-----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, TXRuZQIhFcizZZ/lv23LOKGSUCYmHoop3uWPUk3c4zgcYMuYDTneRV/0wyYstyOv tigOeiYqJehFQWMDBGvwDA== /in/edgar/work/20000628/0000009713-00-000046/0000009713-00-000046.txt : 20000920 0000009713-00-000046.hdr.sgml : 20000920 ACCESSION NUMBER: 0000009713-00-000046 CONFORMED SUBMISSION TYPE: N-4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20000628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRINCIPAL MUTUAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B CENTRAL INDEX KEY: 0000009713 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 420127290 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4 SEC ACT: SEC FILE NUMBER: 333-40254 FILM NUMBER: 662200 FILING VALUES: FORM TYPE: N-4 SEC ACT: SEC FILE NUMBER: 811-02091 FILM NUMBER: 662201 BUSINESS ADDRESS: STREET 1: THE PRINCIPAL FINANCIAL GROUP CITY: DES MOINES STATE: IA ZIP: 50392 BUSINESS PHONE: 5152475477 MAIL ADDRESS: STREET 1: THE PRINCIPAL FINANCIAL GROUP CITY: DES MOINES STATE: IA ZIP: 50392-0200 FORMER COMPANY: FORMER CONFORMED NAME: BANKERS LIFE CO SEPARATE ACCOUNT B DATE OF NAME CHANGE: 19870317 N-4 1 0001.txt PRINCIPAL FVA WITH PPC RIDER Registration No. _________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. _____ _____ Post-Effective Amendment No. _____ _____ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. ___ _____ (Check appropriate box or boxes) Principal Life Insurance Company Separate Account B - -------------------------------------------------------------------------------- (Exact Name of Registrant) Principal Life Insurance Company - -------------------------------------------------------------------------------- (Name of Depositor) The Principal Financial Group, Des Moines, Iowa 50392 - -------------------------------------------------------------------------------- (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code (515) 248-3842 M. D. Roughton, The Principal Financial Group, Des Moines, Iowa 50392 - -------------------------------------------------------------------------------- (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of the Registration Statement Title of Securities Being Registered: Principal Flexible Variable Annuity Contract with Purchase Payment Credit PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B PRINCIPAL FLEXIBLE VARIABLE ANNUITY CONTRACT WITH PURCHASE PAYMENT CREDIT Registration Statement on Form N-4 Cross Reference Sheet Form N-4 Item Caption in Prospectus Part A 1. Cover Page Principal Flexible Variable Annuity Contract with Purchase Payment Credit 2. Definitions Glossary 3. Synopsis Summary of Expense Information Summary 4. Condensed Financial Performance Calculation, Information Independent Auditors, Financial Statements 5. General Description of Summary, The Company, The Registrant Separate Account, Fixed Account and DCA Plus Accounts, Voting Rights 6. Deductions Summary, Charges and Deductions, Annual Fee, Mortality and Expense Risks Charge, Purchase Payment Credit Rider Charge, Premium Taxes, Surrender Charge, Administrative Charge, Special Provisions for Group or Sponsored Arrangements, Distribution of the Contract 7. General Description of Summary, Investment Limita- Variable Annuity Contract tions, Separate Account Invest- ment Options, Transfers, Surrenders, Charges and Deductions, Annuity Payments, Death Benefit, Free-Look Period, The Separate Account, The Contract,To Buy a Contract, The Accumulation Period, General Provisions, Rights Reserved By The Company, 8. Annuity Period The Accumulation Period, The Annuity Payment Period 9. Death Benefit Death Benefit, The Accumulation Period, The Annuity Payment Period, Mortality and Expense Risks Charge, Delay of Payments, Non-Qualified Contracts, Required Distributions for Non- Qualified Contracts, IRA, SEP and Simple-IRA, Rollover IRAs 10. Purchase and Contract Value Summary, Free-Look Period, The Contract, To Buy a Contract, The Accumulation Period, The Annuity Payment Period, Exchange Credit, Purchase Payment Credit Rider, Delay of Payments, Distribution of the Contract 11. Redemptions Summary, Annuity Payments, The Accumulation Period, Charges and Deductions, Annual Fee, Purchase Payment Credit Rider Charge, Delay of Payments, Contract Termination 12. Taxes Summary, Annuity Payments, Federal Tax Matters, Non-Qualified Contracts, Required Distributions for Non-Qualified Contracts, IRA, SEP & Simple-IRA, Rollover IRAs, Withholding, Mutual Fund Diversification 13. Legal Proceedings Legal Proceedings 14. Table of Contents of the Table of Contents of the Statement of Additional Statement of Additional Information Information Part B Statement of Additional Information Caption** 15. Cover Page Principal Flexible Variable Annuity Contract with Purchase Payment Credit 16. Table of Contents Table of Contents 17. General Information and General Information and History History 18. Services Independent Auditors**, Independent Auditors 19. Purchase of Securities Summary**, To Buy a Contract** Being Offered Distribution of the Contract** 20. Underwriters Summary**, Distribution of the Contract** 21. Calculation of Performance Calculation of Yield and Data Total Return 22. Annuity Payments Annuity Payments**, Delay of Payments** 23. Financial Statements Financial Statements ** Prospectus caption given where appropriate. Flexible Variable Annuity Issued by Principal Life Insurance Company (the "Company") This prospectus is dated ____ _, 2000. The individual deferred annuity contract ("Contract") described in this prospectus is funded with the Principal Life Insurance Company Separate Account B ("Separate Account"), dollar cost averaging fixed accounts ("DCA Plus Accounts") and a fixed account ("Fixed Account"). The assets of the Separate Account Divisions ("Divisions") are invested in a corresponding Account of the Principal Variable Contracts Fund, Inc., AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. Value Fund, Fidelity Variable Insurance Products Fund II Contrafund Portfolio, Fidelity Variable Insurance Products Fund Growth Portfolio and Janus Aspen Series - Service Shares Aggressive Growth Portfolio (the "Funds"). The DCA Plus Accounts and the Fixed Account are a part of the General Account of the Company. This prospectus provides information about the Contract and the Separate Account that you, as owner, should know before investing. It should be read and retained for future reference. Additional information about the Contract is included in the Statement of Additional Information ("SAI"), dated ____ _, 2000, which has been filed with the Securities and Exchange Commission (the "SEC"). The SAI is a part of this prospectus. The table of contents of the SAI is on page __ of this prospectus. You may obtain a free copy of the SAI by writing or telephoning: Principal Flexible Variable Annuity Principal Financial Group P. O. Box 9382 Des Moines, Iowa 50306-9382 Telephone: 1-800-852-4450 An investment in the Contract is not a deposit or obligation of any bank and is not insured or guaranteed by any bank, the Federal Deposit Insurance Corporation or any other government agency. As the owner of this Contract, you may elect a purchase payment credit rider with an additional charge and an associated 9-year surrender charge period. The purchase payment credit rider is only available when the Contract is issued. The portions of this prospectus that specifically pertain to election of the purchase payment credit are shown by gray boxes. The charges used to recoup our expense of paying the purchase payment credit include the surrender charge and the purchase payment credit rider charge. The Contract is available with or without the purchase payment credit rider. There may be circumstances where electing the purchase payment credit rider is not to your advantage. In certain circumstances, the amount of the credit may be more than offset by the charges associated with it. The Contract without the purchase payment credit rider has surrender charges and total Separate Account annual expenses that may be lower than the charges for the Contract with the purchase payment credit rider. You should consult with your sales representative to decide if the purchase payment credit rider is suitable. In making this determination, you and your sales representative should consider the following factors: o the length of time you plan to own the Contract; o the frequency, amount and timing of any partial surrenders; and o the amount of your purchase payment(s). Additionally, if you decide to return the Contract during the examination period, we will recover the original purchase payment credit amount. As a result, if the value of the purchase payment credit has declined during the examination period, then we still recover the full amount of the purchase payment credit. The Contract provides an exchange credit that is available to eligible purchasers (see Replacement Contracts - Exchange Credit). The exchange credit is paid for by a reduction in sales commissions for Contracts sold with the exchange credit. Sales commissions are paid by Contract charges and deductions. The charges and deductions are neither proportionally reduced nor increased for Contracts sold with the exchange credit. These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. This prospectus is valid only when accompanied by the current prospectuses for the Funds. These prospectuses should be kept for future reference. TABLE OF CONTENTS GLOSSARY .................................................... 4 SUMMARY OF EXPENSE INFORMATION............................... 6 SUMMARY .................................................... 10 Investment Limitations................................... 10 Separate Account Investment Options...................... 10 Transfers................................................ 11 Surrenders............................................... 11 Charges and Deductions................................... 11 Annuity Payments......................................... 12 Death Benefit............................................ 12 Examination Period (Free-Look)........................... 12 CONDENSED FINANCIAL INFORMATION.............................. 13 THE PRINCIPAL FLEXIBLE VARIABLE ANNUITY...................... 16 THE COMPANY.................................................. 16 THE SEPARATE ACCOUNT......................................... 16 THE UNDERLYING MUTUAL FUNDS.................................. 16 SURPLUS DISTRIBUTIONS........................................ 21 THE CONTRACT................................................. 21 To Buy a Contract........................................ 21 Purchase Payments............................................ 21 Right to Examine the Contract (Free-Look)................ 21 Replacement Contracts.................................... 22 Purchase Payment Credit Rider............................ 23 The Accumulation Period.................................. 25 Automatic Portfolio Rebalancing (APR).................... 27 Telephone Services....................................... 27 Direct Dial.............................................. 27 Internet................................................. 28 Surrenders............................................... 28 Death Benefit............................................ 29 The Annuity Payment Period............................... 30 CHARGES AND DEDUCTIONS....................................... 32 Annual Fee............................................... 32 Mortality and Expense Risks Charge....................... 33 Purchase Payment Credit.................................. 33 Transaction Fee.......................................... 33 Premium Taxes............................................ 33 Surrender Charge......................................... 34 Free Surrender Privilege................................. 35 Administration Charge.................................... 36 Special Provisions for Group or Sponsored Arrangements... 36 FIXED ACCOUNT AND DCA PLUS ACCOUNTS.......................... 36 Fixed Account............................................ 37 Fixed Account Accumulated Value.......................... 37 Fixed Account Transfers, Total and Partial Surrenders.... 37 Dollar Cost Averaging Plus Program (DCA Plus Program).... 38 GENERAL PROVISIONS........................................... 39 The Contract............................................. 39 Delay of Payments........................................ 39 Misstatement of Age or Gender............................ 39 Assignment............................................... 39 Change of Owner.......................................... 39 Beneficiary.............................................. 40 Contract Termination..................................... 40 Reinstatement............................................ 40 Reports.................................................. 40 RIGHTS RESERVED BY THE COMPANY............................... 40 DISTRIBUTION OF THE CONTRACT................................. 41 PERFORMANCE CALCULATION...................................... 41 VOTING RIGHTS................................................ 41 FEDERAL TAX MATTERS.......................................... 42 Non-Qualified Contracts.................................. 42 Required Distributions for Non-Qualified Contracts....... 43 IRA, SEP and SIMPLE-IRA.................................. 43 Rollover IRAs............................................ 44 Withholding.............................................. 44 MUTUAL FUND DIVERSIFICATION.................................. 44 STATE REGULATION............................................. 44 LEGAL OPINIONS............................................... 44 LEGAL PROCEEDINGS............................................ 45 REGISTRATION STATEMENT....................................... 45 OTHER VARIABLE ANNUITY CONTRACTS............................. 45 INDEPENDENT AUDITORS......................................... 45 FINANCIAL STATEMENTS......................................... 45 CUSTOMER INQUIRIES........................................... 45 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION. 45 The Contract offered by this prospectus may not be available in all states. This prospectus is not an offer to sell, or solicitation of an offer to buy, the Contract in states in which the offer or solicitation may not be lawfully made. No person is authorized to give any information or to make any representation in connection with this Contract other than those contained in this prospectus. GLOSSARY Accumulated value - an amount equal to the DCA Plus Account(s) value plus the Fixed Account value plus the Separate Account value. Anniversary - the same date and month of each year following the Contract date. Annuitant - the person, including any joint annuitant, on whose life the annuity payment is based. This person may or may not be the owner. Annuity payment date - the date the owner's accumulated value is applied, under an annuity payment option, to make income payments. (Referred to in the Contract as "Retirement Date.") Contract date - the date that the Contract is issued and which is used to determine Contract years. Contract year - the one-year period beginning on the Contract date and ending one day before the Contract anniversary and any subsequent one-year period beginning on a Contract anniversary. (e.g. If the contract date is June 5, 2000, the first Contract year ends on June 4, 2001, and the first Contract anniversary falls on June 5, 2001.) Dollar Cost Averaging Plus (DCA Plus) Account - an account which earns guaranteed interest for a specific amount of time. (Referred to in the Contract as "Fixed DCA Account.") Dollar Cost Averaging Plus (DCA Plus) accumulated value - the amount of your accumulated value which is in the DCA Plus Account(s). Dollar Cost Averaging Plus (DCA Plus) Program - a program through which purchase payments are transferred from a DCA Plus Account to the Divisions and/or the Fixed Account over a specified period of time. (Referred to in the Contract as "Fixed DCA Account.") Fixed Account - an account which earns guaranteed interest. Fixed Account accumulated value - the amount of your accumulated value which is in the Fixed Account. Investment Options - the DCA Plus Accounts, Fixed Account and Separate Account Divisions. Joint annuitant - additional annuitant. Joint annuitants must be husband and wife and must be named as owner and joint owner. Joint owner - an owner who has an undivided interest with the right of survivorship in this Contract with another owner. Joint owners must be husband and wife and must be named as annuitant and joint annuitant. Mutual Fund - a registered open-end investment company, including a series or portfolio thereof, in which a Division invests. Non-Qualified Contract - a Contract which does not qualify for favorable tax treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA, Simple IRA or Tax Sheltered Annuity. Notice - any form of written communication received by us, at the annuity service office, P.O. Box 9382, Des Moines, Iowa 50306-9382, or in another form approved by us in advance. Owner - the person, including joint owner, who owns all the rights and privileges of this Contract. Purchase payments - the gross amount contributed to the Contract. Qualified Plans - retirement plans which receive favorable tax treatment under Section 401 or 403(a) of the Internal Revenue Code (the "Code"). Separate Account Division (Division(s) )- a part of the Separate Account which invests in shares of a Mutual Fund. (Referred to in the marketing materials as "sub-accounts.") Separate Account accumulated value - the amount of your accumulated value in all Divisions. Surrender charge - the charge deducted upon certain partial or total surrender of the Contract before the annuity payment date. Surrender value - accumulated value less any applicable surrender charge, annual fee, transaction fee and any premium or other taxes. Unit - the accounting measure used to calculate the value of the Division prior to annuity payment date. Unit value - a measure used to determine the value of an investment in a Division. Valuation date - each day the New York Stock Exchange ("NYSE") is open. Valuation period - the period of time from one determination of the value of a unit of a Division to the next. Each valuation period begins at the close of normal trading on the NYSE, generally 4:00 p.m. E.T. (3:00 p.m. C.T.) on each valuation date and ends at the close of normal trading of the NYSE on the next valuation date. You, Your - the owner of this Contract, including any joint owner. SUMMARY OF EXPENSE INFORMATION The purpose of these tables is to assist you in understanding the various costs and expenses of the Contract. This information includes expenses of the Contract as well as the Mutual Funds but does not include any premium taxes that may apply. For a more complete description of the Contract expenses see CHARGES AND DEDUCTIONS. Contract owner transaction expenses: o There is no sales charge imposed on purchase payments. o Surrender charge without the purchase payment credit rider (as a percentage of amounts surrendered): Table of surrender charges without the purchase payment credit rider Number of completed Contract years Surrender charge applied to all since each purchase payment purchase payments received in was made that Contract year 0 (year of purchase payment) 6% 1 6% 2 6% 3 5% 4 4% 5 3% 6 2% 7 and later 0% o Surrender charge with the purchase payment credit rider (as a percentage of amounts surrendered): Table of surrender charges with the purchase payment credit rider Number of completed Contract years Surrender charge applied to all since each purchase payment purchase payments received in was made that Contract year 0 (year of purchase payment) 8% 1 8% 2 8% 3 8% 4 7% 5 6% 6 5% 7 4% 8 3% 9 and later 0% o Annual Contract fee - the lesser of $30 or 2% of the accumulated value. Separate Account annual expenses (as a percentage of average account value) mortality and expense risks charge 1.25% other Separate Account expenses .00 total Separate Account annual expenses 1.25% optional purchase payment credit rider charge 0.60% total Separate Account annual expenses with the purchase payment credit rider 1.85% Annual expenses of the Mutual Funds (as a percentage of average net assets) as of December 31, 1999:
Management Other Rule 12(b)1 Total Annual Expenses Mutual Fund Fees Expenses Fees After Reimbursement Principal Variable Contracts Fund, Inc. Aggressive Growth 0.75% 0.02% N/A 0.77% Asset Allocation 0.80 0.05 N/A 0.85 Balanced 0.57 0.01 N/A 0.58 Bond 0.49 0.01 N/A 0.50 Capital Value 0.43(1) 0.00 N/A 0.43 Government Securities 0.49 0.01 N/A 0.50 Growth 0.45(1) 0.00 N/A 0.45 International 0.73(1) 0.05 N/A 0.78 International Emerging Markets International SmallCap 1.20 0.12 N/A 1.32 LargeCap Growth LargeCap Growth Equity LargeCap Stock Index 0.35 0.14 N/A 0.49(2) MicroCap 1.00 0.28 N/A 1.28(2) MidCap 0.61 0.00 N/A 0.61 MidCap Growth 0.90 0.19 N/A 1.09(2) MidCap Growth Equity Money Market 0.50 0.02 N/A 0.52 Real Estate 0.90 0.09 N/A 0.99 SmallCap 0.85 0.06 N/A 0.91 SmallCap Growth 1.00 0.07 N/A 1.07(2) SmallCap Value 1.10 0.34 N/A 1.44(2) Utilities 0.60 0.04 N/A 0.64 AIM V.I. Growth Fund 0.63 0.10 N/A 0.73 AIM V.I. Growth and Income Fund 0.61 0.16 N/A 0.77 AIM V.I. Value Fund 0.61 0.15 N/A 0.76 Fidelity Variable Insurance Products Fund II Fidelity VIP II Contrafund Portfolio-Service Class 0.58 0.10 0.10%(3) 0.78(4) Fidelity Variable Insurance Products Fund Fidelity VIP Growth Portfolio-Service Class 0.58 0.09 0.10%(3) 0.77(4) Janus Aspen Series - Service Shares Aggressive Growth Portfolio (1) As a result of a shareholder meeting the Account's management fee was modified effective 1/1/2000. (2) Manager has agreed to reimburse expenses, if necessary, so that total Account operating expenses for 2000 will be no more than: MicroCap 1.06% SmallCap Growth 1.06% MidCap Growth 0.96% SmallCap Value 1.16% LargeCap Stock Index 0.40% (3) The Company and Princor Financial Services Corporation may receive a portion of the Mutual Fund Annual Expenses for recordkeeping, marketing and distribution services. (4) Without third party payments or reductions the Total Annual Expenses would have been: Fidelity VIP II Contrafund Portfolio-Service Class 0.81% Fidelity VIP Growth Portfolio-Service Class 0.79%
Example: The purpose of the following examples is to assist you in understanding the various costs and expenses that you, as a Contract owner, bear directly or indirectly. They reflect expenses of the Division as well as the expenses of the Mutual Fund in which the Division invests. In certain circumstances, state premium taxes also apply. The examples should not be considered representations of past or future expenses. Actual expenses may be more or less than those shown. If you surrender your Contract at the end of the applicable time period, you would pay the following expenses on a $1,000 investment. The examples assume that your investment has a 5% return each year and that current expense levels (and waivers and reimbursements, if any) continue.
Separate Account Division 1 Year 1 Year 3 Years 3 Years 5 Years 5 Years 10 years 10 Years Aggressive Growth $83 $119 $145 $238 Asset Allocation 83 121 149 247 Balanced 81 113 136 218 Bond 80 111 132 210 Capital Value 79 109 128 202 Government Securities 80 111 132 210 Growth 80 110 129 205 International 83 119 146 239 International Emerging Markets International SmallCap 88 135 172 294 LargeCap Growth LargeCap Growth Equity LargeCap Stock Index* 85 125 156 261 MicroCap* 87 134 170 290 MidCap 81 114 137 222 MidCap Growth* 86 128 161 271 MidCap Growth Equity Money Market 80 112 133 212 Real Estate 85 125 156 261 SmallCap 84 123 152 253 SmallCap Growth* 85 128 160 269 SmallCap Value* 89 138 178 306 Utilities 81 115 139 225 AIM V.I. Growth 82 118 143 234 AIM V.I. Growth and Income 83 119 145 238 AIM V.I. Value 83 119 145 237 Fidelity VIP II Contrafund 83 119 146 239 Fidelity VIP Growth 83 119 145 238 Janus Aspen Aggressive Growth * After expense reimbursement
If you elect to receive payments under an annuity payment option (referred to in the Contract as "Benefit Option") at the end of the applicable time period or do not surrender your Contract, you would pay the following expenses on a $1,000 investment. The examples assume that your investment has a 5% annual return each year and that current expense levels (and waivers and reimbursements, if any) continue.
Separate Account Division 1 Year 1 Year 3 Years 3 Years 5 Years 5 Years 10 years 10 Years Aggressive Growth $21 $64 $111 $238 Asset Allocation 22 67 115 247 Balanced 19 59 101 218 Bond 18 56 97 210 Capital Value 17 54 93 202 Government Securities 18 56 97 210 Growth 18 55 94 205 International 21 65 111 239 International Emerging Markets International SmallCap 26 81 138 294 LargeCap Growth LargeCap Growth Equity LargeCap Stock Index* 23 71 122 261 MicroCap* 26 80 136 290 MidCap 19 60 102 222 MidCap Growth* 24 74 127 271 MidCap Growth Equity Money Market 18 57 98 212 Real Estate 23 71 122 261 SmallCap 22 69 118 253 SmallCap Growth* 24 73 126 269 SmallCap Value* 28 85 144 306 Utilities 20 60 104 225 AIM V.I. Growth 20 63 109 234 AIM V.I. Growth and Income 21 64 111 238 AIM V.I. Value 21 64 110 237 Fidelity VIP II Contrafund 21 65 111 239 Fidelity VIP Growth 21 64 111 238 Janus Aspen Aggressive Growth * After expense reimbursement
SUMMARY This prospectus describes a flexible variable annuity offered by the Company. The Contract is designed to provide individuals with retirement benefits, including (1) Individual Retirement Annuity plans ("IRA Plans"), Simplified Employee Pension plans ("SEPs") and Savings Incentive Match Plan for Employees ("SIMPLE") IRAs adopted according to Section 408 of the Internal Revenue Code (the "Code") and (2) non-qualified retirement programs. This is a brief summary of the Contract's features. More detailed information follows later in this prospectus. Investment Limitations o Initial purchase payment must be $2,500 or more for non-qualified retirement programs. o Initial purchase payment must be $1,000 for all other contracts. o Each subsequent payment must be at least $100. o If you are a member of a retirement plan covering three or more persons and payments are made through an automatic investment program, then the initial and subsequent purchase payments for the Contract must average at least $100 and not be less than $50. If purchase payments are not paid during two consecutive calendar years and the accumulated value or total purchase payments less partial surrenders and applicable surrender charges is less than $2,000, then we reserve the right to terminate a Contract and distribute the accumulated value, less any applicable charges. Separate Account Investment Options (see THE UNDERLYING MUTUAL FUNDS):
Division invests in: Principal Variable Contracts Fund, Inc. Aggressive Growth Aggressive Growth Account Asset Allocation Asset Allocation Account Balanced Balanced Account Bond Bond Account Capital Value Capital Value Account Government Securities Government Securities Account Growth Growth Account International International Account International Emerging Markets International Emerging Markets Account International SmallCap International SmallCap Account LargeCap Growth LargeCap Growth Account LargeCap Growth Equity LargeCap Growth Equity Account LargeCap Stock Index LargeCap Stock Index Account MicroCap MicroCap Account MidCap MidCap Account MidCap Growth MidCap Growth Account MidCap Growth Equity MidCap Growth Equity Account Money Market Money Market Account Real Estate Real Estate Account SmallCap SmallCap Account SmallCap Growth SmallCap Growth Account SmallCap Value SmallCap Value Account Utilities Utilities Account AIM V.I. Growth AIM V.I. Growth Fund AIM V.I. Growth and Income AIM V.I. Growth and Income Fund AIM V.I. Value AIM V.I. Value Fund Fidelity Variable Insurance Products Fund II Fidelity VIP II Contrafund Fidelity VIP II Contrafund Portfolio Service Class Fidelity Variable Insurance Products Fund Fidelity VIP Growth Fidelity VIP Growth Portfolio Service Class Janus Aspen Aggressive Growth Janus Aspen Series - Service Shares Aggressive Growth Portfolio
You may allocate your net premium payments to Divisions, the DCA Plus Accounts and/or the Fixed Account. Not all Divisions or the DCA Plus Accounts are available in all states. A current list of Divisions available in your state may be obtained from a sales representative or our annuity service office. Each Division invests in shares of an underlying Mutual Fund. More detailed information about the underlying Mutual Funds may be found in the current prospectus for each underlying Mutual Fund. The underlying Mutual Funds are NOT available to the general public directly. The underlying Mutual Funds are available only as investment options in variable life insurance policies or variable annuity contracts issued by life insurance companies. Some of the underlying Mutual Funds have been established by investment advisers that manage publicly traded mutual funds having similar names and investment objectives. While some of the underlying Mutual Funds may be similar to, and may in fact be modeled after publicly traded mutual funds, you should understand that the underlying Mutual Funds are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and of any underlying Mutual Fund may differ substantially. Transfers (See SEPARATE ACCOUNT DIVISION TRANSFERS and FIXED ACCOUNT TRANSFERS, TOTAL AND PARTIAL SURRENDERS for additional restrictions.) This section does not apply to transfers under the DCA Plus Program (see SCHEDULED DCA PLUS TRANSFERS and UNSCHEDULED DCA PLUS TRANSFERS) During the accumulation period: o a dollar amount or percentage of transfer must be specified; o a transfer may occur on a scheduled or unscheduled basis; and o transfers into DCA Plus Accounts are not permitted. During the annuity payment period, transfers are not permitted (no transfers once payments have begun). Surrenders (see SURRENDERS and FIXED ACCOUNT TRANSFERS, TOTAL AND PARTIAL SURRENDERS and DCA PLUS SURRENDERS) During the accumulation period: o a dollar amount must be specified; o surrendered amounts may be subject to surrender charge; o total surrenders may be subject to an annual Contract fee; o during a Contract year, partial surrenders less than the Contract's earnings or 10% of purchase payments are not subject to a surrender charge; and o withdrawals before age 59 1/2 may involve an income tax penalty (see FEDERAL TAX MATTERS). Charges and Deductions o No sales charge on purchase payments. o A contingent deferred surrender charge is imposed on certain total or partial surrenders. o A mortality and expense risks daily charge equal to 1.25% per year applies to amounts in the Separate Account. o If elected, a purchase payment credit rider daily charge equal to 0.60% per year applies to amounts in the Separate Account. o The purchase payment credit rider charge terminates upon completion of your 8th Contract year. o Daily Separate Account administration charge is currently zero but we reserve the right to assess a charge not to exceed 0.15% annually. o Contracts with an accumulated value of less than $30,000 are subject to an annual Contract fee of the lesser of $30 or 2% of the accumulated value. Currently we do not charge the annual fee if your accumulated value is $30,000 or more. If you own more than one Contract, then all the Contracts you own or jointly own are aggregated, on each Contract's anniversary, to determine if the $30,000 minimum has been met. o Certain states and local governments impose a premium tax. The Company reserves the right to deduct the amount of the tax from purchase payments or accumulated values. Annuity Payments o You may choose from several fixed annuity payment options which start on your selected annuity payment date. o Payments are made to the owner (or beneficiary depending on the annuity payment option selected). You should carefully consider the tax implications of each annuity payment option (see ANNUITY PAYMENT OPTIONS and FEDERAL TAX MATTERS). o Your Contract refers to annuity payments as "retirement benefit" payments. Death Benefit o If the annuitant or owner dies before the annuity payment date, then a death benefit is payable to the beneficiary of the Contract. o The death benefit may be paid as either a single sum cash benefit or under an annuity payment option (see DEATH BENEFIT). o If the annuitant dies on or after the annuity payment date, then the beneficiary will receive only any continuing payments which may be provided by the annuity payment option in effect. Examination Period (Free-Look) o You may return the Contract during the examination period which is generally 10 days from the date you receive the Contract. The examination period may be longer in certain states. o We return all purchase payments if required by state law. Otherwise we return accumulated value. o We recover the full amount of any purchase payment credit. CONDENSED FINANCIAL INFORMATION Financial statements are included in the Statement of Additional Information. Following are unit values for the Contract for the periods ended December 31.
Number of Accumulation Unit Value Accumulation Units Outstanding Beginning End of Percentage of Change End of Period of Period Period from Prior Period (in thousands) Aggressive Growth Division Year Ended December 31 1999 $27.815 $38.363 37.92% 9,018 1998 23.689 27.815 17.42 7,486 1997 18.340 23.689 29.17 6,077 1996 14.503 18.340 26.46 3,971 1995 10.184 14.503 42.41 1,324 Period Ended December 31, 1994(1) 10.075 10.184 1.08 362 Asset Allocation Division Year Ended December 31 1999 16.690 19.696 18.01 3,913 1998 15.478 16.690 7.83 3,762 1997 13.260 15.478 16.73 3,134 1996 11.891 13.260 11.51 2,264 1995 9.978 11.891 19.17 912 Period Ended December 31, 1994(1) 10.075 9.978 -0.96 303 Balanced Division Year Ended December 31 1999 17.647 17.846 1.13 9,103 1998 15.966 17.647 10.53 8,903 1997 13.708 15.966 16.47 6,717 1996 12.270 13.708 11.72 4,661 1995 9.972 12.270 23.04 1,373 Period Ended December 31, 1994(1) 10.266 9.972 -2.86 370 Bond Division Year Ended December 31 1999 14.260 13.718 -3.80 7,677 1998 13.408 14.260 6.35 7,499 1997 12.275 13.408 9.23 5,017 1996 12.143 12.275 1.09 3,872 1995 10.064 12.143 20.66 1,401 Period Ended December 31, 1994(1) 10.050 10.064 0.14 301 Capital Value Division Year Ended December 31 1999 23.156 21.888 -5.48 11,634 1998 20.642 23.156 12.18 11,720 1997 16.261 20.642 26.94 9,320 1996 13.333 16.261 21.96 6,267 1995 10.234 13.333 30.28 2,232 Period Ended December 31, 1994(1) 10.328 10.234 -0.91 699 Government Securities Division Year Ended December 31 1999 13.954 13.741 -1.53 8,554 1998 13.049 13.954 6.94 8,554 1997 11.969 13.049 9.02 5,946 1996 11.728 11.969 2.06 5,443 1995 9.973 11.728 17.60 2,023 Period Ended December 31, 1994(1) 10.133 9.973 -1.93 572
Number of Accumulation Unit Value Accumulation Units Outstanding Beginning End of Percentage of Change End of Period of Period Period from Prior Period (in thousands) Growth Division Year Ended December 31 1999 $21.657 $24.904 14.99% 10,999 1998 18.070 21.657 19.85 9,863 1997 14.411 18.070 25.39 7,898 1996 12.970 14.411 11.11 6,089 1995 10.454 12.970 24.07 2,619 Period Ended December 31, 1994(1) 10.336 10.454 1.14 764 International Division Year Ended December 31 1999 16.071 19.987 24.37 7,799 1998 14.795 16.071 8.62 7,866 1997 13.347 14.795 10.85 7,316 1996 10.804 13.347 23.54 4,797 1995 9.582 10.804 12.75 2,146 Period Ended December 31, 1994(1) 9.624 9.582 -0.43 936 International SmallCap Division Year Ended December 31 1999 8.978 17.184 91.40 1,246 Period Ended December 31, 1998(2) 10.000 8.978 -10.22 419 LargeCap Stock Index Division(3) Period Ended December 31, 1999(4) 10.000 10.956 9.56 2,314 MicroCap Division Year Ended December 31 1999 8.106 7.920 -2.30 244 Period Ended December 31, 1998(2) 10.000 8.106 -18.94 141 MidCap Division Year Ended December 31 1999 19.125 21.351 11.64 9,229 1998 18.676 19.125 2.40 10,738 1997 15.405 18.676 21.23 9,820 1996 12.880 15.405 19.60 7,285 1995 10.108 12.880 27.42 3,059 Period Ended December 31, 1994(1) 10.157 10.108 -0.48 973 MidCap Growth Division Year Ended December 31 1999 9.607 10.522 9.52 746 Period Ended December 31, 1998(2) 10.000 9.607 -3.93 352 Money Market Division Year Ended December 31 1999 11.913 12.306 3.30 7,145 1998 11.463 11.913 3.93 4,905 1997 11.027 11.463 3.95 2,752 1996 10.628 11.027 3.75 2,929 1995 10.194 10.628 4.26 1,370 Period Ended December 31, 1994(1) 10.027 10.194 1.67 702
Number of Accumulation Unit Value Accumulation Units Outstanding Beginning End of Percentage of Change End of Period of Period Period from Prior Period (in thousands) Real Estate Division Year Ended December 31 1999 $ 9.275 $ 8.750 -5.66% 261 Period Ended December 31, 1998(2) 10.000 9.275 -7.25 195 SmallCap Division Year Ended December 31 1999 7.928 11.242 41.80 1,208 Period Ended December 31, 1998(2) 10.000 7.928 -20.72 459 SmallCap Growth Division Year Ended December 31 1999 10.179 19.672 93.26 1,388 Period Ended December 31, 1998(2) 10.000 10.179 1.79 314 SmallCap Value Division Year Ended December 31 1999 8.440 10.123 19.94 536 Period Ended December 31, 1998(2) 10.000 8.440 -15.60 306 Utilities Division Year Ended December 31 1999 11.464 11.581 1.02 1,670 Period Ended December 31, 1998(2) 10.000 11.464 14.64 639 AIM V.I. Growth Division Period Ended December 31, 1999(4) 10.000 12.256 22.56 968 AIM V.I. Growth and Income Division Period Ended December 31, 1999(4) 10.000 12.101 21.01 1,494 AIM V.I. Value Division Period Ended December 31, 1999(4) 10.000 11.553 15.53 1,149 Fidelity VIP II Contrafund Division Period Ended December 31, 1999(4) 10.000 11.294 12.94 1,436 Fidelity VIP Growth Division Period Ended December 31, 1999(4) 10.000 12.108 21.08 1,441 (1) Commenced operations on June 16, 1994. (2) Commenced operations on May 1, 1998. (3) Formerly known as Stock Index 500 Division. (4) Commenced operations on July 30, 1999.
THE PRINCIPAL FLEXIBLE VARIABLE ANNUITY The Principal Flexible Variable Annuity is significantly different from a fixed annuity. As the owner of a variable annuity, you assume the risk of investment gain or loss (as to amounts in the Divisions) rather than the insurance company. The Separate Account value under a variable annuity is not guaranteed and varies with the investment performance of the underlying Mutual Funds. Based on your investment objectives, you direct the allocation of purchase payments and accumulated values. There can be no assurance that your investment objectives will be achieved. THE COMPANY The Company is a stock life insurance company with its home office at: Principal Financial Group, Des Moines, Iowa 50306. It is authorized to transact life and annuity business in all of the United States and the District of Columbia. The Company is a wholly owned subsidiary of Principal Financial Services, Inc. In 1879, the Company was incorporated under Iowa law as a mutual life insurance company named Bankers Life Association. It changed its name to Bankers Life Company in 1911 and then to Principal Mutual Life Insurance Company in 1986. The name change to Principal Life Insurance Company and reorganization into a mutual holding company structure took place in 1998. THE SEPARATE ACCOUNT Separate Account B was established under Iowa law on January 12, 1970. It was registered as a unit investment trust with the SEC on July 17, 1970. This registration does not involve SEC supervision of the investments or investment policies of the Separate Account. The income, gains, and losses, whether or not realized, of the Separate Account are credited to or charged against the Separate Account without regard to other income, gains, or losses of the Company. Obligations arising from the Contract, including the promise to make annuity payments, are general corporate obligations of the Company. However, the Contract provides that the portion of the Separate Account's assets equal to the reserves and other liabilities under the Contract are not charged with any liabilities arising out of any other business of the Company. The assets of each Division invest in a corresponding Mutual Fund. New Divisions may be added and made available. Divisions may also be eliminated from the Separate Account. THE UNDERLYING MUTUAL FUNDS The Principal Variable Contracts Fund, Inc., AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. Value Fund, Fidelity Variable Insurance Product Fund, Fidelity Variable Insurance Product Fund II and Janus Aspen Series are Mutual Funds registered under the Investment Company Act of 1940 as open-end investment management companies. The Mutual Funds provide the investment vehicles for the Separate Account. A full description of the Mutual Funds, the investment objectives, policies and restrictions, charges and expenses and other operational information are contained in the accompanying prospectuses (which should be read carefully before investing) and the Statement of Additional Information ("SAI"). Additional copies of these documents are available from a sales representative or our annuity service office. Principal Management Corporation (the "Manager") serves as the manager for the Principal Variable Contracts Fund. The Manager is a subsidiary of Princor Financial Services Corporation. It has managed mutual funds since 1969. As of December 31, 1999, the funds it managed had assets of approximately $6.4 billion. The Manager's address is Principal Financial Group, Des Moines, Iowa 50392-0200. Some of the Principal Variable Contracts Fund's Accounts are used to fund the Company's variable life insurance contracts. The Board of Directors (the "Board") monitors events in order to identify any material irreconcilable conflicts between the interests of the variable annuity contract owners and variable life insurance policyowners. The Board determines any responsive action which may need to be taken. If it becomes necessary for any Separate Account to replace shares of any division with an alternate investment, then the division may have to liquidate securities on a disadvantageous basis. AIM Advisors, Inc. (the advisor) serves as the investment advisor for the AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund and the AIM V.I. Value Fund. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the funds' operations and provides investment advisory services to the funds, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the funds. Fidelity Investments Institutional Services, Inc. is the manager for the Fidelity Insurance Products Fund and Fidelity Insurance Products Fund II. As of December 31, 1999, Fidelity had approximately $863 billion in discretionary assets under management. The manager is located at 82 Devonshire Street, Boston, Massachusetts 02109. As the manager, Fidelity is responsible for choosing the account investments and handling their business affairs. Janus Capital ("Janus") is the investment advisor for the Janus Aspen Series. Janus is located at 100 Fillmore Street, Denver, Colorado 80206-4928. Janus is responsible for the day-to-day management of investment portfolio and other business affairs of the portfolio. The Company purchases and sells Mutual Fund shares for the Separate Account at their net asset value without any sales or redemption charge. Shares represent interests in the Mutual Fund available for investment by the Separate Account. Each Mutual Fund corresponds to one of the Divisions. The assets of each Division are separate from the others. A Division's performance has no effect on the investment performance of any other Division. The following is a brief summary of the investment objectives of each Division:
Division Division Invests In Investment Advisor* Investment Objective Aggressive Growth Principal Variable Contracts Morgan Stanley Asset to provide long-term capital appreciation Fund, Inc. - Management through a by investing primarily in growth-oriented Account Aggressive Growth sub-advisory agreement common stocks of medium and large capitalization U.S. corporations and, to a limited extent, foreign corporations. Asset Allocation Principal Variable Contracts Morgan Stanley Asset to generate a total investment return Fund, Inc. - Management through a consistent with the preservation of capital. Asset Allocation Account sub-advisory agreement The Account intends to pursue a flexible investment policy in seeking to achieve this investment objective. Balanced Principal Variable Contracts Invista Capital Management, LLC to generate a total return consisting of Fund, Inc. - through a sub-advisory agreement current income and capital appreciation Balanced Account while assuming reasonable risks in furtherance of this objective. Bond Principal Variable Contracts Principal Management Corporation to provide as high a level of income as is Fund, Inc. - consistent with preservation of capital and Bond Account prudent investment risk. Capital Value Principal Variable Contracts Invista Capital Management, LLC to provide long-term capital appreciation Fund, Inc. - through a sub-advisory agreement and secondarily growth of investment Capital Value Account income. The Account seeks to achieve its investment objectives through the purchase primarily of common stocks, but the Account may invest in other securities. Division Division Invests In Investment Advisor* Investment Objective - -------- ------------------- ------------------ -------------------- Government Securities Principal Variable Contracts Invista Capital Management, LLC to seek a high level of current income, Fund, Inc. - through a sub-advisory agreement liquidity and safety of principal. The Government Securities Account Account seeks to achieve its objective through the purchase of obligations issued or guaranteed by the United States Government or its agencies, with emphasis on Government National Mortgage Association Certificates ("GNMA Certificates"). Account shares are not guaranteed by the United States Government. Growth Principal Variable Contracts Invista Capital Management, LLC to seek growth of capital. The Account Fund, Inc. - through a sub-advisory agreement seeks to achieve its objective through the Growth Account purchase primarily of common stocks, but the Account may invest in other securities. International Principal Variable Contracts Invista Capital Management, LLC to seek long-term growth of capital by Fund, Inc. - through a sub-advisory agreement investing in a portfolio of equity International Account securities domiciled in any of the nations of the world. International Principal Variable Contracts Invista Capital Management, LLC seeks to achieve long-term growth of capital Emerging Markets Fund, Inc. - through a sub-advisory agreement by investing primarily in equity securities International Emerging of issuers in emerging market countries. Account International SmallCap Principal Variable Contracts Invista Capital Management, LLC seeks long-term growth of capital. The Fund, Inc. - through a sub-advisory agreement Account will attempt to achieve its International SmallCap Account objective by investing primarily in equity securities of non-United States companies with comparatively smaller market capitalizations. LargeCap Growth Principal Variable Contracts Janus Capital Management, LLC seeks long-term growth of capital by Fund, Inc. - through a sub-advisory agreement investing in equity securities of growth LargeCap Growth Account companies with market capitalization of greater than $10 billion. LargeCap Growth Principal Variable Contracts Duncan-Hurst Capital seeks to achieve long-term growth of capital Equity Fund, Inc. - Management, Inc. investing primarily in common stocks LargeCap Growth through a sub-advisory agreement of larger capitalization domestic companies. Equity Account LargeCap Stock Index Principal Variable Contracts Invista Capital Management, LLC The Account attempts to mirror the Fund, Inc. - through a sub-advisory agreement investment results of the Standard & LargeCap Stock Index Account Poor's 500 Stock Index. MicroCap Principal Variable Contracts Goldman Sachs Asset Management seeks long-term growth of capital. The Fund, Inc. - through a sub-advisory agreement Account will attempt to achieve its MicroCap Account objective by investing primarily in value and growth oriented companies with small market capitalizations, generally less than $700 million. MidCap Principal Variable Contracts Invista Capital Management, LLC to achieve capital appreciation by Fund, Inc. - through a sub-advisory agreement investing primarily in securities of MidCap Account emerging and other growth-oriented companies. Division Division Invests In Investment Advisor* Investment Objective - -------- ------------------- ------------------ -------------------- MidCap Growth Principal Variable Contracts Dreyfus Corporation through seeks long-term growth of capital. The Fund, Inc. - a sub-advisory agreement Account will attempt to achieve its MidCap Growth Account objective by investing primarily in growth stocks of companies with market capitalizations in the $1 billion to $10 billion range. MidCap Growth Principal Variable Contracts Turner Investment Partners, Inc. seeks to achieve long-term growth of Equity Fund, Inc. - through a sub-advisory agreement capital by investing primarily in medium MidCap Growth capitalization of U.S. companies with Equity Account strong earnings growth potential. Money Market Principal Variable Contracts Principal Management Corporation to seek as high a level of current income Fund, Inc. - available from short-term securities as is Money Market Account considered consistent with preservation of principal and maintenance of liquidity by investing all of its assets in a portfolio of money market instruments. Real Estate Principal Variable Contracts Principal Management Corporation seeks to generate a high total return. The Fund, Inc. - Account will attempt to achieve its Real Estate Account objective by investing primarily in equity securities of companies principally engaged in the real estate industry. SmallCap Principal Variable Contracts Invista Capital Management, LLC seeks long-term growth of capital. The Fund, Inc. - through a sub-advisory agreement Account will attempt to achieve its SmallCap Account objective by investing primarily in equity securities of both growth and value oriented companies with comparatively smaller market capitalizations. SmallCap Growth Principal Variable Contracts Berger LLC through seeks long-term growth of capital. The Fund, Inc. - a sub-advisory agreement Account will attempt to achieve its SmallCap Growth Account objective by investing primarily in equity securities of small growth companies with market capitalization of less than $1 billion. SmallCap Value Principal Variable Contracts J.P. Morgan Investment seeks long-term growth of capital. The Fund, Inc. - Management Inc. through a Account will attempt to achieve its SmallCap Value Account sub-advisory agreement objective by investing primarily in equity securities of small companies with value characteristics and market capitalizations of less than $1 billion. Utilities Principal Variable Contracts Invista Capital Management, LLC seeks to provide current income and long- Fund, Inc. - through a sub-advisory agreement term growth of income and capital. The Utilities Account Account will attempt to achieve its objective by investing primarily in equity and fixed-income securities of companies in the public utilities industry. AIM V.I. Growth AIM V.I. Growth Fund AIM Advisors, Inc. seeks growth of capital primarily by investing in seasoned and better capitalized companies considered to have strong earnings momentum. AIM V.I. Growth AIM V.I. Growth AIM Advisors, Inc. seeks growth of capital with a secondary and Income and Income Fund objective of current income. Division Division Invests In Investment Advisor* Investment Objective AIM V.I. Value AIM V.I. Value Fund AIM Advisors, Inc. seeks long-term growth of capital by investing primarily in equity securities judged by the fund's investment advisor to be undervalued relative to the investment advisor's appraisal of the current or projected earnings of the companies issuing the securities, or relative to current market values of assets owned by the companies issuing the securities or relative to the equity market generally. Income is a secondary objective. Fidelity VIP II Fidelity Variable Insurance Fidelity Management seeks long-term capital appreciation. Contrafund Products Fund II and Research Company Fidelity VIP II Contrafund Portfolio Service Class Fidelity VIP Growth Fidelity Variable Insurance Fidelity Management seeks to maximize total return by allocating Products Fund and Research Company its assets among stocks, bonds, short-term Fidelity VIP Growth instruments, and other investments. Portfolio Service Class Janus Aspen Janus Aspen Series - Janus Capital Corporation seeks long-term growth of capital.It pursues Aggressive Growth Service Shares its objective by investing primarily in Aggressive Growth common stocks selected for their growth Portfolio potential, and normally invests at least 50% of its equity assets in medium-sized companies. Medium-sized companies are those whose market capitalization falls within the range of companies in the S&P MidCap 400 Index.
* An Investment Advisor agrees to provide investment advisory services for a specific underlying Mutual Fund or underlying Mutual Fund Account. For these services, each Investment Advisor is paid a fee. SURPLUS DISTRIBUTIONS Divisible surplus distributions are not anticipated because the Contracts are not expected to result in a contribution to the divisible surplus of the Company. However, if any divisible surplus distribution is made, then it will be made to the owners in the form of cash. THE CONTRACT The following descriptions are based on provisions of the Contract offered by this prospectus. You should refer to the actual Contract and the terms and limitations of any qualified plan which is to be funded by the Contract. Qualified plans are subject to several requirements and limitations which may affect the terms of any particular Contract or the advisability of taking certain action permitted by the Contract. To Buy a Contract If you want to buy a Contract, you must submit an application and make an initial purchase payment. If you are buying the Contract to fund a SIMPLE-IRA or SEP, an initial purchase payment is not required at the time you send in the application. If the application is complete and the Contract applied for is suitable, the Contract is issued subject to underwriting. If the completed application is received in proper order, the initial purchase payment is credited within two valuation days after the later of receipt of the application or receipt of the initial purchase payment at the annuity service office. If the initial purchase payment is not credited within five valuation days, it is refunded unless we have received your permission to retain the purchase payment until we receive the information necessary to issue the Contract. The date the Contract is issued is the Contract date. The Contract date is the date used to determine Contract years, regardless of when the Contract is delivered. Purchase Payments o The initial purchase payment must be at least $2,500 for non-qualified retirement programs. o All other initial purchase payments must be at least $1,000. o If you are making purchase payments through a payroll deduction plan or through a bank account (or similar financial institution) under an automated investment program, then your initial and subsequent purchase payments must be at least $100. o You may elect a purchase payment credit rider with an additional charge and an associated 9-year surrender charge period. o Subsequent payments must be at least $100 and can be made until the annuity payment date. o If you are a member of a retirement plan covering three or more persons, then the initial and subsequent purchase payments for the Contract must average at least $100 and cannot be less than $50. o The total of all purchase payments may not be greater than $2,000,000 without our prior approval. o In New Jersey after the first Contract year, purchase payments cannot exceed $100,000 per Contract year. The Company reserves the right to: o increase the minimum amount for each purchase payment to not more than $1,000; and o terminate* a Contract and send you the accumulated value if no premiums are paid during two consecutive calendar years and the accumulated value (or total purchase payments less partial surrenders and applicable surrender charges) is less than $2,000. * The Company will first notify you of its intent to exercise this right and give you 60 days to increase the accumulated value to at least $2,000. Right to Examine the Contract (Free-Look) Under state law, you have the right to return the Contract for any reason during the examination period. The examination period is 10 days after the Contract is delivered to you in all states, unless your Contract is issued in: a. California and you are age 60 and over (30 day examination period); b. Colorado (15 day examination period); or c. Idaho or North Dakota (20 day examination period). Some states require us to return the initial purchase payment. If your Contract is issued in one of those states, your initial purchase payments are allocated to the Money Market Division for 15 days (20 days for Contracts issued in Idaho) after the Contract date. After the 15-day period (20 days in Idaho), the then current value of the Money Market Division is reallocated according to your allocation instructions. The states in which purchase payments are returned are: Colorado Kentucky North Carolina Connecticut* Louisiana Oklahoma Georgia Maryland Rhode Island Hawaii Michigan South Carolina Idaho Missouri Utah Indiana Nebraska Washington * Purchase payments are refunded if the Contract is canceled prior to its delivery, otherwise the accumulated value is refunded. If your Contract is issued in a state not listed above and if you return the Contract during the examination period, you will receive the accumulated value. Additionally, if you decide to return the Contract during the examination period, the amount returned is reduced by any credits. If the value of the purchase payment credit declines during the examination period, we recover the full amount of the purchase payment credit. To return a Contract you must send it and a written request to the annuity service office or to the sales representative who sold it to you before the close of business on the last day of the examination period. If you send the request (properly addressed and postage prepaid) to the annuity service office, the date of the postmark is used to determine if the examination period has expired. Replacement Contracts If the purchase of this Contract is a replacement for another annuity contract or a life insurance policy, different examination periods may apply. The Company reserves the right to keep the initial purchase payment in the Money Market Division longer than 15 days to correspond to the examination periods of a particular state's replacement requirements. Exchange Credit If you own a Single Premium Deferred Annuity ("SPDA") or a Single Premium Deferred Annuity Plus ("SPDA+") issued by us and are within at least 8 months of the 8th Contract year, then you may transfer the accumulated value, without charge, to the Contract described in this prospectus. Additionally, we will add 1% of the current SPDA/SPDA+ surrender value to the purchase payment. We reserve the right to change or terminate this program. Any changes or termination will follow at least 1 year notice. Both SPDA and SPDA+ are annuities which provide a fixed rate of accumulation. This Contract varies with the investment experience and objectives of the various Divisions. Thus, the value of your Contract may increase or decrease with the investment holdings of the Divisions. When making an exchange decision, the owner should carefully review the SPDA or SPDA+ contract and this prospectus because the charges and provisions of the contracts differ. An existing SPDA or SPDA+ contract may be currently eligible for waiver of surrender charge due to critical need, while similar riders may not be available under this Contract. To complete a transfer to this Contract, send 1) a Contract application, 2) a SPDA/SPDA+ surrender form, 3) a replacement form (based on state written), and 4) an Annuity Exchange Request and Release Form. The exchange is effective when we receive the completed forms and accept the application. The transaction is valued at the end of the valuation period in which we receive the necessary documents. (This "exchange credit" is not available in New York and may not be available in other states as well. Specific information is available from your registered representative or the annuity service office (1-800-852-4450)). The Exchange Credit is allocated among the Separate Account Divisions, the DCA Plus Account(s) or the Fixed Account in the same ratio as the allocation of the purchase payment. The credit is treated as earnings. The 1% credit is subject to a vesting period. Therefore, the 1% credit is not credited to your Contract until the examination period has expired. If you exercise your right to return the Contract during the examination period, then the amount returned is the original amount invested (see RIGHT TO EXAMINE THE CONTRACT). Purchase Payment Credit Rider You may elect a purchase payment credit rider at the time the Contract is issued (may not be available in all states; consult your sales representative or the annuity service office for availability). If the purchase payment credit rider is elected, then the following provisions apply to the Contract: o A credit of 5% will be applied to purchase payments received during your first Contract year. For example, if you make purchase payments totaling $10,000 in your first Contract year, a credit amount of $500 will be added to your Contract (5% x $10,000). If an additional purchase payment of $5,000 is made in your second Contract year, then a credit is not added as a result of the $5,000 purchase payment. o The credit is allocated among the Fixed Account and the Divisions according to your then current purchase payment allocations. o If you exercise your right to return the Contract during the examination period, the amount returned to you is reduced by any credits. o Credits are considered earnings under the Contract. o All purchase payments are subject to the 9-year surrender charge table (see Surrender Charge). o The purchase payment credit rider may not be cancelled and the associated 9-year surrender charge period cannot be changed. o You may not participate in the DCA Plus Program. The 0.60% purchase payment credit rider charge is assessed against the entire Separate Account accumulated value for the first eight Contract years. If you anticipate making additional purchase payments after the first Contract year you should carefully examine the purchase payment credit rider and consult your sales representative regarding its desirability. The following table demonstrates hypothetical Contract accumulated values for Contracts with the purchase payment credit rider and Contracts without the rider. The example is based on: o a $100,000 initial purchase payment and no additional purchase payments; o no surrender during the 10 years shown by the example; o the deduction of total Separate Account annual expenses of 1.85% annually for Contracts with the purchase payment credit rider and 1.25% annually for Contracts without the rider; o the deduction of Mutual Fund expenses equal to those calculated as of December 31, 1999 o purchase payment allocation among the Divisions proportionally equal to the allocation of the company's total Separate Account assets as of April 30, 2000; o 5% and 10% annual rates of return before charges for a period of 10 years.
5% Annual Return 10% Annual Return Contract without Contract with Contract without Contract with purchase payment purchase payment purchase payment purhcase payment Contract Year credit rider credit credit rider credit 1 $103,138 $107,648 $108,410 $113,151 2 $106,383 $110,371 $117,553 $121,960 3 $109,731 $113,164 $127,468 $131,455 4 $113,185 $116,027 $138,219 $141,691 5 $116,747 $118,964 $149,878 $152,723 6 $120,423 $121,975 $162,521 $164,616 7 $124,214 $125,062 $176,232 $177,435 8 $128,126 $128,229 $191,099 $191,253 9 $132,161 $132,252 $207,222 $207,336 10 $136,323 $136,414 $224,705 $224,823 15 $159,196 $159,322 $336,921 $337,186 20 $185,924 $186,070 $505,220 $505,617
Based on the assumptions stated above, Contract accumulated value will generally be higher for Contracts with the purchase payment credit rider than without, regardless of the rate of return. In addition, the higher the rate of return, the more advantageous the purchase payment credit rider becomes. The Accumulation Period The Value of Your Contract The value of your Contract is the total of the Separate Account value plus the DCA Plus Account(s) value plus the Fixed Account value. The DCA Plus Accounts and Fixed Account are described in the section titled FIXED ACCOUNT AND DCA PLUS ACCOUNTS. There is no guaranteed minimum Separate Account value. Its value reflects the investment experience of the Divisions that you choose. It also reflects your purchase payments, partial surrenders, surrender charges and the Contract expenses deducted from the Separate Account. The Separate Account value changes from day to day. To the extent the accumulated value is allocated to the Separate Account, you bear the investment risk. At the end of any valuation period, your Contract's value in a Division is: o the number of units you have in a Division multiplied by o the value of a unit in the Division. The number of units is the total of units purchased by allocations to the Division from: o your initial purchase payment; o an exchange credit (if applicable); o subsequent investments; o purchase payment credits; and o transfers from another Division, a DCA Plus Account or the Fixed Account. minus units sold: o for partial surrenders from the Division; o as part of a transfer to another Division or the Fixed Account; and o to pay contract charges and fees. Unit values are calculated each valuation date at the close of normal trading of the New York Stock Exchange (generally 3:00 p.m. Central Time). To calculate the unit value of a Division, the unit value from the previous valuation date is multiplied by the Division's net investment factor for the current valuation period. The number of units does not change due to a change in unit value. The net investment factor measures the performance of each Division. The net investment factor for a valuation period is calculated as follows: [{share price (net asset value) of the underlying Mutual Fund at the end of the valuation period plus per share amount of any dividend* (or other distribution) made by the Mutual Fund during the valuation period} divided by share price (net asset value) of the underlying Mutual Fund at the end of the previous valuation period] minus {total Separate Account annual expenses} * When an investment owned by a Mutual Fund pays a dividend, the dividend increases the net asset value of a share of the Mutual Fund as of the date the dividend is recorded. As the net asset value of a share of a Mutual Fund increases, the unit value of the corresponding Division also reflects an increase. Payment of a dividend under these circumstances does not increase the number of units you own in the Division. The Separate Account charges are calculated by dividing the annual amount of the charge by 365 and multiplying by the number of days in the valuation period. The Separate Account charges and any taxes (currently none) are accrued daily and are transferred from the Separate Account at the Company's discretion. Purchase Payments o On your application, you direct your purchase payments to be allocated to the Investment Options. o Allocations may be in percentages. o Percentages must be in whole numbers and total 100%. o Subsequent purchase payments are allocated according to your instructions. o Changes to the allocation instructions may be made without charge. o A change is effective on the next valuation period after we receive your new instructions. o You can change the allocations by: 1) mailing your instructions to us; 2) calling us at 1-800-852-4450 (if telephone privileges apply); or 3) faxing your instructions to us at 1-515-248-9800. o Changes to purchase payment allocations do not transfer any existing Investment Option accumulated values. o Purchase payments are credited on the basis of unit value next determined after we receive a purchase payment. Separate Account Division Transfers o You may request an unscheduled transfer or set up a scheduled transfer by sending us a written request, by telephoning if you have telephone privileges (1-800-852-4450) or sending us a fax (1-515-248-9800). o You must specify the dollar amount or percentage to transfer from each Division. o The minimum amount is $100 or if the Division's value is less than $100, then 100% of the Division from which the transfer is being made. o In states where allowed, we reserve the right to reject transfer instructions from someone providing them for multiple Contracts for which he or she is not the owner. You may not make a transfer to the Fixed Account if: o a transfer has been made from the Fixed Account to a Division within six months; or o following the transfer, the Fixed Account value would be greater than $1,000,000 (without our prior approval). Unscheduled Transfers o You may make unscheduled Division transfers from a Division to another Division or to the Fixed Account. o Transfers are not permitted into DCA Plus Accounts. o The transfer is made, and values determined, as of the end of the valuation period in which we receive your request. Scheduled Transfers (Dollar Cost Averaging) o You may elect to have transfers made on a scheduled basis. o You must specify the dollar amount of the transfer. o You select the transfer date (other than the 29th, 30th or 31st) and the transfer period (monthly, quarterly, semi-annually or annually). o If the selected date is not a valuation date, the transfer is completed on the next valuation date. o Transfers are not permitted into DCA Plus Accounts. o If you want to stop a scheduled transfer, then you must provide us notice prior to the date of the scheduled transfer. o Transfers continue until your value in the Division is zero or we receive notice to stop them. o We reserve the right to limit the number of Divisions from which simultaneous transfers are made. In no event will it ever be less than two. Automatic Portfolio Rebalancing (APR) o APR allows you to maintain a specific percentage of your Separate Account accumulated value in specified Divisions over time. o You may elect APR at any time. o APR is not available for values in the Fixed Account or the DCA Plus Accounts. o APR is not available if you have arranged scheduled transfers from the same Division. o APR will not begin until the examination period has expired. o There is no charge for APR transfers. o APR can be selected for quarterly, semi-annual or annual rebalancing. o You may rebalance by completing and submitting a form to us, by telephoning if you have telephone privileges (1-800-852-4450) or faxing your instructions to us (1-515-248-9800). (Divisions are rebalanced at the end of the next valuation period following your request.) Example: You elect APR to maintain your Separate Account accumulated value with 50% in the A Division and 50% in the B Division. At the end of the specified period, 60% of the values are in the A Division, with the remaining 40% in the B Division. By rebalancing, units from the A Division are sold and applied to the B Division so that 50% of the Separate Account accumulated value is once again in each Division. Telephone Services* Telephone services are permitted for: o purchase payment allocation changes; o transfers; and o changes to APR. Telephone services are available for both you and your sales representative. Telephone services may be declined on the application or at any later date by providing us with written notice. Telephone services are used by calling us at 1-800-852-4450. Telephone instructions must be made while we are open for business. They are effective when received by us before the close of normal trading of the New York Stock Exchange (generally 3 p.m. Central Time). Requests received when we are not open for business or after the New York Stock Exchange closes its normal trading will be effective on the next valuation date. Direct Dial* You may obtain Contract information from our direct dial system between 7:00 a.m. and 9:00 p.m., Central Time, Sunday through Friday, and between 7:00 a.m. and 4:00 p.m., Central Time, on Saturday. The telephone number is 1-800-852-4450. Internet* Internet access is available for both you and your sales representative at www.principal.com. Internet access may be declined on the application or at a later date by providing us with written notice. * Instructions received via our telephone services, direct dial system and internet are binding on both owners if the Contract is jointly owned. Neither the Company nor the Separate Account are responsible for the authenticity of telephone service, direct dial or internet transaction requests. We reserve the right to refuse telephone service, direct dial or internet transaction requests. You assume the risk of loss caused by fraudulent telephone service, direct dial or internet transactions we reasonably believe to be genuine. We follow procedures in an attempt to assure genuine telephone service, direct dial or internet transactions. If these procedures are not followed, then we may be liable for loss caused by unauthorized or fraudulent transactions. The procedures may include recording telephone service transactions, recording direct dial transactions, requesting personal identification (name, daytime telephone number, social security number and/or birth date) and sending written confirmation to your address of record. We reserve the right to modify or terminate telephone service, direct dial or internet transaction procedures at any time. Surrenders Surrenders result in the cancellation of units and your receipt of the canceled unit values minus any applicable fee and surrender charge. Surrenders from the Separate Account are generally paid within seven days of the effective date of the request for surrender (or earlier if required by law). However, certain delays in payment are permitted (see DELAY OF PAYMENTS). Surrenders before age 59 1/2 may involve an income tax penalty (see FEDERAL TAX MATTERS). You must send us a written request for any surrender. You may specify surrender allocation percentages with each partial surrender request. If you don't provide us with specific percentages, we will use your purchase payment allocation percentages for the partial surrender. Surrenders may be subject to a surrender charge (see SURRENDER CHARGE). Total Surrender o You may surrender the Contract at any time before the annuity payment date. o You receive the cash surrender value at the end of the valuation period during which we receive your surrender request. o The cash surrender value is your accumulated value minus any applicable fee and charge. o The written consent of all collateral assignees and irrevocable beneficiaries must be obtained prior to surrender. o We reserve the right to require you to return the Contract to us prior to making any payment though this does not affect the amount of the cash surrender value. Unscheduled Partial Surrender o Prior to the annuity payment date and during the lifetime of the Annuitant, you may surrender a part of the accumulated value by sending us a written request. o You must specify the dollar amount of the surrender (which must be at least $100). o The surrender is effective at the end of the valuation period during which we receive your written request for surrender. o The surrender is deducted from your Investment Options according to the surrender allocation percentages you specify. o If surrender allocation percentages are not specified, we use your purchase payment allocation percentages. o We surrender units from your Investment Options to equal the dollar amount of the surrender request plus any applicable surrender charge and fee. o The accumulated value after the unscheduled partial surrender must be equal to or greater than $5,000 (we reserve the right to change the minimum remaining accumulated value but it will not be greater than $10,000). Scheduled Partial Surrender o You may elect partial surrenders from any of the Investment Options on a scheduled basis by sending us written notice. o Your accumulated value must be at least $5,000 when the scheduled surrenders begin. o You may specify monthly, quarterly, semi-annually or annually and choose a surrender date (other than the 29th, 30th or 31st). o If the selected date is not a valuation date, the surrender is completed on the next valuation date. o The surrenders continue until your value in the Division is zero or we receive written notice to stop them. Death Benefit If you or the annuitant die before the annuity payment date, then we will pay a death benefit. In the case of joint annuitants, the death benefit is paid upon death of the first annuitant. If the owner is not a natural person, death benefits are paid to the beneficiary(ies) upon the death of the annuitant. Before the annuity payment date, you may give us written instructions for payment under a death benefit option. If we do not receive your instructions, the death benefit is paid according to instructions from the beneficiary(ies). You name the beneficiary or beneficiaries in your application. The beneficiary(ies) receives benefits upon your death. Generally, unless the beneficiary(ies) elects otherwise we pay the death benefit in a single sum, subject to proof of your death. Unless you have named an irrevocable beneficiary(ies), you may change your beneficiary by providing us with written notice. If a beneficiary dies before you, on your death we will make equal payments to the surviving beneficiaries unless you had provided us with other written instructions. If none of your beneficiaries survive you, we will pay the death benefit to your estate in a lump sum. Upon death of the annuitant, your beneficiary may elect to: o apply the death benefit under an annuity payment option; or o receive the death benefit as a single payment. No surrender charge applies when a death benefit is paid. If you die before the annuitant and your beneficiary is your spouse, we will continue the Contract with your spouse as the new owner unless your spouse elects to receive the death benefit. If the owner or annuitant of a Contract, not issued as an Individual Retirement Annuity, Roth IRA, SEP IRA or Simple IRA, dies before the annuitant and before the annuity payment date, written notice of the death must be sent to us promptly so distribution arrangements can be made to avoid adverse tax consequences. Standard Death Benefit The amount of the standard death benefit is the greatest of: o your accumulated value on the date we receive proof of death and all required documents; o the total of purchase payments minus any partial surrenders, fees and charges as of the date we receive all required documents and notice (including proof) of death; or o the highest accumulated value on any prior Contract anniversary that is divisible equally by seven, plus any purchase payments and less any partial surrenders (and surrender charges incurred) made after that Contract anniversary. Annual Enhanced Death Benefit This is an optional death benefit rider. Under this rider, if the original annuitant or owner dies before the annuity payment date, then the death benefit payable to the beneficiary is the greatest of: 1) the standard death benefit; 2) the annual increasing death benefit, based on purchase payments (accumulated at 5% annually) minus any surrenders and surrender charges (accumulated at 5% annually) until the later of the Contract anniversary after the original owner's or original annuitant's 75th birthday or five years from the effective date of the rider; or 3) the highest accumulated value on a Contract anniversary, plus any subsequent purchase payments minus any surrenders and surrender charges, until the Contract anniversary following the original owner's or original annuitant's 75th birthday or five years from the effective date of the rider, whichever comes last. For Contracts issued in New York - under this rider, if the original annuitant or owner dies before the annuity payment date, then the death benefit payable to the beneficiary is the greater of: 1) the standard death benefit; o 2) the highest accumulated value on a Contract anniversary until the Contract anniversary following the original owner's or original annuitant's 75th birthday or five years from the effective date of the rider, whichever comes last. Lock-In Feature At the later of the Contract anniversary following the original owner's or original annuitant's 75th birthday ("lock-in date"), the death benefit amount is locked-in. After the lock-in date, the death benefit increases by purchase payments (subject to applicable restrictions) made after the lock-in date, minus any surrenders and surrender charges. However, because the death benefit is locked-in, it will only decrease by surrenders and surrender charges. Once the standard death benefit equals the annual enhanced death benefit, then the annual enhanced death benefit and any associated charge terminate. The standard death benefit then applies. Termination You may terminate the annual enhanced death benefit at anytime. Once the annual enhanced death benefit is terminated, it cannot be reinstated (except in Florida). The annual cost of the rider is 0.20% of the annual accumulated value (0.15% in New York). The charge is equal to 0.05% (0.0375% in New York) of the average accumulated value during the calendar quarter. The cost will be deducted throughout the redemption of units from your Contract's accumulated value in the same proportion as the purchase payment allocations among the DCA Plus Accounts, Fixed Account and Separate Account Divisions. If the rider is purchased after the beginning of a quarter, then the charge is prorated according to the number of days it is in effect during the quarter. Upon termination of the rider or upon death, you will be charged based on the number of days it is in effect during the quarter. The enhanced death benefit rider is only available at the time the Contract is issued. Thus, once a Contract has been purchased without the rider, it may not be added at a later date. Payment of Death Benefit The death benefit is usually paid within seven days of our receiving all documents (including proof of death) that we require to process the claim. Payment is made according to benefit instructions provided by you. Some states require this payment to be made in less than seven days. Under certain circumstances, this payment may be delayed (see DELAY OF PAYMENTS). We pay interest (at least 3% or as required by state law) on the death benefit from the date we receive all required documents until payment is made or until the death benefit is applied under an annuity payment option. NOTE: Proof of death includes: a certified copy of a death certificate; a certified copy of a court order; a written statement by a medical doctor; or other proof satisfactory to us. The Annuity Payment Period Annuity Payment Date You may specify an annuity payment date in your application. You may elect to receive payments under an annuity payment option at any time. If you do not specify an annuity payment date, then the annuity payment date is the later of the older annuitant's 85th birthday or 10 years after issuance. If the annuitant is living and the Contract is in force on that date, we will notify you to begin taking payments under the Contract. You may not select an annuity payment date which is on or after the older annuitant's 85th birthday or 10 years after the Contract date, whichever is the later. (No later than age 88 in Pennsylvania or age 90 in New York.) Depending on the type of annuity payment option selected, payments that are initiated either before or after the annuity payment date may be subject to penalty taxes (see FEDERAL TAX MATTERS). You should consider this carefully when you select or change the annuity payment date. You may change the annuity payment date with our prior approval. The request must be in writing and approved before we issue a supplementary Contract which provides an annuity payment option. Annuity Payment Options We offer fixed annuity payments. If, however, the accumulated value on the annuity payment date is less than $5,000 or if the amount applied under an annuity payment option is less than the minimum requirement we may pay out the entire amount. No surrender charge would be imposed. The Contract would then be canceled. You may choose from several fixed annuity payment options. Payments will be made on the frequency you choose. You may elect to have your annuity payments made on a monthly, quarterly, semiannual or annual basis. The dollar amount of the payments is specified for the entire payment period according to the option selected. There is no right to make any total or partial surrender after the annuity payments start. The amount of the annuity payment depends on: o amount of accumulated value; o annuity payment option selected; and o age and gender of annuitant (unless fixed income option is selected). Annuity payments generally are higher for male annuitants than for female annuitants with an otherwise identical Contract. This is because statistically females have longer life expectancies than males. In certain states, this difference may not be taken into consideration in fixing the payment amount. Additionally, Contracts with no gender distinctions are made available for certain employer-sponsored plans because under most such plans, such Contract provisions are prohibited by law. You may select an annuity payment option or change a previous selection by written request. We must receive the request on or before the annuity payment date. If an annuity payment option is not selected, then we will automatically apply the Life Income with Payments Guaranteed for a Period of 10 Years (see below). If you designate joint annuitants, then payment will be made pursuant to a Joint and Full Survivor Life Income for a Period of 10 Years (see below). Tax laws and regulations may impose further restrictions on annuity payment options. Payments under the annuity payment options are made as of the first day of each payment period beginning with the annuity payment date. The available annuity payment options are: Fixed Income. Payments of a fixed amount or payments for a fixed period of at least five years but not more than 30 years. Payments stop after all guaranteed payments are made. Life Income. Payments are made as of the first day of each payment period during the annuitant's life, starting with the annuity payment date. No payments are made after the annuitant dies. It is possible that you would only receive one payment under this option if the annuitant dies before the second payment is due. Life Income with Payments Guaranteed for a Period of 5 to 20 Years. Payments are made on the first day of each payment period beginning on the annuity payment date. Payments will continue until the annuitant dies. If the annuitant dies before all of the guaranteed payments have been made, then we will continue the guaranteed payments to the beneficiary. Joint and Full Survivor Life Income with Payments Guaranteed for a Period of 10 Years. Payments continue as long as either the annuitant or the joint annuitant is alive. If both die before all guaranteed payments have been made, the guaranteed remaining payments are made to the beneficiary. Joint and Two-thirds Survivor Life Income. Payments continue as long as either the annuitant or the joint annuitant is alive. If either the annuitant or joint annuitant dies, payments continue to the survivor at two-thirds the original amount. Payments stop when both the annuitant and joint annuitant have died. It is possible that only one payment is made under this option if both annuitants die before the second payment is due. Other annuity payment options may be available with our approval. Death of Annuitant If the owner or annuitant dies during the annuity payment period, remaining payments are made to the beneficiary throughout the guarantee period, if any, or for the life of any joint annuitant, if any. In all cases the person entitled to receive payments also receives any rights and privileges under the annuity payment option. The mortality risk assumed by the Company is to make annuity payments for the full life of all annuitants regardless of how long they, or any individual annuitant, might live. Mortality risk does not apply to the Fixed Income option. Annuity payments are determined in accordance with annuity tables and other provisions contained in the Contract. This assures neither an annuitant's own longevity, nor an improvement in life expectancy, will have an adverse effect on the annuity payments received under this Contract. The annuity payment tables contained in this Contract are based on the Annuity Mortality 1983 Table a. These tables are guaranteed for the life of the Contract. If you own one or more qualified annuity contracts, in order to avoid tax penalties, payments from at least one of your qualified contracts must start no later than April 1 following the calendar year in which you turn age 70 1/2. The required minimum payment is a distribution in equal (or substantially equal) amounts over your life or over the joint lives of you and your designated beneficiary. In addition, payments must be made at least once a year. Tax penalties may also apply at your death on certain excess accumulations. You should consider potential tax penalties with your tax advisor when selecting an annuity payment option or taking other distributions from the Contract. Additional rules apply to distributions under non-qualified contracts (see REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS). However, the rules do not apply to contracts issued in connection with IRAs, SEPs or SIMPLE-IRAs. CHARGES AND DEDUCTIONS An annual fee, a mortality and expense risks charge and in some circumstances a purchase credit rider charge are deducted under the Contract. A surrender charge may also be deducted from certain surrenders made before the annuity payment date. We reserve the right to assess a transaction fee, state premium taxes and a daily administration charge. There are also deductions from and expenses paid out of the assets of the Mutual Funds which are described in the Mutual Funds' prospectuses. Annual Fee An annual fee exists which is the lesser of $30 or 2% of your accumulated value (subject to any applicable state law limitations). The fee is deducted from the DCA Plus Accounts, Fixed Account or your interest in a Division, whichever has the greatest value. The fee is deducted on each contract anniversary and upon total surrender of the Contract. This fee is currently waived for Contracts having an accumulated value on the last day of the Contract year of $30,000 or more. The aggregate value of multiple Contracts owned, or jointly owned, by you is used to attain the $30,000 accumulated value. Aggregation occurs on each Contract's anniversary. The fee assists in covering administrative costs. The Company does not anticipate any profit from this fee. The administrative costs include costs associated with: o issuing Contracts; o establishing and maintaining the records which relate to Contracts; o making regulatory filings and furnishing confirmation notices; o preparing, distributing and tabulating voting materials and other communications; o providing computer, actuarial and accounting services; and o processing Contract transactions. Mortality and Expense Risks Charge We assess each Separate Account Division with a daily charge for mortality and expense risks. The annual rate of the charge is 1.25% of the average daily net assets of the Separate Account. We agree not to increase this charge for the duration of the Contract. This charge is assessed only prior to the annuity payment date. This charge is assessed daily when the value of a unit is calculated. We have a mortality risk in that we guarantee payment of a death benefit in a single sum or under an annuity payment option. No surrender charge is imposed on a death benefit payment which gives us an additional mortality risk. The expense risk that we assume is that the actual expenses incurred in issuing and administering the Contract exceed the Contract limits on administrative charges. If the mortality and expense risks charge is not enough to cover the costs, we bear the loss. If the amount of mortality and expense risks charge deducted is more than our costs, the excess is profit to the Company. We expect a profit from the mortality and expense risks charge. Purchase Payment Credit If you elect the purchase payment credit rider we assess each Division with an additional daily charge. The annual rate of the charge is 0.60% of the average daily net assets of the Separate Account. We agree not to increase this charge for the duration of the Contract. This charge is assessed until completion of your 8th Contract year and only prior to the annuity payment date. This charge is assessed daily when the value of a unit is calculated. If the purchase payment credit rider charge is not enough to cover the cost of the credit, we bear the loss. If the amount of the purchase payment credit rider charge deducted is more than our costs, the excess is profit to the Company. We expect a profit from the purchase payment credit rider charge. Transaction Fee We reserve the right to charge a transaction fee of $30 that applies to each unscheduled partial surrender after the 12th unscheduled partial surrender in a Contract year. We also reserve the right to charge a $30 transaction fee on each unscheduled transfer after the 12th such transfer in a Contract year. The transaction fee would be deducted from the DCA Plus Accounts, Fixed Account and/or your interest in a Division from which the amount is surrendered or transferred, on a pro rata basis. Premium Taxes We reserve the right to deduct an amount to cover any premium taxes imposed by states or other jurisdictions. Any deduction is made from either a purchase payment when we receive it, or the accumulated value when you request a surrender (total or partial) or it is applied under an annuity payment option. Premium taxes range from 0% in most states to as high as 3.50%. Surrender Charge No sales charge is collected or deducted when purchase payments are applied under the Contract. A surrender charge is assessed on certain total or partial surrenders. The amounts we receive from the surrender charge are used to cover some of the expenses of the sale of the Contract (commissions and other promotional or distribution expenses). If the surrender charge collected is not enough to cover the actual costs of distribution, the costs are paid from the company's General Account assets which includes profit, if any, from the mortality and expense risks charge. The surrender charge for any total or partial surrender is a percentage of the purchase payments surrendered which were received by us during the Contract years prior to the surrender. The applicable percentage which is applied to the sum of the purchase payments paid during each Contract year is determined by the following tables. Surrender Charge without the purchase payment credit rider (as a percentage of amounts surrendered) Table of surrender charges without the purchase payment credit rider Number of completed Contract years Surrender charge applied to all since each purchase payment purchase payments received in was made that Contract year 0 (year of purchase payment)* 6% 1 6% 2 6% 3 5% 4 4% 5 3% 6 2% 7 and later 0% Surrender Charge with the purchase payment credit rider (as a percentage of amounts surrendered) Number of completed Contract years Surrender charge applied to all since each purchase payment purchase payments received in was made that Contract year 0 (year of purchase payment)* 8% 1 8% 2 8% 3 8% 4 7% 5 6% 6 5% 7 4% 8 3% 9 and later 0% * Each purchase payment begins in year 0 for purposes of calculating the percentage applied to that payment. However, purchase payments are added together by Contract year for purposes of determining the applicable surrender charge percentage. For purpose of calculating surrender charges, we assume that surrenders and transfers are made in the following order: o first from purchase payments no longer subject to a surrender charge; o then from the free surrender privilege (first from the earnings, then from the oldest purchase payments (first-in, first-out)) described below; and o then from purchase payments subject to a surrender charge on a first-in, first-out basis. A surrender charge is not imposed in states where it is prohibited, including: o New Jersey- no surrender charge for total surrender on or after the later of the annuitant's 64th birthday or 4 years after the Contract date. o Washington- no surrender charge for total surrender on or after the later of the annuitant's 70th birthday or 10 years after the Contract date. Free Surrender Privilege The free surrender privilege is an amount normally subject to a surrender charge that may be surrendered without a charge. The free surrender privilege is the greater of: o earnings in the Contract (earnings = accumulated value less unsurrendered purchase payments as of the surrender date); or o 10% of the purchase payments still subject to the surrender charge, decreased by any partial surrenders since the last Contract anniversary. The free surrender privilege not used in a Contract year is not added to the free surrender privilege for any following Contract year(s). Unscheduled partial surrenders of the free surrender privilege may be subject to the transaction fee described above. Waiver of Surrender Charge The surrender charge does not apply to: o amounts applied under an annuity payment option; or o payment of any death benefit, however, the surrender charge does apply to purchase payments made by a surviving spouse after an owner's death; or o amounts distributed to satisfy the minimum distribution requirement of Section 401(a)9 of the Code provided that the amount surrendered does not exceed the minimum distribution amount which would have been calculated based on the value of this Contract alone; or o an amount transferred from the Contract to a single premium immediate annuity issued by the Company after the surrender charge period has expired; or o an amount transferred from a Contract used to fund an IRA to another annuity contract issued by the Company to fund an IRA of the participant's spouse when the distribution is made pursuant to a divorce decree; or o if permitted by state law, withdrawals made after the first Contract anniversary if the original owner or original annuitant has a critical need. Waiver of the surrender charge is available for critical need if the following conditions are met: o original owner or original annuitant has a critical need; and o the critical need did not exist before the Contract date. For the purposes of this section, the following definitions apply: o critical need - owner's or annuitant's confinement to a health care facility, terminal illness diagnosis or total and permanent disability. If the critical need is confinement to a health care facility, the confinement must continue for at least 60 consecutive days after the Contract date and the surrender must occur within 90 days of the confinement's end. o health care facility - a licensed hospital or inpatient nursing facility providing daily medical treatment and keeping daily medical records for each patient (not primarily providing just residency or retirement care). This does not include a facility primarily providing drug or alcohol treatment, or a facility owned or operated by the owner, annuitant or a member of their immediate families. o terminal illness - sickness or injury that results in the owner's or annuitant's life expectancy being 12 months or less from the date notice to receive a distribution from the Contract is received by the Company. o total and permanent disability - a disability that occurs after the Contract date but before the original owner or annuitant reaches age 65 and qualifies to receive social security disability benefits. In New York and West Virginia, different definitions of total and permanent disability apply. Contact us at 1-800-852-4450 for additional information. This waiver of surrender charge rider is not available in Massachusetts, New Jersey or Pennsylvania. In New York, the rider only applies if the original owner or original annuitant suffers a total and permanent disability. Specific information is available from your sales representative or the annuity service office (1-800-852-4450). Administration Charge We reserve the right to assess each Division with a daily charge at the annual rate of 0.15% of the average daily net assets of the Division. This charge would only be imposed before the annuity payment date. This charge would be assessed to help cover administrative expenses. Administrative expenses include the cost of issuing the Contract, clerical, recordkeeping and bookkeeping services, keeping the required financial and accounting records, communicating with Contract owners and making regulatory filings. Special Provisions for Group or Sponsored Arrangements Wherepermitted by state law, Contracts may be purchased under group or sponsored arrangements as well as on an individual basis. Group Arrangement - program under which a trustee, employer or similar entity purchases Contracts covering a group of individuals on a group basis. Sponsored Arrangement - program under which an employer permits group solicitation of its employees or an association permits group solicitation of its members for the purchase of Contracts on an individual basis. The charges and deductions described above may be reduced or eliminated for Contracts issued in connection with group or sponsored arrangements. The rules in effect at the time the application is approved will determine if reductions apply. Reductions may include but are not limited to sales of Contracts without, or with reduced, mortality and expense risks charges, annual fees or surrender charges. Availability of the reduction and the size of the reduction (if any) is based on certain criteria. Eligibility for and the amount of these reductions are determined by a number of factors, including the number of individuals in the group, the amount of expected purchase payments, total assets under management for the Contract owner, the relationship among the group's members, the purpose for which the Contract is being purchased, the expected persistency of the Contract, and any other circumstances which, in our opinion are rationally related to the expected reduction in expenses. Reductions reflect the reduced sales efforts and administrative costs resulting from these arrangements. We may modify the criteria for and the amount of the reduction in the future. Modifications will not unfairly discriminate against any person, including affected Contract owners and other contract owners with contracts funded by the Separate Account. FIXED ACCOUNT AND DCA PLUS ACCOUNTS This prospectus is intended to serve as a disclosure document only for the Contract as it relates to the Separate Account. It only contains selected information regarding the Fixed Account and DCA Plus Accounts. Assets in the Fixed Account and DCA Plus Accounts are held in the General Account of the Company. The General Account is the assets of the Company other than those allocated to any of the Company's Separate Accounts. Subject to applicable law, the Company has sole discretion over the assets in the General Account. Because of exemptive and exclusionary provisions, interests in the Fixed Account and DCA Plus Accounts are not registered under the Securities Act of 1933 and the General Account is not registered as an investment company under the Investment Company Act of 1940. The Fixed Account and DCA Plus Accounts are not subject to these Acts. The staff of the SEC does not review the prospectus disclosures relating to the Fixed Account or DCA Plus Accounts. However, these disclosures are subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in the prospectus. Separate Account expenses are not assessed against any Fixed Account or DCA Plus Account values. More information concerning the Fixed Account and DCA Plus Accounts is available from our annuity service office or from a sales representative. Fixed Account The Company guarantees that purchase payments allocated to the Fixed Account earn interest at a guaranteed interest rate. In no event will the guaranteed interest rate be less than 3% compounded annually. Each purchase payment allocated or amount transferred to the Fixed Account earns interest at the guaranteed rate in effect on the date it is received or transferred. This rate applies to each purchase payment or amount transferred through the end of the Contract year. Each Contract anniversary, we declare a renewal interest rate that is guaranteed and applies to the Fixed Account value in existence at that time. This rate applies until the end of the Contract year. Interest is earned daily and compounded annually at the end of each Contract year. Once credited, the interest is guaranteed and becomes part of the Fixed Account accumulated value from which deductions for fees and charges may be made. Fixed Account Accumulated Value Your Fixed Account value on any valuation date is equal to: o purchase payments allocated to the Fixed Account; o plus any transfers to the Fixed Account from the Separate Account and DCA Plus Accounts; o plus interest credited to the Fixed Account; o minus any surrenders, applicable surrender charges or transaction fee from the Fixed Account; o minus any transfers to the Separate Account. Fixed Account Transfers, Total and Partial Surrenders Transfers and surrenders from the Fixed Account are subject to certain limitations. In addition, surrenders from the Fixed Account may be subject to a charge (see SURRENDER CHARGE). You may transfer amounts from the Fixed Account to the Divisions before the annuity payment date and as provided below. The transfer is effective on the valuation date following our receiving your instructions. You may transfer amounts on either a scheduled or unscheduled basis. You may not make both scheduled and unscheduled Fixed Account transfers in the same Contract year. Unscheduled Fixed Account Transfers The minimum transfer amount is $100 (or entire Fixed Account accumulated value if less than $100). Once per Contract year, within the 30 days following the Contract anniversary date, you can: 1) transfer an amount not to exceed 25% of your Fixed Account accumulated value; or 2) transfer up to 100% of your Fixed Account accumulated value if : o your Fixed Account value is less than $1,000; or o the renewal interest rate for your Fixed Account accumulated value for the current Contract year is more than one percentage point lower than the weighted average of your Fixed Account interest rates for the preceding Contract year. We will inform you if the renewal interest rate falls to that level. Scheduled Fixed Account Transfers Fixed Account Dollar Cost Averaging You may make scheduled transfers on a monthly basis from the Fixed Account to the Separate Account as follows: o You may establish scheduled transfers by sending a written request or by telephoning the annuity service office at 1-800-852-4450. o Transfers occur on a date you specify (other than the 29th, 30th or 31st of any month). o If the selected date is not a valuation date, the transfer is completed on the next valuation date. o Scheduled monthly transfers of an amount not to exceed 2% of your Fixed Account accumulated value at the beginning of the Contract year or the current Fixed Account value will continue until the Fixed Account value is zero or until you notify us to discontinue them. o The minimum transfer amount is $100. o If the Fixed Account accumulated value is less than $100 at the time of transfer, then the entire Fixed Account accumulated value will be transferred. o If you stop the transfers, you may not start them again without our prior approval. Dollar Cost Averaging Plus Program (DCA Plus Program) Purchase payments allocated to the DCA Plus Accounts earn a guaranteed interest rate. A portion of your DCA Plus Account accumulated value is periodically transferred (on the 28th of each month) to Divisions or to the Fixed Account. If the 28th is not a valuation date, then the transfer occurs on the next valuation date. The transfers are allocated according to your DCA Plus allocation instructions. Transfers into a DCA Plus Account are not permitted. If you elect the purchase payment credit rider, you may not participate in the DCA Plus Program. DCA Plus Purchase Payments You may enroll in the DCA Plus program by allocating a minimum purchase payment of $1,000 into a DCA Plus Account and selecting Divisions and/or the Fixed Account into which transfers will be made. Subsequent purchase payments of at least $1,000 are permitted. You can change your DCA Plus allocation instructions during the transfer period. Automatic portfolio rebalancing does not apply to DCA Plus Accounts. DCA Plus purchase payments receive the fixed rate of return in effect on the date each purchase payment is received by us. The rate of return remains in effect for the remainder of the 6-month or 12-month DCA Plus transfer program. Selecting A DCA Plus Account DCA Plus Accounts are available in either a 6-month transfer program or a 12-month transfer program. The 6-month transfer program and the 12-month transfer program generally will have different credited interest rates. You may enroll in both a 6-month and 12-month DCA Plus program. However, you may only participate in one 6-month and one 12-month DCA Plus program at a time. Under the 6-month transfer program, all payments and accrued interest must be transferred from the DCA Plus Account to the selected Divisions and/or Fixed Account in no more than 6 months. Under the 12-month transfer program, all payments and accrued interest must be transferred to the selected Divisions and/or Fixed Account in no more than 12 months. We will transfer an amount each month which is equal to your DCA Plus Account value divided by the number of months remaining in your transfer program. For example, if 4 scheduled transfers remain in your 6-month transfer program and you had a $4,000 DCA Plus Account accumulated value, the transfer amount would be $1,000 ($4,000 / 4). Scheduled DCA Plus Transfers Transfers are made from DCA Plus Accounts to Divisions and the Fixed Account according to your allocation instructions. The transfers begin after we receive your purchase payment and completed enrollment instructions. Transfers occur on the 28th of the month and continue until your entire DCA Plus Account accumulated value is transferred. Unscheduled DCA Plus Transfers You may make unscheduled transfers from DCA Plus Accounts to Divisions and/or the Fixed Account. A $30 fee is imposed for unscheduled transfers following the 12th unscheduled transfer in a Contract year. A transfer is made, and values determined, as of the end of the valuation period in which we receive your request. DCA Plus Surrenders You may make scheduled or unscheduled surrenders from DCA Plus Accounts. Purchase payments earn interest according to the corresponding rate until the surrender date. Surrenders are subject to any applicable surrender charge. GENERAL PROVISIONS The Contract The entire Contract is made up of: the Contract, copies of any applications, amendments, riders and endorsements attached to the Contract; current data pages; copies of any supplemental applications, amendments, endorsements and revised Contract pages or data pages which are mailed to you. Only our corporate officers can agree to change or waive any provisions of a Contract. Any change or waiver must be in writing and signed by an officer of the Company. Delay of Payments Surrenders are generally made within seven days after we receive your instruction for a surrender in a form acceptable to us. This period may be shorter where required by law. However, payment of any amount upon total or partial surrender, death or the transfer to or from a Division may be deferred during any period when the right to sell Mutual Fund shares is suspended as permitted under provisions of the Investment Company Act of 1940 (as amended). The right to sell shares may be suspended during any period when: o trading on the New York Stock Exchange is restricted as determined by the SEC or when the Exchange is closed for other than weekends and holidays; or o an emergency exists, as determined by the SEC, as a result of which: o disposal by a Mutual Fund of securities owned by it is not reasonably practicable; o it is not reasonably practicable for a Mutual Fund to fairly determine the value of its net assets; or o the SEC permits suspension for the protection of security holders. If payments are delayed and your surrender or transfer is not canceled by your written instruction, the amount to be surrendered or transferred will be determined the first valuation date following the expiration of the permitted delay. The surrender or transfer will be made within seven days thereafter. In addition, payments on surrenders attributable to a purchase payment made by check may be delayed up to 15 days. This permits payment to be collected on the check. We may also defer payment of surrender proceeds payable out of the Fixed Account for a period of up to six months. Misstatement of Age or Gender If the age or, where applicable, gender of the annuitant has been misstated, we adjust the annuity payment under your Contract to reflect the amount that would have been payable at the correct age and gender. If we make any overpayment because of incorrect information about age or gender, or any error or miscalculation, we deduct the overpayment from the next payment or payments due. Underpayments are added to the next payment. Assignment You may assign ownership of your non-qualified Contract. Each assignment is subject to any payments made or action taken by the Company prior to our notification of the assignment. We assume no responsibility for the validity of any assignment. An assignment or pledge of a Contract may have adverse tax consequences. An assignment must be made in writing and filed with us at the annuity service office. The irrevocable beneficiary(ies), if any, must authorize any assignment in writing. Your rights, as well as those of the annuitant and beneficiary, are subject to any assignment on file with us. Any amount paid to an assignee is treated as a partial surrender and is paid in a single lump sum. Change of Owner You may change your non-qualified Contract ownership designation at any time. Your request must be in writing and approved by us. After approval, the change is effective as of the date you signed the request for change. If ownership is changed, then the waiver of the surrender charge for surrenders made because of critical need of the owner is not available. We reserve the right to require that you send us the Contract so that we can record the change. Beneficiary Before the annuity payment date and while the annuitant is alive, you have the right to name or change a beneficiary. This may be done as part of the application process or by sending us a written request. Under certain retirement programs, however, spousal consent may be required to name or change a beneficiary. Unless you have named an irrevocable beneficiary, you may change your beneficiary designation by sending us a written request. If a beneficiary has not been named at the time of the annuitant's death, then the benefit will be paid to the owner, if living, otherwise, to the owner's estate. If the beneficiary dies during the annuity payment period, and no other beneficiary is alive, then any remaining benefits will be paid to the beneficiary's estate. If there are joint annuitants on the Contract, the benefit is paid on the first annuitant's death. Contract Termination We reserve the right to terminate the Contract and make a single sum payment (without imposing any charges) to you if your accumulated value at the end of the accumulation period is less than $2,000. Before the Contract is terminated, we will send you a notice to increase the accumulated value to $2,000 within 60 days. Reinstatement If you have replaced this Contract with an annuity contract from another company and want to reinstate this Contract, then the following applies: o we reinstate the Contract effective on the original surrender date; o if you elect the purchase payment credit rider on the reinstatement Contract, then the 9-year surrender charge period will commence from the date of reinstatement; o we calculate the credit based on the amount of the reinstatement; o we apply the amount received from the other company and the amount of the surrender charge you paid when you surrendered the Contract; o these amounts are priced on the valuation day the money from the other company is received by us; o commissions are not paid on the reinstatement amounts; an o new data pages are sent to your address of record. Reports We will mail to you a statement, along with any reports required by state law, of your current accumulated value at least once per year prior to the annuity payment date. After the annuity payment date, any reports will be mailed to the person receiving the annuity payments. Quarterly statements reflect purchases and surrenders occurring during the quarter as well as the balance of units owned and accumulated values. RIGHTS RESERVED BY THE COMPANY We reserve the right to make certain changes if, in our judgment, they best serve the interests of you and the annuitant or are appropriate in carrying out the purpose of the Contract. Any changes will be made only to the extent and in the manner permitted by applicable laws. Also, when required by law, we will obtain your approval of the changes and approval from any appropriate regulatory authority. Approvals may not be required in all cases. Examples of the changes the Company may make include: o transfer assets in any Division to another Division or to the Fixed Account; o add, combine or eliminate a Division(s); o substitute the units of a Division for the units of another Division; o if units of a Division are no longer available for investment; or o if in our judgment, investment in a Division becomes inappropriate considering the purposes of the Separate Account. DISTRIBUTION OF THE CONTRACT The individuals who sell the Contract are authorized to sell life and other forms of personal insurance and variable annuities. These people will usually be representatives of Princor Financial Services Corporation ("Princor"), Principal Financial Group, Des Moines, Iowa 50392-0200 which is a broker-dealer registered under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. As the principal underwriter, Princor is paid 6.5% of purchase payments by the Company for the distribution of the Contract. The Company and Princor may receive a portion of the Fidelity Variable Insurance Products Funds' expenses for recordkeeping, marketing and distribution services. The Contract may also be sold through other selected broker-dealers registered under the Securities and Exchange Act of 1933 or firms that are exempt from such registration. Princor is also the principal underwriter for various registered investment companies organized by the Company. Princor is a subsidiary of Principal Financial Services, Inc. PERFORMANCE CALCULATION The Separate Account may publish advertisements containing information (including graphs, charts, tables and examples) about the hypothetical performance of its Divisions for this Contract as if the Contract had been issued on or after the date the Mutual Fund in which the Division invests was first offered. The hypothetical performance from the date of the inception of the Mutual Fund in which the Division invests is calculated by reducing the actual performance of the underlying Mutual Fund by the fees and charges of this Contract as if it had been in existence. The yield and total return figures described below vary depending upon market conditions, composition of the underlying Mutual Fund's portfolios and operating expenses. These factors and possible differences in the methods used in calculating yield and total return should be considered when comparing the Separate Account performance figures to performance figures published for other investment vehicles. The Separate Account may also quote rankings, yields or returns as published by independent statistical services or publishers and information regarding performance of certain market indices. Any performance data quoted for the Separate Account represents only historical performance and is not intended to indicate future performance. For further information on how the Separate Account calculates yield and total return figures, see the SAI. From time to time the Separate Account advertises its Money Market Division's "yield" and "effective yield" for these Contracts. Both yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of the Division refers to the income generated by an investment in the division over a 7-day period (which period is stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Division is assumed to be reinvested. The "effective yield" is slightly higher than the "yield" because of the compounding effect of the assumed reinvestment. In addition, the Separate Account advertises the "yield" for other Divisions for the Contract. The "yield" of a Division is determined by annualizing the net investment income per unit for a specific, historical 30-day period and dividing the result by the ending maximum offering price of the unit for the same period. The Separate Account also advertises the average annual total return of its various Divisions. The average annual total return for any of the Divisions is computed by calculating the average annual compounded rate of return over the stated period that would equate an initial $1,000 investment to the ending redeemable accumulated value. VOTING RIGHTS The Company votes shares of the Principal Variable Contracts Fund, Inc., AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. Value Fund, Fidelity Variable Insurance Products Fund, Fidelity Variable Insurance Products Fund II and Janus Aspen Series - Service Shares Aggressive Growth Portfolio held in the Separate Account at meetings of shareholders of those Mutual Funds. It follows your voting instructions if you have an investment in the corresponding Division. The number of Mutual Fund shares in which you have a voting interest is determined by your investments in a Mutual Fund as of a "record date." The record date is set by the Mutual Fund within the requirements of the laws of the state which govern the various Mutual Funds. The number of Mutual Fund shares held in the Separate Account attributable to your interest in each Division is determined by dividing the value of your interest in that Division by the net asset value of one share of the Mutual Fund. Shares for which owners are entitled to give voting instructions, but for which none are received, and shares of the Mutual Fund owned by the Company are voted in the same proportion as the total shares for which voting instructions have been received. Voting materials are provided to you along with an appropriate form that may be used to give voting instructions to the Company. If the Company determines pursuant to applicable law, that Mutual Fund shares held in Separate Account B need not be voted pursuant to instructions received from owners, then the Company may vote Mutual Fund shares held in the Separate Account in its own right. FEDERAL TAX MATTERS The following description is a general summary of the tax rules, primarily related to federal income taxes, which in our opinion are currently in effect. These rules are based on laws, regulations and interpretations which are subject to change at any time. This summary is not comprehensive and is not intended as tax advice. Federal estate and gift tax considerations, as well as state and local taxes, may also be material. You should consult a qualified tax adviser about the tax implications of taking action under a Contract or related retirement plan. Non-Qualified Contracts Section 72 of the Code governs the income taxation of annuities in general. o Purchase payments made under non-qualified Contracts are not excludable or deductible from your gross income or any other person's gross income. o An increase in the accumulated value of a non-qualified Contract owned by a natural person resulting from the investment performance of the Separate Account or interest credited to the DCA Plus Accounts and the Fixed Account is generally not taxable until paid out as surrender proceeds, death benefit proceeds, or otherwise. o Generally, owners who are not natural persons are immediately taxed on any increase in the accumulated value. The following discussion applies generally to Contracts owned by natural persons. o Surrenders or partial surrenders are taxed as ordinary income to the extent of the accumulated income or gain under the Contract. o The value of the Contract pledged or assigned is taxed as ordinary income to the same extent as a partial surrender. o Annuity payments: o The investment in the Contract is generally the total of the purchase payments made. o The portion of the annuity payment that represents the amount by which the accumulated value exceeds purchase payments is taxed as ordinary income. The remainder of each annuity payment is not taxed. o After the purchase payment(s) in the Contract is paid out, the full amount of any annuity payment is taxable. For purposes of determining the amount of taxable income resulting from distributions, all Contracts and other annuity contracts issued by us or our affiliates to the same owner within the same calendar year are treated as if they are a single contract. A transfer of ownership of a Contract, or designation of an annuitant or other payee who is not also the owner, may result in a certain income or gift tax consequences to the owner. If you are contemplating any transfer or assignment of a Contract, you should contact a competent tax advisor with respect to the potential tax effects of such transactions. Required Distributions for Non-Qualified Contracts In order for a non-qualified Contract to be treated as an annuity contract for federal income tax purposes, the Code requires: o If the person receiving payments dies on or after the annuity payment date but prior to the time the entire interest in the Contract has been distributed, the remaining portion of the interest is distributed at least as rapidly as under the method of distribution being used as of the date of that person's death. o If you die prior to the annuity payment date, the entire interest in the Contract will be distributed: o within five years after the date of your death; or o as annuity payments which begin within one year of your death and which are made over the life of your designated beneficiary or over a period not extending beyond the life expectancy of that beneficiary. o If you take a distribution from the Contract before you are 59 1/2, you may incur an income tax penalty. Generally, unless the beneficiary elects otherwise, the above requirements are satisfied prior to the annuity payment date by paying the death benefit in a single sum, subject to proof of your death. The beneficiary may elect by written request to receive an annuity payment option instead of a lump sum payment. If your designated beneficiary is your surviving spouse, the Contract may be continued with your spouse deemed to be the new owner for purposes of the Code. Where the owner or other person receiving payments is not a natural person, the required distributions provided for in the Code apply upon the death of the annuitant. IRA, SEP, and SIMPLE-IRA The Contract may be used to fund IRAs, SEPs, and SIMPLE-IRAs. The tax rules applicable to owners, annuitants and other payees vary according to the type of plan and the terms and conditions of the plan itself. In general, purchase payments made under a retirement program recognized under the Code are excluded from the participant's gross income for tax purposes prior to the annuity payment date (subject to applicable state law). The portion, if any, of any purchase payment made that is not excluded from their gross income is their investment in the Contract. Aggregate deferrals under all plans at the employee's option may be subject to limitations. If you are purchasing this Contract to fund a tax qualified retirement plan, you should be aware that the tax-deferred accrual feature is available with any qualified investment vehicle within a qualified plan and is NOT unique to a variable annuity. This Contract provides additional benefits such as lifetime income options, death benefit protection and guaranteed expense levels. The tax implications of these plans are further discussed in the SAI under the heading Taxation Under Certain Retirement Plans. Check with your tax advisor for the rules which apply to your specific situation. With respect to IRAs, IRA rollovers and SIMPLE-IRAs there is a 10% penalty under the Code on the taxable portion of a "premature distribution." The tax is increased to 25% in the case of distributions from SIMPLE-IRAs during the first two years of participation. Generally, an amount is a "premature distribution" unless the distribution is: o made on or after you reach age 59 1/2; o made to a beneficiary on or after your death; o made upon your disability; o part of a series of substantially equal periodic payments for the life or life expectancy of you or you and the beneficiary; o made to pay medical expenses; o for certain unemployment expenses; o for first home purchases (up to $10,000); or o for higher education expenses. Rollover IRAs If you receive a lump-sum distribution from a pension or profit sharing plan or tax-sheltered annuity, you may maintain the tax deferred status of the money by rolling it into a "Rollover Individual Retirement Annuity." Generally, distributions from a qualified plan are subject to mandatory income tax withholding at a rate of 20%, unless the participant elects a direct rollover. You have 60 days from receipt of the money to complete this transaction. If you choose not to reinvest or go beyond the 60 day limit and are under age 59 1/2, you will incur a 10% IRS penalty as well as income tax expenses. Withholding Annuity payments and other amounts received under the Contract are subject to income tax withholding unless the recipient elects not to have taxes withheld. The amounts withheld vary among recipients depending on the tax status of the individual and the type of payments from which taxes are withheld. Notwithstanding the recipient's election, withholding may be required on payments delivered outside the United States. Moreover, special "backup withholding" rules may require us to disregard the recipient's election if the recipient fails to supply us with a "TIN" or taxpayer identification number (social security number for individuals), or if the Internal Revenue Service notifies us that the TIN provided by the recipient is incorrect. Mutual Fund Diversification The United States Treasury Department has adopted regulations under Section 817(h) of the Code which establishes standards of diversification for the investments underlying the Contracts. Under this Code Section, Separate Account investments must be adequately diversified in order for the increase in the value of non-qualified Contracts to receive tax-deferred treatment. In order to be adequately diversified, the portfolio of each underlying Mutual Fund must, as of the end of each calendar quarter or within 30 days thereafter, have no more than 55% of its assets invested in any one investment, 70% in any two investments, 80% in any three investments and 90% in any four investments. Failure of a Mutual Fund to meet the diversification requirements could result in tax liability to non-qualified Contract holders. The investment opportunities of the Mutual Funds could conceivably be limited by adhering to the above diversification requirements. This would affect all owners, including owners of Contracts for whom diversification is not a requirement for tax-deferred treatment. STATE REGULATION The Company is subject to the laws of the State of Iowa governing insurance companies and to regulation by the Insurance Department of the State of Iowa. An annual statement in a prescribed form must be filed by March 1 in each year covering our operations for the preceding year and our financial condition on December 31 of the prior year. Our books and assets are subject to examination by the Commissioner of Insurance of the State of Iowa or her representatives at all times. A full examination of our operations is conducted periodically by the National Association of Insurance Commissioners. Iowa law and regulations also prescribe permissible investments, but this does not involve supervision of the investment management or policy of the Company. In addition, we are subject to the insurance laws and regulations of other states and jurisdictions where we are licensed to operate. Generally, the insurance departments of these states and jurisdictions apply the laws of the state of domicile in determining the field of permissible investments. LEGAL OPINIONS Legal matters applicable to the issue and sale of the Contracts, including our right to issue Contracts under Iowa Insurance Law, have been passed upon by Karen Shaff, General Counsel and Senior Vice President. LEGAL PROCEEDINGS There are no legal proceedings pending to which Separate Account B is a party or which would materially affect Separate Account B. REGISTRATION STATEMENT This prospectus omits some information contained in the SAI (Part B of the registration statement) and Part C of the registration statement which the Company has filed with the SEC. The SAI is hereby incorporated by reference into this prospectus. You may request a free copy of the SAI by writing or telephoning the annuity service office. You may obtain a copy of Part C of the registration statement from the SEC, Washington, D.C. by paying the prescribed fees. OTHER VARIABLE ANNUITY CONTRACTS The Company currently offers other variable annuity contracts that participate in Separate Account B. In the future, we may designate additional group or individual variable annuity contracts as participating in Separate Account B. INDEPENDENT AUDITORS The financial statements of Principal Life Insurance Company Separate Account B and the consolidated financial statements of Principal Life Insurance Company are included in the SAI. Those statements have been audited by Ernst & Young LLP, independent auditors, for the periods indicated in their reports which also appear in the SAI. FINANCIAL STATEMENTS The consolidated financial statements of Principal Life Insurance Company which are included in the SAI should be considered only as they relate to our ability to meet our obligations under the Contract. They do not relate to investment performance of the assets held in the Separate Account. CUSTOMER INQUIRIES Your questions should be directed to: Principal Flexible Variable Annuity, Principal Financial Group, P.O. Box 9382, Des Moines, Iowa 50306-9382, 1-800-852-4450. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Independent Auditors ..................................................... 4 Calculation of Yield and Total Return .................................... 4 Taxation Under Certain Retirement Plans..................................... 5 Principal Life Insurance Company Separate Account B Report of Independent Auditors ........................................ 9 Financial Statements................................................... 10 Principal Life Insurance Company Report of Independent Auditors ........................................ 37 Consolidated Financial Statements...................................... 38 To obtain a free copy of the SAI write or telephone: Principal Flexible Variable Annuity Principal Financial Group P.O. Box 9382 Des Moines, Iowa 50306-9382 Telephone: 1-800-852-4450 PART B PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B FLEXIBLE VARIABLE ANNUITY ("FVA") CONTRACT Statement of Additional Information dated __________ This Statement of Additional Information provides information about Principal Life Insurance Company Separate Account B Flexible Variable Annuity (the "Contract") in addition to the information that is contained in the Contract's Prospectus, dated ---------------. This Statement of Additional Information is not a prospectus. It should be read in conjunction with the Prospectus, a copy of which can be obtained free of charge by writing or telephoning: Variable Annuity The Principal Financial Group P.O. Box 9382 Des Moines Iowa 50306-9382 Telephone: 1-800-852-4450 TABLE OF CONTENTS Independent Auditors ....................................................... 4 Calculation of Yield and Total Return....................................... 4 Taxation Under Certain Retirement Plans..................................... 7 Principal Life Insurance Company Separate Account B Report of Independent Auditors...................................... 9 Financial Statements................................................ 10 Principal Life Insurance Company Report of Independent Auditors...................................... 37 Consolidated Financial Statements................................... 38 INDEPENDENT AUDITORS Ernst & Young LLP, Des Moines, Iowa, serve as independent auditors for Principal Life Insurance Company Separate Account B and Principal Life Insurance Company and perform audit and accounting services for Separate Account B and Principal Life Insurance Company. CALCULATION OF YIELD AND TOTAL RETURN The Separate Account may publish advertisements containing information (including graphs, charts, tables and examples) about the performance of one or more of its Divisions. The Contract was not offered prior to June 16, 1994. However, the Divisions invest in Accounts of the Principal Variable Contracts Fund, Inc., AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. Value Fund, Fidelity Variable Insurance Products Fund, and Fidelity Variable Income Products Fund II. Effective January 1, 1998 the Mutual Funds which correspond to Accounts of the Principal Variable Contracts Fund, Inc. were reorganized as follows:
Old Mutual Fund Name New Corresponding Name -------------------- ---------------------- Principal Variable Contracts Fund, Inc. Principal Aggressive Growth Fund, Inc. Aggressive Growth Account Principal Asset Allocation Fund, Inc. Asset Allocation Account Principal Balanced Fund, Inc. Balanced Account Principal Bond Fund, Inc. Bond Account Principal Capital Accumulation Fund, Inc. Capital Value Account Principal Emerging Growth Fund, Inc. MidCap Account Principal Government Securities Fund, Inc. Government Securities Account Principal Growth Fund, Inc. Growth Account Principal Money Market Fund, Inc. Money Market Account Principal World Fund, Inc. International Account
These Accounts, along with AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. Value Fund and Fidelity VIP Growth Portfolio Service Class, were offered prior to the date the Contract was available. Thus, the Separate Account may publish advertisements containing information about the hypothetical performance of one or more of its Divisions for this Contract had the Contract been issued on or after the date the Mutual Fund in which such Division invests was first offered. Because Service Class shares for the Fidelity VIP Growth Division were not offered until November 3, 1997, performance shown for periods prior to that date represent the historical results of Initial Class shares and do not include the effects of the Service Class' higher annual fees and expenses. Because Service Shares for the Janus Aspen Aggressive Growth Division were not offered until December 31, 1999, performance shown for periods prior to that date represent the historical results of Institutional Shares. The hypothetical performance from the date of inception of the Mutual Fund in which the Division invests is derived by reducing the actual performance of the underlying Mutual Fund by the fees and charges of the Contract as if it had been in existence. The yield and total return figures described below will vary depending upon market conditions, the composition of the underlying Mutual Fund's portfolios and operating expenses. These factors and possible differences in the methods used in calculating yield and total return should be considered when comparing the Separate Account performance figures to performance figures published for other investment vehicles. The Separate Account may also quote rankings, yields or returns as published by independent statistical services or publishers and information regarding performance of certain market indices. Any performance data quoted for the Separate Account represents only historical performance and is not intended to indicate future performance. From time to time the Separate Account advertises its Money Market Division's "yield" and "effective yield" for these Contracts. Both yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of the Division refers to the income generated by an investment under the Contract in the Division over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Division is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. Neither yield quotation reflects a sales load deducted from purchase payments which, if included, would reduce the "yield" and "effective yield." In addition, from time to time, the Separate Account will advertise the "yield" for certain other Divisions for the Contract. The "yield" of a Division is determined by annualizing the net investment income per unit for a specific, historical 30-day period and dividing the result by the ending maximum offering price of the unit for the same period. This yield quotation does not reflect a surrender charge which, if included, would reduce the "yield." Also, from time to time, the Separate Account will advertise the average annual total return of its various Divisions. The average annual total return for any of the Divisions is computed by calculating the average annual compounded rate of return over the stated period that would equate an initial $1,000 investment to the ending redeemable Contract value. In this calculation the ending value is reduced by a surrender charge that decreases from 6% to 0% over a period of 7 years. The Separate Account may also advertise total return figures for its Divisions for a specified period that does not take into account the surrender charge in order to illustrate the change in the Division's unit value over time. See "Charges and Deductions" in the Prospectus for a discussion of surrender charges. Following are the hypothetical average annual total returns for the period ending December 31, 1999 assuming the Contract had been offered as of the effective dates of the underlying Mutual Funds in which the Divisions invest:
Contract without purchase payment credit rider With Surrender Charge Without Surrender Charge Division One Year Five Year Ten Year One Year Five Year Ten Year - ----------------------------------------------------------------------------------------------------------------------------- Aggressive Growth Division 31.74% 30.07% 27.01%(1) 37.74% 30.34% 27.19%(1) Asset Allocation Division 11.98 14.06 12.56(1) 17.98 14.53 12.87(1) Balanced Division (4.91) 11.80 9.94 1.09 12.31 9.94 Bond Division (9.83) 5.72 6.38 (3.83) 6.35 6.38 Capital Value Division (11.51) 15.95 11.48 (5.51) 16.39 11.48 Government Securities Division (7.56) 5.96 6.36 (1.56) 6.58 6.36 Growth Division 8.96 18.52 17.19(2) 14.96 18.92 17.44(2) International Division 18.34 15.35 12.66(2) 24.34 15.80 12.96(2) International Emerging Markets Divsion International SmallCap Division 85.38 N/A N/A 91.38 N/A N/A LargeCap Growth Division LargeCap Growth Equity Division MicroCap Division (8.33) N/A N/A (2.33) N/A N/A MidCap Division 5.61 15.65 13.87 11.61 16.10 13.87 MidCap Growth Division 3.27 N/A N/A 9.27 N/A N/A MidCap Growth Equity Division Money Market Division (2.51) 3.14 3.63 3.49 3.84 3.63 Real Estate Division (11.69) N/A N/A (5.69) N/A N/A SmallCap Division 35.77 N/A N/A 41.77 N/A N/A SmallCap Growth Division 87.23 N/A N/A 93.23 N/A N/A SmallCap Value Division 13.91 N/A N/A 19.91 N/A N/A Stock Index 500 Division 2.01(3) N/A N/A 8.01 (3) N/A N/A Utilities Division (5.01) N/A N/A 0.99 N/A N/A AIM V.I. Growth Division 27.54 27.72 21.27(4) 33.54 28.02 21.37(4) AIM V.I. Growth and Income Division 26.57 26.26 22.72(2) 32.57 26.57 22.93(2) AIM V.I. Value Division 22.27 25.31 21.41(4) 28.27 25.64 21.51(4) Fidelity VIP II Contrafund Division 16.58 26.63(5) N/A 22.58 26.95(5) N/A Fidelity VIP Growth Division 29.56 27.76 18.38 35.56 28.06 18.38 Janus Aspen Aggressive Growth Division (1) Partial period beginning June 1, 1994. (2) Partial period beginning May 2, 1994. (3) Partial period beginning May 3, 1999. (4) Partial period beginning May 5, 1993. (5) Partial period beginning January 31, 1995.
Contract with purchase payment credit rider With Surrender Charge Without Surrender Charge Division One Year Five Year Ten Year One Year Five Year Ten Year - ----------------------------------------------------------------------------------------------------------------------------- Aggressive Growth Division % % % % % % Asset Allocation Division Balanced Division Bond Division Capital Value Division Government Securities Division Growth Division International Division International Emerging Markets Divsion International SmallCap Division LargeCap Growth Division LargeCap Growth Equity Division MicroCap Division MidCap Division MidCap Growth Division MidCap Growth Equity Division Money Market Division Real Estate Division SmallCap Division SmallCap Growth Division SmallCap Value Division Stock Index 500 Division Utilities Division AIM V.I. Growth Division AIM V.I. Growth and Income Division AIM V.I. Value Division Fidelity VIP II Contrafund Division Fidelity VIP Growth Division Janus Aspen Aggressive Growth Division (1) Partial period beginning June 1, 1994. (2) Partial period beginning May 2, 1994. (3) Partial period beginning May 3, 1999. (4) Partial period beginning May 5, 1993. (5) Partial period beginning January 31, 1995.
TAXATION UNDER CERTAIN RETIREMENT PLANS INDIVIDUAL RETIREMENT ANNUITIES Purchase Payments. Individuals may make contributions for individual retirement annuity ("IRA") Contracts. Deductible contributions for any year may be made up to the lesser of $2,000 or 100% of compensation for individuals who (1) are not active participants in another retirement plan, (2) are unmarried and have adjusted gross income of $40,000 or less, or (3) are married and have adjusted gross income of $60,000 or less. Such individuals may establish an IRA for a spouse who makes no contribution to an IRA for the tax year. The annual purchase payments for both spouses' Contracts cannot exceed the lesser of $4,000 or 100% of the working spouse's earned income, and no more than $2,000 may be contributed to either spouse's IRA for any year. Individuals who are active participants in other retirement plans and whose adjusted gross income (with certain special adjustments) exceeds the cut-off point ($40,000 for unmarried, $60,000 for married persons filing jointly, and $0 for married persons filing a separate return) by less than $10,000 are entitled to make deductible IRA contributions in proportionately reduced amounts. For example, a married individual who is an active participant in another retirement plan and files a separate tax return is entitled to a partial IRA deduction if the individual's adjusted gross income is less than $10,000, and no IRA deduction if his or her adjusted gross income is equal to or greater than $10,000. Individuals whose spouse is an active participant in other retirement plans and whose combined adjusted gross income exceeds the cutoff point of $150,000 by less than $10,000 are entitled to make deductible IRA contributions in proportionately reduced amounts. An individual may make non-deductible IRA contributions to the extent of the excess of (1) the lesser of $2,000 ($4,000 in the case of a spousal IRA) or 100% of compensation over (2) the IRA deductible contributions made with respect to the individual. An individual may not make any contribution to his/her own IRA for the year in which he/she reaches age 70 1/2 or for any year thereafter. Taxation of Distributions. Distributions from IRA Contracts are taxed as ordinary income to the recipient, although special rules exist for the tax-free return of non-deductible contributions. In addition, taxable distributions received under an IRA Contract prior to age 59 1/2 are subject to a 10% penalty tax in addition to regular income tax. Certain distributions are exempted from this penalty tax, including distributions following the owner's death or disability if the distribution is paid as part of a series of substantially equal periodic payments made for the life (or life expectancy) of the Owner or the joint lives (or joint life expectancies) of Owner and the Owner's designated Beneficiary; distributions to pay medical expenses; distributions for certain unemployment expenses; distributions for first home purchases (up to $10,000) and distributions for higher education expenses. Required Distributions. Generally, distributions from IRA Contracts must commence not later than April 1 of the calendar year following the calendar year in which the owner attains age 70 1/2, and such distributions must be made over a period that does not exceed the life expectancy of the owner (or the owner and beneficiary). A penalty tax of 50% would be imposed on any amount by which the minimum required distribution in any year exceeded the amount actually distributed in that year. In addition, in the event that the owner dies before his or her entire interest in the Contract has been distributed, the owner's entire interest must be distributed in accordance with rules similar to those applicable upon the death of the Contract Owner in the case of a non-qualified Contract, as described in the Prospectus. Tax-Free Rollovers. The Internal Revenue Code (the "Code") permits the taxable portion of funds to be transferred in a tax-free rollover from a qualified employer pension, profit-sharing, annuity, bond purchase or tax-deferred annuity plan to an IRA Contract if certain conditions are met, and if the rollover of assets is completed within 60 days after the distribution from the qualified plan is received. A direct rollover of funds may avoid a 20% federal tax withholding generally applicable to qualified plans or tax-deferred annuity plan distributions. In addition, not more frequently than once every twelve months, amounts may be rolled over tax-free from one IRA to another, subject to the 60-day limitation and other requirements. The once-per-year limitation on rollovers does not apply to direct transfers of funds between IRA custodians or trustees. SIMPLIFIED EMPLOYEE PENSION PLANS AND SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLANS Purchase Payments. Under Section 408(k) of the Code, employers may establish a type of IRA plan referred to as a simplified employee pension plan (SEP). Employer contributions to a SEP cannot exceed the lesser of $24,000 or 15% or the employee's earned income. Employees of certain small employers may have contributions made to the salary reduction simplified employee pension plan ("SAR/SEP") on their behalf on a salary reduction basis. These salary reduction contributions may not exceed $10,000 in 2000, which is indexed for inflation. Employees of tax-exempt organizations and state and local government agencies are not eligible for SAR/SEPs. Taxation of Distributions. Generally, distribution payments from SEPs and SAR/SEPs are subject to the same distribution rules described above for IRAs. Required Distributions. SEPs and SAR/SEPs are subject to the same minimum required distribution rules described above for IRAs. Tax-Free Rollovers. Generally, rollovers and direct transfers may be made to and from SEPs and SAR/SEPs in the same manner as described above for IRAs, subject to the same conditions and limitations. SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA) Purchase Payments. Under Section 408(p) of the Code, employers may establish a type of IRA plan known as a Simple IRA. Employees may have contributions made to the SIMPLE IRA on a salary reduction basis. These salary reduction contributions may not exceed $6,000 in 2000, which is indexed for inflation. Total salary reduction contributions are limited to $10,000 per year for any employee who makes salary reduction contributions to more than one plan. Employers are required to contribute to the SIMPLE IRA, which contributions may not exceed the lesser of: (1) The amount of salary deferred by the employee, (2) 3% of the employee's compensation, or (3) $6,000, if the employer contributes on a matching basis; or the lesser of: (1) 2% of the employee's compensation, or (2) $3,200, if the employer makes non-elective contributions. An employer may not make contributions to both a SIMPLE IRA and another retirement plan for the same calendar year. Taxation of Distributions. Generally, distribution payments from SIMPLE IRAs are subject to the same distribution rules described above for IRAs, except that distributions made within two years of the date of an employee's first participation in a SIMPLE IRA of an employer are subject to a 25% penalty tax instead of the 10% penalty tax discussed previously. Required Distributions. SIMPLE IRAs are subject to the same minimum required distribution rules described above for IRAs. Tax-Free Rollovers. Direct transfers may be made among SIMPLE IRAs in the same manner as described above for IRAs, subject to the same conditions and limitations. Rollovers from SIMPLE IRAs are permitted after two years have elapsed from the date of an employee's first participation in a SIMPLE IRA of the employer. Rollovers to SIMPLE IRAs from other plans are not permitted. ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA) Purchase Payments. Under Section 408A of the Code, Individuals may make nondeductible contributions to Roth IRA contracts up to $2,000. This contribution amount must be reduced by the amount of any contributions made to other IRAs for the benefit of the Roth IRA owner. The maximum $2,000 contribution is phased out for single taxpayers with adjusted gross income between $95,000 and $110,000 and for joint filers with adjusted gross income between $150,000 and $160,000. If taxable income is recognized on the regular IRA, an IRA owner with adjusted gross income of less than $100,000 may convert a regular IRA into a Roth IRA. If the conversion is made in 1999, IRA income recognized may be spread over four years. Otherwise, all IRA income will need to be recognized in the year of conversion. No IRS 10% tax penalty will apply to the conversion. Taxation of Distribution. Qualified distributions are received income-tax free by the Roth IRA owner, or beneficiary in case of the Roth IRA owner's death. A qualified distribution is any distribution made after five years if the IRA owner is over age 59 1/2, dies, becomes disabled, or uses the funds for first-time home buyer expenses at the time of distribution. The five-year period for converted amounts begins from the year of the conversion. PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) Financial Statements included in the Registration Statement (1) Part A: None (2) Part B: None (b) Exhibits (1) Board Resolution of Registrant (3a) Distribution Agreement* (3b) Selling Agreement (4a) Form of Variable Annuity Contract (4b) Form of Variable Annuity Contract (5) Form of Variable Annuity Application (6a) Articles of Incorporation of the Depositor (6b) Bylaws of Depositor (9) Opinion of Counsel (10b) Powers of Attorney (13a) Total Return Calculation* (13b) Annualized Yield for Separate Account B* * To be filed by amendment Item 25. Officers and Directors of the Depositor Principal Life Insurance Company is managed by a Board of Directors which is elected by its policyowners. The directors and executive officers of the Company, their positions with the Company, including Board Committee memberships, and their principal business address, are as follows: DIRECTORS: Principal Name, Positions and Offices Business Address BETSY J. BERNARD U.S. West Director 1801 California Street Member, Nominating Committee 52nd Floor Denver, CO 80202 JOCELYN CARTER-MILLER Motorola, Inc. Director 1000 Corporate Drive Member, Audit Committee Suite 700 Ft. Lauderdale, FL 33334 DAVID J. DRURY The Principal Financial Group Director Des Moines, IA 50392-0100 Chairman of the Board Chair, Executive Committee C. DANIEL GELATT, JR. NMT Corporation Director P.O. Box 2287 Member, Executive Committee La Crosse, WI 54602-2287 Chair, Human Resources Committee J. BARRY GRISWELL The Principal Financial Group Director, President Des Moines, IA 50392-0100 and Chief Executive Officer Member, Executive Committee CHARLES S. JOHNSON DuPont Director 4935 Mesa Capella Drive Member, Audit Committee Las Vegas, NV 89113-1441 WILLIAM T. KERR Meredith Corporation Director 1716 Locust St. Member, Executive Committee Des Moines, IA 50309-3023 and Chair, Nominating Committee LEE LIU Alliant Energy Corporation Member, Executive and Post Office Box 351 Human Resources Committees Cedar Rapids, IA 52406 VICTOR. H. LOEWENSTEIN Egon Zehnder International Director Cours de Rive #10 Member, Nominating CH-1204 Geneva, Switzerland Committee RONALD D. PEARSON Hy-Vee, Inc. Director 5820 Westown Parkway Member, Human Resources West Des Moines, IA 50266 Committee Federico F. Pena Vestar Capital Partners Member, Audit 1225 17th Street, Ste 1660 Committee Denver, CO 80202 JOHN R. PRICE The Chase Manhattan Corporation Director 270 Park Avenue - 21st Floor Member, Nominating Committee New York, NY 10169 DONALD M. STEWART The Chicago Community Trust Director 222 North LaSalle Street,Suite 1400 Member, Human Resources Chicago, IL 60601-1009 Committee ELIZABETH E. TALLETT Dioscor, Inc. Director 48 Federal Twist Road Chair, Audit Committee Stockton, NJ 08559 FRED W. WEITZ Essex Meadows, Inc. Director 800 Second Avenue, Suite 150 Member, Human Resources Des Moines, IA 50309 Committee Executive Officers (Other than Directors): JOHN E. ASCHENBRENNER Executive Vice President MICHAEL T. DALEY Executive Vice President MICHAEL H.GERSIE Executive Vice President and Chief Financial Officer RICHARD L. PREY Executive Vice President PAUL S. BOGNANNO Senior Vice President GARY M. CAIN Senior Vice President C. ROBERT DUNCAN Senior Vice President DENNIS P. FRANCIS Senior Vice President THOMAS J. GRAF Senior Vice President ROBB B. HILL Senior Vice President DANIEL J. HOUSTON Senior Vice President ELLEN Z. LAMALE Senior Vice President and Chief Actuary MARY A. O'KEEFE Senior Vice President KAREN E. SHAFF Senior Vice President and General Counsel ROBERT A. SLEPICKA Senior Vice President NORMAN R. SORENSEN Senior Vice President CARL C. WILLIAMS Senior Vice President and Chief Information Officer LARRY D. ZIMPLEMAN Senior Vice President Item 26. Persons Controlled by or Under Common Control with Registrant Principal Financial Services, Inc. (an Iowa corporation) an intermediate holding company organized pursuant to Section 512A.14 of the Iowa Code. Subsidiaries wholly-owned by Principal Financial Services, Inc. a. Principal Life Insurance Company (an Iowa corporation) a stock life insurance company engaged in the business of insurance and retirement services. b. Princor Financial Services Corporation (an Iowa Corporation) a registered broker-dealer. c. PFG DO Brasil LTDA (Brazil) a Brazilian holding company. d. Principal Financial Group (Mauritius) Ltd. a Mauritius holding company. e. Principal Pensions Co., Ltd. (Japan) a Japan company who engages in the management, investment and administration of financial assets and any services incident thereto. f. Principal Financial Services (Australia), Inc. (an Iowa holding company) formed to facilitate the acquisition of the Australian business of BT Australia. g. Principal Financial Services (NZ), Inc. (an Iowa holding company) formed to facilitate the acquisition of the New Zealand business of BT Australia. h. Principal Capital Management (Singapore) Limited (a Singapore corporation) a company engaging in funds management. i. Principal Capital Management (Europe) Limited a United Kingdom company that engages in European representation and distributor of the Principal Investments Funds. j. Principal Capital Management (Ireland) Limited an Ireland company that engages in fund management. k. Principal Financial Group Investments (Australia) Pty Limited an Australia holding company. Subsidiary wholly-owned by Princor Financial Services Corporation: a. Principal Management Corporation (an Iowa Corporation) a registered investment advisor. Subsidiary 42% owned by PFG DO Brasil LTDA a. Brasilprev Previdencia Privada S.A.(Brazil) a pension fund company. Subsidiary wholly-owned by Principal Financial Group (Mauritius) Ltd. a. IDBI Principal Asset Management Company (India) a India asset management company. Subsidiary wholly-owned by Principal Financial Services (Australia), Inc.: a. Principal Financial Group (Australia) Holdings Pty Ltd. an Australian holding company organized in connection with the contemplated acquisition of BT Australia Funds Management. Subsidiary wholly-owned by Principal Financial Group (Australia) Holdings Pty Ltd: a. BT Financial Group Pty Ltd. an Australia holding company. Subsidiary wholly-owned by BT Financial Group Pty Ltd: a. BT Investments (Australia) Limited a Delaware holding company. Subsidiary wholly-owned by BT Investments (Australia) Limited: a. BT Australia (Holdings) Ltd an Australia commercial and investment banking and asset management company. Subsidiary wholly-owned by BT Australia (Holdings) Ltd: a. BT Australia Limited an Australia company engaged in asset management and trustee/administrative activites. Subsidiaries wholly-owned by BT Financial Group Limited: a. BT Life Limited an Australia company engaged in commercial and investment linked life insurance policies. b. BT Funds Management Limited an Australia company engaged in institutional and retail money management. c. BT Funds Management (International) Limited an Australia company who manages international funds (New Zealand, Singapore, Asia, North America and United Kingdom). d. BT Securities Limited an Australia company that engages in loan finance secured against share and managed fund portfolios. e. BT (Queensland) Pty Limited an Australia trustee company. f. BT Portfolio Services Limited an Australia company that engages in processing and transaction services for financial planners and financial intermediaries. g. BT Australia Corporate Services Pty Limited an Australia holding company for internal service companies. h. Oniston Pty Ltd an Australia company that is a financial services investment vehicle. i. QV1 Pty Limited an Australia company. Subsidiaries wholly-owned by BT Portfolio Services Limited: a. BT Custodial Services Pty Ltd an Australia custodian nominee for investment management activities. b. National Registry Services Pty Ltd. an Australia company that engages in registry services. c. National Registry Services (WA) Pty Limited an Australia company that engages in registry services. d. BT Finance & Investments Pty Ltd an Australia trustee of wholesale cash management trust. Subsidiaries organized and wholly-owned by BT Australia Corporate Services Pty Limited: a. BT Finance Pty Limited an Australia provider of finance by loans and leases. b. Chifley Services Pty Limited an Australia company that engages in staff car leasing management. c. BT Nominees Pty Limited an Australia company that operates as a trustee of staff superannuation fund (pension plan). Subsidiary organized and wholly-owned by BT Funds Management Limited: a. BT Tactical Asset Management Pty Limited an Australia company that engages in management of futures positions. Subsidiary organized and wholly-owned by BT Custodial Services Pty Ltd: a. BT Hotel Group Pty Ltd an Australia corporation - an inactive shelf corporation to be wound up. b. BT Custodians Ltd an Australia manager and trustee of various unit trusts. c. Dellarak Pty Ltd an Australia trustee company. Subsidiary organized and wholly-owned by Principal Financial Services (NZ), Inc. a. BT Financial Group (NZ) Limited a New Zealand holding company. Subsidiary organized and wholly-owned by BT Financial Group (NZ) Limited: a. BT Portfolio Service (NZ) Limited a New Zealand company that provides third party administration and registry services. b. BT New Zealand Nominees Limited a New Zealand company who acts as a custodian for local assets. c. BT Funds Management (NZ) Limited a New Zealand funds manager. Subsidiary organized and wholly-owned by Principal Financial Group Investments (Australia) Pty Limited: a. Principal Hotels Holdings Pty Ltd. a holding company. b. Principal Hotels Holdings Trust an Australia trust company. Subsidiary organized and wholly-owned by Principal Hotels Holdings Trust: a. Principal Hotels Australia Pty Ltd. a holding company. b. Principal Hotels Australia Trust a trust company. Subsidiary organized and wholly-owned by Principal Hotels Australia Trust: a. BT Hotel Limited an Australia corporation, which is the hotel operating/managing company of the BT Hotel Group. b. BT Hotel Trust an Australia trust. Principal Life Insurance Company sponsored the organization of the following mutual funds, some of which it controls by virtue of owning voting securities: Principal Balanced Fund, Inc.(a Maryland Corporation) 0.18% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Blue Chip Fund, Inc.(a Maryland Corporation) 0.37% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Bond Fund, Inc.(a Maryland Corporation) 0.73% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Capital Value Fund, Inc. (a Maryland Corporation) 26.57% of outstanding shares owned by Principal Life Insurance Company (including subsidiaries and affiliates)on June 21, 2000. Principal Cash Management Fund, Inc. (a Maryland Corporation) 7.41% of outstanding shares owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal European Equity Fund, Inc. (a Maryland Corporation) 93.60% of outstanding shares owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Government Securities Income Fund, Inc. (a Maryland Corporation) 0.04% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Growth Fund, Inc. (a Maryland Corporation) 0.01% of outstanding shares owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal High Yield Fund, Inc. (a Maryland Corporation) 8.33% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal International Emerging Markets Fund, Inc. (a Maryland Corporation) 29.77% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal International Fund, Inc. (a Maryland Corporation) 24.21% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal International SmallCap Fund, Inc. (a Maryland Corporation) 14.56% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Limited Term Bond Fund, Inc. (a Maryland Corporation) 17.23% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal LargeCap Stock Index Fund, Inc. (a Maryland Corporation) 31.94% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal MidCap Fund, Inc. (a Maryland Corporation) 0.39% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000 Principal Pacific Basin Fund, Inc. (a Maryland Corporation) 94.23% of outstanding shares owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Partners Aggressive Growth Fund, Inc.(a Maryland Corporation) 6.88% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000 Principal Partners LargeCap Growth Fund, Inc.(a Maryland Corporation) 42.01% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000 Principal Partners MidCap Growth Fund, Inc.(a Maryland Corporation) 38.30% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000 Principal Real Estate Fund, Inc. (a Maryland Corporation) 59.76% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000 Principal SmallCap Fund, Inc.(a Maryland Corporation) 7.50% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Special Markets Fund, Inc. (a Maryland Corporation) 83.56% of shares outstanding of the International Emerging Markets Portfolio, 46.61% of the shares outstanding of the International Securities Portfolio, 98.66% of shares outstanding of the International SmallCap Portfolio and 100% of the shares outstanding of the Mortgage-Backed Securities Portfolio were owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000 Principal Tax-Exempt Bond Fund, Inc. (a Maryland Corporation) 0.05% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Utilities Fund, Inc. (a Maryland Corporation) 0.31% of shares outstanding owned by Principal Life Insurance Company (including subsidiaries and affiliates) on June 21, 2000. Principal Variable Contracts Fund, Inc. (a Maryland Corporation) 100% of shares outstanding of the following Accounts owned by Principal Life Insurance Company and its Separate Accounts on June 21, 2000: Aggressive Growth, Asset Allocation, Balanced, Blue Chip, Bond, Capital Value, Government Securities, Growth, High Yield, International, International SmallCap, LargeCap Growth, MicroCap, MidCap, MidCap Growth, MidCap Value, Money Market, Real Estate, SmallCap, SmallCap Growth, SmallCap Value Stock Index 500, and Utilities. Subsidiaries organized and wholly-owned by Principal Life Insurance Company: a. Principal Holding Company (an Iowa Corporation) a downstream holding company for Principal Life Insurance Company. b. Principal Development Investors, LLC (a Delaware Corporation) a limited liability company engaged in acquiring and improving real property through development and redevelopment. c. Principal Capital Management, LLC (a Delaware Corporation) a limited liability company that provides private mortgage, real estate & fixed-income securities services to institutional clients. d. Principal Net Lease Investors, LLC (a Delaware Corporation) a limited liability company which operates as a buyer and seller of net leased investments. Subsidiaries organized and 90% owned by Principal Life Insurance Company: a. PT Asuransi Jiwa Principal Indonesia (an Indonesia Corporation) a life insuranced corporation which offers group and individual products. Subsidiaries wholly-owned by Principal Capital Management, LLC: a. Principal Structured Investments, LLC (a Delaware Corporation) a limited liability company that provides product development administration, marketing and asset management services associated with stable value products together with other related institutional financial services including derivatives, asset-liability management, fixed income investment management and ancillary money management products. b. Principal Enterprise Capital, LLC (a Delaware Corporation) a company engaged in portfolio management on behalf of institutional clients for structuring, underwriting and management of entity-level investments in real estate operating companies (REOCs). c. Principal Commercial Acceptance, LLC (a Delaware Corporation) a limited liability company that provides private market bridge financing and other secondary market opportunities. d. Principal Real Estate Investors, LLC (a Delaware Corporation) a registered investment advisor. e. Principal Commercial Funding, LLC (a Delaware Corporation) a limited liability company engaged in the structuring, warehousing, securitization and sale of commercial mortgage-backed securities. f. Principal Generation Plant, LLC an inactive Delaware limited liability company. g. Principal Income Investors, LLC a Delaware limited liability company which provides investment and financial services. h. Principal Capital Futures Trading Advisor, LLC a Delaware funds management limited liability company. Subsidiaries wholly-owned by Principal Holding Company: a. Principal Bank (a Federal Corporation) a Federally chartered direct delivery savings bank. b. Patrician Associates, Inc. (a California Corporation) a real estate development company. c. Petula Associates, Ltd. (an Iowa Corporation) a real estate development company. d. Principal Development Associates, Inc. (a California Corporation) a real estate development company. e. Principal Spectrum Associates, Inc. (a California Corporation) a real estate development company. f. Principal FC, Ltd. (an Iowa Corporation) a limited purpose investment corporation. g. Equity FC, Ltd. (an Iowa Corporation) engaged in investment transactions, including limited partnerships and limited liability companies. h. HealthRisk Resource Group, Inc. (an Iowa Corporation) a general business corporation that engages in investment transactions, including limited partnerships and limited liability companies i. Invista Capital Management, LLC (an Delaware Corporation) a limited liability company which is a registered investment adviser. j. Principal Residential Mortgage, Inc. (an Iowa Corporation) a full service mortgage banking company that makes and services a wide variety of loan types on a nationwide basis. k. Principal Asset Markets, Inc. (an Iowa Corporation) a corporation which is currently inactive. l. Principal Portfolio Services, Inc. (an Iowa Corporation) a corporation which is currently inactive. m. The Admar Group, Inc. (a Florida Corporation) a national managed care service organization that develops and manages preferred provider organizations. n. The Principal Financial Group, Inc. (a Delaware corporation) a corporation which is currently inactive. o. Principal Product Network, Inc. (a Delaware corporation) an insurance broker. p. Principal Health Care, Inc. (an Iowa Corporation) a managed care company. q. Dental-Net, Inc. (an Arizona Corporation) a managed dental care services organization. HMO and dental group practice. r. Principal Financial Advisors, Inc. (an Iowa Corporation) a registered investment advisor. s. Delaware Charter Guarantee & Trust Company, d/b/a Trustar Retirement Services (a Delaware Corporation) a corporation that administers individual and group retirement plans for stock brokerage firm clients and mutual fund distributors. t. Professional Pensions, Inc. d/b/a Northeast Plan Administrators (a Connecticut Corporation) a corporation engaged in sales, marketing and administration of group insurance plans and third-party administrator for defined contribution plans. u. Principal Investors Corporation (a New Jersey Corporation) a corporation which is currently inactive. v. Principal International, Inc. (an Iowa Corporation) a company engaged in international business development. Subsidiaries organized and wholly-owned by PT Asuransi Jiwa Principal Indonesia: a. PT Jasa Principal Indonesia an Indonesia pension company. b. PT Principal Capital Management Indonesia an Indonesia funds management company. Subsidiary wholly-owned by Invista Capital Management, LLC: a. Principal Capital Trust. (a Delaware Corporation) a business trust and private investment company offering non-registered units, initially, to tax-exempt entities. Subsidiary wholly-owned by Principal Residential Mortgage, Inc.: a. Principal Wholesale Mortgage, Inc. (an Iowa Corporation) a brokerage and servicer of residential mortgages. b. Principal Mortgage Reinsurance Company (a Vermont corporation) a mortgage reinsurance company. Subsidiaries wholly-owned by The Admar Group, Inc.: a. Admar Corporation (a California Corporation) a managed care services organization. Subsidiaries wholly-owned by Dental-Net, Inc. a. Employers Dental Services, Inc. (an Arizona corporation) a prepaid dental plan organization. Subsidiaries wholly-owned by Professional Pensions, Inc.: a. Benefit Fiduciary Corporation (a Rhode Island corporation) serves as a corporate trustee for retirement trusts. b. PPI Employee Benefits Corporation (a Connecticut corporation) a registered broker-dealer limited to the sale of open-end mutual funds and variable insurance products. c. Boston Insurance Trust, Inc. (a Massachusetts corporation) a corporation which serves as a trustee and administrator of insurance trusts and arrangements. Subsidiaries wholly-owned by Principal International, Inc.: a. Principal International Espana, S.A. de Seguros de Vida (Spain) a life insurance, annuity, and accident and health company. b. Zao Principal International (a Russia Corporation) inactive. c. Principal International Argentina, S.A. (an Argentina corporation) a holding company that owns Argentina corporations offering annuities, group and individual insurance policies. d. Principal Asset Management Company (Asia) Ltd. (Hong Kong) an asset management company. e. Principal International (Asia) Limited (Hong Kong) a corporation operating as a regional headquarters for Asia. f. Principal Trust Company (Asia) Limited (Hong Kong) (an Asia trust company). g. Principal International de Chile, S.A. (Chile) a holding company. h. Principal Mexico Compania de Seguros, S.A. de C.V. (Mexico) a life insurance company. i. Principal Pensiones, S.A. de C.V. (Mexico) a pension company. j. Principal Afore, S.A. de C.V. (Mexico), a pension company. k. Principal Consulting (India) Private Limited (an India corporation) an India consulting company. Subsidiaries 88% owned by Principal International, Inc.: a. Principal Insurance Company (Hong Kong) Limited (a Hong Kong Corporation) a company that sells insurance and pension products. Subsidiary wholly-owned by Principal International Espana, S.A. de Seguros de Vida (Spain): a. Princor International Espana S.A. de Agencia de Seguros (Spain) an insurance agency. Subsidiary wholly-owned by Principal International (Asia) Limited (Hong Kong): a. Principal Capital Management (Asia) Limited (Hong Kong) Asian representative and distributor for the Principal Investment Funds. Subsidiaries wholly-owned by Principal International Argentina, S.A. (Argentina): a. Principal Retiro Compania de Seguros de Retiro, S.A. (Argentina) an annuity company. b. Principal Life Compania de Seguros, S.A. (Argentina) a life insurance company. Subsidiary wholly-owned by Principal International de Chile, S.A.: a. Principal Compania de Seguros de Vida Chile S.A. (Chile) life insurance company. Subsidiary 60% owned by Principal Compania de Seguros de Vida Chile S.A. (Chile): a. Andueza & Principal Creditos Hipotecarios S.A. (Chile) a residential mortgage company. Subsidiary wholly-owned by Principal Afore, S.A. de C.V.: a. Siefore Principal, S.A. de C.V. (Mexico) an investment fund company. Item 27. Number of Contractowners - As of: March 30, 2000 (1) (2) (3) Number of Plan Number of Title of Class Participants Contractowners -------------- -------------- -------------- BFA Variable Annuity Contracts 76 8 Pension Builder Contracts 535 308 Personal Variable Contracts 5,514 125 Premier Variable Contracts 21,677 259 Flexible Variable Annuity Contract 40,796 40,796 Principal Freedom Variable Annuity Contract 268 268 Item 28. Indemnification None Item 29. Principal Underwriters (a) Princor Financial Services Corporation, principal underwriter for Registrant, acts as principal underwriter for, Principal Balanced Fund, Inc., Principal Blue Chip Fund, Inc., Principal Bond Fund, Inc., Principal Capital Value Fund, Inc., Principal Cash Management Fund, Inc., Principal European Equity Fund, Inc., Principal Government Securities Income Fund, Inc., Principal Growth Fund, Inc., Principal High Yield Fund, Inc., Principal International Emerging Markets Fund, Inc., Principal International Fund, Inc., Principal International SmallCap Fund, Inc., Principal LargeCap Stock Index Fund, Inc., Principal Limited Term Bond Fund, Inc., Principal MidCap Fund, Inc., Principal Pacific Basin Fund Inc., Principal Partners Aggressive Growth Fund, Inc., Principal Partners LargeCap Growth Fund, Inc., Principal Partners MidCap Growth Fund, Inc., Principal Real Estate Fund, Inc., Principal SmallCap Fund, Inc., Principal Special Markets Fund, Inc., Principal Tax-Exempt Bond Fund, Inc., Principal Utilities Fund, Inc., Principal Variable Contracts Fund, Inc. and for variable annuity contracts participating in Principal Life Insurance Company Separate Account B, a registered unit investment trust for retirement plans adopted by public school systems or certain tax-exempt organizations pursuant to Section 403(b) of the Internal Revenue Code, Section 457 retirement plans, Section 401(a) retirement plans, certain non- qualified deferred compensation plans and Individual Retirement Annuity Plans adopted pursuant to Section 408 of the Internal Revenue Code, and for variable life insurance contracts issued by Principal Life Insurance Company Variable Life Separate Account, a registered unit investment trust. (b) (1) (2) Positions and offices Name and principal with principal business address underwriter John E. Aschenbrenner Director The Principal Financial Group Des Moines, IA 50392 Robert W. Baehr Marketing Services The Principal Officer Financial Group Des Moines, IA 50392 Craig L. Bassett Treasurer The Principal Financial Group Des Moines, IA 50392 Michael J. Beer Executive Vice President The Principal Financial Group Des Moines, IA 50392 Jerald L. Bogart Insurance License Officer The Principal Financial Group Des Moines, IA 50392 David J. Drury Director The Principal Financial Group Des Moines, IA 50392 Ralph C. Eucher Director and The Principal President Financial Group Des Moines, IA 50392 Arthur S. Filean Vice President The Principal Financial Group Des Moines, IA 50392 Dennis P. Francis Director The Principal Financial Group Des Moines, IA 50392 Paul N. Germain Vice President - The Principal Mutual Fund Operations Financial Group Des Moines, IA 50392 Ernest H. Gillum Vice President - The Principal Compliance and Product Development Financial Group Des Moines, IA 50392 Thomas J. Graf Director The Principal Financial Group Des Moines, IA 50392 J. Barry Griswell Director and The Principal Chairman of the Financial Group Board Des Moines, IA 50392 Susan R. Haupts Marketing Officer The Principal Financial Group Des Moines, IA 50392 Joyce N. Hoffman Vice President and The Principal Corporate Secretary Financial Group Des Moines, IA 50392 Kraig L. Kuhlers Marketing Officer The Principal Financial Group Des Moines, IA 50392 Ellen Z. Lamale Director The Principal Financial Group Des Moines, IA 50392 Julia M. Lawler Director The Principal Financial Group Des Moines, IA 50392 John R. Lepley Senior Vice The Principal President - Marketing Financial Group and Distribution Des Moines, IA 50392 Kelly A. Paul Systems and Technology The Principal Officer Financial Group Des Moines, IA 50392 Elise M. Pilkington Assistant Director - The Principal Retirement Consulting Financial Group Des Moines, IA 50392 Richard L. Prey Director The Principal Financial Group Des Moines, IA 50392 Layne A. Rasmussen Controller - The Principal Mutual Funds Financial Group Des Moines, IA 50392 Martin R. Richardson Operations Officer - The Principal Broker/Dealer Services Financial Group Des Moines, IA 50392 Elizabeth R. Ring Controller The Principal Financial Group Des Moines, IA 50392 Michael D. Roughton Counsel The Principal Financial Group Des Moines, IA 50392 Jean B. Schustek Product Compliance Officer - The Principal Registered Products Financial Group Des Moines, IA 50392 Kyle R. Selberg Vice President-Marketing The Principal Financial Group Des Moines, IA 50392 Minoo Spellerberg Compliance Officer The Principal Financial Group Des Moines, IA 50392 (c) (1) (2) Net Underwriting Name of Principal Discounts and Underwriter Commissions Princor Financial $12,331,736.46 Services Corporation (3) (4) (5) Compensation on Brokerage Redemption Commissions Compensation 0 0 0 Item 30. Location of Accounts and Records All accounts, books or other documents of the Registrant are located at the offices of the Depositor, The Principal Financial Group, Des Moines, Iowa 50392. Item 31. Management Services Inapplicable Item 32. Undertakings The Registrant undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted. The Registrant undertakes to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information. The Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. REPRESENTATION PURSUANT TO SECTION 26 OF THE INVESTMENT COMPANY ACT OF 1940 Principal Life Insurance Company represents the fees and charges deducted under the Policy, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Principal Life Insurance Company Separate Account B, has duly caused this Registration Statement to be signed on its behalf by the undersigned thereto duly authorized in the City of Des Moines and State of Iowa, on the 27th day of June, 2000 PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B (Registrant) By: PRINCIPAL LIFE INSURANCE COMPANY (Depositor) /s/ David J. Drury By ______________________________________________ David J. Drury Chairman Attest: /s/ Joyce N. Hoffman - ----------------------------------- Joyce N. Hoffman Vice President and Corporate Secretary As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the date indicated. Signature Title Date /s/ D. J. Drury Chairman and June 27, 2000 - -------------------- Director D. J. Drury /s/ D. C. Cunningham Vice President and June 27, 2000 - -------------------- Controller (Principal D. C. Cunningham Accounting Officer) /s/ M. H. Gersie Executive Vice President and June 27, 2000 - -------------------- Chief Financial Officer M. H. Gersie (Principal Financial Officer) (B. J. Bernard)* Director June 27, 2000 - -------------------- B. J. Bernard (J. Carter-Miller)* Director June 27, 2000 - -------------------- J. Carter-Miller (C. D. Gelatt, Jr.)* Director June 27, 2000 - -------------------- C. D. Gelatt, Jr. (J. B. Griswell)* Director June 27, 2000 - -------------------- J. B. Griswell (C. S. Johnson)* Director June 27, 2000 - -------------------- C. S. Johnson (W. T. Kerr)* Director June 27, 2000 - -------------------- W. T. Kerr (L. Liu)* Director June 27, 2000 - -------------------- L. Liu (V. H. Loewenstein)* Director June 27, 2000 - -------------------- V. H. Loewenstein (R. D. Pearson)* Director June 27, 2000 - -------------------- R. D. Pearson (F. F. Pena)* Director June 27, 2000 - -------------------- F. F. Pena (J. R. Price)* Director June 27, 2000 - -------------------- J. R. Price, Jr. (D. M. Stewart)* Director June 27, 2000 - -------------------- D. M. Stewart (E. E. Tallett)* Director June 27, 2000 - -------------------- E. E. Tallett (F. W. Weitz)* Director June 27, 2000 - -------------------- F. W. Weitz *By /s/ David J. Drury ------------------------------------ David J. Drury Chairman Pursuant to Powers of Attorney Previously Filed or Included Herein EX-99.1 2 0002.txt BOARD RESOLUTION OF REGISTRANT BANKERS LIFE COMPANY BOARD RESOLUTION No. 11315 Passed 6-24-68 BE IT RESOLVED: 1. That the Chairman of the Board or the President shall designate the appropriate officers to have the primary responsibility and authority within the provisions of the Articles of Incorporation of the Bankers Life Company and as permitted under the applicable law to prepare and issue group and/or individual variable annuity contracts which would result in tax deferral under the Internal Revenue Code of 1954, as amended, but which do not provide for participation in the Separate Account established by the Company on the 8th day of August, 1964. Such variable annuity contracts may provide for benefits whose dollar amount or other measure of value may vary during the period subsequent to as well as the period prior to the maturity dates of such contracts. 2. That the Chairman of the Board or the President shall designate the same or other officers to have the primary responsibility and authority within the provisions of the Articles of Incorporation of Bankers Life Company and as permitted under the applicable law to establish one or more additional Separate Accounts or funds, each of which shall meet the requirements of a "unit investment trust" as defined by the Investment Company Act of 1940, as amended. 3. That the officers so designated are hereby authorized and directed to prepare, execute and file with the Securities and Exchange Commission in accordance with the provisions of the Securities Act of 1933, as amended, a registration statement or statements, and such amendments thereto as may be necessary or appropriate, relating to such variable annuity contracts as described in this resolution. 4. That the officers so designated are hereby authorized if necessary to prepare, execute and file with the Securities and Exchange Commission in accordance with the provisions of the Investment Company Act of 1940, as amended, a registration statement or statements, and such amendments thereto as may be necessary or appropriate, relating to such unit investment trust or trusts. 5. That the officers so designated are hereby authorized to take such further action as may in their judgment be necessary or desirable to effect the registration of such variable annuity contracts and of such unit investment trust or trusts. This is to certify that the above is a true copy of Board Resolution No. 11315 as it appears on the minute book of the Corporation. /s/ R. E. Cassell ------------------------------------------ R. E. Cassell Senior Vice-President and Secretary EXECUTIVE COMMITTEE RESOLUTION No. 2000 Passed January 12, 1970 RESOLVED, That in furtherance of resolution No. 11315 of the Board of Directors enacted on the 24th day of June, 1968, a separate account to be known as Separate Account B be and hereby is established for the purpose of issuing variable annuity contracts entitled to special tax treatment under Sections 401 or 403(b) of the Internal Revenue Code 1954, as amended. EXECUTIVE COMMITTEE RESOLUTION RESOLUTION NO. 2115 PASSED 4-12-71 "RESOLVED, That Separate Account B heretofore established by Executive Committee Resolution No. 2000, passed January 12, 1970, be and is hereby amended by deleting all reference to Section 401 of the Internal Revenue Code, and as amended said resolution reads as follows: 'RESOLVED, That in furtherance of Resolution No. 11315 of the Board of Directors enacted on the 24th day of June 1968, a separate account to be known as Separate Account B be and hereby is established for the purpose of issuing variable annuity contracts entitled to special tax treatment under Section 403(b) of the Internal Revenue Code 1954, as amended.' " Executive Committe Resolution 2927, dated May 17, 1982 On motion duly made and seconded, the following Resolution was unanimously adopted: WHEREAS, Board Resolution No. 11315, June 24, 1968, authorized the establishment and operation of one or more separate accounts for the purpose of issuing variable annuity contracts entitled to special tax treatment under the Internal Revenue Code of 1954 as amended, and, pursuant thereto the establishment of Separate Account B was authorized by Executive Committee Resolution No. 2000, January 12, 1970, as amended by Executive Committee Resolution No. 2115, April 12, 1971; WHEREAS, the Plan of Operations for Separate Account B provides for alternative funding for variable annuity contracts participating in Separate Account B; NOW, THEREFORE, BE IT RESOLVED, that there are hereby established, for the purpose of providing alternative funding methods for variable annuity contracts entitled to special tax treatment under the Internal Revenue Code of 1954, as amended, two separate divisions within Separate Account B, a Common Stock Division and a Money Market Division. All income and expenses and all gains or losses, whether or not realized, experienced with respect to assets for a series of contracts participating in a Division of Separate Account B shall be credited to or charged against those assets, unaffected by income and expenses or gains or losses experienced with respect to assets for any other series of contracts participating in the same or any other Division of Separate Account B, or constituting any other Separate Account, or constituting the general account of the Company. FURTHERMORE, the assets for a series of contracts participating in a Division of Separate Account B shall not be charged by Bankers Life Company with any liabilities arising from any other series of contracts issued by the company participating in the same or from any other Division of Separate Account B. Board Resolution #12434 (passed February 23-24, 1987) WHEREAS, Board Resolution No. 11315, June 24, 1968, authorized the establishment and operation of one or more separate accounts for the purpose of issuing variable annuity contracts entitled to special tax treatment under the Internal Revenue Code of 1954 as amended, and, pursuant thereto the establishment of Separate Account B was authorized by Executive Committee Resolution No. 2000, January 12, 1970, as amended by Executive Committee Resolution No. 2115, April 12, 1971, and Executive Committee Resolution No. 2927, May 17, 1982; WHEREAS, the Plan of Operations for Separate Account B provides for alternative funding for variable annuity contracts participating in Separate Account B; NOW, THEREFORE, BE IT RESOLVED, that there are hereby established, for the purpose of providing alternative funding methods for variable annuity contracts entitled to special tax treatment under the Internal Revenue Code of 1954, as amended, three separate divisions within Separate Account B, a Common Stock Division, a Money Market Division and a Government Securities Division. All income and expenses and all gains or losses, whether or not realized, experienced with respect to assets for a series of contracts participating in a Division of Separate Account B shall be credited to or charged against those assets, unaffected by income and expenses or gains or losses experienced with respect to assets for any other series of contracts participating in the same or any other Division of Separate Account B, or constituting any other Separate Account, or constituting the general account of the Company. FURTHERMORE, the assets for a series of contracts participating in a Division of Separate Account B shall not be charged by Principal Mutual Life Insurance Company with any liabilities arising from any other series of contracts issued by the Company participating in the same or from any other Division of Separate Account B. MEMORANDUM November 24, 1993 TO: Dave Drury, Officers, S-6, X7-5921 FROM: Barry Griswell, Ind. Staff, G-13, X7-5749 RE: New Divisions for Separate Account B In accordance with Principal Mutual Life Insurance Company Board Resolution No. 12503 passed February 22, 1988, I have created the following new division for Separate Account B to reflect the funding options that will be utilized by the variable annuity Principal Mutual will issue in the near future: 1. Utilities Division; 2. World Division; 3. Growth Division; 4. Blue Chip Division; 5. Emerging Growth Division; 6. Managed Division; and 7. Bond Division. In addition, I have directed that the name of the Common Stock Division be changed to the Capital Accumulation Division. /s/ J. Barry Griswell __________________________________ Barry Griswell BG/srr dd1124.mem Board Resolution #12503 (passed February 22-23, 1988) RESOLVED, that Board Resolution No. 12057, October 18-19, 1982, is amended and superseded by the following resolution, and all references in other resolutions to that resolution, or resolutions which it replaced, are amended to refer to this superseding resolution: BE IT RESOLVED, that either the Chief Executive Officer, or the President, is authorized to designate officers who shall have the power and authority, acting directly or through other officers and employees to whom they may delegate the power and authority: 1. To prepare and issue or amend appropriate individual life policies, annuity contracts, disability and double indemnity riders or contracts, and settlement option contracts; to determine the appropriate plans of insurance, contracts, riders, amendments and benefits to be offered; to determine underwriting practices, including exclusions, restrictions, amount limits and classification of risks; to determine premiums, fees or charges, non-forfeiture values, and policy loan rates; to administer benefit payments; and to make recommendations with respect to dividends to be paid in connection with such policies or contracts. 2. To prepare and issue or amend appropriate individual health policies or contracts; to determine the appropriate plans of insurance, contracts, riders, amendments and benefits to be offered; to determine underwriting practices, including exclusions, restrictions, amount limits and classification of risks; to determine premium, fees or charges and non-forfeiture values; to administer benefit payments; and to make recommendations with respect to dividends to be paid in connection with such policies or contracts. 3. To prepare and issue or amend appropriate group policies, contracts, riders, amendments and other forms, including, but not limited to, life plans, disability benefit plans, health plans, dental plans, annuity plans and all other forms of plans, contracts or agreements pertaining to or utilized in connection with pension, profit sharing and other deferred compensation plans; to determine the plans and benefits to be offered which may include coverage on dependents as well as the participants in the plan; to determine the underwriting practices, including the exclusions, restrictions, amount limits, and classification of risks; to determine premiums, fees or charges and values; to administer benefit payments; and to make recommendations with respect to dividends to be paid in connection with such policies or contracts. 4. To prepare, issue or amend appropriate individual or group contracts, policies or annuities providing for a separate account or accounts and to establish, maintain, amend and discontinue such account or accounts as are deemed necessary or advisable. 5. To enter into reinsurance and coinsurance contracts and treaties; to take such actions as are required to liberalize, restrict or otherwise change benefits, values and underwriting practices with respect to any class or classes of persons or policyholders; to cause the general account or any account maintained by the Company to be segmented for the purposes of crediting investment results separately to any class or classes of policyholders; to enter into contracts or agreements wherein the Company undertakes to provide services of any nature; and to acquire or cause to be formed insurance companies or other subsidiaries, the stock of which will be owned directly or indirectly by the Company. 6. To do those other things deemed necessary or desirable to carry out the business of Principal Mutual Life Insurance Company within the powers of the Corporation. BE IT FURTHER RESOLVED, that either the corporate secretary or the general counsel is authorized to certify the powers of the corporation and the powers and authority of the officers or employees. Memorandum DATE: January 20, 1998 TO: Dave Drury, Officers, S-6, X7-5921 FROM: John Aschenbrenner, Ind. Staff, G-12, X7-5927 RE: New Divisions for Separate Account B CC: Steve Jones, Barry Griswell Eight new divisions are being added to Principal Flexible Variable Annuity effective May 1, 1998. In accordance with Principal Mutual life Insurance Company Board Resolution No. 12503 passed February 22, 1988, I have created the following divisions for the Variable Life Separate Account to reflect the funding options that will be utilized by individual variable annuity contracts issued by Principal Mutual: 1. International SmallCap Division--will invest in shares of the International SmallCap Account of the Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Invista Capital Management; 2. MicroCap Division--will invest in shares of the MicroCap Account of the Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Goldman Sachs Asset Management; 3. MidCap Growth Division--will invest in shares of the MidCap Growth Account of the Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Dreyfus Corporation; 4. Real Estate Division--will invest in shares of the Real Estate Account of the Principal Variable Contracts Fund, Inc. The Account is to be managed by Principal Management Corporation; 5. SmallCap Division--will invest in shares of the SmallCap Account of the Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Invista Capital Management; 6. SmallCap Growth Division--will invest in shares of the SmallCap Growth Account of the Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Berger Associates; 7. SmallCap Value Division--will invest in shares of the SmallCap Value Account of the Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by JP Morgan Asset Management; 8. Utilities Division--will invest in shares of the Utilities Account of the Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Invista Capital Management. In addition, I have directed that the name of the Capital Accumulation Division be changed to the Capital Value Division; that the name of the World Division be changed to the International Division; and that the name of the Emerging Growth Division be changed to the MidCap Division. /S/ John Aschenbrenner John Aschenbrenner Memorandum DATE: September 14, 1998 TO: Dave Drury FROM: John Aschenbrenner, Ind. Staff, G-12, x75927 RE: New Divisions for Separate Account B CC: Steve Jones, Barry Griswell, Joyce Hoffman Six new divisions are being added for the Principal Freedom Variable Annuity effective May 1, 1999. In accordance with Principal Life Insurance Company Board Resolution No. 12503, passed February 22, 1988, I have created the following divisions for Separate Account B to reflect the funding options that will be utilized by individual annuity contracts issued by Principal Life: 1. Blue Chip Division--will invest in shares of the Blue Chip Account of Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Invista Capital Management; 2. LargeCap Growth Division--will invest in shares of the LargeCap Growth Account of Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Janus Capital Corporation; 3. MidCap Value Division--will invest in shares of the MidCap Account of Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Neuberger & Berman Management, Inc.; 4. Stock Index 500 Division--will invest in shares of the Stock Index 500 Account of Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Invista Capital Management; 5. American Century VP Income & Growth Division-- will invest in shares of the American Century Variable Portfolios, Inc. - VP Income & Growth; 6. Templeton VP Stock Division-- will invest in shares of the Templeton Variable products Series Fund - Templeton Stock Fund Class 2. /s/ John Aschenbrenner ----------------------------------------- John Aschenbrenner Memorandum DATE: April 23, 1999 TO: Dave Drury FROM: John Aschenbrenner, Ind. Staff, G-12, x75927 RE: New Divisions for Separate Account B CC: Ralph Eucher, Barry Griswell, Joyce Hoffman Five new division are being added to Separate Account B for the Individual SBU's variable annuities contracts to be effective July 1, 1999. In accordance with Principal Life Insurance Company Board Resolution No. 12503, passed February 22, 1988, I have created the following divisions for Separate Account B to reflect the funding options that will be utilized by variable annuity contracts issued by Principal Life: 1. Fidelity VIP II Contrafund Division - will invest in shares of the Fidelity VIP II Contrafund Portfolio: Service Class. 2. Fidelity VIP Growth Division - will invest in shares of the Fidelity VIP Growth Portfolio: Service Class. 3. AIM V.I. Growth Division - will invest in shares of the AIM V.I. Growth Fund. 4. AIM V.I. Value Division - will invest in shares of the AIM V.I. Value Fund. 5. AIM V.I. Growth and Income Division - will invest in shares of the AIM V.I. Growth and Income Fund. /s/John Aschenbrenner John Aschenbrenner Memorandum DATE: June 22, 2000 TO: Barry Griswell FROM: Bob Slepicka, Ind. Staff, G-13, x22558 RE: New Divisions and a Division Name Change for Separate Account B CC: Dave Drury, Ralph Eucher, Joyce Hoffman, Jean Schustek, Wendy Winders Four new divisions are being added to Separate Account B for the Individual SBU's variable annuities contracts to be effective November 20, 2000. In accordance with Principal Life Insurance Company Board Resolution No. 12503, passed February 22, 1988, I have created the following divisions for Separate Account B to reflect the funding options that will be utilized by individual annuity contracts issued by Principal Life Insurance Company. 1. LargeCap Growth Equity Division -- will invest in shares of the LargeCap Growth Equity Account of Principal Variable Contracts Fund, Inc. The account is to be sub-advised by Duncan-Hurst Capital Management Inc. 2. MidCap Growth Equity Division - will invest in shares of the MidCap Growth Equity Account of Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Turner Investment Partners, Inc. 3. International Emerging Markets Division -- will invest in shares of the International Emerging Markets Account of Principal Variable Contracts Fund, Inc. The Account is to be sub-advised by Invista Capital Management, LLC. 4. Janus Aspen Aggressive Growth Division -- will invest in shares of the Janus Aspen Series - Aggressive Growth Portfolio: Service Class. In addition, I have directed that the name of the Stock Index 500 Division be changed to the LargeCap Stock Index Division (the name of its corresponding Account will be changed to be the LargeCap Stock Index Account of the Principal Variable Contracts Fund, Inc.). /s/ Bob Slepicka - ----------------------------------------- Bob Slepicka EX-99.3B 3 0003.txt FVA SELLING AGREEMENT BROKER-DEALER MARKETING AND SERVICING AGREEMENT FOR VARIABLE ANNUITY CONTRACTS AGREEMENT dated this day of , , by and between Principal Life Insurance Company, (hereinafter called "Issuer"), Princor Financial Services Corporation (hereinafter called "Distributor") and ABC Company (hereinafter called "Broker"). For the purposes of this Agreement, in those states in which Broker cannot obtain an insurance license the term "Broker" shall include such validly licensed insurance representatives designated by Broker to effect the sale of variable annuity contracts issued by the Issuer (hereinafter called "Annuity Contracts"). MARKETING In consideration of the mutual agreements herein contained, the Parties hereto agree as follows: 1. The Distributor appoints the Broker to sell Annuity Contracts. This agreement is a selling and servicing agreement between broker-dealers. It does not designate any party as the broker, agent, or employee of any other Party. Words and phrases in this Agreement given special meaning in any Annuity Contracts shall have that same special meaning in this Agreement unless specifically defined otherwise herein. 2. The Broker agrees to direct its best efforts to find purchasers and provide service for Annuity Contracts. The Broker does not undertake to sell or service any specific number of Annuity Contracts issued by the Issuer. 3. The Distributor shall provide the Broker with a reasonable number of current prospectuses, annual reports and such other material as the Distributor determines to be desirable for use in connection with the sale and servicing of Annuity Contracts or the solicitation of applications for participation thereunder. The Distributor indemnifies and holds the Broker harmless for misrepresentations or omissions with regard to prospectuses and sales materials provided by the Distributor as well as misrepresentations or omissions of employees of the Distributor or Principal Life Insurance Company relied upon in connection with the sale and servicing of Annuity Contracts. 4. The Broker warrants that it is a member in good standing of the National Association of Securities Dealers, Inc. (NASD) and will promptly notify Distributor of any change in Broker's status as a member of the NASD. 5. The Broker represents that it is currently a member of SIPC and, while this agreement is in effect, will continue to be a member of SIPC. The Broker agrees to notify the Distributor if the Broker's SIPC membership status changes. 6. The Broker warrants that the Broker, and any person associated with or acting for the Broker in the solicitation of applications for Annuity Contracts shall be qualified pursuant to the requirements of the NASD and appropriate federal and state agencies regulating securities, insurance, any other aspect of the Annuity Contracts or the sale and servicing of them. The Broker shall be responsible for seeing to such qualifications, and indemnifies and holds the Distributor and the Issuer harmless for any failure to have all persons engaged in solicitation or servicing on its behalf properly licensed, registered, and appointed for securities and insurance sales. 7. The Broker is responsible for supervising and controlling the conduct and activities of its Registered Representatives with regard to the sale and distribution of Annuity Contracts. The Broker agrees to indemnify and hold the Distributor and the Issuer harmless for claims and actions of any sort which arise from the conduct and activities of the persons associated with it who are involved in the sale, servicing and distribution of the Annuity Contracts. The Distributor indemnifies and holds the Broker harmless for claims which arise from alleged untrue statements contained in the registration statement, prospectus or approved sales material for the Annuity Contracts. The Broker shall use only sales materials or advertising for the Annuity Contracts that have been approved in writing by the Distributor. 8. The Broker acts only in its own behalf in making agreements with Registered Representatives or other persons in connection with the solicitation or sales of Annuity Contracts. 9. The Broker agrees to maintain all books and records relating to the servicing and sale of Annuity Contracts or interests therein required to be maintained by the Broker pursuant to the Securities Exchange Act of 1934, in conformity with the requirements of Rules 17, 17a-3 and 17a-4 under such Act, and to the applicable securities or insurance laws of any state. 10. The Broker shall transmit promptly and directly to the Distributor all contributions collected by or paid to the Broker. All Annuity Contracts are to be delivered promptly, and any undelivered Annuity Contracts are to be returned within the time allowed or on demand. COMPENSATION 1. While this Agreement is in force, compensation for the sale and servicing of each Annuity Contract shall be paid pursuant to a corresponding schedule attached hereto and made a part hereof. (Each Annuity Contract will have a corresponding Compensation Schedule) 2. Compensation shall only be paid to the Broker of record on premiums paid to and retained by Issuer while this Agreement is in force. Issuer expressly reserves the right to change the broker-dealer of record or Registered Representative in the event an Annuity Contract owner so requests. Determination of the Annuity Contracts applicable to this Agreement shall be by the Issuer. 3. In those states where Broker cannot obtain an insurance license, Broker represents and warrants that: it will effect the sale of any contract through a validly licensed insurance Representative (Compensation Representative) who has entered into an agreement with Broker for this purpose; it authorizes Distributor to pay any compensation due it from sales of a contract to such Compensation Representative; it remains fully responsible for recordkeeping and supervision of the solicitation and/or sale of Annuity Contracts; all monies received by Compensation Representative in accordance with this section will be distributed by Compensation Representative only to duly licensed Registered Representatives who have been appointed by the Issuer to solicit for applications for Annuity Contracts. 4. The Distributor may, at any time, upon written notice to the Broker, change any and all of the rates of Compensation set out herein. Broker will be deemed to have accepted a new Compensation Schedule if an application is submitted for an Annuity Contract affected after said Compensation Schedule has been mailed to the broker. 5. Any indebtedness of any kind due to the Distributor or Issuer from the Broker may be offset against any amount due the Broker. GENERAL 1. The Broker has no authority to: incur any liability or debt against the Distributor or the Issuer; accept risks or contracts of any kind; make, alter, authorize or discharge any contract; extend the time of payment of any contributions; waive payments, fail to transmit promptly any contributions collected to the Distributor; bind the Distributor or the Issuer in any way. 2. Any modifications of this Agreement must be in writing and signed by an authorized officer of the Distributor and of the Issuer. 3. This Agreement may be terminated by either the Distributor, the Broker or the Issuer upon written notice to the last known address of the other parties. 4. This Agreement supersedes and replaces any and all prior agreements of the Distributor or the Issuer with the Broker on the subject of Annuity Contracts or the sale and service of them. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in triplicate on the date first above written. ABC Company Broker______________________________ By__________________________________ ____________________________________ Please type or print name PRINCOR FINANCIAL SERVICES CORPORATION By__________________________________ PRINCIPAL LIFE INSURANCE COMPANY By__________________________________ Debra K. Blackman - Asst. Director SMB Sales Support DEALER COMPENSATION SCHEDULE FREEDOMsm VARIABLE ANNUITY CONTRACT Contract Year Commission* - ------------- ----------- 1 - 4 years 0.35% (.0875% per quarter) 5 + 0.25% (.0625% per quarter) * Annual Trail Commission paid quarterly starting at the end of the first quarter as a percentage of account value. NOTE: Commissions will not be paid, nor will they accrue, until the Broker-Dealer Marketing and Servicing Agreement has been fully executed. DEALER COMPENSATION SCHEDULE FLEXIBLE VARIABLE ANNUITY ("FVA") CONTRACT The Broker will be paid Dealer Compensation in accordance with the Compensation Options elected herein and which the Broker's sales representative shall elect, using the election procedures established by the Insurer, upon submission of the product application to the Insurer and for which good payment has been received. Compensation paid will be based on Option A unless; 1) the Broker has elected the other Options (making them available to representatives), and 2) the sales representative selects another (Broker elected) Compensation Option upon submission of the product application. Irrespective of the Broker's election of Options, if the Broker becomes entitled to commission as a result of a change of broker on such Annuity Contract, the Broker will receive commissions on such Annuity Contract in accordance with the compensation option in effect for such Annuity Contract prior to the transfer.
A. Compensation ------------ Oldest of Owner's or Annuitant's Age Commission (as a % of purchase payment)* when purchase payment paid Option A Option B Option C Option D -------------------------- -------- -------- -------- -------- Purchase payment less than $2 million ------------------------------------- 0-75 5.500% 5.000% 4.000% 0.000% Trail commission** 0.000% 0.100% 0.300% 1.000% Purchase payment over $2 million -------------------------------- 0-75 4.125% 3.625% 2.625% 0.000% Trail commission** 0.000% 0.100% 0.300% 1.000% All purchase payment amounts ---------------------------- 76-85 4.125% 3.625% 2.625% N/A Trail commission** 0.000% 0.100% 0.300% N/A
B. Reimbursement if Surrendered ---------------------------- In the event of a full or partial surrender of an Annuity Contract for any reason within the first twelve (12) months after a purchase payment is made, any compensation previously paid or payable with respect to such purchase payment will be reimbursed to the Distributor by the Broker promptly and on demand. The amount of the reimbursement will be determined as follows:
Reimbursement Schedule ---------------------- ============================================================================================================= Percentage of Commission Percentage of Commission Month of to be Reimbursed Month of to be Reimbursed Surrender Surrender ============================================================================================================= 1 100% 7 60% ------------------------- ---------------------------- -------------------------- --------------------------- 2 100% 8 50% ------------------------- ---------------------------- -------------------------- --------------------------- 3 100% 9 40% ------------------------- ---------------------------- -------------------------- --------------------------- 4 90% 10 30% ------------------------- ---------------------------- -------------------------- --------------------------- 5 80% 11 20% ------------------------- ---------------------------- -------------------------- --------------------------- 6 70% 12 10% =============================================================================================================
The Distributor also reserves the right to require reimbursement of any compensation paid (less any applicable surrender charge) in the three years prior to the surrender date on any purchase payments in excess of the contractual purchase payment limitations. C. Reimbursement if annuitized If the Annuity Contract is annuitized within the first contract year, the Broker will reimburse the Distributor for compensation paid in an amount determined based upon the dollar amount applied and the type of annuitization option selected. PERCENTAGE OF COMPENSATION TO BE REIMBURSED ------------------------------------------- I. 5-9 Year Fixed Amount or 5-9 Year Fixed Period ---------------------------------------------- Purchase Payments/Age Commission Option --------------------- ----------------- Option A Option B -------- -------- All purchase payments, all ages 75.00% 70.00% Option C Option D -------- -------- 65.00% 0.00%
II. All Other Annuitization Options ------------------------------- Commission Option A Option B Option C Option D -------- -------- -------- -------- Purchase payment less than $2 million ------------------------------------- 0-75 45.00% 40.00% 25.00% 0.00% 76-85 30.00% 20.00% 0.00% 0.00% Purchase payment $2 million to $5 million ----------------------------------------- 0-75 30.00% 20.00% 0.00% 0.00% 76-85 30.00% 20.00% 0.00% 0.00% Purchase payment greater than $5 million ---------------------------------------- 0-75 75.00% 70.00% 65.00% 0.00% 76-85 75.00% 70.00% 65.00% 0.00%
Check any or all options available to your representatives. Broker elects the following compensation option(s) X Option A - Full front end compensation with no trail - --- - --- Option B - Slightly lower front-end commission with a .10% annual trail commission paid quarterly starting at the end of the fifth quarter - --- Option C - Lower front-end commission with a .30% annual trail commission paid quarterly starting at the end of the fifth quarter - --- Option D - No front-end commission with a 1.0% annual trail commission paid quarterly starting at the end of the fifth quarter * In the State of New Jersey, additional purchase payments on or after the later of policy anniversary age 64 or 4 years after issue are payable at 1.0% for Option A, 0.50% for Option B, and 0.0% for Option C and D. In the State of Washington, additional purchase payments on or after the later of policy anniversary age 70 or 10 years after issue are payable at 1.0% for Option A, 0.50% for Option B, and 0.0% for Options C and D. Trail commissions are not affected. ** Calculated as a percentage of account value. EX-99.4A 4 0004.txt FORM OF VARIABLE ANNUITY CONTRACT This contract is a legal contract between you, as Owner, and us, Principal Mutual Life Insurance Company. Your contract is issued based on the information you provided and the initial Purchase Payment shown on the initial Data Page. We will pay you the benefits of this contract in accordance with its provisions. 10-DAY EXAMINATION OFFER IT IS IMPORTANT TO US THAT YOU ARE SATISFIED WITH THIS CONTRACT. IF YOU ARE NOT SATISFIED, YOU MAY RETURN YOUR CONTRACT TO EITHER YOUR AGENT OR OUR HOME OFFICE WITHIN 10 DAYS OF ITS RECEIPT AND YOUR CONTRACT WILL BE CONSIDERED VOID FROM ITS INCEPTION. WE WILL REFUND YOUR PURCHASE PAYMENT IN STATES WHERE REQUIRED. IN STATES WHERE PERMITTED, WE WILL REFUND THE TOTAL ACCUMULATED VALUE, WHICH MAY BE MORE OR LESS THAN YOUR PURCHASE PAYMENT. PLEASE READ YOUR CONTRACT CAREFULLY SO YOU MAY BETTER USE ITS MANY BENEFITS. FLEXIBLE VARIABLE ANNUITY CONTRACT. Income payable starting on Retirement Date, or death benefit if Annuitant or Owner dies before Retirement Date. Benefits based on the performance of the Separate Account are variable and not guaranteed as to dollar amount. PARTICIPATING. A mutual company serving contractowners and beneficiaries since 1879. Signed for Principal Mutual Life Insurance Company at Des Moines, Iowa on the Contract Date. OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Do ISSUE AGE-SEX 35-Male JOINT ANNUITANT Jane ISSUE AGE-SEX 35-Female CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2000 RETIREMENT DATE January 1, 2035 INDEX Accumulated Value................. 6 Incontestability.................21 Age and Sex (Annuitant)...........21 Ownership........................21 Annual Fee........................11 Participating....................21 Annuitant ........................ 4 Purchase Payments ............... 5 Assignment .......................22 Retirement Date (Change) ........22 Beneficiary ......................14 Retirement Income ...............15 Benefit Options ..................15 Separate Account ................ 8 Contract .........................21 Separate Account Value .......... 7 Contract Benefits ................11 Surrender .......................12 Death Benefits ...................13 Surrender Charge ................12 Definitions ...................... 4 Termination .....................15 Fixed Account .................... 8 Transaction Fee .................11 Fixed Account Value .............. 6 Transfers ....................... 9 A copy of any application and additional benefits provided by rider follow the last page of this contract. - ------------------------------------------------------------------------------- DATA PAGE OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Doe ISSUE AGE-SEX 35-Male JOINT ANNUITANT Jane Doe ISSUE AGE-SEX 35-Female CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2001 RETIREMENT DATE January 1, 2049 FORM NO. CONTRACT AND RIDERS SF324 Flexible Variable Annuity SF321 Change of Annuitant Rider SF313 Waiver of Surrender Charge Rider SF568 Purchase Payment Credit Rider The initial Purchase Payment you paid is $2,500.00 The Fixed Account's initial Purchase Payment interest rate is 4.79% Annual Fee: Lesser of $30 or 2.00% of Accumulated Value Transaction Fee: $00.00 SEPARATE ACCOUNT CHARGES THROUGH THE 8TH CONTRACT ANNIVERSARY Daily Separate Account Administration Charge:$.000000000(0.00% annually) Daily Mortality and Expense Risks Charge: $.000034246(1.25% annually) Daily Purchase Payment Credit Rider Charge: $.000016438(0.60% annually) TOTAL: $.000050684(1.85% annually) SEPARATE ACCOUNT CHARGES AFTER THE 8TH CONTRACT ANNIVERSARY Daily Separate Account Administration Charge:$.000000000(0.00% annually) Daily Mortality and Expense Risks Charge: $.000034246(1.25% annually) Daily Purchase Payment Credit Rider Charge: $.000000000(0.00% annually) TOTAL: $.000034246(1.25% annually) CONTRACT LIMITS Minimum Transaction Amount: $100.00 Minimum Surrender Value: $5,000.00 Minimum Transfer Value: Fixed Account $5,000.00 Separate Account $0.00 Maximum Retirement Date: January 1, 2051 (Date your Accumulated Value must be applied under a Benefit Option.) DATA PAGE OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Doe ISSUE AGE-SEX 35-Male JOINT ANNUITANT Jane Doe ISSUE AGE-SEX 35-Female CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2001 RETIREMENT DATE January 1, 2049 INITIAL PURCHASE PAYMENT ALLOCATION PERCENTAGES FIXED ACCOUNT 10% SEPARATE ACCOUNT DIVISIONS: 10% SF 324 PPCR (Continued on Page 3-2) SEPARATE ACCOUNT DIVISIONS: Aggressive Growth 10% AIM V. I. Growth 00% AIM V. I. Growth and Income 00% AIM V. I. Value 00% Asset Allocation 00% Balanced 20% Bond 20% Capital Value 00% Fidelity VIP Growth 00% Fidelity VIP II Contrafund 00% Government Securities 00% Growth 20% International 00% International Emerging Markets 00% International SmallCap 00% Janus Aspen Aggressive Growth 00% LargeCap Growth 00% LargeCap Growth Equity 00% LargeCap Stock Index 00% MicroCap 00% MidCap 00% MidCap Growth 00% MidCap Growth Equity 00% Money Market 00% Real Estate 00% SmallCap 00% SmallCap Growth 00% SmallCap Value 00% Utilities 00% ___ TOTAL 100% SF 324 DATA PAGE OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Doe ISSUE AGE-SEX 35-Male JOINT ANNUITANT Jane Doe ISSUE AGE-SEX 35-Female CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2001 RETIREMENT DATE January 1, 2049 TABLE OF SURRENDER CHARGES NUMBER OF COMPLETED CONTRACT YEARS SURRENDER CHARGE APPLIED TO SINCE PURCHASE PAYMENT WAS MADE ALL PURCHASE PAYMENTS MADE IN THAT CONTRACT YEAR 0 (Year of Purchase Payment) 8% 1 8% 2 8% 3 8% 4 7% 5 6% 6 5% 7 4% 8 3% 9 and later 0% SF 324 DEFINITIONS ACCUMULATED VALUE--means the value described in the Accumulated Value provision of this contract. ANNIVERSARY--means the same date and month of each year following the Contract Date shown on the current Data Page. ANNUAL FEE--means the fee described in the Annual Fee provision of this contract. ANNUITANT--means the person, including any Joint Annuitant, on whose life the benefit payments are based. This person may or may not be the Owner. BENEFIT OPTION--means the options described in the Benefit Options section of this contract. CONTRACT DATE--means the date shown on the current Data Page. CONTRACT YEAR--means the one year period beginning on the Contract Date and ending one day before the Anniversary, and any subsequent one year period beginning on an Anniversary. EXAMPLE: If the Contract Date is June 5, 2000, the first Contract Year ends on June 4, 2001, and the first Anniversary falls on June 5, 2001. The second Contract Year ends on June 4, 2002, and the second Anniversary falls on June 5, 2002, etc. DIVISION--means a part of the Separate Account to which Purchase Payments may be allocated or amounts transferred. FIXED ACCOUNT--means an account to which Purchase Payments may be allocated or amounts transferred, which earns guaranteed interest. FIXED ACCOUNT VALUE--means the amount described in the Fixed Account Value provision of this contract. JOINT ANNUITANT--means an additional Annuitant. The Joint Annuitants must be husband and wife, and must be named as Owner and Joint Owner. In this contract, any reference to the Annuitant's death means the death of the last surviving Annuitant. JOINT OWNER--means an Owner who has an undivided interest with the right of survivorship in this contract with another Owner. The Joint Owners must be husband and wife, and must be named as Annuitant and Joint Annuitant. In this contract, any reference to the Owner's death means the death of the last surviving Owner. MUTUAL FUND--means a registered open-end investment company in which a Division invests. NET INVESTMENT FACTOR--means the investment performance measure described in the Net Investment Factor provision of this contract. NOTICE--means any form of communication providing the information we need, either in writing or another manner that we approve in advance and receive in our home office. SF 324 OWNER--means the person, including any Joint Owner, who owns all rights and privileges of this contract. If the Owner is not a natural person, the Owner must be an entity with its own taxpayer identification number. PURCHASE PAYMENT--means any amount you pay us under this contract as consideration for the benefits it provides, reduced by the amount we may deduct to pay any required premium taxes. RETIREMENT DATE--means the date your Accumulated Value is applied under a Benefit Option to make retirement income payments. SEPARATE ACCOUNT--means Principal Mutual Life Insurance Company Separate Account B, a registered unit investment trust with Divisions and segregated assets, to which Purchase Payments may be allocated under this contract and others we issue. SEPARATE ACCOUNT VALUE--means the amount described in the Separate Account Value provision of this contract. SURRENDER CHARGE--means the charge described in the Surrender Charge sub- provision of this contract. TRANSACTION FEE--means the fee described in the Transaction Fee provision of this contract. UNIT--means the accounting measure used to calculate the Separate Account Value. VALUATION DATE--means the date the net asset value of a Mutual Fund is determined. VALUATION PERIOD--means the period between when the net asset value of a Mutual Fund is determined on one Valuation Date and when such value is determined on the next following Valuation Date. WE, OUR, US--means Principal Mutual Life Insurance Company. YOU, YOUR--means the Owner of this contract, including any Joint Owner. PURCHASE PAYMENTS The initial Purchase Payment is due on the Contract Date and is shown on the initial Data Page. Subsequent Purchase Payments must be sent to the home office address we provide to you either with your annual report or in another manner. You may make Purchase Payments at any time and in any amount while the contract is in force and before you choose a Benefit Option, subject to the following conditions. PURCHASE PAYMENT LIMITS The total Purchase Payments you make during the lifetime of this contract may not exceed $1,000,000, except with our prior approval. Each Purchase Payment must equal or exceed the Minimum Transaction Amount shown on the current Data Page. We reserve the right to change this amount but it will never exceed $1,000. PURCHASE PAYMENT ALLOCATIONS You may allocate Purchase Payments as additions to the Fixed Account and/or any of the Separate Account Divisions shown on the current Data Page. However, allocations to the Fixed Account are not allowed if the Fixed Account Value immediately after the allocation exceeds $1,000,000, except with our prior approval. Also, we reserve the right to allocate the initial Purchase Payment entirely to the Money Market Division for the first 15 days after the Contract Date. Allocations to the Fixed Account and/or each of the Separate Account Divisions must be made as a percentage of each Purchase Payment. Percentages may be either zero or any whole number and must total 100%. You may specify these allocations with each Purchase Payment by providing us Notice. Otherwise, we will allocate each Purchase Payment in the same way you allocated the initial Purchase Payment (as shown on the initial Data Page) unless you change this default allocation. You may change this default allocation at any time by providing us Notice. PREMIUM TAXES We reserve the right to deduct amounts to cover any premium taxes required by TAXES state or local law, when applicable. Any such deduction will be made from either a Purchase Payment when received, or the Accumulated Value when surrendered (in whole or part) or applied under a Benefit Option. CONTRACT VALUES The values and benefits are equal to or greater than those required by any applicable law. We will inform you of their amount on request. ACCUMULATED VALUE Your contract values are calculated based on your Accumulated Value as stated below. Your Accumulated Value at any time is equal to: 1. Your Fixed Account Value; PLUS 2. Your Separate Account Value. FIXED ACCOUNT VALUE Your Fixed Account Value at any time is equal to: 1. Purchase Payments you allocate to the Fixed Account; PLUS 2. Any transfers to the Fixed Account from your interest in a Separate Account Division; PLUS 3. Interest credited; SF 324 MINUS 4. Any transfers to your interest in a Separate Account Division; MINUS 5. Any amounts from the Fixed Account that you received due to partial surrenders; MINUS 6. Any Surrender Charges deducted from the Fixed Account due to partial surrenders; MINUS 7. Any Transaction Fees and/or Annual Fees deducted from the Fixed Account. SEPARATE ACCOUNT VALUE Your Separate Account Value at any time is equal to the sum of the values of your interests in all of the Separate Account Divisions. The value of your interest in each Separate Account Division at any time is equal to: 1. The number of Units credited due to Purchase Payments you allocate to your interest in the Separate Account Division; PLUS 2. The number of Units credited due to any transfers from the Fixed Account or your interest in another Separate Account Division; MINUS 3. The number of Units cancelled due to any transfers to the Fixed Account or your interest in another Separate Account Division; MINUS 4. The number of Units cancelled due to any partial surrenders you made from your interest in the Separate Account Division; MINUS 5. The number of Units cancelled due to any Surrender Charges collected from your interest in the Separate Account Division due to partial Surrenders; MINUS 6. The number of Units cancelled due to any Transaction Fees and/or Annual Fees deducted from your interest in the Separate Account Division. This total number of Units is then: MULTIPLIED BY 7. The Unit value of the Separate Account Division at the time of valuation. SF 324 SF 324 FIXED ACCOUNT GUARANTEED INTEREST RATES Your Fixed Account Value will earn interest at a guaranteed interest rate. In no event will the guaranteed interest rate be less than 3% compounded annually. INTEREST CREDITING METHOD Each Purchase Payment allocated or amount transferred to the Fixed Account earns interest at the guaranteed rate in effect on the date it is received or transferred. This rate applies to each Purchase Payment or amount transferred until the end of the Contract Year. The interest rate applicable during the first Contract Year to any initial Purchase Payment allocated to the Fixed Account is shown on the initial Data Page. Each Anniversary we will declare a renewal interest rate that is guaranteed and applies to the Fixed Account Value in existence at that time. This rate applies until the end of the Contract Year. Interest is earned daily and will be compounded annually at the end of each Contract Year. SEPARATE ACCOUNT SEPARATE ACCOUNT ASSETS Our Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940 (as amended). Assets we put into our Separate Account to support this contract are not part of our general account. Income, gains and losses of our Separate Account, whether or not realized, are credited to or charged against our Separate Account assets, without regard to our other income, gains or losses. The assets of the Separate Account will be available to cover the liabilities of our general account only to the extent that the assets of the Separate Account exceed the liabilities of the Separate Account arising under the contracts supported by the Separate Account. SEPARATE ACCOUNT DIVISIONS Our Separate Account is comprised of the Divisions shown on the current Data Page. Each Division invests in a Mutual Fund with a different investment objective. Income, gains and losses, whether or not realized, from each Division's assets are credited to or charged against that Division without regard to income, gains or losses of other Divisions or our other income, gains or losses. We reserve the right to add other Divisions, eliminate or combine existing Divisions, or transfer assets in one Division to another. If shares of a Mutual Fund are no longer available for investment, or in our judgment investment in a Mutual Fund becomes inappropriate considering the purposes of the Separate Account, we may eliminate the shares of a Mutual Fund and substitute shares of another. Substitution may be made with respect to both existing investments and the investment of future Purchase Payments. However, no such changes will be made without notifying you and getting any required approval from the appropriate state and/or federal regulatory authorities. UNITS AND UNIT VALUE Purchase Payments allocated or amounts transferred to a Separate Account Division are credited as Units by dividing the amount by the Division's Unit value for the Valuation Period during which the amount is allocated or transferred. Units are cancelled when amounts are surrendered or transferred from a Division. The Unit value for each Division was arbitrarily set at $10 as of the date the Division first purchased Mutual Fund shares. Thereafter, the Unit value on any Valuation Date is calculated by multiplying the Unit value on the previous Valuation Date by that Division's Net Investment Factor for the current Valuation Period. The number of Units will not change due to a subsequent change in Unit value. The Unit value for any Valuation Period is the Unit value determined as of the end of the Valuation Period. NET INVESTMENT FACTOR The Net Investment Factor measures Investment performance of each Division and is used to determine changes in Unit value from one Valuation Period to the next. The Net Investment Factor for a Valuation Period is equal to: 1. The quotient obtained by dividing: a. The net asset value of a share of the Division's underlying Mutual Fund shown on the current Data Page as of the end of such Valuation Period, plus the per share amount of any dividend or other distribution made by such Mutual Fund during such Valuation Period, by b. The net asset value of a share of such Mutual Fund as of the end of the immediately preceding Valuation Period; MINUS 2. An administration fee equal to the number of days within such Valuation Period times the Daily Separate Account Administration Charge shown on the current Data Page. We reserve the right to change the Daily Separate Account Administration Charge but it will never exceed 0.15% annually; MINUS 3. A mortality and expense risks charge equal to the number of days within such Valuation Period times the Daily Mortality and Expense Risks Charge shown on the current Data Page. We reserve the right to change the Daily Mortality and Expense Risks Charge but it will never exceed 1.25% annually. We reserve the right to adjust the above formula to provide for any taxes attributable to the operations of this contract or the Separate Account. The Daily Separate Account Administration Charge and Daily Mortality and Expense Risks Charge will be accrued daily and will be deducted from the Separate Account at our discretion. TRANSFERS AND FEES TRANSFERS ALLOWED You may transfer amounts between the Fixed Account and the Separate Account Divisions prior to the Retirement Date and as provided below. To request a transfer, you must provide us Notice. We reserve the right to not accept transfer instructions from someone providing them for multiple contracts. TRANSFERS FROM FIXED ACCOUNT You may transfer amounts from the Fixed Account to a Separate Account Division by making either a scheduled or unscheduled Fixed Account transfer, subject to the following conditions. You must provide us Notice within 30 days following either the Contract Date or any Anniversary. Either unscheduled Fixed Account transfers or scheduled Fixed Account transfers (not both) may occur during the same Contract Year. SF 324 UNSCHEDULED FIXED ACCOUNT TRANSFERS--You may make one unscheduled transfer from the Fixed Account each Contract Year, as follows: 1. The transfer will occur within 1 business day of the date we receive your Notice; and 2. You must specify the dollar amount or percentage to be transferred, and the resulting amount must not exceed 25% of your Fixed Account Value as of the later of the Contract Date or the last Anniversary. However, you may transfer up to 100% of your Fixed Account Value within 30 days after the first and following Anniversaries if: a. Your Fixed Account Value is less than $1,000; or b. The renewal interest rate declared for your Fixed Account Value for the current Contract Year is more than 1 percentage point lower than an average of your total Fixed Account earnings for the preceding Contract Year (in that event, we will notify you). SCHEDULED FIXED ACCOUNT TRANSFERS--You may make scheduled transfers on a monthly basis from the Fixed Account, as follows: 1. The transfer will occur on a date you specify in your Notice (other than the 29th, 30th or 31st of any month); 2. Your Fixed Account Value must equal or exceed the Minimum Transfer Value shown on the current Data Page. We reserve the right to change this amount but it will never exceed $10,000; 3. The monthly amount transferred must equal 2% of your Fixed Account Value as of the later of the Contract Date or the last Anniversary; 4. The transfers will continue until your Fixed Account Value is exhausted or we receive Notice to stop them; and 5. If you stop the transfers, you may not start them again without our prior approval. TRANSFERS FROM SEPARATE ACCOUNT DIVISIONS You may transfer amounts from a Separate Account Division to either the Fixed Account or another Separate Account Division by making either a scheduled or unscheduled Separate Account Division transfer, subject to the following conditions. Transfers to the Fixed Account are allowed only if: 1. You have not transferred any amount from the Fixed Account for at least 6 months; and 2. Your Fixed Account Value immediately after the transfer does not exceed $1,000,000, except with our prior approval. UNSCHEDULED SEPARATE ACCOUNT DIVISION TRANSFERS--You may make unscheduled transfers from a Separate Account Division, as follows: 1. The transfer will occur within 1 business day of the date we receive your Notice; and 2. You must specify the dollar amount or percentage to transfer from each Separate Account Division, and the resulting amount must equal or exceed the lesser of the value of your interest in the Separate Account Division or the Minimum Transaction Amount shown on the current Data Page. SCHEDULED SEPARATE ACCOUNT DIVISION TRANSFERS--You may make scheduled transfers from a Separate Account Division, as follows: 1. The transfers will occur on a date you specify in your Notice (other than the 29th, 30th or 31st of any month); 2. You must specify how often the transfers will occur (annually, semi- annually, quarterly or monthly); 3. You must specify the dollar amount to transfer from each Separate Account Division, and that amount must equal or exceed the lesser of the value of your interest in the Separate Account Division or the Minimum Transaction Amount shown on the current Data Page; 4. The value of each Separate Account Division from which transfers are made must equal or exceed the Minimum Transfer Value shown on the current Data Page; 5. The transfers will continue until your interest in the Division is exhausted or we receive Notice to stop them; and 6. We reserve the right to limit the number of Separate Account Divisions from which transfers will be made at the same time. In no event will it ever be less than 2. ANNUAL FEE The Annual Fee is shown on the current Data Page. The Annual Fee will be reduced, as necessary, so that it never decreases the guaranteed minimum 3% annual interest earnings of any amount in the Fixed Account. The Annual Fee will be deducted on the last day of each Contract Year prior to the Retirement Date. If you surrender this contract in full, the Annual Fee will be deducted at that time. The Annual Fee will be deducted from either your Fixed Account Value or your interest in a Separate Account Division, whichever of them has the largest value on the date it is to be deducted. TRANSACTION FEE The Transaction Fee is shown on the current Data Page. It will be deducted for each unscheduled partial surrender after the first unscheduled partial surrender in each Contract Year. Also, we reserve the right to charge the Transaction Fee for each unscheduled Separate Account Division transfer after the twelfth such transfer in each Contract Year. The Transaction Fee will be deducted from your Fixed Account Value and/or the value of your interest in a Separate Account Division from which the amount is surrendered or transferred, on a pro rata basis. CONTRACT BENEFITS You may surrender this contract, receive retirement income payments or a death benefit will be paid, as provided below. SF 324 We will pay any Separate Account Division surrenders within 7 days after we receive Notice. We will pay any death benefit within 7 days after we receive Notice (including proof) of the Owner's or Annuitant's death. However, we reserve the right to defer surrender or death benefit payments as permitted by the Investment Act of 1940 or other laws in effect at the time payments are to be made. We reserve the right to delay payment of the Fixed Account Value for up to six months after you provide us Notice of a surrender. Also, we reserve the right to require that you send us this contract so we can record any changes. SURRENDER You may surrender this contract on or before the Retirement Date. You may make a full or partial surrender of this contract and receive all or a portion of its Accumulated Value minus any applicable Surrender Charges, Transaction Fees or Annual Fees. To request a surrender, you must provide us Notice. For a partial surrender, you must specify the dollar amount to surrender. The amount will be deducted from your Fixed Account Value and/or your interest in a Separate Account Division according to surrender allocation percentages you provide us. Percentages may be either zero or any whole number and must total 100%. You may specify surrender allocation percentages with each surrender request by providing us Notice. Otherwise, we will use the default percentages you provide. You may change default percentages at any time by providing us Notice. UNSCHEDULED PARTIAL SURRENDERS--You may make unscheduled partial surrenders, as follows: 1. Each unscheduled partial surrender must equal or exceed the Minimum Transaction Amount shown on the current Data Page; and 2. The Accumulated Value after an unscheduled partial surrender must equal or exceed the Minimum Surrender Value shown on the current Data Page. We reserve the right to change this amount but it will never exceed $10,000. SCHEDULED PARTIAL SURRENDERS--You may make scheduled Partial surrenders, as follows: 1. The surrenders will occur on a date you specify in your Notice (other than the 29th, 30th or 31st of any month); 2. You must specify how often scheduled partial surrenders will occur (annually, semi-annually, quarterly or monthly); 3. Your Accumulated Value must equal or exceed the Minimum Surrender Value shown on the current Data Page; and 4. The surrenders will continue until the Accumulated Value is exhausted or we receive Notice to stop them. SURRENDER CHARGE--A Surrender Charge, as determined below, may be deducted if you request a full or partial surrender on or prior to the Retirement Date. For a full surrender, any Surrender Charge will be deducted from your Accumulated Value. For a partial surrender, any Surrender Charge will be deducted from your Fixed Account Value and/or the value of your interest in a Separate Account Division from which the amount is surrendered, on a pro rata basis. The amount of the Surrender Charge is calculated as a percentage of the Purchase Payments surrendered. The Table of Surrender Charges shown on the current Data Page indicates the appropriate percentage, if any, to be applied to the sum of the Purchase Payments made during each of the Contract Years noted in the Table. This percentage is based on the number of completed Contract Years between the Contract Year of the Purchase Payment and the Contract Year of surrender. The Surrender Charge is equal to the total of the sums determined for each Contract Year shown in the Table during which Purchase Payments were made, considering the Free Surrender Privilege sub-provision. For purposes of calculating any Surrender Charge, amounts are considered as surrendered in the following order: 1. Purchase Payments made in Contract Years that are no longer subject to a Surrender Charge; 2. Amounts described in the Free Surrender Privilege sub-provision, first from this contract's earnings, then from the least recent Purchase Payments (first-in, first-out); and 3. Purchase Payments made in Contract Years that are still subject to a Surrender Charge, first-in, first-out. We reserve the right to reduce Surrender Charges for any amounts surrendered from this contract that are attributable to a conversion from existing products issued by Principal Mutual Life Insurance Company and its subsidiaries and as otherwise permitted by the Investment Company Act of 1940 (as amended). FREE SURRENDER PRIVILEGE--No Surrender Charge applies to surrenders, each Contract Year, totalling an amount equal to the greater of: 1. This contract's earnings (your Accumulated Value minus unsurrendered Purchase Payments, as of the surrender date); or 2. 10% of the Purchase Payments made in Contract Years that are still subject to a Surrender Charge, decreased by any partial surrenders made since the last Anniversary. DEATH BENEFIT If you or the Annuitant dies prior to the Retirement Date, we will pay a death benefit. No death benefit is payable under this provision after the Retirement Date. No Surrender Charge applies when we pay a death benefit. The amount of the death benefit equals the greater of: 1. Your Accumulated Value on the date we receive Notice (including proof) of death: 2. The total Purchase Payments minus any partial surrenders as of the date we receive Notice (including proof) of death; or 3. The death benefit that was in effect on any prior Anniversary that is divisible equally by 7, plus any Purchase Payments and minus any partial surrenders made after that Anniversary. If benefit instructions are in effect, the death benefit will be paid according to those instructions. If the Annuitant dies before you, we will pay the death benefit to the Annuitant's beneficiary. If no benefit instructions are in effect, the Annuitant's beneficiary may choose to apply any unpaid death benefit under a Benefit Option. If you die before the Annuitant and your beneficiary is your spouse, we will continue the contract with your surviving spouse as the new Owner or your surviving spouse may choose to: 1. Apply the death benefit under a Benefit Option; or 2. Receive the death benefit as a single payment. Any choice in 1 or 2 above must be made within 60 days after your death. If your beneficiary is a natural person, but not your surviving spouse, the death benefit may be paid as: 1. Fixed income under Benefit Option C for a period of years that does not exceed the life expectancy of the beneficiary; 2. Life income under Benefit Option D with no minimum guaranteed period or a minimum guaranteed period that does not exceed the life expectancy of the beneficiary; or 3. An individual arrangement approved by us under Benefit Option A. If your beneficiary is not a natural person, the death benefit must be paid out within 5 years of your death. We will pay interest on the death benefit from the date we receive Notice (including proof) of death until date of payment or until the death benefit is applied under a Benefit Option. We will pay interest at a rate equal to or greater than 3%. Life expectancy is based on the appropriate life expectancy tables published by the United States Treasury Department, as amended. BENEFIT INSTRUCTIONS--While the Annuitant is alive and before the Retirement Date, you may file benefit instructions for the payment of the death benefit under a Benefit Option. Such benefit instructions, or a change of benefit instructions, must be in a written Notice. A change of beneficiary will revoke any prior benefit instructions. BENEFICIARY--The beneficiary is the person or persons you name in the application to receive benefits payable upon the Annuitant's or your death. You may change your beneficiary designation at any time. You may also change the Annuitant's beneficiary while the Annuitant is alive. Your request must be in writing. No change is effective without our prior approval. Once approved, the change is effective as of the date you signed the request. BENEFICIARY IF YOU ARE THE ANNUITANT--If you are the Annuitant or Joint Annuitant, we will pay any death benefits to your beneficiary. If any beneficiary dies before you, upon your death we will make an equal distribution of that beneficiary's portion of the death benefit to your surviving beneficiaries unless we have approved other written instructions from you. If none of your beneficiaries survives you, we will pay the death benefit to your estate in one sum. BENEFICIARY IF YOU ARE NOT THE ANNUITANT--If you are not the Annuitant, two beneficiary designations are possible: your's and the Annuitant's. Unless you provide otherwise in a written beneficiary designation that we approve, your beneficiary is the Annuitant. The Annuitant's beneficiary receives any benefits payable upon the death of the Annuitant. If any Annuitant's beneficiary dies before the Annuitant, upon the death of the Annuitant, we will make an equal distribution of that beneficiary's portion of the death benefit to any surviving beneficiaries of the Annuitant unless we have approved other written instructions from you. If no beneficiary of the Annuitant survives, we will pay the death benefit to you or your estate in one sum. SIMULTANEOUS DEATH--If you and the Annuitant die and there is not sufficient evidence that the deaths occurred other than at the same time, the death benefit will be paid as if the Annuitant outlived you. RETIREMENT INCOME On the Retirement Date we will apply your Accumulated Value under a Benefit Option and make retirement income payments to you if the Annuitant is living and the contract is in force on that date. No Surrender Charge will be deducted from your Accumulated Value when it is applied under a Benefit Option. If you do not choose a different Benefit Option, we will apply your Accumulated Value under Benefit Option D (Life Income with a 10 year guarantee), or Benefit Option E (Joint and 100% Survivor Life Income with a 10 year guarantee) with Joint Annuitants, to determine the retirement income benefit. TERMINATION CONTRACT TERMINATION This contract will continue until one of the following events occurs: 1. Your Accumulated Value is applied under a Benefit Option; 2. You surrender your contract in full; 3. The Annuitant's death occurs; or 4. Your death occurs (unless your spouse elects to continue the contract pursuant to the Death Benefit provision). We reserve the right to terminate this contract by paying you the Accumulated Value, in one sum, if you pay no Purchase Payments for two or more consecutive Contract Years and both of the following are less than $2,000: 1. Your total Purchase Payments for this policy, less any partial surrenders and Surrender Charges; and 2. Your Accumulated Value. We will notify you and give you 60 days to increase the Accumulated Value to $2,000 before we exercise this right. BENEFIT OPTIONS You may choose to use one of the following Benefit Options, or any other Benefit Option we make available, on the Retirement Date. The tables shown illustrate guaranteed minimum benefits. The benefits you receive may be greater. Option A. SPECIAL BENEFIT ARRANGEMENT--You may arrange an individually designed Benefit Option with our approval. Any arrangement that will not qualify this contract as an annuity under the United States Internal Revenue Code, as amended, will not be permitted. Option C. FIXED INCOME--We will pay an income of a fixed amount or an income for a fixed period of at least 5 years but not exceeding 30 years. Refer to Option C tables to determine the minimum number of fixed amount payments or the minimum amount of each fixed period payment. On request, we will furnish benefit information not shown in the tables. If you die after annuity payments begin, the remaining payments will be paid to the beneficiary named under your Benefit Option. Option D. LIFE INCOME--We will pay an income during a person's lifetime. A minimum guaranteed period may be used, as shown in the Option D table. Payments will be in an amount we determine, but not less than shown in the table. If you die after annuity payments begin and before the end of the minimum guaranteed period (if applicable), the remaining payments will be paid to the beneficiary named under your Benefit Option. Option E. JOINT AND SURVIVOR LIFE INCOME--We will pay an income during the lifetime of two persons, and continuing until the death of the survivor. This option includes a minimum guaranteed period of 10 years. Payments will be in an amount we determine, but not less than shown in the Option E table. On request, we will furnish minimum income information for age combinations not shown in the table. If both persons die before the end of the minimum guaranteed period, the remaining payments will be paid to the beneficiary named under your Benefit Option. Option F. JOINT AND TWO-THIRDS SURVIVOR LIFE INCOME--We will pay an income during the lifetime of two persons, and two-thirds of the original amount during the remaining lifetime of the survivor. Payments during the time both persons are alive will be in an amount we determine (the "original amount"), but not less than shown in the Option F table. On request, we will furnish minimum income information for age combinations not shown in the table. If one of the persons dies after annuity payments begin, we will continue to pay two-thirds of the original amount to the survivor until that person's death. OPTION C TABLES Minimum Monthly Joint and Survivor Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Amount No. of No. of No. of Applied Income Pymts* Income Pymts* Income Pymts* $10,000 $50 274 $100 114 $175 61 25,000 150 214 250 114 400 67 50,000 250 274 500 114 750 72 100,0 450 321 1,000 114 1,500 72 *Minimum number of months for which full monthly income will be paid. There may be part of a payment made one month after the last one. This partial payment will be the balance, if any, of the amount applied less the payments, all accumulated at interest. Minimum Monthly Income To Be Paid for Number Of Years. First Payment on Effective Date of Supplementary Contract. Amount Number of Years Applied 5 10 15 20 25 30 10,000 179.10 96.10 68.70 55.10 47.10 41.80 25,000 447.75 240.25 171.75 137.75 117.75 104.50 50,000 895.50 480.50 343.50 275.50 235.50 209.00 100,000 1,791.00 961.00 687.00 551.00 471.00 418.00 0 BENEFIT OPTIONS You may choose to use one of the following Benefit Options, or any other Benefit Option we make available, on the Retirement Date. The tables shown illustrate guaranteed minimum benefits. The benefits you receive may be greater. Option A. SPECIAL BENEFIT ARRANGEMENT -- You may arrange an individually designed Benefit Option with our approval. Any arrangement that will not qualify this contract as an annuity under the United States Revenue Code, as amended, will not be permitted. Option C. FIXED INCOME -- We will pay an income of a fixed amount or an income for a fixed period of at least 5 years but not exceeding 30 years. Refer to option C tables to determine the minimum number of fixed amount payments or the minimum amount of each fixed period payment. On request, we will furnish benefit information not shown in the tables. If you die after annuity payments begin, the remaining payments will be paid to the beneficiary names under your Benefit Option. Option D. LIFE INCOME -- We will pay an income during a person's lifetime. A minimum guaranteed period may be used, as shown in the Option D table. Payments will be in an amount we determine, but not less than shown in the table. If you die after annuity payments begin and before the end of the minimum guaranteed period (if applicable), the remaining payments will be paid to the beneficiary named under your Benefit Option. Option E. JOINT AND SURVIVOR LIFE INCOME -- We will pay an income during the lifetime of two person, and continuing until the death of the survivor. This option includes a minimum guaranteed period of 10 years. Payments will be in an amount we determine, but not less than shown in the Option E table. On request, we will furnish minimum income information for age combinations not shown in the table. If both persons die before the end of the minimum guaranteed period, the remaining payments will be paid to the beneficiary named under your Benefit Option. Option F. JOINT AND TWO-THIRDS SURVIVOR LIFE INCOME -- We will pay an income during the lifetime of two persons, and two-thirds of the original amount during the remaining lifetime of the survivor. Payments during the time both persons are alive will be in an amount we determine (the "original amount"), but not less than shown in the Option F table. On request, we will furnish minimum income information for age combinations not shown in the table. If one of the persons dies after annuity payments begin, we will continue to pay two-thirds of the original amount to the survivor until that person's death. OPTION D TABLES Minimum Monthly Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Age Minimum Guaranteed Period Last Birthday Male Payee Inst.* None 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. Rfd. 55 4.45 4.44 4.40 4.33 4.23 4.24 56 4.54 4.53 4.48 4.41 4.29 4.31 57 4.64 4.62 4.57 4.48 4.35 4.38 58 4.74 4.72 4.66 4.56 4.42 4.46 59 4.84 4.82 4.76 4.65 4.48 4.54 60 4.96 4.94 4.87 4.74 4.55 4.63 61 5.08 5.06 4.97 4.83 4.61 4.72 62 5.21 5.18 5.09 4.92 4.68 4.82 63 5.35 5.32 5.21 5.01 4.75 4.92 64 5.50 5.46 5.33 5.11 4.81 5.02 65 5.66 5.62 5.47 5.21 4.87 5.13 66 5.83 5.78 5.60 5.31 4.94 5.25 67 6.01 5.95 5.75 5.41 4.99 5.37 68 6.21 6.13 5.89 5.52 5.05 5.50 69 6.42 6.33 6.05 5.62 5.11 5.64 70 6.64 6.53 6.21 5.72 5.16 5.78 71 6.87 6.74 6.37 5.82 5.20 5.93 72 7.12 6.97 6.54 5.91 5.25 6.09 73 7.39 7.21 6.71 6.01 5.29 6.25 74 7.67 7.46 6.88 6.10 5.32 6.42 75 7.98 7.73 7.05 6.18 5.35 6.60 *Income payments continue until the total received equals the amount applied under the option. OPTION D TABLES Minimum Monthly Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Age Minimum Guaranteed Period Last Birthday Female Payee Inst.* None 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. Rfd. 55 4.05 4.05 4.03 4.00 3.95 3.94 56 4.12 4.12 4.10 4.06 4.01 4.00 57 4.20 4.19 4.17 4.13 4.07 4.06 58 4.28 4.27 4.25 4.20 4.13 4.13 59 4.36 4.35 4.33 4.28 4.20 4.20 60 4.45 4.44 4.41 4.35 4.26 4.27 61 4.55 4.54 4.50 4.43 4.33 4.35 62 4.65 4.64 4.60 4.52 4.40 4.43 63 4.76 4.74 4.70 4.61 4.47 4.52 64 4.87 4.86 4.80 4.70 4.54 4.61 65 5.00 4.98 4.91 4.80 4.61 4.70 66 5.13 5.11 5.03 4.89 4.69 4.81 67 5.27 5.24 5.16 5.00 4.76 4.91 68 5.42 5.39 5.29 5.10 4.83 5.02 69 5.58 5.55 5.43 5.21 4.90 5.14 70 5.76 5.71 5.57 5.32 4.97 5.27 71 5.94 5.89 5.73 5.43 5.03 5.40 72 6.15 6.09 5.89 5.55 5.09 5.54 73 6.37 6.30 6.06 5.66 5.15 5.69 74 6.60 6.52 6.24 5.77 5.20 5.85 75 6.86 6.75 6.42 5.88 5.25 6.02 *Income payments continue until the total received equals the amount applied under the option. OPTION E TABLE Minimum Monthly Joint and Survivor Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Age Last Birthday Age Last Birthday of Female Payee of Male Payee 55 60 62 65 70 60 3.82 4.04 4.12 4.25 4.45 62 3.85 4.09 4.19 4.33 4.57 65 3.90 4.16 4.28 4.45 4.74 70 3.95 4.26 4.40 4.62 5.01 75 3.99 4.33 4.48 4.75 5.24 OPTION F TABLE Minimum Monthly Joint and Two-Thirds Survivor Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Age Last Birthday Age Last Birthday of Female Payee of Male Payee 55 60 62 65 70 60 4.22 4.45 4.55 4.71 5.00 62 4.30 4.54 4.65 4.82 5.14 65 4.41 4.68 4.80 4.99 5.35 70 4.61 4.92 5.06 5.29 5.74 75 4.82 5.17 5.33 5.60 6.14 INTEREST Interest on amounts applied under a Benefit Option is at a rate we set, but never less than 3% a year. All values in the tables shown are based on the 1983 Table A with 3% interest compounded annually. The benefit you receive may be greater. CONDITIONS When a Benefit Option is chosen, the following conditions will apply: 1. This contract must be exchanged for a supplementary contract providing the Benefit Option you choose: 2. No changes may be made as to the Benefit Option once the supplementary contract is issued; 3. Until proceeds are applied under a Benefit Option, any death benefit will be held in a new account at an interest rate determined by us which will not be less than 3% per year; 4. We reserve the right to pay the Accumulated Value in a single sum if it does not exceed $5,000, or if the amount to be applied under a Benefit Option would result in periodic payments that do not exceed other minimum requirements that are in effect at that time for Annuitants in the same class; 5. Benefit Options are restricted if the recipient of benefits is not a natural person; 6. One of the natural persons on whose life payment under Options D, E, and F and based must be the Annuitant or a beneficiary. The size of payments depends on the age and sex of the person or persons on whose life payments are based, determined as of the date this contract is exchanged for a supplementary contract. We reserve the right to require evidence of age, sex, and continuing survival; and 7. At the time payments begin, any benefits will be at least that which would be provided by any single premium immediate annuity contract then being offered by us for the same class of Annuitants. GENERAL INFORMATION THE CONTRACT This contract, any attached application, or amendments to it, any attached riders or endorsements, and the current Data Pages make up the entire contract. Any statements made in an application will be considered representations and not warranties. ALTERATIONS This contract may be altered by mutual agreement unless otherwise provided. Only our corporate officers may agree to modify or waive anything provided. Only our corporate officers may agree to modify or waive anything in or approve amendments to your contract. Any alterations must be in writing and signed by one of our corporate officers. No one else, including the agent, may change this contract or waive any provisions. INCONTESTABILITY This contract will be incontestable after is has been in force for 2 years from the Contract Date. The time limit in this Incontestability provision does not apply to fraud. AGE AND SEX If the Annuitant's age or sex is not correctly shown on the current Data Page, we will adjust the monthly income payable under your contract. The age shown should be the Annuitant's age on the Contract Date. Any adjustment will be based on the amount of monthly income that would have been purchased at the correct age and sex. PARTICIPATING Your contract is eligible to share in our divisible surplus. We will determine its share and credit it as a dividend at the end of each Contract Year. We do not expect any dividends will be paid under this contract. Dividends, if any, will be paid in cash. OWNERSHIP The Owner or Joint Owners are named on the current Date Page. Ownership may be changed as provided below. As Owner or Joint Owners, you may exercise every right and privilege provided by this contract. These rights include the right to receive income payments or to name a payee to receive these payments. The exercise of your rights is subject to the rights of any irrevocable beneficiary. Your rights and privileges end at the Annuitant's death. If Joint Owners are named, both must consent to any exercise of these rights. CHANGE OF OWNER You may change your ownership designation at any time. Your request must be in writing. No change is effective without our prior approval. Once approved, the change is effective as of the date you signed the request. We reserve the right to require that you send us this contract so we can record the change. You may change the Retirement Date any time before a supplementary contract which provides a Benefit Option is issued. The new date must be any Anniversary on or before the Maximum Retirement Date shown on the current Data Page. Your request must be in writing and have our prior approval. We reserve the right to require that you send us this contract so we can record the change. ASSIGNMENT You may assign your contract as collateral for a loan. The assignment must be in writing and filed in our home office. We assume no responsibility for any assignment's validity. An assignment as collateral does not change the Owner, but the rights of beneficiaries, whenever named, become subordinate to those of the assignee. Any amount paid an assignee will be treated as a partial surrender and will be paid in one sum. STATEMENTS OF VALUE We will mail you statements of your current Accumulated Value at least once each year until your contract is applied under a Benefit Option or surrendered in full. This will include current statements of the number of Units credited to a Separate Account Division and the dollar value of a Unit. We will mail the statements to your last post office address known to us. ENDORSEMENTS FLEXIBLE VARIABLE ANNUITY CONTRACT. Income payable starting on Retirement Date, or death benefit if Annuitant or Owner dies before Retirement Date. Benefits based on the performance of the Separate Account are variable and not guaranteed as to dollar amount. PARTICIPATING. (Logo) Principal Financial Group SF 568 SAMPLE PURCHASE PAYMENT CREDIT RIDER This rider is part of your contract. All definitions, provisions, and exceptions of the contract apply to this rider unless changed by this rider. In the case of a conflict with any provision in the contract, the provisions of this rider will control. This rider must be elected prior to the Contract Date and is effective on the Contract Date. This rider cannot be terminated by you unless the contract terminates. The charge for this rider is shown on the current Data Page. PURCHASE PAYMENT CREDIT During the first Contract Year, on the date each Purchase Payment is applied to the contract, we will credit the Accumulated Value with an amount equal to 5 percent of the amount of the Purchase Payment. For example, if the Purchase Payment applied to the contract is $10,000, the Purchase Payment credit amount will be .05 x $10,000, or $500. If a Purchase Payment is applied to the contract after the first contract Anniversary, no credit will be given. Purchase Payment credits are allocated to the Fixed Account and/or Separate Account Divisions in the same proportion as the Purchase Payments are allocated. If the initial Purchase Payment is allocated to the Money Market Division under the Purchase Payment Allocations provision of the contract, the credit for that Purchase Payment will also be allocated to the Money Market Division. If the contract terminates under the Examination Offer described on the contract cover, all Purchase Payment credits applied through the termination date will be subtracted from the amount returned to you. EX-99.4B 5 0005.txt FORM OF VARIABLE ANNUITY CONTRACT This contract is a legal contract between you, as Owner, and us, Principal Mutual Life Insurance Company. Your contract is issued based on the information you provided and the initial Purchase Payment shown on the initial Data Page. We will pay you the benefits of this contract in accordance with its provisions. 10-DAY EXAMINATION OFFER. IT IS IMPORTANT TO US THAT YOU ARE SATISFIED WITH THIS CONTRACT. IF YOU ARE NOT SATISFIED, YOU MAY RETURN YOUR CONTRACT TO EITHER YOUR AGENT OR OUR HOME OFFICE WITHIN 10 DAYS OF ITS RECEIPT AND YOUR CONTRACT WILL BE CONSIDERED VOID FROM ITS INCEPTION. WE WILL REFUND YOUR PURCHASE PAYMENT IN STATES WHERE REQUIRED. IN STATES WHERE PERMITTED, WE WILL REFUND THE TOTAL ACCUMULATED VALUE, WHICH MAY BE MORE OR LESS THAN YOUR PURCHASE PAYMENT. PLEASE READ YOUR CONTRACT CAREFULLY SO YOU MAY BETTER USE ITS MANY BENEFITS. FLEXIBLE VARIABLE ANNUITY CONTRACT. Income payable starting on Retirement Date, or death benefit if Annuitant or Owner dies before Retirement Date. Benefits based on the performance of the Separate Account are variable and not guaranteed as to dollar amount. PARTICIPATING. A mutual company serving contractowners and beneficiaries since 1879. Signed for Principal Mutual Life Insurance Company at Des Moines, Iowa on the Contract Date. OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Doe ISSUE AGE-SEX 35 JOINT ANNUITANT Jane Doe ISSUE AGE-SEX 35 CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2000 RETIREMENT DATE January 1, 2035 SF 325 INDEX Accumulated Value............... 6 Incontestability..................20 Age (Annuitant).................20 Ownership.........................20 Annual Fee......................11 Participating.....................20 Annuitant....................... 4 Purchase Payments................. 5 Assignment......................21 Retirement Date (Change)..........15 Beneficiary.....................14 Retirement Income.................15 Benefit Options.................15 Separate Account.................. 8 Contract........................20 Separate Account Value............ 7 Contract Benefits ..............11 Surrender ........................12 Death Benefit ..................13 Surrender Charge .................12 Definitions .................... 4 Termination ......................15 Fixed Account .................. 8 Transaction Fee ..................11 Fixed Account Value ............ 6 Transfers ........................ 9 A copy of any application and addition benefits provided by rider follow the last page of this contract. - ------------------------------------------------------------------------------- DATA PAGE OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Doe ISSUE AGE-SEX 35 JOINT ANNUITANT Jane Doe ISSUE AGE-SEX 35 CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2001 RETIREMENT DATE January 1, 2049 FORM NO. CONTRACT AND RIDERS SF325 Flexible Variable Annuity SF321 Change of Annuitant Rider SF313 Waiver of Surrender Charge Rider SF568 Purchase Paymnet Credit Rider The initial Purchase Payment you paid is $2,500.00 The Fixed Account's initial Purchase Payment interest rate is 4.79% Annual Fee: Lesser of $30 or 2.00% of Accumulated Value Transaction Fee: $00.00 SEPARATE ACCOUNT CHARGES THROUGH THE 8TH CONTRACT ANNIVERSARY Daily Separate Account Administration Charge:$.000000000(0.00% annually) Daily Mortality and Expense Risks Charge: $.000034246(1.25% annually) Daily Purchase Payment Credit Rider Charge: $.000016438(0.60% annually) TOTAL: $.000050684(1.85% annually) SEPARATE ACCOUNT CHARGES AFTER THE 8TH CONTRACT ANNIVERSARY Daily Separate Account Administration Charge:$.000000000(0.00% annually) Daily Mortality and Expense Risks Charge: $.000034246(1.25% annually) Daily Purchase Payment Credit Rider Charge: $.000000000(0.00% annually) TOTAL: $.000034246(1.25% annually) CONTRACT LIMITS Minimum Transaction Amount: $100.00 Minimum Surrender Value: $5,000.00 Minimum Transfer Value: Fixed Account $5,000.00 Separate Account $0.00 Maximum Retirement Date: January 1, 2051 (Date your Accumulated Value must be applied under a Benefit Option.) DATA PAGE OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Doe ISSUE AGE-SEX 35 JOINT ANNUITANT Jane Doe ISSUE AGE-SEX 35 CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2001 RETIREMENT DATE January 1, 2049 INITIAL PURCHASE PAYMENT ALLOCATION PERCENTAGES FIXED ACCOUNT 10% SEPARATE ACCOUNT DIVISIONS: 10% SF 325 PPCR (Continued on Page 3-2) Aggressive Growth 10% AIM V. I. Growth 00% AIM V. I. Growth and Income 00% AIM V. I. Value 00% Asset Allocation 00% Balanced 20% Bond 20% Capital Value 00% Fidelity VIP Growth 00% Fidelity VIP II Contrafund 00% Government Securities 00% Growth 20% International 00% International Emerging Markets 00% International SmallCap 00% Janus Aspen Aggressive Growth 00% LargeCap Growth 00% LargeCap Growth Equity 00% LargeCap Stock Index 00% MicroCap 00% MidCap 00% MidCap Growth 00% MidCap Growth Equity 00% Money Market 00% Real Estate 00% SmallCap 00% SmallCap Growth 00% SmallCap Value 00% Utilities 00% ___ TOTAL 100% DATA PAGE OWNER John Doe JOINT OWNER Jane Doe ANNUITANT John Doe ISSUE AGE-SEX 35 JOINT ANNUITANT Jane Doe ISSUE AGE-SEX 35 CONTRACT NUMBER Sample CONTRACT Flexible Variable Annuity CONTRACT DATE January 1, 2000 RETIREMENT DATE January 1, 2035 TABLE OF SURRENDER CHARGES NUMBER OF COMPLETED CONTRACT YEARS SURRENDER CHARGE APPLIED TO SINCE PURCHASE PAYMENT WAS MADE ALL PURCHASE PAYMENTS MADE IN THAT CONTRACT YEAR 0 (Year of Purchase Payment) 8% 1 8% 2 8% 3 8% 4 7% 5 6% 6 5% 7 4% 8 3% 9 and later 0% DEFINITIONS ACCUMULATED VALUE--means the value described in the Accumulated Value provision of this contract. ANNIVERSARY--means the same date and month of each year following the Contract Date shown on the current Data Page. ANNUAL FEE--means the fee described in the Annual Fee provision of this contract. ANNUITANT--means the person, including any Joint Annuitant, on whose life the benefit payments are based. This person may or may not be the Owner. BENEFIT OPTION--means the options described in the Benefit Options section of this contract. CONTRACT DATE--means the date shown on the current Data Page. CONTRACT YEAR--means the one year period beginning on the Contract Date and ending one day before the Anniversary, and any subsequent one year period beginning on an Anniversary. EXAMPLE: If the Contract Date is June 5, 2000, the first Contract Year ends on June 4, 2001, and the first Anniversary falls on June 5, 2001. The second Contract Year ends on June 4, 2002, and the second Anniversary falls on June 5, 2002, etc. DIVISION--means a part of the Separate Account to which Purchase Payments may be allocated or amounts transferred. FIXED ACCOUNT--means an account to which Purchase Payments may be allocated or amounts transferred, which earns guaranteed interest. FIXED ACCOUNT VALUE--means the amount described in the Fixed Account Value provision of this contract. JOINT ANNUITANT--means an additional Annuitant. The Joint Annuitants must be husband and wife, and must be named as Owner and Joint Owner. In this contract, any reference to the Annuitant's death means the death of the last surviving Annuitant. JOINT OWNER--means an Owner who has an undivided interest with the right of survivorship in this contract with another Owner. The Joint Owners must be husband and wife, and must be named as Annuitant and Joint Annuitant. In this contract, any reference to the Owner's death means the death of the last surviving Owner. MUTUAL FUND--means a registered open-end investment company in which a Division invests. NET INVESTMENT FACTOR--means the investment performance measure described in the Net Investment Factor provision of this contract. NOTICE--means any form of communication providing the information we need, either in writing or another manner that we approve in advance and receive in our home office. OWNER--means the person, including any Joint Owner, who owns all rights and privileges of this contract. If the Owner is not a natural person, the Owner must be an entity with its own taxpayer identification number. PURCHASE PAYMENT--means any amount you pay us under this contract as consideration for the benefits it provides, reduced by the amount we may deduct to pay any required premium taxes. RETIREMENT DATE--means the date your Accumulated Value is applied under a Benefit Option to make retirement income payments. SEPARATE ACCOUNT--means Principal Mutual Life Insurance Company Separate Account B, a registered unit investment trust with Divisions and segregated assets, to which Purchase Payments may be allocated under this contract and others we issue. SEPARATE ACCOUNT VALUE--means the amount described in the Separate Account Value provision of this contract. SURRENDER CHARGE--means the charge described in the Surrender Charge sub- provision of this contract. TRANSACTION FEE--means the fee described in the Transaction Fee provision of this contract. UNIT--means the accounting measure used to calculate the Separate Account Value. VALUATION DATE--means the date the net asset value of a Mutual Fund is determined. VALUATION PERIOD--means the period between when the net asset value of a Mutual Fund is determined on one Valuation Date and when such value is determined on the next following Valuation Date. WE, OUR, US--means Principal Mutual Life Insurance Company. YOU, YOUR--means the Owner of this contract, including any Joint Owner. PURCHASE PAYMENTS The initial Purchase Payment is due on the Contract Date and is shown on the initial Data Page. Subsequent Purchase Payments must be sent to the home office address we provide to you either with your annual report or in another manner. You may make Purchase Payments at any time and in any amount while the contract is in force and before you choose a Benefit Option, subject to the following conditions. PURCHASE PAYMENT LIMITS The total Purchase Payments you make during the lifetime of this contract may not exceed $1,000,000, except with our prior approval. Each Purchase Payment must equal or exceed the Minimum Transaction Amount shown on the current Data Page. We reserve the right to change this amount but it will never exceed $1,000. You may allocate Purchase Payments as additions to the Fixed Account and/or any of theOSeparate Account Divisions shown on the current Data Page. However, allocations to the Fixed Account are not allowed if the Fixed Account Value immediately after the allocation exceeds $1,000,000, except with our prior approval. Also, we reserve the right to allocate the initial Purchase Payment entirely to the Money Market Division for the first 15 days after the Contract Date. Allocations to the Fixed Account and/or each of the Separate Account Divisions must be made as a percentage of each Purchase Payment. Percentages may be either zero or any whole number and must total 100%. You may specify these allocations with each Purchase Payment by providing us Notice. Otherwise, we will allocate each Purchase Payment in the same way you allocated the initial Purchase Payment (as shown on the initial Data Page) unless you change this default allocation. You may change this default allocation at any time by providing us Notice. PREMIUM TAXES We reserve the right to deduct amounts to cover any premium taxes required by TAXES state or local law, when applicable. Any such deduction will be made from either a Purchase Payment when received, or the Accumulated Value when surrendered (in whole or part) or applied under a Benefit Option. CONTRACT VALUES The values and benefits are equal to or greater than those required by any applicable law. We will inform you of their amount on request. ACCUMULATED VALUE Your contract values are calculated based on your Accumulated Value as stated below. Your Accumulated Value at any time is equal to: 1. Your Fixed Account Value; PLUS 2. Your Separate Account Value. FIXED ACCOUNT VALUE Your Fixed Account Value at any time is equal to: 1. Purchase Payments you allocate to the Fixed Account; PLUS 2. Any transfers to the Fixed Account from your interest in a Separate Account Division; PLUS 3. Interest credited; MINUS 4. Any transfers to your interest in a Separate Account Division; MINUS 5. Any amounts from the Fixed Account that you received due to partial surrenders; MINUS 6. Any Surrender Charges deducted from the Fixed Account due to partial surrenders; MINUS 7. Any Transaction Fees and/or Annual Fees deducted from the Fixed Account. SEPARATE ACCOUNT,VALUE Your Separate Account Value at any time is equal to the sum of the values of your interests in all of the Separate Account Divisions. The value of your interest in each Separate Account Division at any time is equal to: 1. The number of Units credited due to Purchase Payments you allocate to your interest in the Separate Account Division; PLUS 2. The number of Units credited due to any transfers from the Fixed Account or your interest in another Separate Account Division; MINUS 3. The number of Units cancelled due to any transfers to the Fixed Account or your interest in another Separate Account Division; MINUS 4. The number of Units cancelled due to any partial surrenders you made from your interest in the Separate Account Division; MINUS 5. The number of Units cancelled due to any Surrender Charges collected from your interest in the Separate Account Division due to partial surrenders; MINUS 6. The number of Units cancelled due to any Transaction Fees and/or Annual Fees deducted from your interest in the Separate Account Division. This total number of Units is then: MULTIPLIED BY 7. The Unit value of the Separate Account Division at the time of valuation. FIXED ACCOUNT GUARANTEED INTEREST RATES Your Fixed Account Value will earn interest at a guaranteed interest rate. In no event will the guaranteed interest rate be less than 3% compounded annually. INTEREST CREDITING METHOD Each Purchase Payment allocated or amount transferred to the Fixed Account earns interest at the guaranteed rate in effect on the date it is received or transferred. This rate applies to each Purchase Payment or amount transferred until the end of the Contract Year. The interest rate applicable during the first Contract Year to any initial Purchase Payment allocated to the Fixed Account is shown on the initial Data Page. Each Anniversary we will declare a renewal interest rate that is guaranteed and applies to the Fixed Account Value in existence at that time. This rate applies until the end of the Contract Year. Interest is earned daily and will be compounded annually at the end of each Contract Year. SEPARATE ACCOUNT SEPARATE ACCOUNT ASSETS Our Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940 (as amended). Assets we put into our Separate Account to support this contract are not part of our general account. Income, gains and losses of our Separate Account, whether or not realized, are credited to or charged against our Separate Account assets, without regard to our other income, gains or losses. The assets of the Separate Account will be available to cover the liabilities of our general account only to the extent that the assets of the Separate Account exceed the liabilities of the Separate Account arising under the contracts supported by the Separate Account. SEPARATE ACCOUNT DIVISIONS Our Separate Account is comprised of the Divisions shown on the current Data Page. Each Division invests in a Mutual Fund with a different investment objective. Income, gains and losses, whether or not realized, from each Division's assets are credited to or charged against that Division without regard to income, gains or losses of other Divisions or our other income, gains or losses. We reserve the right to add other Divisions, eliminate or combine existing Divisions, or transfer assets in one Division to another. If shares of a Mutual Fund are no longer available for investment, or in our judgment investment in a Mutual Fund becomes inappropriate considering the purposes of the Separate Account, we may eliminate the shares of a Mutual Fund and substitute shares of another. Substitution may be made with respect to both existing investments and the investment of future Purchase Payments. However, no such changes will be made without notifying you and getting any required approval from the appropriate state and/or federal regulatory authorities. UNITS AND UNIT VALUE Purchase Payments allocated or amounts transferred to a Separate Account Division are credited as Units by dividing the amount by the Division's Unit value for the Valuation Period during which the amount is allocated or transferred. Units are cancelled when amounts are surrendered or transferred from a Division. The Unit value for each Division was arbitrarily set at $10 as of the date the Division first purchased Mutual Fund shares. Thereafter, the Unit value on any Valuation Date is calculated by multiplying the Unit value on the previous Valuation Date by that Division's Net Investment Factor for the current Valuation Period. The number of Units will not change due to a subsequent change in Unit value. The Unit value for any Valuation Period is the Unit value determined as of the end of the Valuation Period. NET INVESTMENT FACTOR The Net Investment Factor measures Investment performance of each Division and is used to determine changes in Unit value from one Valuation Period to the next. The Net Investment Factor for a Valuation Period is equal to: 1. The quotient obtained by dividing: a. The net asset value of a share of the Division's underlying Mutual Fund shown on the current Data Page as of the end of such Valuation Period, plus the per share amount of any dividend or other distribution made by such Mutual Fund during such Valuation Period, by b. The net asset value of a share of such Mutual Fund as of the end of the immediately preceding Valuation Period; MINUS 2. An administration fee equal to the number of days within such Valuation Period times the Daily Separate Account Administration Charge shown on the current Data Page. We reserve the right to change the Daily Separate Account Administration Charge but it will never exceed 0.15% annually; MINUS 3. A mortality and expense risks charge equal to the number of days within such Valuation Period times the Daily Mortality and Expense Risks Charge shown on the current Data Page. We reserve the right to change the Daily Mortality and Expense Risks Charge but it will never exceed 1.25% annually. We reserve the right to adjust the above formula to provide for any taxes attributable to the operations of this contract or the Separate Account. The Daily Separate Account Administration Charge and Daily Mortality and Expense Risks Charge will be accrued daily and will be deducted from the Separate Account at our discretion. TRANSFERS AND FEES TRANSFERS ALLOWED You may transfer amounts between the Fixed Account and the Separate Account Divisions prior to the Retirement Date and as provided below. To request a transfer, you must provide us Notice. We reserve the right to not accept transfer instructions from someone providing them for multiple contracts. TRANSFERS FROM FIXED ACCOUNT You may transfer amounts from the Fixed Account to a Separate Account Division by making either a scheduled or unscheduled Fixed Account transfer, subject to the following conditions. You must provide us Notice within 30 days following either the Contract Date or any Anniversary. Either unscheduled Fixed Account transfers or scheduled Fixed Account transfers (not both) may occur during the same Contract Year. UNSCHEDULED FIXED ACCOUNT TRANSFERS--You may make one unscheduled transfer from the Fixed Account each Contract Year, as follows: 1. The transfer will occur within 1 business day of the date we receive your Notice; and 2. You must specify the dollar amount or percentage to be transferred, and the resulting amount must not exceed 25% of your Fixed Account Value as of the later of the Contract Date or the last Anniversary. However, you may transfer up to 100% of your Fixed Account Value within 30 days after the first and following Anniversaries if: a. Your Fixed Account Value is less than $1,000; or b. The renewal interest rate declared for your Fixed Account Value for the current Contract Year is more than 1 percentage point lower than an average of your total Fixed Account earnings for the preceding Contract Year (in that event, we will notify you). SCHEDULED FIXED ACCOUNT TRANSFERS--You may make scheduled transfers on a monthly basis from the Fixed Account, as follows: 1. The transfer will occur on a date you specify in your Notice (other than the 29th, 30th or 31st of any month); 2. Your Fixed Account Value must equal or exceed the Minimum Transfer Value shown on the current Data Page. We reserve the right to change this amount but it will never exceed $10,000; 3. The monthly amount transferred must equal 2% of your Fixed Account Value as of the later of the Contract Date or the last Anniversary; 4. The transfers will continue until your Fixed Account Value is exhausted or we receive Notice to stop them; and 5. If you stop the transfers, you may not start them again without our prior approval. TRANSFERS FROM SEPARATE ACCOUNT DIVISIONS You may transfer amounts from a Separate Account Division to either the Fixed Account or another Separate Account Division by making either a scheduled or unscheduled Separate Account Division transfer, subject to the following conditions. Transfers to the Fixed Account are allowed only if: 1. You have not transferred any amount from the Fixed Account for at least 6 months; and 2. Your Fixed Account Value immediately after the transfer does not exceed $1,000,000, except with our prior approval. UNSCHEDULED SEPARATE ACCOUNT DIVISION TRANSFERS--You may make unscheduled transfers from a Separate Account Division, as follows: 1. The transfer will occur within 1 business day of the date we receive your Notice; and 2. You must specify the dollar amount or percentage to transfer from each Separate Account Division, and the resulting amount must equal or exceed the lesser of the value of your interest in the Separate Account Division or the Minimum Transaction Amount shown on the current Data Page. SCHEDULED SEPARATE ACCOUNT DIVISION TRANSFERS--You may make scheduled transfers from a Separate Account Division, as follows: 1. The transfers will occur on a date you specify in your Notice (other than the 29th, 30th or 31st of any month); 2. You must specify how often the transfers will occur (annually, semi-annually, quarterly or monthly); 3. You must specify the dollar amount to transfer from each Separate Account Division, and that amount must equal or exceed the lesser of the value of your interest in the Separate Account Division or the Minimum Transaction Amount shown on the current Data Page; 4. The value of each Separate Account Division from which transfers are made must equal or exceed the Minimum Transfer Value shown on the current Data Page; 5. The transfers will continue until your interest in the Division is exhausted or we receive Notice to stop them; and 6. We reserve the right to limit the number of Separate Account Divisions from which transfers will be made at the same time. In no event will it ever be less than 2. ANNUAL FEE The Annual Fee is shown on the current Data Page. The Annual Fee will be reduced, as necessary, so that it never decreases the guaranteed minimum 3% annual interest earnings of any amount in the Fixed Account. The Annual Fee will be deducted on the last day of each Contract Year prior to the Retirement Date. If you surrender this contract in full, the Annual Fee will be deducted at that time. The Annual Fee will be deducted from either your Fixed Account Value or your interest in a Separate Account Division, whichever of them has the largest value on the date it is to be deducted. TRANSACTION FEE The Transaction Fee is shown on the current Data Page. It will be deducted for each unscheduled partial surrender after the first unscheduled partial surrender in each Contract Year. Also, we reserve the right to charge the Transaction Fee for each unscheduled Separate Account Division transfer after the twelfth such transfer in each Contract Year. The Transaction Fee will be deducted from your Fixed Account Value and/or the value of your interest in a Separate Account Division from which the amount is surrendered or transferred, on a pro rata basis. CONTRACT BENEFITS You may surrender this contract, receive retirement income payments or a death benefit will be paid, as provided below. We will pay any Separate Account Division surrenders within 7 days after we receive Notice. We will pay any death benefit within 7 days after we receive Notice (including proof) of the Owner's or Annuitant's death. However, we reserve the right to defer surrender or death benefit payments as permitted by the Investment Act of 1940 or other laws in effect at the time payments are to be made. We reserve the right to delay payment of the Fixed Account Value for up to six months after you provide us Notice of a surrender. Also, we reserve the right to require that you send us this contract so we can record any changes. SURRENDER You may surrender this contract on or before the Retirement Date. You may make a full or partial surrender of this contract and receive all or a portion of its Accumulated Value minus any applicable Surrender Charges, Transaction Fees or Annual Fees. To request a surrender, you must provide us Notice. For a partial surrender, you must specify the dollar amount to surrender. The amount will be deducted from your Fixed Account Value and/or your interest in a Separate Account Division according to surrender allocation percentages you provide us. Percentages may be either zero or any whole number and must total 100%. You may specify surrender allocation percentages with each surrender request by providing us Notice. Otherwise, we will use the default percentages you provide. You may change default percentages at any time by providing us Notice. UNSCHEDULED PARTIAL SURRENDERS--You may make unscheduled partial surrenders, as follows: 1. Each unscheduled partial surrender must equal or exceed the Minimum Transaction Amount shown on the current Data Page; and 2. The Accumulated Value after an unscheduled partial surrender must equal or exceed the Minimum Surrender Value shown on the current Data Page. We reserve the right to change this amount but it will never exceed $10,000. SCHEDULED PARTIAL SURRENDERS--You may make scheduled Partial surrenders, as follows: 1. The surrenders will occur on a date you specify in your Notice (other than the 29th, 30th or 31st of any month); 2. You must specify how often scheduled partial surrenders will occur (annually, semi-annually, quarterly or monthly); 3. Your Accumulated Value must equal or exceed the Minimum Surrender Value shown on the current Data Page; and 4. The surrenders will continue until the Accumulated Value is exhausted or we receive Notice to stop them. SURRENDER CHARGE--A Surrender Charge, as determined below, may be deducted if you request a full or partial surrender on or prior to the Retirement Date. For a full surrender, any Surrender Charge will be deducted from your Accumulated Value. For a partial surrender, any Surrender Charge will be deducted from your Fixed Account Value and/or the value of your interest in a Separate Account Division from which the amount is surrendered, on a pro rata basis. The amount of the Surrender Charge is calculated as a percentage of the Purchase Payments surrendered. The Table of Surrender Charges shown on the current Data Page indicates the appropriate percentage, if any, to be applied to the sum of the Purchase Payments made during each of the Contract Years noted in the Table. This percentage is based on the number of completed Contract Years between the Contract Year of the Purchase Payment and the Contract Year of surrender. The Surrender Charge is equal to the total of the sums determined for each Contract Year shown in the Table during which Purchase Payments were made, considering the Free Surrender Privilege sub-provision. For purposes of calculating any Surrender Charge, amounts are considered as surrendered in the following order: 1. Purchase Payments made in Contract Years that are no longer subject to a Surrender Charge; 2. Amounts described in the Free Surrender Privilege sub-provision, first from this contract's earnings, then from the least recent Purchase Payments (first-in, first-out); and 3. Purchase Payments made in Contract Years that are still subject to a Surrender Charge, first-in, first-out. We reserve the right to reduce Surrender Charges for any amounts surrendered from this contract that are attributable to a conversion from existing products issued by Principal Mutual Life Insurance Company and its subsidiaries and as otherwise permitted by the Investment Company Act of 1940 (as amended). FREE SURRENDER PRIVILEGE--No Surrender Charge applies to surrenders, each Contract Year, totalling an amount equal to the greater of: 1. This contract's earnings (your Accumulated Value minus unsurrendered Purchase Payments, as of the surrender date); or 2. 10% of the Purchase Payments made in Contract Years that are still subject to a Surrender Charge, decreased by any partial surrenders made since the last Anniversary. DEATH BENEFIT If you or the Annuitant dies prior to the Retirement Date, we will pay a death benefit. No death benefit is payable under this provision after the Retirement Date. No Surrender Charge applies when we pay a death benefit. The amount of the death benefit equals the greater of: 1. Your Accumulated Value on the date we receive Notice (including proof) of death: 2. The total Purchase Payments minus any partial surrenders as of the date we receive Notice (including proof) of death; or 3. The death benefit that was in effect on any prior Anniversary that is divisible equally by 7, plus any Purchase Payments and minus any partial surrenders made after that Anniversary. If benefit instructions are in effect, the death benefit will be paid according to those instructions. If the Annuitant dies before you, we will pay the death benefit to the Annuitant's beneficiary. If no benefit instructions are in effect, the Annuitant's beneficiary may choose to apply any unpaid death benefit under a Benefit Option. If you die before the Annuitant and your beneficiary is your spouse, we will continue the contract with your surviving spouse as the new Owner or your surviving spouse may choose to: 1. Apply the death benefit under a Benefit Option; or 2. Receive the death benefit as a single payment. Any choice in 1 or 2 above must be made within 60 days after your death. If your beneficiary is a natural person, but not your surviving spouse, the death benefit may be paid as: 1. Fixed income under Benefit Option C for a period of years that does not exceed the life expectancy of the beneficiary; 2. Life income under Benefit Option D with no minimum guaranteed period or a minimum guaranteed period that does not exceed the life expectancy of the beneficiary; or 3. An individual arrangement approved by us under Benefit Option A. If your beneficiary is not a natural person, the death benefit must be paid out within 5 years of your death. We will pay interest on the death benefit from the date we receive Notice (including proof) of death until date of payment or until the death benefit is applied under a Benefit Option. We will pay interest at a rate equal to or greater than 3%. Life expectancy is based on the appropriate life expectancy tables published by the United States Treasury Department, as amended. BENEFIT INSTRUCTIONS--While the Annuitant is alive and before the Retirement Date, you may file benefit instructions for the payment of the death benefit under a Benefit Option. Such benefit instructions, or a change of benefit instructions, must be in a written Notice. A change of beneficiary will revoke any prior benefit instructions. BENEFICIARY--The beneficiary is the person or persons you name in the application to receive benefits payable upon the Annuitant's or your death. You may change your beneficiary designation at any time. You may also change the Annuitant's beneficiary while the Annuitant is alive. Your request must be in writing. No change is effective without our prior approval. Once approved, the change is effective as of the date you signed the request. BENEFICIARY IF YOU ARE THE ANNUITANT--If you are the Annuitant or Joint Annuitant, we will pay any death benefits to your beneficiary. If any beneficiary dies before you, upon your death we will make an equal distribution of that beneficiary's portion of the death benefit to your surviving beneficiaries unless we have approved other written instructions from you. If none of your beneficiaries survives you, we will pay the death benefit to your estate in one sum. BENEFICIARY IF YOU ARE NOT THE ANNUITANT--If you are not the Annuitant, two beneficiary designations are possible: your's and the Annuitant's. Unless you provide otherwise in a written beneficiary designation that we approve, your beneficiary is the Annuitant. The Annuitant's beneficiary receives any benefits payable upon the death of the Annuitant. If any Annuitant's beneficiary dies before the Annuitant, upon the death of the Annuitant, we will make an equal distribution of that beneficiary's portion of the death benefit to any surviving beneficiaries of the Annuitant unless we have approved other written instructions from you. If no beneficiary of the Annuitant survives, we will pay the death benefit to you or your estate in one sum. SIMULTANEOUS DEATH--If you and the Annuitant die and there is not sufficient evidence that the deaths occurred other than at the same time, the death benefit will be paid as if the Annuitant outlived you. RETIREMENT INCOME On the Retirement Date we will apply your Accumulated Value under a Benefit Option and make retirement income payments to you if the Annuitant is living and the contract is in force on that date. No Surrender Charge will be deducted from your Accumulated Value when it is applied under a Benefit Option. If you do not choose a different Benefit Option, we will apply your Accumulated Value under Benefit Option D (Life Income with a 10 year guarantee), or Benefit Option E (Joint and 100% Survivor Life Income with a 10 year guarantee) with Joint Annuitants, to determine the retirement income benefit. TERMINATION CONTRACT TERMINATION This contract will continue until one of the following events occurs: 1. Your Accumulated Value is applied under a Benefit Option; 2. You surrender your contract in full; 3. The Annuitant's death occurs; or 4. Your death occurs (unless your spouse elects to continue the contract pursuant to the Death Benefit provision). We reserve the right to terminate this contract by paying you the Accumulated Value, in one sum, if you pay no Purchase Payments for two or more consecutive Contract Years and both of the following are less than $2,000: 1. Your total Purchase Payments for this policy, less any partial surrenders and Surrender Charges; and 2. Your Accumulated Value. We will notify you and give you 60 days to increase the Accumulated Value to $2,000 before we exercise this right. BENEFIT OPTIONS You may choose to use one of the following Benefit Options, or any other Benefit Option we make available, on the Retirement Date. The tables shown illustrate guaranteed minimum benefits. The benefits you receive may be greater. Option A. SPECIAL BENEFIT ARRANGEMENT--You may arrange an individually designed Benefit Option with our approval. Any arrangement that will not qualify this contract as an annuity under the United States Internal Revenue Code, as amended, will not be permitted. Option C. FIXED INCOME--We will pay an income of a fixed amount or an income for a fixed period of at least 5 years but not exceeding 30 years. Refer to Option C tables to determine the minimum number of fixed amount payments or the minimum amount of each fixed period payment. On request, we will furnish benefit information not shown in the tables. If you die after annuity payments begin, the remaining payments will be paid to the beneficiary named under your Benefit Option. Option D. LIFE INCOME--We will pay an income during a person's lifetime. A minimum guaranteed period may be used, as shown in the Option D table. Payments will be in an amount we determine, but not less than shown in the table. If you die after annuity payments begin and before the end of the minimum guaranteed period (if applicable), the remaining payments will be paid to the beneficiary named under your Benefit Option. Option E. JOINT AND SURVIVOR LIFE INCOME--We will pay an income during the lifetime of two persons, and continuing until the death of the survivor. This option includes a minimum guaranteed period of 10 years. Payments will be in an amount we determine, but not less than shown in the Option E table. On request, we will furnish minimum income information for age combinations not shown in the table. If both persons die before the end of the minimum guaranteed period, the remaining payments will be paid to the beneficiary named under your Benefit Option. Option F. JOINT AND TWO-THIRDS SURVIVOR LIFE INCOME--We will pay an income during the lifetime of two persons, and two-thirds of the original amount during the remaining lifetime of the survivor. Payments during the time both persons are alive will be in an amount we determine (the "original amount"), but not less than shown in the Option F table. On request, we will furnish minimum income information for age combinations not shown in the table. If one of the persons dies after annuity payments begin, we will continue to pay two-thirds of the original amount to the survivor until that person's death. OPTION C TABLES Minimum Number of Months for Which Monthly Income will be Paid. First Payment on Effective Date of Supplementary Contract. Amount No. of No. of No. of Applied Income Pymts* Income Pymts* Income Pymts* $10,000 $50 274 $100 114 $175 61 25,000 150 214 250 114 400 67 50,000 250 274 500 114 750 72 100,000 450 321 1,000 114 1,500 72 *Minimum number of months for which full monthly income will be paid. There may be part of a payment made one month after the last one. This partial payment will be the balance, if any, of the amount applied less the payments, all accumulated at interest. Minimum Monthly Income To Be Paid for Number Of Years. First Payment on Effective Date of Supplementary Contract. Amount Number of Years Applied 5 10 15 20 25 30 $10,000 179.10 96.10 68.70 55.10 47.10 41.80 25,000 447.75 240.25 171.75 137.75 117.75 104.50 50,000 895.50 480.50 343.50 275.50 235.50 209.00 100,000 1,791.00 961.00 687.00 551.00 471.00 418.00 BENEFIT OPTIONS You may choose to use one of the following Benefit Options, or any other Benefit Option we make available, on the Retirement Date. The tables shown illustrate guaranteed minimum benefits. The benefits you receive may be greater. Option A. SPECIAL BENEFIT ARRANGEMENT--You may arrange an individually designed Benefit Option with our approval. Any arrangement that will not qualify this contract as an annuity under the United States Internal Revenue Code, as amended, will not be permitted. Option C. FIXED INCOME--We will pay an income of a fixed amount or an income for a fixed period of at least 5 years but not exceeding 30 years. Refer to Option C tables to determine the minimum number of fixed amount payments or the minimum amount of each fixed period payment. On request, we will furnish benefit information not shown in the tables. If you die after annuity payments begin, the remaining payments will be paid to the beneficiary named under your Benefit Option. Option D. LIFE INCOME--We will pay an income during a person's lifetime. A minimum guaranteed period may be used, as shown in the Option D table. Payments will be in an amount we determine, but not less than shown in the table. If you die after annuity payments begin and before the end of the minimum guaranteed period (if applicable), the remaining payments will be paid to the beneficiary named under your Benefit Option. Option E. JOINT AND SURVIVOR LIFE INCOME--We will pay an income during the lifetime of two persons, and continuing until the death of the survivor. This option includes a minimum guaranteed period of 10 years. Payments will be in an amount we determine, but not less than shown in the Option E table. On request, we will furnish minimum income information for age combinations not shown in the table. If both persons die before the end of the minimum guaranteed period, the remaining payments will be paid to the beneficiary named under your Benefit Option. Option F. JOINT AND TWO-THIRDS SURVIVOR LIFE INCOME--We will pay an income during the lifetime of two persons, and two-thirds of the original amount during the remaining lifetime of the survivor. Payments during the time both persons are alive will be in an amount we determine (the "original amount"), but not less than shown in the Option F table. On request, we will furnish minimum income information for age combinations not shown in the table. If one of the persons dies after annuity payments begin, we will continue to pay two-thirds of the original amount to the survivor until that person's death. OPTION D TABLES Minimum Monthly Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Age Minimum Guaranteed Period Last Birthday of Payee Inst.* None 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. Rfd. 55 4.05 4.05 4.03 4.00 3.95 3.94 56 4.12 4.12 4.10 4.06 4.01 4.00 57 4.20 4.19 4.17 4.13 4.07 4.06 58 4.28 4.27 4.25 4.20 4.13 4.13 59 4.36 4.35 4.33 4.28 4.20 4.20 60 4.45 4.44 4.41 4.35 4.26 4.27 61 4.55 4.54 4.50 4.43 4.33 4.35 62 4.65 4.64 4.60 4.52 4.40 4.43 63 4.76 4.74 4.70 4.61 4.47 4.52 64 4.87 4.86 4.80 4.70 4.54 4.61 65 5.00 4.98 4.91 4.80 4.61 4.70 66 5.13 5.11 5.03 4.89 4.69 4.81 67 5.27 5.24 5.16 5.00 4.76 4.91 68 5.42 5.39 5.29 5.10 4.83 5.02 69 5.58 5.55 5.43 5.21 4.90 5.14 70 5.76 5.71 5.57 5.32 4.97 5.27 71 5.94 5.89 5.73 5.43 5.03 5.40 72 6.15 6.09 5.89 5.55 5.09 5.54 73 6.37 6.30 6.06 5.66 5.15 5.69 74 6.60 6.52 6.24 5.77 5.20 5.85 75 6.86 6.75 6.42 5.88 5.25 6.02 *Income payments continue until the total received equals the amount applied under the option. OPTION E TABLE Minimum Monthly Joint and Survivor Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Age Last Birthday Age Last Birthday of Younger Payee of Older Payee 55 60 62 65 70 60 3.75 3.91 62 3.79 3.98 4.05 65 3.84 4.07 4.16 4.29 70 3.91 4.19 4.31 4.50 4.81 75 3.96 4.29 4.43 4.67 5.09 OPTION F TABLE Minimum Monthly Joint and Two-Thirds Survivor Life Income for Each $1,000 Applied. First Payment on Effective Date of Supplementary Contract. Age Last Birthday Age Last Birthday of Younger Payee of Older Payee 55 60 62 65 70 60 4.06 4.26 62 4.13 4.34 4.43 65 4.24 4.47 4.58 4.74 70 4.44 4.71 4.84 5.04 5.41 75 4.65 4.97 5.12 5.36 5.83 INTEREST Interest on amounts applied under a Benefit Option is at a rate we set, but never less than 3% a year. All values in the tables shown are based on the 1983 Table A with 3% interest compounded annually. The benefit you receive may be greater. CONDITIONS When a Benefit Option is chosen, the following conditions will apply: 1. This contract must be exchanged for a supplementary contract providing the Benefit Option you choose: 2. No changes may be made as to the Benefit Option once the supplementary contract is issued; 3. Until proceeds are applied under a Benefit Option, any death benefit will be held in a new account at an interest rate determined by us which will not be less than 3% per year; 4. We reserve the right to pay the Accumulated Value in a single sum if it does not exceed $5,000, or if the amount to be applied under a Benefit Option would result in periodic payments that do not exceed other minimum requirements that are in effect at that time for Annuitants in the same class; 5. Benefit Options are restricted if the recipient of benefits is not a natural person; 6. One of the natural persons on whose life payment under Options D, E, and F and based must be the Annuitant or a beneficiary. The size of payments depends on the age and sex of the person or persons on whose life payments are based, determined as of the date this contract is exchanged for a supplementary contract. We reserve the right to require evidence of age, sex, and continuing survival; and 7. At the time payments begin, any benefits will be at least that which would be provided by any single premium immediate annuity contract then being offered by us for the same class of Annuitants. GENERAL INFORMATION THE CONTRACT This contract, any attached application, or amendments to it, any attached riders or endorsements, and the current Data Pages make up the entire contract. Any statements made in an application will be considered representations and not warranties. ALTERATIONS This contract may be altered by mutual agreement unless otherwise provided. Only our corporate officers may agree to modify or waive anything provided. Only our corporate officers may agree to modify or waive anything in or approve amendments to your contract. Any alterations must be in writing and signed by one of our corporate officers. No one else, including the agent, may change this contract or waive any provisions. INCONTESTABILITY This contract will be incontestable after is has been in force for 2 years from the Contract Date. The time limit in this Incontestability provision does not apply to fraud. AGE If the Annuitant's age or sex is not correctly shown on the current Data Page, we will adjust the monthly income payable under your contract. The age shown should be the Annuitant's age on the Contract Date. Any adjustment will be based on the amount of monthly income that would have been purchased at the correct age and sex. PARTICIPATING Your contract is eligible to share in our divisible surplus. We will determine its share and credit it as a dividend at the end of each Contract Year. We do not expect any dividends will be paid under this contract. Dividends, if any, will be paid in cash. OWNERSHIP The Owner or Joint Owners are named on the current Date Page. Ownership may be changed as provided below. As Owner or Joint Owners, you may exercise every right and privilege provided by this contract. These rights include the right to receive income payments or to name a payee to receive these payments. The exercise of your rights is subject to the rights of any irrevocable beneficiary. Your rights and privileges end at the Annuitant's death. If Joint Owners are named, both must consent to any exercise of these rights. CHANGE OF OWNER You may change your ownership designation at any time. Your request must be in writing. No change is effective without our prior approval. Once approved, the change is effective as of the date you signed the request. We reserve the right to require that you send us this contract so we can record the change. You may change the Retirement Date any time before a supplementary contract which providesNa Benefit Option is issued. The new date must be any Anniversary on or before theEMaximum Retirement Date shown on the current Data Page. Your request must be in writing and have our prior approval. We reserve the right to require that you send us this contract so we can record the change. ASSIGNMENT You may assign your contract as collateral for a loan. The assignment must be in writing and filed in our home office. We assume no responsibility for any assignment's validity. An assignment as collateral does not change the Owner, but the rights of beneficiaries, whenever named, become subordinate to those of the assignee. Any amount paid an assignee will be treated as a partial surrender and will be paid in one sum. STATEMENTS OF VALUE We will mail you statements of your current Accumulated Value at least once each year until your contract is applied under a Benefit Option or surrendered in full. This will include current statements of the number of Units credited to a Separate Account Division and the dollar value of a Unit. We will mail the statements to your last post office address known to us. ENDORSEMENTS FLEXIBLE VARIABLE ANNUITY CONTRACT. Income payable starting on Retirement Date, or death benefit if Annuitant or Owner dies before Retirement Date. Benefits based on the performance of the Separate Account are variable and not guaranteed as to dollar amount. PARTICIPATING. (Logo) Principal Financial Group SF 568 SAMPLE PURCHASE PAYMENT CREDIT RIDER This rider is part of your contract. All definitions, provisions, and exceptions of the contract apply to this rider unless changed by this rider. In the case of a conflict with any provision in the contract, the provisions of this rider will control. This rider must be elected prior to the Contract Date and is effective on the Contract Date. This rider cannot be terminated by you unless the contract terminates. The charge for this rider is shown on the current Data Page. PURCHASE PAYMENT CREDIT During the first Contract Year, on the date each Purchase Payment is applied to the contract, we will credit the Accumulated Value with an amount equal to 5 percent of the amount of the Purchase Payment. For example, if the Purchase Payment applied to the contract is $10,000, the Purchase Payment credit amount will be .05 x $10,000, or $500. If a Purchase Payment is applied to the contract after the first contract Anniversary, no credit will be given. Purchase Payment credits are allocated to the Fixed Account and/or Separate Account Divisions in the same proportion as the Purchase Payments are allocated. If the initial Purchase Payment is allocated to the Money Market Division under the Purchase Payment Allocations provision of the contract, the credit for that Purchase Payment will also be allocated to the Money Market Division. If the contract terminates under the Examination Offer described on the contract cover, all Purchase Payment credits applied through the termination date will be subtracted from the amount returned to you. EX-99.5 6 0006.txt VARIABLE ANNUITY APPLICATION (LOGO) Principal Principal Life Financial Group Insurance Company Mailing Address: Principal Flexible Des Moines, IA 50392-1840 Variable Annuity Application 1. Replacement Do you have any pending or inforce life insurance coverage or annuity contracts? ____ Yes ____No Will this annuity replace or change any pending or inforce life insurance or annuity contracts? ____ Yes ____ No If Yes, give details, listing company name and policy/contract number _______________________________________________________________________________ If Yes, this is a: __ Section 1035 exchange __Direct Transfer of IRA Proceeds 2. Plan Type ___IRA ____ SEP ____Simple IRA ____Pension Trust ____Tax Year ______ ___Rollover IRA ____IRA Transfer ____Non Qualified ___Other___________________ 3. Annuitant Name-First__________ Middle_________ Last___________________ ___Male___Female Birth Date______________ Social Security/Tax ID Number____________ Phone Number (__)_________ Address-Street_________________________ City_____________State______ Zip_______ 4. Owner Name-First__________ Middle_________ Last___________________ ___Male___Female Birth Date______________ Social Security/Tax ID Number____________ Phone Number (__)_________ Address-Street_________________________ City_____________State______ Zip_______ Is Owner a:___Corporation ___Trust ___Partnership ___Custodian Optional 5. Joint Owner/Joint Annuitant Must be Spouses. Not applicable for qualified contracts. ____ Owner and Annuitant are to be Joint Owners and Joint Annuitants. Optional 6. Power of Attorney Enclose supporting documents. ____Yes ____No If Yes ___Durable ___Non Durable ___Durable Postponed Name of Authorized Person given Power of Attorney_______________________________ Phone Number of Authorized Person (____) _______________________________________ 7. Owner's Beneficiary(ies) Primay___________________________ Relationship to Owner ______________________ Contingent ______________________ Relationship to Owner ______________________ 8. Annuitant's Beneficiary(ies) Primary__________________________ Relationship to Annuitant___________________ Contingent_______________________ Relationship to Annuitant___________________ 9. Annual Enhanced Death Benefit Option Annual Enhanced Death Benefit Rider: ____ Yes ____ No If neither box is marked then the Rider will NOT be added. 10. Purchase Payment Information ___Initial Purchase Payment $____________ Make checks payable to Principal Life Insurance Company. Minimum payment of $2500 Non-Qualified, $1000 Qualified, or $100 Pre-authorized Checking Withdrawal or Employer Billing. ___Purchase Payment Credit Rider: ____Yes ____ No If neither box is marked then the Rider will NOT be added. Fixed Dollar Cost Averaging (DCA) Accounts are not available if rider is elected. ___Monthly PreAuthorized Withdrawal-First Payment Drawn on (Date)______________ MM/DD/YYYY (Not available on the 29th, 30th, or 31st of any month) Transit Routing # ________________ Account #________________________________ ___Checking Account ___Savings Account 11. Purchase Payment Allocation Use whole number percentages. Aggressive Growth ___% AIM V.I. Growth ___% AIM V.I. Growth and Income ___% AIM V.I. Value ___% Asset Allocation ___% Balanced ___% Bond ___% Capital Value ___% Fidelity VIP Growth ___% Fidelity VIP II Contrafund ___% Fixed Account ___% Fixed DCA 6 Month* ___% Fixed DCA 12 Month* ___% Government Securities ___% Growth ___% International ___% International Emerging Markets ___% International SmallCap ___% Janus Aspen Aggressive Growth ___% LargeCap Growth ___% LargeCap Growth Equity ___% LargeCap Stock Index ___% MicroCap ___% MidCap ___% MidCap Growth ___% MidCap Growth Equity ___% Money Market ___% Real Estate ___% SmallCap ___% SmallCap Growth ___% SmallCap Value ___% Utilities ___% TOTAL 100% * Must allocate a minimum of $1000 to a Fixed DCA Account and complete Fixed DCA Account Allocation section below. ____Fixed DCA Account Allocation Use whole percentages. Transfer from Fixed DCA 6 Month to: Transfer from Fixed DCA 12 Month to: 1._____________________ ___% 1._____________________ ___% 2._____________________ ___% 2._____________________ ___% 3._____________________ ___% 3._____________________ ___% 4._____________________ ___% 4._____________________ ___% 5._____________________ ___% 5._____________________ ___% 12. Employer Information Complete this section if Payroll Deduct IRA, SEP, Simple IRA, Pesion Trust or in connection with a Non-Qualifed Employer Plan. Name of Company_______________________________Name of Company Contact___________ Address-Street_______________________City____________Zip______Phone Number______ __Employer Billing(List Bill) Annualized Amount: $________ Frequency: __Monthly __Quarterly __Semi-Annually __Annually 13. Rate Lock-In for Fixed Account and/or Fixed DCA Account(s) Applies only to Initial Purchase Payment. If rate lock-in is selected, the lock-in will apply to the Fixed Account and any Fixed DCA Accounts. This rate is guaranteed only if the money is received in our home office within 90 days of the date of this application. ___Lock-in current rate Fixed Account___%for one year Fixed DCA 6 Month ____% Fixed DCA 12 Month ___% If the box is not marked, the rate in effect at the time the money is received will apply 14. Scheduled Transfer (dollar cost averaging) Transfer Start Date (MM/DD/YYYY) _________________ Must be 30 days after the effective date of the contract. Not available on the 29th, 30th, or 31st day of any month. Frequency: ___Quarterly ___Semi-Annually ___Annually Use whole percentages and dollar amounts by the selected Division or Fixed Account. Not available for Fixed DCA Accounts. Investment Option Amount Investment Option Percentage Transferring From Transferring To 1._____________________ $__________ ________________________ _____________% 2._____________________ $__________ ________________________ _____________% 3._____________________ $__________ ________________________ _____________% 4._____________________ $__________ ________________________ _____________% 5._____________________ $__________ ________________________ _____________% __Check here to elect 2% from Fixed Account and indicate "Investment Option Transferring To" in the section above. Leae "Amount" transferring from blank. 15. Automatic Portfolio Rebalancing Automatic Portfolio Rebalancing is NOT available for the Fixed Account and Fixed DCA Accounts. A. Frequency: __Quarterly __Semi-Annually __Annually Effective Date_________ (MM/DD/YYYY) Not available on the 29th, 30th, or 31st of any month. If a date is not specified, the effective date will be the contract anniversary date. B. __One Time Rebalancing. Specified Future Date (MM/DD/YYYY) __________________ Rebalance my contract as follows: __Same as Purchase Payment Allocation (Section 11) __Rebalance as listed below: Investment Option Percentage Investment Option Percentage _____________________ __________% ________________________ _____________% _____________________ __________% ________________________ _____________% _____________________ __________% ________________________ _____________% 16. Telephone and Internet Transfer Authorization I (We) want telephone transaction services as described in the prospectus. ____ Yes ____ No I (We) want Internet transaction services as described in the prospectus. ____ Yes ____ No If these boxes are not checked, telephone and Internet services will apply. Telephone or Internet instructions received from any joint contract owner will be binding on all owners. 17. Scheduled Partial Surrenders (flexible withdrawal option) Accumulated contract value must be $5000 to elect FWO. ___Accumulated Interest Only Fixed Account only, NOT available on Fixed DCA Accounts. ___The minimum required distribution for customers over age 70 1/2. Base minimum required distribution payments on: ___My life expectancy only. ___The joint life expectancy of me and my spouse. Spouse's Birth Date______________________________ Spouses's Social Security #______________________ ___Specified Amount $_______________ Investment Option Percentage 1._____________________ __________% 2._____________________ __________% 3._____________________ __________% 4._____________________ __________% Effective Date (MM/DD/YYYY)___________ Must be 30 days after the effective date of the contract. Not available on the 29th, 30th, or 31st day of any month. The check will be mailed from our Annuity Service Office or funds will be electronically transferred 2 days after the effective date you specify. Frequency: ___Monthly ___Quarterly ___Semi-Annually ___Annually Tax Withholding: ___Yes ___ No Method of Payment: ___Check ___Direct Deposit: Transit Routing#_________ Account #___________ __Checking Account __Savings Account 18. Waiver of Surrender Charge Rider On the contract date, if you or any annuitant are confined in a Health Care Facilitiy, eligible for Social Security disability payments or diagnosed with a terminal illness, you will not be able to use that condition to qualify for benefits under the Waiver of Surrender Charge Rider. This Rider is automatically added to your Contract where available. There is a one-year waiting period before the rider is effective and the rider will not be issued for ages 86 and over. 19. Fraud Notices Arkansas: Any person who knowingly and with intent to defraud any insurance company or other person submits a statement of claim or any application form containing any materially false information or conceals for the purpose of misleading information, concerning any fact material thereto commits a fraudulent insurance act which is a crime. Such actions may be considered felonies and subject to criminal and civil penalties, including imprisonment and fines. In New York, civil penalties cannot exceed five thousand dollars and the state value of the claim for each such violation. Colorado: It is unlawful to knowingly provide false, incomplete, or misleading facts or information to an insurance company for the purpose of defrauding or attempting to defraud the company. Penalties may include imprisonment, fines, denial of insurance, and civil damages. Any insurance company or agent of an insurance company who knowingly provides false, incomplete, or misleading facts or information to a contract owner or claimant for the purpose of defrauding or attempting to defraud the contract owner or claimant with regard to a settlement or award payable from insurance proceeds shall be reported to the Colorado Division of Insurance within the Department of Regulatory Agencies. District of Columbia/Virginia: WARNING: IT IS A CRIME TO PROVIDE FALSE, MISLEADING, OR INCOMPLETE INFORMATION TO AN INSURANCE COMPANY FOR THE PURPOSE OF DEFRAUDING THE COMPANY OR ANY OTHER PERSON. PENALTIES INCLUDE IMPRISONMENT AND/OR FINES AND DENIAL OF INSURANCE BENEFITS. Kentucky/Maine: Any person, who knowingly and with intent to defraud any insurance company or other person, files an application for insurance containing any materially false information or conceals for the purpose of misleading information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime. Louisiana: Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison. New Jersey: Any person who includes any false or misleading information on an application for an insurance policy is subject to criminal and civil penalties. New Mexico: Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to civil fines and criminal penalties. Ohio: Any person who, with intent to defraud or knowing that he is facilitating a fraud against an insurer, submits an application or files a claim containing a false or deceptive statement is guilty of insurance fraud. 20. Signature and Tax Certification I have read this application and have had the opportunity to read the prospectus and agree to all its terms. In addition, I authorize the instructions in this application. I have been given the opportunity to ask questions regarding this investment, and they have been answered to my satisfaction. All of the statements in this application are true and complete to the best of my knowledge and are the basis of any annuity issued. I certify under penalty of perjury (Check the appropriate response): ___ That the Social Security number or taxpayer identification number show is correct and that the IRS has never notified me that I am subject to backup withholding, or has notified me that I am no longer subject to backup withholding. The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. ___ I have not been issued a taxpayer identification number but have applied for such number, or intend to apply for such number in the near future. I understand that if I do not provide a correct taxpayer identification number to Principal Life Insurance Company within 60 days from the date of this certification, backup withholding as described in the prospectus will commence. ___ I am subject to backup withholding. Benefits based on the performance of the separate account are variable and not guaranteed as to dollar amount. Proposed Annuitant's Signature Date (MM/DD/YYYY) Signed at City, State ______________________________ _________________ _____________________ Proposed Owner's Signature Date (MM/DD/YYYY) Signed at City, State (If other than Annuitant) ______________________________ _________________ _____________________ If the Annuitant is also the Joint Owner, the above Proposed Annuitant's signature also represents his or her signature as Joint Owner. ___ Check here to request a copy of the Statement of Additional Information for this contract. Registered Representative's Signature Date MM/DD/YYYY _______________________________________________________________________________ Print Registered Representative's Name Phone Number ( ) _____________________________________________________________ ________________ Home Office Use Only Princor Financial Services Corporation Review (Home Office) Date (MM/DD/YYYY) _______________________________________________________________________________ (LOGO) Principal Principal Life Financial Group Insurance Company Mailing Address: Des Moines, IA 50392-1840 Marketer's Report For Proper Credit This Page Must Be Completed - -------------------------------------------------------------------------------- Agency Office Name and Office Number Group Office Name and Office Number - ------------------------------------------------------------------ - -------------------------------------------------------------------------------- Registered Representative Rep Tax ID Number Rep Detail Code Credit % - ------------------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Group Rep Name Group Rep Code - ------------------------------------------------------------------ - -------------------------------------------------------------------------------- To be Completed by Selling Firm (A selling agreement must be in place if not sold through Princor) - -------------------------------------------------------------------------------- Broker/Dealer's Name - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Broker/Dealer Street Address City State ZIP - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Asset Based Compensation - -------------------------------------------------------------------------------- If this product is being sold through an outside broker dealer, a separate form (DD 1372) will need to be completed. For questions on these commission options, please refer to your commission schedule. ____Option A ____Option B ____Option C o Will be reduced for ages 76-85 and / or premiums over $2 million. o Default option: If no commission option is selected, or if more than one option is selected, the default commission option shall be Option A. o Split Commissions: If there are multiple selling representatives, they must all choose the same commission option. o Option B and C are not available for Internal 1035 Exchanges or Direct Transfers when reduced commissions are paid. Replacement - -------------------------------------------------------------------------------- ALL QUESTIONS MUST BE ANSWERED BY THE REPRESENTATIVE AND THIS REPORT MUST BE SIGNED. 1. Do you know, or have reason to believe, that replacement is or may be involved in this transaction? ____Yes ____No If "Yes", is this ___Section 1035 Exchange ___or a Direct Transfer of IRA Proceeds? (Please choose only one) 2. Please answer the following question about existing insurance or annuity contracts, issued or under a binding conditional receipt by this or any other company. Do you have reason to believe that any such other contract has been or will be subjected to borrowing, assigned, reduced, modified, adjusted, lapsed, canceled, exchanged, partial or fully surrendered, changed to reduced paid-up or extended term, or subject to an automatic premium loan in connection with the purchase of the insurance or annuity contract applied for? ____Yes ____No If "Yes", to either question above, give all details not already provided on the application, including company name and contract number and what has been or will be done to the existing contract(s): --------------------------------------------------------------------------- 3. Do you certify you have explained to the applicant that discontinuing or changing the existing policy or annuity contract may involve disadvantages, including but not limited to surrender charges or tax consequences, and that a careful comparison of existing benefits should be made before applying for this contract? ____Yes ____No ____Not applicable because questions 1 and 2 were answered "No". The answers to each question on the application were recorded exactly as given, and true to the best of my knowledge. - -------------------------------------------------------------------------------- Soliciting Representative City State Date MM/DD/YYYY - -------------------------------------------------------------------------------- (LOGO) Principal Principal Life Financial Group Insurance Company Variable Products Mailing Address: Broker/Dealer Des Moines, IA 50392-1840 Account Form Owner Information - -------------------------------------------------------------------------------- Primary Owner Name (First, MI, Last) Date of Birth Soc. Sec. No. or Fed. Tax (MM/DD/YYYY) I.D. No. - ----------------------------------------------------------------------------- Joint Owner Name (First, MI, Last) Date of Birth Soc. Sec. No. or Fed. Tax (MM/DD/YYYY) I.D. No. - -------------------------------------------------------------------------------- Street Address E-Mail Address - -------------------------------------------------------------------------------- City State Zip Home Phone ( ) - -------------------------------------------------------------------------------- State of Primary Residence Is Registered Representative registered in client's resident state? ____Yes ____No - -------------------------------------------------------------------------------- Your Citizenship is: Country ___U.S. ___Resident Alien (1078) ___Non-Resident Alien (W-8)-Indicate - -------------------------------------------------------------------------------- Retired Name of Employer (If Retired, List Prior Nature of Business Occupation and Employer) __Yes __No - -------------------------------------------------------------------------------- Employer's Street Address Occupation Years with Present Employer or in Retirement - -------------------------------------------------------------------------------- City State Zip Business Phone ( ) - -------------------------------------------------------------------------------- Owner(s) Suitability Information (used to help confirm that transactions are consistent with your goals) - -------------------------------------------------------------------------------- Primary Investment Objective* (check only one) ___Variable Life - Death Benefit ___Variable Annuity-Long Term/Retirement Secondary Investment Objective* Risk Exposure* (check only one) ___Income ___Long-term growth ___Low ___Moderate ___High - --------------------------------------------------------------------------------
Marital Years of Number of Fed. Tax Estimated Annual Liquid Net Worth* Other Investments and Status Investment Dependents Bracket* Income (Do Not Include Primary Savings* Experience* Residence) % $ $ $
- -------------------------------------------------------------------------------- *Corporate/Trust Applicants must complete for suitability review. Source of Funds To Be Invested - -------------------------------------------------------------------------------- ___Current Income ___Personal Savings ___CD/Money Market Fund ___Mutual Fund Liquidation* ___Qualified Plan Distribution ___Insurance Proceeds (Surrender/Loan)* ___IRA Rollover* ___Transfer from an Annuity Contract* ___Other *Please complete the Variable Contract Switch Disclosure below. Variable Contract Switch Disclosure - -------------------------------------------------------------------------------- I understand that it is Princor's policy not to recommend one financial product be replaced with another unless a person's investment or personal objectives can be served better by such switching/replacing. I understand that I may incur a front-end sales charge, contingent deferred sales charge, or surrender charges. I understand I may incur income taxes due to this transaction. If my original investment was in a family of funds or a variable contract, I realize that I might be able to exchange to a fund or separate account within the family or contract without incurring a sales charge. I made my original purchase approximately______________ year(s) ago. ------ I am making this exchange because: ___Lower Cost Structure ___Need for Death Benefit ___Need for Tax-Deferral ___Other_______________________________________________________________________ ____(Please initial) Financial Institution Disclosure - -------------------------------------------------------------------------------- I understand that the investment product that I have purchased is offered through a Registered Broker Dealer. My Registered Representative has disclosed to me, orally and in writing, that the securities products purchased or sold are: o Not insured by the Federal Deposit Insurance Corporation [FDIC] o Not deposits or other obligation of the financial institution and are not guaranteed by the financial institution; and o Subject to investment risks, including possible loss of principal invested. Signature - -------------------------------------------------------------------------------- Sign below exactly as your name appears on this form. For joint registration, all owners must sign. Please note that the Customer Agreement contains a pre-dispute arbitration agreement which is set forth in paragraphs 8 and 9 of the enclosed Customer agreement. I acknowledge receiving a copy of this agreement. - -------------------------------------------------------------------------------- Owner's Signature Date (MM/DD/YYYY) - -------------------------------------------------------------------------------- Joint Owner's Signature Date (MM/DD/YYYY) - -------------------------------------------------------------------------------- Registered Representative Registered Representative's RR Detail Code & Printed Name Signature Percent - -------------------------------------------------------------------------------- Registered Representative Registered Representative's RR Detail Code & Printed Name Signature Percent - -------------------------------------------------------------------------------- Registered Principal's Approval and Acceptance Date of Approval (MM/DD/YYYY) - -------------------------------------------------------------------------------- Customer Agreement - This Customer Agreement is between the Account Owner(s) (referred to as I) and Princor Financial Services Corporation (referred to as You). - -------------------------------------------------------------------------------- 1. Successors This agreement and its provisions shall be continuous, and shall be for the benefit of your present organization, and any successor organization or assigns, and shall be binding upon me and/or the estate, executors, administrators and assigns. 2. Age If an individual, I represent that I am of legal age. 3. Orders and Statements Reports of the execution of orders and statements of the contract shall be conclusive if not objected to in writing. The former within two days and the latter within ten days, after forwarding to me by mail or otherwise. 4. Force Majeure You shall not be liable for loss or delay caused directly or indirectly by war, natural disasters, government restrictions, exchange or market rulings or other conditions beyond your control. 5. Joint Owners This contract is owned jointly, unless you are notified otherwise and the required documentation is provided, the contract(s) shall be held jointly with right of survivorship (payable to either, or the survivor). Each joint owner irrevocably appoints the other as attorney-in-fact to take all action on their behalf and to represent them in all respects in connection with this Agreement. You shall be fully protected in acting but shall not be required to act upon the instructions of either joint owner. Each shall be liable, jointly and individually, for any amounts due to you pursuant to this Agreement, whether incurred by either or both. 6. Address Communications may be sent to me at the address which is on file at your office, or at such other address as may hereafter be given to you in writing. All communications so sent, whether by mail, telegraph, messenger or otherwise, shall be deemed given to me personally, whether actually received or not. 7. Recording Conversations I understand and agree that for our mutual protection you may electronically record any of our telephone conversations. 8. ARBITRATION DISCLOSURES * ARBITRATION IS FINAL AND BINDING ON THE PARTIES. * THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL. * PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. * THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT OR APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED. * THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY. 9. AGREEMENT TO ARBITRATE CONTROVERSIES IT IS AGREED THAT ANY CONTROVERSY BETWEEN US ARISING OUT OF YOUR BUSINESS OR THIS AGREEMENT, SHALL BE SUBMITTED TO ARBITRATION CONDUCTED BEFORE THE NATIONAL ASSOCIATION OF SECURITIES DEALERS INC. AND IN ACCORDANCE WITH ITS RULES. ARBITRATION MUST BE COMMENCED BY SERVICE UPON THE OTHER PARTY OF A WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN NOTICE OF INTENTION TO ARBITRATE. NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A PUTATIVE CLASS ACTION WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIM ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL; (I) THE CLASS CERTIFICATION IS DENIED; (II) THE CLASS ACTION IS DECERTIFIED; OR (III) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN. Securities are offered through Princor Financial Services Corporation, a company of the Principal Financial Group, 711 High Street, Des Moines, Iowa 50392. Princor Financial Services Corporation member SIPC. 800-247-4123 Understanding Your Principal Variable Annuity - -------------------------------------------------------------------------------- You have purchased a FLEXIBLE VARIABLE ANNUITY. Annuities are designed as long-term retirement savings vehicles for individuals allowing for tax-deferred build up of the earnings. If you are purchasing this variable annuity to fund a tax qualified retirement plan, you should be aware that this tax deferral feature is available with any investment vehicle and is not unique to a variable annuity. There are many benefits to a variable annuity that may mean a higher cost compared to other types of investments. These benefits include protection for your beneficiaries (through a guaranteed death benefit), access to a fixed account, and the ability to choose among multiple investment advisors. In addition, you can select a retirement income option that best fits your needs. A retirement income option unique to annuities is one that provides an income you can't outlive. During the accumulation phase, purchase payments you contribute may be allocated to a fixed interest account and to several separate account divisions. The separate account divisions fluctuate in value and with them, you bear the investment risk, including the possible loss of principal. Investment results depend on the performance of the separate account divisions within the annuity. Therefore, the accumulated value of this product may be worth more or less than your original cost. The product does offer certain guaranteed features that depend on the claims paying ability of Principal Life Insurance Company. However, annuity contracts are not insured by the FDIC or any other federal agency. Annuities are not deposits or other obligations of a bank and are not guaranteed by any bank. Separate Account Divisions - You have the ability to choose from a variety of separate account divisions. Each division has a separate objective and invests in shares of an underlying mutual fund. However, you are not purchasing a mutual fund. Your prospectus contains a complete list of separate account divisions and the expenses associated with them. Fixed Account Initial Interest Rate - The initial ___________% (if applicable) and is guaranteed for one year. Any interest rate is subsequent purchase payments receive the interest rate in effect on the date received in the home office. The interest rate assigned to a purchase payment is guaranteed until the next contract anniversary. Renewal Interest Rate - On each anniversary date, a renewal interest rate is determined for the entire fixed account accumulated value. This renewal rate is guaranteed until the next contract anniversary. The renewal interest rate set on each contract anniversary and the interest rates credited to new premiums paid between anniversary dates will differ, and may be higher or lower than the interest rate paid on the initial premium. The Company determines all interest rates at its sole discretion. Interest rates set may depend on many factors, including current and prior investment conditions, the financial experience and objectives of the company, and other circumstances. Interest rates credited will change over time but are guaranteed not to be less than 3.00%. Fixed DCA Accounts Fixed DCA 6 Month - The initial interest _____________% and is guaranteed for six months. Any subsequent purchase rate is payments receive the interest rate in effect on the date received in the home office for the remainder of the six month period. Fixed DCA 12 Month - The initial interest __________% and is guaranteed for twelve months. Any subsequent purchase rate is payments receive the interest rate in effect on the date received in the home office for the remainder of the twelve month period. Annual Fee - The lesser of $30 or 2% of your contract year-end accumulated value will be deducted from your accumulated value. This fee is currently waived if you own or jointly own Principal Variable Annuity Contracts with combined accumulated value of $30,000 or more. Surrender Charges - There is a surrender charge scale on your contract of 6,6,6,5,4,3,2,0 (based on contract years) and surrender charges will apply to any surrenders in excess of your free surrender privilege (see prospectus for details). There are no surrender charges for amounts used to purchase a benefit option or amounts paid out at death. - -------------------------------------------------------------------------------- Withdrawals made prior to age 59 1/2 may incur a 10% IRS penalty. Other Expenses - A mortality and expense risk charge and, in certain circumstances, a Transaction Fee and state premium taxes are deducted under the contract (see prospectus for details). The Company has also reserved the right to assess a daily Administrative Expense Charge. There are also deductions from and expenses paid out of the assets of the Mutual Funds which are described in the Mutual Funds' prospectus. Annual Enhanced Death Benefit - This rider is optional. If elected, the annual cost is .20 percent (state variation may apply). The charge is deducted from your contract's division value at the end of each calendar quarter (.05 percent quarterly). This charge will not be added to the Mortality and Expense Risks charge on your contract. You may terminate the rider at any time. Once terminated, the rider cannot be reinstated. - -------------------------------------------------------------------------------- Signature of Owner City State Date MM/DD/YYYY - -------------------------------------------------------------------------------- Signature of Joint Owner City State Date MM/DD/YYYY (NA for NJ, NY or PA) - -------------------------------------------------------------------------------- Signature of Representative City State Date MM/DD/YYYY - -------------------------------------------------------------------------------- EX-99.6A 7 0007.txt ARTICLES OF INCORPORATION AMENDED AND RESTATED ARTICLES OF INCORPORATION OF PRINCIPAL LIFE INSURANCE COMPANY Effective July 1, 1998 ARTICLE I. The name of the corporation is Principal Life Insurance Company, by which name (or by the name Principal Mutual Life Insurance Company which it may continue to use subject to any applicable law) it shall do business and shall have and retain all its property, rights and privileges. ARTICLE II. The street address of the initial registered office of the corporation is 711 High Street, Des Moines, Iowa 50392, and the name of its initial registered agent at that office is Gregg R. Narber. ARTICLE III. The purposes of this corporation are and it shall have full power to engage in, pursue, maintain and transact a general life, health and accident insurance and annuity business, and to insure other risks, perform other services and engage in other businesses allowed by law. It may issue participating or nonparticipating contracts. It shall further have the power to enter into contracts with respect to proceeds of such insurance, to accept and reinsure risks, to enter into coinsurance agreements, to issue and perform policies and contracts of all types, including but not limited to individual and group, to act as trustee or advisor in any capacity, and to offer all services, including those of a financial, accounting or information technology nature, to all persons, partnerships, corporations and other business organizations, directly or indirectly incidental to its business. It shall have all the rights, powers and privileges granted or permitted by the Constitution and laws of the State of Iowa governing the conduct of insurance companies and by Subtitle I of Title XIII of the Iowa Code and all acts amendatory thereof or additional thereto. The corporation shall be empowered: To sue and be sued, complain and defend, in its corporate or assumed name; to have a corporate seal which may be altered at pleasure, and to use the same by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced; to purchase, take, receive, lease, or otherwise acquire, own, hold, improve, use and otherwise deal in and with, real or tangible or intangible personal property, or any interest therein, wherever situated; to sell, convey, mortgage, pledge, lease, exchange, transfer and otherwise dispose of all or any part of its property and assets; to lend money to, and otherwise assist its employees, agents, officers and directors unless prohibited by law; to purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares, options, warrants or other interests in, or obligations of, other domestic or foreign corporations, associations, partnerships or individuals, or direct or indirect obligations of the United States or of any other government, state, territory, governmental district or municipality or of any instrumentality thereof unless prohibited by law; to make contracts and guarantees and incur liabilities; to lend and borrow money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested; to acquire or organize subsidiaries; to conduct its business, carry on its operations, and have offices and exercise the powers granted in any state, territory, district or possession of the United States, or in any foreign country; to make donations for the public welfare, and for religious, charitable, scientific or educational purposes; to pay pensions and establish pension plans, pension trusts, profit-sharing plans and other incentive, insurance and welfare plans for any or all of its directors, officers, agents and employees; to enter into general partnerships, limited partnerships or limited liability partnerships whether the corporation be a limited or general partner, joint ventures, syndicates, pools, associations and other arrangements for carrying on any or all of the purposes for which the corporation is organized, jointly or in common with others; and to have and exercise all powers necessary or convenient to effect any or all of the purposes for which the corporation is organized. ARTICLE IV. The corporation shall have perpetual existence. ARTICLE V. The private property of the shareholders, directors and other officers and managers of the corporation shall in no case be liable for corporate debts, but shall be exempt therefrom. ARTICLE VI. SECTION 1. The aggregate number of shares of stock which the corporation is authorized to issue is 6,000,000 shares, consisting of (a) 5,000,000 shares of common stock, par value $1.00 per share (the "Common Stock"), and (b) 1,000,000 shares of preferred stock, par value $1.00 per share (the "Preferred Stock"), issuable in one or more series. SECTION 2. The Board of Directors of the corporation is hereby expressly authorized, at any time and from time to time, to divide the shares of Preferred Stock into one or more series, to issue from time to time in whole or in part the shares of Preferred Stock or the shares of any series thereof, and in the resolution or resolutions providing for the issue of shares of Preferred Stock or of a particular series to fix and determine the voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof that may be desired, to the fullest extent now or hereafter permitted by Section 602 of Chapter 490 of Title XII of the Iowa Code ("Chapter 490"), as amended from time to time, and the other provisions of these Articles of Incorporation; provided, however, that in no event shall Preferred Stock have more than one vote per share of Preferred Stock. SECTION 3. Subject to any other provisions of these Amended and Restated Articles of Incorporation, holders of Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the corporation legally available therefor. SECTION 4. No shareholder of the corporation shall be entitled to exercise any right of cumulative voting. SECTION 5. No shareholder of the corporation shall have any preemptive or preferential right, nor be entitled as a matter of right to subscribe for or purchase any part of any new or additional issue of stock of the corporation of any class or series, whether issued for money or for consideration other than money, or of any issue of securities convertible into stock of the corporation. SECTION 6. The corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the corporation shall have notice thereof, except as expressly provided by applicable law. SECTION 7. The corporation shall not issue any shares of Voting Stock (as hereinafter defined) of the corporation or securities convertible into Voting Stock of the corporation to persons other than Principal Financial Services, Inc. ("Principal Financial Services") if, as a result of such issuance, the issued and outstanding Voting Stock of the corporation not held by Principal Financial Services equals or exceeds that held by Principal Financial Services. For purposes of this Section 7, "Voting Stock" means securities of any class or any ownership interest having voting power for the election of directors of the corporation, other than securities having voting power only to elect additional directors only because of the occurrence of a contingency. For purposes of the limitations set forth in this Article VI, any issued and outstanding securities of the corporation that are convertible into Voting Stock are considered issued and outstanding Voting Stock of the corporation as though such convertible securities had been converted into Voting Stock in accordance with their terms. ARTICLE VII. The corporate powers of the corporation (except as at the time otherwise provided by law, these Amended and Restated Articles of Incorporation or the By-Laws of the corporation) shall be exercised by the Board of Directors, and by such officers and agents as the Board of Directors may authorize, elect or appoint. Subject to the rights of any holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, the Board of Directors shall consist of not less than nine nor more than 21 directors, the number to be determined from time to time by the shareholders or a majority of the entire Board of Directors. The Board of Directors, other than with respect to those directors who may be elected by the holders of any class or series of Preferred Stock, shall be divided into three classes, as nearly equal numerically as possible, determined by terms expiring in successive years. Each director shall serve a term of approximately three years except as otherwise provided or where it is necessary to fix a shorter term in order to preserve classification. The term of office of each director shall begin at the annual meeting at which such director is elected or at the time elected by the Board of Directors. No decrease in the number of directors shall shorten the term of any incumbent director. Each director shall serve until a successor is duly elected and qualified and shall be eligible for re-election. Subject to the rights of any holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, any vacancy or vacancies on the Board of Directors may be filled by the shareholders, by the Board of Directors at any meeting of the Board of Directors or, if the directors remaining in office constitute fewer than a quorum of the Board of Directors, by the affirmative vote of a majority of directors remaining in office. The term of office of each director of the corporation shall not extend beyond the annual meeting of the corporation next following the date such director attains age 70, or such younger age as may be established for all directors by the Board of Directors, except that the terms of directors holding office prior to the annual meeting in 1984 may extend to the annual meeting next following the date such director attains age 72 and except that for officer-directors, other than one who is or has been Chief Executive Officer of the corporation, the term as director shall not extend beyond the annual meeting next following the date such director retires as an active officer of the corporation. Members of the Board of Directors shall not be required to be policyowners of the corporation. Subject to the rights of any holders of any class or series of Preferred Stock to elect additional directors under specified circumstances, any director may be removed, but only for cause, at a meeting of shareholders called for that purpose in the manner prescribed by law, upon the affirmative vote of the holders of a majority of the combined voting power of the then outstanding stock of the corporation entitled to vote generally in the election of directors. The Board of Directors shall have the power without the assent or vote of the shareholders of the corporation to adopt such By-Laws and rules and regulations for the transaction of the business of the corporation not inconsistent with these Amended and Restated Articles of Incorporation or the laws of the State of Iowa, and to amend, alter or repeal such By-Laws, rules and regulations. In addition to any requirements of law and any other provision of these Articles of Incorporation, the shareholders of the corporation may adopt, amend, alter or repeal the By-Laws of the corporation upon the affirmative vote of holders of more than 50% of the combined voting power of the outstanding stock of the corporation entitled to vote generally in the election of directors. Advance notice of nominations for the election of directors and of business to be brought by shareholders before any meeting of shareholders of the corporation shall be given in the manner and to the extent provided in the By-Laws of the corporation. The Board of Directors may fix reasonable compensation of the directors for their services. The Board of Directors shall elect a President, and shall authorize, elect or appoint such other officers, agents or committees as in their judgment may be necessary or advisable. A director, in determining what is in the best interests of the corporation when considering a proposal of acquisition, merger or consolidation of the corporation or a similar proposal, may consider any or all of the following community interest factors, in addition to consideration of the effects of any action on shareholders: (i) the effects of action on the corporation's employees, suppliers, creditors and customers; (ii) the effects of the action on the communities in which the corporation and its subsidiaries operate; and (iii) the long-term as well as short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation. If on the basis of the community interest factors described above, the Board of Directors of the corporation determines that a proposal to acquire or merge the corporation is not in the best interests of the corporation, it may reject the proposal. If the Board of Directors of the corporation determines to reject any such proposal, the Board of Directors has no obligation to facilitate, to remove any barriers to or to refrain from impeding the proposal. Consideration of any or all of the community interest factors is not a violation of the business judgment rule or of any duty of the director to the shareholders, or a group of shareholders, even if the director reasonably determines that a community interest factor or factors outweigh the financial or other benefits to the corporation or a shareholder or group of shareholders. ARTICLE VIII. The corporation shall indemnify directors, officers, employees and agents of the corporation as provided in Sections 850 through 858 of Chapter 490, subject to such limitations as may be established by the Board of Directors. Any repeal or modification of this Article VIII or of Sections 850 through 858 of Chapter 490 shall not adversely affect any right of indemnification of a director, officer, employee or agent of the corporation existing at any time prior to such repeal or modification. ARTICLE IX. A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for a breach of the director's duty of loyalty to the corporation or its shareholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (c) for a transaction from which the director derives an improper personal benefit or (d) under Section 833 of Chapter 490, as amended from time to time. If Chapter 490 is hereafter amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability provided herein, shall be eliminated or limited to the extent of such amendment, automatically and without any further action, to the maximum extent permitted by law. Any repeal or modification of the provisions of this Article IX by the shareholders of the corporation shall be prospective only and shall not adversely affect any limitation in the personal liability or any other right or protection of a director of the corporation with respect to any state of facts existing at or prior to the time of such repeal or modification. ARTICLE X. Effective as of such time as the Common Stock shall be registered pursuant to the provisions of the Securities Exchange Act of 1934, as amended, any action required or permitted to be taken by the shareholders of the corporation must be effected at a duly called annual or special meeting of the shareholders of the corporation, and the ability of the shareholders to consent in writing to the taking of any action is specifically denied. ARTICLE XI. Amendments to these Articles of Incorporation are subject to the approval of the Iowa Insurance Commissioner and the Iowa Attorney General as provided in Section 508.4 of Title XIII of the Iowa Code. EX-99.6B 8 0008.txt BYLAWS OF DEPOSITOR AMENDED AND RESTATED BY-LAWS OF PRINCIPAL LIFE INSURANCE COMPANY Effective July 1, 1998 TABLE OF CONTENTS Page ARTICLE I PRINCIPAL OFFICE..........................................1 ARTICLE II REGISTERED OFFICE AND AGENT...............................1 ARTICLE III MEETINGS OF SHAREHOLDERS .................................1 3.1 Annual Meeting............................................1 3.2 Special Meetings..........................................1 3.3 Notices and Reports to Shareholders.......................1 3.4 Notice of Shareholder Business and Nominations ...........1 3.5 Waiver of Notice..........................................2 3.6 Record Date...............................................2 3.7 Shareholders' List........................................3 3.8 Quorum....................................................3 3.9 Organization..............................................3 3.10 Voting of Shares..........................................3 3.11 Voting by Proxy or Representative.........................3 3.12 Conduct of Business.......................................4 3.13 Action Without Meeting....................................4 ARTICLE IV BOARD OF DIRECTORS........................................4 4.1 Qualifications and General Powers.........................4 4.2 Number and Term of Office.................................4 4.3 Quorum and Manner of Acting...............................4 4.4 Resignation...............................................4 4.5 Compensation of Directors.................................4 4.6 Meetings..................................................4 4.7 Waiver of Notice..........................................5 4.8 Director's Assent Presumed................................5 4.9 Action Without Meeting....................................5 4.10 Dividends.................................................5 4.11 Officers of the Board of Directors........................5 ARTICLE V THE EXECUTIVE COMMITTEE AND OTHER COMMITTEES..............5 5.1 Executive Committee.......................................5 5.2 Powers of Executive Committee.............................5 5.3 Other Committees..........................................5 ARTICLE VI OFFICERS..................................................5 6.1 President.................................................5 6.2 Chief Executive Officer...................................6 6.3 Secretary.................................................6 6.4 Other Officers Elected by Board of Directors..............6 6.5 Other Officers............................................6 6.6 Resignation and Removal...................................6 6.7 Compensation of Officers..................................6 ARTICLE VII SHARES, THEIR ISSUANCE AND TRANSFER.......................6 7.1 Consideration for Shares..................................6 7.2 Certificates for Shares...................................6 7.3 Execution of Certificates.................................6 7.4 Share Record .............................................6 7.5 Cancellation..............................................6 7.6 Transfers of Stock........................................7 7.7 Regulations...............................................7 7.8 Lost, Destroyed or Mutilated Certificates.................7 ARTICLE VIII MISCELLANEOUS PROVISIONS..................................7 8.1 Facsimile Signatures......................................7 8.2 Execution of Instruments..................................7 8.3 Disposition of Funds......................................7 8.4 Fiscal Year...............................................7 8.5 Books and Records.........................................7 8.6 Voting of Stocks Owned by the Corporation.................7 ARTICLE IX INDEMNITY.................................................7 ARTICLE X AMENDMENTS................................................7 ARTICLE I PRINCIPAL OFFICE The location of the principal office of the corporation in the State of Iowa will be identified in the corporation's annual report filed with the Secretary of State of the State of Iowa. The corporation may have such other offices either within or without the State of Iowa as the business of the corporation may from time to time require. ARTICLE II REGISTERED OFFICE AND AGENT The initial registered agent and office of the corporation are set forth in the Articles of Incorporation. The registered agent or registered office, or both, may be changed by resolution of the Board of Directors. ARTICLE III MEETINGS OF SHAREHOLDERS Section 3.1 Annual Meeting. The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting, shall be held on the third Monday in May of each year at such place and time as the Board of Directors shall each year fix, or at such other place, time and date as the Board of Directors shall fix. Section 3.2 Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by law (which for purposes of these By-Laws shall mean as required from time to time by the Iowa Business Corporation Act or the Articles of Incorporation of the corporation), may be called by the Chairman of the Board, the Chief Executive Officer or the Board of Directors, and shall be called by the Board of Directors upon the written demand, signed, dated and delivered to the Secretary, of the holders of at least 10% of all the votes entitled to be cast on any issue proposed to be considered at the meeting. Such written demand shall state the purpose or purposes for which such meeting is to be called. The time, date and place of any special meeting shall be determined by the Board of Directors, or, at its direction, by the Chief Executive Officer. Section 3.3 Notices and Reports to Shareholders. (a) Notice of the place, date and time of all meetings of shareholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be communicated not fewer than 10 days nor more than 60 days before the date of the meeting to each shareholder entitled to vote at such meeting. The Board of Directors, as provided in Section 3.6 of these By-Laws, may establish a record date for the determination of shareholders entitled to notice. Notice of adjourned meetings need only be given if required by law or Section 3.8 of these By-Laws. (b) If notice of proposed corporate action is required by law to be given to shareholders not entitled to vote and the action is to be taken by consent of the voting shareholders, the corporation shall give all shareholders written notice of the proposed action at least 10 days before the action is taken. The notice must contain or be accompanied by the same material that would have been required by law to be sent to shareholders not entitled to vote in a notice of meeting at which the proposed action would have been submitted to the shareholders for action. (c) In the event corporate action is taken without a meeting in accordance with the Articles of Incorporation of the corporation and Section 3.13 of these By-Laws by less than unanimous written consent, prompt notice of the taking of such corporate action shall be given to those shareholders who have not consented in writing to the taking of such corporate action. Section 3.4 Notice of Shareholder Business and Nominations. (a) Annual Meetings of Shareholders. (i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders of the corporation (1) by or at the direction of the Board of Directors or the Chairman of the Board or (2) by any shareholder of the corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in clauses (ii) and (iii) of this paragraph (a) of Section 3.4 and who was a shareholder of record at the time such notice was delivered to the Secretary. (ii) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (2) of paragraph (a)(i) of this Section 3.4, the shareholder must have given timely notice thereof in writing to the Secretary. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that if the date of the annual meeting is advanced by more than 20 days or delayed by more than 70 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than 120 days prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. In no event shall the adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (1) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required pursuant to Regulation 14A under Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder, including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (2) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and of any beneficial owner on whose behalf the proposal is made; and (3) as to the shareholder giving the notice and any beneficial owner on whose behalf the nomination or proposal is made (A) the name and address of such shareholder, as they appear on the corporation's books, and of such beneficial owner and (B) the class and number of shares of the corporation which are owned beneficially and of record by such shareholder and such beneficial owner. (iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 3.4 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least 100 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice under this Section 3.4 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation. (b) Special Meetings of Shareholders. Only such business as shall have been brought before the special meeting of the shareholders pursuant to the corporation's notice of meeting pursuant to Section 3.3 of these By-Laws shall be conducted at such meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the corporation's notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this paragraph (b) of Section 3.4 and who is a shareholder of record at the time such notice is delivered to the Secretary. Nominations by shareholders of persons for election to the Board of Directors may be made at such special meeting of shareholders if the shareholder's notice as required by paragraph (a)(ii) of this Section 3.4 shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the adjournment of special meeting commence a new time period for the giving of a shareholder's notice as described above. (c) General. (i) Only persons who are nominated in accordance with the procedures set forth in this Section 3.4 shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the annual or special meeting in accordance with the procedures set forth in this Section 3.4. Except as otherwise provided by law, the Articles of Incorporation of the corporation or these By-Laws, the chairperson of the annual or special meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 3.4 and, if any proposed nomination or business is not in compliance with this Section 3.4, to declare that such defective proposal or nomination shall be disregarded. (ii) For purposes of this Section 3.4, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or (15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this Section 3.4, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the mattes set forth in this Section 3.4. Nothing in this Section 3.4 shall be deemed to affect any rights of (1) shareholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (2) the holders of any series of Preferred Stock to elect directors if so provided under any applicable certificates of designation relating to the series of Preferred Stock. Section 3.5 Waiver of Notice. (a) Any shareholder may waive any notice required by law or these By-Laws if such waiver is in writing and signed by the shareholder entitled to such notice, whether before or after the date and time stated in such notice. Such a waiver shall be equivalent to notice to such shareholder in due time as required by law or these By-Laws. Any such waiver shall be delivered to the corporation for inclusion in the minutes or filing with the corporate records of the corporation. (b) A shareholder's attendance at a meeting, in person or by proxy, waives (i) objection to lack of notice or defective notice of such meeting, unless the shareholder at the beginning of the meeting or promptly upon the shareholder's arrival objects to holding the meeting or transacting business at the meeting and (ii) objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 3.6 Record Date. The Board of Directors may fix, in advance, a date as to the record date for any determination of shareholders for any purpose, such date in every case to be not more than 70 days prior to the date on which the particular action or meeting requiring such determination of shareholders is to be taken or held. If no record date is so fixed for the determination of shareholders, the close of business on the day before the date on which the first notice of a shareholders' meeting is communicated to shareholders or the date on which the Board of Directors authorizes a share dividend or a distribution (other than one involving a repurchase or reacquisition of shares), as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 3.6, such determination shall apply to any adjournment thereof, unless the Board of Directors selects a new record date or unless a new record date is required by law. Section 3.7 Shareholders' List. After fixing a record date for a meeting, the corporation shall prepare an alphabetical list of the names of all shareholders who are entitled to notice of a shareholders' meeting. The list must be arranged by voting group and within each voting group by class or series of shares, and show the address of and number of shares held by each shareholder. The shareholders' list must be available for inspection by any shareholder beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting at the corporation's principal office or at a place in the city where the meeting will be held which such place shall be identified in the notice of the meeting. A shareholder, or a shareholder's agent or attorney, is entitled on written demand to inspect and, subject to the requirements of law, to copy the list, during regular business hours and at the person's expense, during the period the list is available for inspection. The corporation shall make the shareholders' list available at the meeting, and any shareholder, or a shareholder's agent or attorney, is entitled to inspect the list at any time during the meeting or any adjournment thereof. Section 3.8 Quorum. (a) At any meeting of the shareholders, a majority of the votes entitled to be cast on the matter by a voting group constitutes a quorum of that voting group for action on that matter, unless the representation of a different number is required by law, and in that case, the representation of the number so required shall constitute a quorum. If at the time for which a meeting of shareholders has been called less than a quorum is present, the chairperson of the meeting or a majority of the shareholders present or represented by proxy and entitled to vote thereat may adjourn the meeting to another place, date or time. (b) When a meeting is adjourned to another place, date or time, notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than 120 days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, notice of the place, date and time of the adjourned meeting shall be given in conformity with these By-Laws. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. (c) Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment thereof unless a new record date is or must be set for that adjourned meeting. Section 3.9 Organization. (a) The Chairman of the Board, or in the absence of the Chairman of the Board, the acting Chairman of the Board, or in his or her absence, such person as shall be designated by the holders of a majority of the votes present at the meeting shall call meetings of the shareholders to order and shall act as presiding officer of such meetings. (b) The Secretary shall act as secretary at all meetings of the shareholders, but in the absence of the Secretary at any meeting of the shareholders, the presiding officer may appoint any person to act as secretary of the meeting. Section 3.10 Voting of Shares. (a) Every shareholder entitled to vote may vote in person or by proxy. Except as provided in subsection (c) of this Section 3.10 or unless otherwise provided by law, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. Unless otherwise provided by law, directors in each class shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. Shareholders do not have the right to cumulate their votes for directors unless the Articles of Incorporation of the corporation so provide. (b) The shareholders having the right to vote shares at any meeting shall be only those of record on the stock books of the corporation on the record date fixed by law or pursuant to the provisions of Section 3.6 of these By-Laws. (c) Absent special circumstances, the shares of the corporation held, directly or indirectly, by another corporation are not entitled to vote if a majority of the shares entitled to vote for the election of directors of such other corporation is held by the corporation. The foregoing does not limit the power of the corporation to vote any shares held by the corporation in a fiduciary capacity. (d) If a quorum exists, action on a matter other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater number is required by law. Section 3.11 Voting by Proxy or Representative. (a) At all meetings of the shareholders, a shareholder entitled to vote may vote in person or by proxy appointed in writing, which appointment shall be effective when received by the secretary of the meeting or other officer, agent or inspector authorized to tabulate votes. An appointment of a proxy is valid for 11 months from the date of its execution, unless a longer period is expressly provided in the appointment form. (b) Shares held by an administrator, executor, guardian, conservator, receiver, trustee, pledgee or another corporation may be voted as provided by law. Section 3.12 Conduct of Business. The person acting as the presiding officer of any meeting of shareholders shall determine the order of business and procedure at the meeting, including such regulation of the manner of voting and the conduct of business as seem to him or her to be in order. Section 3.13 Action Without Meeting. Except as otherwise set forth in this Section 3.13 and subject to Section 3.3(c) of these By-Laws and the Articles of Incorporation of the corporation, any action required or permitted by law to be taken at a meeting of the shareholders of the corporation may be taken without a meeting or vote, and without notice, if one or more consents in writing setting forth the action taken shall be signed and dated by the holders of outstanding shares having not less than 90% of the votes entitled to be cast at a meeting at which all shares entitled to vote on the action were present and voted, and are delivered to the corporation for inclusion in the minutes or filing with the corporate records of the corporation; provided, however, that a director shall not be removed by written consents unless written consents are obtained from the holders of all of the outstanding shares of the corporation that are entitled to vote on the removal of the director. Written consents from a sufficient number of shareholders must be obtained within 60 days from the date of the earliest dated consent for such consents to be effective to take corporate action. If not otherwise fixed by law or in accordance with these By-Laws, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs such a written consent. ARTICLE IV BOARD OF DIRECTORS Section 4.1 Qualifications and General Powers. No director is required to be an officer, employee, shareholder or policyowner of the corporation or a resident of the State of Iowa. The business and affairs of the corporation shall be managed under the direction of the Board of Directors. The Board of Directors may authorize any officer or officers or agent or agents to enter into any contract or to execute and deliver any instrument in the name and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 4.2 Number and Term of Office. The Board of Directors shall be elected in the manner and for the term specified in the Articles of Incorporation of the corporation and in Section 3.4 of these By-Laws. Each director (whenever elected) shall hold office until his or her death, resignation or removal, except that each director who attains retirement age, as set forth in the Articles of Incorporation of the corporation or as determined by the Board of Directors, during the term for which elected shall hold office only until the next annual meeting of shareholders following attainment of retirement age, at which time a person may be elected as director to complete the unexpired term of office, if any, for which the director attaining retirement age had been elected. Section 4.3 Quorum and Manner of Acting. A quorum of the Board of Directors consists of a majority of the number of directors prescribed in accordance with Section 4.2 of these By-Laws. If at any meeting of the Board of Directors less than a quorum is present, a majority of the directors present may adjourn the meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. At all meetings of directors where a quorum is present, the act of the majority of the directors present at the meeting shall be the act of the Board of Directors. Section 4.4 Resignation. Any director of the corporation may resign at any time by delivering written notice to the Chairman of the Board, the Board of Directors, or the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. Section 4.5 Compensation of Directors. Directors who are not officers of the corporation shall be entitled to an annual retainer and an additional amount for attendance at each regular or special meeting of the Board of Directors or meetings of committees of the Board of Directors, plus the expense of attending such meetings, if any, as may be fixed from time to time by resolution of the Board of Directors. Section 4.6 Meetings. Regular meetings of the Board of Directors shall be held without notice once in each calendar quarter on such date and at such hour and place, within or without the State of Iowa, as may be fixed by the Board of Directors, except that the meeting in the second quarter shall be held in the principal office of the corporation in Des Moines on the date of the annual meeting of the shareholders of the corporation. The date, time and place of any regular meeting other than the meeting in the second quarter may be changed by the Chairman of the Board, if any, or the President, by written notice to all directors at least 30 days before the regular meeting date, provided that the date to which any meeting is changed shall not be more than 15 days earlier or later than the date fixed by the Board of Directors. Special meetings of the Board of Directors may be called at any time upon two days' written notice given by the Chairman of the Board, if any, the President or a majority of directors then in office, which notice shall state the date, time and place of the special meeting. In the alternative, upon oral or written notice received prior to the time of the meeting by at least two-thirds of the directors, the Chairman of the Board, or the acting Chairman of the Board, may call a special meeting of the Board of Directors to be held through communications equipment which permits all participants to communicate with each other, with such participation constituting attendance at such meeting. Any meeting may be continued to the succeeding day if the Board of Directors does not complete the business coming before it on the meeting date. At any meeting at which every director shall be present, even without notice, any business may be transacted. Section 4.7 Waiver of Notice. A director may waive any notice required by law or these By-Laws if the waiver is in writing and signed by the director entitled to such notice, whether before or after the date and time stated in such notice. Such a waiver shall be equivalent to notice in due time as required by these By-Laws. Attendance of a director at or participation in a meeting shall constitute a waiver of notice of such meeting, unless the director at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Section 4.8 Director's Assent Presumed. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless the director's dissent shall be entered in the minutes of the meeting or unless the director shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the Secretary immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 4.9 Action Without Meeting. Any action required or permitted by law to be taken at any meeting of the Board of Directors may be taken without a meeting of the action is taken by all of the directors then in office and if one or more consents in writing describing the action so taken shall be signed by each director then in office and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this section is effective when the last director signs the consent, unless the consent specifies a different effective date. Section 4.10 Dividends. Subject to applicable law and any applicable provisions of the Articles of Incorporation of the corporation, the Board of Directors may authorize and the corporation may make distribution to its shareholders in cash or property. Section 4.11 Officers of the Board of Directors. (a) The Board of Directors shall elect from its number a Chairman of the Board to serve at the pleasure of the Board of Directors. The Chairman of the Board shall, if present, preside at each meeting of the Board of Directors and shall have such powers and shall perform such duties as may be assigned to him or her by these By-Laws or by or pursuant to authorization of the Board of Directors. (b) The Board of Directors shall by resolution establish a procedure to provide for an acting Chairman of the Board in the event the current Chairman of the Board is unable to serve or act in that capacity. ARTICLE V THE EXECUTIVE COMMITTEE AND OTHER COMMITTEES Section 5.1 Executive Committee. The Board of Directors shall appoint an Executive Committee composed of five directors, including the Chairman of the Board and the Chief Executive Officer if other than the Chairman of the Board. Members of the Executive Committee shall be appointed by and serve at the pleasure of the Board of Directors. If the Board of Directors has elected a Chairman of the Board he or she shall, if present, preside at each meeting of the Executive Committee. In the absence or vacancy in the office of the Chairman of the Board, the Chief Executive Officer shall preside. If the Chairman of the Board is also the Chief Executive Officer, any other member of the Executive Committee, as determined by the members of the Executive Committee present, shall preside at a meeting of the Executive Committee in the absence of the Chairman of the Board. The Secretary shall act as secretary of the Executive Committee and shall keep a record of all proceedings of the Executive Committee. A majority of the members of the Executive Committee shall constitute a quorum. Section 5.2 Powers of Executive Committee. The Executive Committee shall have and may exercise all of the powers of the Board of Directors in the management and affairs of the corporation except when the Board of Directors is in session. Actions of the Executive Committee, except when the rights or acts of third parties would be adversely affected, shall be subject to the approval of the Board of Directors, which approval shall be implied unless contrary action is taken by the Board of Directors. Section 5.3 Other Committees. The Board of Directors, by resolution adopted by the affirmative vote of a majority of the number of directors then in office, may establish one or more other committees of the Board of Directors, each committee to consist of two or more directors appointed by the Board of Directors. Any such committee shall serve at the pleasure of the Board of Directors. Each such committee shall have the powers and duties delegated to it by the Board of Directors, subject to the limitations set forth in applicable Iowa law. The Board of Directors may elect one or more of its members as alternate members of any such committee who may take the place of any absent member or members at any meeting of such committee, upon request of the Chairman of the Board or the chairperson of such committee. ARTICLE VI OFFICERS Section 6.1 President. The Board of Directors shall elect a President of the corporation to serve at the pleasure of the Board of Directors. The President, if not the Chief Executive Officer, shall have such powers and perform such duties as may be assigned to him or her by these By-Laws, as may from time to time be assigned to him or her by or pursuant to authorization of the Board of Directors or by the Chief Executive Officer, and as may be incident to the office of President. Section 6.2 Chief Executive Officer. The Board of Directors shall empower either the Chairman of the Board, if one is elected, or the President to serve as the Chief Executive Officer of the corporation. The Chief Executive Officer shall (a) supervise the carrying out of policies adopted or approved by the Board of Directors, (b) exercise a general supervision and superintendence over all the business and affairs of the corporation, and (c) possess such other powers and perform such other duties as may be assigned to him or her by these By-Laws, as may from time to time be assigned by the Board of Directors and as may be incident to the office of Chief Executive Officer. Section 6.3 Secretary. The Board of Directors shall appoint a Secretary to serve at the pleasure of the Board of Directors. The Secretary shall (a) keep minutes of all meetings of the shareholders and of the Board of Directors, (b) authenticate records of the corporation and (c) in general, have such powers and perform such other duties as may be assigned to him or her by these By-Laws, as may from time to time be assigned to him or her by the Board of Directors or the Chief Executive Officer and as may be incident to the office of Secretary. Section 6.4 Other Officers Elected by Board of Directors. At any meeting of the Board of Directors, the Board of Directors may elect such other officers of the corporation as the Board of Directors may deem necessary, to serve at the pleasure of the Board of Directors. Other officers elected by the Board of Directors shall have such powers and perform such duties as may be assigned to them by or pursuant to authorization of the Board of Directors or by the Chief Executive Officer. Section 6.5 Other Officers. The Board of Directors may authorize the corporation to elect or appoint other officers, each of whom shall serve at the pleasure of the corporation. Officers elected or appointed by the corporation shall have such powers and perform such duties as may be assigned to them by the corporation. Section 6.6 Resignation and Removal. An officer may resign at any time by delivering notice to the Secretary. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. Any officer may be removed, for or without cause, by the Board of Directors at any time. Section 6.7 Compensation of Officers. The compensation of all officers elected by the Board of Directors shall be fixed by the Board of Directors. The compensation of officers elected or appointed by the corporation shall be fixed as provided by resolution of the Board of Directors. ARTICLE VII SHARES, THEIR ISSUANCE AND TRANSFER Section 7.1 Consideration for Shares. The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation. Before the corporation issues shares, the Board of Directors must determine that the consideration received or to be received for shares to be issued is adequate. Section 7.2 Certificates for Shares. Every shareholder of the corporation shall be entitled to a certificate or certificates, to be in such form as the Board of Directors shall prescribe, certifying the number and class of shares of the corporation owned by such shareholder. Section 7.3 Execution of Certificates. The certificates for shares of stock shall be numbered in the order in which they shall be issued and shall be signed by the Chief Executive Officer or President and the Secretary or an Assistant Secretary of the corporation. The signatures of the Chief Executive Officer or President and the Secretary or Assistant Secretary or other persons signing for the corporation upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer or other authorized person who has signed or whose facsimile signature has been placed upon such certificate for the corporation shall have ceased to be such officer or employee or agent before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer or employee or agent at the date of the issuance of such certificate. Section 7.4 Share Record. A record shall be kept by the Secretary, or by any other officer, employee or agent designated by the Board of Directors, of the name and address of each shareholder of the corporation, the number and class of shares held by such shareholder, the number of the certificates representing such shares and the respective dates of issuance of such certificates and, in case of cancellation of any such certificate, the respective date of cancellation. Section 7.5 Cancellation. Every certificate surrendered to the corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided in Section 7.8 of these By-Laws. Section 7.6 Transfers of Stock. Transfers of shares of the capital stock of the corporation shall be made only on the books of the corporation by the record holder thereof, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation; provided, however, that whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact, if known to the Secretary, shall be so expressed in the entry of transfer. Section 7.7 Regulations. The Board of Directors may make such other rules and regulations as it may deem expedient, not inconsistent with law, concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. Section 7.8 Lost, Destroyed or Mutilated Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.1 Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the corporation may be used whenever and as authorized by the Board of Directors or a committee thereof. If any officer whose facsimile signature has been placed upon any form of instrument shall have ceased to be such officer before an instrument in such form is issued, such instrument may be issued with the same effect as if he or she had been such officer at the time of its issue. Section 8.2 Execution of Instruments. Instruments affecting or relating to real estate or the investment of funds of the corporation may be executed as authorized by resolution of the Board of Directors or as may be authorized by such officers of the corporation as the Board of Directors designates. Section 8.3 Disposition of Funds. The funds of the corporation shall be paid out, transferred or otherwise disposed of only in such manner and under such controls as may be authorized by resolution of the Board of Directors or as may be authorized by such officers of the corporation as the Board of Directors designates. Section 8.4 Fiscal Year. The fiscal year of the corporation shall be from the first day of January through the last day of December. Section 8.5 Books and Records. The books and records of the corporation shall be kept (except that the shareholder list must also be kept at the places described in Section 3.7 of these By-Laws) at the principal office of the corporation. Section 8.6 Voting of Stocks Owned by the Corporation. In the absence of a resolution of the Board of Directors to the contrary, the Chief Executive Officer and the President are authorized and empowered on behalf of the corporation to attend and vote, or to grant discretionary proxies to be used, at any meeting of shareholders of any corporation in which this corporation holds or owns shares of stock, and in that connection, on behalf of this corporation, to execute a waiver of notice of any such meeting or a written consent to action without a meeting. The Board of Directors shall have authority to designate any officer or person as a proxy or attorney-in-fact to vote shares of stock in any other corporation in which the corporation may own or hold shares of stock. ARTICLE IX INDEMNITY The Board of Directors shall indemnify, or authorize the officers of the corporation to indemnify, directly and through insurance coverage, each person now or hereafter a director, officer, employee or other representative of the corporation, and that person's heirs and legal representatives, against all damages, awards, costs and expenses, including counsel fees, reasonably incurred or imposed in connection with or resulting from any action, suit or proceeding, or the settlement thereof prior to final adjudication, to which such person is or may be made a party by reason of being or having been a director, officer, employee or other representative of the corporation or by reason of service at the request of the corporation in any capacity with another entity or organization. Such rights or indemnification shall be in addition to any rights to which any director, officer, employee or other representative of the corporation, former, present or future, may otherwise be entitled as a matter of law and subject to such limitations permitted by law as may be established by the Board of Directors. ARTICLE X AMENDMENTS These By-Laws may be amended, altered or repealed by the Board of Directors at any regular or special meeting of the Board of Directors, provided written notice expressing in substance the proposed change shall have been given to each director at least two days prior to the date of such regular or special meeting. Notice of any proposed amendment, alteration or repeal may be waived by any director by filing a written waiver of notice with the Secretary before, on or after the meeting date. The shareholders of the corporation may also amend, alter or repeal these By-Laws as provided in the Articles of Incorporation of the corporation. Any amendment to these By-Laws shall be submitted to the Iowa Insurance Commissioner for review not less than thirty (30) days prior to the effective date of the amendment, or pursuant to such other procedure as is established by law or regulation. EX-99.9 9 0009.txt OPINION OF COUNSEL June 27, 2000 Board of Directors Principal Life Insurance Company 711 High Street Des Moines, IA 50392 Re Separate Account B Dear Board of Directors The establishment of Separate Account B by the Board of Directors of Principal Life Insurance Company as a separate account for assets applicable to variable annuity contracts, pursuant to the then existing provisions of the Code of Iowa applicable to the establishment of separate accounts by Iowa domiciled life insurance companies, was supervised by the office of General Counsel of the Company. I have supervised the preparation of the Registration Statement on Form N-4 to be filed by Principal Life Insurance Company with the Securities and Exchange Commission under the Securities Act of 1933 with respect to the Principal Flexible Variable Annuity Contract with Purchase Payment Credit Rider. It is my opinion that: 1. Separate Account B is a separate account of the Company duly created and validly existing pursuant to Iowa law, currently consisting of thirty-three distinct Divisions. 2. The Principal Flexible Variable Annuity Contract with Purchase Payment Credit Rider, when issued in accordance with the Prospectuses contained or referred to in the Registration Statement and upon compliance with applicable local law, will be legal and binding obligations of the Company enforceable in accordance with their terms. 3. All income and expenses and all gains and losses, whether or not realized, of Separate Account B, shall be credited to or charged against those assets, without regard to income and expenses or gains and losses of the Company. 4. The assets of Separate Account B, equal to the reserves and other liabilities arising under the contracts, shall not be charged with any liabilities arising from any other business conducted by the Company. In arriving at the foregoing opinion, I have made such examination of law and examined such records and other documents as in my judgement are necessary or appropriate. I consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of my name under the caption "Legal Opinions" in the prospectus contained in the Registration Statement. Very truly yours /s/ Traci L. Weldon Traci L. Weldon Counsel TLW/ap EX-99.10B 10 0010.txt POWERS OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ Betsy J. Bernard B. J. Bernard POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ Jocelyn Carter-Miller J. Carter-Miller POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ D. J. Drury D. J. Drury POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ C. D. Gelatt C. D. Gelatt, Jr. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ J. Barry Griswell J. B. Griswell POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ Charles S. Johnson C. S. Johnson POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ William T. Kerr W. T. Kerr POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ Lee Liu L. Liu POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ V. H. Loewenstein V. H. Lowenstein POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ Ronald D. Pearson R. D. Pearson POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June, 2000. /s/ Federico F. Pena __________________________ F. F. Pena POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ John R. Price J. R. Price POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ Donald M. Stewart D. M. Stewart POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June 2000. /s/ E. E. Tallett E. E. Tallett POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Principal Life Insurance Company, an Iowa corporation (the "Company"), hereby constitutes and appoints D. J. Drury, J. B. Griswell, G. R. Narber and J. N. Hoffman, and each of them (with full power to each of them to act alone), the undersigned's true and lawful attorney-in-fact and agent, with full power of substitution to each, for and on behalf and in the name, place and stead of the undersigned, to execute and file any of the documents referred to below relating to registration under the Securities Act of 1933 with respect to variable annuity contracts, with premiums received in connection with such contracts held in the Principal Life Insurance Company Separate Account B on Form N-4 or other forms under the Securities Act of 1933, and any and all amendments thereto and reports thereunder with all exhibits and all instruments necessary or appropriate in connection therewith, each of said attorneys-in-fact and agents and his or their substitutes being empowered to act with or without the others or other, and to have full power and authority to do or cause to be done in the name and on behalf of the undersigned each and every act and thing requisite and necessary or appropriate with respect thereto to be done in and about the premises in order to effectuate the same, as fully to all intents and purposes as the undersigned might or could do in person; hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director has hereunto set his hand this 27th day of June, 2000. /s/ F. W. Weitz F. W. Weitz -----END PRIVACY-ENHANCED MESSAGE-----