Filed On 4/29/04 5:37pm ET · SEC Files 33-74232, 811-02091 · Accession Number 1127048-4-46
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
4/30/04 Principal Life Ins Co Separate..B 485BPOS 4/30/04 3:172 Principal Partners...Inc
Principal Life Insurance Co Separate Account B
Document/Exhibit Description Pages Size
1: 485BPOS Fva Pea #20 165 1,083K
2: EX-99.10 AUDITORS E&Y Auditors Consent 1 6K
3: EX-99.11 AUDITORS Plic Financial Schedules 6± 34K
| Page | (sequential) | | | | (alphabetic) | Top |
|---|
| | |
- Alternative Formats (RTF, XML, et al.)
- Accumulation Period, The
- Administration Charge
- Annual Fee
- Annuity Payment Period, The
- Annuity Payments
- Appendix B
- Assignment
- Automatic Portfolio Rebalancing (APR)
- Balance at beginning of year
- Balance at end of year
- Beneficiary
- Calculation of Yield and Total Return
- Change of Owner
- Charges and Deductions
- Closed Block
- Company, The
- Consolidated Statements of Operations
- Contract Termination
- Contract, The
- Death Benefit
- Delay of Payments
- Distribution of the Contract
- Division
- Dollar Cost Averaging Plus Program (DCA Plus Program)
- Examination Period (Free-Look)
- Exchange Credit
- Federal Tax Matters
- Financial Statements
- Financial Statements and Exhibits
- Fixed Account
- Fixed Account Accumulated Value
- Fixed Account and Dca Plus Accounts
- Fixed Account Transfers, Total and Partial Surrenders
- Free Surrender Privilege
- General Information
- General Provisions
- Glossary
- Growth
- Indemnification
- Independent Auditors
- Investment Limitations
- Location of Accounts and Records
- Management Services
- Misstatement of Age or Gender
- Mortality and Expense Risks Charge
- Mutual Fund Diversification
- Non-Qualified Contracts
- Officers and Directors of the Depositor
- Performance Calculation
- Persons Controlled by or Under Common Control with Registrant
- Premium Taxes
- Principal Flexible Variable Annuity
- Principal Flexible Variable Annuity, The
- Principal Underwriter
- Purchase Payment Credit
- Purchase Payment Credit Rider
- Purchase Payments
- Reinstatement
- Replacement Contracts
- Report of Independent Auditors
- Reports
- Required Distributions for Non-Qualified Contracts
- Rights Reserved by the Company
- Right to Examine the Contract (Free-Look)
- Rollover IRAs
- Separate Account, The
- Special Provisions for Group or Sponsored Arrangements
- State Regulation
- Summary
- Surplus Distributions
- Surrender Charge
- Surrenders
- Table of Contents
- Table of Contents of the Statement of Additional Information
- Taxation Under Certain Retirement Plans
- Telephone and Internet Services
- The Accumulation Period
- The Annuity Payment Period
- The Company
- The Contract
- The Principal Flexible Variable Annuity
- The Separate Account
- The Underlying Mutual Funds
- To Buy a Contract
- Transaction Fee
- Underlying Mutual Funds, The
- Undertakings
- Voting Rights
- Withholding
|
| 1 | 1st Page
|
| 3 | Principal Flexible Variable Annuity
|
| 5 | Table of Contents
|
| 6 | Glossary
|
| 12 | Summary
|
| " | Investment Limitations
|
| " | Division
|
| 14 | Charges and Deductions
|
| " | Annuity Payments
|
| " | Death Benefit
|
| " | Examination Period (Free-Look)
|
| 15 | The Principal Flexible Variable Annuity
|
| " | The Company
|
| " | The Separate Account
|
| " | The Underlying Mutual Funds
|
| 16 | Surplus Distributions
|
| " | The Contract
|
| " | To Buy a Contract
|
| " | Purchase Payments
|
| " | Right to Examine the Contract (Free-Look)
|
| " | Replacement Contracts
|
| " | Exchange Credit
|
| 18 | Purchase Payment Credit Rider
|
| 19 | The Accumulation Period
|
| 21 | Automatic Portfolio Rebalancing (APR)
|
| 22 | Telephone and Internet Services
|
| " | Surrenders
|
| 24 | The Annuity Payment Period
|
| 26 | Annual Fee
|
| " | Mortality and Expense Risks Charge
|
| 27 | Purchase Payment Credit
|
| " | Transaction Fee
|
| " | Premium Taxes
|
| " | Surrender Charge
|
| 28 | Free Surrender Privilege
|
| 29 | Administration Charge
|
| " | Special Provisions for Group or Sponsored Arrangements
|
| " | Fixed Account and Dca Plus Accounts
|
| 30 | Fixed Account
|
| " | Fixed Account Accumulated Value
|
| " | Fixed Account Transfers, Total and Partial Surrenders
|
| 31 | Dollar Cost Averaging Plus Program (DCA Plus Program)
|
| 32 | General Provisions
|
| " | Delay of Payments
|
| " | Misstatement of Age or Gender
|
| " | Assignment
|
| " | Change of Owner
|
| 33 | Beneficiary
|
| " | Contract Termination
|
| " | Reinstatement
|
| " | Reports
|
| " | Rights Reserved by the Company
|
| 34 | Distribution of the Contract
|
| " | Performance Calculation
|
| 35 | Voting Rights
|
| " | Federal Tax Matters
|
| " | Non-Qualified Contracts
|
| 36 | Required Distributions for Non-Qualified Contracts
|
| 37 | Rollover IRAs
|
| " | Withholding
|
| " | Mutual Fund Diversification
|
| 38 | State Regulation
|
| " | General Information
|
| " | Independent Auditors
|
| " | Financial Statements
|
| 39 | Table of Contents of the Statement of Additional Information
|
| 47 | Appendix B
|
| 49 | Principal Underwriter
|
| " | Calculation of Yield and Total Return
|
| 54 | Taxation Under Certain Retirement Plans
|
| 57 | Report of Independent Auditors
|
| 97 | Growth
|
| 100 | Consolidated Statements of Operations
|
| 104 | Closed Block
|
| 136 | Balance at beginning of year
|
| " | Balance at end of year
|
| 162 | Item 24. Financial Statements and Exhibits
|
| 163 | Item 25. Officers and Directors of the Depositor
|
| " | Item 26. Persons Controlled by or Under Common Control with Registrant
|
| " | Item 28. Indemnification
|
| " | Item 30. Location of Accounts and Records
|
| " | Item 31. Management Services
|
| " | Item 32. Undertakings
|
Registration No. 33-74232
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. _20__ __X__
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. __________
(Check appropriate box or boxes)
Principal Life Insurance Company Separate Account B
--------------------------------------------------------------------------------
(Exact Name of Registrant)
Principal Life Insurance Company
--------------------------------------------------------------------------------
(Name of Depositor)
The Principal Financial Group, Des Moines, Iowa 50392
--------------------------------------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (515) 248-3842
M. D. Roughton, The Principal Financial Group, Des Moines, Iowa 50392
--------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on April 30, 2004 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B
FLEXIBLE VARIABLE ANNUITY ("FVA") CONTRACT
Registration Statement on Form N-4
Cross Reference Sheet
Form N-4 Item Caption in Prospectus
Part A
1. Cover Page Principal Life
Insurance Company Separate
Account B Flexible Variable
Annuity ("FVA") Contract
2. Definitions Glossary
3. Synopsis Summary of Expense Information
4. Condensed Financial Condensed Financial Information
Information Independent Auditors,
Financial Statements
5. General Description of Summary, The Company,
Registrant The Separate Account, Voting
Rights, The Underlying Mutual
Funds
6. Deductions Summary, Charges and
Deductions, Annual Fee,
Mortality and Expense Risks
Charge, Transaction Fee,
Premium Taxes, Surrender
Charge, Administrative Charge
Distribution of the Contract
7. General Description of Summary, The Contract,
Variable Annuity Contract To Buy a Contract, Purchase
Payments, Right to Examine the
Contract, Exchange Credit,
Prior to the Retirement Date,
Performance Calculation, The
Accumulation Period, The Value
of Your Contract, Separate
Account Division, Unscheduled
Transfers, Scheduled Transfers,
Automatic Portfolio
Rebalancing, Surrenders, Total
Surrender, Unscheduled
Partial Surrender, Scheduled
Partial Surrender, Death
Benefit Payment of Death
Benefit, The Annuity payment
Period, Annuity Payment Date,
Annuity Payment Options,
Transfers, The Separate
Account, General Provisions,
Rights Reserved by the Company,
Customer Inquiries
8. Annuity Period Annuity Payment Period,
Annuity Payment Date, Annuity
Payment Options
9. Death Benefit Death Benefit, Payment of Death
Benefit, Federal Tax Matters,
Non-Qualified Contracts,
Required Distributions for Non-
Qualified Contracts, IRA, SEP
and SIMPLE-IRA, Rollover IRAs
10. Purchase and Contract Value Summary, The Contract,
To Buy a Contract, Purchase
Payments, Right to Examine the
Contract, Replacement
Contracts, The Accumulation
Period, The Value of Your
Contract, Purchase Payments,
Separate Account Division
Transfers, Delay of Payments,
Distribution of the
Contract
11. Redemptions Summary, Annuity Payment
Options, Surrenders,
Delay of Payments
12. Taxes Summary, Annuity Payment
Options, Federal Tax Matters,
Non-Qualified Contracts,
Required Distributions for
Non-Qualified Contracts, IRA,
SEP, SAR/SEP and 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 Life
Insurance Company Separate
Account B Flexible Variable
Annuity ("FVA") Contract
16. Table of Contents Table of Contents
17. General Information and None
History
18. Services Independent Auditors**,
Independent Auditors
19. Purchase of Securities Summary**, Purchase Payments
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 Payment Options**
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 April 30, 2004.
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. The DCA Plus Accounts and the Fixed Account are
a part of the General Account of the Company. The assets of the Separate Account
Divisions ("divisions") are invested in the following underlying mutual funds:
· Download Table
AIM V.I. Core Equity Fund - Series I Bond Account
AIM V.I. Growth Fund - Series I Capital Value Account
AIM V.I. Premier Equity Fund - Series I Equity Growth Account
American Century Variable Portfolios, Inc. Equity Income (fka Utilities) Account
VP Income & Growth Fund - Class I Government Securities Account
VP Ultra Fund - Class I Growth Account
VP Value Fund - Class II International Account
Dreyfus Investment Portfolios International Emerging Markets Account
Founders Discovery Portfolio - Initial Class International SmallCap Account
Fidelity Variable Insurance Products Fund LargeCap Blend Account
Contrafund/(R)/ Portfolio - Service Class LargeCap Growth Equity Account
Equity-Income Portfolio - Service Class 2 LargeCap Stock Index Account
Growth Portfolio - Service Class LargeCap Value Account
INVESCO VIF Dynamics Fund Limited Term Bond
INVESCO VIF Health Sciences Fund MidCap Account
INVESCO VIF Small Company Growth MidCap Growth Account
INVESCO VIF Technology Fund MidCap Value Account
Janus Aspen Series Money Market Account
Mid Cap Growth Portfolio - Service Shares Real Estate Securities (fka Real
Estate) Account
Principal Variable Contracts Fund, Inc. SmallCap Account
Asset Allocation Account SmallCap Growth Account
Balanced Account SmallCap Value Account
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 April 30, 2004, 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 at the end 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 rider 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:
.. the length of time you plan to own the Contract;
.. the frequency, amount and timing of any partial surrenders; and
.. the amount and timing 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. If the
value of the purchase payment credit has declined during the examination
period, 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 SEC or any state
securities commission nor has the SEC 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 underlying mutual funds. These prospectuses should be kept for future
reference.
TABLE OF CONTENTS
GLOSSARY................................................................5
SUMMARY OF EXPENSE INFORMATION..........................................7
SUMMARY.................................................................10
Investment Limitations................................................. 11
Separate Account Investment Options.................................... 11
Transfers.............................................................. 12
Surrenders............................................................. 12
Charges and Deductions................................................. 12
Annuity Payments....................................................... 13
Death Benefit.......................................................... 13
Examination Period (Free-Look)......................................... 13
THE PRINCIPAL FLEXIBLE VARIABLE ANNUITY.................................13
THE COMPANY.............................................................13
THE SEPARATE ACCOUNT....................................................13
THE UNDERLYING MUTUAL FUNDS.............................................14
SURPLUS DISTRIBUTIONS...................................................21
THE CONTRACT............................................................21
To Buy a Contract...................................................... 22
Purchase Payments...................................................... 22
Right to Examine the Contract (Free-Look).............................. 22
Replacement Contracts.................................................. 23
Purchase Payment Credit Rider.......................................... 24
The Accumulation Period................................................ 25
Automatic Portfolio Rebalancing (APR).................................. 27
Telephone and Internet Services........................................ 28
Surrenders............................................................. 28
Death Benefit.......................................................... 29
The Annuity Payment Period............................................. 31
CHARGES AND DEDUCTIONS..................................................33
Annual Fee............................................................. 33
Mortality and Expense Risks Charge..................................... 33
Purchase Payment Credit................................................ 33
Transaction Fee........................................................ 34
Premium Taxes.......................................................... 34
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...........................................................42
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
GENERAL INFORMATION.....................................................45
FINANCIAL STATEMENTS....................................................45
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION............46
APPENDIX A..............................................................47
APPENDIX B..............................................................48
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) accumulated value
plus the Fixed Account accumulated value plus the Separate Account accumulated
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, 2003,
the first contract year ends on June 4, 2004, and the first contract anniversary
falls on June 5, 2004.)
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.
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.
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.
UNDERLYING MUTUAL FUND - a registered open-end investment company, or a separate
division or portfolio thereof, in which a division invests.
UNIT - the accounting measure used to calculate the value of a 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.
SYNOPSIS
The following tables describe the fees and expenses that you will pay when
buying, owning and surrendering the Contract. The first table describes the fees
and expenses that you will pay at the time that you buy the Contract, surrender
the Contract or transfer cash value between investment options. State premium
taxes may also be deducted.
· Download Table
CONTRACT OWNER TRANSACTION EXPENSES
------------------------------------------------------------------------------
Sales charge imposed on purchase payments (as .none
a percentage of purchase payments)
------------------------------------------------------------------------------
Maximum deferred surrender charge (as a .6%
percentage of amount surrendered)/(1)/
------------------------------------------------------------------------------
Maximum deferred surrender charge (as a .8%
percentage of amount surrendered)/(2)/
------------------------------------------------------------------------------
Transaction Fees (as a percentage of amount
surrendered) .$30 for each unscheduled
. guaranteed maximum partial surrender after the
12th in a contract year
.zero
.current
------------------------------------------------------------------------------
Transfer Fee .$30 for each unscheduled
. guaranteed maximum transfer after the 12th in a
contract year
.current .zero
------------------------------------------------------------------------------
(1) Surrender charge without the purchase payment credit rider (as a percentage
of amounts surrendered):
· Download Table
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%
(2) Surrender charge with the purchase payment credit rider (as a percentage of
amounts surrendered):
· Download Table
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%
The next table describes the fees and expenses that you will pay periodically
during the time that you own the Contract, not including underlying mutual fund
fees and expenses.
· Download Table
Annual Contract Fee (waived for Contracts with the lesser of $30
accumulated value of $30,000 or more) or 2% of the
-------------------------------------------------accumulated value
-----------------------------
Separate Account Annual Expenses (as a
percentage of average account value) 1.25%
. Mortality and Expense Risk Fees 0.00
. Other Account Fees and Expenses 1.25%
------------------------------------------------------------------------------
Separate Account Annual Expenses ((with
optional purchase payment credit rider) as a
percentage of average account value) 1.25%
. Mortality and Expense Risk Fees 0.60
. Purchase Payment Credit Rider 0.00
. Other Account Fees and Expenses 1.85%
------------------------------------------------------------------------------
Administrative Charge 0.15% of separate account
. guaranteed maximum accumulated value
none
.current
------------------------------------------------------------------------------
The next item shows the minimum and maximum total operating expenses charged by
the underlying mutual funds that you may pay periodically during the time that
you own the contract. More detail concerning the fees and expenses of each
underlying mutual fund is contained its prospectus.
Annual Underlying Mutual Fund Operating Expenses as of December 31, 2003.
· Enlarge/Download Table
MINIMUM MAXIMUM
---------------------------------------------------------------------------------------------------------
Total annual underlying mutual fund operating expenses (expenses that are
deducted from underlying mutual fund assets, including management fees, 0.39% 1.84%
distribution and/or service (12b-1) fees and other expenses)
---------------------------------------------------------------------------------------------------------
Annual expenses of the mutual funds (as a percentage of average net assets) as
of December 31, 2003:
· Enlarge/Download Table
MANAGEMENT 12B-1 OTHER
UNDERLYING MUTUAL FUNDS FEES FEES EXPENSES TOTAL EXPENSES/ //(1)/
----------------------- ---------- ----- -------- --------------------------------------
AIM V.I. Core Equity - Series I 0.61% N/A 0.20% 0.81%
AIM V.I. Growth - Series I 0.63 N/A 0.27 0.90/(2)/
AIM V.I. Premier Equity - Series I 0.61 N/A 0.24 0.85
American Century VP Income & Growth - Class I 0.70 N/A 0.00 0.70
American Century VP Ultra - Class I 1.00 N/A 0.01 1.01
American Century VP Value - Class II 0.85 0.25 0.00 1.10
Dreyfus IP Founders Discovery - Initial Class 0.90 N/A 0.51 1.41/(//3//)/
Fidelity VIP Contrafund - Service Class 0.58 0.10 0.09 0.77/(4)/
Fidelity VIP Equity-Income - Service Class 2 0.48 0.25 0.09 0.82/(4)/
Fidelity VIP Growth - Service Class 0.58 0.10 0.09 0.77/(4)/
INVESCO VIF - Dynamics Fund - Series I 0.75 N/A 0.42 1.17/(//5//)//(6)/
INVESCO VIF - Health Sciences Fund - Series I 0.75 N/A 0.33 1.08/(//5//)//(6)/
INVESCO VIF - Small Company Growth Fund - Series I 0.75 N/A 0.64 1.39/(//5//)//(6)(7)/
INVESCO VIF - Technology Fund - Series I 0.75 N/A 0.41 1.16/(//2//)//(5)(6)/
Janus Aspen Series Mid Cap Growth Portfolio - Service
Shares 0.65 0.25 0.02 0.92/(8)/
Principal VCF Asset Allocation 0.80 N/A 0.05 0.85
Principal VCF Balanced 0.59 N/A 0.06 0.65/(//9//)/
Principal VCF Bond 0.46 N/A 0.01 0.47
Principal VCF Capital Value 0.60 N/A 0.01 0.61/(//9//)/
Principal VCF Equity Growth 0.76 N/A 0.01 0.77/(//9//)/
Principal VCF Equity Income 0.60 N/A 0.01 0.61
Principal VCF Government Securities 0.43 N/A 0.01 0.44
Principal VCF Growth 0.60 N/A 0.01 0.61/(//9//)/
Principal VCF International 0.85 N/A 0.08 0.93/(//9//)/
Principal VCF International Emerging Markets 1.25 N/A 0.59 1.84/(//10//)(//1//1//)/
Principal VCF International SmallCap 1.20 N/A 0.13 1.33/(//9//)/
Principal VCF LargeCap Blend 0.75 N/A 0.08 0.83/(//1//1//)//(//1//2//)/
Principal VCF LargeCap Growth Equity 1.00 N/A 0.19 1.19/(12)/
Principal VCF LargeCap Stock Index 0.35 N/A 0.04 0.39/(//1//1//)(//1//3//)//(14)
Principal VCF LargeCap Value 0.75 N/A 0.04 0.79/(//1//1//)//(1//2//)/
Principal VCF Limited Term Bond 0.50 N/A 0.07 0.57/(1//1//)//(1//4//)/
Principal VCF MidCap 0.60 N/A 0.01 0.61/(//9//)/
Principal VCF MidCap Growth 0.90 N/A 0.04 0.94/(//1//2//)/
Principal VCF MidCap Value 1.05 N/A 0.03 1.08/(//1//2//)/
Principal VCF Money Market 0.48 N/A 0.01 0.49
Principal VCF Real Estate Securities 0.90 N/A 0.02 0.92/(//9//)/
Principal VCF SmallCap 0.85 N/A 0.10 0.95/(//9//)/
Principal VCF SmallCap Growth 1.00 N/A 0.02 1.02/(//1//2//)/
Principal VCF SmallCap Value 1.10 N/A 0.08 1.18/(//1//2//)/
/ //(1)/ The Company and Princor Financial Services Corporation may receive a
portion of the underlying fund expenses for record keeping, marketing and
distribution services.
/ //(2)/ As a result of a reorganization of another fund into the Fund, which
occurred on April 30, 2004, the Fund's Total Annual Operating Expenses have
been restated to reflect current expenses.
/ //(3)/ The Dreyfus Corporation has agreed, until December 31, 2004, to waive
receipt of its fees and/or assume the expenses of the portfolio so that the
expenses (excluding taxes, brokerage commissions, extraordinary expenses,
interest expenses and commitment fees on borrowings) do not exceed 1.50%.
/ //(4)/ Fidelity Management & Research Company has voluntarily agreed to
reimburse the fund to the extent that total operating expenses, as a percentage
of average net assets, exceed the following rates: VIP Contrafund 1.10%; VIP
Equity-Income 1.25% and VIP Growth 1.10%. These arrangements may be
discontinued by FMR at any time.
/ //(5) /The Fund has adopted a new form of administrative services and transfer
agency agreements which will be effective May 1, 2004. As a result, Other
Expenses have been restated to reflect the changes in fees under the new
agreements.
/ //(6)/ The Fund's advisor is entitled to receive reimbursement from the Fund
for fees and expenses paid for by the Fund's advisor pursuant to expense
limitation commitments between the Fund's advisor and the Fund if such
reimbursement does not cause the Fund to exceed its then-current expense
limitations and the reimbursement is made within three years after the Fund's
advisor incurred the expense.
/ //(7)/ The Fund's advisor has contractually agreed to waive advisory fees or
reimburse expenses of Series I shares to the extent necessary to limit Total
Annual Fund Operating Expenses (excluding certain items discussed below) to
1.30%. In determining the advisor's obligation to waive advisory fees and/or
reimburse expenses, certain expenses are not taken into account, and could
cause the Total Annual Fund Operating Expenses to exceed the 1.30% cap. This
expense limitation agreement is in effect through December 31, 2005.
/ //(8)/ Expenses are shown without the effect of expense offset arrangements.
/ //(//9//) /Expense ratio without fees paid indirectly.
/ //(//10//) /Expense ratio without fees paid indirectly and the Manager's
voluntary expense limit (which increased May 1, 2003).
/ //(1//1//)/ Principal Management Corporation voluntarily agreed to reimburse
the total annual expenses through April 30, 2004. With the expense limit, the
total annual expenses through April 30, 2004 were: 2.00% for International
Emerging Markets Account; 1.00% for LargeCap Blend Account; 1.00% for LargeCap
Value Account; 0.40% for LargeCap Stock Index Account and 0.75% for Limited
Term Bond Account.
/ //(1//2//) /Expense ratio without fees paid indirectly and the Manager's
voluntary expense limit.
/ //(1//3//)/ Principal Management Corporation has voluntarily agreed to
reimburse the total annual expenses through April 30, 2005 so that they will
not exceed 0.40% for LargeCap Stock Index Account.
/ //(1//4//) /Expense ratio without the Manager's voluntary expense limit.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
contract with the cost of investing in other variable annuity contracts. These
costs include contract owner transaction expenses, contract fees, separate
account annual expenses, and underlying mutual fund fees and expenses.
The Example assumes that you invest $10,000 in the contract for the time periods
indicated. The Example also assumes that your investment has a 5% return each
year and assumes the maximum fees and expenses of any of the
underlying mutual funds. Although your actual costs may be higher or lower,
based on these assumptions, your costs would be:
(1) If you surrender your contract at the end of the applicable time period:
· Enlarge/Download Table
SEPARATE ACCOUNT DIVISION 1 YEAR 1 YEAR 3 YEARS 3 YEARS 5 YEARS 5 YEARS 10
------------------------- ------ ------ ------- ------- ------- ------- YEAR
----
AIM V.I. Growth $822 $1,082 $1,185 $1,665 $1,475 $2,074 2,52
AIM V.I. Core Equity 813 1,073 1,158 1,638 1,429 2,030 2,43
AIM V.I. Premier Equity 817 1,077 1,170 1,650 1,449 2,050 2,47
American Century VP Income & Growth 802 1,062 1,124 1,606 1,373 1,975 2,31
American Century VP Ultra 833 1,093 1,218 1,698 1,530 2,128 2,63
American Century VP Value 842 1,102 1,246 1,724 1,576 2,172 2,72
Dreyfus Investment Portfolios - Founders Discovery 873 1,133 1,338 1,816 1,730 2,322 3,03
Fidelity VIP Contrafund 809 1,069 1,146 1,626 1,409 2,010 2,39
Fidelity VIP Equity-Income 799 1,059 1,115 1,597 1,357 1,961 2,28
Fidelity VIP Growth 809 1,069 1,146 1,626 1,409 2,010 2,39
INVESCO VIF-Dynamics 849 1,109 1,267 1,745 1,611 2,206 2,79
INVESCO VIF-Health Sciences 840 1,100 1,240 1,719 1,566 2,162 2,70
INVESCO VIF-Small Company Growth 871 1,131 1,332 1,810 1,720 2,312 3,01
INVESCO VIF-Technology 848 1,108 1,264 1,742 1,606 2,201 2,78
Janus Aspen Mid Cap Growth 824 1,084 1,191 1,671 1,485 2,084 2,54
Principal Variable Contracts Fund, Inc.
Asset Allocation 817 1,077 1,170 1,650 1,449 2,050 2,47
Balanced 797 1,057 1,109 1,591 1,347 1,951 2,26
Bond 779 1,039 1,054 1,537 1,254 1,861 2,07
Capital Value 793 1,053 1,097 1,579 1,327 1,931 2,22
Equity Growth 809 1,069 1,146 1,626 1,409 2,010 2,39
Equity Income (fka Utilities) 793 1,053 1,097 1,579 1,327 1,931 2,22
Government Securities 776 1,036 1,045 1,528 1,239 1,845 2,04
Growth 793 1,053 1,097 1,579 1,327 1,931 2,22
International 825 1,085 1,194 1,674 1,490 2,089 2,55
International Emerging Markets* 916 1,175 1,466 1,941 1,940 2,525 3,43
International SmallCap 865 1,125 1,315 1,792 1,690 2,283 2,95
LargeCap Blend 815 1,075 1,164 1,644 1,439 2,040 2,45
LargeCap Growth Equity* 851 1,111 1,273 1,751 1,621 2,216 2,81
LargeCap Stock Index* 771 1,031 1,030 1,512 1,213 1,820 1,98
LargeCap Value 811 1,071 1,152 1,632 1,419 2,020 2,41
Limited Term Bond 789 1,049 1,085 1,567 1,306 1,911 2,18
MidCap 793 1,053 1,097 1,579 1,327 1,931 2,22
MidCap Growth 826 1,086 1,197 1,677 1,495 2,094 2,56
MidCap Value 840 1,100 1,240 1,719 1,566 2,162 2,70
Money Market 781 1,041 1,060 1,543 1,265 1,871 2,09
Real Estate Securities (fka Real Estate) 824 1,084 1,191 1,671 1,485 2,084 2,54
SmallCap 827 1,087 1,200 1,680 1,500 2,099 2,57
SmallCap Growth* 834 1,094 1,221 1,701 1,535 2,133 2,64
SmallCap Value* 850 1,110 1,270 1,748 1,616 2,211 2,80
* After expense reimbursement
(2) If you do not surrender your contract or if you elect to receive payments
under an annuity payment option:
· Enlarge/Download Table
SEPARATE ACCOUNT DIVISION 1 YEAR 1 YEAR 3 YEARS 3 YEARS 5 YEARS 5 YEARS 10 YEARS 10 YEARS
------------------------- ------ ------ ------- ------- ------- ------- -------- --------
AIM V.I. Growth $222 $282 $235 $295 $248 $308 $285 $343
AIM V.I. Core Equity 213 273 226 286 239 299 276 335
AIM V.I. Premier Equity 217 277 230 290 243 303 280 339
American Century VP Income & Growth 202 262 214 275 227 288 264 325
American Century VP Ultra 233 293 246 306 259 318 296 353
American Century VP Value 242 302 255 314 268 327 305 361
Dreyfus Investment Portfolios - Founders
Discovery 273 333 286 344 299 356 335 387
Fidelity VIP Contrafund 209 269 222 282 235 295 271 331
Fidelity VIP Equity-Income 199 259 211 272 224 285 261 322
Fidelity VIP Growth 209 269 222 282 235 295 271 331
INVESCO VIF-Dynamics 249 309 262 321 275 334 312 367
INVESCO VIF-Health Sciences 240 300 253 312 266 325 303 360
INVESCO VIF-Small Company Growth 271 331 284 342 297 354 333 386
INVESCO VIF-Technology 248 308 261 320 274 333 311 366
Janus Aspen Mid Cap Growth 224 284 237 297 250 310 287 345
Principal Variable Contracts Fund, Inc.
Asset Allocation 217 277 230 290 243 303 280 339
Balanced 197 257 209 270 222 283 258 320
Bond 179 239 191 252 203 265 238 302
Capital Value 193 253 205 266 218 279 254 316
Equity Growth 209 269 222 282 235 295 271 331
Equity Income (fka Utilities) 193 253 205 266 218 279 254 316
Government Securities 176 236 188 249 200 262 235 299
Growth 193 253 205 266 218 279 254 316
International 225 285 238 298 251 311 288 346
International Emerging Markets* 316 375 328 385 340 395 373 421
International SmallCap 265 325 278 337 291 349 328 381
LargeCap Blend 215 275 228 288 241 301 278 337
LargeCap Growth Equity* 251 311 264 323 277 336 314 369
LargeCap Stock Index* 171 231 182 244 195 257 229 294
LargeCap Value 211 271 224 284 237 297 273 333
Limited Term Bond 189 249 201 262 214 275 250 312
MidCap 193 253 205 266 218 279 254 316
MidCap Growth 226 286 239 299 252 312 289 347
MidCap Value 240 300 253 312 266 325 303 360
Money Market 181 241 193 254 205 267 241 304
Real Estate Securities (fka Real Estate) 224 284 237 297 250 310 287 345
SmallCap 227 287 240 300 253 313 290 348
SmallCap Growth 234 294 247 306 260 319 297 354
SmallCap Value 250 310 263 322 276 335 313 368
* 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
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
.. Initial purchase payment must be $2,500 or more for non-qualified retirement
programs.
.. Initial purchase payment must be $1,000 for all other contracts.
.. Each subsequent payment must be at least $100.
.. 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):
· Download Table
DIVISION: THE DIVISION INVESTS IN:
--------- ------------------------
AIM V.I. Core Equity Fund -
AIM V.I. Core Equity Series I
AIM V.I. Growth AIM V.I. Growth Fund - Series I
AIM V.I. Premier Equity Fund -
AIM V.I. Premier Equity Series I
American Century VP Income &
American Century VP Income & Growth Growth Fund - Class I
American Century VP Ultra Fund -
American Century VP Ultra Class I
American Century VP Value Fund -
American Century VP Value Class II
Dreyfus Investment Portfolios
Dreyfus Investment Portfolios - Founders Founders Discovery Portfolio -
Discovery Portfolio Initial Class
Fidelity Variable Insurance
Products Fund
Contrafund Portfolio - Service
Fidelity VIP Contrafund Class
Equity-Income Portfolio - Service
Fidelity VIP Equity-Income Class 2
Fidelity VIP Growth Growth Portfolio - Service Class
INVESCO Variable Investment
INVESCO VIF-Dynamics Fund Dynamics Fund
INVESCO VIF-Health Sciences Fund Health Sciences Fund
INVESCO VIF-Small Company Growth Small Company Growth
INVESCO VIF-Technology Fund Technology Fund
Janus Aspen Series
Mid Cap Growth Portfolio -
Janus Aspen Mid Cap Growth Service Shares
Principal Variable Contracts
Fund, Inc.
Asset Allocation Asset Allocation Account
Balanced Balanced Account
Bond Bond Account
Capital Value Capital Value Account
Equity Growth Equity Growth Account
Equity Income (fka Utilities) Equity Income 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 Blend LargeCap Blend Account
LargeCap Growth Equity LargeCap Growth Equity Account
LargeCap Stock Index LargeCap Stock Index Account
LargeCap Value LargeCap Value Account
Limited Term Bond Limited Term Bond Account
MidCap MidCap Account
MidCap Growth MidCap Growth Account
MidCap Value MidCap Value Account
Money Market Money Market Account
Real Estate Securities (fka Real
Real Estate Securities (fka Real Estate) Estate) Account
SmallCap SmallCap Account
SmallCap Growth SmallCap Growth Account
SmallCap Value SmallCap Value Account
You may allocate your net premium payments to divisions, the DCA Plus Accounts
and/or the Fixed Account. Not all of the 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 and qualified plans. 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 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:
.. a dollar amount or percentage of transfer must be specified;
.. a transfer may occur on a scheduled or unscheduled basis;
.. transfers to the Fixed Account are not permitted if a transfer has been made
from the Fixed Account to a division within six month; and
.. 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:
.. a dollar amount must be specified;
.. surrendered amounts may be subject to surrender charge;
.. total surrenders may be subject to an annual Contract fee;
.. 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
.. withdrawals before age 591/2 may involve an income tax penalty (see FEDERAL
TAX MATTERS).
CHARGES AND DEDUCTIONS
.. No sales charge on purchase payments.
..
A contingent deferred surrender charge is imposed on certain total or partial
surrenders
..
A mortality and expense risks daily charge equal to 1.25% per year applies to
amounts in the Separate Account
.. If elected, a purchase payment credit rider daily charge equal to 0.60% per
year applies to amounts in the Separate Account. The purchase payment credit
rider charge terminates upon completion of your 8th contract year.
..
Daily Separate Account administration charge is currently zero but we reserve
the right to assess a charge not to exceed 0.15% annually.
..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.
..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
.. You may choose from several fixed annuity payment options which start on your
selected annuity payment date.
.. 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).
.. Your Contract refers to annuity payments as "retirement benefit" payments.
DEATH BENEFIT
.. If the annuitant or owner dies before the annuity payment date, then a death
benefit is payable to the beneficiary of the Contract.
.. The death benefit may be paid as either a single sum cash benefit or under an
annuity payment option (see Death Benefit).
.. 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)
..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.
..
We return all purchase payments if required by state law. Otherwise we return
accumulated value.
.. We retain the full amount of any purchase payment credit.
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 accumulated 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 50392. It is authorized to transact life and
annuity business in all states of the United States and the District of
Columbia. The Company is a wholly owned indirect subsidiary of Principal
Financial Group, Inc., a publicly-traded company.
Principal Management Corporation (the "Manager") serves as 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, 2003, the funds it managed had assets of
approximately $7.8 billion. The Manager's address is Principal Financial Group,
Des Moines, Iowa 50392-2080.
In 1879, the Company was incorporated under Iowa law as a mutual assessment life
insurance company named Bankers Life Association. It became a legal reserve life
insurance company and 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 insurance holding
company structure took place in 1998, when the Company became a stock life
insurance company. In 2001, the mutual insurance holding company converted to a
stock company through a process called demutualization, resulting in the current
organizational structure.
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 underlying mutual fund.
New divisions may be added and made available. Divisions may also be eliminated
from the Separate Account following SEC approval.
THE UNDERLYING MUTUAL FUNDS
The underlying mutual funds are registered under the Investment Company Act of
1940 as open-end investment management companies. The underlying mutual funds
provide the investment vehicles for the Separate Account. A full description of
the underlying 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 WITHOUT CHARGE FROM A SALES
REPRESENTATIVE OR OUR ANNUITY SERVICE OFFICE (CALL 1-800-852-4450).
The Company purchases and sells mutual fund shares for the Separate Account at
their net asset value. 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.
Appendix A contains a brief summary of the investment objectives of, and
sub-advisor for, each division.
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
..The initial purchase payment must be at least $2,500 for non-qualified
retirement programs.
.. All other initial purchase payments must be at least $1,000.
..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.
..You may elect a purchase payment credit rider with an additional charge and
an associated 9-year surrender charge period.
..
All purchase payments are subject to a surrender charge period that begins in
the contract year each payment is received.
.If you do not elect the purchase payment credit rider, each purchase
payment is subject to a 7 year surrender charge period.
.If you elect the purchase payment credit rider, each purchase payment is
subject to a 9 year surrender charge period.
.. Subsequent payments must be at least $100 and can be made until the annuity
payment date.
.. 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.
.. The total of all purchase payments may not be greater than $2,000,000 without
our prior approval.
.. In New Jersey after the first contract year, purchase payments cannot exceed
$100,000 per contract year.
The Company reserves the right to:
.. increase the minimum amount for each purchase payment to not more than $1,000;
and
.. 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:
. Arizona and you are age 65 and over (30 day examination period),
. California and you are age 60 and over (30 day examination period),
. Idaho (20 day examination period), 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 the examination period after the contract date.
After the examination period, 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:
· Download Table
Georgia Louisiana Nebraska Rhode Island
Hawaii Maine New Hampshire South Carolina
Idaho Maryland North Carolina Utah
Iowa Michigan Oklahoma Virginia
Kentucky Missouri Pennsylvania West Virginia
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.
If you are purchasing this Contract to fund an IRA, SIMPLE-IRA, or SEP-IRA; and
you return it on or before the seventh day of the examination period, then we
will return the greater of:
.. Total purchase payments; or
.. Accumulated value.
In addition, 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.
Specific information is available from your sales representative or the annuity
service office (1-800-852-4450).
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. Electing the exchange credit does not
result in additional charges or deductions. The charges and deductions
associated with your Contract and any riders still apply.
To complete a transfer to this Contract, send:
.. a Contract application,
.. a SPDA/SPDA+ surrender form,
.. a replacement form (based on state written), and
.. 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, 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:
..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.
..The credit is allocated among the Fixed Account and the divisions according
to your then current purchase payment allocations.
..If you exercise your right to return the Contract during the examination
period, the amount returned to you is reduced by any credits.
.. Credits are considered earnings under the Contract.
..All purchase payments are subject to the 9-year surrender charge table (see
Surrender Charge).
..The purchase payment credit rider may not be cancelled and the associated
9-year surrender charge period cannot be changed.
.. 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 Fixed Account is not available if the Purchase Payment Credit Rider is
selected in Oregon. Specific information is available from your registered
representative or the annuity service office (1-800-852-4450)).
The following tables demonstrate hypothetical values. The first table shows
accumulated values. The second table shows surrender values. The tables are
based on:
.. a $100,000 initial purchase payment and no additional purchase payments;
..the deduction of total Separate Account annual expenses of 1.85% (for the
first eight contract years) annually for Contracts with the purchase payment
credit rider and 1.25% annually for Contracts without the rider;
..the deduction of mutual fund expenses equal to those calculated as of
December 31, 2000;
..purchase payment allocation among the divisions proportionally equal to the
allocation of the Company's total Separate Account assets as of April 30,
2000; and
.. 5% and 10% annual rates of return before charges.
· Enlarge/Download Table
5% ANNUAL RETURN 10% ANNUAL RETURN
------------------------------------ ------------------------------------
CONTRACT CONTRACT CONTRACT CONTRACT
ACCUMULATED VALUE ACCUMULATED VALUE ACCUMULATED VALUE ACCUMULATED VALUE
WITHOUT WITH WITHOUT WITH
PURCHASE PAYMENT PURCHASE PAYMENT PURCHASE PAYMENT PURCHASE PAYMENT
CONTRACT YEAR RIDER CREDIT RIDER CREDIT RIDER CREDIT RIDER
------------- ----------------- ----------------- ----------------- -----------------
1 $103,086 $107,595 $108,356 $113,095
2 $106,277 $110,261 $117,436 $121,838
3 $109,567 $112,994 $127,277 $131,259
4 $112,959 $115,796 $137,943 $141,408
5 $116,456 $118,667 $149,504 $152,342
6 $120,062 $121,609 $162,035 $164,123
7 $123,780 $124,625 $175,616 $176,815
8 $127,614 $127,716 $190,335 $190,489
9 $131,566 $131,670 $206,290 $206,452
10 $135,642 $135,749 $223,582 $223,758
15 $158,001 $158,126 $334,391 $334,654
20 $184,060 $184,205 $500,155 $500,549
· Enlarge/Download Table
5% ANNUAL RETURN 10% ANNUAL RETURN
---------------------------------- ----------------------------------
SURRENDER VALUE SURRENDER VALUE SURRENDER VALUE SURRENDER VALUE
WITHOUT WITH WITHOUT WITH
PURCHASE PAYMENT PURCHASE PAYMENT PURCHASE PAYMENT PURCHASE PAYMENT
CONTRACT YEAR CREDIT RIDER CREDIT RIDER CREDIT RIDER CREDIT RIDER
------------- ---------------- ---------------- ---------------- ----------------
1 $ 97,501 $ 99,787 $102,454 $105,095
2 $100,500 $102,261 $111,436 $113,838
3 $103,593 $104,994 $121,277 $123,259
4 $107,959 $107,796 $132,943 $133,408
5 $112,456 $111,667 $145,504 $145,342
6 $117,062 $115,609 $159,035 $158,123
7 $121,780 $119,625 $173,616 $171,815
8 $127,614 $123,716 $190,335 $186,489
9 $131,566 $128,670 $206,290 $203,452
10 $135,642 $135,749 $223,582 $223,758
15 $158,001 $158,126 $334,391 $334,654
20 $184,060 $184,205 $500,155 $500,549
Based on the assumptions stated above, 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. However,
Contracts with the purchase payment credit rider are subject to both a greater
surrender charge and a longer surrender charge period than Contracts issued
without the purchase payment credit rider. If you surrender your Contract with
the purchase payment credit rider while subject to a surrender charge, your
surrender value may be less than a Contract without the purchase payment credit
rider.
THE ACCUMULATION PERIOD
The Value of Your Contract
--------------------------
The value of your Contract is the total of the Separate Account accumulated
value plus the DCA Plus Account(s) accumulated value plus the Fixed Account
accumulated 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 accumulated 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 accumulated 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:
.. the number of units you have in a division multiplied by
.. the value of a unit in the division.
The number of units is the total of units purchased by allocations to the
division from:
.. your initial purchase payment;
.. an exchange credit (if applicable);
.. subsequent investments;
.. purchase payment credits; and
.. transfers from another division, a DCA Plus Account or the Fixed Account.
minus units sold:
.. for partial surrenders from the division;
.. as part of a transfer to another division or the Fixed Account; and
.. to pay contract charges and fees.
Unit values are calculated each valuation date at the close of normal trading of
the NYSE (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
-----------------
.. On your application, you direct your purchase payments to be allocated to the
Investment Options.
.. Allocations may be in percentages.
.. Percentages must be in whole numbers and total 100%.
.. Subsequent purchase payments are allocated according to your future deposit
allocation instructions.
.. Changes to the allocation instructions are made without charge.
. A change is effective on the next valuation period after we receive your new
instructions.
. You can change the current allocations and future allocation instructions
by:
. mailing your instructions to us;
. calling us at 1-800-852-4450 (if telephone privileges apply);
. faxing your instructions to us at 1-515-248-9800; or
. visiting www.principal.com.
.. Changes to purchase payment allocations do not transfer any existing
Investment Option accumulated values.
.. Purchase payments are credited on the basis of unit value next determined
after we receive a purchase payment.
Division Transfers
------------------
.. 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).
.. You must specify the dollar amount or percentage to transfer from each
division.
.. 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.
.. 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:
.. a transfer has been made from the Fixed Account to a division within six
months; or
.. following the transfer, the Fixed Account value would be greater than
$1,000,000 (without our prior approval).
Unscheduled Transfers
---------------------
.. You may make unscheduled division transfers from a division to another
division or to the Fixed Account by:
. mailing your instructions to us;
. calling us at 1-800-852-4450 (if telephone privileges apply);
. faxing your instructions to us at 1-515-248-9800; or
. visiting www.principal.com.
.. Transfers are not permitted into DCA Plus Accounts.
.. 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)
-------------------------------------------
.. You may elect to have transfers made on a scheduled basis.
.. You must specify the dollar amount of the transfer.
.. You select the transfer date (other than the 29th, 30th or 31st) and the
transfer period (monthly, quarterly, semi-annually or annually).
.. If the selected date is not a valuation date, the transfer is completed on the
next valuation date.
.. Transfers are not permitted into DCA Plus Accounts.
.. If you want to stop a scheduled transfer, then you must provide us notice
prior to the date of the scheduled transfer.
.. Transfers continue until your value in the division is zero or we receive
notice to stop them.
.. 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)
.. APR allows you to maintain a specific percentage of your Separate Account
accumulated value in specified divisions over time.
.. You may elect APR at any time.
.. APR is not available for values in the Fixed Account or the DCA Plus Accounts.
.. APR is not available if you have arranged scheduled transfers from the same
division.
.. APR will not begin until the examination period has expired.
.. There is no charge for APR transfers.
.. APR can be selected for quarterly, semi-annual or annual rebalancing.
.. 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 AND INTERNET SERVICES
These services permit you to:
.. make purchase payment allocation changes;
.. make redemptions;
.. set up DCA scheduled transfers;
.. make transfers; and
.. make changes to APR.
Instructions received via our telephone services 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 or
internet transaction requests. We reserve the right to refuse telephone service
or internet transaction requests. You assume the risk of loss caused by
fraudulent telephone service or internet transactions we reasonably believe to
be genuine. We follow procedures in an attempt to assure genuine telephone
service 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, requesting
personal identification (name, address, security phrase, PIN, daytime telephone
number, social security number and/or birth date) and sending written
confirmation to your address of record.
If the Contract is owned by a business entity or a trust, an authorized
individual (with the proper PIN or Password) may use these services.
Instructions provided by the authorized individual are binding on the owner.
We reserve the right to modify or terminate telephone service or internet
transaction procedures at any time.
Telephone Services
------------------
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 in good order by us before the close of normal trading
of the NYSE (generally 3 p.m. Central Time). Requests received when we are not
open for business or after the NYSE closes its normal trading will be effective
on the next valuation date.
Internet
--------
Internet access is available for both you and your sales representative at
www.principal.com. You may elect Internet authorization for your sales
representative by providing us written notice.
SURRENDERS
Surrenders result in the cancellation of units and your receipt of the value of
the canceled unit 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
591/2 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
---------------
.. You may surrender the Contract at any time before the annuity payment date.
.. You receive the cash surrender value at the end of the valuation period during
which we receive your surrender request.
.. The cash surrender value is your accumulated value minus any applicable fee
and charge.
.. The written consent of all collateral assignees and irrevocable beneficiaries
must be obtained prior to surrender.
.. 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
-----------------------------
.. 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.
.. You must specify the dollar amount of the surrender (which must be at least
$100).
.. The surrender is effective at the end of the valuation period during which we
receive your written request for surrender.
.. The surrender is deducted from your Investment Options according to the
surrender allocation percentages you specify.
.. If surrender allocation percentages are not specified, we use your purchase
payment allocation percentages.
.. We surrender units from your Investment Options to equal the dollar amount of
the surrender request plus any applicable surrender charge and fee.
.. 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
---------------------------
.. You may elect partial surrenders from any of the Investment Options on a
scheduled basis by sending us written notice.
.. Your accumulated value must be at least $5,000 when the scheduled surrenders
begin.
.. You may specify monthly, quarterly, semi-annually or annually and choose a
surrender date (other than the 29th, 30th or 31st).
.. If the selected date is not a valuation date, the surrender is completed on
the next valuation date.
.. 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:
.. apply the death benefit under an annuity payment option; or
.. 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.
NOTE: for Contracts not issued as an IRA, Roth IRA, SEP IRA or Simple-IRA:
If the owner (or in the case of joint annuitants one of the annuitants),
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:
.. the accumulated value on the date we receive proof of death and all required
documents;
.. the total of purchase payments minus the proportionate withdrawal amount of
each partial surrender (and any applicable fees and charges) made prior to the
date we receive proof of death and all required documents; or
.. the highest accumulated value on any prior contract anniversary that is
divisible by seven plus any purchase payments and minus the proportionate
withdrawal amount of each partial surrender (and any applicable fees and
charges) made after that contract anniversary.
The proportionate withdrawal amount is equal to (a) divided by (b) where:
(a) is the amount of the partial surrender (and any applicable fees and
charges) and
(b) is the accumulated value immediately before the partial surrender.
Example: If your accumulated value is $10,000 and you take a partial
surrender of $2,000 (20%), we reduce the accumulated value by 20% and
adjust the total of all purchase payments by 20% for purposes of
calculating the death benefit.
Annual Enhanced Death Benefit
-----------------------------
This is an optional death benefit rider. Under this rider, if the original
annuitant or original owner dies before the annuity payment date, the amount of
the death benefit is the greatest of:
.. the standard death benefit;
.. the annual increasing death benefit, based on purchase payments (accumulated
at 5% annually) minus the proportionate withdrawal amount of each partial
surrender (and any applicable fees and charges) (accumulated at 5% annually)
until the later of the contract anniversary after the 75th birthday of the
older of the original owner or the original annuitant or five years from the
effective date of the rider; or
.. the highest accumulated value on any prior contract anniversary, plus purchase
payments and minus the proportionate withdrawal amount of each partial
surrender (and any applicable fees and charges) until the contract anniversary
following the later of the 75th birthday of the older of the original owner or
the original annuitant or five years from the effective date of the rider.
The proportionate withdrawal amount is equal to (a) divided by (b) where:
(a) is the amount of the partial surrender (and any applicable fees and
charges) and
(b) is the accumulated value immediately before the partial surrender.
Example: If your accumulated value is $10,000 and you take a partial
surrender of $2,000 (20%), we reduce the accumulated value by 20% and
adjust the total of all purchase payments by 20% for purposes of
calculating the death benefit.
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:
.. the standard death benefit; or
.. 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 the proportionate withdrawal amount of each partial
surrender (and any applicable fees and charges). The death benefit is
locked-in, so it will only decrease by the proportionate withdrawal amount of
each partial surrender (and any applicable fees and charges). Once the
standard death benefit equals the annual enhanced death benefit, 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 through the redemption of units from your Contract's accumulated
value in the same proportion as the surrender allocation percentages among the
DCA Plus Accounts, Fixed Account and 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:
. amount of accumulated value;
. annuity payment option selected; and
. 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 701/2. 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 underlying mutual funds which are described in the
underlying 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:
.. issuing Contracts;
.. establishing and maintaining the records which relate to Contracts;
.. making regulatory filings and furnishing confirmation notices;
.. preparing, distributing and tabulating voting materials and other
communications;
.. providing computer, actuarial and accounting services; and
.. processing Contract transactions.
MORTALITY AND EXPENSE RISKS CHARGE
We assess each 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)
· Download Table
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)
· Download Table
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%
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. If your contract year begins April 1 and ends
March 31 the following year, then all purchase payments received during
that period are considered to have been made in that contract year.
For purpose of calculating surrender charges, we assume that surrenders and
transfers are made in the following order:
.. first from purchase payments no longer subject to a surrender charge;
.. then from the free surrender privilege (first from the earnings, then from the
oldest purchase payments (first-in, first-out)) described below; and
.. 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:
.. 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.
.. 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:
.. earnings in the Contract (earnings = accumulated value less unsurrendered
purchase payments as of the surrender date); or
.. 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:
.. amounts applied under an annuity payment option; or
.. 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
.. amounts distributed to satisfy the minimum distribution requirement of Section
401(a)9 of the Internal Revenue 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
.. an amount transferred from the Contract to a single premium immediate annuity
issued by the Company after the surrender charge period has expired; or
.. 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
.. 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:
.. original owner or original annuitant has a critical need; and
.. the critical need did not exist before the contract date.
For the purposes of this section, the following definitions apply:
.. 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.
.. 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.
.. 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.
.. 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. 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, record keeping 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
Where permitted 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 accumulated value on any valuation date is equal to:
.. purchase payments allocated to the Fixed Account;
.. plus any transfers to the Fixed Account from the Separate Account and DCA Plus
Accounts;
.. plus interest credited to the Fixed Account;
.. minus any surrenders or applicable surrender charges from the Fixed Account;
.. 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:
.. transfer an amount not to exceed 25% of your Fixed Account accumulated value;
or
.. transfer up to 100% of your Fixed Account accumulated value if your Fixed
Account accumulated value is less than $1,000; or 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:
.. You may establish scheduled transfers by sending a written request or by
telephoning the annuity service office at 1-800-852-4450.
.. Transfers occur on a date you specify (other than the 29th, 30th or 31st of
any month).
.. If the selected date is not a valuation date, the transfer is completed on the
next valuation date.
.. Scheduled transfers are only available if the Fixed Account accumulated value
is $5,000 or more at the time the scheduled transfers begin.
.. 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 accumulated value will continue until the Fixed Account
accumulated value is zero or until you notify us to discontinue them.
.. The minimum transfer amount is $100.
.. 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.
.. 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 four scheduled transfers remain in the six-month transfer program
and the DCA Plus Account accumulated value is $4,000, 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 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:
.. trading on the NYSE is restricted as determined by the SEC or when the NYSE is
closed for other than weekends and holidays; or
.. an emergency exists, as determined by the SEC, as a result of which:
. disposal by a mutual fund of securities owned by it is not reasonably
practicable;
. it is not reasonably practicable for a mutual fund to fairly determine the
value of its net assets; or
. 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 apply:
.. we reinstate the Contract effective on the original surrender date;
..
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 we calculate the purchase payment credit based on the amount of
the reinstatement;
..we apply the amount received from the other company and the amount of the
surrender charge you paid when you surrendered the Contract;
..these amounts are priced on the valuation day the money from the other
company is received by us;
.. commissions are not paid on the reinstatement amounts; and
.. 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.
IMPORTANT INFORMATION ABOUT PROCEDURES
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires financial institutions to obtain, verify, and
record information that identifies each person who opens an account. When you
open an account, we will ask for your name, address, date of birth, and other
information that will allow us to verify your identity. We may also ask to see
your driver's license or other identifying documents.
If concerns arise with verification of your identification, no transactions,
other than redemptions, will be permitted while we attempt to reconcile the
concerns. If we are unable to verify your identity within 30 days of our receipt
of your original purchase, the account(s) will be closed and redeemed in
accordance with normal redemption procedures.
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:
.. transfer assets in any division to another division or to the Fixed Account;
.. add, combine or eliminate a division(s);
.. substitute the units of a division for the units of another division;
. if units of a division are no longer available for investment; or
. if in our judgment, investment in a division becomes inappropriate
considering the purposes of the Separate Account.
MARKET TIMING DISCLOSURE
The Contract does not permit excessive trading or market timing. Market timing
activity can disrupt management strategy of the underlying mutual funds and
increase expenses, which are borne by all Contract owners. We reserve the right
to reject excessive exchanges or purchases by market timers if the trade would
disrupt the management of the Separate Account, any division of the Separate
Account or any underlying mutual fund. In addition, we may suspend or modify
transfer privileges at any time to prevent market timing efforts that could
disadvantage other Contract owners. These modifications could include, but not
be limited to:
.. requiring a minimum time period between each transfer;
.. not accepting transfer requests from someone providing them for multiple
Contracts for which he or she is not the owner; or
.. limiting the dollar amount that a Contract owner may transfer at any one time.
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 and Janus Aspen Series Funds' expenses for record keeping,
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.
From time to time, Princor may enter into special arrangements with certain
broker-dealers and may enter into special arrangements with registered
representatives of Princor. These special arrangements may provide for the
payment of higher compensation to such broker-dealers and registered
representatives for selling the Contract.
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 underlying mutual fund in which the division
invests was first offered. The hypothetical performance from the date of the
inception of the underlying 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 underlying mutual funds 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 an underlying 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 Internal Revenue Code governs the income taxation of annuities
in general.
.. Purchase payments made under non-qualified Contracts are not excludable or
deductible from your gross income or any other person's gross income.
.. 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.
.. 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.
.. Surrenders or partial surrenders are taxed as ordinary income to the extent of
the accumulated income or gain under the Contract.
.. The value of the Contract pledged or assigned is taxed as ordinary income to
the same extent as a partial surrender.
.. Annuity payments:
. The investment in the Contract is generally the total of the purchase
payments made.
. 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.
. 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 Internal Revenue Code requires:
.. 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.
.. If you die prior to the annuity payment date, the entire interest in the
Contract will be distributed:
. within five years after the date of your death; or
. 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.
.. If you take a distribution from the Contract before you are 591/2, 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
Internal Revenue Code. Where the owner or other person receiving payments is not
a natural person, the required distributions provided for in the Internal
Revenue 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.
.. IRA - An Individual Retirement Annuity (IRA) is a retirement savings annuity.
Contributions grow tax deferred.
.. SEP-IRA - A SEP is a form of IRA. A SEP allows you, as an employer, to provide
retirement benefits for your employees by contributing to their IRAs.
.. SIMPLE-IRA - SIMPLE stands for Savings Incentive Match Plan for Employers. A
SIMPLE-IRA allows employees to save for retirement by deferring salary on a
pre-tax basis and receiving predetermined company contributions.
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 Internal
Revenue 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
(IRA, SEP, SIMPLE IRA), you should be aware that this tax deferral feature is
available with any qualified investment vehicle and is not unique to an annuity.
This Contract provides additional benefits such as lifetime income options,
death benefit protection and guaranteed expense levels. Carefully consider the
features and benefits of the Contract in making the decision to purchase it.
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 Internal Revenue 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:
.. made on or after you reach age 591/2;
.. made to a beneficiary on or after your death;
.. made upon your disability;
.. part of a series of substantially equal periodic payments for the life or life
expectancy of you or you and the beneficiary;
.. made to pay medical expenses;
.. for certain unemployment expenses;
.. for first home purchases (up to $10,000); or
.. 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 591/2,
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 Internal Revenue Code which establishes standards of
diversification for the investments underlying the Contracts. Under this
Internal Revenue 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 an underlying mutual
fund to meet the diversification requirements could result in tax liability to
non-qualified Contract holders.
The investment opportunities of the underlying 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 the Commissioner's
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.
GENERAL INFORMATION
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.
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.
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.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Independent Auditors....................................................
Principal Underwriter...................................................
Calculation of Yield and Total Return...................................
Taxation Under Certain Retirement Plans.................................
Principal Life Insurance Company Separate Account B
Report of Independent Auditors.........................................
Financial Statements...................................................
Principal Life Insurance Company
Report of Independent Auditors.........................................
Consolidated Financial Statements......................................
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
APPENDIX A - INVESTMENT DIVISIONS
The following is a brief summary of the investment objectives of each division.
There is no guarantee that the objectives will be met.
AIM V.I. CORE EQUITY DIVISION
INVESTS IN: AIM V.I. Core Equity Fund - Series I
INVESTMENT ADVISOR: A I M Advisors, Inc.
INVESTMENT OBJECTIVE: seeks growth of capital with a secondary
objective of current income. The Fund invests primarily in
equity securities.
AIM V.I. GROWTH DIVISION
INVESTS IN: AIM V.I. Growth Fund - Series I
INVESTMENT ADVISOR: A I M Advisors, Inc.
INVESTMENT OBJECTIVE: seeks growth of capital while investing
principally in seasoned and better capitalized companies.
AIM V.I. PREMIER EQUITY DIVISION
INVESTS IN: AIM V.I. Premier Equity Fund - Series I
INVESTMENT ADVISOR: A I M Advisors, Inc.
INVESTMENT OBJECTIVE: seeks long-term growth of capital. Income is
a secondary objective. The Fund invests primarily in equity
securities.
AMERICAN CENTURY VP INCOME & GROWTH DIVISION
INVESTS IN: American Century Variable Portfolios, Inc. VP Income &
Growth Fund - Class I
INVESTMENT ADVISOR: American Century Investment Management, Inc.
INVESTMENT OBJECTIVE: seeks dividend growth, current income and
appreciation. The account will seek to achieve its investment
objective by investing in common stocks.
AMERICAN CENTURY VP ULTRA DIVISION
INVESTS IN: American Century Variable Portfolios, Inc. VP Ultra
Fund - Class I
INVESTMENT ADVISOR: American Century Investment Management, Inc.
INVESTMENT OBJECTIVE: seeks long-term capital growth by investing
primarily in common stocks of large U.S. companies.
AMERICAN CENTURY VP VALUE DIVISION
INVESTS IN: American Century Variable Portfolios, Inc. VP Value
Fund - Class II
INVESTMENT ADVISOR: American Century Investment Management, Inc.
INVESTMENT OBJECTIVE: seeks capital growth over time and,
secondarily, income by investing primarily in equity securities.
DREYFUS IP FOUNDERS DISCOVERY DIVISION
INVESTS IN: Dreyfus Investment Portfolios Founders Discovery
Portfolio - Initial Class
INVESTMENT ADVISOR: Founders Asset Management LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: seeks capital appreciation. To pursue this
goal, the portfolio invests primarily in equity securities of
small, U.S. based companies which are characterized as "growth"
companies.
FIDELITY VIP CONTRAFUND DIVISION
INVESTS IN: Fidelity VIP Contra Portfolio - Service Class
INVESTMENT ADVISOR: Fidelity Management & Research Company
INVESTMENT OBJECTIVE: seeks long-term capital appreciation. The
Fund invests primarily in common stocks.
FIDELITY VIP EQUITY-INCOME DIVISION
INVESTS IN: Fidelity VIP Equity-Income Portfolio - Service Class 2
INVESTMENT ADVISOR: Fidelity Management & Research Company
INVESTMENT OBJECTIVE: seeks reasonable income. The fund will also
consider the potential for capital appreciation. The fund's goad
is to achieve a yield which exceeds the composite yield on the
securities comprising the S&P 500 Index.
FIDELITY VIP GROWTH DIVISION
INVESTS IN: Fidelity VIP Growth Portfolio - Service Class
INVESTMENT ADVISOR: Fidelity Management & Research Company
INVESTMENT OBJECTIVE: seeks long-term capital appreciation. The
Fund invests primarily in common stocks.
INVESCO VIF - DYNAMICS DIVISION
INVESTS IN: INVESCO VIF - Dynamics Fund - Series I
INVESTMENT ADVISOR: INVESCO Funds Group
INVESTMENT OBJECTIVE: seeks long-term capital growth by investing
primarily in equity securities.
INVESCO VIF - HEALTH SCIENCES DIVISION
INVESTS IN: INVESCO VIF - Health Sciences Fund - Series I
INVESTMENT ADVISOR: INVESCO Funds Group
INVESTMENT OBJECTIVE: seeks long-term capital growth. The Fund
invests primarily in equity securities.
INVESCO VIF - SMALL COMPANY GROWTH DIVISION
INVESTS IN: INVESCO VIF - Small Company Growth Fund - Series I
INVESTMENT ADVISOR: INVESCO Funds Group
INVESTMENT OBJECTIVE: seeks long-term capital growth by investing
primarily in small-capitalization companies.
INVESCO VIF - TECHNOLOGY DIVISION
INVESTS IN: INVESCO VIF - Technology Fund - Series I
INVESTMENT ADVISOR: INVESCO Funds Group
INVESTMENT OBJECTIVE: seeks long-term capital growth by investing
primarily in equity securities and equity related instruments of
companies engaged in technology related industries.
JANUS ASPEN MID CAP GROWTH DIVISION
INVESTS IN: Janus Aspen Series Mid Cap Growth Portfolio - Service
Shares
INVESTMENT ADVISOR: Janus Capital Management LLC
INVESTMENT OBJECTIVE: seeks long-term growth of capital. It
pursues its objective by investing primarily in common stocks
selected for their growth potential, and normally invests at
least 80% of its net assets in equity securities of medium-sized
companies.
ASSET ALLOCATION DIVISION
INVESTS IN: Principal Variable Contracts Fund - Asset Allocation
Account
INVESTMENT ADVISOR: Morgan Stanley Asset Management through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to generate a total investment return
consistent with the preservation of capital. The Account intends
to pursue a flexible investment policy in seeking to achieve
this investment objective by investing primarily in equity and
fixed-income securities.
BALANCED DIVISION
INVESTS IN: Principal Variable Contracts Fund - Balanced Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to generate a total return consisting of
current income and capital appreciation while assuming
reasonable risks in furtherance of this objective by investing
primarily in equity and fixed-income securities.
BOND DIVISION
INVESTS IN: Principal Variable Contracts Fund - Bond Account
INVESTMENT ADVISOR: Principal Management Corporation
INVESTMENT OBJECTIVE: to provide as high a level of income as is
consistent with preservation of capital and prudent investment
risk.
CAPITAL VALUE DIVISION
INVESTS IN: Principal Variable Contracts Fund - Capital Value
Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to provide long-term capital appreciation
and secondarily growth investment income. The Account seeks to
achieve its investment objectives through the purchase primarily
of common stocks, but the Account may invest in other
securities.
EQUITY GROWTH DIVISION
INVESTS IN: Principal Variable Contracts Fund - Equity Growth
Account
INVESTMENT ADVISOR: Morgan Stanley Asset Management through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to provide long-term capital appreciation by
investing primarily in growth-oriented common stocks of medium
and large capitalization U.S. corporations and, to a limited
extent, foreign corporations.
EQUITY INCOME DIVISION
INVESTS IN: Principal Variable Contracts Fund - Equity Income
Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek to provide current income and
long-term growth of income and capital by investing primarily in
equity and fixed- income securities of companies in the public
utilities industry.
GOVERNMENT SECURITIES DIVISION
INVESTS IN: Principal Variable Contracts Fund - Government
Securities Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek a high level of current income,
liquidity and safety of principal.
GROWTH DIVISION
INVESTS IN: Principal Variable Contracts Fund - Growth Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek growth of capital. The Account seeks
to achieve its objective through the purchase primarily of
common stocks, but the Account may invest in other securities.
INTERNATIONAL DIVISION
INVESTS IN: Principal Variable Contracts Fund - International
Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital by
investing in a portfolio of equity securities domiciled in any
of the nations of the world.
INTERNATIONAL EMERGING MARKETS DIVISION
INVESTS IN: Principal Variable Contracts Fund - International
Emerging Markets Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: seeks long-term growth of capital by
investing in equity securities of issuers in emerging market
countries.
INTERNATIONAL SMALLCAP DIVISION
INVESTS IN: Principal Variable Contracts Fund - International
SmallCap Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital. The
Account will attempt to achieve its objective by investing
primarily in equity securities of non-U.S. companies with
comparatively smaller market capitalizations.
LARGECAP BLEND DIVISION
INVESTS IN: Principal Variable Contracts Fund - LargeCap Blend
Account
INVESTMENT ADVISOR: Federated Investment Management Company
through a sub-advisory agreement
INVESTMENT OBJECTIVE: seeks long-term growth of capital.
LARGECAP GROWTH EQUITY DIVISION
INVESTS IN: Principal Variable Contracts Fund - LargeCap Growth
Equity Account
INVESTMENT ADVISOR: Putnam Investment Management, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital by
investing in stocks of U.S. companies, with a focus on growth
stocks.
LARGECAP STOCK INDEX DIVISION
INVESTS IN: Principal Variable Contracts Fund - LargeCap Stock
Index Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital by
investing in stocks of large U.S. companies. The Account
attempts to mirror the investment results of the Standard &
Poor's 500 Index.
LARGECAP VALUE DIVISION
INVESTS IN: Principal Variable Contracts Fund - LargeCap Value
Account
INVESTMENT ADVISOR: Bernstein Investment Research and Management
through a sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital.
LIMITED TERM BOND DIVISION
INVESTS IN: Principal Variable Contracts Fund - Limited Term Bond
Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to provide current income.
MIDCAP DIVISION
INVESTS IN: Principal Variable Contracts Fund - MidCap Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to achieve capital appreciation by investing
primarily in securities of emerging and other growth-oriented
companies.
MIDCAP GROWTH DIVISION
INVESTS IN: Principal Variable Contracts Fund - MidCap Growth
Account
INVESTMENT ADVISOR: The Dreyfus Corporation through a sub-advisory
agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital. The
Account will attempt to achieve its objective by investing
primarily in growth stocks of medium market capitalization
companies.
MIDCAP VALUE DIVISION
INVESTS IN: Principal Variable Contracts Fund - MidCap Value
Account
INVESTMENT ADVISOR: Neuberger Berman Management, Inc. through a
sub-advisory agreement.
INVESTMENT OBJECTIVE: seeks long-term growth of capital by
investing primarily in equity securities of companies with value
characteristics and medium market capitalizations.
MONEY MARKET DIVISION
INVESTS IN: Principal Variable Contracts Fund - Money Market
Account
INVESTMENT ADVISOR: Principal Management Corporation
INVESTMENT OBJECTIVE: to seek as high a level of current income
available from short-term securities as is considered consistent
with preservation of principal and maintenance of liquidity by
investing all of its assets in a portfolio of money market
instruments.
REAL ESTATE SECURITIES DIVISION
INVESTS IN: Principal Variable Contracts Fund - Real Estate
Securities Account
INVESTMENT ADVISOR: Principal Management Corporation
INVESTMENT OBJECTIVE: to seek to generate a high total return. The
Account will attempt to achieve its objective by investing
primarily in equity securities of companies principally engaged
in the real estate industry.
SMALLCAP DIVISION
INVESTS IN: Principal Variable Contracts Fund - SmallCap Account
INVESTMENT ADVISOR: Principal Global Investors, LLC through a
sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital. The
Account will attempt to achieve its objective by investing
primarily in equity securities of both growth and value oriented
companies with comparatively smaller market capitalizations.
SMALLCAP GROWTH DIVISION
INVESTS IN: Principal Variable Contracts Fund - SmallCap Growth
Account
INVESTMENT ADVISOR: UBS Global Asset Management (New York) Inc.
through a sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital. The
Account will attempt to achieve its objective by investing
primarily in equity securities of growth companies with
comparatively smaller market capitalizations.
SMALLCAP VALUE DIVISION
INVESTS IN: Principal Variable Contracts Fund - SmallCap Value
Account
INVESTMENT ADVISOR: J.P. Morgan Investment Management, Inc.
through a sub-advisory agreement
INVESTMENT OBJECTIVE: to seek long-term growth of capital by
investing primarily in equity securities of small companies with
value characteristics and comparatively smaller market
capitalizations.
APPENDIX B
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.
· Enlarge/Download Table
NUMBER OF
ACCUMULATION UNIT VALUE ACCUMULATION
----------------------------------------- UNITS
BEGINNING END OF PERCENTAGE OF CHANGE OUTEND OFNG
DIVISION OF PERIOD PERIOD FROM PRIOR PERIOD PERIOD
-------- --------- ------ -------------------- (IN
THOUSANDS)
------------
AIM V.I. Core Equity
2003 6.487 7.971 22.88 3,942
2002 7.781 6.487 -16.63 4,400
2001 10.211 7.781 -23.80 5,152
2000 12.101 10.211 -15.62 4,586
Period Ended December 31, 1999/(1) / 10.000 12.101 21.01 1,494
AIM V.I. Growth
2003 $ 4.283 5.552 29.61 3,250
2002 6.284 4.283 -31.84 3,594
2001 9.624 6.284 -34.70 4,437
2000 12.256 9.624 -21.48 4,277
Period Ended December 31, 1999/(1)/ 10.000 12.256 22.56 968
AIM V.I. Premier Equity
2003 5.791 7.154 23.53 3,948
2002 8.408 5.791 -31.12 4,035
2001 9.738 8.408 -13.66 4,011
2000 11.553 9.738 -15.71 3,486
Period Ended December 31, 1999/(1)/ 10.000 11.553 15.53 1,149
American Century Income & Growth
2003 7.138 9.119 27.75 1,589
2002 8.965 7.138 -20.37 1,122
Period Ended December 31, 2001/(2)/ 10.000 8.965 -10.35 368
American Century Ultra
2003 6.960 8.585 23.34 616
2002 9.119 6.960 -23.67 436
Period Ended December 31, 2001/(2)/ 10.000 9.119 -8.81 120
American Century Value
2003 8.408 10.696 27.21 775
Period Ended December 31, 2002/(3)/ 10.000 8.408 -15.92 192
Dreyfus Investments Portfolios - Founders Discovery
2003 5.819 7.826 34.49 511
2002 8.825 5.819 -34.06 134
Period Ended December 31, 2001/(2)/ 10.000 8.825 -11.75 22
Fidelity VIP Contrafund
2003 8.055 10.210 26.75 4,985
2002 9.005 8.055 -10.55 4,524
2001 10.405 9.005 -13.46 4,272
2000 11.294 10.405 -7.87 3,917
Period Ended December 31, 1999/(1)/ 10.000 11.294 12.94 1,436
Fidelity VIP Equity-Income
2003 8.009 10.285 28.42 1,570
Period Ended December 31, 2002/(3)/ 10.000 8.009 -19.91 374
Fidelity VIP Growth
2003 5.956 7.810 31.13 4,456
2002 8.640 5.956 -31.07 4,674
2001 10.635 8.640 -18.76 5,285
2000 12.108 10.635 -12.17 4,837
Period Ended December 31, 1999/(1)/ 10.000 12.108 21.08 1,441
INVESCO VIF-Dynamics
2003 5.371 7.311 36.12 161
2002 7.986 5.371 -32.74 45
Period Ended December 31, 2001/(2)/ 10.000 7.986 -20.14 31
INVESCO VIF-Health Sciences
2003 7.375 9.307 26.19 830
2002 9.852 7.375 -25.14 568
Period Ended December 31, 2001/(2)/ 10.000 9.852 -1.48 252
INVESCO VIF-Small Company Growth
2003 5.743 7.568 31.77 235
2002 8.443 5.743 -31.98 141
Period Ended December 31, 2001/(2)/ 10.000 8.443 -15.57 45
INVESCO VIF-Technology
2003 3.711 5.325 43.48 716
2002 7.070 3.711 -47.51 229
Period Ended December 31, 2001/(2)/ 10.000 7.070 -29.30 100
Janus Aspen Mid Cap Growth
2003 3.951 5.258 33.09 1,819
2002 5.565 3.951 -29.01 1,636
2001 9.329 5.565 -40.35 1,448
Period Ended December 31, 2000/(//4//)/ 10.000 9.329 -6.71 70
Asset Allocation
2003 16.123 19.363 20.10 3,893
2002 18.753 16.123 -14.03 4,235
2001 19.766 18.753 -5.12 4,644
2000 19.696 19.766 0.36 4,505
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/(//5//)/ 10.075 9.978 -0.96 303
Balanced
2003 13.901 16.313 17.35 5,379
2002 16.213 13.901 -14.26 5,862
2001 17.647 16.213 -8.13 6,926
2000 17.846 17.647 -1.12 7,235
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/(//5//)/ 10.266 9.972 -2.86 370
Bond
2003 16.885 17.440 3.29 9,858
2002 15.648 16.885 7.91 9,735
2001 14.655 15.648 6.78 8,059
2000 13.718 14.655 6.83 6,415
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/(//5//)/ 10.050 10.064 0.14 301
Capital Value
2003 17.098 21.190 23.93 7,376
2002 20.053 17.098 -14.74 7,883
2001 22.084 20.053 -9.20 8,725
2000 21.888 22.084 0.90 8,705
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/(//5//)/ 10.328 10.234 -0.91 699
Equity Growth
2003 20.076 24.972 24.39 7,750
2002 28.124 20.076 -28.62 8,433
2001 33.450 28.124 -15.92 9,806
2000 38.363 33.450 -12.81 10,065
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
Equity Income (fka Utilities)
2003 8.399 9.442 12.42 2,381
2002 9.732 8.399 -13.70 2,332
2001 13.631 9.732 -28.60 2,694
2000 11.581 13.631 17.70 2,253
1999 11.464 11.581 1.02 1,670
Period Ended December 31, 1998/(//6//)/ 10.000 11.464 14.64 639
Government Securities
2003 17.262 17.361 0.57 14,675
2002 16.066 17.262 7.45 14,056
2001 15.118 16.066 6.27 9,403
2000 13.741 15.118 10.02 7,195
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/(//5//)/ 10.133 9.973 -1.93 572
Growth
2003 11.387 14.222 24.89 7,025
2002 16.257 11.387 -29.95 8,040
2001 22.098 16.257 -26.43 9,977
2000 24.904 22.098 -11.27 10,270
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/(//5//)/ 10.336 10.454 1.14 764
International
2003 11.214 14.656 30.69 7,446
2002 13.529 11.214 -17.11 7,391
2001 18.092 13.529 -25.22 8,130
2000 19.987 18.092 -9.48 8,208
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/(//5//)/ 9.624 9.582 -0.43 936
International Emerging Markets
2003 8.549 13.272 55.25 806
2002 9.371 8.549 -8.78 506
2001 9.910 9.371 -5.44 153
Period Ended December 31, 2000/(//4//)/ 10.000 9.910 -0.90 9
International SmallCap
2003 9.593 14.604 52.24 2,905
2002 11.592 9.593 -17.25 2,774
2001 15.020 11.592 -22.82 2,848
2000 17.184 15.020 -12.59 2,822
1999 8.978 17.184 91.40 1,246
Period Ended December 31, 1998/(//6//)/ 10.000 8.978 -10.22 419
LargeCap Blend
2003 8.255 10.089 22.22 3,447
Period Ended December 31, 2002/(//7//)/ 10.000 8.255 -17.45 1,047
LargeCap Growth Equity
2003 4.420 5.375 21.62 1,675
2002 6.707 4.420 -34.10 565
2001 9.713 6.707 -30.95 218
Period Ended December 31, 2000/(//4//)/ 10.000 9.713 -2.87 18
LargeCap Stock Index
2003 6.498 8.235 26.72 7,596
2002 8.484 6.498 -23.40 6,302
2001 9.774 8.484 -13.20 5,484
2000 10.956 9.774 -10.79 4,136
Period Ended December 31, 1999/(1)/ 10.000 10.956 9.56 2,314
LargeCap Value
2003 8.326 10.530 26.47 2,948
Limited Term Bond
2003 9.960 1,380
MicroCap
2003 7.243 10.007 38.16 0
2002 8.825 7.243 -17.93 666
2001 8.771 8.825 0.62 639
2000 7.920 8.771 10.74 523
1999 8.106 7.920 -2.30 244
Period Ended December 31, 1998/(//6//)/ 10.000 8.106 -18.94 141
MidCap
2003 20.704 27.156 31.16 8,364
2002 22.975 20.704 -9.88 8,520
2001 24.162 22.975 -4.91 8,963
2000 21.351 24.162 13.17 8,777
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/(//5//)/ 10.157 10.108 -0.48 973
MidCap Growth
2003 6.711 9.317 38.83 3,255
2002 9.217 6.711 -27.19 1,754
2001 11.234 9.217 -17.95 1,867
2000 10.522 11.234 6.77 1,539
1999 9.607 10.522 9.52 746
Period Ended December 31, 1998/(//6//)/ 10.000 9.607 -3.93 352
MidCap Value
2003 8.514 11.476 34.79 2,126
2002 9.575 8.514 -11.08 1,282
Period Ended December 31, 2001/(//4//)/ 10.000 9.575 -4.25 261
Money Market
2003 13.272 13.203 -0.52 5,147
2002 13.252 13.272 0.15 7,629
2001 12.912 13.252 2.63 7.538
2000 12.306 12.912 4.92 5,465
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/(//5//)/ 10.027 10.194 1.67 702
Real Estate Securities (fka Real Estate)
2003 12.931 17.740 37.19 3,015
2002 12.155 12.931 6.38 2,087
2001 11.318 12.155 7.40 893
2000 8.750 11.318 29.35 643
1999 9.275 8.750 -5.66 261
Period Ended December 31, 1998/(//6//)/ 10.000 9.275 -7.25 195
SmallCap
2003 7.123 9.625 35.12 4,065
2002 9.926 7.123 -28.24 2,980
2001 9.801 9.926 1.28 2,697
2000 11.242 9.801 -12.82 2,250
1999 7.928 11.242 41.80 1,208
Period Ended December 31, 1998/(//6//)/ 10.000 7.928 -20.72 459
SmallCap Growth
2003 6.005 8.637 43.84 3,973
2002 11.229 6.005 -46.53 3,622
2001 16.724 11.229 -32.86 3,766
2000 19.672 16.724 -14.99 3,535
1999 10.179 19.672 93.26 1,388
Period Ended December 31, 1998/(//6//)/ 10.000 10.179 1.79 314
SmallCap Value
2003 11.694 17.394 48.74 2,478
2002 12.993 11.694 -10.00 2,064
2001 12.384 12.993 4.92 1,213
2000 10.123 12.384 22.34 756
1999 8.440 10.123 19.94 536
Period Ended December 31, 1998/(//6//)/ 10.000 8.440 -15.60 306
/ //(1)/ Commenced operations on July 30, 1999.
/ //(2)/ Commenced operations on May 19, 2001.
/ //(3)/ Commenced operations on May 18, 2002.
/ //(4)/ Commenced operations on November 24, 2000.
/ //(5)/ Commenced operations on June 16, 1994.
/ //(6)/ Commenced operations on May 1, 1998.
/ //(7)/ Commenced operations on May 1, 2002.
· Enlarge/Download Table
NUMBER OF
ACCUMULATION UNIT VALUE ACCUMULATION UNITS
----------------------------------------- OUTSTANDING
BEGINNING END OF PERCENTAGE OF CHANGE END OF PERIOD
DIVISION OF PERIOD PERIOD FROM PRIOR PERIOD (IN THOUSANDS)
-------- --------- ------ -------------------- --------------------
AIM V.I. Core Equity
2003 $ 6.405 $ 7.824 22.15% 818
2002 7.730 6.405 -17.14 722
2001 10.205 7.730 -24.25 577
Period Ended December
31, 2000/(1)/ 10.446 10.205 -2.31 46
AIM V.I. Growth
2003 4.230 5.449 28.83 430
2002 6.242 4.230 -32.24 368
2001 9.619 6.242 -35.11 314
Period Ended December
31, 2000/(1)/ 9.819 9.619 -2.04 25
AIM V.I. Premier
Equity
2003 5.718 7.022 22.81 888
2002 8.353 5.718 -31.55 689
2001 9.733 8.353 -14.18 439
Period Ended December
31, 2000/(1)/ 9.810 9.733 -0.78 21
American Century
Income & Growth
2003 7.069 8.977 26.99 801
2002 8.931 7.069 -20.85 531
Period Ended December
31, 2001/(2)/ 10.000 8.931 -10.69 181
American Century
Ultra
2003 6.893 8.451 22.62 315
2002 9.085 6.893 -24.14 262
Period Ended December
31, 2001/(2)/ 10.000 9.085 -9.15 107
American Century
Value
2003 8.376 10.593 26.47 349
Period Ended December
31, 2002/(3)/ 10.000 8.376 -16.24 90
Dreyfus Investment
Portfolios - Founders
Discovery
2003 5.762 7.704 33.70 337
2002 8.792 5.762 -34.46 101
Period Ended December
31, 2001/(2)/ 10.000 8.792 -12.08 12
Fidelity VIP
Contrafund
2003 7.954 10.022 26.00 1,109
2002 8.946 7.954 -11.09 823
2001 10.399 8.946 -13.97 418
Period Ended December
31, 2000/(1)/ 10.228 10.399 1.67 14
Fidelity VIP Equity
Income
2003 7.979 10.185 27.65 783
Period Ended December
31, 2002/(3)/ 10.000 7.979 -20.21 143
Fidelity VIP Growth
2003 5.881 7.666 30.35 846
2002 8.583 5.881 -31.48 651
2001 10.629 8.583 -19.25 454
Period Ended December
31, 2000/(1)/ 11.022 10.629 -3.57 27
INVESCO VIF-Dynamics
2003 5.319 7.196 35.29 120
2002 7.956 5.319 -33.15 22
Period Ended December
31, 2001/(2)/ 10.000 7.956 -20.44 5
INVESCO VIF-Health
Sciences
2003 7.304 9.162 25.44 493
2002 9.815 7.304 -25.59 299
Period Ended December
31, 2001/(2)/ 10.000 9.815 -1.85 121
INVESCO VIF-Small
Company Growth
2003 5.688 7.450 30.98 97
2002 8.411 5.688 -32.38 73
Period Ended December
31, 2001/(2)/ 10.000 8.411 -15.89 20
INVESCO VIF-Technology
2003 3.675 5.242 42.63 336
2002 7.044 3.675 -47.82 138
Period Ended December
31, 2001/(2)/ 10.000 7.044 -29.56 45
Janus Aspen Mid Cap
Growth
2003 3.901 5.161 42.63 1,036
2002 5.528 3.901 -29.43 913
2001 9.324 5.528 -40.71 607
Period Ended December
31, 2000/(1)/ 10.000 9.324 -6.76 21
Asset Allocation
2003 15.921 19.006 19.38 466
2002 18.630 15.921 -14.54 384
2001 19.754 18.630 -5.69 278
Period Ended December
31, 2000 /(1)/ 19.631 19.754 0.63 16
Balanced
2003 13.727 16.012 16.65 582
2002 16.107 13.727 -14.78 358
2001 17.637 16.107 -8.67 150
Period Ended December
31, 2000/(1)/ 17.485 17.637 0.87 6
Bond
2003 16.674 17.119 2.67 2,590
2002 15.545 16.674 7.26 1,758
2001 14.647 15.545 6.13 805
Period Ended December
31, 2000/(1)/ 14.225 14.647 2.97 12
Capital Value
2003 16.883 20.800 23..20 752
2002 19.921 16.883 -15.25 547
2001 22.072 19.921 -9.75 259
Period Ended December
31, 2000/(1)/ 20.967 22.072 5.27 10
Equity Growth
2003 19.824 24.511 23.64 611
2002 27.939 19.824 -29.04 463
2001 33.431 27.939 -16.43 284
Period Ended December
31, 2000/(1)/ 35.430 33.431 -5.64 14
Equity Income (fka
Utilities)
2003 8.294 9.268 11.75 508
2002 9.667 8.294 -14.20 407
2001 13.624 9.667 -29.04 347
Period Ended December
31, 2000/(1)/ 12.984 13.624 4.93 16
Government Securities
2003 17.046 17.041 -0.03 4,230
2002 15.960 17.046 6.80 3,410
2001 15.109 15.960 5.63 1,094
Period Ended December
31, 2000/(1)/ 14.739 15.109 2.51 23
Growth
2003 11.244 13.959 24.14 410
2002 16.149 11.244 -30.37 358
2001 22.086 16.149 -26.88 271
Period Ended December
31, 2000/(1)/ 23.356 22.086 -5.44 16
International
2003 11.074 14.385 29.90 1,244
2002 13.440 11.074 -17.61 769
2001 18.082 13.440 -25.67 412
Period Ended December
31, 2000/(1)/ 17.028 18.082 6.19 22
International
Emerging Markets
2003 8.441 13.027 54.32 436
2002 9.309 8.441 -9.32 261
2001 9.904 9.309 -6.01 112
Period Ended December
31, 2000/(1)/ 10.000 9.904 -0.96 10
International
SmallCap
2003 9.473 14.335 51.33 635
2002 11.515 9.473 -17.74 450
2001 15.011 11.515 -23.29 265
Period Ended December
31, 2000/(1)/ 14.559 15.011 3.10 25
LargeCap Blend
2003 8.224 9.991 21.49 1,544
Period Ended December
31, 2002/(//4//)/ 10.000 8.224 -17.76 366
LargeCap Growth
Equity
2003 4.364 5.276 20.90 1,003
2002 6.663 4.364 -34.50 290
2001 9.708 6.663 -31.37 148
Period Ended December
31, 2000/(1)/ 10.000 9.708 -2.92 17
LargeCap Stock Index
2003 6.417 8.084 25.98 2,745
2002 8.428 6.417 -23.86 1,531
2001 9.769 8.428 -13.73 710
Period Ended December
31, 2000/(1)/ 9.939 9.769 -1.71 16
LargeCap Value
2003 8.295 10.427 25.70 1,063
Period Ended December
31, 2002/(//4//)/ 10.000 8.295 -17.05 299
Limited Term Bond
2003 9.922 558
MidCap
2003 20.445 26.655 30.38 1,064
2002 22.824 20.445 -10.42 697
2001 24.148 22.824 -5.48 335
Period Ended December
31, 2000/(1)/ 22.631 24.148 6.70 8
MidCap Growth
2003 6.627 9.145 38.00 1,101
2002 9.156 6.627 -27.62 406
2001 11.228 9.156 -18.45 195
Period Ended December
31, 2000/(1)/ 10.932 11.228 2.71 10
MidCap Value
2003 8.431 11.297 33.99 868
2002 9.539 8.431 -11.61 433
Period Ended December
31, 2001/(2)/ 10.00 9.539 -4.61 99
Money Market
2003 13.106 12.960 -1.11 1,683
2002 13.164 13.106 -.0.44 2,833
2001 12.905 13.164 2.01 2,457
Period Ended December
31, 2000/(1)/ 12.851 12.905 0.42 534
Real Estate
Securities (fka Real
Estate)
2003 12.769 17.413 36.37 1,001
2002 12.075 12.769 5.75 612
2001 11.312 12.075 6.75 158
Period Ended December
31, 2000/(1)/ 10.520 11.312 7.53 10
SmallCap
2003 7.034 9.448 34.32 947
2002 9.860 7.034 -28.66 505
2001 9.795 9.860 0.66 218
Period Ended December
31, 2000/(1)/ 9.961 9.795 -1.67 8
SmallCap Growth
2003 5.929 8.477 42.97 741
2002 11.154 5.929 -46.84 517
2001 16.715 11.154 -33.27 291
Period Ended December
31, 2000/(1)/ 16.727 16.715 -0.07 22
SmallCap Value
2003 11.548 17.073 47.85 776
2002 12.908 11.548 -10.54 571
2001 12.377 12.908 4.29 229
Period Ended December
31, 2000/(1)/ 11.303 12.377 9.50 3
//
/(1)/
Commenced operations
on November 24, 2000.
///(2)/
Commenced operations
on May 19, 2001.
///(//3//)/
Commenced operations
on May 18, 2002.
///(//4//)/
Commenced operations
on May 1, 2002.
PART B
PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B
FLEXIBLE VARIABLE ANNUITY ("FVA") CONTRACT
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 30, 2004
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 April 30, 2004.
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
Page
Independent Auditors ....................................................3
Principal Underwriter...................................................3
Calculation of Yield and Total Return...................................3
Taxation Under Certain Retirement Plans.................................7
Principal Life Insurance Company Separate Account B
Report of Independent Auditors.........................................11
Financial Statements...................................................12
Principal Life Insurance Company
Report of Independent Auditors.........................................70
Consolidated Financial Statements......................................71
INDEPENDENT AUDITORS
Ernst & Young LLP, 801 Grand, Des Moines, Iowa, serves as independent auditors
for Principal Life Insurance Company Separate Account B and the Principal Life
Insurance Company.
PRINCIPAL UNDERWRITER
Princor Financial Services Corporation ("Princor") is the principal underwriter
of the Contract. Princor is a subsidiary of Principal Financial Services, Inc.
The Contract's offering to the public is continuous. As the principal
underwriter, Princor is paid for the distribution of the Contract. For the last
three fiscal years Princor has received and retained the following commissions:
· Download Table
2003 2002 2001
RECEIVED/RETAINED RECEIVED/RETAINED RECEIVED/RETAINED
----------------- ----------------- -----------------
$14,897,344/$0 $18,879,680/$0 $14,886,087/$0
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 June 12, 2000 the Principal Variable Contracts Fund, Inc. Stock Index
500 Account changed its name to the LargeCap Stock Index Account. Effective
January 1, 1998 the Mutual Funds which correspond to Accounts of the Principal
Variable Contracts Fund, Inc. were reorganized as follows:
· Download Table
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
The Aggressive Growth Account changed its name to the Equity Growth Account on
May 1, 2001.
The Real Estate and Utilities Accounts their names to Real Estate Securities
Account and Equity Income Account, respectively, on March 9, 2004.
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. Service Shares of the Janus Aspen Series were first offered on
December 31, 1999. Performance shown for periods prior to December 31, 1999,
reflects performance of a different class of shares (the Institutional Shares)
restated based on the Service Shares' estimated fees and expenses including the
Service Shares' .25% 12b-1 fee and ignoring any fee and expense
limitations. 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." For the period ended December 31,
2003, the 7-day annualized and effective yields were -0.26% and -0.26%,
respectively, for Contracts without a surrender charge or purchase payment
credit, and -6.26% and -6.26%, respectively, for Contracts subject to a
surrender charge but without a purchase payment credit. For the period ended
December 31, 2003, the 7-day annualized and effective yields were -1.82% and
-1.78%, respectively, for Contracts without a surrender but with a purchase
payment credit, and -7.82% and -7.78%, respectively, for Contracts subject to a
surrender charge but with a purchase payment credit.
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, 2003 assuming the Contract had been offered as of the
effective dates of the underlying Mutual Funds in which the Divisions invest:
· Enlarge/Download Table
CONTRACT WITHOUT PURCHASE PAYMENT CREDIT RIDER
WITH SURRENDER CHARGE
--------------------------------------------------------------
EFFECTIVE SINCE
DIVISION DATE ONE YEAR FIVE YEARS TEN YEARS INCEPTION
-------- --------- -------- ---------- --------- ---------
Asset Allocation
Division June 1, 1994 14.03% 2.42% 7.10%
Balanced Division December 18, 1987 11.28 -2.27 4.65% 7.05
Bond Division December 18, 1987 -2.79 3.54 5.16 6.80
Capital Value
Division May 13, 1970 17.86 -2.48 7.43 10.45
Equity Growth
Division June 1, 1994 18.31 -2.88 / 9.99
Equity Income (fka
Utilities) Division May 1, 1998 6.34 -4.59 / -1.48
Government Securities
Division April 9, 1987 -5.50 3.90 5.03 6.47
Growth Division May 2, 1994 18.82 -9.00 3.67
International
Division May 2, 1994 24.62 -2.55 / 3.99
International
Emerging Markets
Division October 24, 2000 49.18 / 6.18
International
SmallCap Division May 1, 1998 46.17 9.76 / 6.41
LargeCap Blend
Division May 1, 2002 16.15 / -2.23
LargeCap Growth
Equity Division October 24, 2000 15.54 / -25.78
LargeCap Stock Index
Division May 3, 1999 20.66 / -5.22
LargeCap Value
Division May 1, 2002 20.39 / 0.84
Limited Term Bond
Division May 1, 2003 / -6.13
MidCap Division December 18, 1987 25.09 6.75 10.29 12.75
MidCap Growth
Division May 1, 1998 32.76 -1.34 / -1.78
MidCap Value Division May 3, 1999 28.72 / 10.57
Money Market Division March 18, 1983 -6.59 1.46 2.83 4.20
Real Estate
Securities (fka Real
Estate) Division May 1, 1998 31.12 13.44 / 10.35
SmallCap Division May 1, 1998 29.05 3.38 / -1.21
SmallCap Growth
Division May 1, 1998 37.77 -3.99 / -2.96
SmallCap Value
Division May 1, 1998 42.67 15.18 / 9.94
AIM V.I. Core Equity
Division May 2, 1994 16.80 -3.41 / 8.07
AIM V.I. Growth
Division May 5, 1993 23.54 -10.56 4.11 4.76
AIM V.I. Premier
Equity Division May 5, 1993 17.46 -5.30 7.11 7.96
American Century VP
Income & Growth
Division October 31, 1997 21.68 -1.78 / 3.88
American Century VP
Ultra Division May 1, 2001 17.28 / -6.43
American Century VP
Value Division May 1, 1996 21.14 6.36 / 9.43
DIP Founders
Discovery Division December 15, 1999 28.42 / -10.17
Fidelity VIP
Contrafund Division January 31, 1995 20.69 1.46 / 12.76
Fidelity VIP Equity
Income Division November 3, 1986 22.34 1.50 9.39 9.47
Fidelity VIP Growth
Division October 31, 1986 25.06 -3.39 8.15 10.19
INVESCO VIF -
Dynamics Division August 25, 1997 30.04 -2.56 1.54
INVESCO VIF - Health
Sciences Division May 22, 1997 20.12 1.02 / 8.10
INVESCO VIF - Small
Company Growth
Division August 25, 1997 25.71 2.10 4.11
INVESCO VIF -
Technology Division May 21, 1997 37.42 -5.67 / 1.44
Janus Aspen Mid Cap
Growth Division September 13, 1993 27.02 -4.25 6.60 8.01
· Enlarge/Download Table
CONTRACT WITHOUT PURCHASE PAYMENT CREDIT RIDER
WITHOUT SURRENDER CHARGE
--------------------------------------------------------------
EFFECTIVE SINCE
DIVISION DATE ONE YEAR FIVE YEARS TEN YEARS INCEPTION
-------- --------- -------- ---------- --------- ---------
Asset Allocation
Division June 1, 1994 20.03% 2.96% 7.10%
Balanced Division December 18, 1987 17.28 -1.62 4.65% 7.05
Bond Division December 18, 1987 3.21 4.05 5.16 6.80
Capital Value
Division May 13, 1970 23.86 -1.83 7.43 10.45
Equity Growth
Division June 1, 1994 24.31 -2.22 / 9.99
Equity Income (fka
Utilities) Division May 1, 1998 12.34 -3.87 / -1.11
Government Securities
Division April 9, 1987 0.50 4.41 5.03 6.47
Growth Division May 2, 1994 24.82 -8.14 / 3.67
International
Division May 2, 1994 30.62 -1.89 / 3.99
International
Emerging Markets
Division October 24, 2000 55.18 / 7.27
International
SmallCap Division May 1, 1998 52.17 10.17 / 6.67
LargeCap Blend
Division May 1, 2002 22.15 / 1.37
LargeCap Growth
Equity Division October 24, 2000 21.54 / -23.45
LargeCap Stock Index
Division May 3, 1999 26.66 / -4.45
LargeCap Value
Division May 1, 2002 26.39 / 4.37
Limited Term Bond
Division May 1, 2003 / -0.13
MidCap Division December 18, 1987 31.09 7.21 10.29 12.75
MidCap Growth
Division May 1, 1998 38.76 -0.72 / -1.40
MidCap Value Division May 3, 1999 34.72 / 11.01
Money Market Division March 18, 1983 -0.59 2.02 2.83 4.20
Real Estate
Securities (fka Real
Estate) Division May 1, 1998 37.12 13.80 / 10.57
SmallCap Division May 1, 1998 35.05 3.90 / -0.84
SmallCap Growth
Division May 1, 1998 43.77 -3.29 / -2.56
SmallCap Value
Division May 1, 1998 48.67 15.52 / 10.16
AIM V.I. Core Equity
Division May 2, 1994 22.80 -2.73 / 8.07
AIM V.I. Growth
Division May 5, 1993 29.54 -9.64 4.11 4.76
AIM V.I. Premier
Equity Division May 5, 1993 23.46 -4.56 7.11 7.96
American Century VP
Income & Growth
Division October 31, 1997 27.68 -1.14 / 3.88
American Century VP
Ultra Division May 1, 2001 23.28 / -4.37
American Century VP
Value Division May 1, 1996 27.14 6.82 / 9.43
DIP Founders
Discovery Division December 15, 1999 34.42 / -9.16
Fidelity VIP
Contrafund Division January 31, 1995 26.69 2.02 / 12.76
Fidelity VIP Equity
Income Division November 3, 1986 28.34 2.05 9.39 9.47
Fidelity VIP Growth
Division October 31, 1986 31.06 -2.71 8.15 10.19
INVESCO VIF -
Dynamics Division August 25, 1997 36.04 -1.90 / 1.54
INVESCO VIF - Health
Sciences Division May 22, 1997 26.12 1.59 / 8.10
INVESCO VIF - Small
Company Growth
Division August 25, 1997 31.71 2.65 4.11
INVESCO VIF -
Technology Division May 21, 1997 43.42 -4.93 / 1.44
Janus Aspen Mid Cap
Growth Division September 13, 1993 33.02 -3.55 6.60 8.01
· Enlarge/Download Table
CONTRACT WITH PURCHASE PAYMENT CREDIT RIDER
WITH SURRENDER CHARGE
--------------------------------------------------------------
EFFECTIVE SINCE
DIVISION DATE ONE YEAR FIVE YEARS TEN YEARS INCEPTION
-------- --------- -------- ---------- --------- ---------
Asset Allocation
Division June 1, 1994 11.31% 1.23% / 6.46%
Balanced Division December 18, 1987 8.58 -3.56 4.02% 6.41
Bond Division December 18, 1987 -5.40 2.36 4.53 6.16
Capital Value
Division May 13, 1970 15.12 -3.78 6.78 9.79
Equity Growth
Division June 1, 1994 15.57 -4.19 9.33
Equity Income (fka
Utilities) Division May 1, 1998 3.67 -5.93 / -2.68
Government Securities
Division April 9, 1987 -8.10 2.73 4.40 5.83
Growth Division May 2, 1994 16.08 -10.47 / 3.06
International
Division May 2, 1994 21.84 -3.84 3.37
International
Emerging Markets
Division October 24, 2000 46.25 / 4.68
International
SmallCap Division May 1, 1998 43.26 8.67 / 5.35
LargeCap Blend May 1, 2002 13.42 / -4.08
LargeCap Growth
Equity Division October 24, 2000 12.81 / -28.16
LargeCap Stock Index
Division May 3, 1999 17.90 / -6.63
LargeCap Value May 1, 2002 17.64 / -1.00
Limited Term Bond
Division May 1, 2003 / -8.53
MidCap Division December 18, 1987 22.30 5.62 9.63 12.07
MidCap Growth
Division May 1, 1998 29.93 -2.61 / -2.98
MidCap Value Division May 3, 1999 25.92 / 9.43
Money Market Division March 18, 1983 -9.19 0.25 2.22 3.58
Real Estate
Securities (fka Real
Estate) Division May 1, 1998 28.30 12.37 / 9.33
SmallCap Division May 1, 1998 26.25 2.20 / -2.40
SmallCap Growth
Division May 1, 1998 34.91 -5.32 / -4.20
SmallCap Value
Division May 1, 1998 39.78 14.13 / 8.92
AIM V.I. Core Equity
Division May 2, 1994 14.07 -4.73 / 7.43
AIM V.I. Growth
Division May 5, 1993 20.77 -12.11 3.49 4.13
AIM V.I. Premier
Equity Division May 5, 1993 14.72 -6.67 6.47 7.32
American Century VP
Income & Growth
Division October 31, 1997 18.91 -3.06 / 2.70
American Century VP
Ultra Division May 1, 2001 14.54 / -8.30
American Century VP
Value Division May 1, 1996 18.38 5.22 / 8.55
DIP Founders
Discovery Division December 15, 1999 25.62 / -11.80
Fidelity VIP
Contrafund Division January 31, 1995 17.93 0.25 12.09
Fidelity VIP Equity
Income Divison November 3, 1986 19.58 0.29 8.74 8.82
Fidelity VIP Growth
Division October 31, 1986 22.28 -4.70 7.50 9.53
INVESCO VIF-Dynamics
Division August 25, 1997 27.23 -3.86 / 0.32
INVESCO VIF-Health
Sciences Division May 22, 1997 18.37 -0.20 7.04
INVESCO VIF-Small
Company Growth
Division August 25, 1997 22.92 0.90 2.95
INVESCO
VIF-Technology
Division May 21, 1997 34.56 -7.05 0.24
Janus Aspen Mid Cap
Growth Division September 13, 1993 24.22 -5.58 5.97 7.37
· Enlarge/Download Table
CONTRACT WITH PURCHASE PAYMENT CREDIT RIDER
WITHOUT SURRENDER CHARGE
--------------------------------------------------------------
EFFECTIVE SINCE
DIVISION DATE ONE YEAR FIVE YEARS TEN YEARS INCEPTION
-------- --------- -------- ---------- --------- ---------
Asset Allocation
Division June 1, 1994 19.31% 2.34% 6.46%
Balanced Division December 18, 1987 16.58 -2.21 4.02% 6.41
Bond Division December 18, 1987 2.60 3.43 4.53 6.16
Capital Value
Division May 13, 1970 23.12 -2.41 6.78 9.79
Equity Growth
Division June 1, 1994 23.57 -2.80 / 9.33
Equity Income (fka
Utilities) Division May 1, 1998 11.67 -4.45 / -1.70
Government Securities
Division April 9, 1987 -0.10 3.79 4.40 5.83
Growth Division May 2, 1994 24.08 -8.68 3.06
International
Division May 2, 1994 29.84 -2.48 / 3.37
International
Emerging Markets
Division October 24, 2000 54.25 / 6.62
International
SmallCap Division May 1, 1998 51.26 9.51 / 6.03
LargeCap Blend May 1, 2002 21.42 / 0.77
LargeCap Growth
Equity Division October 24, 2000 20.81 / -23.92
LargeCap Stock Index
Division May 3, 1999 25.90 / -5.02
LargeCap Value May 1, 2002 25.64 / 3.75
Limited Term Bond
Division May 1, 2003 / -0.53
MidCap Division December 18, 1987 30.30 6.57 9.63 12.07
MidCap Growth
Division May 1, 1998 37.93 -1.31 / -1.99
MidCap Value Division May 3, 1999 33.92 / 10.35
Money Market Division March 18, 1983 -1.19 1.41 2.22 3.58
Real Estate
Securities (fka Real
Estate) Division May 1, 1998 36.30 13.12 / 9.90
SmallCap Division May 1, 1998 34.25 3.28 / -1.44
SmallCap Growth
Division May 1, 1998 42.91 -3.87 / -3.15
SmallCap Value
Division May 1, 1998 47.78 14.82 / 9.50
AIM V.I. Core Equity
Division May 2, 1994 22.07 -3.32 7.43
AIM V.I. Growth
Division May 5, 1993 28.77 -10.18 3.49 4.13
AIM V.I. Premier
Equity Division May 5, 1993 22.72 -5.14 6.47 7.32
American Century VP
Income & Growth
Division October 31, 1997 26.91 -1.74 3.26
American Century VP
Ultra Division May 1, 2001 22.54 / -4.94
American Century VP
Value Division May 1, 1996 26.38 6.18 8.78
DIP Founders
Discovery Division December 15, 1999 33.62 / -9.70
Fidelity VIP
Contrafund Division January 31, 1995 25.93 1.41 12.09
Fidelity VIP Equity
Income Divison November 3, 1986 27.58 1.45 8.74 8.82
Fidelity VIP Growth
Division October 31, 1986 30.28 -3.29 7.50 9.53
INVESCO VIF-Dynamics
Division August 25, 1997 35.23 -2.49 / 0.93
INVESCO VIF-Health
Sciences Division May 22, 1997 25.37 0.98 7.45
INVESCO VIF-Small
Company Growth
Division August 25, 1997 30.92 2.03 / 3.49
INVESCO
VIF-Technology
Division May 21, 1997 42.56 -5.50 0.83
Janus Aspen Mid Cap
Growth Division September 13, 1993 32.22 -4.12 5.97 7.37
TAXATION UNDER CERTAIN RETIREMENT PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Contributions. Individuals may make contributions for individual retirement
--------------
annuity (IRA) contracts. Individuals may make deductible contributions (for any
year) up to the lesser of the amount shown in the chart or 100% of compensation.
Individuals age 50 or over are also permitted to make additional "catch-up"
contributions. The additional contribution is $500 for 2002 through 2005 and
$1,000 in 2006 and beyond.
Such individuals may establish a traditional IRA for a non-working spouse. The
annual contribution for both spouses' contracts cannot exceed the lesser of the
amount shown in the chart or 100% of the working spouse's compensation. No more
than the individual IRA limit may be contributed to either spouse's IRA for any
year.
· Download Table
IRA - MAXIMUM ANNUAL CONTRIBUTION
----------------------------------------------------------
YEAR INDIVIDUAL IRA INDIVIDUAL IRA + SPOUSAL IRA
---- -------------- ----------------------------
2002 $3,000 $ 6,000
2003 $3,000 $ 6,000
2004 $3,000 $ 6,000
2005 $4,000 $ 8,000
2006 $4,000 $ 8,000
2007 $4,000 $ 8,000
2008 $5,000 $10,000
Starting in 2009, limits are indexed for cost-of-living.
Contributions may be tax deductible. If an individual and his/her spouse do not
participate in a qualified retirement plan, the contributions to an IRA are
fully tax deductible regardless of income. If an individual is an active
participant in a qualified retirement plan, his/her ability to deduct the
contributions depends upon his/her income level.
For individuals who are not active participants but whose spouses are,
deductibility of traditional IRA contributions is phased out if the couple's
Adjusted Gross Income is between $150,000 and $160,000; assuming taxes are filed
jointly.
· Enlarge/Download Table
DEDUCTIBILITY OF TRADITIONAL IRA CONTRIBUTIONS FOR ACTIVE PARTICIPANTS
-----------------------------------------------------------------------------------------------------------------
MARRIED INDIVIDUALS (FILING JOINTLY) SINGLE INDIVIDUAL
----------------------------------------------------------------------- ----------------------------------------
LIMITED NO LIMITED NO
YEAR DEDUCTION DEDUCTION YEAR DEDUCTION DEDUCTION
---- --------- --------- ---- --------- ---------
2002 $54,000 $ 64,000 2002 $34,000 $44,000
2003 $60,000 $ 70,000 2003 $40,000 $50,000
2004 $65,000 $ 75,000 2004 $45,000 $55,000
2005
2005 $70,000 $ 80,000 and beyond $50,000 $60,000
2006 $75,000 $ 85,000
2007 and beyond $80,000 $100,000
An individual may make non-deductible IRA contributions to the extent of the
excess of:
1) The lesser of maximum annual contribution 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 591/2 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 701/2, and such distributions must be made over a
period that does not exceed the uniform life distribution period established by
the IRS. 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
Contributions. 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 amounts in the chart below.
· Download Table
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP)
---------------------------------------------------------------------------
YEAR EMPLOYER ANNUAL CONTRIBUTION
---- ----------------------------
2002 Lesser of 15% of the employee's compensation or $30,000.
2003 and beyond Indexed for cost-of-living.
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. The amount that an employee chooses to defer and contribute to
the SAR/SEP is referred to as an elective deferral.
These elective deferrals are subject to the same cap as elective deferrals to
IRC Section 401(k) plans, see table below. In addition to the elective
deferrals, SAR/SEP may permit additional elective deferrals by individuals age
50 or over, referred to as "catch-up contributions".
No new SAR/SEP are permitted after 1996 for any employer, but those in effect
prior to 1997 may continue to operate, receive contributions, and add new
employees.
Employees of tax-exempt organizations and state and local government agencies
are not eligible for SAR/SEPs.
· Download Table
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN (SAR-SEP)
--------------------------------------------------------------------------
YEAR ELECTIVE DEFERRAL CATCH-UP CONTRIBUTION
---- ----------------- ---------------------
2002 $11,000 $1,000
2003 $12,000 $2,000
2004 $13,000 $3,000
2005 $14,000 $4,000
2006 $15,000 $5,000
2007 and beyond Indexed for cost-of-living. Indexed for cost-of-living.
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)
Contributions. 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. The amount that an employee chooses to
defer and contribute to the SIMPLE IRA is referred to as an elective deferral.
These elective deferrals cannot exceed the amounts shown in the chart. In
addition to the elective deferrals, SIMPLE IRA may permit additional elective
deferrals by individuals age 50 or over, referred to as "catch-up
contributions".
Elective contribution amounts made under the salary reduction portions (i.e.,
those subject to the $7,000 limit in 2002) of a SIMPLE IRA plan are counted in
the overall limit on elective deferrals by any individual. For example, an
individual under age 50 who defers the maximum of $7,000 to a SIMPLE IRA of one
employer and participates in a 401(k) plan of another employer would be limited
to an elective deferral of $4,000 in 2002 ($11,000 - $7,000) to the 401(k) plan.
The employer generally must match either 100% of the employee's elective
deferral, up to 3% of the employee's compensation or fixed nonelective
contributions of 2% of compensation.
· Enlarge/Download Table
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES (SIMPLE IRA)
---------------------------------------------------------------------------------------------------------------
YEAR ELECTIVE DEFERRAL CATCH-UP CONTRIBUTION OVERALL LIMIT ON ELECTIVE DEFERRALS
---- ----------------- --------------------- -----------------------------------
2002 $7,000 $500 $11,000
2003 $8,000 $1,000 $12,000
2004 $9,000 $1,500 $13,000
2005 $10,000 $2,000 $14,000
2006 Indexed for cost-of-living. $2,500 $15,000
2007 and beyond Indexed for cost-of-living. Indexed for cost-of-living.
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)
Contribution. Under Section 408A of the Code, individuals may contribute to a
-------------
Roth IRA on his/her own behalf up to the lesser of maximum annual contribution
limit as shown in the chart or 100% of compensation. In addition, the
contribution must be reduced by the amount of any contributions made to other
IRAs for the benefit of the same individual.
Individuals age 50 or over are also permitted to make additional "catch-up"
contributions. The additional contribution is $500 for 2002 through 2005 and
$1,000 in 2006 and beyond.
· Download Table
ROTH IRA - MAXIMUM ANNUAL CONTRIBUTION
------------------------------------------------
YEAR INDIVIDUAL ROTH IRA CATCH-UP CONTRIBUTION
---- ------------------- ---------------------
2002 $3,000 $ 500
2003 $3,000 $ 500
2004 $3,000 $ 500
2005 $4,000 $ 500
2006 $4,000 $1,000
2007 $4,000 $1,000
2008 $5,000 $1,000
Starting in 2009, individual Roth IRA limits are indexed for cost-of-living.
The maximum 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 (see chart below).
If taxable income is recognized on the traditional IRA, and IRA owner (with
adjusted gross income of less than $100,000) may convert a traditional 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.
· Enlarge/Download Table
MODIFIED ADJUSTED GROSS INCOME
------------------------------------------------------------------------------------------------------------------------
SINGLE MARRIED FILING JOINT ROTH IRA CONTRIBUTION
------ -------------------- ---------------------
$95,000 or less $150,000 or less Full Contribution
$95,000 - $110,000 $150,000 - $160,0000 Partial Contribution*
$110,000 & over $160,000 & over No Contribution
*Those entitled to only a partial contribution should check with a tax
advisor to determine the allowable contribution.
Married person whose filing status is "married, filing separately" may not make
a full Roth IRA contribution, unless the couple are separated and have been
living apart for the entire year. Only a partial contribution is allowed if the
Modified Adjusted Gross Income is less than $10,000.
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 591/2, 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.
Report of Independent Auditors
Board of Directors and Participants
Principal Life Insurance Company
We have audited the accompanying statements of assets and liabilities of each of
the divisions of Principal Life Insurance Company Separate Account B [comprised
of the AIM V.I. Growth, AIM V.I. Core Equity, AIM V.I. Premier Equity, American
Century VP Income & Growth, American Century VP Ultra, American Century VP
Value, Asset Allocation, Balanced, Bond, Capital Value, Dreyfus DIP Founders
Discovery, Equity Growth, Fidelity VIP II Contrafund, Fidelity VIP
Equity-Income, Fidelity VIP Growth, Government Securities, Growth,
International, International Emerging Markets, International SmallCap, INVESCO
VIF-Dynamics, INVESCO VIF-Health Sciences, INVESCO VIF-Small Company Growth,
INVESCO VIF-Technology, Janus Aspen MidCap Growth (formerly Janus Aspen
Aggressive Growth), LargeCap Blend, LargeCap Growth Equity, LargeCap Stock
Index, LargeCap Value, Limited Term Bond, MidCap, MidCap Growth, MidCap Value,
Money Market, Real Estate, SmallCap, SmallCap Growth, SmallCap Value, Templeton
Growth Securities, and Utilities Divisions] as of December 31, 2003, and the
related statements of operations for the year then ended, and changes in net
assets for the periods disclosed in the financial statements. These financial
statements are the responsibility of the management of Principal Life Insurance
Company. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 2003, by
correspondence with the transfer agents. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
divisions of Principal Life Insurance Company Separate Account B at December 31,
2003, and the results of their operations and the changes in their net assets
for the periods described above, in conformity with accounting principles
generally accepted in the United States.
/s/Ernst & Young LLP
Des Moines, Iowa
February 20, 2004
Principal Life Insurance
Company Separate Account B
Statements of Assets and Liabilities
December 31, 2003
AIM V.I. Growth AIM V.I.
Division Core Equity
Division
---------------------------------
---------------------------------
Assets
Investments in shares of mutual funds, at marke $20,390,427 $37,820,862
Liabilities - -
---------------------------------
---------------------------------
Net assets $20,390,427 $37,820,862
=================================
=================================
Net assets
Accumulation units:
Bankers Flexible Annuity $ - $ -
-
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable - -
Premier Variable - -
Principal Freedom Variable Annuity - -
The Principal Variable Annuity 18,044,651 31,417,377
The Principal Variable Annuity With Purchase
Payment Credit Rider 2,345,776 6,403,485
Contracts in annuitization period:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
---------------------------------
---------------------------------
Total net assets $20,390,427 $37,820,862
=================================
=================================
Investments in shares of mutual funds, at cost $37,644,636 $47,878,027
Shares of mutual fund owned 1,374,944 1,806,154
Accumulation units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable - -
Premier Variable - -
Principal Freedom Variable Annuity - -
The Principal Variable Annuity 3,250,196 3,941,555
The Principal Variable Annuity With Purchase
Payment Credit Rider 430,468 818,474
Accumulation unit value:
Bankers Flexible Annuity $ - $ -
-
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable - -
Premier Variable - -
Principal Freedom Variable Annuity - -
The Principal Variable Annuity 5.55 7.97
The Principal Variable Annuity With Purchase
Payment Credit Rider 5.45 7.82
Annuitized units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
Annuitized unit value:
Bankers Flexible Annuity $ - $ -
-
Pension Builder Plus - Rollover IRA - -
See accompanying notes.
· Enlarge/Download Table
American
AIM V.I. Century VP Income American Century American Century
Premier & Growth VP Ultra VP II Value Asset
Equity Division Division Division Allocation Balanced
Division Division Division
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$34,478,905 $24,813,567 $7,951,779 $11,980,780 $84,285,312 $109,670,750
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$34,478,905 $24,813,567 $7,951,779 $11,980,780 $84,285,312 $109,670,750
===========================================================================================================
===========================================================================================================
$ -$ -$ - $ - $ $
- -
- - - - - -
- - - - - -
- - - - - 2,528,703
- - - - 51,720 10,074,608
- 3,136,734 - - - -
28,242,400 14,486,880 5,290,952 8,288,586 75,378,403 87,741,289
6,236,505 7,189,953 2,660,827 3,692,194 8,855,189 9,326,150
- - - - - -
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$34,478,905 $24,813,567 $7,951,779 $11,980,780 $84,285,312 $109,670,750
===========================================================================================================
===========================================================================================================
$45,181,933 $22,561,333 $7,429,164 $10,363,668 $84,867,486 $120,368,420
1,704,345 3,776,799 866,207 1,539,946 7,208,873 8,239,726
- - - - - -
- - - - - -
- - - - - -
- - - - - 1,498,564
- - - - 49,445 5,850,443
- 341,907 - - - -
3,947,940 1,588,628 616,274 774,898 3,892,867 5,378,747
888,179 800,959 314,843 348,564 465,913 582,456
$ - $ - $ - $ - $ - $ -
- -
- - - - - -
- - - - - -
- - - - - 1.69
- - - - 1.05 1.72
- 9.17 - - - -
7.15 9.12 8.59 10.70 19.36 16.31
7.02 8.98 8.45 10.59 19.01 16.01
- - - - - -
- - - - - -
$ - $ - $ - $ - $ - $ -
- -
- - - - - -
Principal Life Insurance
Company Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2003
· Enlarge/Download Table
Bond Capital Value
Division Division
------------------------------------
------------------------------------
Assets
Investments in shares of mutual funds, at market $234,068,815 $205,388,604
Liabilities - -
------------------------------------
------------------------------------
Net assets $234,068,815 $205,388,604
====================================
====================================
Net assets
Accumulation units:
Bankers Flexible Annuity $ - $ 2,816,487
-
Pension Builder Plus - 3,624,391
Pension Builder Plus - Rollover IRA - 361,270
Personal Variable 1,777,852 4,048,865
Premier Variable 7,936,106 20,135,527
Principal Freedom Variable Annuity 8,101,234 2,194,702
The Principal Variable Annuity 171,918,761 156,299,660
The Principal Variable Annuity With Purchase Payment Credit Rider 44,334,862 15,637,953
Contracts in annuitization period:
Bankers Flexible Annuity - 43,250
Pension Builder Plus - Rollover IRA - 226,499
------------------------------------
------------------------------------
Total net assets $234,068,815 $205,388,604
====================================
====================================
Investments in shares of mutual funds, at cost $223,802,888 $214,666,449
Shares of mutual fund owned 19,014,526 7,026,637
Accumulation units outstanding:
Bankers Flexible Annuity - 94,247
Pension Builder Plus - 682,229
Pension Builder Plus - Rollover IRA - 59,846
Personal Variable 958,753 1,618,427
Premier Variable 4,193,719 7,849,047
Principal Freedom Variable Annuity 646,003 251,458
The Principal Variable Annuity 9,857,760 7,375,957
The Principal Variable Annuity With Purchase Payment Credit Rider 2,589,879 751,838
Accumulation unit value:
Bankers Flexible Annuity $ 29.88
-
Pension Builder Plus - 5.31
Pension Builder Plus - Rollover IRA - 6.04
Personal Variable 1.85 2.50
Premier Variable 1.89 2.57
Principal Freedom Variable Annuity 12.54 8.73
The Principal Variable Annuity 17.44 21.19
The Principal Variable Annuity With Purchase Payment Credit Rider 17.12 20.80
Annuitized units outstanding:
Bankers Flexible Annuity - 1,444
Pension Builder Plus - Rollover IRA - 37,520
Annuitized unit value:
Bankers Flexible Annuity $ 29.95
-
Pension Builder Plus - Rollover IRA - 6.04
See accompanying notes.
· Enlarge/Download Table
Dreyfus DIP Fidelity Fidelity
Founders Equity VIP II VIP Equity- Fidelity VIP Government
Discovery Growth Contrafund Income Growth Securities
Division Division Division Division Division Division
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$6,592,127 $208,587,034 $62,013,988 $24,125,340 $41,285,813 $341,729,801
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$6,592,127 $208,587,034 $62,013,988 $24,125,340 $41,285,813 $341,729,801
===========================================================================================================
===========================================================================================================
$ - $ - $ - $ - $ - $ -
- - - -
- - - - - 287,126
- - - - - 53,401
- - - - - 2,651,048
- 72,039 - - - 9,904,817
- - - - - 1,969,397
3,995,919 193,535,123 50,895,534 16,150,888 34,799,588 254,772,944
2,596,208 14,979,872 11,118,454 7,974,452 6,486,225 72,091,068
- - - - - -
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$6,592,127 $208,587,034 $62,013,988 $24,125,340 $41,285,813 $341,729,801
===========================================================================================================
===========================================================================================================
$5,614,570 $250,390,820 $61,536,230 $20,380,959 $58,014,035 $329,106,342
739,028 14,160,695 2,689,245 1,050,755 1,335,246 29,033,968
- - - - - -
- - - - - 107,440
- - - - - 18,385
- - - - - 1,358,239
- 83,897 - - - 4,948,427
- - - - - 198,162
510,594 7,750,226 4,984,662 1,570,415 4,455,612 14,674,895
337,007 611,156 1,109,393 782,983 846,087 4,230,409
$ - $ - $ - $ - $ - $ -
- - - -
- - - - - 2.67
- - - - - 2.90
- - - - - 1.95
- .86 - - - 2.00
- - - - - 9.94
7.83 24.97 10.21 10.28 7.81 17.36
7.70 24.51 10.02 10.18 7.67 17.04
- - - - - -
- - - - - -
$ - $ - $ - $ - $ - $ -
- - - -
- - - - - -
Principal Life Insurance
Company Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2003
· Enlarge/Download Table
Growth International
Division Division
------------------------------------
------------------------------------
Assets
Investments in shares of mutual funds, at market $123,359,235 $137,067,625
Liabilities - -
------------------------------------
------------------------------------
Net assets $123,359,235 $137,067,625
====================================
====================================
Net assets
Accumulation units:
Bankers Flexible Annuity $ $
- -
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable 3,039,321 1,882,070
Premier Variable 14,695,419 6,911,107
Principal Freedom Variable Annuity - 1,255,151
The Principal Variable Annuity 99,902,040 109,123,449
The Principal Variable Annuity With Purchase Payment Credit Rider 5,722,455 17,895,848
Contracts in annuitization period:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
------------------------------------
------------------------------------
Total net assets $123,359,235 $137,067,625
====================================
====================================
Investments in shares of mutual funds, at cost $177,082,616 $145,457,300
Shares of mutual fund owned 11,265,684 11,939,689
Accumulation units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable 2,111,941 1,215,117
Premier Variable 10,006,463 4,372,431
Principal Freedom Variable Annuity - 144,213
The Principal Variable Annuity 7,024,539 7,445,734
The Principal Variable Annuity With Purchase Payment Credit Rider 409,938 1,244,027
Accumulation unit value:
Bankers Flexible Annuity $ $
- -
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable 1.44 1.55
Premier Variable 1.47 1.58
Principal Freedom Variable Annuity - 8.70
The Principal Variable Annuity 14.22 14.66
The Principal Variable Annuity With Purchase Payment Credit Rider 13.96 14.39
Annuitized units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
Annuitized unit value:
Bankers Flexible Annuity $ $
- -
Pension Builder Plus - Rollover IRA - -
See accompanying notes.
· Enlarge/Download Table
INVESCO
International INVESCO VIF-Small
Emerging Markets International INVESCO VIF-Health Company Growth INVESCO
Division SmallCap Division VIF-Dynamics Sciences Division Division VIF-Technology
Division Division
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$16,413,769 $51,539,854 $2,038,741 $12,246,239 $2,496,782 $5,577,617
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$16,413,769 $51,539,854 $2,038,741 $12,246,239 $2,496,782 $5,577,617
===========================================================================================================
===========================================================================================================
$ - $ -$ - $ -$ - $ -
- - - - - -
- - - - - -
- - - - - -
44,972 19,475 - - - -
- - - - - -
10,692,158 42,419,290 1,176,857 7,725,376 1,775,134 3,814,306
5,676,639 9,101,089 861,884 4,520,863 721,648 1,763,311
- - - - - -
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$16,413,769 $51,539,854 $2,038,741 $12,246,239 $2,496,782 $5,577,617
===========================================================================================================
===========================================================================================================
$12,224,583 $47,573,432 $1,827,894 $11,311,212 $2,279,001 $5,079,343
1,276,343 3,753,813 173,215 696,997 184,537 469,892
- - - - - -
- - - - - -
- - - - - -
- - - - - -
32,473 17,002 - - - -
- - - - - -
805,643 2,904,637 160,978 830,053 234,547 716,265
435,767 634,905 119,766 493,448 96,864 336,381
$ -$ -$ - $ - $ - $ -
- - - - - -
- - - - - -
- - - - - -
1.38 1.15 - - - -
- - - - - -
13.27 14.60 7.31 9.31 7.57 5.33
13.03 14.33 7.20 9.16 7.45 5.24
- - - - - -
- - - - - -
$ -$ -$ - $ - $ - $ -
- - - - - -
Principal Life Insurance
Company Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2003
· Enlarge/Download Table
Janus Aspen
MidCap Growth LargeCap
Division Blend
Division
------------------------------------
------------------------------------
Assets
Investments in shares of mutual funds, at market $14,913,079 $50,195,427
Liabilities - -
------------------------------------
------------------------------------
Net assets $14,913,079 $50,195,427
====================================
====================================
Net assets
Accumulation units:
Bankers Flexible Annuity $ $ -
-
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable - -
Premier Variable - -
Principal Freedom Variable Annuity - -
The Principal Variable Annuity 9,565,435 34,773,984
The Principal Variable Annuity With Purchase Payment Credit Rider 5,347,644 15,421,443
Contracts in annuitization period:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
------------------------------------
------------------------------------
Total net assets $14,913,079 $50,195,427
====================================
====================================
Investments in shares of mutual funds, at cost $16,375,416 $44,092,659
Shares of mutual fund owned 708,460 4,840,446
Accumulation units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable - -
Premier Variable - -
Principal Freedom Variable Annuity - -
The Principal Variable Annuity 1,819,265 3,446,682
The Principal Variable Annuity With Purchase Payment Credit Rider 1,036,215 1,543,500
Accumulation unit value:
Bankers Flexible Annuity $ $ -
-
Pension Builder Plus - -
Pension Builder Plus - Rollover IRA - -
Personal Variable - -
Premier Variable - -
Principal Freedom Variable Annuity - -
The Principal Variable Annuity 5.26 10.09
The Principal Variable Annuity With Purchase Payment Credit Rider 5.16 9.99
Annualized units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
Annuitized unit value:
Bankers Flexible Annuity $ $ -
-
Pension Builder Plus - Rollover IRA - -
See accompanying notes.
· Enlarge/Download Table
LargeCap Growth LargeCap LargeCap Limited MidCap Growth
Equity Division Stock Index Value Term Bond Division MidCap Division Division
Division Division
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$15,477,925 $93,977,440 $42,122,329 $20,445,921 $277,285,964 $41,401,897
- - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$15,477,925 $93,977,440 $42,122,329 $20,445,921 $277,285,964 $41,401,897
===========================================================================================================
===========================================================================================================
$ -$ -$ $ - $ $ -
- -
- - - - - -
- - - - - -
- - - - 3,804,262 -
32,736 222,192 - - 15,928,229 83,880
1,153,783 9,007,623 - 1,163,815 2,060,700 921,697
9,000,888 62,559,154 31,037,619 13,748,453 227,134,683 30,325,632
5,290,518 22,188,471 11,084,710 5,533,653 28,358,090 10,070,688
-
- - - - - -
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$15,477,925 $93,977,440 $42,122,329 $20,445,921 $277,285,964 $41,401,897
===========================================================================================================
===========================================================================================================
$15,534,139 $97,832,680 $36,138,507 $20,467,800 $228,494,284 $41,046,736
3,462,623 11,659,732 3,900,216 2,046,639 7,382,480 4,704,761
- - - - - -
- - - - - -
- - - - - -
- - - - 1,351,969 -
45,516 239,143 - - 5,547,002 88,132
101,203 1,073,502 - 116,562 145,693 90,773
1,674,654 7,596,333 2,947,666 1,380,439 8,364,124 3,254,774
1,002,839 2,744,912 1,063,037 557,713 1,063,890 1,101,189
$ - $ -$ $ -$ $ -
- -
- - - - - -
- - - - - -
- - - - 2.81 -
.72 .93 - 2.87 .95
11.40 8.39 - 9.98 14.14 10.15
5.37 8.24 10.53 9.96 27.16 9.32
5.28 8.08 10.43 9.92 26.66 9.15
- - - - - -
- - - - - -
$ - $ -$ $ -$ $ -
- -
- - - - - -
Principal Life Insurance
Company Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2003
· Enlarge/Download Table
MidCapValue Money Market
Division Division
------------------------------------
------------------------------------
Assets
Investments in shares of mutual funds, at market $37,405,845 $107,056,300
Liabilities - -
------------------------------------
------------------------------------
Net assets $37,405,845 $107,056,300
====================================
====================================
Net assets
Accumulation units:
Bankers Flexible Annuity $ $ 684,160
-
Pension Builder Plus - 7,419
Pension Builder Plus - Rollover IRA - -
Personal Variable - 2,249,802
Premier Variable 207,724 8,837,131
Principal Freedom Variable Annuity 2,986,713 5,538,037
The Principal Variable Annuity 24,402,826 67,934,959
The Principal Variable Annuity With Purchase Payment Credit Rider 9,808,582 21,804,792
Contracts in annuitization period:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
------------------------------------
------------------------------------
Total net assets $37,405,845 $107,056,300
====================================
====================================
Investments in shares of mutual funds, at cost $30,972,017 $107,056,300
Shares of mutual fund owned 2,647,264 107,056,300
Accumulation units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - 318,871
Pension Builder Plus - Rollover IRA - 3,224
Personal Variable - 1,540,908
Premier Variable 172,631 5,902,643
Principal Freedom Variable Annuity 175,874 495,764
The Principal Variable Annuity 2,126,346 5,146,528
The Principal Variable Annuity With Purchase Payment Credit Rider 868,228 1,682,884
Accumulation unit value:
Bankers Flexible Annuity $ $ -
-
Pension Builder Plus - 2.15
Pension Builder Plus - Rollover IRA - 2.30
Personal Variable - 1.46
Premier Variable 1.20 1.50
Principal Freedom Variable Annuity 16.98 11.17
The Principal Variable Annuity 11.48 13.20
The Principal Variable Annuity With Purchase Payment Credit Rider 11.30 12.96
Annuitized units outstanding:
Bankers Flexible Annuity - -
Pension Builder Plus - Rollover IRA - -
Annuitized unit value:
Bankers Flexible Annuity $ $
- -
Pension Builder Plus - Rollover IRA - -
See accompanying notes.
· Enlarge/Download Table
Templeton
SmallCap SmallCap Growth
Real Estate SmallCap Division Growth Value Securities Utilities
Division Division Division Division Division
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$71,203,391 $50,283,315 $41,565,742 $56,508,984 $1,193,400 $27,202,954
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$71,203,391 $50,283,315 $41,565,742 $56,508,984 $1,193,400 $27,202,954
===========================================================================================================
===========================================================================================================
$ -$ -$ $ - $ - $ -
-
- - - - - -
- - - - - -
- - - - - -
277,574 27,900 78,279 158,958 - 13,897
- 2,183,307 886,372 - - -
53,486,975 39,125,515 34,318,730 43,093,686 1,193,400 22,479,806
17,438,842 8,946,593 6,282,361 13,256,340 - 4,709,251
- - - - - -
- - - - - -
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
$71,203,391 $50,283,315 $41,565,742 $56,508,984 $1,193,400 $27,202,954
===========================================================================================================
===========================================================================================================
$57,114,464 $50,456,140 $67,035,992 $43,367,484 $1,164,379 $34,158,322
4,778,751 6,309,073 4,971,979 3,757,246 106,649 3,430,385
- - - - - -
- - - - - -
- - - - - -
- - - - - -
183,596 30,325 125,381 121,112 - 17,546
- 181,997 115,648 - 94,381 -
3,015,095 4,064,872 3,973,466 2,477,509 - 2,380,899
1,001,493 946,964 741,069 776,437 - 508,141
$ -$ -$ $ -$ $ -
- -
- - - - - -
- - - - - -
- - - - - -
1.51 .92 .62 1.31 - .79
- 12.00 7.66 - 12.64 -
17.74 9.63 8.64 17.39 - 9.44
17.41 9.45 8.48 17.07 - 9.27
- - - - - -
- - - - - -
$ - $ $ $ -$ $ -
- -
- - - - - -
Principal Life Insurance Company
Separate Account B
Statements of Operations
For the Year Ended December 31, 2003
· Enlarge/Download Table
American
AIM V.I. Century VP
AIM V.I. Growth AIM V.I. Core Premier Equity Income & Growth
Division Equity Division Division
Division
---------------------------------------------------------------
---------------------------------------------------------------
Investment income (loss)
Income:
Dividends $ $ 342,528 $ 94,948 $ 200,551
-
Expenses:
Mortality and expense risks 221,104 414,692 374,638 211,698
Separate account rider charges 10,808 30,921 29,689 30,828
---------------------------------------------------------------
Net investment income (loss) (231,912) (103,085) (309,379) (41,975)
---------------------------------------------------------------
Realized gains (losses) on investments
Realized gain (losses) on sale of fund (3,698,841) (2,904,706) (1,931,457) (160,698)
shares
Capital gain distributions - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Total realized gain (losses) on investments (3,698,841) (2,904,706) (1,931,457) (160,698)
Change in net unrealized appreciation or
depreciation of investments 8,522,752 9,923,491 8,657,841 4,819,595
---------------------------------------------------------------
---------------------------------------------------------------
Net increase (decrease) in net assets $4,591,999 $6,915,700 $6,417,005 $4,616,922
resulting from operations
===============================================================
See accompanying notes.
· Enlarge/Download Table
American Century American Century
VP Ultra VP Value Asset Allocation
Division Division Division Balanced Bond Capital Value
Division Division Division
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$ - $ 27,160 $ 1,467,485 $ 2,947,777 $9,567,023 $ 2,634,886
84,793 66,675 949,988 1,146,408 2,712,941 2,070,594
12,923 9,765 42,431 38,177 224,414 70,556
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(97,716) (49,280) 475,066 1,763,192 6,629,668 493,736
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(79,603) (6,818) (1,888,873) (3,761,560) 694,334 (4,531,146)
- - - - - -
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(79,603) (6,818) (1,888,873) (3,761,560) 694,334 (4,531,146)
1,424,749 1,686,630 15,469,547 18,072,534 (229,444) 43,922,707
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$1,247,430 $1,630,532 $14,055,740 $16,074,166 $7,094,558 $39,885,297
======================================================================================================
Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
For the Year Ended December 31, 2003
· Enlarge/Download Table
Dreyfus DIP Fidelity Fidelity VIP
Founders Equity Growth VIP II Equity- Income
Discovery Division Contrafund Division
Division Division
---------------------------------------------------------------
---------------------------------------------------------------
Investment income (loss)
Income:
Dividends $ - $ 774,845 $ 166,971 $ 88,336
Expenses:
Mortality and expense risks 42,921 2,342,450 614,994 146,629
Separate account rider charges 8,549 67,452 50,628 21,945
---------------------------------------------------------------
Net investment income (loss) (51,470) (1,635,057) (498,651) (80,238)
---------------------------------------------------------------
Realized gains (losses) on investments
Realized gain (loss) on sale of fund shares 20,353 (8,432,347) (862,882) 6,993
Capital gain distributions - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Total realized gain (loss) on investments 20,353 (8,432,347) (862,882) 6,993
Change in net unrealized appreciation or
depreciation of investments 1,177,986 50,974,630 13,482,385 3,817,936
---------------------------------------------------------------
---------------------------------------------------------------
Net increase (decrease) in net assets $1,146,869 $40,907,226 $12,120,852 $3,744,691
resulting from operations
===============================================================
See accompanying notes.
· Enlarge/Download Table
International
Fidelity VIP Government Emerging Markets International
Growth Division Securities Growth International Division SmallCap Division
Division Division Division
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$ 66,790 $12,157,064 $ 257,644 $ 1,132,605 $ 108,991 $ 509,465
434,207 4,298,321 1,293,105 1,280,973 118,428 460,118
28,525 429,981 28,245 68,497 20,123 35,160
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(395,942) 7,428,762 (1,063,706) (216,865) (29,560) 14,187
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(2,771,173) 2,047,895 (12,722,688) (5,388,986) (37,158) (2,820,743)
- - - - - -
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(2,771,173) 2,047,895 (12,722,688) (5,388,986) (37,158) (2,820,743)
12,649,041 (8,300,799) 39,344,003 36,598,232 4,657,895 19,529,973
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$ 9,481,926 $ 1,175,858 $25,557,609 $30,992,381 $4,591,177 $16,723,417
======================================================================================================
Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
For the Year Ended December 31, 2003
· Enlarge/Download Table
INVESCO
INVESCO INVESCO VIF-Small INVESCO
VIF-Dynamics VIF-Health Company Growth VIF-Technology
Division Sciences Division Division
Division
---------------------------------------------------------------
---------------------------------------------------------------
Investment income (loss)
Income:
Dividends $ - $ $ - $ -
-
Expenses:
Mortality and expense risks 12,167 107,608 20,855 38,727
Separate account rider charges 2,374 18,336 3,005 5,813
---------------------------------------------------------------
Net investment income (loss) (14,541) (125,944) (23,860) (44,540)
---------------------------------------------------------------
Realized gains (losses) on investments
Realized gain (loss) on sale of fund shares 12,763 (80,827) (10,029) (41,504)
Capital gain distributions - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Total realized gain (loss) on investments 12,763 (80,827) (10,029) (41,504)
Change in net unrealized appreciation or
depreciation of investments 310,340 2,291,382 487,677 1,133,877
---------------------------------------------------------------
---------------------------------------------------------------
Net increase (decrease) in net assets $308,562 $2,084,611 $453,788 $1,047,833
resulting from operations
===============================================================
<FN>
(1) Commenced operations May 17, 2003.
(2) Represented the operations of the Janus Aspen Aggressive Growth Division
until May 17, 2003 name change.
See accompanying notes.
</FN>
· Enlarge/Download Table
Janus Aspen LargeCap Growth
MidCap Growth LargeCap Blend Equity LargeCap LargeCap Value Limited
Division (2) Division Division Stock Index Division Term Bond
Division Division (1)
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$ - $ 281,907 $ - $ 978,764 $ 396,945 $157,681
150,205 335,755 66,322 826,478 285,785 61,391
26,270 46,768 10,959 86,362 33,606 9,132
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(176,475) (100,616) (77,281) 65,924 77,554 87,158
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(352,135) (48) (101,279) (1,165,193) (3,999) 1,228
- - - - - -
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(352,135) (48) (101,279) (1,165,193) (3,999) 1,228
3,984,036 6,532,064 1,403,871 18,057,963 6,379,123 (21,879)
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$3,455,426 $6,431,400 $1,225,311 $16,958,694 $6,452,678 $ 66,507
======================================================================================================
Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
For the Year Ended December 31, 2003
· Enlarge/Download Table
MidCap Money
MidCap Growth MidCap Value Market
Division Division Division Division
---------------------------------------------------------------
---------------------------------------------------------------
Investment income (loss)
Income:
Dividends $ 2,459,871 $ $ 19,422 $1,037,931
-
Expenses:
Mortality and expense risks 2,705,262 263,987 293,820 1,589,581
Separate account rider charges 117,018 26,932 36,614 179,544
---------------------------------------------------------------
Net investment income (loss) (362,409) (290,919) (311,012) (731,194)
---------------------------------------------------------------
Realized gains (losses) on investments
Realized gain (loss) on sale of fund shares (755,382) (423,898) 36,054 -
Capital gain distributions - - 416,300 -
---------------------------------------------------------------
---------------------------------------------------------------
Total realized gain (loss) on investments (755,382) (423,898) 452,354 -
Change in net unrealized appreciation or
depreciation of investments 65,228,283 7,786,159 7,814,399 -
---------------------------------------------------------------
---------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $64,110,492 $7,071,342 $7,955,741 $ (731,194)
===============================================================
See accompanying notes.
· Enlarge/Download Table
Templeton
SmallCap SmallCap Growth
Real Estate SmallCap Growth Value Securities Utilities
Division Division Division Division Division Division
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$ 1,866,654 $ 34,210 $ $ 179,433 $ 13,448 $1,074,213
-
611,426 394,638 385,167 496,890 7,646 299,982
70,679 31,477 26,411 54,747 - 23,085
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
1,184,549 (391,905) (411,578) (372,204) 5,802 751,146
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
261,686 (745,178) (4,266,680) 130,481 (68,690) (955,971)
1,226,227 - - 1,482,483 - -
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
1,487,913 (745,178) (4,266,680) 1,612,964 (68,690) (955,971)
13,421,069 11,383,631 16,062,643 15,400,567 312,071 3,056,569
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
$16,093,531 $10,246,548 $11,384,385 $16,641,327 $249,183 $2,851,744
======================================================================================================
Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets
For the Years Ended December 31, 2003 and 2002
· Enlarge/Download Table
AIM V.I. Growth AIM V.I. Core Equity Division
Division (1)
------------------------------- --------------------------------
2003 2002 2003 2002
------------------------------- --------------------------------
Increase (decrease) in net assets from operations:
Net investment income (loss) $ (231,912) $ (293,651) $ (103,085) $ (399,322)
Net realized gains (losses) on
investments (3,698,841) (6,562,643) (2,904,706) (4,379,890)
Change in net unrealized
appreciation or depreciation of
investments 8,522,752 (2,200,917) 9,923,491 (2,768,818)
------------------------------- --------------------------------
------------------------------- --------------------------------
Net increase (decrease) in net assets
resulting from operations 4,591,999 (9,507,211) 6,915,700 (7,548,030)
Changes from principal transactions:
Purchase payments, less sales charges,
per payment fees and applicable
premium taxes 2,921,012 3,141,075 6,542,195 8,378,629
Administration charges (6,286) (6,463) (16,246) (14,614)
Contingent sales charges (28,226) (40,128) (66,785) (72,832)
Contract terminations (1,343,370) (1,528,972) (2,811,000) (2,700,901)
Death benefit payments (54,747) (162,128) (264,248) (225,707)
Flexible withdrawal option payments (288,978) (387,082) (742,859) (798,578)
Transfer payments to other contracts (2,357,133) (4,727,076) (4,906,450) (8,400,299)
Annuity payments - - - -
------------------------------- --------------------------------
------------------------------- --------------------------------
Increase (decrease) in net assets from
principal transactions (1,157,728) (3,710,774) (2,265,393) (3,834,302)
------------------------------- --------------------------------
------------------------------- --------------------------------
Total increase (decrease) 3,434,271 (12,767,985) 4,650,307 (11,382,332)
Net assets at beginning of period 16,956,156 29,724,141 33,170,555 44,552,887
------------------------------- --------------------------------
