cloyed Title: President 17 18 Schedule A Separate Accounts, Associated Contracts, and Available Portfolios
Name of Separate Account and Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- Farmers Annuity Separate Account A (4/6/99) Farmers Variable Annuity Farmers Variable Life Separate Account A (4/6/99) Farmers Flexible Premium Variable Life Insurance Policy
Portfolios of CVS to be made available to the Company as the sponsor of the Separate Accounts are: Calvert Variable Series, Inc. Social Small Cap Portfolio 19 Schedule B Effective March 28, 2001, Calvert Distributors, Inc. ("CDI") shall pay Farmers New World Life Insurance Company (the "Company") an amount equal to the following: - 0.15% of average quarterly assets of the Portfolio held in the Separate Accounts ("Service Fees"). The applicable portion of the Service Fees will be paid by CDI within 20 days following the end of each calendar quarter. - The parties acknowledge and agree that the Service Fees will be paid by CDI and shall be paid with regard to the Portfolio only so long as this Agreement is in effect. Payment will be accompanied by a statement showing the calculation of the quarterly amount payable by CDI and such other supporting data as may be reasonably requested by the Company. In addition, the Company will furnish to CDI or its designees such information as CDI or its designees may reasonably request (including, without limitation, periodic certifications confirming the rendering of services with respect to shares of the Portfolio as described herein), and will otherwise cooperate with CDI and its designees (including, without limitation, any auditors designated by CDI), in the preparation of reports concerning this Agreement and the monies paid or payable by CDI pursuant hereto, as well as any other reports or filings that may be required by law. EX-99.8(N) 10 a71651ex99-8n.txt EXHIBIT 8(N) 1 EXHIBIT 8(n) FUND PARTICIPATION AGREEMENT This Agreement is entered into as of the ___ day of __________, 2001, between FARMERS NEW WORLD LIFE INSURANCE COMPANY, a life insurance company organized under the laws of the State of Washington ("Insurance Company"), and each of the DREYFUS VARIABLE INVESTMENT FUND(S); AND THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (each a "Fund"). ARTICLE I DEFINITIONS 1.1 "Act" shall mean the Investment Company Act of 1940, as amended. 1.2 "Board" shall mean the Board of Directors or Trustees, as the case may be, of a Fund, which has the responsibility for management and control of the Fund. 1.3 "Business Day" shall mean any day for which a Fund calculates net asset value per share as described in the Fund's Prospectus. 1.4 "Commission" shall mean the Securities and Exchange Commission. 1.5 "Contract" shall mean a variable annuity or life insurance contract that uses any Participating Fund (as defined below) as an underlying investment medium. Individuals who participate under a group Contract are "Participants." 1.6 "Contractholder" shall mean any entity that is a party to a Contract with a Participating Company (as defined below). 1.7 "Disinterested Board Members" shall mean those members of the Board of a Fund that are not deemed to be "interested persons" of the Fund, as defined by the Act. 1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates, including Dreyfus Service Corporation. 1.9 "Insurance Company's Separate Account(s)" shall mean the separate account(s) of Insurance Company and its affiliates that invest in Shares (as defined below) of a Participating Fund. 1.10 "Participating Companies" shall mean any insurance company (including Insurance Company) that offers variable annuity and/or variable life insurance contracts to the public and that has entered into an agreement with one or more of the Funds. 2 1.11 "Participating Fund" shall mean each Fund, including, as applicable, any series thereof, specified in Exhibit A, as such Exhibit may be amended from time to time by agreement of the parties hereto, the shares of which are available to serve as the underlying investment medium for the aforesaid Contracts. 1.12 "Prospectus" shall mean the current prospectus and statement of additional information of a Fund, as most recently filed with the Commission. 1.13 "Separate Account" shall mean Farmers Annuity Separate Account A and Farmers Variable Life Separate Account A, separate account(s) established by Insurance Company in accordance with the laws of the State of Washington. 1.14 "Shares" shall mean (I) each class of shares of a Participating Fund set forth on Exhibit A next to the name of such Participating Fund, as such Exhibit may be revised from time to time, or (ii) if no class of shares is set forth on Exhibit A next to the name of such Participating Fund, the shares of the Participating Fund. 1.15 "Software Program" shall mean the software program used by a Fund for providing Fund and account balance information including net asset value per share. Such Program may include the Lion System. In situations where the Lion System or any other Software Program used by a Fund is not available, such information may be provided by telephone. The Lion System shall be provided to Insurance Company at no charge. ARTICLE II REPRESENTATIONS 2.1 Insurance Company represents and warrants that (a) it is an insurance company duly organized and in good standing under applicable law; (b) it has legally and validly established the Separate Account(s) pursuant to insurance laws of the State of Washington and regulations thereunder for the purpose of offering to the public certain individual and group variable annuity and variable life insurance contracts; (c) it has registered the Separate Account(s) as a unit investment trust under the Act to serve as the segregated investment account for the Contracts; and (d) the Separate Account is eligible to invest in shares of each Participating Fund without such investment disqualifying any Participating Fund as an investment medium for insurance company separate accounts supporting variable annuity contracts or variable life insurance contracts. 2.2 Insurance Company represents and warrants that (a) the Contracts will be described in a registration statement filed under the Securities Act of 1933, as amended ("1933 Act"); (b) the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and (c) the sale of the Contracts shall comply in all material respects with state insurance law requirements. Insurance Company agrees to notify each Participating Fund 2 3 promptly of any investment restrictions imposed by state insurance law and applicable to the Participating Fund. 2.3 Insurance Company represents and warrants that the income, gains and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the applicable Contracts, to be credited to or charged against such Separate Account without regard to other income, gains or losses from assets allocated to any other accounts of Insurance Company. Insurance Company represents and warrants that the assets of the Separate Account are and will be kept separate from Insurance Company's General Account and any other separate accounts Insurance Company may have, and will not be charged with liabilities from any business that Insurance Company may conduct or the liabilities of any companies affiliated with Insurance Company. 2.4 Each Participating Fund represents that it is registered with the Commission under the Act as an open-end, management investment company and possesses, and shall maintain, all legal and regulatory licenses, approvals, consents and/or exemptions required for the Participating Fund to operate and offer its shares as an underlying investment medium for Participating Companies. 2.5 Each Participating Fund represents that it is currently qualified as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, and regulations thereunder as amended (the "Code"), and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify Insurance Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.6 Insurance Company represents and agrees that the Contracts are currently, and at the time of issuance will be, treated as life insurance policies or annuity contracts, whichever is appropriate, under applicable provisions of the Code, and that it will make every effort to maintain such treatment and that it will notify each Participating Fund and Dreyfus immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. Insurance Company agrees that any prospectus offering a Contract that is a "modified endowment contract," as that term is defined in Section 7702A of the Code, will identify such Contract as a modified endowment contract (or policy). 2.7 Each Participating Fund agrees that its assets shall be managed and invested in a manner that complies with the requirements of Section 817(h) of the Code, and the rules and regulations thereunder.. 2.8 Upon request by the Insurance Company, each Participating Fund shall provide the Insurance Company or its designee with reports certifying compliance with the Section 817(h) diversification and Sub-Chapter M Qualification requirements. 3 4 2.9 Insurance Company agrees that each Participating Fund shall be permitted (subject to the other terms of this Agreement) to make its shares available to other Participating Companies and Contractholders. 2.10 Each Participating Fund represents and warrants that any of its directors, trustees, officers, employees, investment advisers, and other individuals/entities who deal with the money and/or securities of the Participating Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Participating Fund in an amount not less than that required by Rule 17g-1 under the Act. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.11 Insurance Company represents and warrants that all of its employees and agents who deal with the money and/or securities of each Participating Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage in an amount not less than the coverage required to be maintained by the Participating Fund. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.12 Each Participating Fund represents and warrants that the Adviser is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the Adviser shall perform its obligations in compliance in all material respects with the laws of the State of New York and any applicable state and federal securities laws. 2.13 Each party will keep confidential any information acquired as a result of this Agreement regarding the business and affairs of the other parties to this Agreement and their affiliates. 2.14 In addition, each Participating Fund and its affiliates shall not, directly or indirectly, disclose or use any non public personal information regarding the consumers or customers of the Insurance Company (as the terms "consumer" and "customer" are defined in Rule 3(g) and 3(j), respectively, of Regulation S-P of the Securities and Exchange Commission) ("Confidential Information"), other than to carry out the functions contemplated by this Agreement. The foregoing obligation of confidentiality shall not extend to any portion of the Confidential Information that is, or becomes, generally available to the general public from: (a) federal, State or local governmental records, (b) widely distributed media, or (c) disclosures to the general public that are required to be made by federal, State or local law. 4 5 ARTICLE III FUND SHARES 3.1 The Contracts funded through the Separate Account will provide for the investment of certain amounts in shares of each Participating Fund. 3.2 Each Participating Fund agrees to make its shares available for purchase at the then applicable net asset value per share by Insurance Company and the Separate Account on each Business Day pursuant to rules of the Commission. Notwithstanding the foregoing, each Participating Fund may refuse to sell its shares to any person, or suspend or terminate the offering of its shares, if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of its Board, acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, necessary and in the best interests of the Participating Fund's shareholders. 3.3 Each Participating Fund agrees that shares of the Participating Fund will be sold only to (a) Participating Companies and their separate accounts or (b) "qualified pension or retirement plans" as determined under Section 817(h)(4) of the Code. Except as otherwise set forth in this Section 3.3, no shares of any Participating Fund will be sold to the general public. 3.4 Each Participating Fund shall use its best efforts to provide closing net asset value, dividend and capital gain information on a per-share basis to Insurance Company by 6:00 p.m. Eastern time on each Business Day. Any material errors in the calculation of net asset value, dividend and capital gain information shall be reported immediately upon discovery to Insurance Company. Non-material errors will be corrected in the next Business Day's net asset value per share. 3.5 At the end of each Business Day, Insurance Company will use the information described in Sections 3.2 and 3.4 to calculate the unit values of the Separate Account for the day. Using this unit value, Insurance Company will process the day's Separate Account transactions received by it by the close of trading on the floor of the New York Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net dollar amount of each Participating Fund's shares that will be purchased or redeemed at that day's closing net asset value per share. The net purchase or redemption orders will be transmitted to each Participating Fund by Insurance Company by 11:00 a.m. Eastern time on the Business Day next following Insurance Company's receipt of that information. Subject to Sections 3.6 and 3.8, all purchase and redemption orders for Insurance Company's Separate Accounts shall be effected at the net asset value per share of each Participating Fund next calculated after receipt of the order by the Participating Fund or its Transfer Agent. 3.6 Each Participating Fund appoints Insurance Company as its agent for the limited purpose of accepting orders for the purchase and redemption of Participating 5 6 Fund shares for the Separate Account. Each Participating Fund will execute orders at the applicable net asset value per share determined as of the close of trading on the day of receipt of such orders by Insurance Company acting as agent ("effective trade date"), provided that the Participating Fund receives notice of such orders by 11:00 a.m. Eastern time on the next following Business Day and, if such orders request the purchase of Participating Fund shares, the conditions specified in Section 3.8, as applicable, are satisfied. A redemption or purchase request that does not satisfy the conditions specified above and in Section 3.8, as applicable, will be effected at the net asset value per share computed on the Business Day immediately preceding the next following Business Day upon which such conditions have been satisfied in accordance with the requirements of this Section and Section 3.8. Insurance Company represents and warrants that all orders submitted by the Insurance Company for execution on the effective trade date shall represent purchase or redemption orders received from Contractholders prior to the close of trading on the New York Stock Exchange on the effective trade date. 3.7 Insurance Company will make its best efforts to notify each applicable Participating Fund in advance of any unusually large purchase or redemption orders. 3.8 If Insurance Company's order requests the purchase of a Participating Fund's shares, Insurance Company will pay for such purchases by wiring Federal Funds to the Participating Fund or its designated custodial account on the day the order is transmitted. Insurance Company shall make all reasonable efforts to transmit to the applicable Participating Fund payment in Federal Funds by 12:00 noon Eastern time on the Business Day the Participating Fund receives the notice of the order pursuant to Section 3.5. Each applicable Participating Fund will execute such orders at the applicable net asset value per share determined as of the close of trading on the effective trade date if the Participating Fund receives payment in Federal Funds by 12:00 midnight Eastern time on the Business Day the Participating Fund receives the notice of the order pursuant to Section 3.5. If payment in Federal Funds for any purchase is not received or is received by a Participating Fund after 12:00 noon Eastern time on such Business Day, Insurance Company shall promptly, upon each applicable Participating Fund's request, reimburse the respective Participating Fund for any charges, costs, fees, interest or other expenses incurred by the Participating Fund in connection with any advances to, or borrowings or overdrafts by, the Participating Fund, or any similar expenses incurred by the Participating Fund, as a result of portfolio transactions effected by the Participating Fund based upon such purchase request. If Insurance Company's order requests the redemption of any Participating Fund's shares valued at or greater than $1 million dollars, in a single purchase request, the Participating Fund will wire such amount to Insurance Company within seven days of the order. 6 7 3.9 Each Participating Fund has the obligation to ensure that its shares are registered with applicable federal agencies at all times. 3.10 Each Participating Fund will confirm each purchase or redemption order made by Insurance Company. Transfer of Participating Fund shares will be by book entry only. No share certificates will be issued to Insurance Company. Insurance Company will record shares ordered from a Participating Fund in an appropriate title for the corresponding account. 3.11 Each Participating Fund shall credit Insurance Company with the appropriate number of shares. 3.12 On each ex-dividend date of a Participating Fund or, if not a Business Day, on the first Business Day thereafter, each Participating Fund shall communicate to Insurance Company the amount of dividend and capital gain, if any, per share. All dividends and capital gains shall be automatically reinvested in additional shares of the applicable Participating Fund at the net asset value per share on the ex-dividend date. Each Participating Fund shall, on the day after the ex-dividend date or, if not a Business Day, on the first Business Day thereafter, notify Insurance Company of the number of shares so issued. ARTICLE IV STATEMENTS AND REPORTS 4.1 Each Participating Fund shall provide monthly statements of account as of the end of each month for all of Insurance Company's accounts by the fifteenth (15th) Business Day of the following month. 4.2 Each Participating Fund shall distribute to Insurance Company copies of the Participating Fund's Prospectuses, proxy materials, notices, periodic reports and other printed materials (which the Participating Fund customarily provides to its shareholders) in quantities as Insurance Company may reasonably request for distribution to each Contractholder and Participant. Insurance Company may elect to print the Participating Fund's prospectus and/or its statement of additional information in combination with other fund companies' prospectuses and statements of additional information, which are also offered in Insurance Companies insurance product at their own cost. At Insurance Company's request, the Participating Fund will provide, in lieu of printed documents, camera-ready copy or diskette of prospectuses, annual and semi-annual reports for printing by the Insurance Company. 4.3 Each Participating Fund will provide to Insurance Company at least one complete copy of all registration statements, Prospectuses, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the 7 8 Participating Fund or its shares, contemporaneously with the filing of such document with the Commission or other regulatory authorities. 4.4 Insurance Company will provide to each Participating Fund at least one copy of all registration statements, Prospectuses, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Contracts or the Separate Account, contemporaneously with the filing of such document with the Commission. 4.5 Insurance Company will provide Participating Funds on a semi-annual basis, or more frequently as reasonably requested by the Participating Funds, with a current tabulation of the number of existing Variable Contract owners of Insurance Company whose Variable Contract values are invested in the Participating Funds. This tabulation will be sent to Participating Funds in the form of a letter signed by a duly authorized officer of the Insurance Company attesting to the accuracy of the information contained in the letter. ARTICLE V EXPENSES 5.1 The charge to each Participating Fund for all expenses and costs of the Participating Fund, including but not limited to management fees, administrative expenses and legal and regulatory costs, will be included in the determination of the Participating Fund's daily net asset value per share. 5.2 Except as provided in Article IV and V, in particular in the next sentence, Insurance Company shall not be required to pay directly any expenses of any Participating Fund or expenses relating to the distribution of its shares. Insurance Company shall pay the following expenses or costs: a. Such amount of the production expenses of any Participating Fund materials, including the cost of printing a Participating Fund's Prospectus, or marketing materials for prospective Insurance Company Contractholders and Participants as Dreyfus and Insurance Company shall agree from time to time. b. Distribution expenses of any Participating Fund materials or marketing materials for prospective Insurance Company Contractholders and Participants. c. Distribution expenses of any Participating Fund materials or marketing materials for Insurance Company Contractholders and Participants. 8 9 Except as provided herein, all other expenses of each Participating Fund shall not be borne by Insurance Company. ARTICLE VI EXEMPTIVE RELIEF 6.1 Insurance Company has reviewed a copy of (i) the amended order dated December 31, 1997 of the Securities and Exchange Commission under Section 6(c) of the Act with respect to Dreyfus Variable Investment Fund and Dreyfus Life and Annuity Index Fund, Inc.; and (ii) the order dated February 5, 1998 of the Securities and Exchange Commission under Section 6(c) of the Act with respect to The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Investment Portfolios, and, in particular, has reviewed the conditions to the relief set forth in each related Notice. As set forth therein, if Dreyfus Variable Investment Fund, Dreyfus Life and Annuity Index Fund, Inc., The Dreyfus Socially Responsible Growth Fund, Inc. or Dreyfus Investment Portfolios is a Participating Fund, Insurance Company agrees, as applicable, to report any potential or existing conflicts promptly to the respective Board of Dreyfus Variable Investment Fund, Dreyfus Life and Annuity Index Fund, Inc., The Dreyfus Socially Responsible Growth Fund, Inc. and/or Dreyfus Investment Portfolios, and, in particular, whenever contract voting instructions are disregarded, and recognizes that it will be responsible for assisting each applicable Board in carrying out its responsibilities under such application. Insurance Company agrees to carry out such responsibilities with a view to the interests of existing Contractholders. 6.2 If a majority of the Board, or a majority of Disinterested Board Members, determines that a material irreconcilable conflict exists with regard to Contractholder investments in a Participating Fund, the Board shall give prompt notice to all Participating Companies and any other Participating Fund. If the Board determines that Insurance Company is responsible for causing or creating said conflict, Insurance Company shall at its sole cost and expense, and to the extent reasonably practicable (as determined by a majority of the Disinterested Board Members), take such action as is necessary to remedy or eliminate the irreconcilable material conflict. Such necessary action may include, but shall not be limited to: a. Withdrawing the assets allocable to the Separate Account from the Participating Fund and reinvesting such assets in another Participating Fund (if applicable) or a different investment medium, or submitting the question of whether such segregation should be implemented to a vote of all affected Contractholders; and/or b. Establishing a new registered management investment company. 9 10 6.3 If a material irreconcilable conflict arises as a result of a decision by Insurance Company to disregard Contractholder voting instructions and said decision represents a minority position or would preclude a majority vote by all Contractholders having an interest in a Participating Fund, Insurance Company may be required, at the Board's election, to withdraw the investments of the Separate Account in that Participating Fund. 6.4 For the purpose of this Article, a majority of the Disinterested Board Members shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will any Participating Fund be required to bear the expense of establishing a new funding medium for any Contract. Insurance Company shall not be required by this Article to establish a new funding medium for any Contract if an offer to do so has been declined by vote of a majority of the Contractholders materially adversely affected by the irreconcilable material conflict. 6.5 No action by Insurance Company taken or omitted, and no action by the Separate Account or any Participating Fund taken or omitted as a result of any act or failure to act by Insurance Company pursuant to this Article VI, shall relieve Insurance Company of its obligations under, or otherwise affect the operation of, Article V. ARTICLE VII VOTING OF PARTICIPATING FUND SHARES 7.1 Each Participating Fund shall provide Insurance Company with copies, at no cost to Insurance Company, of the Participating Fund's proxy material, reports to shareholders and other communications to shareholders in such quantity as Insurance Company shall reasonably require for distributing to Contractholders or Participants. Insurance Company shall: (a) solicit voting instructions from Contractholders or Participants on a timely basis and in accordance with applicable law; (b) vote the Participating Fund shares in accordance with instructions received from Contractholders or Participants; and (c) vote the Participating Fund shares for which no instructions have been received in the same proportion as Participating Fund shares for which instructions have been received. Insurance Company agrees at all times to vote its shares in both the General and Separate Accounts in the same proportion as the Participating Fund shares for 10 11 which instructions have been received from Contractholders or Participants. Insurance Company further agrees to be responsible for assuring that voting the Participating Fund shares for the Separate Account is conducted in a manner consistent with other Participating Companies. ARTICLE VIII MARKETING AND REPRESENTATIONS 8.1 Each Participating Fund or its underwriter shall periodically furnish Insurance Company with the following documents, in quantities as Insurance Company may reasonably request: a. Current Prospectus and any supplements thereto; and b. Other marketing materials. Expenses for the production of such documents shall be borne by Insurance Company in accordance with Section 5.2 of this Agreement. 8.2 Insurance Company shall designate certain persons or entities that shall have the requisite licenses to solicit applications for the sale of Contracts. No representation is made as to the number or amount of Contracts that are to be sold by Insurance Company. Insurance Company shall make reasonable efforts to market the Contracts and shall comply with all applicable federal and state laws in connection therewith. 8.3 Insurance Company shall furnish, or shall cause to be furnished, to each applicable Participating Fund or its designee, each piece of sales literature or other promotional material in which the Participating Fund, its investment adviser or the administrator is named, at least fifteen Business Days prior to its use. No such material shall be used unless the Participating Fund or its designee approves such material. Such approval, must be in writing and shall be presumed not given if not received within ten Business Days after receipt of such material. Each applicable Participating Fund or its designee, as the case may be, shall use all reasonable efforts to respond within ten days of receipt. 8.4 Insurance Company shall not give any information or make any representations or statements on behalf of a Participating Fund or concerning a Participating Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement or Prospectus of, as may be amended or supplemented from time to time, or in reports or proxy statements for, the applicable Participating Fund, or in sales literature or other promotional material approved by the applicable Participating Fund. 8.5 Each Participating Fund shall furnish, or shall cause to be furnished, to Insurance Company, each piece of the Participating Fund's sales literature or other 11 12 promotional material in which Insurance Company or the Separate Account is named, at least fifteen Business Days prior to its use. No such material shall be used unless Insurance Company approves such material. Such approval must be in writing and shall be presumed not given if not received by each Participating Fund within ten Business Days after receipt of such material. Insurance Company shall use all reasonable efforts to respond within ten days of receipt. 8.6 Each Participating Fund shall not, in connection with the sale of Participating Fund shares, give any information or make any representations on behalf of Insurance Company or concerning Insurance Company, the Separate Account, or the Contracts other than the information or representations contained in a registration statement or prospectus for the Contracts, as may be amended or supplemented from time to time, or in published reports for the Separate Account that are in the public domain or approved by Insurance Company for distribution to Contractholders or Participants, or in sales literature or other promotional material approved by Insurance Company. 8.7 For purposes of this Agreement, the phrase "sales literature or other promotional material" or words of similar import include, without limitation, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures or other public media), sales literature (such as any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under National Association of Securities Dealers, Inc. rules, the Act or the 1933 Act. ARTICLE IX INDEMNIFICATION 9.1 Insurance Company agrees to indemnify and hold harmless each Participating Fund, Dreyfus, each respective Participating Fund's investment adviser and sub-investment adviser (if applicable), each respective Participating Fund's distributor, and their respective affiliates, and each of their directors, trustees, officers, employees, agents and each person, if any, who controls or is associated with any of the foregoing entities or persons within the meaning of the 1933 Act (collectively, the "Indemnified Parties" for purposes of Section 9.1), against any and all losses, claims, damages or liabilities joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted) for which the Indemnified Parties may become subject, under the 1933 12 13 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect to thereof) (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in information furnished by Insurance Company for use in the registration statement or Prospectus or sales literature or advertisements of the respective Participating Fund or with respect to the Separate Account or Contracts, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) arise out of or as a result of conduct, statements or representations (other than statements or representations contained in the Prospectus and sales literature or advertisements of the respective Participating Fund) of Insurance Company or its agents, with respect to the sale and distribution of Contracts for which the respective Participating Fund's shares are an underlying investment; (iii) arise out of the wrongful conduct of Insurance Company or persons under its control with respect to the sale or distribution of the Contracts or the respective Participating Fund's shares; (iv) arise out of Insurance Company's incorrect calculation and/or untimely reporting of net purchase or redemption orders; or (v) arise out of any breach by Insurance Company of a material term of this Agreement or as a result of any failure by Insurance Company to provide the services and furnish the materials or to make any payments provided for in this Agreement. Insurance Company will reimburse any Indemnified Party in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that with respect to clauses (i) and (ii) above Insurance Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission or alleged omission made in such registration statement, prospectus, sales literature, or advertisement in conformity with written information furnished to Insurance Company by the respective Participating Fund specifically for use therein. This indemnity agreement will be in addition to any liability which Insurance Company may otherwise have. 9.2 Each Participating Fund severally agrees to indemnify and hold harmless Insurance Company, their respective affiliates and each of its directors, officers, employees, agents and each person, if any, who controls Insurance Company within the meaning of the 1933 Act against any losses, claims, damages or liabilities to which Insurance Company, their respective affiliates or any such director, officer, employee, agent or controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) (1) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or Prospectus or sales literature or advertisements of the respective Participating Fund; (2) arise out of or are based upon the omission to state in the registration statement or Prospectus or sales literature or advertisements of the respective Participating Fund any material fact required to be stated therein or necessary to make the statements therein not misleading; or (3) arise out of or are based upon any untrue statement or alleged untrue statement 13 14 of any material fact contained in the registration statement or Prospectus or sales literature or advertisements with respect to the Separate Account or the Contracts and such statements were based on information provided to Insurance Company by the respective Participating Fund; and the respective Participating Fund will reimburse any legal or other expenses reasonably incurred by Insurance Company or any such director, officer, employee, agent or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the respective Participating Fund will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission or alleged omission made in such registration statement, Prospectus, sales literature or advertisements in conformity with written information furnished to the respective Participating Fund by Insurance Company specifically for use therein. This indemnity agreement will be in addition to any liability which the respective Participating Fund may otherwise have. 9.3 Each Participating Fund severally shall indemnify and hold Insurance Company harmless against any and all liability, loss, damages, costs or expenses which Insurance Company may incur, suffer or be required to pay due to the respective Participating Fund's (1) incorrect calculation of the daily net asset value, dividend rate or capital gain distribution rate; (2) incorrect reporting of the daily net asset value, dividend rate or capital gain distribution rate; and (3) untimely reporting of the net asset value, dividend rate or capital gain distribution rate; provided that the respective Participating Fund shall have no obligation to indemnify and hold harmless Insurance Company if the incorrect calculation or incorrect or untimely reporting was the result of incorrect information furnished by Insurance Company or information furnished untimely by Insurance Company or otherwise as a result of or relating to a breach of this Agreement by Insurance Company. 9.4 Promptly after receipt by an indemnified party under this Article of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Article, notify the indemnifying party of the commencement thereof. The omission to so notify the indemnifying party will not relieve the indemnifying party from any liability under this Article IX, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. In case any such action is brought against any indemnified party, and it notified the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, assume the defense thereof, with counsel satisfactory to such indemnified party, and to the extent that the indemnifying party has given notice to such effect to the indemnified party and is performing its obligations under this Article, the indemnifying party shall not be liable for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation. Notwithstanding the foregoing, in any such proceeding, any 14 15 indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article IX. The provisions of this Article IX shall survive termination of this Agreement. 9.5 Insurance Company shall indemnify and hold each respective Participating Fund, Dreyfus and sub-investment adviser of the Participating Fund harmless against any tax liability incurred by the Participating Fund under Section 851 of the Code arising from purchases or redemptions directly by the Insurance Company's General Accounts. ARTICLE X COMMENCEMENT AND TERMINATION 10.1 This Agreement shall be effective as of the date hereof and shall continue in force until terminated in accordance with the provisions herein. 10.2 This Agreement shall terminate without penalty: a. As to any Participating Fund, at the option of Insurance Company or the Participating Fund at any time from the date hereof upon 180 days' notice, unless a shorter time is agreed to by the respective Participating Fund and Insurance Company; b. As to any Participating Fund, at the option of Insurance Company, if shares of that Participating Fund are not reasonably available to meet the requirements of the Contracts as determined by Insurance Company. Prompt notice of election to terminate shall be furnished by Insurance Company, said termination to be effective ten days after receipt of notice unless the Participating Fund makes available a sufficient number of shares to meet the requirements of the Contracts within said ten-day period; c. As to a Participating Fund, at the option of Insurance Company, upon the institution of formal proceedings against that Participating Fund by the Commission, National Association of Securities Dealers or any other regulatory body, the expected or anticipated ruling, judgment or outcome 15 16 of which would, in Insurance Company's reasonable judgment, materially impair that Participating Fund's ability to meet and perform the Participating Fund's obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by Insurance Company with said termination to be effective upon receipt of notice; d. As to a Participating Fund, at the option of each Participating Fund, upon the institution of formal proceedings against Insurance Company by the Commission, National Association of Securities Dealers or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in the Participating Fund's reasonable judgment, materially impair Insurance Company's ability to meet and perform Insurance Company's obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by such Participating Fund with said termination to be effective upon receipt of notice; e. As to a Participating Fund, at the option of that Participating Fund, if the Participating Fund shall determine, in its sole judgment reasonably exercised in good faith, that Insurance Company has suffered a material adverse change in its business or financial condition or is the subject of material adverse publicity and such material adverse change or material adverse publicity is likely to have a material adverse impact upon the business and operation of that Participating Fund or Dreyfus, such Participating Fund shall notify Insurance Company in writing of such determination and its intent to terminate this Agreement, and after considering the actions taken by Insurance Company and any other changes in circumstances since the giving of such notice, such determination of the Participating Fund shall continue to apply on the sixtieth (60th) day following the giving of such notice, which sixtieth day shall be the effective date of termination; f. As to a Participating Fund, at the option of Insurance Company, if Insurance Company shall determine, in its sole judgment reasonably exercised in good faith that the Participating Fund has suffered a material adverse change in its business or financial condition or is the subject of material adverse publicity and such material adverse change or material adverse publicity is likely to have a material adverse impact upon the business and operations of Insurance Company or its Separate Account, the Insurance Company shall notify the Participating Fund in writing of such determination and its intent to terminate this Agreement, and after considering the actions taken by the Participating Fund and any other changes in circumstances since the giving of such notice, such determination of Insurance Company shall continue to apply to the sixtieth (60th) day following the giving of such notice, which sixtieth day shall be the effective date of termination; 16 17 g. Upon termination of the Investment Advisory Agreement between that Participating Fund and Dreyfus or its successors unless Insurance Company specifically approves the selection of a new Participating Fund investment adviser. Such Participating Fund shall promptly furnish notice of such termination to Insurance Company; h. As to a Participating Fund, in the event that Participating Fund's shares are not registered, issued or sold in accordance with applicable federal law, or such law precludes the use of such shares as the underlying investment medium of Contracts issued or to be issued by Insurance Company. Termination shall be effective immediately as to that Participating Fund only upon such occurrence without notice; i. At the option of a Participating Fund upon a determination by its Board in good faith that it is no longer advisable and in the best interests of shareholders of that Participating Fund to continue to operate pursuant to this Agreement. Termination pursuant to this Subsection (i) shall be effective upon notice by such Participating Fund to Insurance Company of such termination; j. At the option of a Participating Fund if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if such Participating Fund reasonably believes that the Contracts may fail to so qualify; k. At the option of any party to this Agreement, upon another party's breach of any material provision of this Agreement; l. At the option of a Participating Fund, if the Contracts are not registered, issued or sold in accordance with applicable federal and/or state law; or m. Upon assignment of this Agreement, unless made with the written consent of every other non-assigning party. Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or 10.2k herein shall not affect the operation of Article V of this Agreement. Any termination of this Agreement shall not affect the operation of Article IX of this Agreement. 10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2 hereof, each Participating Fund and Dreyfus may, at the option of the Participating Fund, continue to make available additional shares of that Participating Fund for as long as the Participating Fund desires pursuant to the 17 18 terms and conditions of this Agreement as provided below, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if that Participating Fund and Dreyfus so elect to make additional Participating Fund shares available, the owners of the Existing Contracts or Insurance Company, whichever shall have legal authority to do so, shall be permitted to reallocate investments in that Participating Fund, redeem investments in that Participating Fund and/or invest in that Participating Fund upon the making of additional purchase payments under the Existing Contracts. In the event of a termination of this Agreement pursuant to Section 10.2 hereof, such Participating Fund and Dreyfus, as promptly as is practicable under the circumstances, shall notify Insurance Company whether Dreyfus and that Participating Fund will continue to make that Participating Fund's shares available after such termination. If such Participating Fund shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect and thereafter either of that Participating Fund or Insurance Company may terminate the Agreement as to that Participating Fund, as so continued pursuant to this Section 10.3, upon prior written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Participating Fund, need not be for more than six months. 10.4 Termination of this Agreement as to any one Participating Fund shall not be deemed a termination as to any other Participating Fund unless Insurance Company or such other Participating Fund, as the case may be, terminates this Agreement as to such other Participating Fund in accordance with this Article X. ARTICLE XI AMENDMENTS 11.1 Any other changes in the terms of this Agreement, except for the addition or deletion of any Participating Fund as specified in Exhibit A, shall be made by agreement in writing between Insurance Company and each respective Participating Fund. 18 19 ARTICLE XII NOTICE 12.1 Each notice required by this Agreement shall be given by certified mail, return receipt requested, to the appropriate parties at the following addresses: Insurance Company: Farmers New World Life Insurance Company 3007 -- 77th Avenue, S.E. Mercer Island, Washington 98040 Attention: C. Paul Patsis, President with a copy to: Farmers New World Life Insurance Company 4680 Wilshire Boulevard Los Angeles, California 90010 Attention: M. Douglas Close, Vice President and General Counsel Participating Funds: Dreyfus Variable Investment Fund and Dreyfus Socially Responsible Growth Fund, Inc. c/o Dreyfus Corporation 200 Park Avenue New York, New York 10166 Attn: General Counsel with copies to: Stroock & Stroock & Lavan 180 Maiden Lane New York, New York 10038-4982 Attn: Lewis G. Cole, Esq. Stuart H. Coleman, Esq. 19 20 Notice shall be deemed to be given on the date of receipt by the addresses as evidenced by the return receipt. ARTICLE XIII MISCELLANEOUS 13.1 This Agreement has been executed on behalf of each Fund by the undersigned officer of the Fund in his capacity as an officer of the Fund. The obligations of this Agreement shall only be binding upon the assets and property of the Fund and shall not be binding upon any director, trustee, officer or shareholder of the Fund individually. It is agreed that the obligations of the Funds are several and not joint, that no Fund shall be liable for any amount owing by another Fund and that the Funds have executed one instrument for convenience only. ARTICLE XIV LAW 14.1 This Agreement shall be construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflict of laws. ARTICLE XV FOREIGN TAX CREDITS 15.1 Each Participating Fund agrees to consult in advance with Insurance Company concerning any decision to elect or not elect to pass through the benefit of any foreign tax credits to the Participating Fund's shareholders pursuant to Section 853 of the Code. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly executed and attested as of the date first above written. INSURANCE COMPANY By: -------------------------------- Name: C. Paul Patsis Its President Attest: ----------------------- 20 21 DREYFUS VARIABLE INVESTMENT FUND By: -------------------------------- Name: Its: Attest: ----------------------- THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. By: -------------------------------- Name: Its: Attest: ----------------------- 21 22 EXHIBIT A LIST OF PARTICIPATING PORTFOLIOS (INCLUDE PARTICULAR CLASS OF SHARES, IF APPLICABLE)
PORTFOLIOS CLASS OF SHARES The Dreyfus Socially Responsible Service Growth Fund, Inc. Dreyfus Variable Investment Fund Small Cap Portfolio Service Quality Bond Portfolio Service
22 EX-99.8(O) 11 a71651ex99-8o.txt EXHIBIT 8(O) 1 EXHIBIT 8(o) FORM OF PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into this ___day of April, 2001 by and between GOLDMAN SACHS VARIABLE INSURANCE TRUST, an unincorporated business trust formed under the laws of Delaware (the "Trust"), GOLDMAN, SACHS & CO., a New York limited partnership (the "Distributor"), and FARMERS NEW WORLD LIFE INSURANCE COMPANY, a Washington life insurance company (the "Company"), on its own behalf and on behalf of each separate account of the Company identified herein. WHEREAS, the Trust is a series-type mutual fund offering shares of beneficial interest (the "Trust shares") consisting of one or more separate series ("Series") of shares, each such Series representing an interest in a particular investment portfolio of securities and other assets (a "Fund"), and which Series may be subdivided into various classes ("Classes") with each such Class supporting a distinct charge and expense arrangement; and WHEREAS, the Trust was established for the purpose of serving as an investment vehicle for insurance company separate accounts supporting variable annuity contracts and variable life insurance policies to be offered by insurance companies and may also be utilized by qualified retirement plans; and WHEREAS, the Distributor has the exclusive right to distribute Trust shares to qualifying investors; and WHEREAS, the Company desires that the Trust serve as an investment vehicle for a certain separate account(s) of the Company and the Distributor desires to sell shares of certain Series and/or Class(es) to such separate account(s); NOW, THEREFORE, in consideration of their mutual promises, the Trust, the Distributor and the Company agree as follows: ARTICLE I ADDITIONAL DEFINITIONS 1.1. "Account" -- the separate account of the Company described more specifically in Schedule 1 to this Agreement. If more than one separate account is described on Schedule 1, the term shall refer to each separate account so described. 1.2. "Business Day" -- each day that the Trust is open for business as provided in the Trust's Prospectus. 1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any successor thereto. 2 1.4. "Contracts" -- the class or classes of variable annuity contracts and/or variable life insurance policies issued by the Company and described more specifically on Schedule 2 to this Agreement. 1.5. "Contract Owners" -- the owners of the Contracts, as distinguished from all Product Owners. 1.6. "Participating Account" -- a separate account investing all or a portion of its assets in the Trust, including the Account. 1.7. "Participating Insurance Company" -- any insurance company investing in the Trust on its behalf or on behalf of a Participating Account, including the Company. 1.8. "Participating Plan" -- any qualified retirement plan investing in the Trust. 1.9. "Participating Investor" -- any Participating Account, Participating Insurance Company or Participating Plan, including the Account and the Company. 1.10. "Products" -- variable annuity contracts and variable life insurance policies supported by Participating Accounts, including the Contracts. 1.11. "Product Owners" -- owners of Products, including Contract Owners. 1.12. "Trust Board" -- the board of trustees of the Trust. 1.13. "Registration Statement" -- with respect to the Trust shares or a class of Contracts, the registration statement filed with the SEC to register such securities under the 1933 Act, or the most recently filed amendment thereto, in either case in the form in which it was declared or became effective. The Contracts' Registration Statement for each class of Contracts is described more specifically on Schedule 2 to this Agreement. The Trust's Registration Statement is filed on Form N-1A (File No. 333-35883). 1.14. "1940 Act Registration Statement" -- with respect to the Trust or the Account, the registration statement filed with the SEC to register such person as an investment company under the 1940 Act, or the most recently filed amendment thereto. The Account's 1940 Act Registration Statement is described more specifically on Schedule 2 to this Agreement. The Trust's 1940 Act Registration Statement is filed on Form N-1A (File No. 811-08361). 1.15. "Prospectus" -- with respect to shares of a Series (or Class) of the Trust or a class of Contracts, each version of the definitive prospectus or supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act. With respect to any provision of this Agreement requiring a party to take action in accordance with a Prospectus, such reference thereto shall be deemed to be to the version for the applicable Series, Class or Contracts last so filed prior to the taking of such action. For purposes of Article IX, the term "Prospectus" shall include any statement of additional information incorporated therein. 2 3 1.16. "Statement of Additional Information" -- with respect to the shares of the Trust or a class of Contracts, each version of the definitive statement of additional information or supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act. With respect to any provision of this Agreement requiring a party to take action in accordance with a Statement of Additional Information, such reference thereto shall be deemed to be the last version so filed prior to the taking of such action. 1.17. "SEC" -- the Securities and Exchange Commission. 1.18. "NASD" -- The National Association of Securities Dealers, Inc. 1.19. "1933 Act" -- the Securities Act of 1933, as amended. 1.20. "1940 Act" -- the Investment Company Act of 1940, as amended. ARTICLE II SALE OF TRUST SHARES 2.1. AVAILABILITY OF SHARES (a) The Trust has granted to the Distributor exclusive authority to distribute the Trust shares and to select which Series or Classes of Trust shares shall be made available to Participating Investors. Pursuant to such authority, and subject to Article X hereof, the Distributor shall make available to the Company for purchase on behalf of the Account, shares of the Series and Classes listed on Schedule 3 to this Agreement, such purchases to be effected at net asset value in accordance with Section 2.3 of this Agreement. Such Series and Classes shall be made available to the Company in accordance with the terms and provisions of this Agreement until this Agreement is terminated pursuant to Article X or the Distributor suspends or terminates the offering of shares of such Series or Classes in the circumstances described in Article X. (b) Notwithstanding clause (a) of this Section 2.1, Series or Classes of Trust shares in existence now or that may be established in the future will be made available to the Company only as the Distributor may so provide, subject to the Distributor's rights set forth in Article X to suspend or terminate the offering of shares of any Series or Class or to terminate this Agreement. (c) The parties acknowledge and agree that: (i) the Trust may revoke the Distributor's authority pursuant to the terms and conditions of its distribution agreement with the Distributor; and (ii) the Trust reserves the right in its sole discretion to refuse to accept a request for the purchase of Trust shares. 2.2. REDEMPTIONS. The Trust shall redeem, at the Company's request, any full or fractional Trust shares held by the Company on behalf of the Account, such redemptions to be 3 4 effected at net asset value in accordance with Section 2.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not redeem Trust shares attributable to Contract Owners except in the circumstances permitted in Article X of this Agreement, and (ii) the Trust may delay redemption of Trust shares of any Series or Class to the extent permitted by the 1940 Act, any rules, regulations or orders thereunder, or the Prospectus for such Series or Class. 2.3. PURCHASE AND REDEMPTION PROCEDURES (a) The Trust hereby appoints the Company as an agent of the Trust for the limited purpose of receiving purchase and redemption requests on behalf of the Account (but not with respect to any Trust shares that may be held in the general account of the Company) for shares of those Series or Classes made available hereunder, based on allocations of amounts to the Account or subaccounts thereof under the Contracts, other transactions relating to the Contracts or the Account and customary processing of the Contracts. Receipt of any such requests (or effectuation of such transaction or processing) on any Business Day by the Company as such limited agent of the Trust prior to the Trust's close of business as defined from time to time in the applicable Prospectus for such Series or Class (which as of the date of execution of this Agreement is defined as the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New York Time)) shall constitute receipt by the Trust on that same Business Day, provided that the Company uses its best efforts to provide actual and sufficient notice of such request to the Trust by 8:30 a.m. New York Time on the next following Business Day and the Trust receives such notice no later than 9:00 a.m. New York time on such Business Day. Such notice may be communicated by telephone to the office or person designated for such notice by the Trust, and shall be confirmed by facsimile. (b) The Company shall pay for shares of each Series or Class on the same day that it provides actual notice to the Trust of a purchase request for such shares. Payment for Series or Class shares shall be made in Federal funds transmitted to the Trust by wire to be received by the Trust by 3:30 New York Time on the day the Trust receives actual notice of the purchase request for Series or Class shares (unless the Trust determines and so advises the Company that sufficient proceeds are available from redemption of shares of other Series or Classes effected pursuant to redemption requests tendered by the Company on behalf of the Account). In no event may proceeds from the redemption of shares requested pursuant to an order received by the Company after the Trust's close of business on any Business Day be applied to the payment for shares for which a purchase order was received prior to the Trust's close of business on such day. If the issuance of shares is canceled because Federal funds are not timely received, the Company shall indemnify the respective Fund and Distributor with respect to all costs, expenses and losses relating thereto. Upon the Trust's receipt of Federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Trust. If Federal funds are not received on time, such funds will be invested, and Series or Class shares purchased thereby will be issued, as soon as practicable after actual receipt of such funds but in any event not on the same day that the purchase order was received. 4 5 (c) Payment for Series or Class shares redeemed by the Account or the Company shall be made in Federal funds transmitted by wire to the Company or any other person properly designated in writing by the Company. The Trust shall use its best efforts to transmit such funds by 6:00 p.m. New York Time on the same Business Day after Trust receives actual notice of the redemption order for Series or Class shares (unless redemption proceeds are to be applied to the purchase of Trust shares of other Series or Classes in accordance with Section 2.3(b) of this Agreement), except that the Trust reserves the right to redeem Series or Class shares in assets other than cash and to delay payment of redemption proceeds to the extent permitted by the 1940 Act, any rules or regulations or orders thereunder, or the applicable Prospectus; provided, however, that if the Trust fails to transmit such redemption proceeds by 6:00 p.m. New York Time on the same Business Day or the end of such Business Day and such failure is due to circumstances within the Trust's or the Distributor's control, the Distributor will pay interest to the Company equal to the amount of such proceeds multiplied by the current Federal funds rate on each day that delivery of the proceeds is overdue. The Trust shall not bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds by the Company; the Company alone shall be responsible for such action. (d) Any purchase or redemption request for Series or Class shares held or to be held in the Company's general account shall be effected at the net asset value per share next determined after the Trust's actual receipt of such request, provided that, in the case of a purchase request, payment for Trust shares so requested is received by the Trust in Federal funds prior to close of business for determination of such value, as defined from time to time in the Prospectus for such Series or Class. (e) Prior to the first purchase of any Trust shares hereunder, the Company and the Trust shall provide each other with all information necessary to effect wire transmissions of Federal funds to the other party and all other designated persons pursuant to such protocols and security procedures as the parties may agree upon. Should such information change thereafter, the Trust and the Company, as applicable, shall notify the other in writing of such changes, observing the same protocols and security procedures, at least three Business Days in advance of when such change is to take effect. The Company and the Trust shall observe customary procedures to protect the confidentiality and security of such information. (f) The procedures set forth herein are subject to any additional terms set forth in the applicable Prospectus for the Series or Class or by the requirements of applicable law. 2.4. NET ASSET VALUE. The Trust shall make the net asset value per share for each Series or Class to the Company on a daily basis as soon as reasonably practicable after the net asset value per share for such Series or Class is calculated and shall use its best efforts to make such net asset value per share available by 7:00 p.m. New York Time each Business Day. The 5 6 Trust or the Distributor shall provide to the Company a list of persons to contact to ascertain the time at which the net asset value per share will be available. The Trust shall calculate such net asset value in accordance with the Prospectus for such Series or Class. 2.5. DIVIDENDS AND DISTRIBUTIONS. The Trust shall furnish notice to the Company as soon as reasonably practicable of any income dividends or capital gain distributions payable on any Series or Class shares. The Company, on its behalf and on behalf of the Account, hereby elects to receive all such dividends and distributions as are payable on any Series or Class shares in the form of additional shares of that Series or Class. The Company reserves the right, on its behalf and on behalf of the Account, to revoke this election and to receive all such dividends and capital gain distributions in cash; to be effective, such revocation must be made in writing and received by the Trust at least three (3) Business Days prior to a dividend or distribution date. The Trust shall notify the Company promptly of the number of Series or Class shares so issued as payment of such dividends and distributions. 2.6. BOOK ENTRY. Issuance and transfer of Trust shares shall be by book entry only. Stock certificates will not be issued to the Company or the Account. Purchase and redemption orders for Trust shares shall be recorded in an appropriate ledger for the Account or the appropriate subaccount of the Account. The Trust shall provide to the Company for each Business Day involving a trade a confirmation listing the closing net asset value for the Business Day and a transaction history report. 2.7. PRICING ERRORS. Any material errors in the calculation of net asset value, dividends or capital gain information shall be reported immediately upon discovery to the Company. An error shall be deemed "material" based on our interpretation of the SEC's position and policy with regard to materiality, as it may be modified from time to time. Neither the Trust, any Fund, the Distributor, nor any of their affiliates shall be liable for any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by or on behalf of the Company or any other Participating Company to the Trust or the Distributor; otherwise if the Trust provides the Company with a materially incorrect share net asset value, the Company on behalf of the Account(s) described in Schedule 1, shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect correct net asset value. 2.8. LIMITS ON PURCHASERS. The Distributor and the Trust shall sell Trust shares only to insurance companies and their separate accounts and to persons or plans ("Qualified Persons") that qualify to purchase shares of the Trust under Section 817(h) of the Code and the regulations thereunder without impairing the ability of the Account to consider the portfolio investments of the Trust as constituting investments of the Account for the purpose of satisfying the diversification requirements of Section 817(h). The Distributor and the Trust shall not sell Trust shares to any insurance company or separate account unless an agreement complying with Article VIII of this Agreement is in effect to govern such sales. The Company hereby represents and warrants that it and the Account are Qualified Persons. 6 7 ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1. COMPANY. The Company represents and warrants that: (i) the Company is an insurance company duly organized and in good standing under Washington insurance law; (ii) the Account is a validly existing separate account, duly established and maintained in accordance with applicable law; (iii) the Account's 1940 Act Registration Statement has been filed with the SEC in accordance with the provisions of the 1940 Act and the Account is duly registered as a unit investment trust thereunder; (iv) the Contracts' Registration Statement has been declared effective by the SEC; (v) the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws; (vi) the Contracts have been filed, qualified and/or approved for sale, as applicable, under the insurance laws and regulations of the states in which the Contracts will be offered; (vii) the Account will maintain its registration under the 1940 Act and will comply in all material respects with the 1940 Act; (viii) the Contracts currently are, and at the time of issuance and for so long as they are outstanding will be, treated as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code; and (ix) the Company's entering into and performing its obligations under this Agreement does not and will not violate its charter documents or by-laws, rules or regulations, or any agreement to which it is a party. The Company will notify the Trust promptly if for any reason it is unable to perform its obligations under this Agreement. 3.2. TRUST. The Trust represents and warrants that: (i) the Trust is an unincorporated business trust duly formed and validly existing under the Delaware law; (ii) the Trust's 1940 Act Registration Statement has been filed with the SEC in accordance with the provisions of the 1940 Act and the Trust is duly registered as an open-end management investment company thereunder; (iii) the Trust's Registration Statement has been declared effective by the SEC; (iv) the Trust shares will be issued in compliance in all material respects with all applicable federal laws; (v) the Trust will remain registered under and will comply in all material respects with the 1940 Act during the term of this Agreement; (vi) each Fund of the Trust qualifies or will qualify as a "regulated investment company" under Subchapter M of the Code and complies or will comply with the diversification standards prescribed in Section 817(h) of the Code and the regulations thereunder; and (vii) the investment policies of each Fund are in material compliance with any investment restrictions set forth on Schedule 4 to this Agreement. The Trust, however, makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) otherwise complies with the insurance laws or regulations of any state. 3.3. DISTRIBUTOR. The Distributor represents and warrants that: (i) the Distributor is a limited partnership duly organized and in good standing under New York law; (ii) the Distributor is registered as a broker-dealer under federal and applicable state securities laws and is a member of the NASD; and (iii) the Distributor is registered as an investment adviser under federal securities laws. All information relating to agents, customers, shareholders, prospects or leads of the Company acquired by distributors shall be and remain the exclusive property of the Company. 7 8 The Distributor acknowledges that it and its employees may, in the course of performing their responsibilities under this Agreement be exposed to or acquire information which is proprietary to or confidential to the Company or its affiliates or their clients or to third parties to whom the Company owes a duty of confidentiality. The Company's confidential and proprietary information shall include, but not be limited to: (i) the Company's business methods, policies, products, personnel, operations, systems, financial, records, procedures, processes, practices, and strategies; (ii) all compilation of data, information, or other documents provided to the distributor; (iii) all information regarding the Company's agents and customers and the nature of Company's relationship with its agents and customers; (iv) confidential, proprietary or trade secret information submitted by Company's suppliers, consultants or co-venturers or other agents to the Company for study, evaluation or use; and (v) any other information concerning the Company not generally known to the public. The Distributor agrees to hold such information in strict confidence and not to copy, reproduce, sell, assign, license, market, transfer or otherwise dispose of, give or disclose such information to third parties or to use such information for any purposes whatsoever other than the provision of services to the Company as contemplated by this Agreement and to advise each of its employees who may be exposed to such proprietary and confidential information of their obligations to keep such information confidential. The Distributor shall not utilize, or permit to be utilized, its knowledge of the Company or its knowledge of the Company's agents or clients, which is derived as a result of any relationship created through this Agreement, except to the extent necessary to fulfill the purposes of this Agreement or except as expressly permitted by the prior written consent of the Company. Confidential information shall not be deemed to include information which is (1) in or becomes part of the public domain other than by disclosure by the Distributor in violation of this Agreement; (2) demonstrably known to the Distributor previously; (3) independently developed by the Distributor outside of this Agreement; or (4) rightfully obtained by the Distributor from third parties. It is understood and agreed that in the event of a breach of this section the Company shall be entitled to injunctive relief to restrain any such breach, threatened or actual. In the event the Company or the Distributor is made aware of any actual or potential violation of this section each shall notify the other immediately and will provide any assistance reasonably requested by the other in investigating or remedying any actual or potential violations of this section. The parties acknowledge that in the event of a breach of this section, the aggrieved party will suffer irreparable harm for which no adequate remedy at law exists and shall be entitled to injunctive relief to restrain any such breach, threatened or actual. 3.4. LEGAL AUTHORITY. Each party represents and warrants that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate, partnership or trust action, as applicable, by such party, and, when so executed and delivered, this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. 3.5. BONDING REQUIREMENT. Each party represents and warrants that all of its directors, officers, partners and employees dealing with the money and/or securities of the Trust are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for 8 9 the benefit of the Trust in an amount not less than the amount required by the applicable rules of the NASD and the federal securities laws. The aforesaid bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. All parties shall make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, shall provide evidence thereof promptly to any other party upon written request therefore, and shall notify the other parties promptly in the event that such coverage no longer applies. ARTICLE IV REGULATORY REQUIREMENTS 4.1. TRUST FILINGS. The Trust shall amend the Trust's Registration Statement and the Trust's 1940 Act Registration Statement from time to time as required in order to effect the continuous offering of Trust shares in compliance with applicable law and to maintain the Trust's registration under the 1940 Act for so long as Trust shares are sold. 4.2. CONTRACTS FILINGS. The Company shall amend the Contracts' Registration Statement and the Account's 1940 Act Registration Statement from time to time as required in order to effect the continuous offering of the Contracts in compliance with applicable law or as may otherwise be required by applicable law, but in any event shall maintain a current effective Contracts' Registration Statement and the Account's registration under the 1940 Act for so long as the Contracts are outstanding unless the Company has supplied the Trust with an SEC no-action letter or opinion of counsel satisfactory to the Trust's counsel to the effect that maintaining such Registration Statement(s) on a current basis is no longer required. The Company shall be responsible for filing all such Contract forms, applications, marketing materials and other documents relating to the Contracts and/or the Account with state insurance commissions, as required or customary, and shall use its best efforts: (i) to obtain any and all approvals thereof, under applicable state insurance law, of each state or other jurisdiction in which Contracts are or may be offered for sale; and (ii) to keep such approvals in effect for so long as the Contracts are outstanding. 4.3. VOTING OF TRUST SHARES. With respect to any matter put to vote by the holders of Trust shares ("Voting Shares"), the Company will provide "pass-through" voting privileges to owners of Contracts registered with the SEC as long as the 1940 Act requires such privileges in such cases. In cases in which "pass-through" privileges apply, the Company will (i) solicit voting instructions from Contract Owners of SEC-registered Contracts; (ii) vote Voting Shares attributable to Contract Owners in accordance with instructions or proxies timely received from such Contract Owners; and (iii) vote Voting Shares held by it that are not attributable to reserves for SEC-registered Contracts or for which it has not received timely voting instructions in the same proportion as instructions received in a timely fashion from Owners of SEC-registered Contracts. The Company shall be responsible for ensuring that it calculates "pass-through" votes for the Account in a manner consistent with the provisions set forth above and with other Participating Insurance Companies. Neither the Company nor any of its affiliates will in any way recommend action in connection with, or oppose or interfere with, the solicitation of proxies for the Trust shares held for such Contract Owners, except with respect to matters as to which the 9 10 Company has the right under Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote Voting Shares without regard to voting instructions from Contract Owners. 4.4. STATE INSURANCE RESTRICTIONS. The Company acknowledges and agrees that it is the responsibility of the Company and other Participating Insurance Companies to determine investment restrictions and any other restrictions, limitations or requirements under state insurance law applicable to any Fund or the Trust or the Distributor, and that neither the Trust nor the Distributor shall bear any responsibility to the Company, other Participating Insurance Companies or any Product Owners for any such determination or the correctness of such determination. Schedule 4 sets forth the investment restrictions that the Company and/or other Participating Insurance Companies have determined are applicable to any Fund and with which the Trust has agreed to comply as of the date of this Agreement. The Company shall inform the Trust of any investment restrictions imposed by state insurance law that the Company determines may become applicable to the Trust or a Fund from time to time as a result of the Account's investment therein, other than those set forth on Schedule 4 to this Agreement. Upon receipt of any such information from the Company or any other Participating Insurance Company, the Trust shall determine whether it is in the best interests of shareholders to comply with any such restrictions. If the Trust determines that it is not in the best interests of shareholders (it being understood that "shareholders" for this purpose shall mean Product Owners) to comply with a restriction determined to be applicable by the Company, the Trust shall so inform the Company, and the Trust and the Company shall discuss alternative accommodations in the circumstances. If the Trust determines that it is in the best interests of shareholders to comply with such restrictions, the Trust and the Company shall amend Schedule 4 to this Agreement to reflect such restrictions, subject to obtaining any required shareholder approval thereof. 4.5. COMPLIANCE. Under no circumstances will the Trust, the Distributor or any of their affiliates (excluding Participating Investors) be held responsible or liable in any respect for any statements or representations made by them or their legal advisers to the Company or any Contract Owner concerning the applicability of any federal or state laws, regulations or other authorities with regard to the activities of the Company, the Accounts and the Contracts contemplated by this Agreement. 4.6. DRAFTS OF FILINGS. The Trust and the Company shall provide to each other copies of draft versions of any Registration Statements, Prospectuses, Statements of Additional Information, periodic and other shareholder or Contract Owner reports, proxy statements, solicitations for voting instructions, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, prepared by or on behalf of either of them and that mentions the other party by name. Such drafts shall be provided to the other party sufficiently in advance of filing such materials with regulatory authorities in order to allow such other party a reasonable opportunity to review the materials; provided that each party shall only comment on that portion of the draft that relates directly or indirectly to that party or the conduct of its business. 4.7. COPIES OF FILINGS. The Trust and the Company shall provide to each other at least one complete copy of all Registration Statements, Prospectuses, Statements of Additional 10 11 Information, periodic and other shareholder or Contract Owner reports, proxy statements, solicitations of voting instructions, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, that relate to the Trust, the Contracts or the Account, as the case may be, promptly after the filing by or on behalf of each such party of such document with the SEC or other regulatory authorities (it being understood that this provision is not intended to require the Trust to provide to the Company copies of any such documents prepared, filed or used by Participating Investors other than the Company and the Account). 4.8. REGULATORY RESPONSES. Each party shall promptly provide to all other parties copies of responses to no-action requests, notices, orders and other rulings received by such party with respect to any filing covered by Section 4.7 of this Agreement. 4.9. COMPLAINTS AND PROCEEDINGS (a) The Trust and/or the Distributor shall immediately notify the Company of: (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order (but not including an order of a regulatory body exempting or approving a proposed transaction or arrangement) with respect to the Trust's Registration Statement or the Prospectus of any Series or Class; (ii) any request by the SEC for any amendment to the Trust's Registration Statement or the Prospectus of any Series or Class; (iii) the initiation of any proceedings for that purpose or for any other purposes relating to the registration or offering of the Trust shares; or (iv) any other action or circumstances that may prevent the lawful offer or sale of Trust shares or any Class or Series in any state or jurisdiction, including, without limitation, any circumstance in which (A) such shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law or (B) such law precludes the use of such shares as an underlying investment medium for the Contracts. The Trust will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. (b) The Company shall immediately notify the Trust and the Distributor of: (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order (but not including an order of a regulatory body exempting or approving a proposed transaction or arrangement) with respect to the Contracts' Registration Statement or the Contracts' Prospectus; (ii) any request by the SEC for any amendment to the Contracts' Registration Statement or Prospectus; (iii) the initiation of any proceedings for that purpose or for any other purposes relating to the registration or offering of the Contracts; or (iv) any other action or circumstances that may prevent the lawful offer or sale of the Contracts or any class of Contracts in any state or jurisdiction, including, without limitation, any circumstance in which such Contracts are not registered, qualified and approved, and, in all material respects, issued and sold in accordance with applicable state and federal laws. The Company will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or 11 12 similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. (c) Each party shall immediately notify the other parties when it receives notice, or otherwise becomes aware of, the commencement of any litigation or proceeding against such party or a person affiliated therewith in connection with the issuance or sale of Trust shares or the Contracts. (d) The Company shall provide to the Trust and the Distributor any complaints it has received from Contract Owners pertaining to the Trust or a Fund, and the Trust and Distributor shall each provide to the Company any complaints it has received from Contract Owners relating to the Contracts. 4.10. COOPERATION. Each party hereto shall cooperate with the other parties and all appropriate government authorities (including without limitation the SEC, the NASD and state securities and insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry by any such authority relating to this Agreement or the transactions contemplated hereby. However, such access shall not extend to attorney-client privileged information. ARTICLE V SALE, ADMINISTRATION AND SERVICING OF THE CONTRACTS 5.1. SALE OF THE CONTRACTS. The Company shall be responsible for the sale and marketing of the Contracts. The Company shall make available Contracts, the Contracts' and Trust's Prospectuses, Contracts' and Trust's Statements of Additional Information, and all amendments or supplements to any of the foregoing to Contract Owners and prospective Contract Owners, all in material compliance accordance with federal and state laws. The Company shall, consistent with industry practice, use its best efforts to ensure that all persons offering the Contracts are duly licensed and registered under applicable insurance and securities laws. The Company shall ensure that procedures are in place that sales of the Contracts satisfy applicable suitability requirements under insurance and securities laws and regulations, including without limitation the rules of the NASD. The Company shall adopt and implement procedures reasonably designed to ensure that information concerning the Trust and the Distributor that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Contract Owners or offerees) is so used. 5.2. ADMINISTRATION AND SERVICING OF THE CONTRACTS. In connection with the offering of the Contracts, the Company shall be fully responsible as to the Trust and the Distributor for the underwriting, issuance, service and administration of the Contracts and for the administration of the Account, including, without limitation, the calculation of performance information for the Contracts, the timely payment of Contract Owner redemption requests and processing of Contract transactions, and the maintenance of a service center. The Company shall use its best efforts to perform such functions in all respects at a level commensurate with those standards prevailing in the variable insurance industry. Subject to Section 5.4, the Company shall provide 12 13 to Contract Owners all Trust reports, solicitations for voting instructions including any related Trust proxy solicitation materials, and updated Trust Prospectuses as required under the federal securities laws. 5.3. CUSTOMER COMPLAINTS. The Company shall promptly address all customer complaints and resolve such complaints consistent with high ethical standards and principles of ethical conduct. 5.4. TRUST PROSPECTUSES AND REPORTS. In order to enable the Company to fulfill its obligations under this Agreement and the federal securities laws, the Trust shall provide the Company with a copy, in camera-ready form or form otherwise suitable for printing or duplication of: (i) the Trust's Prospectus for the Series and Classes listed on Schedule 3 and any supplement thereto; (ii) each Statement of Additional Information and any supplement thereto; (iii) any Trust proxy soliciting material for such Series or Classes; and (iv) any Trust periodic shareholder reports or other communications with shareholders. The Trust and the Company may agree upon alternate arrangements, but in all cases, the Trust reserves the right to approve the printing of any such material. The Trust shall provide the Company at least 10 days advance written notice when any such material shall become available, provided, however, that in the case of a supplement, the Trust shall provide the Company notice reasonable in the circumstances, it being understood that circumstances surrounding such supplement may not allow for advance notice. The Company may not alter any material so provided by the Trust or the Distributor (including without limitation presenting or delivering such material in a different medium, e.g., electronic or Internet) without the prior written consent of the Distributor. 5.5. TRUST ADVERTISING MATERIAL. No piece of marketing, advertising or sales literature or other promotional material in which the Trust or the Distributor or the trade name and trademark Goldman Sachs (the "Mark") is named (including, without limitation, material for prospects, existing Contract Owners, brokers, rating or ranking agencies, or the press, whether in print, radio, television, video, Internet, or other electronic medium) shall be used by the Company or any person directly or indirectly authorized by the Company, including without limitation, underwriters, distributors, and sellers of the Contracts, except with the prior written consent of the Trust or the Distributor, as applicable, as to the form, content and medium of such material. Any such piece shall be furnished to the Trust for such consent prior to its use, which consent shall not be unreasonably withheld. The Trust or the Distributor shall respond to any request for written consent within five (5) Business Days, but failure to respond shall not relieve the Company of the obligation to obtain the prior written consent of the Trust or the Distributor. After receiving the Trust's or Distributor's consent to the use of any such material, no further changes may be made without obtaining the Trust's or Distributor's consent to such changes. The Trust or Distributor may at any time in its sole discretion revoke such written consent, and upon notification of such revocation, the Company shall no longer use the material subject to such revocation. Until further notice to the Company, the Trust has delegated its rights and responsibilities under this provision to the Distributor. 5.6. CONTRACTS ADVERTISING MATERIAL. No piece of marketing, advertising or sales literature or other promotional material in which the Company is named shall be used by the 13 14 Trust or the Distributor, except with the prior written consent of the Company, which consent shall not be unreasonably withheld. Any such piece shall be furnished to the Company for such consent prior to its use. The Company shall respond to any request for written consent within five (5) Business Days, but failure to respond shall not relieve the Company of the obligation to obtain the prior written consent of the Company. The Company may at any time in its sole discretion revoke any written consent, and upon notification of such revocation, neither the Trust nor the Distributor shall use the material subject to such revocation. The Company, upon prior written notice to the Trust, may delegate its rights and responsibilities under this provision to the principal underwriter for the Contracts. 5.7. TRADE NAMES. No party shall use any other party's trade names, logos, trademarks or service marks, whether registered or unregistered, without the prior written consent of such other party, or after written consent therefor has been revoked, provided that separate consent is not required under this Section 5.7 to the extent that consent to use a party's name, logo, trademark or service mark in connection with a particular piece of advertising or sales literature has previously been given by a party under Section 5.5 or 5.6 of this Agreement. The Company shall not use in advertising, publicity or otherwise the name of the Trust, Distributor, or any of their affiliates nor any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof of the Trust, Distributor, or their affiliates without the prior written consent of the Trust or the Distributor in each instance. The Company acknowledges that the Distributor owns all right, title and interest in and to the Mark and the registrations thereof. The Company shall use the Mark intact and shall not modify or alter the Mark. Upon termination of this Agreement, the Company or its successor (to the extent and as soon as it lawfully can) will cease the use of the Mark. The Trust and the Distributor shall not use in advertising, publicity, or otherwise the name of the Company, or any of its affiliates not any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof of the Company, or its affiliates without the prior written consent of the Company in each instance. 5.8. REPRESENTATIONS BY COMPANY. Except with the prior written consent of the Trust, the Company shall not give any information or make any representations or statements about the Trust or the Funds nor shall it authorize or allow any other person to do so except information or representations contained in the Trust's Registration Statement or the Trust's Prospectuses or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved in writing by the Trust or its designee in accordance with this Article V, or in published reports or statements of the Trust in the public domain. 5.9. REPRESENTATIONS BY TRUST. Except with the prior written consent of the Company, the Trust shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account or the Contracts other than the information or representations contained in the Contracts' Registration Statement or Contracts' Prospectus or in published reports of the Account which are in the public domain or in sales literature or other promotional material approved in writing by the Company in accordance with this Article V. 14 15 5.10. ADVERTISING. For purposes of this Article V, the phrase "sales literature or other promotional material" includes, but is not limited to, any material constituting sales literature or advertising under the NASD rules, the 1940 Act or the 1933 Act. ARTICLE VI COMPLIANCE WITH CODE 6.1. SECTION 817(h). Each Fund of the Trust shall comply with Section 817(h) of the Code and the regulations issued thereunder to the extent applicable to the Fund as an investment company underlying the Account, and the Trust shall (i) notify the Company immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future, and (ii) take all reasonable steps to adequately diversify a Fund to achieve compliance with the grace period afforded by Treasury Regulation 1.817-5. 6.2. SUBCHAPTER M. Each Fund of the Trust shall maintain the qualification of the Fund as a registered investment company (under Subchapter M or any successor or similar provision), and the Trust shall (i) notify the Company immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future, and (ii) take all reasonable steps to maintain qualification or to requalify the Funds as a registered investment company under Subchapter M. 6.3. CONTRACTS. The Company shall ensure the continued treatment of the Contracts as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code and shall notify the Trust and the Distributor immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. ARTICLE VII EXPENSES 7.1. EXPENSES. All expenses incident to each party's performance under this Agreement (including expenses expressly assumed by such party pursuant to this Agreement) shall be paid by such party to the extent permitted by law. 7.2. TRUST EXPENSES. Expenses incident to the Trust's performance of its duties and obligations under this Agreement include, but are not limited to, the costs of: (a) registration and qualification of the Trust shares under the federal securities laws; (b) preparation and filing with the SEC of the Trust's Prospectuses, Trust's Statement of Additional Information, Trust's Registration Statement, Trust proxy materials and shareholder reports, and preparation of a camera-ready copy of the foregoing; (c) preparation of all statements and notices required by any Federal or state securities law; 15 16 (d) all taxes on the issuance or transfer of Trust shares; (e) payment of all applicable fees relating to the Trust, including, without limitation, all fees due under Rule 24f-2 in connection with sales of Trust shares to qualified retirement plans, custodial, auditing, transfer agent and advisory fees, fees for insurance coverage and Trustees' fees; and (f) any expenses permitted to be paid or assumed by the Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. 7.3. COMPANY EXPENSES. Expenses incident to the Company's performance of its duties and obligations under this Agreement include, but are not limited to, the costs of: (a) registration and qualification of the Contracts under the federal securities laws; (b) preparation and filing with the SEC of the Contracts' Prospectus and Contracts' Registration Statement; (c) the sale, marketing and distribution of the Contracts, including printing and dissemination of Contracts' and the Series Prospectuses and compensation for Contract sales; (d) administration of the Contracts; (e) payment of all applicable fees relating to the Contracts, including, without limitation, all fees due under Rule 24f-2; (f) preparation, printing and dissemination of all statements and notices to Contract Owners required by any Federal or state insurance law other than those paid for by the Trust; and (g) preparation, printing and dissemination of all marketing materials for the Contracts and Trust except where other arrangements are made in advance. 7.4. 12b-1 PAYMENTS. The Trust shall pay no fee or other compensation to the Company under this Agreement, except that if the Trust or any Series or Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses, then payments may be made to the Company in accordance with such plan. The Trust currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or in contravention of such rule, although it may make payments pursuant to Rule 12b-1 in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1 and such formulation is required by the 1940 Act or any rules or order thereunder, the Trust undertakes to have a Board of Trustees, a majority of whom are not interested persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 16 17 ARTICLE VIII POTENTIAL CONFLICTS 8.1. EXEMPTIVE ORDER. The parties to this Agreement acknowledge that the Trust has received an exemptive order from the SEC (the "Exemptive Order") granting relief from various provisions of the 1940 Act and the rules thereunder to the extent necessary to permit Trust shares to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated Participating Insurance Companies and other Qualified Persons (as defined in Section 2.8 hereof). The Exemptive Order requires the Trust and each Participating Insurance Company to comply with conditions and undertakings substantially as provided in this Article VIII. The Trust will not enter into a participation agreement with any other Participating Insurance Company unless it imposes the same conditions and undertakings on that company as are imposed on the Company pursuant to this Article VIII. 8.2. COMPANY MONITORING REQUIREMENTS. The Company will monitor its operations and those of the Trust for the purpose of identifying any material irreconcilable conflicts or potential material irreconcilable conflicts between or among the interests of Participating Plans, Product Owners of variable life insurance policies and Product Owners of variable annuity contracts. 8.3. COMPANY REPORTING REQUIREMENTS. The Company shall report any conflicts or potential conflicts to the Trust Board and will provide the Trust Board, at least annually, with all information reasonably necessary for the Trust Board to consider any issues raised by such existing or potential conflicts or by the conditions and undertakings required by the Exemptive Order. The Company also shall assist the Trust Board in carrying out its obligations including, but not limited to: (a) informing the Trust Board whenever it disregards Contract Owner voting instructions with respect to variable life insurance policies, and (b) providing such other information and reports as the Trust Board may reasonably request. The Company will carry out these obligations with a view only to the interests of Contract Owners. 8.4. TRUST BOARD MONITORING AND DETERMINATION. The Trust Board shall monitor the Trust for the existence of any material irreconcilable conflicts between or among the interests of Participating Plans, Product Owners of variable life insurance policies and Product Owners of variable annuity contracts and determine what action, if any, should be taken in response to those conflicts. A majority vote of Trustees who are not interested persons of the Trust as defined in the 1940 Act (the "disinterested trustees") shall represent a conclusive determination as to the existence of a material irreconcilable conflict between or among the interests of Product Owners and Participating Plans and as to whether any proposed action adequately remedies any material irreconcilable conflict. The Trust Board shall give prompt written notice to the Company and Participating Plan of any such determination. 8.5. UNDERTAKING TO RESOLVE CONFLICT. In the event that a material irreconcilable conflict of interest arises between Product Owners of variable life insurance policies or Product Owners of variable annuity contracts and Participating Plans, the Company will, at its own 17 18 expense, take whatever action is necessary to remedy such conflict as it adversely affects Contract Owners up to and including (1) establishing a new registered management investment company, and (2) withdrawing assets from the Trust attributable to reserves for the Contracts subject to the conflict and reinvesting such assets in a different investment medium (including another Fund of the Trust) or submitting the question of whether such withdrawal should be implemented to a vote of all affected Contract Owners, and, as appropriate, segregating the assets supporting the Contracts of any group of such owners that votes in favor of such withdrawal, or offering to such owners the option of making such a change. The Company will carry out the responsibility to take the foregoing action with a view only to the interests of Contract Owners. 8.6. WITHDRAWAL. If a material irreconcilable conflict arises because of the Company's decision to disregard the voting instructions of Contract Owners of variable life insurance policies and that decision represents a minority position or would preclude a majority vote at any Fund shareholder meeting, then, at the request of the Trust Board, the Company will redeem the shares of the Trust to which the disregarded voting instructions relate. No charge or penalty, however, will be imposed in connection with such a redemption. 8.7. EXPENSES ASSOCIATED WITH REMEDIAL ACTION. In no event shall the Trust be required to bear the expense of establishing a new funding medium for any Contract. The Company shall not be required by this Article to establish a new funding medium for any Contract if an offer to do so has been declined by vote of a majority of the Contract Owners materially adversely affected by the irreconcilable material conflict. 8.8. SUCCESSOR RULES. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provisions of the 1940 Act or the rules promulgated thereunder with respect to mixed and shared funding on terms and conditions materially different from those contained in the Exemptive Order, then (i) the Trust and/or the Company, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the extent such rules are applicable, and (ii) Sections 8.2 through 8.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. ARTICLE IX INDEMNIFICATION 9.1. INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to, and shall, indemnify and hold harmless the Trust, the Distributor and each person who controls or is affiliated with the Trust or the Distributor within the meaning of such terms under the 1933 Act or 1940 Act (but not any Participating Insurance Companies or Qualified Persons) and any officer, trustee, partner, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become 18 19 subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Trust or the Distributor for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature or promotional material for the Contracts (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of any untrue statement of a material fact contained in the Trust Registration Statement, any Prospectus for Series or Classes or sales literature or other promotional material of the Trust (or any amendment or supplement to any of the foregoing), or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Trust or Distributor in writing by or on behalf of the Company; or (c) arise out of or are based upon any wrongful conduct of, or violation of federal or state law by, the Company or persons under its control or subject to its authorization, including without limitation, any broker-dealers or agents authorized to sell the Contracts, with respect to the sale, marketing or distribution of the Contracts or Trust shares, including, without limitation, any impermissible use of broker-only material, unsuitable or improper sales of the Contracts or unauthorized representations about the Contracts or the Trust; or (d) arise as a result of any failure by the Company or persons under its control (or subject to its authorization) to provide services, furnish materials or make payments as required under this Agreement; or (e) arise out of any material breach by the Company or persons under its control (or subject to its authorization) of this Agreement; or (f) arise out of any breach of any warranties contained in Article III hereof, any failure to transmit a request for redemption or purchase of Trust shares or payment therefor on a timely basis in accordance with the procedures set forth in Article II, 19 20 or any unauthorized use of the names, trade names or trademark of the Trust or the Distributor. This indemnification is in addition to any liability that the Company may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is caused by the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 9.2. INDEMNIFICATION BY THE TRUST. The Trust hereby agrees to, and shall, indemnify and hold harmless the Company and each person who controls or is affiliated with the Company within the meaning of such terms under the 1933 Act or 1940 Act and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement of any material fact contained in the Trust Registration Statement, any Prospectus for Series or Classes or sales literature or other promotional material of the Trust (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Trust or the Distributor for use in the Trust Registration Statement, Trust Prospectus or sales literature or promotional material for the Trust (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of any untrue statement of a material fact contained in the Contracts Registration Statement, Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Trust to the Company; or (c) arise out of or are based upon wrongful conduct of or violation of federal or state law by the Trust or its Trustees or officers or persons under its control with respect to the sale of Trust shares; or 20 21 (d) arise as a result of any failure by the Trust or its Trustees or officers or persons under its control to provide services, furnish materials or make payments as required under the terms of this Agreement; or (e) arise out of any material breach by the Trust of this Agreement or persons under its control (including any breach of Section 6.1 of this Agreement and any warranties contained in Article III hereof); or (f) arise out of or result from the materially incorrect or untimely calculation or reporting of the daily net asset value per share or dividend or capital gain distribution rate, provided that the foregoing shall be limited to reasonable administrative costs, and shall not apply where such miscalculation or report is the result of (i) incorrect information supplied by or on behalf of the Company to the Trust or the Distributor, or (ii) circumstances outside the Trust's or the Distributor's control. it being understood that in no way shall the Trust be liable to the Company with respect to any violation of insurance law, compliance with which is a responsibility of the Company under this Agreement or otherwise or as to which the Company failed to inform the Trust in accordance with Section 4.4 hereof. This indemnification is in addition to any liability that the Trust may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is caused by the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 9.3. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor hereby agrees to, and shall, indemnify and hold harmless the Company and each person who controls or is affiliated with the Company within the meaning of such terms under the 1933 Act or 1940 Act and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement of any material fact contained in the Trust Registration Statement, any Prospectus for Series or Classes or sales literature or other promotional material of the Trust (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Trust or Distributor for use in the Trust Registration Statement, Trust Prospectus or sales literature or promotional material for the Trust (or any amendment or supplement to any of the 21 22 foregoing) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of any untrue statement of a material fact contained in the Contracts Registration Statement, Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Distributor to the Company; or (c) arise out of or are based upon wrongful conduct of or violation of federal or state law by the Distributor or persons under its control with respect to the sale of Trust shares; or (d) arise as a result of any failure by the Distributor or persons under its control to provide services, furnish materials or make payments as required under the terms of this Agreement; or (e) arise out of any material breach by the Distributor or persons under its control of this Agreement (including any breach of Section 6.1 of this Agreement and any warranties contained in Article III hereof); it being understood that in no way shall the Distributor be liable to the Company with respect to any violation of insurance law, compliance with which is a responsibility of the Company under this Agreement or otherwise or as to which the Company failed to inform the Distributor in accordance with Section 4.4 hereof. This indemnification is in addition to any liability that the Distributor may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is caused by the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 9.4. RULE OF CONSTRUCTION. It is the parties' intention that, in the event of an occurrence for which the Trust has agreed to indemnify the Company, the Company shall seek indemnification from the Trust only in circumstances in which the Trust is entitled to seek indemnification from a third party with respect to the same event or cause thereof. 9.5. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to indemnification ("indemnified party") under this Article IX of notice of the commencement of any action, if a claim in respect thereof is to be made by the indemnified party against any person obligated to provide indemnification under this Article IX ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission to so notify the indemnifying party will not relieve it from any liability under this Article IX, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result 22 23 of the failure to give such notice. The indemnifying party, upon the request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article IX. The indemnification provisions contained in this Article IX shall survive any termination of this Agreement. ARTICLE X RELATIONSHIP OF THE PARTIES; TERMINATION 10.1. RELATIONSHIP OF PARTIES. The Company is to be an independent contractor vis-a-vis the Trust, the Distributor, or any of their affiliates for all purposes hereunder and will have no authority to act for or represent any of them (except to the limited extent the Company acts as agent of the Trust pursuant to Section 2.3(a) of this Agreement). In addition, no officer or employee of the Company will be deemed to be an employee or agent of the Trust, Distributor, or any of their affiliates. The Company will not act as an "underwriter" or "distributor" of the Trust, as those terms variously are used in the 1940 Act, the 1933 Act, and rules and regulations promulgated thereunder. 10.2. NON-EXCLUSIVITY AND NON-INTERFERENCE. The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive; the Trust shares may be sold to other insurance companies and investors (subject to Section 2.8 hereof) and the cash value of the Contracts may be invested in other investment companies, provided, however, that until this Agreement is terminated pursuant to this Article X: (a) the Company shall promote the Trust and the Funds made available hereunder on the same basis as other funding vehicles available under the Contracts; (b) the Company shall not, without prior notice to the Distributor (unless otherwise required by applicable law), take any action to operate the Account as a management investment company under the 1940 Act; 23 24 (c) the Company shall not, without the prior written consent of the Distributor (unless otherwise required by applicable law), solicit, induce or encourage Contract Owners to change or modify the Trust to change the Trust's distributor or investment adviser, to transfer or withdraw Contract Values allocated to a Fund, or to exchange their Contracts for contracts not allowing for investment in the Trust; (d) the Company shall not substitute another investment company for one or more Funds without providing written notice to the Distributor at least 60 days in advance of effecting any such substitution; and (e) the Company shall not withdraw the Account's investment in the Trust or a Fund of the Trust except as necessary to facilitate Contract Owner requests and routine Contract processing. 10.3. TERMINATION OF AGREEMENT. This Agreement shall not terminate until (i) the Trust is dissolved, liquidated, or merged into another entity, or (ii) as to any Fund that has been made available hereunder, the Account no longer invests in that Fund and the Company has confirmed in writing to the Distributor, if so requested by the Distributor, that it no longer intends to invest in such Fund. However, certain obligations of, or restrictions on, the parties to this Agreement may terminate as provided in Sections 10.4 through 10.6 and the Company may be required to redeem Trust shares pursuant to Section 10.7 or in the circumstances contemplated by Article VIII. Article IX and Sections 5.7, 10.8 and 10.9 shall survive any termination of this Agreement. 10.4. TERMINATION OF OFFERING OF TRUST SHARES. The obligation of the Trust and the Distributor to make Trust shares available to the Company for purchase pursuant to Article II of this Agreement shall terminate at the option of the Distributor upon written notice to the Company as provided below: (a) upon institution of formal proceedings against the Company, or the Distributor's reasonable determination that institution of such proceedings is being considered by the NASD, the SEC, the insurance commission of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of the Account, the administration of the Contracts or the purchase of Trust shares, or an expected or anticipated ruling, judgment or outcome which would, in the Distributor's reasonable judgment exercised in good faith, materially impair the Company's or Trust's ability to meet and perform the Company's or Trust's obligations and duties hereunder, such termination effective upon 15 days prior written notice; (b) in the event any of the Contracts are not registered, issued or sold in accordance with applicable federal and/or state law, such termination effective immediately upon receipt of written notice; 24 25 (c) if the Distributor shall determine, in its sole judgment exercised in good faith, that either (1) the Company shall have suffered a material adverse change in its business or financial condition or (2) the Company shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of either the Trust or the Distributor, such termination effective upon 30 days prior written notice; (d) if the Distributor suspends or terminates the offering of Trust shares of any Series or Class to all Participating Investors or only designated Participating Investors, if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Distributor acting in good faith, suspension or termination is necessary in the best interests of the shareholders of any Series or Class (it being understood that "shareholders" for this purpose shall mean Product Owners), such notice effective immediately upon receipt of written notice, it being understood that a lack of Participating Investor interest in a Series or Class may be grounds for a suspension or termination as to such Series or Class and that a suspension or termination shall apply only to the specified Series or Class; (e) upon the Company's assignment of this Agreement (including, without limitation, any transfer of the Contracts or the Account to another insurance company pursuant to an assumption reinsurance agreement) unless the Trust consents thereto, such termination effective upon 30 days prior written notice; (f) if the Company is in material breach of any provision of this Agreement, which breach has not been cured to the satisfaction of the Trust within 10 days after written notice of such breach has been delivered to the Company, such termination effective upon expiration of such 10-day period; (g) upon the determination of the Trust's Board to dissolve, liquidate or merge the Trust as contemplated by Section 10.3(i), upon termination of the Agreement pursuant to Section 10.3(ii), or upon notice from the Company pursuant to Section 10.5 or 10.6, such termination pursuant hereto to be effective upon 15 days prior written notice; or (h) at any time upon six months prior written notice. Except in the case of an option exercised under clause (b), (d) or (g), the obligations shall terminate only as to new Contracts and the Distributor shall continue to make Trust shares available to the extent necessary to permit owners of Contracts in effect on the effective date of such termination (hereinafter referred to as "Existing Contracts") to reallocate investments in the Trust, redeem investments in the Trust and/or invest in the Trust upon the making of additional purchase payments under the Existing Contracts. 10.5. TERMINATION OF INVESTMENT IN A FUND. The Company may elect to cease investing in a Fund, promoting a Fund as an investment option under the Contracts, or withdraw 25 26 its investment or the Account's investment in a Fund, subject to compliance with applicable law, upon written notice to the Trust within 15 days of the occurrence of any of the following events (unless provided otherwise below): (a) if the Trust informs the Company pursuant to Section 4.4 that it will not cause such Fund to comply with investment restrictions as requested by the Company and the Trust and the Company are unable to agree upon any reasonable alternative accommodations; (b) if shares in such Fund are not reasonably available to meet the requirements of the Contracts as determined by the Company (including any non-availability as a result of notice given by the Distributor pursuant to Section 10.4(d)), and the Distributor, after receiving written notice from the Company of such non-availability, fails to make available, within 10 days after receipt of such notice, a sufficient number of shares in such Fund or an alternate Fund to meet the requirements of the Contracts; (c) if such Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder and the Trust, upon written request, fails to provide reasonable assurance that it will take action to cure or correct such failure; (d) if such Fund ceases to qualify as a regulated investment company under Subchapter M of the Code, as defined therein, or any successor or similar provision, or if the Company reasonably believes that the Fund may fail to so qualify, and the Trust, upon written request, fails to provide reasonable assurance that it will take action to cure or correct such failure within 30 days; (e) upon the Trust's or the Distributor's assignment of this Agreement, unless the Company consents thereto, or unless the assignment is to an affiliate as a result of a merger, a change in control or a reorganization into another jurisdiction, such termination effective upon 30 days prior written notice; or (f) at any time upon six months prior notice. Such termination shall apply only as to the affected Fund and shall not apply to any other Fund in which the Company or the Account invests. 10.6. TERMINATION OF INVESTMENT BY THE COMPANY. The Company may elect to cease investing in all Series or Classes of the Trust made available hereunder, promoting the Trust as an investment option under the Contracts, or withdraw its investment or the Account s investment in the Trust, subject to compliance with applicable law, upon written notice to the Trust within 15 days of the occurrence of any of the following events (unless provided otherwise below): 26 27 (a) upon institution of formal proceedings against the Trust or the Distributor (but only with regard to the Trust) by the NASD, the SEC or any state securities or insurance commission or any other regulatory body; or (b) if the Trust or Distributor is in material breach of a provision of this Agreement, which breach has not been cured to the satisfaction of the Company within 10 days after written notice of such breach has been delivered to the Trust or the Distributor, as the case may be. 10.7. COMPANY REQUIRED TO REDEEM. The parties understand and acknowledge that it is essential for compliance with Section 817(h) of the Code that the Contracts qualify as annuity contracts or life insurance policies, as applicable, under the Code. Accordingly, if any of the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Trust reasonably believes that any such Contracts may fail to so qualify, the Trust shall have the right to require the Company to redeem Trust shares attributable to such Contracts upon notice to the Company and the Company shall so redeem such Trust shares in order to ensure that the Trust complies with the provisions of Section 817(h) of the Code applicable to ownership of Trust shares. Notice to the Company shall specify the period of time the Company has to redeem the Trust shares or to make other arrangements satisfactory to the Trust and its counsel, such period of time to be determined with reference to the requirements of Section 817(h) of the Code. In addition, the Company may be required to redeem Trust shares pursuant to action taken or request made by the Trust Board in accordance with the Exemptive Order described in Article VIII or any conditions or undertakings set forth or referenced therein, or other SEC rule, regulation or order that may be adopted after the date hereof. The Company agrees to redeem shares in the circumstances described herein and to comply with applicable terms and provisions. Also, in the event that the Distributor suspends or terminates the offering of a Series or Class pursuant to Section 10.4(d) of this Agreement, the Company, upon request by the Distributor, will cooperate in taking appropriate action to withdraw the Account's investment in the respective Fund. 10.8. CONFIDENTIALITY. A party will keep confidential any information acquired as a result of this Agreement regarding the business and affairs of the other parties to this Agreement and their affiliates. In addition, the Trust and the Distributor shall not, directly or indirectly, disclose or use any nonpublic personal information regarding the consumers or customers of the Company (as the terms "consumer" and "customer" are defined in Rule 3(g) and 3(j), respectively, of Regulation S-P of the Securities and Exchange Commission) ("Confidential Information"), other than to carry out the functions contemplated by this Agreement. The foregoing obligation of confidentiality shall not extend to any portion of the Confidential Information that is, or becomes, generally available to the general public from: (a) federal, State or local governmental records, (b) widely distributed media, or (c) disclosures to the general public that are required to be made by federal, State or local law. 27 28 ARTICLE XI APPLICABILITY TO NEW ACCOUNTS AND NEW CONTRACTS The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect, as appropriate, changes in or relating to the Contracts, any Series or Class, additions of new classes of Contracts to be issued by the Company and separate accounts therefor investing in the Trust. Such amendments may be made effective by executing the form of amendment included on each schedule attached hereto. The provisions of this Agreement shall be equally applicable to each such class of Contracts, Series, Class or separate account, as applicable, effective as of the date of amendment of such Schedule, unless the context otherwise requires. The parties to this Agreement may amend this Agreement from time to time by written agreement signed by all of the parties. ARTICLE XII NOTICE, REQUEST OR CONSENT Any notice, request or consent to be provided pursuant to this Agreement is to be made in writing and shall be given: If to the Trust: James McNamara President Goldman Sachs Variable Insurance Trust 32 Old Slip, 17th Floor New York, NY 10005 If to the Distributor: James McNamara Vice President Goldman Sachs & Co. 32 Old Slip, 17th Floor New York, NY 10005 If to the Company: John Comerford National Sales and Marketing Manager Farmers New World Life Insurance Company 3003 77th Avenue, SE Mercer Island, WA 98040 28 29 with a copy to: James P. Brennan, Sr., Esq. Corporate Counsel Farmers Insurance Group 4680 Wilshire Blvd. Los Angeles, CA 90010 or at such other address as such party may from time to time specify in writing to the other party. Each such notice, request or consent to a party shall be sent by registered or certified United States mail with return receipt requested or by overnight delivery with a nationally recognized courier, and shall be effective upon receipt. Notices pursuant to the provisions of Article II may be sent by facsimile to the person designated in writing for such notices. ARTICLE XIII MISCELLANEOUS 13.1. INTERPRETATION. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the state of Delaware, without giving effect to the principles of conflicts of laws, subject to the following rules: (a) This Agreement shall be subject to the provisions of the 1933 Act, 1940 Act and Securities Exchange Act of 1934, as amended, and the rules, regulations and rulings thereunder, including such exemptions from those statutes, rules, and regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. (b) The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. (c) If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. (d) The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 13.2. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which together shall constitute one and the same instrument. 13.3. NO ASSIGNMENT. Neither this Agreement nor any of the rights and obligations hereunder may be assigned by the Company, the Distributor or the Trust without the prior written consent of the other parties. 29 30 13.4. DECLARATION OF TRUST. A copy of the Declaration of Trust of the Trust is on file with the Secretary of State of the State of Delaware, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as trustees, and is not binding upon any of the Trustees, officers or shareholders of the Trust individually, but binding only upon the assets and property of the Trust. No Series of the Trust shall be liable for the obligations of any other Series of the Trust. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. GOLDMAN SACHS VARIABLE INSURANCE TRUST (Trust) Date: By: ------------- Name: Title: GOLDMAN, SACHS & CO. (Distributor) Date: By: ------------- Name: Title: FARMERS NEW WORLD LIFE INSURANCE COMPANY (Company) Date: By: ------------- Name: C. Paul Patsis Title: President 30 31 SCHEDULE 1 Accounts of the Company Investing in the Trust Effective as of the date the Agreement was executed, the following separate accounts of the Company are subject to the Agreement:
================================================================================================= Date Established by Name of Account and Board of Directors of SEC 1940 Act Type of Product Subaccounts the Company Registration Number Supported by Account - ------------------------------------------------------------------------------------------------- Farmers Annuity April 6, 1999 811-09547 Variable Annuity Separate Account A - ------------------------------------------------------------------------------------------------- Farmers Variable April 6, 1999 811-09507 Variable Life Universal Life Separate Account A =================================================================================================
- -------------------------------------------------------------------------------- [Form of Amendment to Schedule 1] Effective as of _____, the following separate accounts of the Company are hereby added to this Schedule 1 and made subject to the Agreement:
================================================================================================= Date Established by Name of Account and Board of Directors of SEC 1940 Act Type of Product Subaccounts the Company Registration Number Supported by Account - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- =================================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 1 in accordance with Article XI of the Agreement. - -------------------------------------- ----------------------------------- Goldman Sachs Variable Insurance Trust Farmers New World Life Insurance Company - -------------------------------------- Goldman, Sachs & Co. 31 32 SCHEDULE 2 Classes of Contracts Supported by Separate Accounts Listed on Schedule 1 Effective as of the date the Agreement was executed, the following classes of Contracts are subject to the Agreement:
================================================================================================= SEC 1933 Act Policy Marketing Name Registration Number Contract Form Number Annuity or Life - ------------------------------------------------------------------------------------------------- Farmers Annuity 333-85183 Farmers Individual Annuity Separate Account A Premium Flexible Variable Annuity K 2000-398 - ------------------------------------------------------------------------------------------------- Farmers Variable 333-84023 Farmers Individual Life Universal Life Separate Flexible Premium Account A Variable Universal Life Policy =================================================================================================
- -------------------------------------------------------------------------------- [Form of Amendment to Schedule 2] Effective as of _______, the following classes of Contracts are hereby added to this Schedule 2 and made subject to the Agreement:
================================================================================================= SEC 1933 Act Name of Supporting Policy Marketing Name Registration Number Account Annuity or Life - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- =================================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 2 in accordance with Article XI of the Agreement. - -------------------------------------- ----------------------------------- Goldman Sachs Variable Insurance Trust Farmers New World Life Insurance Company - -------------------------------------- Goldman, Sachs & Co. 32 33 SCHEDULE 3 Trust Classes and Series Available Under Each Class of Contracts Effective as of the date the Agreement was executed, the following Trust Classes and Series are available under the Contracts:
======================================================================================= Contracts Marketing Name Trust Classes and Series - --------------------------------------------------------------------------------------- Farmers Annuity Separate Account A VIT CORE SMALL CAP EQUITY VIT MID CAP VALUE VIT CAPITAL GROWTH - --------------------------------------------------------------------------------------- Farmers Variable Universal Life Separate VIT CORE SMALL CAP EQUITY Account A VIT MID CAP VALUE VIT CAPITAL GROWTH =======================================================================================
- -------------------------------------------------------------------------------- [Form of Amendment to Schedule 3] Effective as of __________________, this Schedule 3 is hereby amended to reflect the following changes in Trust Classes and Series:
======================================================================================= Contracts Marketing Name Trust Classes and Series - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- =======================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 3 in accordance with Article XI of the Agreement. - -------------------------------------- ----------------------------------- Goldman Sachs Variable Insurance Trust Farmers New World Life Insurance Company - -------------------------------------- Goldman, Sachs & Co. 33 34 SCHEDULE 4 Investment Restrictions Applicable to the Trust Effective as of the date the Agreement was executed, the following investment restrictions are applicable to the Trust: - -------------------------------------------------------------------------------- [Form of Amendment to Schedule 4] Effective as of ___________________, this Schedule 4 is hereby amended to reflect the following changes: IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 4 in accordance with Article XI of the Agreement. - -------------------------------------- ----------------------------------- Goldman Sachs Variable Insurance Trust Farmers New World Life Insurance Company - -------------------------------------- Goldman, Sachs & Co. EX-99.8(P) 12 a71651ex99-8p.txt EXHIBIT 8(P) 1 EXHIBIT (8)(p) JANUS ASPEN SERIES FUND PARTICIPATION AGREEMENT (SERVICE SHARES) THIS AGREEMENT is made this 10th day of April, 2001, among JANUS ASPEN SERIES, an open-end management investment company organized as a Delaware business trust (the "Trust"), JANUS CAPITAL CORPORATION, a Colorado corporation (the "Adviser") and FARMERS NEW WORLD LIFE INSURANCE COMPANY, a life insurance company organized under the laws of the State of Washington (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be amended from time to time (the "Accounts"). W I T N E S S E T H: WHEREAS, the Trust has registered with the Securities and Exchange Commission as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and the beneficial interest in the Trust is divided into several series of shares, each series representing an interest in a particular managed portfolio of securities and other assets (the "Portfolios"); and WHEREAS, the Trust has registered the offer and sale of a class of shares designated the Service Shares ("Shares") of each of its Portfolios under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust desires to act as an investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts to be offered by insurance companies that have entered into participation agreements with the Trust (the "Participating Insurance Companies"); and WHEREAS, the Trust has received an order from the Securities and Exchange Commission granting Participating Insurance Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies and certain qualified pension and retirement plans (the "Exemptive Order"); and WHEREAS, the Company has registered or will register (unless registration is not required under applicable law) certain variable life insurance policies and/or variable annuity contracts under the 1933 Act (the "Contracts"); and -1- 2 WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act; and WHEREAS, the Company desires to utilize the Shares of one or more Portfolios as an investment vehicle of the Accounts; WHEREAS, the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities laws; and WHEREAS, the Adviser serves as investment adviser to the Trust. NOW, THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I Sale of Trust Shares 1.1 The Trust shall make Shares of its Portfolios listed on Schedule B available to the Accounts at the net asset value next computed after receipt of such purchase order by the Trust (or its agent), as established in accordance with the provisions of the then current prospectus of the Trust. Shares of a particular Portfolio of the Trust shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell Shares of any Portfolio to any person, or suspend or terminate the offering of Shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 1.2 The Trust will redeem any full or fractional Shares of any Portfolio when requested by the Company on behalf of an Account at the net asset value next computed after receipt by the Trust (or its agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust. The Trust shall make payment for such shares in the manner established from time to time by the Trust, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. 1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the Company as its agent for the limited purpose of receiving and accepting purchase and redemption orders resulting from investment in and payments under the Contracts. Receipt by the Company shall constitute receipt by the Trust provided that i) such orders are received by the Company in good order prior to the time the net asset value of each Portfolio is priced in accordance with its prospectus and ii) the Trust receives notice of such orders by 10:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the -2- 3 rules of the Securities and Exchange Commission. 1.4 Purchase orders that are transmitted to the Trust in accordance with Section 1.3 shall be paid for no later than 12:00 noon New York time on the same Business Day that the Trust receives notice of the order. The Trust shall pay and transmit the proceeds of redemption orders that are transmitted to the Trust in accordance with Section 1.3 no later than 12:00 noon New York time on the same Business Day that the Trust receives notice of the redemption, except that the Trust reserves the right to postpone payment upon redemption consistent with Section 22(e) of the 1940 Act and any rules thereunder. Payments for such purchase orders will be made net of any redemptions received on the same day as the purchase. Payments shall be made in federal funds transmitted by wire. 1.5 Issuance and transfer of the Trust's Shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Shares ordered from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. 1.6 The Trust shall furnish prompt notice to the Company of any income dividends or capital gain distributions payable on the Trust's Shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's Shares in additional Shares of that Portfolio. The Trust shall notify the Company promptly of the number of Shares so issued as payment of such dividends and distributions. 1.7 The Trust shall make the net asset value per Share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per Share is calculated and shall use its best efforts to make such net asset value per Share available by 6 p.m. New York time. Any material error in the calculation or reporting of net asset value per share, dividend or capital gains information shall be reported promptly upon discovery to the Company. In such event the Company shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct closing net asset value per share and the Trust or the Adviser shall bear the cost of correcting such errors. Any error of a lesser amount shall be corrected in the next Business Day's net asset value per share. 1.8 The Trust agrees that its Shares will be sold only to Participating Insurance Companies and their separate accounts and to certain qualified pension and retirement plans to the extent permitted by the Exemptive Order. No Shares of any Portfolio will be sold directly to the general public. The Company agrees that Trust Shares will be used only for the purposes of funding the Contracts and Accounts listed in Schedule A, as amended from time to time. 1.9 The Trust agrees that all Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding to those contained in Section 2.8 and Article IV of this Agreement. -3- 4 ARTICLE II Obligations of the Parties 2.1 The Trust shall prepare and be responsible for filing with the Securities and Exchange Commission and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of the Trust. The Trust shall bear the costs of registration and qualification of its shares, preparation and filing of the documents listed in this Section 2.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.2 At the option of the Company, the Trust shall either (a) provide the Company (at the Company's expense) with as many copies of the Trust's Shares' current prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company shall reasonably request; or (b) provide the Company with a camera ready copy of such documents in a form suitable for printing. The Trust shall provide the Company with a copy of the Shares' statement of additional information in a form suitable for duplication by the Company. The Trust shall also provide the Company with such other assistance as is reasonably necessary in order for the Company once each year (or as often as is required by the SEC) to have the prospectus for the Contracts and the prospectus for the Portfolios printed together in one document. The prospectus and statement of additional information provided by the Trust shall relate either to all Portfolios of the Trust or only selected Portfolios of the Trust, as the Company shall reasonably request. The Trust (at its expense) shall provide the Company with copies of any Trust-sponsored proxy materials in such quantity as the Company shall reasonably require for distribution to Contract owners. 2.3 (a) The Company shall bear the costs of printing and distributing the Trust's Shares' prospectus, statement of additional information, shareholder reports and other shareholder communications to owners of and applicants for policies for which Shares of the Trust are serving or are to serve as an investment vehicle. The Company shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. The Company assumes sole responsibility for ensuring that such materials are delivered to Contract owners in accordance with applicable federal and state securities laws. (b) If the Company elects to include any materials provided by the Trust, specifically prospectuses, SAIs, shareholder reports and proxy materials, on its web site or in any other computer or electronic format, the Company assumes sole responsibility for maintaining such materials in the form provided by the Trust and for promptly replacing such materials with all updates provided by the Trust. 2.4 The Company agrees and acknowledges that the Trust's adviser, Janus Capital Corporation ("Janus Capital"), is the sole owner of the name and mark "Janus" and that all use of any designation comprised in whole or part of Janus (a "Janus Mark") under this Agreement shall inure to the benefit of Janus Capital. Except as provided in Section 2.5, the Company shall not -4- 5 use any Janus Mark on its own behalf or on behalf of the Accounts or Contracts in any registration statement, advertisement, sales literature or other materials relating to the Accounts or Contracts without the prior written consent of Janus Capital. Upon termination of this Agreement for any reason, the Company shall cease all use of any Janus Mark(s) as soon as reasonably practicable. 2.5 The Company shall furnish, or cause to be furnished, to the Trust or its designee, a copy of each Contract prospectus or statement of additional information in which the Trust or the Adviser is named prior to the filing of such document with the Securities and Exchange Commission. The Company shall furnish, or shall cause to be furnished, to the Trust or its designee, each piece of sales literature or other promotional material in which the Trust or the Adviser is named, at least fifteen Business Days prior to its use. No such material shall be used if the Trust or its designee reasonably objects to such use within ten Business Days after receipt of such material. 2.6. The Trust shall furnish, or cause to be furnished, to the Company (or its designee), a copy of any initial Trust prospectus and statement of additional information in which the Company is first named prior to the filing of such document with the Securities and Exchange Commission. The Trust shall furnish, or shall cause to be furnished, to the Company (or its designee) a copy of each subsequent Trust prospectus, profile (if any) and statement of additional information in which the Company is named concurrently with the filing of such document with the Securities and Exchange Commission provided that there are no material changes in disclosure related to the Company. No such material shall be used if the Company (or its designee) reasonably objects to such use within ten Business Days after receipt of such material. 2.7 The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust or the Adviser in connection with the sale of the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Trust Shares (as such registration statement and prospectus may be amended or supplemented from time to time), reports of the Trust, Trust-sponsored proxy statements, or in sales literature or other promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee. 2.8 The Trust shall not give any information or make any representations or statements on behalf of the Company or concerning the Company, the Accounts or the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the written permission of the Company. 2.9 So long as, and to the extent that the Securities and Exchange Commission -5- 6 interprets the 1940 Act to require pass-through voting privileges for variable policyowners, the Company will provide pass-through voting privileges to owners of policies whose cash values are invested, through the Accounts, in shares of the Trust. The Trust shall require all Participating Insurance Companies to calculate voting privileges in the same manner and the Company shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by the Trust. With respect to each Account, the Company will vote Shares of the Trust held by the Account and for which no timely voting instructions from policyowners are received as well as Shares it owns that are held by that Account, in the same proportion as those Shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for Trust shares held by Contract owners without the prior written consent of the Trust, which consent may be withheld in the Trust's sole discretion. 2.10 The Trust and Adviser shall use their best efforts to maintain qualification of each Portfolio as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended ("Code") and shall notify the Company immediately upon having a reasonable basis for believing that a Portfolio has ceased to so qualify or that it might not so qualify in the future. The Trust and the Adviser acknowledge that compliance with Subchapter M is an essential element of compliance with Section 817(h). 2.11 Each Portfolio of the Trust shall comply with the requirements of Section 817(h) of the Code and the regulations issued thereunder relating to the diversification requirements for variable life insurance policies and variable annuity contracts, and the Trust and Adviser shall notify the Company immediately upon having a reasonable basis for believing that any Portfolio has ceased or might cease to comply. In addition, the Trust and Adviser will immediately take all steps necessary to adequately diversify the Portfolio to achieve compliance. 2.12 The Trust shall provide the Company or its designee with reports certifying compliance with the aforesaid Section 817(h) diversification and Subchapter M qualification requirements on a quarterly basis. 2.13 Each party will keep confidential any information designated as confidential and acquired as a result of this Agreement regarding the business and affairs of the other parties to this Agreement and their affiliates, except (a) as required by applicable law, (b) if such information becomes public or is acquired outside of this Agreement, or (c) as agreed among the parties. In addition, the Trust and the Adviser shall not, directly or indirectly, disclose or use any nonpublic personal information regarding the consumers or customers of the Company (as defined in Rule 3(g) and 3(j), respectively, of Regulation S-P of the Securities and Exchange Commission) ("Confidential Information"), other than to carry out the functions contemplated by this Agreement. The foregoing obligation of confidentiality shall not extend to any portion of the Confidential Information that is, or becomes, generally available to the general public from: (a) federal, State or local governmental records, (b) widely distributed media, or (c) disclosures that are required to be made by federal, State or local law. -6- 7 ARTICLE III Representations and Warranties 3.1 The Company represents and warrants that it is an insurance company duly organized and in good standing under the laws of the State of Washington and that it has legally and validly established each Account as a segregated asset account under such law on the date set forth in Schedule A. 3.2 The Company represents and warrants that each Account has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust in accordance with the provisions of the 1940 Act. 3.3 The Company represents and warrants that the Contracts or interests in the Accounts (1) are or, prior to issuance, will be registered as securities under the 1933 Act or, alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents and warrants that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. 3.4 The Trust represents and warrants that it is duly organized and validly existing under the laws of the State of Delaware. 3.5 The Trust represents and warrants that the Trust Shares offered and sold pursuant to this Agreement will be registered under the 1933 Act and the Trust shall be registered under the 1940 Act prior to any issuance or sale of such Shares. The Trust shall amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its Shares. The Trust shall register and qualify its Shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust. 3.6 The Trust and the Adviser represent and warrant that the investments of each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. 3.7. The Adviser represents and warrants that it is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities laws. ARTICLE IV Potential Conflicts -7- 8 4.1 The parties acknowledge that the Trust's shares may be made available for investment to other Participating Insurance Companies. In such event, the Trustees will monitor the Trust for the existence of any material irreconcilable conflict between the interests of the contract owners of all Participating Insurance Companies. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Trustees shall promptly inform the Company if they determine that an irreconcilable material conflict exists and the implications thereof. 4.2 The Company agrees to promptly report any potential or existing conflicts of which it is aware to the Trustees. The Company will assist the Trustees in carrying out their responsibilities under the Exemptive Order by providing the Trustees with all information reasonably necessary for the Trustees to consider any issues raised including, but not limited to, information as to a decision by the Company to disregard Contract owner voting instructions. 4.3 If it is determined by a majority of the Trustees, or a majority of its disinterested Trustees, that a material irreconcilable conflict exists that affects the interests of Contract owners, the Company shall, in cooperation with other Participating Insurance Companies whose contract owners are also affected, at its expense and to the extent reasonably practicable (as determined by the Trustees) take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, which steps could include: (a) withdrawing the assets allocable to some or all of the Accounts from the Trust or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of the Trust, or submitting the question of whether or not such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (b) establishing a new registered management investment company or managed separate account. 4.4 If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account; provided, however that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees. Any such withdrawal and termination must take place within six (6) months after the Trust gives written notice that this provision is being implemented. Until the end of such six (6) month period, the Trust shall continue to accept and -8- 9 implement orders by the Company for the purchase and redemption of shares of the Trust. 4.5 If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account within six (6) months after the Trustees inform the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees. Until the end of such six (6) month period, the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. 4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of the disinterested Trustees shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Company be required to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Trustees determine that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in the Trust and terminate this Agreement within six (6) months after the Trustees inform the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested Trustees. 4.7 The Company shall at least annually submit to the Trustees such reports, materials or data as the Trustees may reasonably request so that the Trustees may fully carry out the duties imposed upon them by the Exemptive Order, and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Trustees. 4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Exemptive Order) on terms and conditions materially different from those contained in the Exemptive Order, then the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable. ARTICLE V Indemnification 5.1 Indemnification By the Company. The Company agrees to indemnify and hold harmless the Trust, the Adviser, and each of their Trustees, officers, employees and agents and -9- 10 each person, if any, who controls the Trust or Adviser within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a registration statement or prospectus for the Contracts or in the Contracts themselves or in sales literature for the Trust generated or approved by the Company on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, "Company Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Company by or on behalf of the Trust or Adviser for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust Shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or Trust Shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined in Section 5.2(a) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Trust by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company. 5.2 Indemnification By the Trust and the Adviser. The Trust and Adviser agree to indemnify and hold harmless the Company and each of its directors, officers, employees and -10- 11 agents and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust and the Adviser) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for the Trust (or any amendment or supplement thereto), (collectively, "Trust Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Trust by or on behalf of the Company for use in Trust Documents or otherwise for use in connection with the sale of the Contracts or Trust Shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of the Trust or persons under its control, with respect to the sale or acquisition of the Contracts or Trust Shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Company by or on behalf of the Trust; or (d) arise out of or result from any failure by the Trust or the Adviser to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Trust or Adviser in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust or Adviser (including a failure whether unintentional, or in good faith, or otherwise, to comply with the diversification and other qualification requirements specified in Article II of this Agreement); or (f) arise out of or result from the materially incorrect calculation or reporting -11- 12 of the daily net asset value per share or dividend or capital gain distribution rate. The Adviser shall determine whether a material error has occurred based on SEC guidelines and the Adviser shall control the correction of such error. 5.3 None of the parties to this Agreement shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise from such Indemnified Party's willful misfeasance, bad faith or negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 5.4 None of the parties to this Agreement shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim shall not relieve that party from any liability which it may have to the Indemnified Party in the absence of Sections 5.1 and 5.2. 5.5 In case any such action is brought against the Indemnified Parties, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from the indemnifying party to the Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. ARTICLE VI Termination 6.1 This Agreement shall terminate as to the sale and issuance of new Contracts by either party for any reason by ninety (90) days advance written notice delivered to the other party. 6.2 Notwithstanding any termination of this Agreement, the Trust shall, at the option of the Company, continue to make available additional shares of the Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement, provided that the Company continues to pay the costs set forth in Section 2.3. 6.3 The provisions of Article V shall survive the termination of this Agreement, and -12- 13 the provisions of Article IV and Section 2.11, 2.12 and 2.13 shall survive the termination of this Agreement as long as Shares of the Trust are held on behalf of Contract owners in accordance with Section 6.2. Specifically, without limitation, the owners of any existing Contracts shall be permitted to transfer or reallocate investment under the Contracts, redeem investments in any Portfolio and/or invest in the Trust upon the making of additional premium payments under the existing Contracts. ARTICLE VII Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: Janus Aspen Series 100 Fillmore Street Denver, Colorado 80206 Attention: General Counsel If to the Company Farmers New World Life Insurance Company 3007 -- 77th Avenue, S.E. Mercer Island, Washington 98040 Attention: C. Paul Patsis, President With a copy to: M. Douglas Close Vice President and General Counsel Farmers New World Life Insurance Company 4680 Wilshire Boulevard Los Angeles, California 90010 ARTICLE VIII Miscellaneous 8.1 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. -13- 14 8.2 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 8.3 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 8.4 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of State of Colorado. 8.5 The parties to this Agreement acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and that no Trustee, officer, agent or holder of shares of beneficial interest of the Trust shall be personally liable for any such liabilities. 8.6 Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the Securities and Exchange Commission, the National Association of Securities Dealers, Inc., and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 8.7 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 8.8 The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect. 8.9 Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written approval of the other party. 8.10 No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written. JANUS ASPEN SERIES By: /s/ BONNIE M. HOWE --------------------------------- Name: Bonnie M. Howe ------------------------------- Title: Vice President ------------------------------ -14- 15 FARMERS NEW WORLD LIFE INSURANCE COMPANY By: /s/ JOHN R. PATTON --------------------------------- Name: John R. Patton Title: Assistant Vice-President and Corporate Secretary -15- 16 Schedule A Separate Accounts and Associated Contracts
Contracts Funded Name of Separate Account By Separate Account - ------------------------ ------------------- Farmers Annuity Separate Account A (4/6/99) Farmers Variable Annuity Farmers Variable Life Separate Account A (4/6/99) Farmers Flexible Premium Variable Life Insurance Policy
-16- 17 Schedule B List of Portfolios Name of Portfolio All Portfolios of Janus Aspen Series open to new investors (as set forth in the current prospectus of Janus Aspen Series) except Global Technology Portfolio and Global Life Sciences Portfolio* *The Company shall have no obligation to make available any or all of these Portfolios. -17- EX-99.8(Q) 13 a71651ex99-8q.txt EXHIBIT 8(Q) 1 EXHIBIT (8)(q) PARTICIPATION AGREEMENT Among VARIABLE INSURANCE PRODUCTS FUNDS, FIDELITY DISTRIBUTORS CORPORATION and FARMERS NEW WORLD LIFE INSURANCE COMPANY THIS AGREEMENT, made and entered into as of the 1st day of April, 2001 by and among FARMERS NEW WORLD LIFE INSURANCE COMPANY, (hereinafter the "Company"), a life insurance company organized under the laws of the State of Washington, on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A hereto as may be amended from time to time (each such account hereinafter referred to as the "Account"); and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a Massachusetts corporation; and each of VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II and VARIABLE INSURANCE PRODUCTS FUND III, each an unincorporated business trust organized under the laws of the Commonwealth of Massachusetts (each referred to hereinafter as the "Fund"). RECITALS WHEREAS, each Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively, the "Variable Insurance Products") to be offered by insurance companies which have entered into participation agreements with the Fund and the Underwriter (hereinafter "Participating Insurance Companies"); and WHEREAS, the beneficial interest in each Fund is divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets, any one or more of which may be made available under this Agreement, as may be amended from time to time by mutual agreement of the parties hereto (each such series hereinafter referred to as a "Portfolio"); and WHEREAS, each Fund has obtained an order from the Securities and Exchange Commission, dated October 15, 1985 (File No. 812-6102) or September 17, 1986 (File No. 1 2 812-6422), granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and WHEREAS, each Fund is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly registered as an investment adviser under the federal Investment Advisers Act of 1940 and any applicable state securities law; and WHEREAS, the variable life insurance and/or variable annuity products identified on Schedule A hereto ("Contracts") have been or will be registered by the Company under the 1933 Act, unless such Contracts are exempt from registration thereunder; and WHEREAS, each Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the aforesaid Contracts; and WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act, unless such Account is exempt from registration thereunder; and WHEREAS, the Underwriter is registered as a broker dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (hereinafter "NASD"); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolios on behalf of each Account to fund certain of the aforesaid Contracts and the Underwriter is authorized to sell such shares to each Account at net asset value; AGREEMENT NOW, THEREFORE, in consideration of their mutual promises, the Company, the Underwriter and each Fund agree as follows: 2 3 ARTICLE A. Form of Agreement Although the parties have executed this Agreement in the form of a Master Participation Agreement for administrative convenience, this Agreement shall create a separate participation agreement for each Fund, as though the Company and the Distributor had executed a separate, identical form of participation agreement with each Fund. No rights, responsibilities or liabilities of any Fund shall be attributed to any other Fund. ARTICLE I. Sale of Fund Shares 1.1. The Underwriter agrees to sell to the Company those shares of the Fund which each Account orders, executing such orders on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Fund. For purposes of this Section 1.1, the Company shall be the designee of the Fund for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such order by 9:00 a.m. Boston time on the next following Business Day. Beginning within three months of the effective date of this Agreement, the Company agrees that all order for the purchase and redemption of Fund shares on behalf of the Accounts will be placed by the Company with the Funds or their transfer agent by electronic transmission. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. 1.2. The Fund agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Fund calculates its net asset value pursuant to rules of the Securities and Exchange Commission and the Fund shall use reasonable efforts to calculate such net asset value on each day which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 1.3. The Fund and the Underwriter agree that shares of the Fund will be sold only to Participating Insurance Companies and their separate accounts. No shares of any Portfolio will be sold to the general public. 1.4. The Fund and the Underwriter will not sell Fund shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles I, III, V, VII and Section 2.5 of Article II of this Agreement is in effect to govern such sales. 1.5. The Fund agrees to redeem for cash, on the Company's request, any full or fractional shares of the Fund held by the Company, executing such requests on a daily basis at 3 4 the net asset value next computed after receipt by the Fund or its designee of the request for redemption. For purposes of this Section 1.5, the Company shall be the designee of the Fund for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such request for redemption on the next following Business Day. 1.6. The Company agrees that purchases and redemptions of Portfolio shares offered by the then current prospectus of the Fund shall be made in accordance with the provisions of such prospectus. The Company agrees that all net amounts available under the Contracts shall be invested in the Fund, in such other Funds advised by the Adviser as may be mutually agreed to in writing by the parties hereto, or in the Company's general account, or in an investment company other than the Fund. 1.7. The Company shall pay for Fund shares on the next Business Day after an order to purchase Fund shares is made in accordance with the provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. 1.8. Issuance and transfer of the Fund's shares will be by book entry only. Stock certificates will not be issued to the Company or any Account. Shares ordered from the Fund will be recorded in an appropriate title for each Account or the appropriate subaccount of each Account. 1.9. The Fund shall furnish same day notice (by wire or telephone, followed by written confirmation) to the Company of any income, dividends or capital gain distributions payable on the Fund's shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on the Portfolio shares in additional shares of that Portfolio. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.10. The Fund shall make the net asset value per share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated (normally by 6:30 p.m. Boston time) and shall use its best efforts to make such net asset value per share available by 7 p.m. Boston time. ARTICLE II. Representations and Warranties 2.1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act or are exempt from registration thereunder; that the Contracts will be issued and sold in compliance in all material respects with all applicable Federal and State laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. The Company further represents and warrants that it is an insurance 4 5 company duly organized and in good standing under applicable law and that it has legally and validly established each Account prior to any issuance or sale thereof as a segregated asset account under Section 48.18A.020 of the Washington Insurance Code and that each Account is either registered or exempt from registration as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts. 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws of the State of Washington and all applicable federal and state securities laws and that the Fund is and shall remain registered under the 1940 Act. The Fund shall amend the Registration Statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund or the Underwriter. 2.3. The Fund represents that it is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Company represents that the Contracts are currently treated as endowment, life insurance or annuity insurance contracts, under applicable provisions of the Code and that it will make every effort to maintain such treatment and that it will notify the Fund and the Underwriter immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.5. (a) With respect to Initial Class shares, the Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it may make such payments in the future. The Fund has adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for distribution expenses. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of trustees, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. (b) With respect to Service Class shares and Service Class 2 shares, the Fund has adopted Rule 12b-1 Plans under which it makes payments to finance distribution expenses. The Fund represents and warrants that it has a board of trustees, a majority of whom are not interested persons of the Fund, which has formulated and approved each of its Rule 12b-1 Plans to finance distribution expenses of the Fund and that any changes to the Fund's Rule 12b-1 Plans will be approved by a similarly constituted board of trustees. 2.6. The Fund makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the 5 6 insurance laws or regulations of the various states except that the Fund represents that the Fund's investment policies, fees and expenses are and shall at all times remain in compliance with the laws of the State of Washington and the Fund and the Underwriter represent that their respective operations are and shall at all times remain in material compliance with the laws of the State of Washington to the extent required to perform this Agreement. 2.7. The Underwriter represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Underwriter further represents that it will sell and distribute the Fund shares in accordance with the laws of the Commonwealth of Massachusetts and all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.8. The Fund represents that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act. 2.9. The Underwriter represents and warrants that the Adviser is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the Adviser shall perform its obligations for the Fund in compliance in all material respects with the laws of the Commonwealth of Massachusetts and any applicable state and federal securities laws. 2.10. The Fund and Underwriter represent and warrant that all of their directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.11. The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Fund are covered by a blanket fidelity bond or similar coverage for the benefit of the Fund, and that said bond is issued by a reputable bonding company, includes coverage for larceny and embezzlement, and is in an amount not less than $5 million. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Fund and the Underwriter in the event that such coverage no longer applies. ARTICLE III. Prospectuses and Proxy Statements; Voting 3.1. The Underwriter shall provide the Company with as many printed copies of the Fund's current prospectus and Statement of Additional Information as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund shall provide camera-ready film containing the Fund's prospectus and Statement of Additional Information, and such 6 7 other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or Statement of Additional Information for the Fund is amended during the year) to have the prospectus, private offering memorandum or other disclosure document ("Disclosure Document") for the Contracts and the Fund's prospectus printed together in one document, and to have the Statement of Additional Information for the Fund and the Statement of Additional Information for the Contracts printed together in one document. Alternatively, the Company may print the Fund's prospectus and/or its Statement of Additional Information in combination with other fund companies' prospectuses and statements of additional information. Except as provided in the following three sentences, all expenses of printing and distributing Fund prospectuses and Statements of Additional Information shall be the expense of the Company. For prospectuses and Statements of Additional Information provided by the Company to its existing owners of Contracts in order to update disclosure annually as required by the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the Company chooses to receive camera-ready film in lieu of receiving printed copies of the Fund's prospectus, the Fund will reimburse the Company in an amount equal to the product of A and B where A is the number of such prospectuses distributed to owners of the Contracts, and B is the Fund's per unit cost of typesetting and printing the Fund's prospectus. The same procedures shall be followed with respect to the Fund's Statement of Additional Information. The Company agrees to provide the Fund or its designee with such information as may be reasonably requested by the Fund to assure that the Fund's expenses do not include the cost of printing any prospectuses or Statements of Additional Information other than those actually distributed to existing owners of the Contracts. 3.2. The Fund's prospectus shall state that the Statement of Additional Information for the Fund is available from the Underwriter or the Company (or in the Fund's discretion, the Prospectus shall state that such Statement is available from the Fund). 3.3. The Fund, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other communications (except for prospectuses and Statements of Additional Information, which are covered in Section 3.1) to shareholders in such quantity as the Company shall reasonably require for distributing to Contract owners. 3.4. If and to the extent required by law the Company shall: (i) solicit voting instructions from Contract owners; (ii) vote the Fund shares in accordance with instructions received from Contract owners; and (iii) vote Fund shares for which no instructions have been received in a particular separate account in the same proportion as Fund shares of such portfolio for which instructions have been received in that separate account, so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. The 7 8 Company reserves the right to vote Fund shares held in any segregated asset account in its own right, to the extent permitted by law. Participating Insurance Companies shall be responsible for assuring that each of their separate accounts participating in the Fund calculates voting privileges in a manner consistent with the standards set forth on Schedule B attached hereto and incorporated herein by this reference, which standards will also be provided to the other Participating Insurance Companies. 3.5. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in accordance with the Securities and Exchange Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of trustees and with whatever rules the Commission may promulgate with respect thereto. ARTICLE IV. Sales Material and Information 4.1. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, each piece of sales literature or other promotional material in which the Fund or its investment adviser or the Underwriter is named, at least fifteen Business Days prior to its use. No such material shall be used if the Fund or its designee reasonably objects to such use within fifteen Business Days after receipt of such material. 4.2. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Fund shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or its designee or by the Underwriter, except with the permission of the Fund or the Underwriter or the designee of either. 4.3. The Fund, Underwriter, or its designee shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company and/or its separate account(s), is named at least fifteen Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within fifteen Business Days after receipt of such material. 4.4. The Fund and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, each Account, or the Contracts other than the information or representations contained in a registration statement or Disclosure Document for the Contracts, as such registration statement or Disclosure Document may be amended or supplemented from time to time, or in published reports for each Account which are in the public domain or approved by the Company for distribution to Contract owners, 8 9 or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 4.5. The Fund will provide to the Company at least one complete copy of all registration statements, prospectuses, Statements of Additional Information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Fund or its shares, contemporaneously with the filing of such document with the Securities and Exchange Commission or other regulatory authorities. 4.6. The Company will provide to the Fund at least one complete copy of all registration statements, Disclosure Documents, Statements of Additional Information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to the Contracts or each Account, contemporaneously with the filing of such document with the SEC or other regulatory authorities or, if a Contract and its associated Account are exempt from registration, at the time such documents are first published. 4.7. For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, any of the following that refer to the Fund or any affiliate of the Fund: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and registration statements, Disclosure Documents, Statements of Additional Information, shareholder reports, and proxy materials. ARTICLE V. Fees and Expenses 5.1. The Fund and Underwriter shall pay no fee or other compensation to the Company under this agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing and such payments will be made out of existing fees otherwise payable to the Underwriter, past profits of the Underwriter or other resources available to the Underwriter. No such payments shall be made directly by the Fund. 5.2. All expenses incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the 9 10 expenses for the cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of the Fund's shares. 5.3. The Company shall bear the expenses of distributing the Fund's prospectus and reports to owners of Contracts issued by the Company. The Fund shall bear the costs of soliciting Fund proxies from Contract owners, including the costs of mailing proxy materials and tabulating proxy voting instructions, not to exceed the costs charged by any service provider engaged by the Fund for this purpose. The Fund and the Underwriter shall not be responsible for the costs of any proxy solicitations other than proxies sponsored by the Fund. ARTICLE VI. Diversification 6.1. The Fund will at all times invest money from the Contracts in such a manner as to ensure that the Contracts will be treated as variable contracts under the Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Fund will at all times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations. In the event of a breach of this Article VI by the Fund, it will take all reasonable steps (a) to notify Company of such breach and (b) to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Regulation 1.817-5. ARTICLE VII. Potential Conflicts 7.1. The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. 7.2. The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under 10 11 the Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever contract owner voting instructions are disregarded. 7.3. If it is determined by a majority of the Board, or a majority of its disinterested trustees, that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1), withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (2), establishing a new registered management investment company or managed separate account. 7.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund's election, to withdraw the affected Account's investment in the Fund and terminate this Agreement with respect to such Account; provided, however that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the end of that six month period the Underwriter and Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund. 7.5. If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account's investment in the Fund and terminate this Agreement with respect to such Account within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Until the end of the foregoing six month period, the Underwriter and Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund. 7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately 11 12 remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in the Fund and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination, provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested members of the Board. 7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Shared Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. ARTICLE VIII. Indemnification 8.1. Indemnification By The Company 8.1(a). The Company agrees to indemnify and hold harmless the Fund and each trustee of the Board and officers and each person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of, or investment in, the Fund's shares or the Contracts and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Disclosure Documents for the Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made 12 13 in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in any Disclosure Document relating to the Contracts or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of the Fund not supplied by the Company, or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund Shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus, or sales literature of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company; or (iv) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company, as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof. 8.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement or to the Fund, whichever is applicable. 8.1(c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the 13 14 defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.1(d). The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Fund Shares or the Contracts or the operation of the Fund. 8.2. Indemnification by the Underwriter 8.2(a). The Underwriter agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of, or investment in, the Fund's shares or the Contracts and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Underwriter or Fund by or on behalf of the Company for use in the registration statement or prospectus for the Fund or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus or sales literature for the Contracts not supplied by the Underwriter or persons under its control) or wrongful conduct of the Fund, Adviser or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Fund shares; or 14 15 (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Disclosure Document or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund; or (iv) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification requirements specified in Article VI of this Agreement); or (v) arise out of or result from any material breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof. 8.2(b). The Underwriter shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to each Company or the Account, whichever is applicable. 8.2(c). The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. The Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 15 16 8.2(d). The Company agrees promptly to notify the Underwriter of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of each Account. 8.3. Indemnification By the Fund 8.3(a). The Fund agrees to indemnify and hold harmless the Company, and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Fund) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Fund and: (i) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure to comply with the diversification requirements specified in Article VI of this Agreement);or (ii) arise out of or result from any material breach of any representation and/or warranty made by the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Fund; as limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) hereof. 8.3(b). The Fund shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company, the Fund, the Underwriter or each Account, whichever is applicable. 8.3(c). The Fund shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Fund of any such claim shall not relieve the Fund from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Fund will be entitled to participate, at its own expense, in the defense thereof. The Fund also shall be entitled to assume the defense thereof, 16 17 with counsel satisfactory to the party named in the action. After notice from the Fund to such party of the Fund's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Fund will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.3(d). The Company and the Underwriter agree promptly to notify the Fund of the commencement of any litigation or proceedings against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of either Account, or the sale or acquisition of shares of the Fund. ARTICLE IX. Applicable Law 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the Securities and Exchange Commission may grant (including, but not limited to, the Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. Termination 10.1. This Agreement shall continue in full force and effect until the first to occur of: (a) termination by any party for any reason by sixty (60) days advance written notice delivered to the other parties; or (b) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio based upon the Company's determination that shares of such Portfolio are not reasonably available to meet the requirements of the Contracts; or (c) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event any of the Portfolio's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or (d) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event that such Portfolio ceases to qualify 17 18 as a Regulated Investment Company under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that the Fund may fail to so qualify; or (e) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event that such Portfolio fails to meet the diversification requirements specified in Article VI hereof; or (f) termination by either the Fund or the Underwriter by written notice to the Company, if either one or both of the Fund or the Underwriter respectively, shall determine, in their sole judgment exercised in good faith, that the Company and/or its affiliated companies has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (g) termination by the Company by written notice to the Fund and the Underwriter, if the Company shall determine, in its sole judgment exercised in good faith, that either the Fund or the Underwriter has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (h) termination by the Fund or the Underwriter by written notice to the Company, if the Company gives the Fund and the Underwriter the written notice specified in Section 1.6(b) hereof and at the time such notice was given there was no notice of termination outstanding under any other provision of this Agreement; provided, however any termination under this Section 10.1(h) shall be effective forty five (45) days after the notice specified in Section 1.6(b) was given. 10.2. Notwithstanding any termination of this Agreement, the Fund and the Underwriter shall at the option of the Company, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.2 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. 10.3. The provisions of Articles II (Representations and Warranties), VIII (Indemnification), IX (Applicable Law) and XII (Miscellaneous) shall survive termination of this Agreement. In addition, all other applicable provisions of this Agreement shall survive termination as long as shares of the Fund are held on behalf of Contract owners in accordance with section 10.2, except that the Fund and Underwriter shall have no further obligation to make Fund shares available in Contracts issued after termination. 18 19 10.4. The Company shall not redeem Fund shares attributable to the Contracts (as opposed to Fund shares attributable to the Company's assets held in the Account) except (i) as necessary to implement Contract Owner initiated or approved transactions, or (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption") or (iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish to the Fund and the Underwriter the opinion of counsel for the Company (which counsel shall be reasonably satisfactory to the Fund and the Underwriter) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, the Company shall not prevent Contract Owners from allocating payments to a Portfolio that was otherwise available under the Contracts without first giving the Fund or the Underwriter 90 days notice of its intention to do so. ARTICLE XI. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Fund: 82 Devonshire Street Boston, MA 02109 Attention: Treasurer If to the Company: Farmers New World Life Insurance Company 3003 77th Avenue, SE Mercer Island, WA 98040 Attention: C. Paul Patsis, President If to the Underwriter: 82 Devonshire Street Boston, MA 02109 Attention: Treasurer ARTICLE XII. Miscellaneous 12.1. All persons dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund as neither the Board, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Fund. 12.2. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts 19 20 and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information until such time as it may come into the public domain without the express written consent of the affected party. In addition, each Fund and the Underwriter shall not, directly or indirectly, disclose or use any nonpublic personal information regarding the consumers or customers of the Company (as defined in Rule 3(g) and 3(j), respectively, of Regulation S-P of the Securities and Exchange Commission) ("Confidential Information"), other than to carry out the functions contemplated by this Agreement. The foregoing obligation of confidentiality shall not extend to any portion of the Confidential Information that is, or becomes, generally available to the general public from: (a) federal, State or local governmental records, (b) widely distributed media, or (c) disclosures to the general public that are required to be made by federal, State or local law. 12.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 12.4. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 12.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 12.6. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish the California Insurance Commissioner with any information or reports in connection with services provided under this Agreement which such Commissioner may request in order to ascertain whether the insurance operations of the Company are being conducted in a manner consistent with the California Insurance Regulations and any other applicable law or regulations. 12.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 12.8. This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto; provided, however, that the Underwriter may assign this Agreement or any rights or obligations hereunder to any affiliate of or company under common control with the Underwriter, if such assignee is duly licensed and registered to perform the obligations of the Underwriter under this Agreement. The 20 21 Company shall promptly notify the Fund and the Underwriter of any change in control of the Company. 12.9. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee copies of the following reports: (a) the Company's annual statement (prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles ("GAAP"), if any), as soon as practical and in any event within 90 days after the end of each fiscal year; (b) the Company's quarterly statements (statutory) (and GAAP, if any), as soon as practical and in any event within 45 days after the end of each quarterly period: (c) any financial statement, proxy statement, notice or report of the Company sent to stockholders and/or policyholders, as soon as practical after the delivery thereof to stockholders; (d) any registration statement (without exhibits) and financial reports of the Company filed with the Securities and Exchange Commission or any state insurance regulator, as soon as practical after the filing thereof; (e) any other report submitted to the Company by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company, as soon as practical after the receipt thereof. 21 22 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative. FARMERS NEW WORLD LIFE INSURANCE COMPANY By: /s/ John R. Patton ---------------------------------------------------- John R. Patton Assistant Vice President and Corporate Secretary VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, and VARIABLE INSURANCE PRODUCTS FUND III By: /s/ Robert C. Pozen ---------------------------------------------------- Name: Robert C. Pozen Their: Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: /s/ Mike Kellogg ---------------------------------------------------- Name: Mike Kellogg Its: Vice President 22 23 SCHEDULE A SEPARATE ACCOUNTS, ASSOCIATED CONTRACTS AND AVAILABLE PORTFOLIOS
Name of Separate Account and Policy Form Numbers of Contracts Date Established by Board of Directors Funded By Separate Account - -------------------------------------- -------------------------- Farmers Variable Universal Life Farmers Individual Flexible Separate Account A Premium Variable Universal Life 4/6/99 Policy Farmers Annuity Farmers Individual Premium Flexible Variable Separate Account A Annuity Contract 2000-398 4/6/99
Portfolios Available Under the Contracts - ---------------------------------------- S&P 500 Index (Service Class Shares) VIP Growth (Service Class Shares) VIP Mid-Cap (Service Class Shares) 23 24 SCHEDULE B PROXY VOTING PROCEDURE The following is a list of procedures and corresponding responsibilities for the handling of proxies relating to the Fund by the Underwriter, the Fund and the Company. The defined terms herein shall have the meanings assigned in the Participation Agreement except that the term "Company" shall also include the department or third party assigned by the Insurance Company to perform the steps delineated below. 1. The number of proxy proposals is given to the Company by the Underwriter as early as possible before the date set by the Fund for the shareholder meeting to facilitate the establishment of tabulation procedures. At this time the Underwriter will inform the Company of the Record, Mailing and Meeting dates. This will be done verbally approximately two months before meeting. 2. Promptly after the Record Date, the Company will perform a "tape run", or other activity, which will generate the names, addresses and number of units which are attributed to each contractowner/policyholder (the "Customer") as of the Record Date. Allowance should be made for account adjustments made after this date that could affect the status of the Customers' accounts as of the Record Date. Note: The number of proxy statements is determined by the activities described in Step #2. The Company will use its best efforts to call in the number of Customers to Fidelity, as soon as possible, but no later than two weeks after the Record Date. 3. The Fund's Annual Report no longer needs to be sent to each Customer by the Company either before or together with the Customers' receipt of a proxy statement. Underwriter will provide the last Annual Report to the Company pursuant to the terms of Section 3.3 of the Agreement to which this Schedule relates. 4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is provided to the Company by the Fund. The Company, at its expense, shall produce and personalize the Voting Instruction Cards. The Legal Department of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card before it is printed. Allow approximately 2-4 business days for printing information on the Cards. Information commonly found on the Cards includes: a. name (legal name as found on account registration) b. address c. Fund or account number d. coding to state number of units e. individual Card number for use in tracking and verification of votes (already on Cards as printed by the Fund) (This and related steps may occur later in the chronological process due to possible uncertainties relating to the proposals.) 24 25 5. During this time, Fidelity Legal will develop, produce, and the Fund will pay for the Notice of Proxy and the Proxy Statement (one document). Printed and folded notices and statements will be sent to Company for insertion into envelopes (envelopes and return envelopes are provided and paid for by the Insurance Company). Contents of envelope sent to Customers by Company will include: a. Voting Instruction Card(s) b. One proxy notice and statement (one document) c. return envelope (postage pre-paid by Company) addressed to the Company or its tabulation agent d. "urge buckslip" - optional, but recommended. (This is a small, single sheet of paper that requests Customers to vote as quickly as possible and that their vote is important. One copy will be supplied by the Fund.) e. cover letter - optional, supplied by Company and reviewed and approved in advance by Fidelity Legal. 6. The above contents should be received by the Company approximately 3-5 business days before mail date. Individual in charge at Company reviews and approves the contents of the mailing package to ensure correctness and completeness. Copy of this approval sent to Fidelity Legal. 7. Package mailed by the Company. * The Fund must allow at least a 15-day solicitation time to the Company as the shareowner. (A 5-week period is recommended.) Solicitation time is calculated as calendar days from (but not including) the meeting, counting backwards. 8. Collection and tabulation of Cards begins. Tabulation usually takes place in another department or another vendor depending on process used. An often used procedure is to sort Cards on arrival by proposal into vote categories of all yes, no, or mixed replies, and to begin data entry. Note: Postmarks are not generally needed. A need for postmark information would be due to an insurance company's internal procedure and has not been required by Fidelity in the past. 9. Signatures on Card checked against legal name on account registration which was printed on the Card. Note: For Example, If the account registration is under "Bertram C. Jones, Trustee," then that is the exact legal name to be printed on the Card and is the signature needed on the Card. 25 26 10. If Cards are mutilated, or for any reason are illegible or are not signed properly, they are sent back to Customer with an explanatory letter, a new Card and return envelope. The mutilated or illegible Card is disregarded and considered to be not received for purposes of vote tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure are "hand verified," i.e., examined as to why they did not complete the system. Any questions on those Cards are usually remedied individually. 11. There are various control procedures used to ensure proper tabulation of votes and accuracy of that tabulation. The most prevalent is to sort the Cards as they first arrive into categories depending upon their vote; an estimate of how the vote is progressing may then be calculated. If the initial estimates and the actual vote do not coincide, then an internal audit of that vote should occur. This may entail a recount. 12. The actual tabulation of votes is done in units which is then converted to shares. (It is very important that the Fund receives the tabulations stated in terms of a percentage and the number of shares.) Fidelity Legal must review and approve tabulation format. 13. Final tabulation in shares is verbally given by the Company to Fidelity Legal on the morning of the meeting not later than 10:00 a.m. Boston time. Fidelity Legal may request an earlier deadline if required to calculate the vote in time for the meeting. 14. A Certification of Mailing and Authorization to Vote Shares will be required from the Company as well as an original copy of the final vote. Fidelity Legal will provide a standard form for each Certification. 15. The Company will be required to box and archive the Cards received from the Customers. In the event that any vote is challenged or if otherwise necessary for legal, regulatory, or accounting purposes, Fidelity Legal will be permitted reasonable access to such Cards. 16. All approvals and "signing-off" may be done orally, but must always be followed up in writing. 26 27 SCHEDULE C Other investment companies currently available under variable annuities or variable life insurance issued by the Company: CALVERT VARIABLE SERIES, INC. - Social Small Cap Growth Portfolio DREYFUS VARIABLE INVESTMENT FUND - Quality Bond Portfolio - Small Cap Portfolio DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - Franklin Small Cap Fund, Class 2 - Templeton Asset Strategy Fund, Class 2 - Templeton Developing Markets Fund, Class 2 GOLDMAN SACHS VARIABLE INSURANCE TRUST - Capital Growth Fund - CORE(SM) Small Cap Equity Fund - Mid Cap Value Fund JANUS ASPEN SERIES - Aggressive Growth Portfolio - Balanced Portfolio - Capital Appreciation Portfolio KEMPER VARIABLE SERIES - Kemper Government Securities Portfolio - Kemper High Yield Portfolio - Kemper Small Cap Growth Portfolio - KVS Dreman High Return Equity Portfolio PIMCO VARIABLE INSURANCE TRUST - Foreign Bond Portfolio - Low Duration Bond Portfolio 27 28 SCUDDER VARIABLE LIFE INVESTMENT FUND - Bond Portfolio - Global Discovery Portfolio - Growth and Income Portfolio - International Portfolio - Money Market Portfolio WM VARIABLE TRUST - Equity Income Fund - Mid Cap Stock Fund - Small Cap Stock Fund 28 EX-99.8(R) 14 a71651ex99-8r.txt EXHIBIT 8(R) 1 EXHIBIT (8)(r) WM VARIABLE TRUST PARTICIPATION AGREEMENT THIS AGREEMENT is made this 2nd day of April, 2001 among WM VARIABLE TRUST, an open-end management investment company organized under the laws of the Commonwealth of Massachusetts ("WMVT"), WM FUNDS DISTRIBUTOR, INC. ("WMFDI"), the principal underwriter of WMVT, organized under the laws of the State of Washington, and FARMERS NEW WORLD LIFE INSURANCE COMPANY, a life insurance company organized under the laws of the State of Washington (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be amended from time to time (the "Accounts"). W I T N E S S E T H: WHEREAS, WMVT is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and WMVT has registered its shares under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, WMVT desires to act as an investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts to be offered by insurance companies that have entered into participation agreements with WMVT (the "Participating Insurance Companies"); and WHEREAS, WMVT issues shares of beneficial interest, divided into several series of shares, each series representing an interest in a particular managed fund of securities and other assets; and WHEREAS, WMVT has received an order from the SEC granting Participating Insurance Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of WMVT to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies and certain qualified pension and retirement plans (the "Exemptive Order"); and WHEREAS, WM Advisors, Inc. (the "Adviser") is duly registered as an investment adviser under the Investment Advisers Act of 1940 and any applicable state securities laws; and WHEREAS, WMFDI is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and 2 WHEREAS, the Company desires to utilize shares of those series of the WMVT identified on Schedule A (the "Funds") as an investment vehicle for the variable life insurance and/or variable annuity contracts issued by the Company and identified on Schedule A (collectively, the "Contracts") funded by the Accounts; NOW THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I. Sale of WMVT Shares 1.1. WMVT shall make shares of the Funds available to the Accounts at the net asset value next computed after receipt of such purchase order by WMVT (or its agent), as established in accordance with the provisions of the then current prospectus of WMVT. Shares of a particular Fund of WMVT shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Board of Trustees of WMVT (the "Trustees") may refuse to sell shares of any Fund to any person, or suspend or terminate the offering of shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Fund. 1.2. WMVT will redeem any full or fractional shares of any Fund when requested by the Company on behalf of an Account at the net asset value next computed after receipt by WMVT (or its agent) of the request for redemption in good order in accordance with the provisions of the then current prospectus of WMVT. 1.3. For the purposes of Sections 1.1 and 1.2, WMVT hereby appoints the Company as its agent for the limited purpose of receiving and accepting purchase and redemption orders resulting from investments in and payments under the Contracts. Receipt by the Company shall constitute receipt by WMVT provided that (i) such orders are received by the Company in good order prior to the time the net asset value of each Fund is determined in accordance with its prospectus and (ii) WMVT receives notice of such orders by telephone by 11:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which WMVT calculates its net asset value pursuant to the rules of the SEC. 1.4. Purchase orders that are transmitted to WMVT in accordance with Section 1.3 shall be paid for by the Company no later than 12:00 noon New York time on the same Business Day that WMVT receives notice of the order. WMVT shall pay and transmit the proceeds of redemption orders that are transmitted to WMVT in accordance with Section 1.3 no later than 12:00 noon New York time on the same Business Day that WMVT receives notice of the redemption, except that WMVT reserves the right to postpone payment upon redemption consistent with Section 22(e) of the 1940 Act and any rules thereunder. Payments for purchase orders with respect to each Fund will be made net of any redemption proceeds payable by 2 3 WMVT in respect of such Fund on the same Business Day as the purchase. Payments shall be made in federal funds transmitted by wire. 1.5. Issuance and transfer of WMVT's shares will be by book entry only. Share certificates will not be issued to the Company or the Account. Shares purchased from WMVT will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. WMVT shall fax to the Company at the number designated by the Company a copy of a transaction report and a transaction history report on the Business Day following each trade. 1.6. WMFDI shall furnish prompt notice to the Company of any income dividends or capital gain distributions payable on WMVT's shares at least five (5) Business Days prior to the ex-dividend date. On the ex-dividend date or, if not a Business Day on the first Business Day thereafter, WMFDI shall notify the Company of the actual amount of dividend or distribution payable per share. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Fund's shares in additional shares of that Fund. WMFDI shall, on the date of issuance or if not a Business Day on the first Business Day thereafter, notify the Company of the number of shares so issued in payment of such dividends and distributions. 1.7. WMFDI shall fax the closing net asset value per share for each Fund to the Company on a daily basis as soon as reasonably practicable after such closing net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 6 p.m. New York time. Any material error in the calculation or reporting of the closing net asset value per share shall be reported promptly to the Company upon discovery. In such event the Company shall use reasonable efforts to assist WMVT in adjusting the number of shares purchased or redeemed or otherwise complying with WMVT's net asset value correction procedures which are attached as Exhibit 1. 1.8. Each Business Day, the Company shall send WMFDI a fax listing its orders for purchasing and redeeming Fund shares (as a follow-up to the earlier telephonic trade instructions). Later that day, WMFDI shall send the Company at the number designated by the Company a fax confirming such orders and listing the closing net asset value for the prior Business Day. 1.9. WMVT agrees that its shares will be sold only to Participating Insurance Companies and their separate accounts, to certain qualified pension and retirement plans ("Qualified Plans") and to WM Advisors, Inc. ("Advisor") to the extent permitted by the Exemptive Order. No shares of any Fund will be sold other than in reliance upon the Exemptive Order. The Company agrees that WMVT shares will be used only for the purposes of funding the Contracts and Accounts listed in Schedule A, as amended from time to time. 1.10. WMVT agrees that all Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding to those contained in Section 2.8 and Article IV of this Agreement. 3 4 ARTICLE II. Obligations of the Parties 2.1. WMVT shall prepare and be responsible for filing with the SEC and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses, profiles (if any) and statements of additional information of WMVT. WMVT shall bear the costs of registration and qualification of its shares, preparation and filing of the documents listed in this Section 2.1. and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.2. At the option of the Company, WMVT shall either (a) provide the Company (at the Company's expense) with as many copies of WMVT's current prospectus, profile (if any), annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company shall reasonably request; or (b) provide the Company with a camera-ready copy of such documents in a form suitable for printing. WMVT shall provide the Company with a copy of its statement of additional information in a form suitable for duplication by the Company. WMVT shall also provide the Company with such other assistance as is reasonably necessary in order for the Company once each year (or as often as is required by the SEC) to have the prospectus for the Contracts and the prospectus or profile (if any) for the Funds printed together in one document. The prospectus, profile (if any) and statement of additional information provided by WMVT shall relate either to all funds of WMVT or only the Funds of WMVT, as the Company shall reasonably request. WMVT (at its expense) shall provide the Company with copies of any WMVT-sponsored proxy materials in such quantity as the Company shall reasonably require for distribution to Contract owners. 2.3. The Company shall bear the costs of printing and distributing WMVT's prospectus, profile (if any), statement of additional information, shareholder reports and other shareholder communications (including sales literature) to owners of and applicants for policies for which WMVT is serving or is to serve as an investment vehicle. The Company shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. The Company assumes sole responsibility for ensuring that such materials are delivered to Contract owners in accordance with applicable federal and state securities laws. WMFDI agrees to pay the Company a fee for reimbursement for the printing and administrative processing of WMVT Fund shares based on attached Schedule B. 2.4. The Company shall furnish, or cause to be furnished, to WMVT (or its designee), a copy of the Contract prospectus and statement of additional information in which WMVT or WMFDI is first named prior to the filing of such document with the SEC. The Company shall furnish, or shall cause to be furnished, to WMVT (or its designee) a copy of each subsequent Contract prospectus and statement of additional information in which WMVT or WMFDI is named concurrently with the filing of such document with the SEC provided that there are no material changes in disclosure related to WMVT or WMFDI. WMVT may, in its reasonable discretion, request that the Company modify any references to WMVT or WMFDI in subsequent filings. The Company shall furnish, or shall cause to be furnished, to WMVT (or its designee), each piece of sales literature or other promotional material in which WMVT or WMFDI is 4 5 named, at least five Business Days prior to its use or concurrently with the filing of such document with the NASD, whichever is greater. No such material shall be used if WMVT (or its designee) reasonably objects to such use within five Business Days after receipt of such material. 2.5. WMVT shall furnish, or cause to be furnished, to the Company (or its designee), a copy of any initial WMVT prospectus and statement of additional information in which the Company is first named prior to the filing of such document with the SEC. WMVT shall furnish, or shall cause to be furnished, to the Company (or its designee) a copy of each subsequent WMVT prospectus, profile (if any) and statement of additional information in which the Company is named concurrently with the filing of such document with the SEC provided that there are no material changes in disclosure related to the Company. The Company may, in its reasonable discretion, request that WMVT modify any references to the Company in subsequent filings. WMVT shall furnish, or shall cause to be furnished to the Company (or its designee) each piece of sales literature or other promotional material in which the Company is named, at least five Business Days prior to its use or concurrently with the filing of such document with the NASD, whichever is greater. No such material shall be used if the Company (or its designee) reasonably objects to such use within five Business Days after receipt of such material. 2.6. The Company shall not give any information or make any representations or statements on behalf of WMVT or WMFDI or concerning WMVT, WMFDI or Advisor in connection with the sale of the Contracts other than information or representations contained in and accurately derived from the registration statement, prospectus or profile (if any) for WMVT shares (as such registration statement, profile (if any) and prospectus may be amended or supplemented from time to time), reports of WMVT, WMVT-sponsored proxy statements, or in sales literature or other promotional material approved by WMVT or its designee or WMFDI, except as required by legal process or regulatory authorities or with the written permission of WMVT or its designee or WMFDI. 2.7. Neither WMVT nor WMFDI shall give any information or make any representations or statements on behalf of the Company or concerning the Company, the Accounts or the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the written permission of the Company. 2.8. WMVT or WMFDI will provide the Company with as much advance notice as is reasonably practicable of any material change affecting the Funds (including, but not limited to, any material change in its registration statement or prospectus affecting the Funds and any proxy solicitation sponsored by WMVT or WMFDI affecting the Funds) and consult with the Company in order to implement any such change in an orderly manner, recognizing the expenses of changes and attempting to minimize such expenses by implementing them in conjunction with regular annual updates of the prospectus for the Contracts. 5 6 2.9. WMVT and WMFDI agree to maintain a blanket fidelity bond or similar coverage for the benefit of WMVT in an amount not less than the minimum coverage required by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from time to time under the 1940 Act. 2.10. So long as, and to the extent that the SEC interprets the 1940 Act to require passthrough voting privileges for variable Contract owners, the Company will provide pass-through voting privileges to owners of policies whose cash values are invested, through the Accounts, in shares of WMVT. WMVT shall require all Participating Insurance Companies to calculate voting privileges in a consistent manner and the Company shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by WMVT. With respect to each Account, the Company will vote shares of WMVT held by the Account and for which no timely voting instructions from Contract owners are received as well as shares it owns that are held by that Account, in the same proportion as those shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for WMVT shares held by Contract owners without the prior written consent of WMVT, which consent may be withheld in WMVT's sole discretion, except in the event that the Company determines, in reliance on an opinion of counsel, that a proxy proposal would result in a violation of applicable insurance laws. 2.11. WMVT shall use its best efforts to maintain qualification of each Fund as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended ("Code") and shall notify the Company immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future. WMVT and WMFDI acknowledge that compliance with Subchapter M is an essential element of compliance with Section 817(h). 2.12. Each Fund shall comply with the requirements of Section 817(h) of the Code and the regulations issued thereunder relating to the diversification requirements for variable life insurance policies and variable annuity contracts, and WMVT shall notify the Company immediately upon having a reasonable basis for believing that any Fund has ceased or might cease to so comply. In addition, WMVT will immediately take such steps as may reasonably be necessary to adequately diversify the Fund to achieve compliance. 2.13. WMVT shall provide the Company or its designee with reports certifying compliance with the aforesaid Section 817(h) diversification and Subchapter M qualification requirements on a quarterly basis. 2.14. WMVT shall provide monthly statements of account as of the end of each month for all of the Company's accounts by the fifteenth (15th) Business Day of the following month. ARTICLE III. Representations 3.1. The Company represents and warrants that (i) it is an insurance company duly organized and in good standing under the laws of the State of Washington; (2) it has legally and 6 7 validly established and will maintain each Account as a segregated asset account under Section 48.18A.020 of the Washington Insurance Code. 3.2. The Company represents and warrants that each of the Accounts (1) has been registered as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated asset account for its variable annuity or variable life contracts, including the Contracts or, alternatively has not been registered in proper reliance upon an exclusion from registration under the 1940 Act; (2) the Accounts comply, and will continue to comply, in all material respects with applicable requirements of the 1940 Act and the rules thereunder; (3) the Accounts' 1933 Act registration statements relating to the Contracts, together with any amendments thereto, will at all times comply in all materials respects with the requirements of the 1933 Act and the rules thereunder, and (4) the prospectus for each Contract will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. 3.3. The Company represents and warrants that the Contracts or interests in the Accounts (1) are or, prior to issuance, will be registered as securities under the 1933 Act or, alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents and warrants that in all material respects the Contracts or interests in the Accounts comply with, and will be issued and sold in compliance with all applicable federal and state laws. 3.4. WMVT represents and warrants that it is duly organized and validly existing under the laws of the Commonwealth of Massachusetts. 3.5. WMVT represents and warrants that WMVT shares offered and sold pursuant to this Agreement are registered under the 1933 Act and WMVT is registered under the 1940 Act. WMVT shall amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. WMVT shall register and qualify its shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by WMVT. 3.6. WMVT represents and warrants that the investments of each Fund will comply with the diversification requirements set forth in Section 817(h) of the Code and the rules and regulations thereunder. 3.7. WMFDI represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. WMFDI further represents that it will sell and distribute WMVT shares in accordance with the laws of the State of Washington and all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 3.8. WMFDI represents and warrants that the Adviser is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the Adviser shall perform its obligations for WMVT in compliance in all material respects with the laws of the State of Washington and any applicable state and federal securities laws. 7 8 3.9. Each party will keep confidential any information acquired as a result of this Agreement regarding the business and affairs of the other parties to this Agreement and their affiliates. 3.10. In addition, WMVT and WMFDI shall not, directly or indirectly, disclose or use any nonpublic personal information regarding the consumers or customers of the Company (as the terms "consumer" and "customer" are defined in Rule 3(g) and 3(j), respectively, of Regulation S-P of the Securities and Exchange Commission) ("Confidential Information"), other than to carry out the functions contemplated by this Agreement. The foregoing obligation of confidentiality shall not extend to any portion of the Confidential Information that is, or becomes, generally available to the general public from: (a) federal, State or local governmental records, (b) widely distributed media, or (c) disclosures to the general public that are required to be made by federal, State or local law. ARTICLE IV. Potential Conflicts 4.1. The parties acknowledge that WMVT's shares may be made available for investment to other Participating Insurance Companies and participants in Qualified Plans. In such event, the Trustees will monitor WMVT for the existence of any material irreconcilable conflict between the interests of the contract owners of all Participating Insurance Companies and Qualified Plan investors. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Fund are being managed; (e) a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners and Qualified Plan investors; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Trustees shall promptly inform the Company if they determine that an irreconcilable material conflict exists and the implications thereof. 4.2. The Company agrees to promptly report any potential or existing conflicts of which it is aware to the Trustees. The Company will assist the Trustees in carrying out their responsibilities under the Exemptive Order by providing the Trustees with all information reasonably necessary for the Trustees to consider any issues raised including, but not limited to, information as to a decision by the Company to disregard Contract owner voting instructions. 4.3. If it is determined by a majority of the Trustees, or a majority of the disinterested Trustees, that a material irreconcilable conflict exists that affects the interests of Contract owners, the Company shall, in cooperation with Qualified Plans to the extent applicable and other Participating Insurance Companies whose contract owners are also affected, at its expense and to the extent reasonably practicable (as determined by the Trustees) take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, which steps could include: (a) withdrawing the assets allocable to some or all of the Accounts from WMVT or any Fund 8 9 and reinvesting such assets in a different investment medium, including (but not limited to) another fund of WMVT, or submitting the question of whether or not such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (b) establishing a new registered management investment company or managed separate account. The Company agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out with a view only to the interests of the owners of the Contracts. 4.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at WMVT's election, to withdraw the affected Account's investment in WMVT and terminate this Agreement with respect to such Account; provided, however that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees. Any such withdrawal and termination must take place within six (6) months after WMVT gives written notice that this provision is being implemented. Until the end of such six (6) month period, WMVT shall continue to accept and implement orders by the Company for the purchase and redemption of shares of WMVT upon the terms set forth above. 4.5. If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account's investment in WMVT and terminate this Agreement with respect to such Account within six (6) months after the Trustees inform the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees. Until the end of such six (6) month period, WMVT shall continue to accept and implement orders by the Company for the purchase and redemption of shares of WMVT upon the terms set forth above. 4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of the disinterested Trustees shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Company be required to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contact owners materially adversely affected by the irreconcilable material conflict. In the event that the Trustees determine that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in WMVT and terminate this Agreement within six (6) months after the Trustees inform the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested Trustees. 9 10 4.7. The Company shall at least annually submit to the Trustees such reports, materials or data as the Trustees may reasonably request so that the Trustees may fully carry out the duties imposed upon them by the Exemptive Order, and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Trustees. 4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Exemptive Order) on terms and conditions materially different from those contained in the Exemptive Order, then WMVT and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable. 4.9. The Company will maintain at its home office available to the SEC a list of its officers, directors and employees who participate directly in the management and administration of any separate account organized as a unit investment trust or of any Fund, which individuals will continue to be subject to the automatic disqualification provisions of Section 9(a) of the 1940 Act. ARTICLE V. Indemnification 5.1. Indemnification By the Company. The Company agrees to indemnify and hold harmless WMVT, WMFDI, and each of their Trustees, directors, officers, employees and agents and each person, if any, who controls WMVT or WMFDI within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a registration statement, prospectus or profile (if any) for the Contracts or in the Contracts themselves or in sales literature generated or approved by the Company on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, "Company Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Company by or on behalf of WMVT or WMFDI for use in Company Documents or otherwise for use in connection with the sale of the Contracts or WMVT shares; or 10 11 (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from WMVT Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or WMVT shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in WMVT Documents as defined in Section 5.2(a) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to WMVT or WMFDI by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to perform its obligations under this Agreement; or (e) arise out of or result from any material breach of any representation/and or warranty made by the Company or arise out of or result from any other material breach of this Agreement. 5.2. Indemnification By WMFDI. WMFDI agrees to indemnify and hold harmless the Company and each of its Trustees, officers, employees and agents and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of WMFDI) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for WMVT (or any amendment or supplement thereto), (collectively, "WMVT Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to WMVT by or on behalf of the Company for use in WMVT Documents or otherwise for use in connection with the sale of the Contracts or WMVT shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of WMVT or persons under its control, with respect to the sale or acquisition of the Contracts or WMVT shares; or 11 12 (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Company by or on behalf of WMVT; or (d) arise out of or result from any failure by WMVT or WMFDI to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by WMVT or WMFDI in this Agreement or arise out of or result from any other material breach of this Agreement by WMVT or WMFDI (including a failure whether unintentional, or in good faith, or otherwise, to comply with the diversification and other qualification requirements specified in Article II of this agreement). 5.3. None of the parties to this Agreement shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise from such Indemnified Party's willful misfeasance, bad faith or negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 5.4. None of the parties to this Agreement shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the other parties in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim or shall not relieve that party from any liability which it may have to the Indemnified Party in the absence of Sections 5.1 and 5.2. 5.5. In case any such action is brought against the Indemnified Parties, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from the indemnifying party to the Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. ARTICLE VI. Termination 6.1. This Agreement shall terminate as to the sale and issuance of new Contracts: 12 13 (a) at the option of any party, for any reason upon ninety (90) days advance written notice to the other parties, unless a shorter time period is agreed to in writing by the parties to this Agreement; (b) at the option of the Company, upon one week advance written notice to WMVT, if WMVT shares are not reasonably available to meet the requirements of the Contracts as determined by the Company; (c) at the option of the Company, immediately upon institution of formal proceedings against WMVT, WMFDI, or the Adviser by the NASD, SEC, or any other regulatory body that are deemed by the Company to materially affect the performance of the obligations under this Agreement; (d) at the option of WMVT or WMFDI, immediately upon institution of formal proceedings against the broker-dealer or broker-dealers marketing the Contracts, the Accounts, or the Company by the NASD, SEC, or any other regulatory body that are deemed by WMVT or WMFDI to materially affect the performance of the obligations under this Agreement; (e) upon the requisite vote of Contract owners having an interest in WMVT, or SEC approval of an application pursuant to Section 26(b) of the 1940 Act, to substitute for WMVT's shares the shares of another investment company in accordance with the terms of the applicable Contacts. The Company will give forty-five (45) days written notice to WMVT of any proposed application or vote to replace WMVT's shares. WMVT, the Adviser, and WMFDI shall cooperate with the Company in connection with such application; (f) upon assignment (as defined in Section 2(a)(4) of the 1940 Act) of the Agreement, unless made with the written consent of all other parties hereto; (g) at the option of the Company, if WMVT's shares are not registered, issued or sold in conformance with Federal law or such law precludes the use of WMVT's shares as an underlying investment medium for Contracts issued or to be issued by the Company. Prompt notice shall be given by each party should such situation occur; (h) by any party to the Agreement upon a determination by a majority of the Trustees of WMVT, or a majority of its disinterested Trustees, that an irreconcilable material conflict exists; (i) at the option of WMVT or WMFDI, if the Contracts cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code or if the Contracts are not registered, issued or sold in accordance with applicable state and/or federal law; (j) at the option of the Company, if the need for substitution of the shares of another investment company, pursuant to Section 26(b) of the 1940 Act, arises out of WMVT's failure to be registered, issued or sold in conformance with federal law, including applicable tax law, the expenses of obtaining such order shall be reimbursed by WMFDI. WMVT, the Adviser, and WMFDI shall cooperate with the Company in connection with such application; or 13 14 (k) at the option of the Company by written notice to WMVT with respect to any Fund in the event that such Fund ceases to qualify as a Regulated Investment Company under Subchapter M or fails to comply with the Section 817(h) diversification requirements specified in Article II hereof, or if the Company reasonably believes that such Fund may fail to so qualify or comply. 6.2 Notwithstanding any termination of this Agreement, WMVT shall, at the option of the Company, continue to make available additional shares of WMVT (or any Fund) pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement provided that the Company continues to pay the costs set forth in Section 2.3. 6.3 The provisions of Articles III and V shall survive the termination of this Agreement, and the provisions of Article IV and Section 2.10 shall survive the termination of this Agreement as long as shares of WMVT are held on behalf of Contract owners in accordance with Section 6.2. Specifically, without limitation, the owners of any existing Contracts shall, subject to the terms and conditions of this Agreement and the WMVT prospectus, be permitted to transfer or reallocate investment under the Contracts, redeem investments in any Fund and/or invest in WMVT upon the making of additional premium payments under the existing Contracts. ARTICLE VII. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to WMVT: WM Variable Trust 1201 Third Avenue, 22nd Floor Seattle, WA 98101-3000 Attention: William G. Papesh, President If to the Company: Farmers New World Life Insurance Company 3007 - 77th Avenue, S.E. Mercer Island, Washington 98040 Attention: C. Paul Patsis, President 14 15 with a copy to: M. Douglas Close Vice President and General Counsel Farmers New World Life Insurance Company 4680 Wilshire Boulevard Los Angeles, California 90010 ARTICLE VIII. Unregistered Separate Accounts Pursuant to Section 12(d)(1)(E) of the 1940 Act, the Company will comply with the following conditions for it to hold shares of any Fund in one or more unregistered separate accounts: 8.1. The Company represents that either the Company or the principal underwriter of any unregistered separate account holding Fund shares is a broker or dealer registered under the 1934 Act or is controlled (as defined in the 1940 Act) by a broker or dealer registered under the 1934 Act. 8.2. The Company will not hold any other investment security (as defined in Section 3 of the 1940 Act) in the corresponding subaccount of an unregistered separate account that holds shares of a Fund. 8.3. The Company will seek instructions from holders of interests in an unregistered separate account holding Fund shares with regard to the voting of all proxies solicited in connection with a Fund and will vote those proxies only in accordance with those instructions, or the Company will vote Fund shares held in its unregistered separate accounts in the same proportion as the vote of all of the Fund's other shareholders. 8.4. The Company will not substitute another security for shares of a Fund held in an unregistered separate account unless the Securities and Exchange Commission approves the substitution in the manner provided in Section 26 of the 1940 Act. ARTICLE IX. Miscellaneous 9.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 9.2. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 15 16 9.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 9.4. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of State of Washington. 9.5. Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 9.6. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 9.7. The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect. 9.8. Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written approval of the other party. 9.9. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. 9.10. It is expressly understood and agreed that the obligations and liabilities of WMVT hereunder will not be binding upon any of the trustees, shareholders, nominees, officers, agents, or employees of WMVT, as provided in the Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees and this Agreement has been signed by an authorized officer of WMVT, acting as such, and neither such authorization by the Trustees nor such execution and delivery by such officer will be deemed to have been made by any of the Trustees individually or impose any liability on any of them personally, but will bind only the assets of the relevant Fund, as provided in the Declaration of Trust. 16 17 IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written. FARMERS NEW WORLD LIFE INSURANCE COMPANY By: /s/ John R. Patton --------------------------------- Name: John R. Patton Title: Secretary WM VARIABLE TRUST By: /s/ William G. Papesh --------------------------------- Name: William G. Papesh Title: President WM FUNDS DISTRIBUTOR, INC. By: /s/ William G. Papesh --------------------------------- Name: William G. Papesh Title: President 17 18 Schedule A Separate Accounts, Associated Contracts, and Available Funds
Name of Separate Account and Contracts Funded Date Established by Board of Trustees By Separate Account - ------------------------------------- ------------------- Farmers Annuity Separate Account A (4/6/99) Farmers Variable Annuity Farmers Variable Life Separate Account A (4/6/99) Farmers Flexible Premium Variable Life Insurance Policy
Funds of WMVT to be made available to the Company as the sponsor of the Separate Accounts are: WM VARIABLE TRUST Equity Income Fund Mid Cap Stock Fund Small Cap Stock Fund 19 Schedule B Effective April 2, 2001, WMFDI shall pay Farmers New World Life Insurance Company an amount equal to the following: - .25% of average monthly assets of the Fund held in the Separate Accounts Such payments shall be made within thirty days of the end of each calendar quarter. 20 SCHEDULE 1 WM GROUP OF FUNDS NAV ERROR CORRECTION PROCEDURES ================================================================================ DEFINITIONS A. An NAV ERROR is one or more errors in the computation of net asset value which, when considered cumulatively, result in a difference between the originally computed NAV and the corrected NAV of at least $.01 per share. This computation is based upon the actual difference and is not based upon the rounding of NAV to the nearest cent per share. B. The NAV ERROR PERIOD is the day on which an NAV error occurred. C. A FUND LOSS occurs when, as a result of an NAV error, a fund has either paid excessive redemption proceeds as a result of an overstatement of net asset value or received insufficient sales proceeds as a result of an understatement of net asset value. When such a fund loss occurs, the individual shareholders effecting transactions suffer a corresponding benefit (a "SHAREHOLDER BENEFIT"). D. A FUND BENEFIT occurs when, as a result of an NAV error, a fund has either paid insufficient redemption proceeds as a result of an understatement of net assets or received excessive sales proceeds as a result of an overstatement of net asset value. When such a fund benefit occurs, the individual shareholders effecting transactions suffer a corresponding loss (a "SHAREHOLDER LOSS"). E. A NET LOSS occurs when the fund loss, as a result of an NAV error, exceeds the fund benefit as a result of such NAV error and the amount of the net loss is the difference between the fund loss and the fund benefit plus the amount, if any, of the fund benefit paid to shareholders as account adjustments. CORRECTION PROCEDURES 1. If there are one or more errors in the computation of net asset value which, when considered cumulatively, result in a difference between the originally computed NAV and the corrected NAV of less than $.01 per share, the impact is deemed to be immaterial and no corrective adjustment will be made to the fund or any shareholder account. This computation is based upon the actual difference and is not based upon the rounding of NAV to the nearest cent per share. 21 2. If an NAV error is less than 1/2 of 1% of the originally computed per share NAV, a fund should determine whether total fund losses exceeded total fund benefits for the NAV error period. If the fund incurred a net loss, the fund should be made whole by the responsible party (e.g., the adviser, sub-adviser, administrator or recordkeeping agent) reimbursing the fund for the net loss. If the fund had a net benefit, no action need be taken; however, such net benefit may be carried forward or backward with respect to other days which had an NAV error based upon the same error(s) but should not be carried forward to any analyses performed in the future for other NAV errors that may arise. 3. If an NAV error equals or exceeds 1/2 of 1% of the originally computed per share NAV, the fund and the shareholders should be made whole by (i) account adjustments being made to compensate shareholders for shareholder losses, and (ii) the responsible party reimbursing the fund for fund losses. (a) With respect to individual shareholder losses, the fund (or responsible party) should pay to individual shareholders any additional redemption proceeds owed and either refund excess sales monies paid or credit the shareholder account as of the date of the error for additional shares, provided, however, that no adjustment shall be made for any shareholder account for which the amount involved is de minimis, which for the purposes of these procedures shall be $25.00 or less. (b) With respect to fund losses, unless the individual shareholders who benefited from the errors are willing to reimburse the fund, the responsible party should reimburse the fund for the amount of the fund's losses. Note that there is no netting of fund benefits with fund losses (except to the extent described in 2 above) where the error equals or exceeds 1/2 of 1% of NAV, to the extent fund benefits were paid out by the fund to shareholders as account adjustments. 4. In the case of an error that fluctuates above and below 1/2 of 1%, individual shareholder adjustments should be effected for those days where the error was equal to or exceeded 1/2 of 1%. With respect to the remaining days, the fund level process described above may be applied. 22 5. The process described above should be a comprehensive analysis encompassing all known errors. If there is a subsequent discovery of an error which affects an NAV error period that had previously been corrected in the manner described above, the subsequently discovered error should be analyzed in isolation without taking into consideration the previously corrected errors. 6. Subject to the review and approval of the Board of Trustees of the Trust, the Adviser shall determine the responsible party for any error covered by these Procedures. 7. The foregoing Procedures are designed for general application. However, the Board of Trustees of the Trust and the Adviser realize that there may be situations where the equities of the situation would suggest a different result. Accordingly the Board and the Adviser reserve the right to vary these Procedures in any particular situation which they deem appropriate. EX-99.9 15 a71651ex99-9.txt EXHIBIT 9 1 EXHIBIT 9 FARMERS NEW WORLD LIFE INSURANCE COMPANY 4680 Wilshire Blvd. Los Angeles, California 90010 Direct Dial Number: 323-932-7165 Facsimile: 323-964-8093 April 26, 2001 Board of Directors Farmers New World Life Insurance Company Farmers Annuity Separate Account A 3003 - 77th Avenue, S.E. Mercer Island, Washington 98040 Ladies and Gentlemen: 1. In my capacity as Vice President and General Counsel of Farmers New World Life Insurance Company ("Farmers"), I have participated in the preparation and review of this Post-Effective Amendment No. 2 to the Registration Statement on Form N-4 (File No. 333-85183) filed with the Securities and Exchange Commission under the Securities Act of 1933 for the registration of individual flexible premium variable annuity contracts (the "Contracts") to be issued with respect to Farmers Annuity Separate Account A (the "Account"). The Account was established on April 6, 1999, by the Board of Directors of Farmers as a separate account for assets applicable to the Contracts, pursuant to the provisions of Section 48.18A.020 of the Washington Insurance Laws. 2. The Separate Account is a separate account of Farmers validly existing pursuant to Washington law and the regulations issued thereunder. 3. The Contracts, when issued as contemplated by the Registration Statement, will be legal and binding obligations of Farmers in accordance with their terms. In arriving at the foregoing opinion, I have made such examination of law and examined such records and other documents as I judged to be necessary or appropriate. I hereby consent to the filing of this opinion as an exhibit to the above referenced Registration Statement and to the use of my name under the caption "Legal Matters" in the Statement of Additional Information constituting a part of the Registration Statement. Very truly yours, /s/ M. Douglas Close - ---------------------------------------- M. Douglas Close Vice President and General Counsel Farmers New World Life Insurance Company EX-99.10(A) 16 a71651ex99-10a.txt EXHIBIT 10(A) 1 Exhibit 10(a) Sutherland Asbill & Brennan LLP Letterhead 1275 Pennsylvania Ave., N.W. Washington, DC 20004 STEPHEN E. ROTH DIRECT LINE: (202)383-0158 Internet: sroth@sablaw.com April 26, 2001 VIA EDGARLINK Board of Directors Farmers New World Life Insurance Company 3003 77th Avenue, S.E. Mercer Island, WA 98040 Ladies and Gentlemen: We hereby consent to the reference to our name under the caption "Legal Matters" in the Statement of Additional Information for the Farmers Variable Annuity filed as part of Post-Effective Amendment No. 2 to the registration statement on Form N-4 for the Farmers Annuity Separate Account A (File Nos. 333-85183; 811-09547). In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. Very truly yours, Sutherland Asbill & Brennan LLP By: /s/ Stephen E. Roth --------------------------------- Stephen E. Roth EX-99.10(B) 17 a71651ex99-10b.txt EXHIBIT 10(B) 1 EXHIBIT 10(b) [Letterhead of Deloitte & Touche LLP] INDEPENDENT AUDITORS' CONSENT - -------------------------------------------------------------------------------- We consent to the use in this Post-Effective Amendment No. 2 to Registration Statement No. 333-85183 of Farmers Annuity Separate Account A on Form N-4 of our report dated April 23, 2001, appearing in the Statement of Additional Information, which is part of this Registration Statement, and of our report dated February 12, 2001, relating to the financial statements of Farmers New World Life Insurance Company appearing in the Statement of Additional Information, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Statement of Additional Information. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Seattle, Washington April 23, 2001 EX-99.13 18 a71651ex99-13.txt EXHIBIT 13 1 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 4.93% $1,049.333 $ 1,000.00 1 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 9.52% $1,095.198 $ 1,000.00 1 Dreyfus Small Cap Portfolio 8/31/90 11.60% $1,115.984 $ 1,000.00 1 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 -12.40% $ 875.972 $ 1,000.00 1 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 -12.20% $ 878.033 $ 1,000.00 1 Fidelity VIP Index 500 Portfolio 8/27/92 -10.56% $ 894.373 $ 1,000.00 1 Fidelity VIP Mid Cap Portfolio 12/28/98 31.87% $1,318.741 $ 1,000.00 1 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 -15.87% $ 841.285 $ 1,000.00 1 Templeton Asset Strategy Fund 8/24/88 -1.24% $ 987.617 $ 1,000.00 1 Templeton Developing Markets Securities Fund 3/4/96 -32.95% $ 670.488 $ 1,000.00 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 -9.17% $ 908.338 $ 1,000.00 1 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 0.45% $1,004.481 $ 1,000.00 1 Goldman Sachs Mid Cap Value Fund 5/1/98 29.43% $1,294.302 $ 1,000.00 1 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 -32.90% $ 670.958 $ 1,000.00 1 Janus Balanced Portfolio (Service Shares) 9/13/93 -3.77% $ 962.271 $ 1,000.00 1 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 -6.50% $ 934.969 $ 1,000.00 1 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 15.47% $1,154.748 $ 1,000.00 1 WM Mid Cap Stock Fund 05/01/00 NA 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 6.21% $1,351.297 $ 1,000.00 5 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 4.19% $1,228.041 $ 1,000.00 5 Dreyfus Small Cap Portfolio 8/31/90 11.19% $1,699.283 $ 1,000.00 5 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.66% $2,160.576 $ 1,000.00 5 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 17.69% $2,257.725 $ 1,000.00 5 Fidelity VIP Index 500 Portfolio 8/27/92 16.38% $2,134.519 $ 1,000.00 5 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 5 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 18.53% $2,339.556 $ 1,000.00 5 Templeton Asset Strategy Fund 8/24/88 10.77% $1,667.989 $ 1,000.00 5 Templeton Developing Markets Securities Fund 3/4/96 NA 5 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 5 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 5 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 5 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 18.38% $2,325.066 $ 1,000.00 5 Janus Balanced Portfolio (Service Shares) 9/13/93 16.94% $2,187.059 $ 1,000.00 5 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 5 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 5 WM Mid Cap Stock Fund 05/01/00 NA 5
2 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 -11.93% $ 880.722 $ 1,000.00 1
FIVE YEAR RETURNS --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 13.65% $1,895.828 $ 1,000.00 5
3 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 NA 10 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.79% $ 1,928.539 $1,000.00 10 Dreyfus Small Cap Portfolio 8/31/90 32.32% $16,457.770 $1,000.00 10 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 NA 10 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 18.41% $ 5,419.133 $1,000.00 10 Fidelity VIP Index 500 Portfolio 8/27/92 NA 10 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 10 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 NA 10 Templeton Asset Strategy Fund 8/24/88 12.33% $ 3,199.233 $1,000.00 10 Templeton Developing Markets Securities Fund 3/4/96 NA 10 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 10 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 10 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 10 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 NA 10 Janus Balanced Portfolio (Service Shares) 9/13/93 NA 10 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 10 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 10 WM Mid Cap Stock Fund 05/01/00 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ Calvert Variable Series, Inc. Calvert Social Small Cap Growth Portfolio 3/15/95 6.83% $ 1,466.720 $1,000.00 5.797 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 7.22% $ 2,055.263 $1,000.00 10.334 Dreyfus Small Cap Portfolio 8/31/90 31.33% $16,717.395 $1,000.00 10.334 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.74% $ 3,062.958 $1,000.00 7.233 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 14.81% $ 7,131.247 $1,000.00 14.227 Fidelity VIP Index 500 Portfolio 8/27/92 15.37% $ 3,297.064 $1,000.00 8.345 Fidelity VIP Mid Cap Portfolio 12/28/98 41.21% $ 1,999.804 $1,000.00 2.008 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 18.35% $ 2,387.336 $1,000.00 5.164 Templeton Asset Strategy Fund 8/24/88 10.16% $ 3,305.659 $1,000.00 12.353 Templeton Developing Markets Securities Fund 3/4/96 -12.91% $ 513.067 $1,000.00 4.827 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 9.75% $ 1,282.184 $1,000.00 2.671 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 1.55% $ 1,045.265 $1,000.00 2.879 Goldman Sachs Mid Cap Value Fund 5/1/98 3.05% $ 1,083.370 $1,000.00 2.668 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 20.63% $ 3,931.096 $1,000.00 7.299 Janus Balanced Portfolio (Service Shares) 9/13/93 15.42% $ 2,848.731 $1,000.00 7.299 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 16.55% $ 2,044.300 $1,000.00 4.668 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 6.64% $ 1,187.717 $1,000.00 2.677 WM Mid Cap Stock Fund 05/01/00 16.23% $ 1,162.319 $1,000.00 0.668
4 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- WM Small Cap Stock Fund 01/12/94 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ WM Small Cap Stock Fund 01/12/94 14.30% $ 2,537.897 $1,000.00 6.967
5 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 4.67% $1,046.668 $ 1,000.00 1 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 9.24% $1,092.432 $ 1,000.00 1 Dreyfus Small Cap Portfolio 8/31/90 11.32% $1,113.166 $ 1,000.00 1 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 -12.62% $ 873.759 $ 1,000.00 1 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 -12.42% $ 875.815 $ 1,000.00 1 Fidelity VIP Index 500 Portfolio 8/27/92 -10.79% $ 892.114 $ 1,000.00 1 Fidelity VIP Mid Cap Portfolio 12/28/98 31.54% $1,315.412 $ 1,000.00 1 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 -16.08% $ 839.160 $ 1,000.00 1 Templeton Asset Strategy Fund 8/24/88 -1.49% $ 985.123 $ 1,000.00 1 Templeton Developing Markets Securities Fund 3/4/96 -33.12% $ 668.794 $ 1,000.00 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 -9.40% $ 906.031 $ 1,000.00 1 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 0.19% $1,001.930 $ 1,000.00 1 Goldman Sachs Mid Cap Value Fund 5/1/98 29.10% $1,291.017 $ 1,000.00 1 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 -33.07% $ 669.253 $ 1,000.00 1 Janus Balanced Portfolio (Service Shares) 9/13/93 -4.02% $ 959.828 $ 1,000.00 1 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 -6.74% $ 932.607 $ 1,000.00 1 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 15.18% $1,151.833 $ 1,000.00 1 WM Mid Cap Stock Fund 05/01/00 NA 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 5.94% $1,334.237 $ 1,000.00 5 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 3.93% $1,212.554 $ 1,000.00 5 Dreyfus Small Cap Portfolio 8/31/90 10.90% $1,677.855 $ 1,000.00 5 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.36% $2,133.332 $ 1,000.00 5 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 17.39% $2,229.257 $ 1,000.00 5 Fidelity VIP Index 500 Portfolio 8/27/92 16.08% $2,107.604 $ 1,000.00 5 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 5 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 18.23% $2,310.087 $ 1,000.00 5 Templeton Asset Strategy Fund 8/24/88 10.49% $1,646.979 $ 1,000.00 5 Templeton Developing Markets Securities Fund 3/4/96 NA 5 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 5 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 5 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 5 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 18.08% $2,295.747 $ 1,000.00 5 Janus Balanced Portfolio (Service Shares) 9/13/93 16.65% $2,159.482 $ 1,000.00 5 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 5 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 5 WM Mid Cap Stock Fund 05/01/00 NA 5
6 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\ (1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 -12.15% $ 878.497 $ 1,000.00 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 13.36% $1,871.948 $ 1,000.00 5
7 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\ (1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 NA 10 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.52% $ 1,880.244 $ 1,000.00 10 Dreyfus Small Cap Portfolio 8/31/90 31.99% $16,045.719 $ 1,000.00 10 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 10/7/93 NA 10 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 18.11% $ 5,283.442 $ 1,000.00 10 Fidelity VIP Index 500 Portfolio 8/27/92 NA 10 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 10 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 NA 10 Templeton Asset Strategy Fund 8/24/88 12.05% $ 3,119.122 $ 1,000.00 10 Templeton Developing Markets Securities Fund 3/4/96 NA 10 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 10 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 10 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 10 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 NA 10 Janus Balanced Portfolio (Service Shares) 9/13/93 NA 10 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 10 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 10 WM Mid Cap Stock Fund 05/01/00 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 6.56% $ 1,445.300 $ 1,000.00 5.797 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.95% $ 2,002.099 $ 1,000.00 10.334 Dreyfus Small Cap Portfolio 8/31/90 31.00% $16,285.048 $ 1,000.00 10.334 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. (SERVICE CLASS SHARES) 10/7/93 16.44% $ 3,007.475 $ 1,000.00 7.233 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 14.52% $ 6,878.521 $ 1,000.00 14.227 Fidelity VIP Index 500 Portfolio 8/27/92 15.08% $ 3,228.045 $ 1,000.00 8.345 Fidelity VIP Mid Cap Portfolio 12/28/98 40.86% $ 1,989.665 $ 1,000.00 2.008 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 18.05% $ 2,356.285 $ 1,000.00 5.164 Templeton Asset Strategy Fund 8/24/88 9.88% $ 3,203.712 $ 1,000.00 12.353 Templeton Developing Markets Securities Fund 3/4/96 -13.13% $ 506.828 $ 1,000.00 4.827 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 9.47% $ 1,273.522 $ 1,000.00 2.671 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 1.29% $ 1,037.647 $ 1,000.00 2.879 Goldman Sachs Mid Cap Value Fund 5/1/98 2.79% $ 1,076.058 $ 1,000.00 2.668 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 20.32% $ 3,858.974 $ 1,000.00 7.299 Janus Balanced Portfolio (Service Shares) 9/13/93 15.13% $ 2,796.468 $ 1,000.00 7.299 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 16.26% $ 2,020.262 $ 1,000.00 4.668 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 6.37% $ 1,179.693 $ 1,000.00 2.677 WM Mid Cap Stock Fund 05/01/00 16.04% $ 1,160.368 $ 1,000.00 0.668
8 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\ (1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- WM Small Cap Stock Fund 01/12/94 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ WM Small Cap Stock Fund 01/12/94 14.01% $ 2,493.463 $ 1,000.00 6.967
9 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 4.40% $1,044.004 $ 1,000.00 1 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 8.97% $1,089.667 $ 1,000.00 1 Dreyfus Small Cap Portfolio 8/31/90 11.03% $1,110.348 $ 1,000.00 1 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 -12.85% $ 871.547 $ 1,000.00 1 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 -12.64% $ 873.597 $ 1,000.00 1 Fidelity VIP Index 500 Portfolio 8/27/92 -11.01% $ 889.855 $ 1,000.00 1 Fidelity VIP Mid Cap Portfolio 12/28/98 31.21% $1,312.082 $ 1,000.00 1 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 -16.30% $ 837.034 $ 1,000.00 1 Templeton Asset Strategy Fund 8/24/88 -1.74% $ 982.629 $ 1,000.00 1 Templeton Developing Markets Securities Fund 3/4/96 -33.29% $ 667.100 $ 1,000.00 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 -9.63% $ 903.724 $ 1,000.00 1 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 -0.06% $ 999.380 $ 1,000.00 1 Goldman Sachs Mid Cap Value Fund 5/1/98 28.77% $1,287.731 $ 1,000.00 1 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 -33.25% $ 667.549 $ 1,000.00 1 Janus Balanced Portfolio (Service Shares) 9/13/93 -4.26% $ 957.384 $ 1,000.00 1 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 -6.98% $ 930.246 $ 1,000.00 1 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 14.89% $1,148.917 $ 1,000.00 1 WM Mid Cap Stock Fund 05/01/00 NA 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 5.67% $1,317.351 $ 1,000.00 5 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 3.67% $1,197.224 $ 1,000.00 5 Dreyfus Small Cap Portfolio 8/31/90 10.62% $1,656.644 $ 1,000.00 5 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.07% $2,106.364 $ 1,000.00 5 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 17.09% $2,201.076 $ 1,000.00 5 Fidelity VIP Index 500 Portfolio 8/27/92 15.79% $2,080.961 $ 1,000.00 5 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 5 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 17.93% $2,280.916 $ 1,000.00 5 Templeton Asset Strategy Fund 8/24/88 10.21% $1,626.180 $ 1,000.00 5 Templeton Developing Markets Securities Fund 3/4/96 NA 5 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 5 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 5 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 5 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 17.78% $2,266.724 $ 1,000.00 5 Janus Balanced Portfolio (Service Shares) 9/13/93 16.35% $2,132.184 $ 1,000.00 5 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 5 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 5 WM Mid Cap Stock Fund 05/01/00 NA 5
10 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\ (1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 -12.37% $ 876.273 $ 1,000.00 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 13.07% $1,848.309 $ 1,000.00 5
11 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 NA 10 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) 8/31/90 6.25% $ 1,833.041 $ 1,000.00 10 Dreyfus Quality Bond Portfolio 8/31/90 31.65% $15,642.976 $ 1,000.00 10 Dreyfus Small Cap Portfolio THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 NA 10 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 17.81% $5,150.817 $ 1,000.00 10 Fidelity VIP Index 500 Portfolio 8/27/92 NA 10 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 10 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 NA 10 Templeton Asset Strategy Fund 8/24/88 11.76% $3,040.822 $ 1,000.00 10 Templeton Developing Markets Securities Fund 3/4/96 NA 10 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 10 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 10 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 10 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 NA 10 Janus Balanced Portfolio (Service Shares) 9/13/93 NA 10 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 10 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 10 WM Mid Cap Stock Fund 05/01/00 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO T ERV P N ------- ----------- ---------- ------ CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 6.29% $ 1,424.139 $ 1,000.00 5.797 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 6.68% $ 1,950.181 $ 1,000.00 10.334 Dreyfus Small Cap Portfolio 30.66% $15,862.826 $ 1,000.00 10.334 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 16.15% $ 2,952.859 $ 1,000.00 7.233 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 14.22% $ 6,634.142 $ 1,000.00 14.227 Fidelity VIP Index 500 Portfolio 14.78% $ 3,160.300 $ 1,000.00 8.345 Fidelity VIP Mid Cap Portfolio 40.50% $ 1,979.551 $ 1,000.00 2.008 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 17.75% $ 2,325.559 $ 1,000.00 5.164 Templeton Asset Strategy Fund 9.60% $ 3,104.661 $ 1,000.00 12.353 Templeton Developing Markets Securities Fund -13.35% $ 500.648 $ 1,000.00 4.827 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 9.20% $ 1,264.897 $ 1,000.00 2.671 Goldman Sachs CORESM Small Cap Equity Fund 1.03% $ 1,030.066 $ 1,000.00 2.879 Goldman Sachs Mid Cap Value Fund 2.52% $ 1,068.778 $ 1,000.00 2.668 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 20.02% $ 3,787.998 $ 1,000.00 7.299 Janus Balanced Portfolio (Service Shares) 14.84% $ 2,745.034 $ 1,000.00 7.299 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 15.96% $ 1,996.448 $ 1,000.00 4.668 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 6.10% $ 1,171.703 $ 1,000.00 2.677 WM Mid Cap Stock Fund 15.84% $ 1,158.415 $ 1,000.00 0.668
12 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- WM Small Cap Stock Fund 01/12/94 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ WM Small Cap Stock Fund 01/12/94 13.72% $ 2,449.698 $ 1,000.00 6.967
13 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 -1.25% $ 987.550 $ 1,000.00 1 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 3.07% $1,030.714 $ 1,000.00 1 Dreyfus Small Cap Portfolio 8/31/90 5.06% $1,050.564 $ 1,000.00 1 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 -17.56% $ 824.396 $ 1,000.00 1 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 -17.37% $ 826.336 $ 1,000.00 1 Fidelity VIP Index 500 Portfolio 8/27/92 -15.83% $ 841.714 $ 1,000.00 1 Fidelity VIP Mid Cap Portfolio 12/28/98 25.33% $1,253.320 $ 1,000.00 1 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 -20.82% $ 791.751 $ 1,000.00 1 Templeton Asset Strategy Fund 8/24/88 -7.05% $ 929.468 $ 1,000.00 1 Templeton Developing Markets Securities Fund 3/4/96 -36.90% $ 631.011 $ 1,000.00 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 -14.51% $ 854.856 $ 1,000.00 1 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 -5.47% $ 945.339 $ 1,000.00 1 Goldman Sachs Mid Cap Value Fund 5/1/98 22.89% $1,228.882 $ 1,000.00 1 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 -36.85% $ 631.453 $ 1,000.00 1 Janus Balanced Portfolio (Service Shares) 9/13/93 -9.44% $ 905.614 $ 1,000.00 1 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 -12.01% $ 879.919 $ 1,000.00 1 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 8.93% $1,089.328 $ 1,000.00 1 WM Mid Cap Stock Fund 05/01/00 NA 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 5.59% $1,312.835 $ 1,000.00 5 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 3.53% $1,189.579 $ 1,000.00 5 Dreyfus Small Cap Portfolio 8/31/90 10.68% $1,660.822 $ 1,000.00 5 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.24% $2,122.115 $ 1,000.00 5 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 17.28% $2,219.264 $ 1,000.00 5 Fidelity VIP Index 500 Portfolio 8/27/92 15.95% $2,096.058 $ 1,000.00 5 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 5 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 18.14% $2,301.094 $ 1,000.00 5 Templeton Asset Strategy Fund 8/24/88 10.26% $1,629.528 $ 1,000.00 5 Templeton Developing Markets Securities Fund 3/4/96 NA 5 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 5 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 5 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 5 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 17.99% $2,286.605 $ 1,000.00 5 Janus Balanced Portfolio (Service Shares) 9/13/93 16.53% $2,148.598 $ 1,000.00 5 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 5 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 5 WM Mid Cap Stock Fund 05/01/00 NA 5
14 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 -17.11% $ 828.866 $ 1,000.00 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 13.18% $1,857.367 $ 1,000.00 5
15 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 NA 10 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.79% $ 1,928.539 $ 1,000.00 10 Dreyfus Small Cap Portfolio 8/31/90 32.32% $16,457.770 $ 1,000.00 10 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 NA 10 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 18.41% $ 5,419.133 $ 1,000.00 10 Fidelity VIP Index 500 Portfolio 8/27/92 NA 10 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 10 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 NA 10 Templeton Asset Strategy Fund 8/24/88 12.33% $ 3,199.233 $ 1,000.00 10 Templeton Developing Markets Securities Fund 3/4/96 NA 10 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 10 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 10 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 10 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 NA 10 Janus Balanced Portfolio (Service Shares) 9/13/93 NA 10 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 10 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 10 WM Mid Cap Stock Fund 05/01/00 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ CALVERT VARIABLE SERIES, INC. Calvert Social Small Cap Growth Portfolio 3/15/95 6.46% $ 1,437.594 $ 1,000.00 5.797 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 7.22% $ 2,055.263 $ 1,000.00 10.334 Dreyfus Small Cap Portfolio 8/31/90 31.33% $16,717.395 $ 1,000.00 10.334 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.74% $ 3,062.958 $ 1,000.00 7.233 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 14.81% $ 7,131.247 $ 1,000.00 14.227 Fidelity VIP Index 500 Portfolio 8/27/92 15.37% $ 3,297.064 $ 1,000.00 8.345 Fidelity VIP Mid Cap Portfolio 12/28/98 39.53% $ 1,952.185 $ 1,000.00 2.008 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 18.07% $ 2,358.210 $ 1,000.00 5.164 Templeton Asset Strategy Fund 8/24/88 10.16% $ 3,305.659 $ 1,000.00 12.353 Templeton Developing Markets Securities Fund 3/4/96 -13.54% $ 495.307 $ 1,000.00 4.827 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 8.21% $ 1,234.565 $ 1,000.00 2.671 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 0.02% $ 1,000.468 $ 1,000.00 2.879 Goldman Sachs Mid Cap Value Fund 5/1/98 1.37% $ 1,036.940 $ 1,000.00 2.668 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 20.63% $ 3,931.096 $ 1,000.00 7.299 Janus Balanced Portfolio (Service Shares) 9/13/93 15.42% $ 2,848.731 $ 1,000.00 7.299 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 16.08% $ 2,005.838 $ 1,000.00 4.668 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 5.02% $ 1,140.098 $ 1,000.00 2.677 WM Mid Cap Stock Fund 05/01/00 9.69% $ 1,096.899 $ 1,000.00 0.668
16 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- WM Small Cap Stock Fund 01/12/94 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ WM Small Cap Stock Fund 01/12/94 14.18% $ 2,518.289 $ 1,000.00 6.967
17 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 -1.50% $ 985.042 $ 1,000.00 1 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 2.81% $1,028.111 $ 1,000.00 1 Dreyfus Small Cap Portfolio 8/31/90 4.77% $1,047.746 $ 1,000.00 1 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 -17.77% $ 822.314 $ 1,000.00 1 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 -17.58% $ 824.249 $ 1,000.00 1 Fidelity VIP Index 500 Portfolio 8/27/92 -16.04% $ 839.588 $ 1,000.00 1 Fidelity VIP Mid Cap Portfolio 12/28/98 25.00% $1,249.991 $ 1,000.00 1 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 -21.02% $ 789.751 $ 1,000.00 1 Templeton Asset Strategy Fund 8/24/88 -7.29% $ 927.121 $ 1,000.00 1 Templeton Developing Markets Securities Fund 3/4/96 -37.06% $ 629.416 $ 1,000.00 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 -14.73% $ 852.685 $ 1,000.00 1 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 -5.71% $ 942.938 $ 1,000.00 1 Goldman Sachs Mid Cap Value Fund 5/1/98 22.56% $1,225.596 $ 1,000.00 1 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 -37.02% $ 629.849 $ 1,000.00 1 Janus Balanced Portfolio (Service Shares) 9/13/93 -9.67% $ 903.315 $ 1,000.00 1 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 -12.23% $ 877.697 $ 1,000.00 1 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 8.64% $1,086.412 $ 1,000.00 1 WM Mid Cap Stock Fund NA $ 1,000.00 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 5.32% $1,295.776 $ 1,000.00 5 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 3.26% $1,174.093 $ 1,000.00 5 Dreyfus Small Cap Portfolio 8/31/90 10.39% $1,639.394 $ 1,000.00 5 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 15.94% $2,094.871 $ 1,000.00 5 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 16.98% $2,190.795 $ 1,000.00 5 Fidelity VIP Index 500 Portfolio 8/27/92 15.65% $2,069.143 $ 1,000.00 5 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 5 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 17.83% $2,271.625 $ 1,000.00 5 Templeton Asset Strategy Fund 8/24/88 9.97% $1,608.517 $ 1,000.00 5 Templeton Developing Markets Securities Fund 3/4/96 NA 5 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 5 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 5 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 5 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 17.68% $2,257.285 $ 1,000.00 5 Janus Balanced Portfolio (Service Shares) 9/13/93 16.23% $2,121.021 $ 1,000.00 5 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 5 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 5 WM Mid Cap Stock Fund NA 5
18 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH EITHER GRIB OR GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 -17.32% $ 826.773 $ 1,000.00 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 12.89% $1,833.486 $ 1,000.00 5
19 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 NA 10 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.52% $ 1,880.244 $ 1,000.00 10 Dreyfus Small Cap Portfolio 8/31/90 31.99% $16,045.719 $ 1,000.00 10 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 NA 10 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 18.11% $ 5,283.442 $ 1,000.00 10 Fidelity VIP Index 500 Portfolio 8/27/92 NA 10 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 10 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 NA 10 Templeton Asset Strategy Fund 8/24/88 12.05% $ 3,119.122 $ 1,000.00 10 Templeton Developing Markets Securities Fund 3/4/96 NA 10 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 10 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 10 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 10 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 NA 10 Janus Balanced Portfolio (Service Shares) 9/13/93 NA 10 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 10 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 10 WM Mid Cap Stock Fund NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 6.19% $ 1,416.174 $ 1,000.00 5.797 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.95% $ 2,002.099 $ 1,000.00 10.334 Dreyfus Small Cap Portfolio 8/31/90 31.00% $16,285.048 $ 1,000.00 10.334 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.44% $ 3,007.475 $ 1,000.00 7.233 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 14.52% $ 6,878.521 $ 1,000.00 14.227 Fidelity VIP Index 500 Portfolio 8/27/92 15.08% $ 3,228.045 $ 1,000.00 8.345 Fidelity VIP Mid Cap Portfolio 12/28/98 39.17% $ 1,942.046 $ 1,000.00 2.008 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 17.77% $ 2,327.158 $ 1,000.00 5.164 Templeton Asset Strategy Fund 8/24/88 9.88% $ 3,203.712 $ 1,000.00 12.353 Templeton Developing Markets Securities Fund 3/4/96 -13.76% $ 489.284 $ 1,000.00 4.827 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 7.92% $ 1,225.903 $ 1,000.00 2.671 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 -0.24% $ 993.177 $ 1,000.00 2.879 Goldman Sachs Mid Cap Value Fund 5/1/98 1.11% $ 1,029.942 $ 1,000.00 2.668 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 20.32% $ 3,858.974 $ 1,000.00 7.299 Janus Balanced Portfolio (Service Shares) 9/13/93 15.13% $ 2,796.468 $ 1,000.00 7.299 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 15.78% $ 1,981.801 $ 1,000.00 4.668 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 4.74% $ 1,132.074 $ 1,000.00 2.677 WM Mid Cap Stock Fund 9.49% $ 1,094.948 $ 1,000.00 0.668
20 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS NOT SURRENDERED OR ANNUITIZED WITH STANDARD DEATH BENEFIT T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- WM Small Cap Stock Fund 01/12/94 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ WM Small Cap Stock Fund 01/12/94 13.88% $ 2,473.856 $ 1,000.00 6.967
21 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH BOTH GRIB AND GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- -------- ---------- ---------- --- CALVERT VARIABLE SERIES, INC 3/15/95 -1.75% $ 982.535 $ 1,000.00 1 Calvert Social Small Cap Growth Portfolio DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) 8/31/90 2.55% $1,025.509 $ 1,000.00 1 Dreyfus Quality Bond Portfolio 8/31/90 4.50% $1,044.973 $ 1,000.00 1 Dreyfus Small Cap Portfolio THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 -17.98% $ 820.231 $ 1,000.00 1 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) 10/9/86 -17.78% $ 822.161 $ 1,000.00 1 Fidelity VIP Growth Portfolio 8/27/92 -16.25% $ 837.462 $ 1,000.00 1 Fidelity VIP Index 500 Portfolio 12/28/98 24.67% $1,246.662 $ 1,000.00 1 Fidelity VIP Mid Cap Portfolio FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) 11/1/95 -21.22% $ 787.751 $ 1,000.00 1 Franklin Small Cap Fund 8/24/88 -7.52% $ 924.773 $ 1,000.00 1 Templeton Asset Strategy Fund 3/4/96 -37.22% $ 627.822 $ 1,000.00 1 Templeton Developing Markets Securities Fund GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 -14.95% $ 850.514 $ 1,000.00 1 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 -5.95% $ 940.538 $ 1,000.00 1 Goldman Sachs Mid Cap Value Fund 5/1/98 22.23% $1,222.311 $ 1,000.00 1 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 -37.18% $ 628.244 $ 1,000.00 1 Janus Balanced Portfolio (Service Shares) 9/13/93 -9.90% $ 901.015 $ 1,000.00 1 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 -12.45% $ 875.474 $ 1,000.00 1 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 8.35% $1,083.496 $ 1,000.00 1 WM Mid Cap Stock Fund 05/01/00 NA 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 5.04% $1,278.889 $ 1,000.00 5 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 2.99% $1,158.763 $ 1,000.00 5 Dreyfus Small Cap Portfolio 8/31/90 10.10% $1,618.183 $ 1,000.00 5 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 15.64% $2,067.903 $ 1,000.00 5 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 16.68% $2,162.615 $ 1,000.00 5 Fidelity VIP Index 500 Portfolio 8/27/92 15.35% $2,042.500 $ 1,000.00 5 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 5 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 17.53% $2,242.454 $ 1,000.00 5 Templeton Asset Strategy Fund 8/24/88 9.69% $1,587.719 $ 1,000.00 5 Templeton Developing Markets Securities Fund 3/4/96 NA 5 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 5 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 5 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 5 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 17.38% $2,228.263 $ 1,000.00 5 Janus Balanced Portfolio (Service Shares) 9/13/93 15.93% $2,093.722 $ 1,000.00 5 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 5 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 5 WM Mid Cap Stock Fund 05/01/00 NA 5
22 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH BOTH GRIB AND GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
ONE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- -------- ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 -17.53% $ 824.679 $ 1,000.00 1
FIVE YEAR RETURNS -------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------ ---------- ---------- --- WM Small Cap Stock Fund 01/12/94 12.60% $1,809.847 $ 1,000.00 5
23 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH BOTH GRIB AND GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 NA 10 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.25% $ 1,833.041 $ 1,000.00 10 Dreyfus Small Cap Portfolio 8/31/90 31.65% $15,642.976 $ 1,000.00 10 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 NA 10 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 17.81% $ 5,150.817 $ 1,000.00 10 Fidelity VIP Index 500 Portfolio 8/27/92 NA 10 Fidelity VIP Mid Cap Portfolio 12/28/98 NA 10 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 NA 10 Templeton Asset Strategy Fund 8/24/88 11.76% $ 3,040.822 $ 1,000.00 10 Templeton Developing Markets Securities Fund 3/4/96 NA 10 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 NA 10 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 NA 10 Goldman Sachs Mid Cap Value Fund 5/1/98 NA 10 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 NA 10 Janus Balanced Portfolio (Service Shares) 9/13/93 NA 10 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 NA 10 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 NA 10 WM Mid Cap Stock Fund 05/01/00 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ CALVERT VARIABLE SERIES, INC Calvert Social Small Cap Growth Portfolio 3/15/95 5.91% $ 1,395.013 $ 1,000.00 5.797 DREYFUS VARIABLE INVESTMENT FUND (SERVICE CLASS SHARES) Dreyfus Quality Bond Portfolio 8/31/90 6.68% $ 1,950.181 $ 1,000.00 10.334 Dreyfus Small Cap Portfolio 8/31/90 30.66% $15,862.826 $ 1,000.00 10.334 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC (SERVICE CLASS SHARES) 10/7/93 16.15% $ 2,952.859 $ 1,000.00 7.233 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("VIP") (SERVICE CLASS SHARES) Fidelity VIP Growth Portfolio 10/9/86 14.22% $ 6,634.142 $ 1,000.00 14.227 Fidelity VIP Index 500 Portfolio 8/27/92 14.78% $ 3,160.300 $ 1,000.00 8.345 Fidelity VIP Mid Cap Portfolio 12/28/98 38.81% $ 1,931.932 $ 1,000.00 2.008 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2 SHARES) Franklin Small Cap Fund 11/1/95 17.47% $ 2,296.433 $ 1,000.00 5.164 Templeton Asset Strategy Fund 8/24/88 9.60% $ 3,104.661 $ 1,000.00 12.353 Templeton Developing Markets Securities Fund 3/4/96 -13.98% $ 483.318 $ 1,000.00 4.827 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Capital Growth Fund 4/30/98 7.64% $ 1,217.277 $ 1,000.00 2.671 Goldman Sachs CORESM Small Cap Equity Fund 2/13/98 -0.49% $ 985.920 $ 1,000.00 2.879 Goldman Sachs Mid Cap Value Fund 5/1/98 0.85% $ 1,022.973 $ 1,000.00 2.668 JANUS ASPEN SERIES Janus Aggressive Growth Portfolio (Service Shares) 9/13/93 20.02% $ 3,787.998 $ 1,000.00 7.299 Janus Balanced Portfolio (Service Shares) 9/13/93 14.84% $ 2,745.034 $ 1,000.00 7.299 SCUDDER VARIABLE SERIES I Scudder Global Discovery Portfolio (Class A Shares) 05/01/96 15.48% $ 1,957.986 $ 1,000.00 4.668 WM VARIABLE TRUST (CLASS 2 SHARES) WM Equity Income Fund 04/28/98 4.47% $ 1,124.084 $ 1,000.00 2.677 WM Mid Cap Stock Fund 05/01/00 9.30% $ 1,092.995 $ 1,000.00 0.668
24 ADJ HISTORICAL TOTAL RETURNS FOR PERIOD ENDING 12/29/00 COMPUTATION OF AVERAGE ANNUAL TOTAL RETURNS ASSUMING CONTRACT IS SURRENDERED OR ANNUITIZED WITH BOTH GRIB AND GMDB T = ((ERV/P)/\(1/N))-1 where T = Average Annual Total Return ERV = Ending Redeemable value of the initial investment (net of any applicable Surrender Charges and Record Maintenance Charges) of the hypothetical Variable Account at the end of the period shown. P = $1,000 of initial investment N = Number of Years
TEN YEAR RETURNS ------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- --- WM Small Cap Stock Fund 01/12/94 NA 10
RETURN SINCE INCEPTION (CUMULATIVE IF LESS THAN 1 YEAR) --------------------------------------------------- PORTFOLIO INCEPTION DATE T ERV P N -------------- ------- ----------- ---------- ------ WM Small Cap Stock Fund 01/12/94 13.59% $ 2,430.090 $ 1,000.00 6.967
EX-99.15 19 a71651ex99-15.txt EXHIBIT 15 1 EXHIBIT 15 POWER OF ATTORNEY The undersigned directors and officers of Farmers New World Life Insurance Company, a Washington corporation ("Farmers"), hereby constitute and appoint C. Paul Patsis, David A. Demmon, and M. Douglas Close, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, with full power of substitution to each, for him and on his behalf and in his name, place and stead, to execute and file any of the documents referred to below relating to registrations under the Securities Act of 1933 and under the Investment Company Act of 1940 with respect to the variable annuity contracts to be issued through the Farmers Annuity Separate Account A: registration statements on any form or forms under the Securities Act of 1933 and under the Investment Company Act of 1940, and any and all amendments and supplements thereto, with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and him or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand on the date set forth below.
NAME TITLE DATE - ---- ----- ---- /s/ Kathryn M. Callahan Vice President, Actuary and April 9, 2001 - ------------------------------- Director Kathryn M. Callahan /s/ Michael W. Keller - ------------------------------- Michael W. Keller Vice President and Director April 9, 2001 /s/ James I. Randolph Vice President, Assistant April 9, 2001 - ------------------------------- Secretary and Director James I. Randolph
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