PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT, 485APOS, 1997-12-23

PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
485APOS, 1997-12-23

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As filed with the Securities and Exchange Commission on December 23, 1997.

Registration No. 333 - 7509
811 - 7689

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No.
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Post-Effective Amendment No. 2
---
and

REGISTRATION STATEMENT UNDER THE [X]
INVESTMENT COMPANY ACT OF 1940

Amendment No. 3
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PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
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(Exact Name of Registrant)

PFL LIFE INSURANCE COMPANY
--------------------------
(Name of Depositor)

4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499-0001
(Address of Depositor's Principal Executive Offices)

Depositor's Telephone Number, including Area Code

(319) 297-8468

Frank A. Camp, Esquire
PFL Life Insurance Company
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
(Name and Address of Agent for Service)

Copy to:

Frederick R. Bellamy, Esquire
Sutherland, Asbill and Brennan L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
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------------------------

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) of Rule 485.
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on May 1, 1997 pursuant to paragraph (b) of Rule 485.
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X 60 days after filing pursuant to paragraph (a)(i) of Rule 485
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on pursuant to paragraph (a)(i) of Rule 485
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75 days after filing pursuant to paragraph (a)(ii)
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on pursuant to paragraph (a)(ii) of Rule 485
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If appropriate, check the following box:

X This post-effective amendment designates a new effective date
---
for a previously filed post-effective amendment.

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CROSS REFERENCE SHEET
Pursuant to Rule 495

Showing Location in Part A (Prospectus) and
Part B (Statement of Additional Information)
of Registration Statement of Information Required by Form N-4
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PART A
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<TABLE>
<CAPTION>

Item of Form N-4 Prospectus Caption
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<S> <C>
1. Cover Page................................ Cover Page

2. Definitions............................... Definitions

3. Synopsis.................................. Summary; Historical Performance Data

4. Condensed Financial Information........... Condensed Financial Information;
Financial Statements

5. General Description of Registrant,
Depositor and Portfolio Companies
(a) Depositor............................ PFL Life Insurance Company
(b) Registrant........................... The Retirement Builder Accounts
(c) Portfolio Company.................... The Mutual Fund Account
(d) Fund Prospectus...................... Underlying Funds
(e) Voting Rights........................ Underlying Funds

6. Deductions and Expenses
(a) General.............................. Charges and Deductions
(b) Sales Load %......................... Surrender Charge
(c) Special Purchase Plan................ N/A
(d) Commissions.......................... Distributor of the Policies
(e) Expenses - Registrant................ N/A
(f) Fund Expenses........................ Other Expenses including Investment
Advisory Fees
(g) Organizational Expenses.............. N/A

7. Policies
(a) Persons with Rights.................. The Policy; Election of Payment Option;
Annuity Payments; Annuity Commencement
Date; Voting Rights

(b) (i) Allocation of Premium
Payments....................... Allocation of Premium Payments
(ii) Transfers...................... Transfers
(iii) Exchanges...................... N/A

(c) Changes.............................. The Policy; Annuity Payment Options;
Premium Payments; Possible changes in
taxation; Addition, Deletion, or
Substitution of Investments
</TABLE>
<PAGE>

<TABLE>

<S> <C>
(d) Inquiries............................ Summary

8. Annuity Period............................ Annuity Payment Options;
...................................... Annuity Commencement Date

9. Death Benefit............................. Death Benefit

10. Purchases and Contract Value
(a) Purchases............................ Policy Application and Issuance of
..................................... Policies; Premium Payments
(b) Valuation............................ Policy Value; The Mutual Fund
..................................... Policy Value
(c) Daily Calculation.................... The Mutual Fund Policy Value
(d) Underwriter.......................... Distributor of the Policies

11. Redemptions
(a) By Owners............................ Surrenders
By Annuitant......................... N/A
(b) Texas ORP............................ Restrictions Under the Texas Optional
..................................... Retirement Program
(c) Check Delay.......................... Payment Not Honored by Bank
(d) Lapse................................ N/A
(e) Free Look............................ Summary

12. Taxes..................................... Certain Federal Income Tax Consequences

13. Legal Proceedings......................... Legal Proceedings

14. Table of Contents for the
Statement of Additional Information....... Statement of Additional Information

<CAPTION>
PART B
------
Item of Form N-4 Statement of Additional
- ---------------- Information Caption
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<S> <C>
15. Cover Page................................ Cover Page

16. Table of Contents......................... Table of Contents

17. General Information and History........... (Prospectus) PFL Life Insurance Company

18. Services
(a) Fees and Expenses of Registrant...... N/A
(b) Management Policies.................. N/A
(c) Custodian............................ Custody of Assets
</TABLE>
<PAGE>

<TABLE>

Independent
Auditors............................. Independent Auditors
(d) Assets of Registrant................. Custody of Assets
(e) Affiliated Person.................... N/A
(f) Principal Underwriter................ Distribution of the Policies

19. Purchase of Securities Being Offered...... Distribution of the Policies
Offering Sales Load....................... N/A

20. Underwriters.............................. Distribution of the Policies;
(Prospectus) Distributor of the
Policies

21. Calculation of Performance Data........... Historical Performance Data

22. Annuity Payments.......................... (Prospectus) Annuity Payment Options

23. Financial Statements...................... Financial Statements

<CAPTION>
PART C -- OTHER INFORMATION
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Item of Form N-4 Part C Caption
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<S> <C>
24. Financial Statements
and Exhibits
(a) Financial Statements................. Financial Statements
(b) Exhibits............................. Exhibits

25. Directors and Officers of
the Depositor............................. Directors and Officers of the Depositor

26. Persons Controlled By or
Under Common Control with the
Depositor or Registrant................... Persons Controlled By or Under Common Control
with the Depositor or Registrant

27. Number of Contractowners.................. Number of Contractowners

28. Indemnification........................... Indemnification

29. Principal Underwriters.................... Principal Underwriters

30. Location of Accounts and Records.......... Location of Accounts and Records

31. Management Services....................... Management Services

32. Undertakings.............................. Undertakings

Signature Page............................ Signature Page
</TABLE>
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PROSPECTUS , 199

FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY

ISSUED THROUGH

PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT

PFL LIFE INSURANCE COMPANY

The Flexible Premium Individual Deferred Variable Annuity Policy ("Policy")
offered by this Prospectus is offered by PFL Life Insurance Company ("PFL")
through First Union Brokerage Services, Inc. ("FUBS"). FUBS is a corporate
affiliate of First Union National Bank of North Carolina ("FUNB"), which in
turn is a subsidiary of First Union Corporation, the sixth largest bank
holding company in the United States. You can use the Policy to accumulate
funds for retirement or other long-term financial planning purposes. You are
generally not taxed on any earnings on amounts you invest until you withdraw
them or begin to receive annuity payments. The Policy is a "variable" annuity
because the value of your investments can go up or down based on the
performance of mutual fund portfolios that you select. It is a flexible
premium policy because after you purchase it you can generally make additional
investments of any amount of $50 or more, until the Annuity Commencement Date
when PFL begins making annuity payments to you.

You have eighteen investment options to choose from through the Policy. They
include these seventeen mutual fund portfolios of the AIM Variable Insurance
Funds, Inc., Evergreen Variable Trust, Federated Insurance Series, MFS
Variable Insurance Trust, Oppenheimer Variable Account Funds, and Putnam
Variable Trust.

AIM VARIABLE INSURANCE
FUNDS, INC.

EVERGREEN VARIABLE TRUST FEDERATED INSURANCE
------------------- SERIES

AIM V.I. Growth and Evergreen VA Fund
Income Fund Evergreen VA Foundation Federated High Income
AIM V.I. International Fund Bond Fund II
Equity Fund Evergreen VA Growth and
AIM V.I. Value Fund Income Fund

OPPENHEIMER VARIABLE
ACCOUNT FUNDS

MFS VARIABLE INSURANCE PUTNAM VARIABLE TRUST
TRUST -------------------

Oppenheimer Growth Fund Putnam VT Global Growth
MFS Emerging Growth Oppenheimer Multiple Fund
Series Strategies Fund Putnam VT Money Market
MFS Research Series Oppenheimer Strategic Fund
MFS Total Return Series Bond Fund Putnam VT New Value Fund
MFS Utilities Series

YOU AS THE OWNER OF THE POLICY, BEAR THE ENTIRE INVESTMENT RISK FOR ALL
AMOUNTS THAT YOU ALLOCATE TO ANY OF THE MUTUAL FUNDS. THIS MEANS THAT YOU
COULD LOSE THE AMOUNT THAT YOU INVEST. But if the mutual fund shares increase
in value, then the value of your Policy will also increase.

The eighteenth investment option is the Fixed Account. If you invest in one
of the alternatives offered in the Fixed Account, then PFL guarantees to
return your investment with interest at rates that PFL will declare from time
to time.

Of course, you can choose any combination of these investment options. You
can also transfer amounts among these options (subject to some restrictions).

LIKE ALL SECURITIES, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>

You should only purchase a Policy as a long-term investment. However, you do
have access to all or some of the current cash value of your investments at
any time before the Annuity Commencement Date. But, if you do withdraw cash
from your Policy, there may be a surrender charge. You may also have to pay
income taxes on some or all of the amount you withdraw, and if you are under
age 59 1/2 there may also be a tax penalty. Finally, there may be an interest
penalty if you make a premature withdrawal from the Fixed Account (this is
called an "Excess Interest Adjustment," and it could also result in your
earning extra interest). PFL has the right to postpone withdrawals from the
Fixed Account.

Prospectuses for the mutual fund portfolios are attached to the back of this
Prospectus. This prospectus and the mutual fund prospectuses give you vital
information about the Policies and the mutual funds. Please read them
carefully before you invest. Keep them for future reference.

PLEASE NOTE THAT THE POLICIES AND THE MUTUAL FUNDS:

. ARE NOT BANK DEPOSITS,

. ARE NOT FEDERALLY INSURED,

. ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY, AND

. ARE NOT GUARANTEED TO ACHIEVE THEIR GOAL.

This Prospectus sets forth the information that a prospective purchaser
should consider before purchasing a Policy. A Statement of Additional
Information about the Policy and the Mutual Fund Account which has the same
date as this Prospectus has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Statement of
Additional Information is available at no cost to any person requesting a copy
by writing PFL at the Administrative and Service Office or by calling 1-800-
525-6205. The table of contents of the Statement of Additional Information is
included at the end of this Prospectus.

This Prospectus and the Statement of Additional Information generally
describe only the Policies and the Mutual Fund Account, except when the Fixed
Account is specifically mentioned.

Administrative and Service Office:
Financial Markets Division--Variable Annuity Department
PFL Life Insurance Company
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS................................................................ 5
SUMMARY.................................................................... 8
CONDENSED FINANCIAL INFORMATION............................................ 19
FINANCIAL STATEMENTS....................................................... 19
HISTORICAL PERFORMANCE DATA................................................ 19
Standardized Performance Data............................................ 19
Subaccounts.............................................................. 20
Non-Standardized Performance Data........................................ 23
Manager or Subadviser Performance........................................ 24
PUBLISHED RATINGS.......................................................... 25
PFL LIFE INSURANCE COMPANY................................................. 25
THE ACCOUNTS............................................................... 25
The Mutual Fund Account.................................................. 25
The Fixed Account........................................................ 29
Guaranteed Periods..................................................... 29
Dollar Cost Averaging Fixed Account Option............................. 30
Current Interest Rates................................................. 30
Transfers................................................................ 31
Reinstatements........................................................... 31
Telephone Transactions................................................... 32
Dollar Cost Averaging.................................................... 32
Asset Rebalancing........................................................ 33
THE POLICY................................................................. 33
Policy Application and Issuance of Policies--Premium Payments............ 33
Additional Premium Payments............................................ 34
Maximum Total Premium Payments......................................... 34
Allocation of Premium Payments......................................... 34
Payment Not Honored by Bank............................................ 34
Policy Value............................................................. 34
The Mutual Fund Policy Value........................................... 35
Adjusted Policy Value.................................................... 35
Amendments............................................................... 35
Non-participating Policy................................................. 35
DISTRIBUTIONS UNDER THE POLICY............................................. 35
Surrenders............................................................... 35
Nursing Care and Terminal Condition Withdrawal Option.................... 37
Unemployment Waiver...................................................... 37
Excess Interest Adjustments (EIA)........................................ 37
Systematic Payout Option................................................. 38
Annuity Payments......................................................... 38
Annuity Commencement Date.............................................. 38
Election of Payment Option............................................. 39
Premium Tax............................................................ 39
Supplementary Contract................................................. 39
Annuity Payment Options.................................................. 39
Death Benefit............................................................ 42
Death of Annuitant Prior to Annuity Commencement Date.................. 42
Death On or After Annuity Commencement Date............................ 43
Beneficiary............................................................ 44
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Death of Owner........................................................... 44
Restrictions Under the Texas Optional Retirement Program................. 44
Restrictions Under Section 403(b) Plans.................................. 44
Restrictions Under Qualified Policies.................................... 44
CHARGES AND DEDUCTIONS..................................................... 44
Surrender Charge......................................................... 45
Mortality and Expense Risk Fee........................................... 45
Administrative Charges................................................... 46
Premium Taxes............................................................ 46
Federal, State and Local Taxes........................................... 46
Transfer Fee............................................................. 47
Other Expenses Including Investment Advisory Fees........................ 47
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 47
Tax Status of Policy..................................................... 48
Taxation of Annuities.................................................... 48
DISTRIBUTOR OF THE POLICIES................................................ 52
VOTING RIGHTS.............................................................. 52
LEGAL PROCEEDINGS.......................................................... 53
STATEMENT OF ADDITIONAL INFORMATION........................................ 54
Appendix A............................................................... A-1
</TABLE>

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DEFINITIONS

Accumulation Unit--An accounting unit of measure used in calculating the
Policy Value in the Mutual Fund Account before the Annuity Commencement Date.

Adjusted Policy Value--An amount equal to the Policy Value increased or
decreased by any Excess Interest Adjustments applied at the time of surrender
or on the Annuity Commencement Date.

Administrative and Service Office--Financial Markets Division Variable
Annuity Department, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.

Annuitant--The person entitled to receive Annuity Payments after the Annuity
Commencement Date and during whose life any Annuity Payments involving life
contingencies will continue.

Annuity Commencement Date--The date the Owner begins having Annuity Payments
come from the Policy. The Annuity Commencement Date may not be later than the
last day of the policy month starting after the Annuitant's 85th birthday,
except as expressly allowed by PFL, but in no event later than the last day of
the Policy month following the month of the Annuitant's 95th birthday. The
Annuity Commencement Date may be required to be earlier for Qualified Policies
or as required by state law.

Annuity Payment Option or Payment Option--A method of receiving a stream of
Annuity Payments selected by the Owner.

Annuity Unit--An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Annuity Payment.

Beneficiary--The person who has the right to the death benefit set forth in
the Policy.

Business Day--A day when the New York Stock Exchange is open for trading.

Cash Value--The Adjusted Policy Value, less the Surrender Charge, if any.

Code--The Internal Revenue Code of 1986, as amended.

Cumulative Free Percentage--The percentage (as applied to the Policy Value)
which is available to the Owner free of any Surrender Charge.

Current Interest Rate--The interest rate or rates currently guaranteed to be
credited on amounts allocated to one or more options in the Fixed Account.
This interest rate will always be equal to or greater than 3%.

Dollar Cost Averaging--The process by which the Owner may elect to liquidate
a specified Dollar Cost Averaging Fixed Account Option in order to purchase
Mutual Fund Account Accumulation Units on a systematic basis.

Due Proof of Death--A certified copy of a death certificate, a certified
copy of a decree of a court of competent jurisdiction as to the finding of
death, a written statement by the attending physician, or any other proof
satisfactory to PFL, will constitute Due Proof of Death.

Excess Interest Adjustment--A positive or negative adjustment to amounts
withdrawn upon partial or full surrenders by the Owner from the Fixed Account
Guaranteed Period Options, or to amounts applied to Annuity Payment Options.
The adjustment reflects changes in the interest rates declared by PFL since
the date any payment was received by or an amount was transferred to the
Guaranteed Period Option. The Excess Interest Adjustment (EIA) can either
decrease or increase the amount to be received

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<PAGE>

by the Owner upon full surrender or commencement of Annuity Payments,
depending upon whether there has been an increase or decrease in interest
rates, respectively. "Excess Interest" is the additional interest paid by the
Company over the minimum guaranteed amount stated in the policy.

Excess Partial Surrender--The portion of a partial withdrawal (surrender)
that can be subject to a Surrender Charge.

Fixed Account--A group of Investment Options under the Policy, other than
the Mutual Fund Account, that are part of the general assets of PFL that are
not in separate accounts.

Fixed Annuity Payments--Payments made pursuant to an Annuity Payment Option
which do not fluctuate in amount.

Guaranteed Period Options--The various guaranteed interest rate periods of
the Fixed Account which may be offered by PFL and into which Premium Payments
may be paid or amounts transferred.

Investment Options--Any of the Guaranteed Period Options of the Fixed
Account, the Dollar Cost Averaging Fixed Account Option, and any of the
Subaccounts of the Mutual Fund Account.

Mutual Fund Account--That portion of the PFL Retirement Builder Variable
Annuity Account, a separate account established and registered as a unit
investment trust under the Investment Company Act of 1940, which is dedicated
to the Policy and to which Premium Payments under the Policies may be
allocated.

Nonqualified Policy--A Policy other than a Qualified Policy.

Owner or Owners--The person who may exercise all rights and privileges under
the Policy. The Owner during the lifetime of the Annuitant and prior to the
Annuity Commencement Date is the person designated as the Owner or a Successor
Owner in the application.

Policy Anniversary--Each anniversary of the Policy Date.

Policy Date--The Policy Date as shown on the Policy Data Page attached to
the Policy.

Policy Value--On or before the Annuity Commencement Date, the Policy Value
is equal to the Owner's:

(1) Premium Payments; minus

(2) Partial Withdrawals (including any applicable Excess Interest
Adjustments and/or Surrender Charges on such withdrawals); plus

(3) interest credited in the Fixed Account; plus or minus

(4) accumulated gains or losses in the Mutual Fund Account; minus

(5) Service Charges, premium taxes and transfer fees, if any.

Policy Year--A Policy Year begins on the Policy Date and on each Policy
Anniversary.

Premium Payment--An amount paid to PFL by the Owner or on the Owner's behalf
as consideration for the benefits provided by the Policy.

Qualified Policy--A Policy issued in connection with retirement plans that
qualify for special Federal income tax treatment under the Code.

Service Charge--There is an annual Service Charge on each Policy Anniversary
(and a charge at the time of surrender during any Policy Year) for Policy
maintenance and related administrative expenses. This annual charge is the
lesser of 2% of the Policy Value or $30.

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Subaccount--A subdivision within the Mutual Fund Account available under the
Policies, the assets of which are invested in a specified Portfolio of the
Underlying Funds.

Successor Owner--A person appointed by the Owner to succeed to ownership of
the Policy in the event of the death of the Owner who is not the Annuitant
before the Annuity Commencement Date.

Surrender Charge--The applicable contingent deferred sales charge, assessed
on certain full surrenders or partial withdrawals of Premium Payments to cover
expenses relating to the sale of the Policies.

Underlying Funds--The designated portfolios of AIM Variable Insurance Funds,
Inc., managed by A I M Advisors, Inc. ("AIM"); Evergreen Variable Trust,
managed by Evergreen Asset Management Corp.; Federated Insurance Series,
managed by Federated Advisers; MFS Variable Insurance Trust, managed by
Massachusetts Financial Services Company; Oppenheimer Variable Account Funds,
managed by OppenheimerFunds, Inc.; and Putnam Variable Trust, managed by
Putnam Investment Management, Inc.

Valuation Period--The period of time from one determination of Accumulation
Unit and Annuity Unit values to the next subsequent determination of values.
Such determinations shall be made on each Business Day.

Variable Annuity Payments--Payments made pursuant to an Annuity Payment
Option which fluctuate as to dollar amount or payment term in relation to the
investment performance of the specified Subaccounts within the Mutual Fund
Account.

Written Notice or Written Request--Written notice, signed by the Owner, that
gives PFL the information it requires and is received at the Administrative
and Service Office. For some transactions, PFL may accept an electronic notice
such as telephone instructions. Such electronic notice must meet the
requirements PFL establishes for such notices.

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<PAGE>

SUMMARY

The following summary is intended to provide a brief overview of the Policy.
More detailed information can be found in the sections of this Prospectus that
follow, all of which should be read in their entirety.

THE POLICY

The Policy is a tax-deferred flexible premium variable annuity policy which
can be purchased on a non-tax qualified basis or with the proceeds from
certain plans qualifying for favorable federal income tax treatment. The
Policy provides the Owner with the ability to accumulate funds on a tax-
deferred basis and to receive periodic annuity payments on a variable basis, a
fixed basis, or a combination of both. The Owner allocates the Premium
Payments among the various options available under the Mutual Fund Account and
the Fixed Account. The Policy is intended for long-term purposes, such as
retirement, and for persons who may have maximized their use of other
retirement savings methods, such as 401(k) plans and individual retirement
accounts (IRAs).

THE ACCOUNTS

The Mutual Fund Account. The Mutual Fund Account is a separate account of
PFL, which currently has dedicated seventeen Subaccounts to the Policy that
invest exclusively in shares of seventeen designated portfolios of the AIM
Variable Insurance Funds, Inc., Evergreen Variable Trust, Federated Insurance
Series, MFS Variable Insurance Trust, Oppenheimer Variable Account Funds, and
Putnam Variable Trust, (collectively, the "Underlying Funds"). The following
portfolios are available, as shown under the names of the various managers or
subadvisers to the portfolios:

Managed by A I M Advisors, Inc.:
. AIM V.I. Growth and Income Fund
. AIM V.I. International Equity Fund
. AIM V.I. Value Fund

Managed by Evergreen Asset Management Corp.:
. Evergreen VA Fund
. Evergreen VA Foundation Fund
. Evergreen VA Growth and Income Fund

Managed by Federated Advisers:
. Federated High Income Bond Fund II

Managed by Massachusetts Financial Services Company:
. MFS Emerging Growth Series
. MFS Research Series
. MFS Total Return Series
. MFS Utilities Series

Managed by OppenheimerFunds, Inc.:
. Oppenheimer Growth Fund
. Oppenheimer Multiple Strategies Fund
. Oppenheimer Strategic Bond Fund

Managed by Putnam Investment Management, Inc.:
. Putnam VT Global Growth Fund
. Putnam VT Money Market Fund
. Putnam VT New Value Fund

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<PAGE>

Each of the seventeen Subaccounts of the Mutual Fund Account invests solely
in a corresponding Portfolio of the Underlying Funds. Because the Policy Value
will depend on the investment experience of the selected Subaccounts, the
Owner bears the entire investment risk with respect to Premium Payments
allocated to, and amounts transferred to, the Mutual Fund Account. (See "THE
ACCOUNTS--The Mutual Fund Account," p. 25.)

The Fixed Account. PFL guarantees a minimum effective annual interest rate
of at least 3% on Premium Payments and transfers to, less partial withdrawals
and transfers from the Fixed Account. Upon Surrender, PFL guarantees return of
at least the Premium Payments made to, less prior partial withdrawals and
transfers from, the Fixed Account. PFL will always offer a Current Interest
Rate which will be guaranteed for at least one year from the date of the
Premium Payment or transfer. PFL may, in its sole discretion, declare a higher
Current Interest Rate from time-to-time. PFL may offer optional guaranteed
interest rate periods into which Premium Payments may be made or amounts
transferred. PFL may also offer a Dollar Cost Averaging Fixed Account Option
which will have a one-year interest rate guarantee and which will require
automatic periodic transfers to the Mutual Fund Account. (See "THE ACCOUNTS--
The Fixed Account," p. 29.)

PREMIUM PAYMENTS

A Nonqualified or Qualified Policy may be purchased with an initial Premium
Payment of at least $2,000, but there is no minimum initial Premium Payment
required for a Policy purchased and used in connection with a tax deferred
403(b) Annuity. An Owner may make subsequent additional Premium Payments of at
least $50 each at any time before the Annuity Commencement Date. The maximum
total Premium Payments allowed without prior approval of PFL is $1,000,000. At
the time of each Premium Payment no charges or fees are deducted, so the
entire Premium Payment is invested immediately, subject to the restrictions
below regarding the "Right to Cancel" period. (See "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 48 and "CHARGES AND DEDUCTIONS--Premium Taxes," p. 46.)

The Owner must allocate the initial Premium Payment among the Investment
Options (that is, among the options available under the Fixed Account and/or
the Subaccounts of the Mutual Fund Account) according to allocation
percentages in the Policy application or transmittal form. Any allocation must
be in whole percents, and the total allocation must equal 100%. However, any
amounts allocated to Subaccounts of the Mutual Fund Account will be allocated
entirely to the Putnam VT Money Market Subaccount of the Mutual Fund Account
for the first 14 days after the date the Policy is issued or a longer period
if the laws of the state where issued require more than a 10 day "right-to-
cancel" period (See "Right to Cancel Period," below.) At the end of this
period, the amount in the Putnam VT Money Market Subaccount will then be
allocated to the Subaccount(s) of the Mutual Fund Account in accordance with
the allocation percentages specified by the Owner. Allocations specified by
the Owner will be used for Subsequent Additional Premium Payments unless the
Owner requests a change in allocation. Allocations for additional Premium
Payments may be changed by sending Written Notice to PFL's Administrative and
Service Office. (See "THE POLICY--Premium Payments," p. 33.)

RIGHT TO CANCEL PERIOD

When the Owner receives the Policy, it should be reviewed carefully to make
sure it is what the Owner intended to purchase. The Owner may, until the end
of the period of time specified in the Policy (the Right to Cancel period),
examine the Policy and return it for a refund. The applicable period will
depend on the state in which the Policy is issued. In many states the period
is 10 days after the Policy is delivered to the Owner. Some states may allow
for a longer period to return the Policy. The amount of the refund will be the
greater of the Premium Payments made under the Policy or the Policy Value. PFL
will pay the refund within 7 days after it receives written notice of
cancellation and the returned Policy. The Policy will then be deemed void.

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TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE

An Owner can transfer values from one Subaccount to another within the
Mutual Fund Account or from the Mutual Fund Account to the Fixed Account, or
from the Fixed Account to the Mutual Fund Account, within limits established
by PFL. Transfers of Policy Values from any of the Guaranteed Period Options
of the Fixed Account to any of the Subaccounts of the Mutual Fund Account are
allowed only at the end of the applicable Guaranteed Periods, and will not be
subject to an Excess Interest Adjustment at that time. The Owner may, however,
transfer an amount from $50 up to an amount equal to all of the interest
credited in any of the Guaranteed Period Options to any Subaccount(s) of the
Mutual Fund Account prior to the end of a specified Guaranteed Period. (See
"THE ACCOUNTS--Transfers," p. 31.) Any such "interest transfers" from a
Guaranteed Period Option prior to the end of a Guaranteed Period will not be
subject to any Excess Interest Adjustment. (See "DISTRIBUTIONS UNDER THE
POLICY--Excess Interest Adjustments," p. 37.) Transfers from the Dollar Cost
Averaging Fixed Account Option, except through a Dollar Cost Averaging
program, are not allowed. (See "THE ACCOUNTS--Dollar Cost Averaging Fixed
Account Option," p. 30.) Transfers currently may be made either by telephone
or by sending Written Notice to PFL's Administrative and Service Office. (See
"THE ACCOUNTS--Telephone Transactions," p. 32.)

PFL reserves the right to impose a $10 fee for each transfer in excess of 12
transfers per Policy Year. At the present time, PFL does not charge for
transfers. (See "THE ACCOUNTS--Transfers," p. 31.)

SURRENDERS

The Owner may elect to surrender all or withdraw a portion of the Cash Value
($500 minimum) in exchange for a payment from PFL at any time prior to the
earlier of the Annuitant's death or the Annuity Commencement Date. The Cash
Value equals the Policy Value increased or decreased by any Excess Interest
Adjustment, less any applicable Surrender Charge (described below). A
surrender request must be made by Written Request, and a request for a partial
withdrawal must specify the Subaccounts or Guaranteed Period Options from
which the withdrawal is requested. There is currently no limit on the
frequency or timing of Policy withdrawals, although for Qualified Policies the
retirement plan or applicable law may restrict and/or penalize withdrawals.
(See "DISTRIBUTIONS UNDER THE POLICY--Surrenders," p. 35.) In addition to any
applicable Surrender Charge, Service Charge, Excess Interest Adjustment, and
premium tax, surrenders and partial withdrawals may be subject to income taxes
and a 10% Federal penalty tax.

NURSING CARE AND TERMINAL CONDITION WITHDRAWAL OPTION

In some states, if the Owner or Owner's spouse (Annuitant or Annuitant's
spouse if the Owner is not a natural person): (1) has been confined in a
hospital or nursing facility for 30 consecutive days or (2) has been diagnosed
as having a terminal condition as defined in the Policy or endorsement
(generally, a life expectancy of twelve months or less), then the Surrender
Charge and Excess Interest Adjustment (See "DISTRIBUTIONS UNDER THE POLICY--
Death Benefit," p. 42.) are not imposed on surrenders or partial withdrawals.
(Since this benefit may not be available in all states, see the Policy or
endorsement for details.) (See DISTRIBUTIONS UNDER THE POLICY--Nursing Care
and Terminal Condition Withdrawal Option," p. 37.)

UNEMPLOYMENT WAIVER

- 10 -
<PAGE>

Cash Value at the time of withdrawal of $5,000. Proof of unemployment will
consist of providing PFL with a determination letter from the applicable
State's Department of Labor which verifies that the individual qualifies for
and is receiving unemployment benefits at the time of withdrawal. Therefore,
this benefit may not be available if the unemployed person (a) quit
voluntarily, (b) retired due to age, (c) ceased employment due to disability,
or (d) was terminated for cause, or terminated for other reasons that would
prevent the person from receiving unemployment benefits under state or federal
law. The determination letter must be received by PFL no later than 15 days
after the date of the withdrawal request. This benefit may not be available in
all states, see the Policy or endorsement for details.

CHARGES AND DEDUCTIONS

Surrender Charge. In order to permit investment of the entire Premium
Payment, PFL does not deduct sales or other charges at the time of investment.
However, a Surrender Charge, which is a contingent deferred sales charge, of
up to 6% of the Premium Payment is imposed on certain full surrenders or
partial withdrawals of Premium Payments in order to partially cover expenses
relating to the distribution of the Policies. The applicable Surrender Charge
is based on the period of time elapsed since payment of the Premium Payment(s)
being withdrawn. There will be no Surrender Charge imposed five or more years
after a Premium Payment was paid. In any event, Surrender Charges will be
waived after the tenth Policy Year. For purposes of determining the applicable
Surrender Charge, Premium Payments are considered to be withdrawn on a "first-
in, first-out" basis. (See "CHARGES AND DEDUCTIONS--Surrender Charge," p. 45.)

In each Policy Year the Owner may request partial withdrawals ($500 minimum)
of up to 10% of the Policy Value (calculated at the time of the partial
withdrawal) free of Surrender Charges. The percentage that may be taken free
of Surrender Charges each Policy Year is cumulative. This is referred to as
the "Cumulative Free Percentage." That is, Cumulative Free Percentages which
are not taken are carried forward and are available to be taken in the
following Policy Year free of Surrender Charges. Cumulative Free Percentage
withdrawals previously taken reduce the Cumulative Free Percentage that is
available. (See "DISTRIBUTIONS UNDER THE POLICY--Surrenders," p. 35.)
Withdrawals in excess of the available Cumulative Free Percentage will be
subject to a Surrender Charge of up to 6% of the Premium Payment withdrawn.

Excess Interest Adjustment. Full surrenders, partial withdrawals from the
Guaranteed Period Options of the Fixed Account prior to the end of the
Guaranteed Period, and amounts applied to an Annuity Payment Option (prior to
the end of the Guaranteed Period) and which are in excess of the cumulative
interest credited at the time of, but prior to, the withdrawal, are subject to
an Excess Interest Adjustment. Depending upon declared rates of interest, the
effect of an Excess Interest Adjustment could eliminate all interest in excess
of the minimum guaranteed effective annual interest rate of 3%, or it could
result in the crediting of additional interest. (See "DISTRIBUTIONS UNDER THE
POLICY--Excess Interest Adjustments," p. 37.)

Account Charges. PFL deducts a daily charge equal to a percentage of the net
assets in the Mutual Fund Account for the mortality and expense risks assumed
by PFL. For Guaranteed Minimum Death Benefit Option "A" (Return of Premium
Death Benefit), the effective annual rate of this charge is 1.10% of the value
of the Mutual Fund Account's net assets. For Guaranteed Minimum Death Benefit
Options "B" (5% Annually Compounding Death Benefit) and "C" (Annual Step-Up
Death Benefit), the effective annual rate of this charge is 1.25% of the value
of the Mutual Fund Account's net assets. (See "CHARGES AND DEDUCTIONS--
Mortality and Expense Risk Fee," p. 45, and "DISTRIBUTIONS UNDER THE POLICY--
Death Benefit," p. 42.)

PFL also deducts a daily Administrative Charge from the net assets of the
Mutual Fund Account to partially cover expenses incurred by PFL in connection
with the administration of the Account and the

- 11 -
<PAGE>

Policies. The effective annual rate of this charge is .15% of the value of the
Mutual Fund Account's net assets. (See "CHARGES AND DEDUCTIONS--Administrative
Charges," p. 46.)

PFL guarantees that the account charges for mortality and expense risks and
administrative expenses will not exceed a total of 1.25% for the Return of
Premium Death Benefit, and 1.40% for the 5% Annually Compounding Death Benefit
or the Annual Step Up Benefit Death Benefit.

Service Charge. There is also an annual Service Charge on each Policy
Anniversary (and a charge at the time of surrender during any Policy Year) for
Policy maintenance and related administrative expenses. This annual charge is
the lesser of 2% of the Policy Value or $30 and is deducted from each
Investment Option in proportion to each Investment Option's percentage of the
Policy Value in the Investment Option just prior to such charge. This charge
is waived if either the Policy Value or the sum of all Premium Payments less
the sum of all partial withdrawals equals or exceeds $50,000 on a Policy
Anniversary (or date of surrender). PFL GUARANTEES THAT THIS CHARGE WILL NOT
BE INCREASED IN THE FUTURE. (See "CHARGES AND DEDUCTIONS--Administrative
Charges," p. 46.)

Taxes. PFL may incur premium taxes relating to the Policies. When permitted
by state law, PFL will not deduct any premium taxes related to particular
Policy from the Policy Value until surrender of the Policy, payment of the
death benefit or until the Annuity Commencement Date. Premium taxes currently
range from 0% to 3.50% of Premium Payments. (See "CHARGES AND DEDUCTIONS--
Premium Taxes," p. 46.)

No charges are currently made against any of the Accounts for federal,
state, or local income taxes. However, PFL reserves the right to deduct
charges in the future for federal, state and local taxes or the economic
burden resulting from the application of any tax laws that PFL determines to
be attributable to the Policies. (See "CHARGES AND DEDUCTIONS--Federal, State
and Local Taxes," p. 46.)

Charges Against the Underlying Funds. The value of the net assets of the
Subaccounts of the Mutual Fund Account will reflect the investment advisory
fees and other expenses incurred by the Underlying Funds.

Expense Data. The charges and deductions are summarized in the following
tables. This tabular information regarding expenses assumes that the entire
Policy Value is in the Mutual Fund Account.

- 12 -
<PAGE>

FEE TABLE

<TABLE>
<S> <C>
POLICY OWNER TRANSACTION
EXPENSES(/1/)
Sales Load On Purchase Payments......................................... 0
Maximum Surrender Charge (as a % of Premium Payment
Surrendered)(/2/)...................................................... 6%
Surrender Fees.......................................................... 0
Annual Service Charge
Lesser of 2% of Policy Value or $30 Per Policy
Transfer Fee
Currently No Fee

MUTUAL FUND ACCOUNT ANNUAL EXPENSES
(as a percentage of account value)
Mortality and Expense Risk Fees(/3/).................................. 1.25%
Administrative Charge 0.15%
----
TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES............................. 1.40%
</TABLE>

UNDERLYING FUNDS ANNUAL EXPENSES(/4/)
(as a percentage of average net assets, after waivers and reimbursements)

<TABLE>
<CAPTION>
TOTAL
UNDERLYING
MANAGEMENT OTHER RULE 12B-1 FUNDS ANNUAL
FEES EXPENSES FEES EXPENSES
---------- -------- ---------- ------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and Income Fund... 0.65% 0.13% -- 0.78%
AIM V.I. International Equity
Fund............................. 0.75% 0.21% -- 0.96%
AIM V.I. Value Fund............... 0.64% 0.09% -- 0.73%
Evergreen VA Fund(/5/)............ 0.95% 0.05% -- 1.00%
Evergreen VA Foundation
Fund(/5/)........................ 0.825% 0.175% -- 1.00%
Evergreen VA Growth and Income
Fund(/5/)........................ 0.95% 0.05% -- 1.00%
Federated High Income Bond Fund
II............................... 0.60% 0.10% -- 0.80%
MFS Emerging Growth Series(/6/)... 0.75% 0.25% -- 1.00%
MFS Research Series(/6/).......... 0.75% 0.25% -- 1.00%
MFS Total Return Series(/6/)...... 0.75% 0.25% -- 1.00%
MFS Utilities Series(/6/)......... 0.75% 0.25% -- 1.00%
Oppenheimer Growth Fund(/7/)...... 0.75% 0.04% -- 0.79%
Oppenheimer Multiple Strategies
Fund............................. 0.73% 0.04% -- 0.77%
Oppenheimer Strategic Bond Fund... 0.75% 0.10% -- 0.85%
Putnam VT Global Growth
Fund(/8/)........................ 0.60% 0.16% 0.15% 0.91%
Putnam VT Money Market
Fund(/8/)(/9/)................... 0.45% 0.10% 0.15% 0.70%
Putnam VT New Value
Fund(/8/)(/10/).................. 0.70% 0.13% 0.15% 0.98%
</TABLE>
- -------------------------
(/1/) The Surrender Charge and Transfer Fee, if any is imposed, apply to each
Policy, regardless of how Policy Value is allocated among the Mutual Fund
Account and the Fixed Account. The Service Charge applies to both the
Fixed Account and the Mutual Fund Account, and is assessed on a prorata
basis relative to each Account's Policy Value as a percentage of the
Policy's total Policy Value. Mutual Fund Account Annual Expenses do not
apply to the Fixed Account (See "CHARGES AND DEDUCTIONS--Other Expenses
Including Investment Advisory Fees," p. 47.)
(/2/) The Surrender Charge is decreased based on the number of years since the
Premium Payment was made, from 6% in the year in which the Premium
Payment was made to 0% in the sixth year after the Premium Payment was
made.
(/3/) Mortality and Expense Risk Fees shown (1.25%) are for the 5% Annually
Compounding Death Benefit and the Annual Step Up Death Benefit. The
corresponding Fee for the "Return of Premium Death Benefit" is 1.10% for
each Subaccount. (See "DISTRIBUTIONS UNDER THE POLICY--Death Benefit,"
p.42.)
(/4/) The fee table information relating to the Underlying Funds was provided
to PFL by the Underlying Funds, relative to the year ended December 31,
1996, and PFL has not independently verified such information.

- 13 -
<PAGE>

(/5/) Annualized results for the Evergreen VA Funds from March 1, 1996,
(commencement of operations of the underlying fund) through December 31,
1996, and net of expense waivers and reimbursement. If the underlying
fund had borne all expenses that were assumed or waived by the investment
advisor, the ratios for Other Expenses and Total Underlying Fund Annual
Expenses respectively would have been as follows: Evergreen VA Fund:
1.43%, 2.38%; Evergreen VA Foundation Fund: 0.895%, 1.72%; and Evergreen
VA Growth and Income Fund: 1.10%, 2.05%.
(/6/) Each MFS Series has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent, and may enter
into other such arrangements and directed brokerage arrangements (which
would also have the effect of reducing the Series' expenses). Any such
fee reductions are not reflected under "Other Expenses." The Adviser has
agreed to bear expenses for each Series, subject to reimbursement by each
Series, such that each Series' "Other Expenses" shall not exceed 0.25% of
the average daily net assets of each Series during the current fiscal
year. Otherwise, "Other Expenses" and "Total Operating Expenses"
respectively for each Series would be: MFS Emerging Growth Series: 0.41%,
1.16%; MFS Research Series: 0.73%, 1.48%; MFS Total Return Series: 1.35%,
2.10%; and MFS Utilities Series: 2.00%, 2.75%.
(/7/) Before voluntary reimbursement by the manager, other expenses for the
Oppenheimer Growth Fund were 0.06% and Total Underlying Fund Annual
Expenses were 0.81%.
(/8/) The expenses for Putnam VT Global Growth Fund, Putnam VT Money Market
Fund and Putnam VT New Value Fund are based on Class IA shares. They have
been restated to reflect the 12b-1 fees assessed on Class IB shares which
were not outstanding in 1996.
(/9/) Total expenses for Putnam VT Money Market Fund have been restated to
reflect the cost of certain portfolio insurance purchased by the fund.
See the fund's portfolio for more detailed information. Estimated total
fund operating expenses based on actual expenses of class IA shares would
have been 0.68%.
(/10/) The expenses for Putnam New Value Fund are estimated amounts as that fund
commenced investment operations after December 31, 1996.

- 14 -
<PAGE>

EXAMPLES

I. An Owner would pay the following expenses on a $1,000 investment,
assuming Death Benefit Option A, (Return of Premium Death Benefit) a
hypothetical 5% annual return on assets and assuming the entire Policy Value
is in the applicable Subaccount:

1. If the Policy is surrendered at the end of the applicable time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Subaccount...... $75 $106 $121 $243
AIM V.I. International
Equity Subaccount...... $77 $112 $130 $261
AIM V.I. Value
Subaccount............. $75 $104 $119 $237
Evergreen VA
Subaccount............. $77 $113 $132 $265
Evergreen VA Foundation
Subaccount............. $77 $113 $132 $265
Evergreen VA Growth and
Income Subaccount...... $77 $113 $132 $265
Federated High Income
Bond Fund II
Subaccount............. $75 $107 $122 $245
MFS Emerging Growth
Subaccount............. $77 $113 $132 $265
MFS Research
Subaccount............. $77 $113 $132 $265
MFS Total Return
Subaccount............. $77 $113 $132 $265
MFS Utilities
Subaccount............. $77 $113 $132 $265
Oppenheimer Growth
Subaccount............. $75 $106 $122 $244
Oppenheimer Multiple
Strategies Subaccount.. $75 $106 $121 $242
Oppenheimer Strategic
Bond Subaccount........ $76 $108 $125 $250
Putnam VT Global Growth
Subaccount............. $76 $110 $128 $256
Putnam VT Money Market
Subaccount............. $74 $104 $117 $234
Putnam VT New Value
Subaccount............. $77 $112 $131 $263

2. If the Policy is annuitized at the end of the applicable time period:

<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Subaccount...... $21 $ 66 $113 $243
AIM V.I. International
Equity Subaccount...... $23 $ 71 $122 $261
AIM V.I. Value
Subaccount............. $21 $ 64 $110 $237
Evergreen VA
Subaccount............. $23 $ 72 $124 $265
Evergreen VA Foundation
Subaccount............. $23 $ 72 $124 $265
Evergreen VA Growth and
Income Subaccount...... $23 $ 72 $124 $265
Federated High Income
Bond Fund II
Subaccount............. $21 $ 66 $114 $245
MFS Emerging Growth
Subaccount............. $23 $ 72 $124 $265
MFS Research
Subaccount............. $23 $ 72 $124 $265
MFS Total Return
Subaccount............. $23 $ 72 $124 $265
MFS Utilities
Subaccount............. $23 $ 72 $124 $265
Oppenheimer Growth
Subaccount............. $21 $ 66 $113 $244
Oppenheimer Multiple
Strategies Subaccount.. $21 $ 65 $112 $242
Oppenheimer Strategic
Bond Subaccount........ $22 $ 68 $116 $250
Putnam VT Global Growth
Subaccount............. $23 $ 70 $119 $256
Putnam VT Money Market
Subaccount............. $20 $ 63 $109 $234
Putnam VT New Value
Subaccount............. $23 $ 72 $123 $263
</TABLE>

- 15 -
<PAGE>

3. If the Policy is not surrendered or annuitized:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Subaccount...... $21 $ 66 $113 $243
AIM V.I. International
Equity Subaccount...... $23 $ 71 $122 $261
AIM V.I. Value
Subaccount............. $21 $ 64 $110 $237
Evergreen VA
Subaccount............. $23 $ 72 $124 $265
Evergreen VA Foundation
Subaccount............. $23 $ 72 $124 $265
Evergreen VA Growth and
Income Subaccount...... $23 $ 72 $124 $265
Federated High Income
Bond Fund II
Subaccount............. $21 $ 66 $114 $245
MFS Emerging Growth
Subaccount............. $23 $ 72 $124 $265
MFS Research
Subaccount............. $23 $ 72 $124 $265
MFS Total Return
Subaccount............. $23 $ 72 $124 $265
MFS Utilities
Subaccount............. $23 $ 72 $124 $265
Oppenheimer Growth
Subaccount............. $21 $ 66 $113 $244
Oppenheimer Multiple
Strategies Subaccount.. $21 $ 65 $112 $242
Oppenheimer Strategic
Bond Subaccount........ $22 $ 68 $116 $250
Putnam VT Global Growth
Subaccount............. $23 $ 70 $119 $256
Putnam VT Money Market
Subaccount............. $20 $ 63 $109 $234
Putnam VT New Value
Subaccount............. $23 $ 72 $123 $263

II. An Owner would pay the following expenses on a $1,000 investment,
assuming Death Benefit Option B, (5% Annually Compounding Death Benefit) or
Death Benefit Option C, (Annual Step-Up Death Benefit) a hypothetical 5%
annual return on assets and assuming the entire Policy Value is in the
applicable Subaccount:

1. If the Policy is surrendered at the end of the applicable time period:

<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Subaccount...... $77 $111 $129 $258
AIM V.I. International
Equity Subaccount...... $78 $116 $138 $276
AIM V.I. Value
Subaccount............. $76 $109 $126 $253
Evergreen VA
Subaccount............. $79 $117 $140 $280
Evergreen VA Foundation
Subaccount............. $79 $117 $140 $280
Evergreen VA Growth and
Income Subaccount...... $79 $117 $140 $280
Federated High Income
Bond Fund II
Subaccount............. $77 $111 $130 $260
MFS Emerging Growth
Subaccount............. $79 $117 $140 $280
MFS Research
Subaccount............. $79 $117 $140 $280
MFS Total Return
Subaccount............. $79 $117 $140 $280
MFS Utilities
Subaccount............. $79 $117 $140 $280
Oppenheimer Growth
Subaccount............. $77 $111 $129 $259
Oppenheimer Multiple
Strategies Subaccount.. $76 $110 $128 $257
Oppenheimer Strategic
Bond Subaccount........ $77 $113 $132 $265
Putnam VT Global Growth
Subaccount............. $78 $115 $135 $271
Putnam VT Money Market
Subaccount............. $76 $108 $125 $250
Putnam VT New Value
Subaccount............. $79 $117 $139 $278
</TABLE>

- 16 -
<PAGE>

2. If the Policy is annuitized at the end of the applicable time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Subaccount...... $23 $70 $120 $258
AIM V.I. International
Equity Subaccount...... $25 $76 $129 $276
AIM V.I. Value
Subaccount............. $22 $69 $118 $253
Evergreen VA
Subaccount............. $25 $77 $131 $280
Evergreen VA Foundation
Subaccount............. $25 $77 $131 $280
Evergreen VA Growth and
Income Subaccount...... $25 $77 $131 $280
Federated High Income
Bond Fund II
Subaccount............. $23 $71 $121 $260
MFS Emerging Growth
Subaccount............. $25 $77 $131 $280
MFS Research
Subaccount............. $25 $77 $131 $280
MFS Total Return
Subaccount............. $25 $77 $131 $280
MFS Utilities
Subaccount............. $25 $77 $131 $280
Oppenheimer Growth
Subaccount............. $23 $70 $121 $259
Oppenheimer Multiple
Strategies Subaccount.. $23 $70 $120 $257
Oppenheimer Strategic
Bond Subaccount........ $23 $72 $124 $265
Putnam VT Global Growth
Subaccount............. $24 $74 $127 $271
Putnam VT Money Market
Subaccount............. $22 $68 $116 $250
Putnam VT New Value
Subaccount............. $25 $76 $130 $278

3. If the Policy is not surrendered or annuitized:

<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Subaccount...... $23 $70 $120 $258
AIM V.I. International
Equity Subaccount...... $25 $76 $129 $276
AIM V.I. Value
Subaccount............. $22 $69 $118 $253
Evergreen VA
Subaccount............. $25 $77 $131 $280
Evergreen VA Foundation
Subaccount............. $25 $77 $131 $280
Evergreen VA Growth and
Income Subaccount...... $25 $77 $131 $280
Federated High Income
Bond Fund II
Subaccount............. $23 $71 $121 $260
MFS Emerging Growth
Subaccount............. $25 $77 $131 $280
MFS Research
Subaccount............. $25 $77 $131 $280
MFS Total Return
Subaccount............. $25 $77 $131 $280
MFS Utilities
Subaccount............. $25 $77 $131 $280
Oppenheimer Growth
Subaccount............. $23 $70 $121 $259
Oppenheimer Multiple
Strategies Subaccount.. $23 $70 $120 $257
Oppenheimer Strategic
Bond Subaccount........ $23 $72 $124 $265
Putnam VT Global Growth
Subaccount............. $24 $74 $127 $271
Putnam VT Money Market
Subaccount............. $22 $68 $116 $250
Putnam VT New Value
Subaccount............. $25 $76 $130 $278
</TABLE>

The above tables are intended to assist the Owner in understanding the costs
and expenses of the Mutual Fund Account and the Underlying Funds that the
Owner will bear, directly or indirectly. These include the 1996 expenses of
the Underlying Funds. (See "CHARGES AND DEDUCTIONS," p. 44, and the Underlying
Funds' prospectuses.) In addition to the expenses listed above, premium taxes,
currently ranging from 0% to 3.50% of Premium Payments may be applicable.

THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS
THAN THE ASSUMED RATE. THE FIGURES AND DATA FOR UNDERLYING FUND ANNUAL

- 17 -
<PAGE>

EXPENSES HAVE BEEN PROVIDED BY THE UNDERLYING FUNDS FOR 1996 AND PFL HAS NOT
INDEPENDENTLY VERIFIED THEIR ACCURACY.

In these examples, the $30 Service Charge is reflected as a charge of .0100%
based on an anticipated average Policy Value of $30,000.

DEATH BENEFIT

In the event that the Annuitant who is not the Owner dies prior to the
Annuity Commencement Date, the Owner will become the Annuitant unless the
Owner specifically requests on the application or in a Written Request that
the death benefit be paid upon the Annuitant's death and PFL agrees to such an
election. If the Annuitant is also the Owner, upon receipt of proof that the
Annuitant has died before the Annuity Commencement Date, the Death Benefit is
calculated and is payable to the Beneficiary when we receive an election of
the method of settlement and return of the Policy.

The amount of the Death Benefit will depend on the state where the Policy is
purchased and the death benefit option elected by the Owner. However, the
Death Benefit will always be at least equal to the greater of the Policy Value
or the Cash Value on the date due proof of death and election of the method of
settlement are received by PFL.

The Owner has the "one-time" option of choosing a "Return of Premium Death
Benefit," (Death Benefit Option "A"), a "5% Annually Compounding Death
Benefit," (Death Benefit Option "B"), or an "Annual Step-Up Death Benefit,"
(Death Benefit Option "C"). The Return of Premium Death Benefit is the return
of all Premium Payments less any Partial Withdrawals, as of the date of death.
The 5% Annually Compounding Death Benefit is the total Premium Payments less
an adjustment for any Partial Withdrawals, accumulated at 5% until the earlier
of any Owner's date of death or any Owner's 81st birthday. The Annual Step-Up
Death Benefit is the largest Policy Value on the issue date or on any Policy
Anniversary prior to the earlier of any Owner's date of death or prior to any
Owner's 81st birthday, plus any premiums paid, less an adjustment for any
Partial Withdrawals taken, subsequent to the date of the largest anniversary
Policy Value. If no election is made by the Owner, the Return of Premium Death
Benefit will be used upon death of the Annuitant.

The Death Benefit provisions may vary depending on the state where the
Policy is issued. The Death Benefit may be paid as either a lump sum cash
benefit or as an annuity as permitted by federal or state law. (See
"DISTRIBUTIONS UNDER THE POLICY--Death Benefit," p. 42.)

The Death Benefit is not paid on the death of an Owner if the Owner is not
the Annuitant. If an Owner who is not the Annuitant dies before the Annuity
Commencement Date, the amount payable under the Policy upon surrender will be
the Policy Value increased or decreased by an Excess Interest Adjustment.

VARIATIONS IN POLICY PROVISIONS

Certain provisions of the Policies may vary from the descriptions in this
Prospectus in order to comply with different state laws. See the Policy itself
for variations. Any such state variations will be included in the Policy
itself or in riders or endorsements attached to the Policy.

New Jersey residents: Annuity Payments must begin on or before the Policy
Anniversary that is closest to the Annuitant's 70th birthday or the 10th
Policy Anniversary, whichever occurs last. The Owner may not select a
Guaranteed Period Option that would extend beyond that date. The Owner's
options at the Annuity Commencement Date are to elect a lump sum payment, or
elect to receive annuity payments under one of the Fixed Payment Options. New
Jersey residents cannot elect Variable Payment Options. Consult your agent and
the Policy itself for details regarding these and other terms applicable to
Policies sold in New Jersey.

- 18 -
<PAGE>

FEDERAL INCOME TAX CONSEQUENCES OF INVESTMENT IN THE POLICY

With respect to Owners who are natural persons, there should be no federal
income tax on increases in the Policy Value until a distribution under the
Policy occurs (e.g., a surrender or Annuity Payment) or is deemed to occur
(e.g., a pledge or assignment of a Policy). Generally, a portion of any
distribution or deemed distribution will be taxable as ordinary income. The
taxable portion of certain distributions will be subject to withholding unless
the recipient elects otherwise. In addition, a penalty tax may apply to
certain distributions or deemed distributions under the Policy. (See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," p. 47.)

Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the Statement of
Additional Information and in the prospectuses for the Underlying Funds and in
the Policy, all of which should be referred to for more detailed information.
This Prospectus generally describes only the Policy and the Mutual Fund
Account. Separate prospectuses describe the Underlying Funds. (There is no
prospectus for the Fixed Account since interests in the Fixed Account are
deemed not to be securities. See "THE ACCOUNTS--The Fixed Account," p. 29.)

REQUESTS FOR INFORMATION

Any telephone requests and inquiries may be made to 1-800-525-6205.

Any Written Notices or Written Requests must be sent to the following address:

PFL Life Insurance Company
Administrative and Service Office:

Financial Markets Division-Variable Annuity Dept.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001

CONDENSED FINANCIAL INFORMATION

The PFL Retirement Builder Variable Annuity Account did not commence
operations until January 2, 1997, therefore there are no financial statements
for that account for the year ended December 31, 1996.

FINANCIAL STATEMENTS

The financial statements of PFL and the independent auditors' report thereon
are contained in the Statement of Additional Information which is available
free upon request to PFL's Administrative and Service Office.

HISTORICAL PERFORMANCE DATA

STANDARDIZED PERFORMANCE DATA

From time to time, PFL may advertise historical yields and total returns for
the Subaccounts of the Mutual Fund Account. These figures will be calculated
according to standardized methods prescribed by the Securities and Exchange
Commission ("SEC"). These yields and total returns will be based on historical
returns only and are not intended to indicate future performance.

- 19 -
<PAGE>

The yield of the Putnam VT Money Market Subaccount for a Policy refers to
the annualized income generated by an investment under a Policy in the
Subaccount over a specified seven-day period. The yield is calculated by
assuming that the income generated for that seven-day period is generated each
seven-day period 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 under a Policy in the Subaccount is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.

The yield of a Subaccount of the Mutual Fund Account (other than the Money
Market Subaccount) for a Policy refers to the annualized income generated by
an investment under a Policy in the Subaccount over a specified 30-day period.
The yield is calculated by assuming that the income generated by the
investment during that 30-day period is generated each 30-day period over a
12-month period and is shown as a percentage of the investment.

The total return of a Subaccount of the Mutual Fund Account refers to return
quotations assuming an investment under a Policy has been held in the
Subaccount for various periods of time including, but not limited to, a period
measured from the date the Subaccount commenced operations. When a Subaccount
has been in operation for 1, 5, and 10 years, respectively, the total return
for these periods will be provided. The total return quotations for a
Subaccount will represent the average annual compounded rates of return that
equate an initial investment of $1,000 in the Subaccount to the redemption
value of that investment as of the last day of each of the periods for which
total return quotations are provided.

The yield and total return calculations for a Subaccount do not reflect the
effect of any premium taxes that may be applicable to a particular Policy. The
yield calculations also do not reflect the effect of any Surrender Charge that
may be applicable to a particular Policy. To the extent that any or all of a
premium tax and/or Surrender Charge is applicable to a particular Policy, the
yield and/or total return of that Policy will be reduced. For additional
information regarding yields and total returns calculated using the standard
formats briefly summarized above, please refer to the Statement of Additional
Information, a copy of which may be obtained from PFL's Administrative and
Service Office upon request.

SUBACCOUNTS

None of the Subaccounts had commenced operations before the date of this
Prospectus, therefore, the following performance data is historic performance
data for the underlying Portfolios since their inception reduced by some or
all of the fees and charges under the Policy. Such adjusted historic
performance includes data that precedes the inception dates of the
Subaccounts. This data is designed to show the performance that would have
resulted if the Policy had been in existence during that time, based on the
performance of the applicable Portfolio and the assumption that the applicable
Subaccount was in existence for the same period as the Portfolio with a level
of charges equal to those currently assessed under the Policies.

For instance, as shown in the table below, PFL Life may disclose average
annual total returns for the Portfolios reduced by all fees and charges under
the Policy, as if the Policy had been in existence since the inception of the
Portfolio. Such fees and charges include the Mortality and Expense Risk Fee,
Administrative Charge and Surrender Charges. Such data assumes a complete
surrender of the Policy at the end of the period; THEREFORE THE SURRENDER
CHARGE IS DEDUCTED.

- 20 -
<PAGE>

The following information is also based on the method of calculation
described in the Statement of Additional Information. The adjusted historical
average annual total returns for periods ended December 31, 1996, were as
follows:

ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS

Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.25%)

<TABLE>
<CAPTION>
10 YEAR CORRESPONDING
OR PORTFOLIO
1 YEAR 5 YEAR INCEPTION INCEPTION DATE
------ ------ --------- ----------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and Income
Subaccount........................ 13.89% -- 16.98% May 2, 1994
AIM V.I. International Equity
Subaccount........................ 13.99% -- 12.85% May 5, 1993
AIM V.I. Value Subaccount.......... 8.93% -- 17.00% May 5, 1993
Evergreen VA Subaccount............ -- -- 6.95% March 1, 1996
Evergreen VA Foundation
Subaccount........................ -- -- 7.35% March 1, 1996
Evergreen VA Growth and Income
Subaccount........................ -- -- 11.00% March 1, 1996
Federated High Income Bond Fund II
Subaccount........................ 6.67% -- 5.84% February 2, 1994
MFS Emerging Growth Subaccount..... 10.94% -- 18.64% July 24, 1995
MFS Research Subaccount............ 16.28% -- 17.43% July 26, 1995
MFS Total Return Subaccount........ 8.28% -- 14.69% January 3, 1995
MFS Utilities Subaccount........... 12.44% -- 20.05% January 3, 1995
Oppenheimer Growth Subaccount...... 17.48% 14.62% 12.86% April 3, 1985
Oppenheimer Multiple Strategies
Subaccount........................ 7.86% 10.08% 10.08% February 9, 1987
Oppenheimer Strategic Bond
Subaccount........................ 4.46% -- 5.46% May 3, 1993
Putnam VT Global Growth
Subaccount........................ 7.94% 8.97% 7.14% May 1, 1990
Putnam VT Money Market
Subaccount*....................... -3.90% 1.20% 2.69% February 1, 1988
Putnam VT New Value Subaccount..... -- -- -- January 1, 1997
</TABLE>
- -------------------------
* The underlying Putnam VT Money Market Portfolio seeks to maintain a stable
$1.00 share price, however, there is no assurance that it will be able to do
so. An investment in the portfolio is not guaranteed or insured by the U.S.
Government or any agency.

- 21 -
<PAGE>

5% Annually Compounding Death Benefit or Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)

<TABLE>
<CAPTION>
10 YEAR CORRESPONDING
OR PORTFOLIO
1 YEAR 5 YEAR INCEPTION INCEPTION DATE
------ ------ --------- ----------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and Income
Subaccount........................ 13.72% -- 16.81% May 2, 1994
AIM V.I. International Equity
Subaccount........................ 13.82% -- 12.68% May 5, 1993
AIM V.I. Value Subaccount.......... 8.77% -- 16.83% May 5, 1993
Evergreen VA Subaccount............ -- -- 6.79% March 1, 1996
Evergreen VA Foundation
Subaccount........................ -- -- 7.18% March 1, 1996
Evergreen VA Growth and Income
Subaccount........................ -- -- 10.84% March 1, 1996
Federated High Income Bond Fund II
Subaccount........................ 6.51% -- 5.68% February 2, 1994
MFS Emerging Growth Subaccount..... 10.78% -- 18.47% July 24, 1995
MFS Research Subaccount............ 16.11% -- 17.26% July 26, 1995
MFS Total Return Subaccount........ 8.12% -- 14.52% January 3, 1995
MFS Utilities Subaccount........... 12.27% -- 19.87% January 3, 1995
Oppenheimer Growth Subaccount...... 17.12% 14.43% 12.70% April 3, 1985
Oppenheimer Multiple Strategies
Subaccount........................ 7.53% 9.91% 9.92% February 9, 1987
Oppenheimer Strategic Bond
Subaccount........................ 4.13% -- 5.30% May 3, 1993
Putnam VT Global Growth
Subaccount........................ 7.61% 8.80% 6.98% May 1, 1990
Putnam VT Money Market
Subaccount*....................... -4.21% 1.03% 2.54% February 1, 1988
Putnam VT New Value Subaccount..... -- -- -- January 1, 1997
</TABLE>
- -------------------------
* The underlying Putnam VT Money Market Portfolio seeks to maintain a stable
$1.00 share price, however, there is no assurance that it will be able to do
so. An investment in the portfolio is not guaranteed or insured by the U.S.
Government or any agency.

For purposes of this calculation, the deductions for the Mortality and
Expense Risk Fee and Administrative Charge are made on a monthly basis, rather
than a daily basis. The monthly deduction is made at the beginning of each
month and generally approximates the performance which would have resulted if
the Subaccount had been in existence since the inception of the Portfolio.
Accumulation Unit values and yields will fluctuate and there is no guarantee
the Owner will receive back the Owner's original principal. Average Annual
Total Returns and Yield include all insurance contract charges.

- 22 -
<PAGE>

NON-STANDARDIZED PERFORMANCE DATA

PFL may from time to time also advertise or disclose average annual total
return or other performance data in non-standard formats for a Subaccount of
the Mutual Fund Account. The non-standard performance data may assume that no
Surrender Charge is applicable, and may also make other assumptions such as
the amount invested in a Subaccount, differences in time periods to be shown,
or the effect of partial withdrawals or annuity payments.

The following non-standardized adjusted historical average annual total
return figures are based on the assumption that the Policy is not surrendered,
and therefore THE FOLLOWING FIGURES ASSUME THAT THE SURRENDER CHARGE IS NOT
IMPOSED.

ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS
(ASSUMING NO SURRENDER CHARGE)

Return of Premium Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.25%)

<TABLE>
<CAPTION>
10 YEAR CORRESPONDING
OR PORTFOLIO
1 YEAR 5 YEAR INCEPTION INCEPTION DATE
------ ------ --------- ----------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and Income
Subaccount........................ 18.47% -- 17.90% May 2, 1994
AIM V.I. International Equity
Subaccount........................ 18.57% -- 13.14% May 5, 1993
AIM V.I. Value Subaccount.......... 13.57% -- 17.20% May 5, 1993
Evergreen VA Subaccount............ -- -- 13.44% March 1, 1996
Evergreen VA Foundation
Subaccount........................ -- -- 13.83% March 1, 1996
Evergreen VA Growth and Income
Subaccount........................ -- -- 17.50% March 1, 1996
Federated High Income Bond Fund II
Subaccount........................ 11.33% -- 7.01% February 2, 1994
MFS Emerging Growth Subaccount..... 15.56% -- 23.15% July 24, 1995
MFS Research Subaccount............ 20.83% -- 21.95% July 26, 1995
MFS Total Return Subaccount........ 12.92% -- 19.24% January 3, 1995
MFS Utilities Subaccount........... 17.04% -- 24.54% January 3, 1995
Oppenheimer Growth Subaccount...... 22.00% 14.62% 12.86% April 3, 1985
Oppenheimer Multiple Strategies
Subaccount........................ 12.50% 10.08% 10.08% February 9, 1987
Oppenheimer Strategic Bond
Subaccount........................ 9.14% -- 5.94% May 3, 1993
Putnam VT Global Growth
Subaccount........................ 12.58% 8.97% 7.14% May 1, 1990
Putnam VT Money Market
Subaccount*....................... 0.88% 1.20% 2.69% February 1, 1988
Putnam VT New Value Subaccount..... -- -- -- January 1, 1997
</TABLE>
- -------------------------
* The underlying Putnam VT Money Market Portfolio seeks to maintain a stable
$1.00 share price, however, there is no assurance that it will be able to do
so. An investment in the portfolio is not guaranteed or insured by the U.S.
Government or any agency.

- 23 -
<PAGE>

5% Annually Compounding Death Benefit or Annual Step-Up Death Benefit
(Total Mutual Fund Account Annual Expenses: 1.40%)

<TABLE>
<CAPTION>
10 YEAR CORRESPONDING
OR PORTFOLIO
1 YEAR 5 YEAR INCEPTION INCEPTION DATE
------ ------ --------- ----------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and Income
Subaccount........................ 18.30% -- 17.74% May 2, 1994
AIM V.I. International Equity
Subaccount........................ 18.40% -- 12.98% May 5, 1993
AIM V.I. Value Subaccount.......... 13.41% -- 17.03% May 5, 1993
Evergreen VA Subaccount............ -- -- 13.27% March 1, 1996
Evergreen VA Foundation
Subaccount........................ -- -- 13.67% March 1, 1996
Evergreen VA Growth and Income
Subaccount........................ -- -- 17.34% March 1, 1996
Federated High Income Bond Fund II
Subaccount........................ 11.17% -- 6.85% February 2, 1994
MFS Emerging Growth Subaccount..... 15.39% -- 22.98% July 24, 1995
MFS Research Subaccount............ 20.66% -- 21.78% July 26, 1995
MFS Total Return Subaccount........ 12.76% -- 19.08% January 3, 1995
MFS Utilities Subaccount........... 16.87% -- 24.37% January 3, 1995
Oppenheimer Growth Subaccount...... 21.65% 14.43% 12.70% April 3, 1985
Oppenheimer Multiple Strategies
Subaccount........................ 12.17% 9.91% 9.92% February 9, 1987
Oppenheimer Strategic Bond
Subaccount........................ 8.82% -- 5.78% May 3, 1993
Putnam VT Global Growth
Subaccount........................ 12.24% 8.80% 6.98% May 1, 1990
Putnam VT Money Market
Subaccount*....................... 0.57% 1.03% 2.54% February 1, 1988
Putnam VT New Value Subaccount..... -- -- -- January 1, 1997
</TABLE>
- -------------------------
* The underlying Putnam VT Money Market Portfolio seeks to maintain a stable
$1.00 share price, however, there is no assurance that it will be able to do
so. An investment in the portfolio is not guaranteed or insured by the U.S.
Government or any agency.

All non-standard performance data will be advertised only if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information, a copy of which may be obtained free from PFL's
Administrative and Service office upon request.

MANAGER OR SUBADVISER PERFORMANCE

The prospectuses for the Underlying Funds may present the total returns of
certain existing private or SEC-registered funds that are managed by Managers
or Subadvisers for the Portfolios and that have investment objectives,
policies, and strategies substantially similar to those of certain Portfolios
("Similar Subadviser Funds"). NONE OF THE FEES AND CHARGES UNDER THE POLICY
HAVE BEEN DEDUCTED FROM SUCH SUBADVISER PERFORMANCE DATA. IF THOSE FEES AND
CHARGES WERE DEDUCTED, THE INVESTMENT RETURNS WOULD BE LOWER. SIMILAR
SUBADVISER FUNDS ARE NOT AVAILABLE FOR INVESTMENT UNDER THE POLICY. For more
information on Subadviser performance, see the appropriate prospectus for the
Underlying Fund.

- 24 -
<PAGE>

PUBLISHED RATINGS

PFL may from time to time publish in advertisements, sales literature and
reports to Owners, the ratings and other information assigned to it by one or
more independent rating organizations such as A.M. Best Company, Standard &
Poor's Insurance Ratings Services, Moody's Investors Service and Duff & Phelps
Credit Rating Co. The purpose of the ratings is to reflect the financial
strength and/or claims-paying ability of PFL and they should not be considered
as bearing on the investment performance of assets held in the Mutual Fund
Account or of the safety or riskiness of an investment in the Mutual Fund
Account. Each year the A.M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of
the life/health insurance industry. In addition, the claims-paying ability of
PFL as measured by Standard & Poor's Insurance Ratings Services, Moody's
Investors Service or Duff & Phelps Credit Rating Co. may be referred to in
advertisements or sales literature or in reports to Owners. These ratings are
opinions of an operating insurance company's financial capacity to meet the
obligations of its insurance policies in accordance with their terms. Claims-
paying ability ratings do not refer to an insurer's ability to meet non-policy
obligations such as debt or commercial paper obligations.

PFL LIFE INSURANCE COMPANY

PFL Life Insurance Company ("PFL"), 4333 Edgewood Road, N.E., Cedar Rapids,
Iowa 52499-0001, is a stock life insurance company. It was incorporated under
the name NN Investors Life Insurance Company, Inc. under the laws of the State
of Iowa on April 19, 1961. It is principally engaged in the sale of life
insurance and annuity policies, and is licensed in the District of Columbia,
Guam, and in all states except New York. As of December 31, 1996, PFL had
assets of approximately $7.9 billion. PFL is a wholly-owned indirect
subsidiary of AEGON USA, Inc. which conducts substantially all of its
operations through subsidiary companies engaged in the insurance business or
in providing non-insurance financial services. All of the stock of AEGON USA,
Inc., is indirectly owned by AEGON n.v. of the Netherlands, the securities of
which are publicly traded. AEGON n.v., a holding company, conducts its
business through subsidiary companies engaged primarily in the insurance
business.

THE ACCOUNTS

Premium Payments made under a Policy may be allocated to the Mutual Fund
Account, to the Fixed Account, or to a combination of these Accounts.

THE MUTUAL FUND ACCOUNT

The Mutual Fund Account was established as a separate investment account of
PFL under the laws of the State of Iowa on March 29, 1996. The Mutual Fund
Account receives and currently invests the Premium Payments under the Policies
that are allocated to it for investment only in shares of specified management
investment companies. The shares available under the Policy are those of the
AIM Variable Insurance Funds, Inc., (managed by A I M Advisors, Inc.),
Evergreen Variable Trust (managed by Evergreen Asset Management Corp.),
Federated Insurance Series (managed by Federated Advisers), MFS Variable
Insurance Trust (managed by Massachusetts Financial Services Company),
Oppenheimer Variable Account Funds (managed by OppenheimerFunds, Inc.), and
Putnam Variable Trust (managed by Putnam Investment Management, Inc.).

The Mutual Fund Account currently has dedicated seventeen Subaccounts to the
Policy. Other or additional Subaccounts may be established at the discretion
of PFL. The Mutual Fund Account also includes other subaccounts which are not
available under the Policy. Each Subaccount invests exclusively

- 25 -
<PAGE>

in shares of one of the Portfolios of the Underlying Funds. Under Iowa law,
the assets of the Mutual Fund Account are owned by PFL but they are held
separately from the other assets of PFL. To the extent that these assets are
attributable to the Cash Value of the Policies (or other variable annuity
policies), these assets are not chargeable with liabilities incurred in any
other business operation of PFL. Income, gains, and losses incurred on the
assets in the Subaccounts of the Mutual Fund Account, whether or not realized,
are credited to or charged against that Subaccount without regard to other
income, gains or losses of any other Account or Subaccount of PFL. Therefore,
the investment performance of any Subaccount should be entirely independent of
the investment performance of PFL's general account assets or any other
Account or Subaccount maintained by PFL.

The Mutual Fund Account is registered with the SEC under the Investment
Company Act of 1940 (the "1940 Act") as a unit investment trust and meets the
definition of a separate account under federal securities laws. However, the
SEC does not supervise the management or the investment practices or policies
of the Mutual Fund Account or PFL

Underlying Funds. The available Subaccounts of the Mutual Fund Account
currently invest exclusively in shares of the Underlying Funds. The Underlying
Funds are diversified, open-end management investment companies.

Certain information concerning the Underlying Funds is set forth below. More
detailed information may be found in the Underlying Funds' current
prospectuses, which are included with or accompany this Prospectus, and the
Underlying Funds' current Statements of Additional Information. The following
description is qualified in its entirety by reference to each Underlying
Fund's prospectus and Statement of Additional Information.

The seventeen Portfolios offered by the Underlying Funds provide a range of
investment alternatives that vary according to the different investment
objectives and policies described in the Underlying Funds' prospectuses and
summarized below. The assets of each Portfolio are separate from the others,
and each Portfolio has separate investment objectives and policies. As a
result, each Portfolio operates as a separate investment fund, and the
investment performance of one Portfolio has no effect on the investment
performance of any other Portfolio. Each of the Portfolios may not be
available for investment in every state.

AIM V.I. GROWTH AND INCOME FUND seeks to provide growth of capital, with
current income as a secondary objective by investing primarily in dividend
paying common stocks which have prospects for both growth of capital and
dividend income.

AIM V.I. INTERNATIONAL EQUITY FUND seeks to provided long-term growth of
capital by investing in international equity securities, the issuers of which
are considered by AIM to have strong earnings momentum.

AIM V.I. VALUE FUND seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by AIM to be undervalued
relative to the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity markets generally.
Income is a secondary objective.

EVERGREEN VA FUND seeks to achieve capital appreciation by investing in the
securities of little-known or relatively small companies, or companies
undergoing changes which the Fund's investment adviser believes will have
favorable consequences. Income will not be a factor in the selection of the
portfolio investments.

EVERGREEN VA FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into
or exchangeable for common stocks, and fixed income securities.

- 26 -
<PAGE>

EVERGREEN VA GROWTH AND INCOME FUND seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.

FEDERATED HIGH INCOME BOND FUND II FUND seeks high current income. The
portfolio endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of fixed income securities. The
fixed income securities in which the Fund intends to invest are lower-rated
corporate debt obligations, which are commonly referred to as "junk bonds."
Some of these fixed income securities may involve equity features. Capital
growth will be considered, but only when consistent with the investment
objective of high current income. Such securities may be subject to greater
risk of loss of principal and non payment of interest than higher rated
securities. See the Fund's prospectus for additional information, including
risk factors.

MFS EMERGING GROWTH SERIES seeks to provide long-term growth of capital.
Dividend and interest income from portfolio securities, if any, is incidental
to the Series' investment objective.

MFS RESEARCH SERIES seeks to provide long-term growth of capital and future
income.

MFS TOTAL RETURN SERIES seeks to provide above-average income (compared to a
portfolio invested entirely in equity securities) consistent with the prudent
employment of capital, and secondarily to provide a reasonable opportunity for
growth of capital and income.

MFS UTILITIES SERIES seeks capital growth and current income (income above
that available from a portfolio invested entirely in equity securities).

OPPENHEIMER GROWTH FUND seeks to achieve capital appreciation by investing
in securities of well-known established companies.

OPPENHEIMER MULTIPLE STRATEGIES FUND seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.

OPPENHEIMER STRATEGIC BOND FUND seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance such
income by writing covered call options on debt securities. The Fund intends to
invest principally in: (i) foreign government and corporate debt securities,
(ii) U.S. Government securities, and (iii) lower-rated high yield domestic
debt securities, commonly known as "junk bonds", which are subject to a
greater risk of loss of principal and nonpayment of interest than higher-rated
securities. Current income is not an objective. Such securities may be subject
to greater risk of loss of principal and non payment of interest than higher
rated securities. See the Fund's prospectus for additional information,
including risk factors.

PUTNAM VT GLOBAL GROWTH FUND seeks capital appreciation. The fund is
designed for investors seeking above-average capital growth potential through
a globally diversified portfolio of common stocks. Dividend and interest
income is only an incidental consideration. In seeking capital appreciation,
the fund follows a global investment strategy of investing primarily in common
stocks traded in securities markets located in a number of foreign countries
and in the United States. There are special considerations with international
investing, including currency, fluctuations, economic instability, and
political developments.

PUTNAM VT MONEY MARKET FUND seeks as high a level of current income as is,
in the view of the funds manager, consistent with liquidity and capital
preservation. The Fund invests in a portfolio of high-quality money market
instruments, including bank certificates of deposit and prime commercial
paper. There can be no assurance that the Fund will maintain a stable net
asset value.

- 27 -
<PAGE>

PUTNAM VT NEW VALUE FUND seeks long-term capital appreciation. The Fund
invests primarily in common stocks that its manager believes are undervalued
at the time of purchase and have the potential for long-term capital
appreciation.

THERE IS NO ASSURANCE THAT ANY OF THE UNDERLYING FUNDS' PORTFOLIOS WILL
ACHIEVE ITS INVESTMENT OBJECTIVE.

PFL may receive expense reimbursements or other revenues from the Underlying
Funds or their investment advisors.

The Underlying Funds' prospectuses should be read carefully before any
decision is made concerning the allocation of Premium Payments to a particular
Subaccount. The Underlying Funds are not limited to selling their shares to
the Mutual Fund Account and are permitted to accept investments from any
separate account of an insurance company and perhaps qualified retirement
plans. Since the Portfolios of the Underlying Funds are available to
registered separate accounts offering variable annuity products of the
Company, as well as variable annuity and variable life products of other
insurance companies and perhaps qualified retirement plans, there is a
possibility that a material conflict may arise between the interests of the
Mutual Fund Account and one or more of the separate accounts of another
participating insurance company. In the event of a material conflict, the
affected insurance companies, including PFL, agree to take any necessary
steps, including removing their separate accounts from the Underlying Funds,
to resolve the matter. See the Underlying Funds' prospectuses for further
details.

An investment in the Mutual Fund Account, or in any Portfolio, including the
Putnam VT Money Market Fund is not insured or guaranteed by the U.S.
government or any government agency.

Addition, Deletion, or Substitution of Investments. PFL cannot and does not
guarantee that any of the Subaccounts will always be available for Premium
Payments, allocations, or transfers. PFL retains the right, subject to any
applicable law, to make certain changes in the Mutual Fund Account and its
investments. PFL reserves the right to eliminate the shares of any Portfolio
held by a Subaccount and to substitute shares of another Portfolio of the
Underlying Funds, or of another registered open-end management investment
company for the shares of any Portfolio, if the shares of the Portfolio are no
longer available for investment or if, in PFL's judgment, investment in any
Portfolio would be inappropriate in view of the purposes of the Mutual Fund
Account. To the extent required by the 1940 Act, substitutions of shares
attributable to an Owner's interest in a Subaccount will not be made without
prior notice to the Owner and the prior approval of the SEC. Nothing contained
herein shall prevent the Mutual Fund Account from purchasing other securities
for other series or classes of variable annuity policies, or from effecting an
exchange between series or classes of variable annuity policies on the basis
of requests made by Owners.

New Subaccounts may be established when, in the sole discretion of PFL,
marketing, tax, investment or other conditions warrant. Any new Subaccounts
may be made available to existing Owners on a basis to be determined by PFL.
Each additional Subaccount will purchase shares in a mutual fund portfolio or
other investment vehicle. PFL may also eliminate one or more Subaccounts if,
in its sole discretion, marketing, tax, investment or other conditions warrant
such change. In the event any Subaccount is eliminated, PFL will notify Owners
and request a reallocation of the amounts invested in the eliminated
Subaccount. If no such reallocation is provided by the Owner, PFL will
reinvest the amounts invested in the eliminated Subaccount in the Subaccount
that invests in the Money Market Portfolio (or in a similar portfolio of money
market instruments) or in another Subaccount, if appropriate.

In the event of any such substitution or change, PFL may, by appropriate
endorsement, make such changes in the Policies as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to
be in the best interests of persons having voting rights under the Policies,
the Mutual Fund Account may be (i) operated as a management company under the
1940 Act or any other

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<PAGE>

form permitted by law, (ii) deregistered under the 1940 Act in the event such
registration is no longer required or (iii) combined with one or more other
separate accounts. To the extent permitted by applicable law, PFL also may (1)
transfer the assets of the Mutual Fund Account associated with the Policies to
another account or accounts, (2) restrict or eliminate any voting rights of
Owners or other persons who have voting rights as to the Mutual Fund Account,
(3) create new mutual fund accounts, (4) add new Subaccounts to or remove
existing Subaccounts from the Mutual Fund Account, or combine Subaccounts, or
(5) add new underlying funds, or substitute a new fund for an existing fund.

THE FIXED ACCOUNT

This Prospectus is generally intended to serve as a disclosure document only
for the Policy and the Mutual Fund Account. For complete details regarding the
Fixed Account, see the Policy itself.

Premium Payments allocated and amounts transferred to the Fixed Account
become part of the general account of PFL, which supports insurance and
annuity obligations. Interests in the general account have not been registered
under the Securities Act of 1933 (the "1933 Act"), nor is the general account
registered as an investment company under the 1940 Act. Accordingly, neither
the general account nor any interests therein are generally subject to the
provisions of the 1933 or 1940 Acts. PFL has been advised that the staff of
the SEC has not reviewed the disclosures in this Prospectus which relate to
the fixed portion.

The Fixed Account is part of the general assets of PFL, other than those in
the Mutual Fund Account or in any other segregated asset account. The Policy
Owner may allocate Premium Payments to the Fixed Account at the time of
Premium Payment or by subsequent transfers from the Mutual Fund Account.
Rather than the Policy Owner bearing the investment risk, as is the case for
Policy Value allocated to the Mutual Fund Account, PFL bears the full
investment risk for all Policy Value allocated to the Fixed Account. PFL has
sole discretion to invest the assets of its general account, including the
Fixed Account, subject to applicable law. While PFL bears the full investment
risk for all Policy Value in the Fixed Account, all guaranteed rates or
benefits are subject to PFL's claims-paying ability.

Premium Payments applied to, and any amounts transferred to, the Fixed
Account will reflect a fixed interest rate. The interest rates PFL sets will
be credited for increments of at least one year measured from each Premium
Payment or transfer date. These rates will never be less than an effective
annual interest rate of 3%.

Upon full surrender, the Owner will always receive at least the Premium
Payments applied to, less prior partial withdrawals and transfers from, the
Fixed Account.

Guaranteed Periods. PFL may offer optional guaranteed interest rate periods
("Guaranteed Period Options") into which Premium Payments may be paid or
amounts transferred. For example, PFL may offer Guaranteed Period Options for
1, 3, 5, or 7 years duration from time to time. The Current Interest Rate PFL
sets for funds placed in each Guaranteed Period Option will be guaranteed
until the end of the applicable Guaranteed Period. At the end of the
Guaranteed Period, the Policy Value for the Guaranteed Period Option will be
rolled into a new Guaranteed Period Option(s) or may be transferred to any
Subaccount(s) within the Mutual Fund Account.

The Owner may choose the Guaranteed Period Option(s) in which to place the
Policy Value by giving PFL notice within 30 days before the end of the
expiring Guaranteed Period. In the absence of such election, the new
Guaranteed Period Option will be the same as the expiring Guaranteed Period
Option unless that Guaranteed Period Option is no longer offered, in which
case, the next shorter Guaranteed Period Option offered will be used. PFL
reserves the right, for new Premium Payments, transfers, or rollovers, to
offer or not to offer any Guaranteed Period Option. PFL will, however, always
offer at least a one-year Guaranteed Period Option.

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<PAGE>

Surrenders or partial withdrawals from a Guaranteed Period Option prior to
the end of the Guaranteed Period and which are in excess of the cumulative
interest credited at the time of, but prior to, the withdrawal are subject to
an Excess Interest Adjustment on the amount withdrawn. An Excess Interest
Adjustment may result in a loss of interest credited, or a credit of
additional interest, but the Owner's Fixed Account Policy Values will always
be credited with an effective annual interest rate of at least 3%. Surrender
charges, if any, are applied after the Excess Interest Adjustment. However,
upon full surrender the Owner is guaranteed return of Premium Payments to the
Fixed Account, less partial withdrawals and transfers from the Fixed Account.
See "DISTRIBUTIONS UNDER THE POLICY--Excess Interest Adjustment," p. 37.) No
transfers from any Guaranteed Period Option to any other Investment Option
will be allowed prior to the end of the Guaranteed Period. (See "Transfers,"
p. 31.)

For purposes of crediting interest, the oldest Premium Payment or transfer
into a Guaranteed Period Option within the Fixed Account, plus interest
allocable to that Premium Payment or transfer, is considered to be withdrawn
first; the next oldest Premium Payment or transfer plus interest is considered
to be withdrawn next, and so on (this is a "first-in, first-out" procedure).

Dollar Cost Averaging Fixed Account Option. PFL may offer a Dollar Cost
Averaging Fixed Account Option separate from the Guaranteed Period Option(s).
This option will have a one-year interest rate guarantee and will only be
available under a Dollar Cost Averaging (DCA) program.

Prior to the Annuity Commencement Date, no transfers, except through a
Dollar Cost Averaging program, will be allowed from the Dollar Cost Averaging
Fixed Account. Dollar Cost Averaging transfers to Subaccounts of the Mutual
Fund Account must begin within 30 days after the Premium Payment or transfer
to the Dollar Cost Averaging Fixed Account. Transfers must be scheduled for at
least six but not more than 24 months, or for at least four, but not more than
eight calendar quarters. No changes to the amount transferred will be allowed,
but changes can be made to the Subaccounts to which these transfers are
allocated. Transfers under a Dollar Cost Averaging program will not be subject
to an Excess Interest Adjustment. (See "THE ACCOUNTS--Dollar Cost Averaging,"
p. 32.)

Dollar cost averaging requires regular investment regardless of fluctuating
prices and does not guarantee profits nor prevent losses in a declining
market. Before electing this option, individuals should consider their
financial ability to continue transfers through periods of both high and low
price levels.

Current Interest Rates. PFL periodically will establish an applicable
Current Interest Rate for each of the Guaranteed Period Options within the
Fixed Account, and the Dollar Cost Averaging Fixed Account Option. Current
Interest Rates may be changed by PFL frequently or infrequently depending on
interest rates on investments available to PFL and other factors as described
below, but once established, the rate will be guaranteed for the entire
duration of the Guaranteed Period. However, except for limited situations, any
amount withdrawn will be subject to an Excess Interest Adjustment, except
those at the end of the Guaranteed Period Option. (See "Excess Interest
Adjustment," p. 37.)

The Current Interest Rate will not be less than 3% per year regardless of
any application of the Excess Interest Adjustment. PFL has no specific formula
for determining the rate of interest that it will declare as a Current
Interest Rate, as this rate will be reflective of interest rates available on
the types of debt instruments in which PFL intends to invest amounts allocated
to the Fixed Account. In addition, PFL's management may consider other factors
in determining Current Interest Rates for a particular Guaranteed Period
including but not limited to: regulatory and tax requirements; sales
commissions and administrative expenses borne by the Company; general economic
trends; and competitive factors. There is no obligation to declare a rate in
excess of 3%; the Policy Owner assumes the risk that declared rates will not
exceed 3%. PFL has complete discretion to declare any rate of at least 3%,
regardless of market interest rates, the amounts earned by PFL on its
investments, or any other factors.

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<PAGE>

PFL'S MANAGEMENT HAS COMPLETE AND SOLE DISCRETION TO DETERMINE THE CURRENT
INTEREST RATES. PFL CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE CURRENT
INTEREST RATES, EXCEPT THAT PFL GUARANTEES THAT FUTURE CURRENT EFFECTIVE
INTEREST RATES WILL NOT BE BELOW 3% PER YEAR.

TRANSFERS

An Owner can transfer Policy Value from one Investment Option to another
within certain limits.

Subject to the limitations and restrictions described below, transfers from
an Investment Option may be made, up to thirty days prior to the Annuity
Commencement Date, by sending Written Notice, signed by the Owner, to the
Administrative and Service Office. The minimum amount of Policy Value which
may be transferred from a Subaccount of the Mutual Fund Account is the lesser
of $500 or the entire Subaccount value. If the Subaccount value remaining
after a transfer is less than $500, PFL reserves the right, at its discretion,
to include that amount as part of the transfer.

Subject to the limitations and restrictions described below, transfers
currently may be made without charge as often as the Owner wishes, subject to
the minimum dollar amounts specified above. PFL reserves the right to limit
these transfers to no more than 12 per Policy Year in the future, or as may be
required by the trustees of underlying funds to protect investors in those
funds, or to charge up to $10 per transfer in excess of 12 per Policy Year. If
a transfer charge is assessed in the future, the amount of the charge will be
deducted from the balance in the remaining subaccount, if sufficient,
otherwise, from the account to which the transfer is made.

Transfers of Policy Values from any of the Guaranteed Period Option(s) of
the Fixed Account to any Subaccount(s) of the Mutual Fund Account are allowed
only at the end of the Guaranteed Period(s), and will not be subject to an
Excess Interest Adjustment at that time. The Owner must notify PFL within 30
days prior to the end of any expiring Guaranteed Period Option to instruct PFL
regarding any transfers to be performed at that time. The Owner may, however,
transfer amounts equal to the interest credited in any of the Guaranteed
Period Option(s) to any Subaccount(s) of the Mutual Fund Account prior to the
end of the Guaranteed Period. Each such "interest transfer" must be at least
$50. The maximum "interest transfer" permitted from any Guaranteed Period
Option before the end of the Guaranteed Period will be the cumulative amount
of interest credited for the Guaranteed Period Option at the time of, but
prior to, the transfer. No Excess Interest Adjustment will apply to such
"interest transfers." Interest transfers may affect the interest crediting
rates on amounts remaining in the Guaranteed Period Option, since for purposes
of crediting interest, PFL considers the oldest Premium Payment or transfer
into the Guaranteed Period Option, plus interest allocable to that particular
Premium Payment or transfer, to be withdrawn first.

Transfers out of the Dollar Cost Averaging Fixed Account, except through a
Dollar Cost Averaging program, are not allowed. (See "Dollar Cost Averaging,"
p. 32.)

After the Annuity Commencement Date, transfers out of the Fixed Account are
not permitted. (See "DISTRIBUTIONS UNDER THE POLICY--Annuity Payment Options,"
p. 39.)

Transfers may be made by telephone, subject to the provisions described
below under "Telephone Transactions."

REINSTATEMENTS

Requests are occasionally received by PFL to reinstate funds which had been
transferred to another life insurance company pursuant to a Code Section 1035
exchange or trustee-to-trustee transfer. In this situation PFL will require
the Owner to replace the same total dollar amount of funds as was taken from

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<PAGE>

the Policy to effect the exchange. The total dollar amount of funds reapplied
to the Mutual Fund Account will be used to purchase a number of Accumulation
Units available for each Subaccount based on the Accumulation Unit values at
the date of reinstatement (within two days of the date the funds are received
by PFL). It should be noted that the number of Accumulation Units available on
the Reinstatement date may be more or less than the number surrendered for the
exchange. Amounts reapplied to the Fixed Account will be entitled to receive
the interest rate they would otherwise have received had they not been
withdrawn. However, an adjustment will be made to the amount reapplied to
compensate PFL for the additional interest credited during the period of time
between the withdrawal and the reapplication of the funds. Owners should
consult a qualified personal tax adviser concerning the tax consequences of
any Code Section 1035 exchanges or reinstatements.

TELEPHONE TRANSACTIONS

Owners (or their designated registered representative) may make transfers
and/or change the allocation of subsequent Premium Payments by telephone if
the "Telephone Transfer/Reallocation Authorization" box in the Policy
application has been initialed or telephone transfers have been subsequently
authorized by the Owner by appropriate Written Request. PFL will not be liable
for following instructions communicated by telephone that it reasonably
believes to be genuine. However, PFL will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. If PFL fails
to do so, it may be liable for any losses due to unauthorized or fraudulent
instructions. All telephone requests will be recorded on voice recorder
equipment for the protection of the Owner. The Owner, when making telephone
requests, will be required to provide the Owner's social security number,
and/or other information for identification purposes.

Telephone requests must be received at the Administrative and Service Office
no later than 3:00 p.m. Central time in order to assure same-day pricing of
the transaction.

The telephone transaction privilege may be discontinued at any time as to
some or all Owners and PFL may require written confirmation of a telephone
transaction request at its discretion.

DOLLAR COST AVERAGING (DCA)

Under the Dollar Cost Averaging program, prior to the Annuity Commencement
Date, the Owner can instruct PFL to automatically transfer a dollar amount
specified by the Owner from the DCA Fixed Account Option to any other
Subaccount or Subaccounts of the Mutual Fund Account. The automatic transfers
can occur monthly or quarterly and will occur on the 28th day of the month. If
the DCA request is received prior to the 28th day of any month, the first
transfer will occur on the 28th day of that month. If the DCA request is
received on or after the 28th day of any month, the first transfer will occur
on the 28th day of the following month. The amount transferred each time must
be at least $500. A minimum of six monthly or four quarterly transfers are
required and a maximum of 24 monthly or eight quarterly transfers are allowed
from the DCA Fixed Account.

Dollar Cost Averaging results in the purchase of more Accumulation Units
when the Accumulation Unit value is low, and fewer Accumulation Units when the
Accumulation Unit value is high. However, there is no guarantee that the
Dollar Cost Averaging program will result in higher Policy Values or will
otherwise be successful.

The Policy Owner may request Dollar Cost Averaging when purchasing the
Policy or later. The program will terminate when the amount in the DCA Fixed
Account is insufficient for the next transfer, at which time the entire
remaining balance is transferred.

The Owner may discontinue the program after satisfying the required minimum
number of transfers at any time by sending a Written Notice to the
Administrative and Service Office. The required minimum

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<PAGE>

number of transfers (six monthly or four quarterly) must be satisfied each
time the DCA program is restarted following termination of the program for any
reason. There is no charge for participation in this program.

ASSET REBALANCING

Prior to the Annuity Commencement Date the Owner may instruct PFL to
automatically transfer amounts among the Subaccounts of the Mutual Fund
Account on a regular basis to maintain a desired allocation of the Policy
Value among the various Subaccounts offered. Rebalancing will occur on a
monthly, quarterly, semi-annual, or annual basis based on the Policy Date, and
beginning on a date selected by the Owner. The Owner must select the
percentage of the Policy Value desired in each of the various Subaccounts
offered (totaling 100%). Any amounts in the Fixed Account are ignored for
purposes of asset rebalancing. Rebalancing may be started, stopped, or changed
at any time, except that rebalancing will not be available when:

(1) a Dollar Cost Averaging program is in effect; or

(2) any other transfer is requested.

There is no charge for participation in this program.

THE POLICY

The Policy is a flexible premium variable annuity policy. The rights and
benefits under the Policy are summarized below; however, the description of
the Policy contained in this Prospectus is qualified in its entirety by
reference to the Policy itself, a copy of which is available upon request from
PFL. The Policy may be purchased on a non-tax qualified basis ("Nonqualified
Policy"). The Policy may also be purchased and used in connection with
retirement plans or individual retirement accounts that qualify for favorable
federal income tax treatment ("Qualified Policy").

POLICY APPLICATION AND ISSUANCE OF POLICIES--PREMIUM PAYMENTS

Before it will issue a Policy, PFL must receive a completed Policy
application or transmittal form and a minimum initial Premium Payment of
$2,000 for a Nonqualified or Qualified Policy. There is no minimum initial
Premium Payment required for tax deferred 403(b) annuity purchases; any amount
selected by the Owner in such case, up to the maximum total premium payment
allowed by PFL, may be used to start a Policy. The initial Premium Payment for
tax deferred 403(b) purchases must be received within 90 days following the
Policy Date, otherwise the Policy will be canceled. PFL reserves the right to
increase or decrease this amount for a class of Policies issued after some
future date. The initial Premium Payment is the only Premium Payment required
to be paid under a Policy. A Policy ordinarily will be issued only in respect
of Annuitants Age 0 through 80. Acceptance or declination of an application
shall be based on PFL's underwriting standards, and PFL reserves the right to
reject any application or Premium Payment based on those underwriting
standards.

If the application or transmittal form can be accepted in the form received,
the initial Premium Payment will be credited to the Policy Value within two
Business Days after the later of receipt of the information needed to issue
the Policy or receipt of the initial Premium Payment. If the initial Premium
Payment cannot be credited because the application or other issuing
requirements are incomplete, the applicant will be contacted within five
Business Days and given an explanation for the delay and the initial Premium
Payment will be returned at that time unless the applicant consents to PFL's
retaining the initial Premium Payment and crediting it as soon as the
necessary requirements are fulfilled.

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<PAGE>

PFL may, if the application or transmittal form can be accepted in the form
received, credit the initial Premium Payment to the Policy Value within one
Business Day after the later of receipt by PFL's agent of the information
needed or the Premium Payment.

The date on which the initial Premium Payment is credited to the Policy
Value is the Policy Date. The Policy Date is the date used to determine Policy
Years and Policy Anniversaries.

All checks or drafts for Premium Payments should be made payable to PFL Life
Insurance Company and sent to the Administrative and Service Office. The Death
Benefit will not take effect until the check or draft for the Premium Payment
is honored.

Additional Premium Payments. While the Annuitant is living and prior to the
Annuity Commencement Date, the Owner may make Additional Premium Payments at
any time, and in any frequency. The minimum Additional Premium Payment under
both a Nonqualified Policy and a Qualified Policy is $50. Additional Premium
Payments will be credited to the Policy and added to the Policy Value as of
the Business Day when the premium and required information are received.

Maximum Total Premium Payments. The maximum total Premium Payments allowed
without prior approval of PFL is $1,000,000.

Allocation of Premium Payments. An Owner must allocate Premium Payments to
one or more of the Investment Options. The Owner must specify the initial
allocation in the Policy application or transmittal form. This allocation will
be used for Additional Premium Payments unless the Owner requests a change of
allocation. All allocations must be made in whole percentages and must total
100%. However, the portion of the initial Premium Payment which is allocated
to the Mutual Fund Account will be temporarily allocated entirely to the Money
Market Portfolio of the Mutual Fund Account only for a period of time equal to
the greater of the Policy's Right to Cancel Period, or fourteen (14) days
following the Policy Date. (See "SUMMARY--Right to Cancel Period," p. 9.)
Based on current state laws, the maximum right to cancel period, and therefore
maximum period of time the funds are expected to be allocated to the money
market account, is 30 days from the date the policy is issued. At the end of
that period, the Policy Value in the Putnam VT Money Market Portfolio will
then be allocated to the Subaccount(s) of the Mutual Fund Account in
accordance with the allocation percentages specified by the Owner. If Premium
Payments are allocated to the Dollar Cost Averaging Fixed Account, directions
regarding the Subaccount(s) to which transfers are to be made must be
specified on the application or other proper Written Request. If the Owner
fails to specify how Premium Payments are to be allocated, the Premium
Payment(s) cannot be accepted.

The Owner may change the allocation instructions for future Additional
Premium Payments by sending a Written Notice, signed by the Owner, to PFL's
Administrative and Service Office, or by telephone (subject to the provisions
described under "THE ACCOUNTS--Telephone Transactions," p. 32). The allocation
change will apply to Premium Payments received after the date the Written
Notice or telephone request is received.

Payment Not Honored by Bank. Any payment due under the Policy which is
derived, all or in part, from any amount paid to PFL by check or draft may be
postponed until such time as PFL determines that such instrument has been
honored.

POLICY VALUE

On or before the Annuity Commencement Date, the Policy Value is equal to the
Owner's:

(1) Premium Payments; minus

(2) partial withdrawals (including any applicable Excess Interest
Adjustments and/or Surrender Charges on such withdrawals); plus

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<PAGE>

(3) interest credited in the Fixed Account; plus or minus

(4) accumulated gains or losses in the Mutual Fund Account; minus

(5) Service Charges, premium taxes and transfer fees, if any.

The Policy Value is expected to change from Valuation Period to Valuation
Period, reflecting the investment experience of the selected Subaccount(s), as
well as the deductions for charges. A Valuation Period is the period between
successive Business Days. It begins at the close of business on each Business
Day and ends at the close of business on the next succeeding Business Day. A
Business Day is each day that the New York Stock Exchange is open for trading.
Holidays are generally not Business Days.

The Mutual Fund Policy Value. When a Premium Payment is allocated or an
amount is transferred to a Subaccount of the Mutual Fund Account, it is
credited to the Policy Value in the form of Accumulation Units. Each
Subaccount of the Mutual Fund Account has a distinct Accumulation Unit value.
The number of units credited is determined by dividing the Premium Payment or
amount transferred to the Subaccount by the Accumulation Unit value of the
Subaccount as of the end of the Valuation Period during which the allocation
is made. When amounts are transferred out of, or fully surrendered or
partially withdrawn from a Subaccount, Accumulation Units are canceled or
redeemed in a similar manner.

For each Subaccount, the Accumulation Unit Value for a given Business Day is
based on the net asset value of a share of the corresponding Portfolio of the
Underlying Funds less any applicable charges or fees. Therefore, the
Accumulation Unit Values will fluctuate from day to day based on the
investment experience of the corresponding Portfolio. The determination of
Subaccount Accumulation Unit Values is described in detail in the Statement of
Additional Information.

ADJUSTED POLICY VALUE (APV)

The Adjusted Policy Value is the Policy Value increased or decreased by any
Excess Interest Adjustment applied at the time of surrender or on the Annuity
Commencement Date.

The Adjusted Policy Value will be used on the Annuity Commencement Date to
provide the amount of annuity payments under a Policy.

AMENDMENTS

No change in the Policy is valid unless made in writing by PFL and approved
by one of PFL's officers. No registered representative has authority to change
or waive any provision of the Policy.

PFL reserves the right to amend the Policies to meet the requirements of the
Code, regulations or published rulings. An Owner can refuse such a change by
giving Written Notice, but a refusal may result in adverse tax consequences.

NON-PARTICIPATING POLICY

The Policy does not participate or share in the profits or surplus earnings
of PFL. No dividends are payable on the Policy.

DISTRIBUTIONS UNDER THE POLICY

SURRENDERS

Prior to the Annuity Commencement Date, the Owner may surrender all or a
portion of the Cash Value in exchange for a payment from PFL. The Cash Value
is the Adjusted Policy Value, less the Surrender Charge, if any. (See
"DISTRIBUTIONS UNDER THE POLICY--Annuity Payment Options," p. 39.) The

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<PAGE>

Policy cannot be surrendered after the Annuity Commencement Date. (See
"DISTRIBUTIONS UNDER THE POLICY--Annuity Payments," p. 38.)

When requesting a partial withdrawal ($500 minimum), the Owner must instruct
PFL how the amount withdrawn is to be allocated among various Investment
Options. If the Owner's request for a partial withdrawal from a Guaranteed
Period Option of the Fixed Account is greater than the Cash Value of that
Guaranteed Period Option, PFL will pay the Owner the amount of the Cash Value
of that Guaranteed Period Option. If no allocation instructions are given, the
withdrawal will be deducted from each Investment Option in the same proportion
that the Owner's interest in each Investment Option bears to the total Policy
Value. PFL reserves the right to defer payment of the Cash Value from the
Fixed Account for up to six months.

In each Policy Year the Owner may request partial withdrawals ($500 minimum)
of up to 10% of the Policy Value (calculated at the time of the partial
surrender) free of Surrender Charges. The percentage that may be taken free of
Surrender Charges each Policy Year is cumulative. This is referred to as the
Cumulative Free Percentage. That is, Cumulative Free Percentages which are not
taken are carried forward and are available to be taken in the following
Policy Year free of Surrender Charges. Cumulative Free percentage withdrawals
previously taken (that is, lump sums, systematic payouts, nursing care and
terminal condition withdrawals, minimum required distributions, and
unemployment withdrawals) reduce the Cumulative Free Percentage that is
available. For example, 10% Cumulative Free Percentage is available at the
beginning of the first policy year. If no partial withdrawals are taken in the
first policy year, the first year unused Cumulative Free Percentage of 10% is
carried forward to the second policy year. The unused 10% from year one plus
10% additional Cumulative Free Percentage available at the beginning of policy
year two accumulates to a 20% Cumulative Free Percentage as of the beginning
of policy year two. Assume only 5% is used in policy year two. Thus the
Cumulative Free Percentage available as of the beginning of policy year three
would be 25% (that is, 20% - 5% = 15% unused from policy year two, plus an
additional 10% available at the beginning of policy year three). Amounts
withdrawn in excess of the available Cumulative Free Percentage will be
subject to a Surrender Charge (up to 6%). Neither a Surrender Charge nor an
Excess Interest Adjustment will be assessed if the withdrawal is necessary to
meet the minimum distribution requirements for that Policy specified by the
IRS for tax qualified plans.

Upon full surrender or partial withdrawal, the cumulative interest credited
at the time of, but prior to, the surrender or withdrawal will not be subject
to an Excess Interest Adjustment.

Surrenders or partial withdrawals that are allowed free of Surrender Charges
will reduce the Policy Value by the amount withdrawn. Surrendered or partially
withdrawn amounts in excess of the portion that is free of Surrender Charges
are Excess Partial Withdrawals. Excess Partial Withdrawals will reduce the
Policy Value by an amount equal to (X = Y + Z) where:

X = Excess Partial Withdrawal

Y = Excess Interest Adjustment, which is applicable to the Excess Partial
Withdrawal

Z = Surrender Charge on X minus Y.

For a discussion of the Surrender Charge, see "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 45. For a discussion of the Excess Interest Adjustment,
see "DISTRIBUTIONS UNDER THE POLICY--Excess Interest Adjustment," p. 37 and
Appendix "A".

Since the Owner assumes the investment risk with respect to all Premium
Payments allocated to the Mutual Fund Account, and because withdrawals may be
subject to an Excess Interest Adjustment and to a Surrender Charge, and
possibly premium taxes, the total amount paid upon total surrender of the Cash
Value (taking any prior surrenders into account) may be more or less than the
total Premium Payments made. Following a surrender of the total Cash Value, or
at any time the Policy Value is zero, all rights of the Owner and Annuitant
will terminate.

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<PAGE>

In addition to any applicable Excess Interest Adjustment, Surrender Charge,
and premium tax, surrenders and partial withdrawals may be subject to income
taxes and, if taken prior to age 59 1/2, a ten percent Federal penalty tax.
(See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," p. 47.)

NURSING CARE AND TERMINAL CONDITION WITHDRAWAL OPTION

In some states, if the Owner or Owner's spouse (Annuitant or Annuitant's
spouse if the Owner is not a natural person)--(1) has been confined in a
hospital or nursing facility for 30 consecutive days or (2) has been diagnosed
as having a terminal condition as defined in the Policy or endorsement
(generally a life expectancy of 12 months or less), then the Surrender Charge
and Excess Interest Adjustment are not imposed on surrenders or partial
withdrawals. (Since this benefit may not be available in all states, see the
Policy or endorsement for details.)

UNEMPLOYMENT WAIVER

The Owner may withdraw all or a portion of the Policy Value free of
Surrender Charges and free of Excess Interest Adjustments if the Owner or
Owner's spouse (Annuitant or Annuitant's spouse, if the Owner is not a natural
person) becomes unemployed. In order to qualify, the affected individual must
provide proof of unemployment to PFL and (1) must have been employed full time
for at least two years prior to becoming unemployed, (2) must have been
employed full time on the Policy Date, (3) must have been unemployed for at
least 60 consecutive days at the time of withdrawal, and (4) must have a
minimum Cash Value at the time of withdrawal of $5,000. Proof of unemployment
will consist of providing PFL with a determination letter from the applicable
State's Department of Labor which verifies that the individual qualifies for
and is receiving unemployment benefits at the time of withdrawal. Therefore,
this benefit may not be available if the unemployed person (a) quit
voluntarily, (b) retired due to age, (c) ceased employment due to disability,
or (d) was terminated for cause, or terminated for other reasons that would
prevent the person from receiving unemployment benefits under state or federal
law. The determination letter must be received by PFL no later than fifteen
(15) days following the date PFL receives the withdrawal request. (This
benefit may not be available in all states--see the Policy or endorsement for
details.)

EXCESS INTEREST ADJUSTMENT (EIA)

Full surrenders, partial withdrawals, and amounts applied to an Annuity
Payment Option (prior to the end of any Guaranteed Period) from the Fixed
Account Guaranteed Period Options will be subject to an Excess Interest
Adjustment except as provided for under "Surrenders" or "Nursing Care and
Terminal Condition Withdrawal Option," or "Unemployment Waiver" above or
"Systematic Payout Option," below.

The Excess Interest Adjustment partially compensates PFL for the foregoing
early removal of funds from the Guaranteed Period Options where interest rates
declared by PFL have risen since the date of the guarantee. Conversely, the
Excess Interest Adjustment allows PFL to share the benefit of falling interest
rates with the Owner upon such withdrawals.

Generally, if interest rates declared by PFL have risen since the date of
the guarantee, the application of the Excess Interest Adjustment (a negative
Excess Interest Adjustment in this case) will result in a lower Cash Value
upon surrender. Conversely, if interest rates have fallen since the date of
the guarantee, the application of the Excess Interest Adjustment (a positive
Excess Interest Adjustment in this case) will result in a higher Cash Value
upon surrender.

Excess Interest Adjustments will not reduce the Adjusted Policy Value at the
time of full surrender for a Guaranteed Period Option below the amount paid
into, less any prior partial withdrawals and transfers from that Guaranteed
Period Option, plus interest at the Policy's minimum guaranteed effective
annual interest rate of 3%.

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<PAGE>

The formula for calculating the Excess Interest Adjustment and examples of
the application of the Excess Interest Adjustments are set forth in Appendix A
to this Prospectus.

SYSTEMATIC PAYOUT OPTION

Under the Systematic Payout Option, Owners can instruct PFL to make
automatic payments to them monthly, quarterly, semi-annually or annually from
specified Investment Options (except the DCA account). Monthly and quarterly
payments can only be accomplished by electronic funds transfer directly to a
checking or savings account. The minimum payment is $50. The maximum payment
is 10% of the Policy Value at the time the Systematic Payout is made divided
by the number of payments made per year (for example, 12 for monthly). If this
requested amount is below the minimum distribution requirements for that
Policy specified by the IRS for tax qualified plans, the maximum payment will
be increased to this minimum required distribution amount. Only partial
withdrawal requests which are in excess of the minimum required distribution
will be subject to any applicable Surrender Charge and/or Excess Interest
Adjustment. The "Request for Systematic Payout" form must specify a date for
the first payment, which must be at least 30 days but not more than one year
after the form is submitted (i.e., Systematic Payouts will start at the end of
the payment mode selected, but not earlier than 30 days from the date of
request). There is no additional fee imposed for participation in a Systematic
Payout program.

The Surrender Charge and Excess Interest Adjustment will be waived for
Owners under age 59 on Qualified Policies if they take Systematic Payouts
using one of the payout methods described in I.R.S. Notice 89-25, Q&A-12 (the
Life Expectancy Recalculation Option, Amortization, or Annuity Factor) which
generally requires payments for life or life expectancy. These payments must
be continued until the later of age 59 or five years from commencement of the
payments. No additional withdrawals may be taken during the time these
payments are made. For Qualified Policies, Owners age 59 or older, the
Surrender Charge and Excess Interest Adjustment will be waived if payments are
made using the Life Expectancy Recalculation Option.

In addition, for either Qualified or Nonqualified Policies, the Surrender
Charge will not be imposed on Systematic Payouts. Only Systematic Payouts in
excess of the cumulative interest credited at the time of, but prior to, the
payout will be subject to an Excess Interest Adjustment.

Qualified Policies are subject to complex rules with respect to restrictions
on and taxation of distributions, including the applicability of penalty
taxes. In addition, the tax treatment of systematic payouts from Nonqualified
Policies has had an unfavorable ruling regarding the ability to avoid the 10%
penalty tax. Therefore, the Owner should consult a qualified tax adviser
before requesting a Systematic Payout. In certain circumstances withdrawn
amounts may be included in the Owner's gross income. (See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," p. 47.)

ANNUITY PAYMENTS

Annuity Commencement Date. Annuity Payments under a Policy will begin on the
Annuity Commencement Date which initially is selected by the Owner at the time
the Policy is applied for. The Annuity Commencement Date may be changed from
time to time by the Owner by Written Notice to PFL, provided that notice of
each change is received by PFL at its Administrative and Service Office at
least thirty (30) days prior to the then current Annuity Commencement Date.
Except as otherwise permitted by PFL, a new Annuity Commencement Date must be
a date which is: (1) at least thirty (30) days after the date notice of the
change is received by PFL and (2) not later than the last day of the Policy
month starting after the Annuitant's 85th birthday. In no event will an
Annuity Commencement Date be permitted to be later than the last day of the
Policy month following the month of the Annuitant's 95th birthday. The Annuity
Commencement Date may also be changed by the Beneficiary's election of the
Annuity Option after the Annuitant's death.

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<PAGE>

Election of Payment Option. During the lifetime of the Annuitant and prior
to the Annuity Commencement Date, the Owner may choose a Payment Option or
change the election, but Written Notice of any election or change of election
must be received by PFL at its Administrative and Service Office at least
thirty (30) days prior to the Annuity Commencement Date. If no election is
made prior to the Annuity Commencement Date, Annuity Payments will be made
under (i) Option 3, life income with level payments for 10 years certain,
using the existing Adjusted Policy Value of the Fixed Account, or (ii) under
Option 3-V, life income with variable payments for 10 years certain using the
existing Policy Value of the Mutual Fund Account, or (iii) in a combination of
(i) and (ii). If the Adjusted Policy Value on the Annuity Commencement Date is
less than $2,000, PFL reserves the right to pay it in one lump sum in lieu of
applying it under a Payment Option.

Prior to the Annuity Commencement Date, the Beneficiary may elect to receive
the Death Benefit in a lump sum or under one of the Payment Options, to the
extent allowed by law and subject to the terms of any settlement agreement.
(See "Death Benefit," p. 44.) Annuity Payments will be made on either a fixed
basis or a variable basis as selected by the Owner (or the Beneficiary, after
the Annuitant's death).

The person who elects a Payment Option can also name one or more successor
payees to receive any unpaid amount PFL has at the death of a payee. Naming
these payees cancels any prior choice of a successor payee.

A payee who did not elect the Payment Option does not have the right to
advance or assign payments, take the payments in one sum, or make any other
change. However, the payee may be given the right to do one or more of these
things if the person who elects the option tells PFL in writing and PFL
agrees.

Unless the Owner specifies otherwise, the payee shall be the Annuitant, or,
after the Annuitant's death, the Beneficiary. PFL may require written proof of
the age of any person who has selected Annuity Payments under Option 3, 3-V, 5
or 5-V.

Premium Tax. PFL may be required by state law to pay premium tax on the
amount applied to a payment option or upon withdrawal. If so, PFL will deduct
the premium tax before applying or paying the proceeds.

Supplementary Contract. Once proceeds become payable and a Payment Option
has been selected, the Policy will terminate and PFL will issue a
Supplementary Contract to reflect the terms of the option selected. The
Supplementary Contract will name the payees and will describe the payment
schedule.

ANNUITY PAYMENT OPTIONS

The Policy provides five Payment Options which are described below. Two of
these are offered as either "Fixed Payment Options" or "Variable Payment
Options," and three are only available as Fixed Payment Options. The Owner may
elect a Fixed Payment Option, a Variable Payment Option, or a combination of
both. If the Owner elects a combination, he must specify what part of the
Policy proceeds are to be applied to the Fixed and Variable Payment Options
(and he must also specify which Subaccounts for the Variable Payment Options).

NOTE CAREFULLY: Under Payment Options 3(l) and 5 (including 3-V(l) and 5-V),
it would be possible for only one Annuity Payment to be made if the
Annuitant(s) were to die before the due date of the second Annuity Payment;
only two Annuity Payments if the Annuitant(s) were to die before the due date
of the third Annuity Payment; and so forth.

On the Annuity Commencement Date, the Adjusted Policy Value will be applied
to provide for Annuity Payments under the selected Annuity Option as
specified. The Adjusted Policy Value is the Policy Value for the Valuation
Period which ends immediately preceding the Annuity Commencement Date,
including the effect of any applicable Excess Interest Adjustment.

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<PAGE>

The effect of choosing a Fixed Payment Option is that the amount of each
payment will be set on the Annuity Commencement Date and will not change. If a
Fixed Payment Option is selected, the Adjusted Policy Value will be
transferred to the general account of PFL, and the Annuity Payments will be
fixed in amount by the fixed annuity provisions selected and the age and sex
(if consideration of sex is allowed) of the Annuitant. For further
information, contact PFL at its Administrative and Service Office.

Guaranteed Values. There are five Fixed Payment Options. Options 1, 2 and 4
are based on a guaranteed interest rate of 3%. Options 3 and 5 are based on a
guaranteed interest rate of 3% using the "1983 Table a" (male, female, and
unisex if required by law) mortality table improved to the year 2000 with
projection scale G. ("The 1983 Table a" mortality rates are adjusted based on
improvements in mortality since 1983 to more appropriately reflect increased
longevity. This is accomplished using a set of improvement factors referred to
as projection scale G.)

Option 1--Interest Payments. The Adjusted Policy Value may be left with PFL
for any agreed-upon term. PFL will pay the interest in equal payments or it
may be left to accumulate. Withdrawal rights will be agreed upon by the Owner
and PFL when the option is elected.

Option 2--Income for a Specified Period. Level payments of the proceeds with
interest are made for the fixed period elected, at which time the funds are
exhausted.

Option 3--Life Income. An election may be made between:

1. "No Period Certain"--Level payments will be made during the lifetime
of the Annuitant.

2. "10 Years Certain"--Level Payments will be made for the longer of
the Annuitant's lifetime or ten years.

3. "Guaranteed Return of Policy Proceeds"--Level payments will be made
for the longer of the Annuitant's lifetime or until the total dollar
amount of payments made equals the proceeds applied to the income
option.

Option 4--Income of a Specified Amount. Payments are made for any specified
amount until the proceeds with interest are exhausted.

Option 5--Joint and Survivor Annuity. Payments are made during the joint
lifetime of the payee and a joint payee of the Owner's selection. Payments
will be made as long as either person is living.

For Options 2, 3, and 4, in the event of the death of the person receiving
payments prior to the end of the Guaranteed Period, payments will be continued
to that person's beneficiary or their present value may be paid in a single
sum.

Other options may be arranged by agreement with PFL. Certain options may not
be available in some states.

Current immediate annuity rates for the same class of annuities will be used
if higher than the guaranteed rates (guaranteed rates are based upon the
mortality tables and/or guaranteed interest rates specified in the Policy
under the section entitled "Annuity Payments"). Current amounts may be
obtained from PFL.

Variable Payment Options. The dollar amount of the first Variable Annuity
Payment will be determined in accordance with the annuity payment rates set
forth in the applicable table contained in the Policy. The tables are based on
a 5% effective annual Assumed Investment Return and the "1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year
2000 with projection Scale G. ("The 1983 Table a" mortality rates are adjusted
based on improvements in mortality since 1983 to more appropriately reflect
increased longevity. This is accomplished using a set of improvement factors

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<PAGE>

referred to as projection scale G.) The dollar amount of subsequent Variable
Annuity Payments will vary based on the investment performance of the
Subaccount(s) of the Mutual Fund Account selected by the Annuitant or
Beneficiary. If the actual investment performance exactly matched the Assumed
Investment Return of 5% at all times, the amount of each Variable Annuity
Payment would remain equal. If actual investment performance exceeds the
Assumed Investment Return, the amount of the Variable Annuity Payments would
increase. Conversely, if actual investment performance is lower than the
Assumed Investment Return, the amount of the Variable Annuity Payments would
decrease.

Determination of the First Variable Payment. The amount of the first
variable payment depends upon the sex (if consideration of sex is allowed
under state law) and adjusted age of the Annuitant. The adjusted age is the
Annuitant's actual age nearest birthday, on the Annuity Commencement Date,
adjusted as follows:

<TABLE>
<CAPTION>
ANNUITY COMMENCEMENT DATE ADJUSTED AGE
------------------------- ------------
<S> <C>
Before 2001 Actual Age
2001-2010 Actual Age minus 1
2011-2020 Actual Age minus 2
2021-2030 Actual Age minus 3
2031-2040 Actual Age minus 4
After 2040 As determined by PFL
</TABLE>

This adjustment assumes an increase in life expectancy, and therefore it
results in lower payments than without such an adjustment.

The following Variable Payment Options generally are available:

Option 3-V--Life Income. An election may be made between:

1. "No Period Certain"--Payments will be made during the lifetime of
the Annuitant.

2. "10 Years Certain"--Payments will be made for the longer of the
Annuitant's lifetime or ten years.

Option 5-V--Joint and Survivor Annuity. Payments are made as long as either
the Annuitant or the joint Annuitant is living.

Certain options may not be available in some states.

Determination of Subsequent Variable Payments. All Variable Annuity Payments
other than the first are calculated using "Annuity Units" which are credited
to the Policy. The number of Annuity Units to be credited in respect of a
particular Subaccount is determined by dividing that portion of the first
Variable Annuity Payment attributable to that Subaccount by the Annuity Unit
Value of that Subaccount on the Annuity Commencement Date. The number of
Annuity Units of each particular Subaccount credited to the Policy then
remains fixed, assuming no transfers to or from that Subaccount occur. The
dollar value of variable Annuity Units in the chosen Subaccount will increase
or decrease reflecting the investment experience of the chosen Subaccount. The
dollar amount of each Variable Annuity Payment after the first may increase,
decrease or remain constant, and is equal to the sum of the amounts determined
by multiplying the number of Annuity Units of each particular Subaccount
credited to the Policy by the Annuity Unit value for the particular Subaccount
on the date the payment is made.

Transfers. A Policy Owner may transfer the value of the Annuity Units from
one Subaccount to another within the Mutual Fund Account or to the Fixed
Account. However, after the Annuity Commencement Date no transfers may be made
from the Fixed Account to the Mutual Fund Account. The minimum amount which
may be transferred is the lesser of $10 of monthly income or the entire
monthly

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<PAGE>

income of the variable Annuity Units in the Subaccount from which the transfer
is being made. The remaining Annuity Units in the Subaccount must provide at
least $10 of monthly income. If, after a transfer, the monthly income of the
remaining Annuity Units in a Subaccount would be less than $10, PFL reserves
the right to include those Annuity Units as part of the transfer. PFL reserves
the right to limit transfers between Subaccounts or from the Mutual Fund
Account to the Guaranteed Period Options of the Fixed Account after the
Annuity Commencement Date to once per Policy Year.

Tax Withholding. A portion or the entire amount of the Annuity Payments may
be taxable as ordinary income. If, at the time the Annuity Payments begin, the
Owner has not provided PFL with a written election not to have federal income
taxes withheld, PFL must by law withhold such taxes from the taxable portion
of such annuity payments and remit that amount to the federal government.
Withholding is mandatory for certain qualified Policies. (See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," p. 47)

Adjustment of Annuity Payments. Payments will be made at 1, 3, 6, or 12
month intervals. If the individual payments provided for would be or become
less than $50, PFL may change, at its discretion, the frequency of payments to
such intervals as will result in payments of at least $50. If the Adjusted
Policy Value on the Annuity Commencement Date is less than $2,000, PFL may pay
such value in one sum in lieu of the payments otherwise provided for.

DEATH BENEFIT

Death of Annuitant Prior to Annuity Commencement Date. A Death Benefit will
be paid to the Beneficiary if the Owner is the Annuitant and dies prior to the
Annuity Commencement Date. The amount of the Death Benefit will be the
greatest of a) the Policy Value on the date proof of the Owner's death and an
election of the method of settlement are received by PFL's Administrative and
Service Office, b) the Cash Value on the date PFL receives due proof of death
and an election of a method of settlement, and c) the Guaranteed Minimum Death
Benefit ("GMDB") described below, plus Premium Payments less Partial
Withdrawals, from the date of death to the date the death proceeds are paid.

There are three Guaranteed Minimum Death Benefit options available, (A) the
"Return of Premium Death Benefit", (B) the "5% Annually Compounding Death
Benefit," and (C) the "Annual Step-Up Death Benefit."

The "Return of Premium Death Benefit" is the total Premium Payments less any
Adjusted Partial Withdrawals (defined below), as of the date of death.

The "5% Annually Compounding Death Benefit" is the total Premium Payments
less any Adjusted Partial Withdrawals (defined below) plus interest at an
effective annual rate of 5% from the payment or withdrawal date up to the
earlier of the date of death or the Owner's 81st birthday. There is an extra
charge for this Death Benefit (See "CHARGES AND DEDUCTIONS--Mortality and
Expense Risk Fee," p. 45.)

The "Annual Step-Up Death Benefit" is the largest Policy Value on the issue
date or on any Policy Anniversary prior to the earlier of the date of death or
the Owner's 81st birthday, plus any premiums paid, less any partial
withdrawals taken, subsequent to the date of the largest anniversary Policy
Value. There is an extra charge for this Death Benefit. (See "CHARGES AND
DEDUCTIONS--Mortality and Expense Risk Fee," p. 45.)

Under all three Death Benefit Options, if the surviving spouse elects to
continue the Policy in lieu of receiving the Death Benefit, an amount equal to
the excess, if any, of the Guaranteed Minimum Death Benefit (i.e., the Return
of Premium Death Benefit, the 5% Annually Compounding Death Benefit, or the
Annual Step-Up Death Benefit) over the Policy Value, will then be added to the
Policy Value. This amount will be added only once, at the time of such
election.

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<PAGE>

If no choice of Guaranteed Minimum Death Benefit is made in the Policy
application, the "Return of Premium Death Benefit" will apply.

After the Policy Date, an election cannot be made and the Death Benefit
option cannot be changed.

Adjusted Partial Withdrawal. To determine the Guaranteed Minimum Death
Benefit for each partial withdrawal, the Adjusted Partial Withdrawal is the
sum of (1) and (2), where

(1) The Surrender-charge-free withdrawal amount taken and,

(2) The amount that an Excess Partial Withdrawal reduces the Policy Value
(See "DISTRIBUTIONS UNDER THE POLICY--Surrenders," p. 35.) times [(a)
divided by (b)] where:

(a) is the amount of the Death Benefit prior to the Excess Partial
Withdrawal; and

(b) is the Policy Value prior to the Excess Partial Withdrawal.

If a partial withdrawal is taken when the Guaranteed Minimum Death Benefit
exceeds the Policy Value, then the partial withdrawal amount used to determine
the Guaranteed Minimum Death Benefit will exceed the amount of the partial
withdrawal. In that case, the total proceeds of a partial withdrawal followed
by a Death Benefit could be less than total Premium Payments.

If the Annuitant who is not the Owner dies, the Owner will become the
Annuitant and no Death Benefits are payable unless the Owner specifically
requests on the Policy application or in writing that the Death Benefit be
paid upon the Annuitant's death and PFL agrees to such election. See your
Policy's provisions.

Due Proof of Death of the Annuitant is proof that the Annuitant who is the
Owner died prior to the commencement of Annuity Payments. Upon receipt of this
proof and an election of a method of settlement and return of the Policy, the
Death Benefit generally will be paid within seven days, or as soon thereafter
as PFL has sufficient information about the Beneficiary to make the payment.
The Beneficiary may receive the amount payable in a lump sum cash benefit, or,
subject to any limitation under any state or federal law, rule, or regulation,
under one of the Payment Options described above, unless a settlement
agreement is effective at the death of the Owner preventing such election.

If the Annuitant was the Owner, and the Beneficiary was not the Annuitant's
spouse, the Death Benefit must (1) be distributed within five years of the
date of the deceased Owner's death, or (2) payments under a Payment Option
must begin no later than one year after the deceased Owner's death and must be
made for the Beneficiary's lifetime or for a period certain (so long as any
certain period does not exceed the Beneficiary's life expectancy). Death
Proceeds which are not paid to or for the benefit of a natural person must be
distributed within five years of the date of the deceased Owner's death. If
the sole Beneficiary is the deceased Owner's surviving spouse, such spouse may
elect to continue the Policy as the new Annuitant and Owner instead of
receiving the Death Benefit. (See "Federal Tax Matters" in the Statement of
Additional Information.)

If the Annuitant is not the Owner, and the Owner dies prior to the Annuity
Commencement Date, a Successor Owner may surrender the Policy at any time for
the amount of the Adjusted Policy Value. If the successor owner is not the
deceased Owner's spouse, however, the Adjusted Policy Value must be
distributed: (1) within five years after the date of the deceased Owner's
death, or (2) payments under a Payment Option must begin no later than one
year after the deceased Owner's death and must be made for the successor
Owner's lifetime or for a period certain (so long as any period certain does
not exceed the successor Owner's life expectancy).

Death On or After Annuity Commencement Date. The Death Benefit payable on or
after the Annuity Commencement Date depends on the Payment Option selected. If
any Owner dies on or after the Annuity Commencement Date, but before the
entire interest in the Policy is distributed, the remaining

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<PAGE>

portion of such interest in the Policy will be distributed at least as rapidly
as under the method of distribution being used as of the date of that Owner's
death.

Beneficiary. The Beneficiary designation in the application will remain in
effect until changed. The Owner may change the designated Beneficiary by
sending Written Notice to PFL. The Beneficiary's consent to such change is not
required unless the Beneficiary was irrevocably designated or consent is
required by law. (If an irrevocable Beneficiary dies, the Owner may then
designate a new Beneficiary.) The change will take effect as of the date the
Owner signs the Written Notice, whether or not the Owner is living when the
Notice is received by PFL. PFL will not be liable for any payment made before
the Written Notice is received. If more than one Beneficiary is designated,
and the Owner fails to specify their interests, they will share equally.

DEATH OF OWNER

Federal tax law requires that if any Owner (including any joint Owner or any
Successor Owner who has become a current Owner) dies before the Annuity
Commencement Date, then the entire value of the Policy must generally be
distributed within five years of the date of death of such Owner. Certain
rules apply where 1) the spouse of the deceased Owner is the sole beneficiary,
2) the Owner is not a natural person and the primary Annuitant dies or is
changed, or 3) any Owner dies after the Annuity Commencement Date. See
"Federal Tax Matters" in the Statement of Additional Information for a
detailed description of these rules. Other rules may apply to Qualified
Policies. (See also "Death Benefit" p. 44.)

RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM

Section 36.105 of the Texas Educational Code permits participants in the
Texas Optional Retirement Program (ORP) to withdraw their interest in a
variable annuity Policy issued under the ORP only upon: (1) termination of
employment in the Texas public institutions of higher education; (2)
retirement; or (3) death. Accordingly, a participant in the ORP (or the
participant's estate if the participant has died) will be required to obtain a
certificate of termination from the employer or a certificate of death before
the account can be redeemed.

RESTRICTIONS UNDER SECTION 403(B) PLANS

Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Policy used for a 403(b) plan will prohibit distributions of elective
contributions and earnings on elective contributions except upon death of the
employee, attainment of age 59, separation from service, disability, or
financial hardship. In addition, income attributable to elective contributions
may not be distributed in the case of hardship.

RESTRICTIONS UNDER QUALIFIED POLICIES

Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Policies or under the terms
of the plans in respect of which Qualified Policies are issued.

CHARGES AND DEDUCTIONS

No deductions are made from Premium Payments when made, so that the full
amount of each Premium Payment is invested in one or more of the Accounts. PFL
will make certain charges and deductions in connection with the Policy in
order to compensate it for incurring expenses in distributing the Policy,
bearing mortality and expense risks under the Policy, and administering the
Accounts and the Policies. Charges may also be made for premium taxes,
federal, state or local taxes, or for certain transfers or other transactions.
Charges and expenses are also deducted from the Underlying Funds.

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<PAGE>

SURRENDER CHARGE

PFL will incur expenses relating to the sale of Policies, including
commissions to registered representatives and other promotional expenses. PFL
may apply a Surrender Charge, which is a contingent deferred sales charge, to
any amount surrendered (i.e., withdrawn) in connection with a full or partial
Policy surrender in order to cover distribution expenses. A Surrender Charge,
if applicable, will only be applied to withdrawals which exceed the Cumulative
Free Percentage at the time of, but prior to, the withdrawal. (See
"DISTRIBUTIONS UNDER THE POLICY--Surrenders" p. 35.)

The Surrender Charge is not imposed upon exercise of the Nursing Care and
Terminal Condition Withdrawal Option or the Unemployment Waiver. These
features may not be available in all states. (See "DISTRIBUTIONS UNDER THE
POLICY--Nursing Care and Terminal Condition Withdrawal Option," p. 37, and
"Unemployment Waiver," p. 37.) The Surrender Charge is also waived upon
certain Systematic Payouts. (See "DISTRIBUTIONS UNDER THE POLICY--Systematic
Payout Option," p. 38.)

The amount of the Surrender Charge is determined by multiplying the amount
of the Premium Payment withdrawn by the applicable Surrender Charge
Percentage. The applicable Surrender Charge Percentage will depend upon the
number of years that have elapsed since the Premium Payment that is being
withdrawn was made. For this purpose, surrenders are allocated to Premium
Payments on a "first-in, first-out" basis, i.e., first to the oldest Premium
Payment, then to the next oldest Premium Payment and so on. Premium Payments
are deemed to be withdrawn before earnings, and after all Premium Payments
have been withdrawn, the remaining Adjusted Policy Value may be withdrawn
without any Surrender Charge. The following is the table of Surrender Charge
Percentages:

<TABLE>
<CAPTION>
APPLICABLE SURRENDER CHARGE
NUMBER OF YEARS SINCE PERCENTAGE (AS PERCENTAGE OF
PREMIUM PAYMENT PREMIUM PAYMENT WITHDRAWN)
---------------------- ----------------------------
<S> <C>
Less than 1................. 6%
At least 1 and less than 2.. 6%
At least 2 and less than 3.. 6%
At least 3 and less than 4.. 4%
At least 4 and less than 5.. 2%
5 or more................... 0%
</TABLE>

No Surrender Charge will be applied after the tenth Policy Year.

PFL anticipates that the Surrender Charge will not generate sufficient funds
to pay the cost of distributing the Policies. If this charge is insufficient
to cover the distribution expenses, the deficiency will be met from PFL's
general funds, which will include amounts derived from the fee for mortality
and expense risks.

MORTALITY AND EXPENSE RISK FEE

PFL imposes a daily charge as compensation for bearing certain mortality and
expense risks in connection with the Policies. For Guaranteed Minimum Death
Benefit Option A (Return of Premium Death Benefit), this charge is equal to an
effective annual rate of 1.10% of the daily net asset value in the Mutual Fund
Account for each Subaccount. For Guaranteed Minimum Death Benefit Options B
(5% Annually Compounding Death Benefit), and C (Annual Step-Up Death Benefit),
the corresponding charge is equal to 1.25% of the net assets in the Mutual
Fund Account. The Mortality and Expense Risk Fee is reflected in the
Accumulation or Annuity Unit Values for the Policy for each Subaccount.

Policy Values and Annuity Payments are not affected by changes in actual
mortality experience nor by actual expenses incurred by PFL. The mortality
risks assumed by PFL arise from its contractual obligations to make Annuity
Payments (determined in accordance with the Annuity tables and other

- 45 -
<PAGE>

provisions contained in the Policy) and to pay Death Benefits prior to the
Annuity Commencement Date. Thus, Owners are assured that neither an
Annuitant's own longevity nor an unanticipated improvement in general life
expectancy will adversely affect the periodic Annuity payments that the
Annuitant will receive under the Policy.

PFL also bears substantial risk in connection with the Death Benefit
Guarantee since PFL will pay a Death Benefit equal to the Guaranteed Minimum
Death Benefit (that is, Return of Premium Death Benefit, 5% Annually
Compounding Death Benefit, or Annual Step-Up Death Benefit) if that amount is
higher than the greater of the Policy Value or the Cash Value.

The expense risk assumed by PFL is the risk that PFL's actual expenses in
administering the Policy and the Accounts will exceed the amount recovered
through the Administrative and Service Charges.

If the Mortality and Expense Risk Fee is insufficient to cover PFL's actual
costs, PFL will bear the loss; conversely, if the charge is more than
sufficient to cover costs, the excess will be profit to PFL. PFL expects a
profit from this charge. To the extent that the Surrender Charge is
insufficient to cover the actual cost of Policy distribution, the deficiency
will be met from PFL's general corporate assets, which may include amounts, if
any, derived from the Mortality and Expense Risk Fee. A Mortality and Expense
Risk Fee is assessed during the accumulation phase and during the annuity
phase for all Variable Annuity Options.

ADMINISTRATIVE CHARGES

In order to cover the costs of administering the Policies, PFL deducts a
Service Charge from the Policy Value of each Policy.

The annual Service Charge is deducted from the Policy Value of each Policy
on each Policy Anniversary prior to the Annuity Commencement Date. PFL also
reserves the right to charge up to $30 at the time of surrender during any
Policy Year. After the Annuity Commencement Date, the charge is not deducted.
This annual Service Charge is the lesser of 2% of the Policy Value or $30 and
it will not be increased in the future. This charge is waived if either the
Policy Value or the sum of all Premium Payments less the sum of all partial
surrenders equals or exceeds $50,000 on a Policy Anniversary (or date of
surrender). The Service Charge will be deducted from the Guaranteed Period
Option(s) of the Fixed Account and from the Subaccount(s) in the Mutual Fund
Account, in the same proportion that the Owner's interest in each Guaranteed
Period Option/Subaccount bears to the Owner's total Policy Value.

PFL also deducts a daily Administrative Charge from the net assets of the
Mutual Fund Account to partially cover expenses incurred by PFL in connection
with the administration of the Account and the Policies. The effective annual
rate of this charge is .15% of the net assets in the Mutual Fund Account.

PREMIUM TAXES

PFL currently makes no deduction from the Premium Payments for any state
premium taxes PFL pays in connection with Premium Payments under the Policies.
However, PFL will deduct the aggregate premium taxes paid on behalf of a
particular Policy from the Policy Value on (i) the Annuity Commencement Date
(thus reducing the Policy Value), (ii) the total surrender of a Policy, or
(iii) payment of the death proceeds of a Policy. Premium taxes currently range
from 0% to 3.50% of Premium Payments.

FEDERAL, STATE AND LOCAL TAXES

No charges are currently made for federal, state, or local taxes other than
premium taxes. However, PFL reserves the right to deduct charges in the future
for any taxes or other economic burden resulting from the application of any
tax laws that PFL determines to be attributable to the accounts or the
policies.

- 46 -
<PAGE>

TRANSFER FEE

There is no charge for the first 12 allowable transfers among Investment
Options in each Policy Year. PFL reserves the right to impose a $10 charge for
the thirteenth and each subsequent transfer request made by the Owner during a
single Policy Year. For the purpose of determining whether a Transfer Fee is
payable, Premium Payment allocations are not considered transfers. All
transfer requests made simultaneously will be treated as a single request. No
Transfer Fee will be imposed for any transfer which is not at the Owner's
request.

OTHER EXPENSES INCLUDING INVESTMENT ADVISORY FEES

Each of the Portfolios of the Underlying Funds is responsible for all of its
expenses. In addition, charges will be made against each of the Portfolios of
the Underlying Funds for investment advisory services provided to the
Portfolio. The net assets of each Portfolio of the Underlying Funds will
reflect deductions in connection with the investment advisory fee and other
expenses.

For more information concerning the investment advisory fee and other
charges against the Portfolios, see the prospectuses for the Underlying Funds,
current copies of which accompany this Prospectus.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary does not constitute tax advice. It is a general
discussion of certain of the expected federal income tax consequences of
investment in and distributions with respect to a Policy, based on the
Internal Revenue Code of 1986, as amended (the "Code'), proposed and final
Treasury Regulations thereunder, judicial authority, and current
administrative rulings and practice. This summary discusses only certain
federal income tax consequences to "United States Persons," and does not
discuss state, local, or foreign tax consequences. United States Persons means
citizens or residents of the United States, domestic corporations, domestic
partnerships and trusts or estates that are subject to United States federal
income tax regardless of the source of their income.

At the time the initial Premium Payment is paid, a prospective purchaser
must specify whether he or she is purchasing a Nonqualified Policy or a
Qualified Policy. If the initial Premium Payment is derived from an exchange
or surrender of another annuity policy, PFL may require that the prospective
purchaser provide information with regard to the federal income tax status of
the previous annuity policy. PFL will require that persons purchase separate
Policies if they desire to invest monies qualifying for different annuity tax
treatment under the Code. Each such separate Policy would require the minimum
initial Premium Payment stated above. Subsequent Additional Premium Payments
under a Policy must qualify for the same federal income tax treatment as the
initial Premium Payment under the Policy; PFL will not accept a Subsequent
Additional Premium Payment under a Policy if the federal income tax treatment
of such Premium Payment would be different from that of the initial Premium
Payment.

The Qualified Policies were designed for use by retirement plans and
individual retirement accounts that qualify for special federal income tax
treatment under Sections 401(a), 403(b), or 408(a), or 457 of the Code and
individuals purchasing individual retirement annuities that qualify for
special federal income tax treatment under Section 408(b) of the Code. Certain
requirements must be satisfied in purchasing a Qualified Policy in order for
the plan, account or annuity to retain its special tax treatment. This summary
is not intended to cover such requirements, and assumes that Qualified
Policies are purchased pursuant to retirement plans or individual retirement
accounts, or are individual retirement annuities, that qualify for such
special tax treatment. This summary was prepared by PFL after consultation
with tax counsel, but no opinion of tax counsel has been obtained.

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<PAGE>

THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. EACH
POTENTIAL PURCHASER IS URGED TO CONSULT HIS/HER OWN TAX ADVISER AS TO THE
CONSEQUENCES OF INVESTMENT IN A POLICY UNDER FEDERAL AND APPLICABLE STATE,
LOCAL AND FOREIGN TAX LAWS.

TAX STATUS OF THE POLICY

The following discussion is based on the assumption that the Policy
qualifies as an annuity contract for federal income tax purposes. The
Statement of Additional Information discusses the tax requirements for
qualifying as an annuity contract.

TAXATION OF ANNUITIES

The discussion below applies only to those Policies owned by natural
persons, and that qualify as annuity contracts for federal income tax
purposes. With respect to Owners who are natural persons, the Policy should be
treated as an annuity contract for federal income tax purposes.

In General. Except as described below with respect to Owners who are not
natural persons, an Owner who holds a Policy satisfying the diversification
and distribution requirements described in the Statement of Additional
Information should not be taxed on increases in the Policy Value until an
amount is received or deemed received, e.g., upon a partial or full surrender,
assignment, or as Annuity Payments under the Annuity Option selected.
Generally, any amount received or deemed received under a Nonqualified Annuity
Contract prior to the Annuity Commencement Date is deemed to come first from
any "Income on the Contract" and then from the "Investment in the Contract."
The "Investment in the Contract" generally equals total premium payments less
amounts received which were not includable in gross income. To the extent that
the Policy Value (ignoring any surrender charges except on a full surrender)
exceeds the "Investment in the Contract," such excess constitutes the "Income
on the Contract." For these purposes such "Income on the Contract" shall be
computed by reference to the aggregation rules described below, and the amount
includable in gross income will be taxable as ordinary income. If at the time
that any amount is received or deemed received there is no "Income on the
Contract" (e.g., because the Policy Value does not exceed the "Investment in
the Contract" and no aggregation rule applies), then such amount received or
deemed received will not be includable in gross income, and will simply reduce
the "Investment in the Contract."

For this purpose, the assignment, pledge or agreement to assign or pledge
any portion of the Policy Value (including assignment of Owner's right to
receive Annuity Payments prior to the Annuity Commencement Date) generally
will be treated as a distribution in the amount of such portion of the Policy
Value. Additionally, if an Owner designates a new Owner prior to the Annuity
Commencement Date without receiving full and adequate consideration, the old
Owner generally will be treated as receiving a distribution under the Policy
in an amount equal to the Policy Value. A transfer of ownership or an
assignment of a Policy, or designation of an Annuitant or Beneficiary who is
not also the Owner, as well as the selection of certain Annuity Commencement
Dates, may result in certain tax consequences to the Owner that are not
discussed herein. An Owner contemplating any such transfer, designation,
selection or assignment of a Policy should contact a competent tax adviser
with respect to the potential tax effects of such a transaction.

Aggregation Rules. Generally all Nonqualified deferred annuity contracts
issued by the same company (or an affiliated company) to the same owner during
any calendar year shall be treated as one annuity contract, and "aggregated"
for purposes of determining the amount includable in gross income. In
addition, for such purposes all individual retirement annuities and accounts
under Section 408 of the Code for an individual are aggregated, and generally
all distributions therefrom during a calendar year are treated as one
distribution made as of the end of such year.

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<PAGE>

Surrenders or Partial Withdrawals. In the case of a partial withdrawal
(including systematic partial withdrawals) under a Nonqualified Policy, the
amount received generally will be includable in gross income to the extent
that it does not exceed the "Income on the Contract" which is generally equal
to the excess of the Policy Value immediately before the partial withdrawal
over the "Investment in the Contract" at that time. However, for these
purposes the Policy Value immediately before a partial withdrawal may have to
be increased by any positive Excess Interest Adjustment which results from
such a partial withdrawal or which could result from a simultaneous full
surrender, and may need further adjustments if the aggregation rules apply.
There is, however, no definitive guidance on the proper tax treatment of
Excess Interest Adjustments, and the Owner should contact a competent tax
adviser with respect to the potential tax consequences of an Excess Interest
Adjustment that may apply in the case of a Non-Qualified Policy or a Qualified
Policy. In the case of a partial surrender (including systematic payouts)
under a Qualified Policy (other than one qualified under Section 457 of the
Code), a ratable portion of the amount received is generally excludable from
gross income, based on the ratio of the "Investment in the Contract" to the
individual's total account balance or accrued benefit under the retirement
plan at the time of each such payment. For a Qualified Policy, the "Investment
in the Contract" can be zero, and generally any distribution would therefore
be fully taxable. Special tax rules may be available for certain distributions
from a Qualified Policy. In the case of a surrender under a Nonqualified
Policy or a Qualified Policy, the amount received generally will be taxable
only to the extent it exceeds the "Investment in the Contract," unless the
aggregation rules apply.

Annuity Payments. Although the tax consequences may vary depending on the
Annuity Payment Option elected under the Policy, in general, for Nonqualified
and certain Qualified Policies, only a portion of the Annuity Payments
received after the Annuity Commencement Date will be includable in the gross
income of the recipient.

For Fixed Annuity Payments, in general the excludable portion of each
payment is determined by dividing the "Investment in the Contract" on the
Annuity Commencement Date by the total expected value of the Annuity Payments
for the term of the payments. The remainder of each Annuity Payment is
includable in gross income. Once the "Investment in the Contract" has been
fully recovered, the full amount of any additional Annuity Payments is
includable in gross income.

For Variable Annuity Payments, the includable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is excludable from gross income. This dollar amount is determined
by dividing the "Investment in the Contract" on the Annuity Commencement Date
by the total number of expected periodic payments. The remainder of each
Annuity Payment is includable in gross income. Once the "Investment in the
Contract" has been fully recovered, the full amount of any additional Annuity
Payments is includable in gross income.

Where an Owner allocates a portion of the Adjusted Policy Value on the
Annuity Commencement Date to more than one annuity payment option (fixed or
variable), special rules govern the allocation of the Policy's entire
"Investment in the Contract" on such date to each such option, for purposes of
determining the excludable amount of each payment received under that option.
PFL makes no attempt to describe these allocation rules, because they would
prescribe a complex variety of results, depending on how the allocations were
made among the various types of options. Instead, any Owner is advised to
consult a competent tax adviser as to the potential tax effects of allocating
any amount of Adjusted Policy Value to any particular annuity payment option.

If, after the Annuity Commencement Date, Annuity Payments cease by reason of
the death of the Annuitant, the excess (if any) of the "Investment in the
Contract" as of the Annuity Commencement Date over the aggregate amount of
Annuity Payments received on or after the Annuity Commencement Date that was
excluded from gross income is allowable as a deduction for the last taxable
year of the Annuitant.

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<PAGE>

Taxation of Death Benefit Proceeds. Amounts may be distributed from the
Policy because of the death of an Owner or the Annuitant. Generally, such
amounts are includable in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a full
surrender, as described above, or (2) if distributed under an Annuity Payment
Option, they are taxed in the same manner as Annuity Payments, as described
above. For these purposes, the "Investment in the Contract" is not affected by
the Owner's or Annuitant's death. That is, the "Investment in the Contract"
remains generally the total premium payments less amounts received which were
not includable in gross income.

Penalty Taxes. In the case of any amount received or deemed received from
the Policy, e.g., upon a surrender of a Policy (including systematic payouts)
or a deemed distribution under a Policy resulting from a pledge, assignment or
agreement to pledge or assign or an Annuity Payment with respect to a Policy,
there may be imposed on the recipient a federal penalty tax equal to 10% of
the amount includable in gross income. The penalty tax generally will not
apply to any distribution: (i) made on or after the date on which the taxpayer
attains age 59 1/2; (ii) made as a result of the death of the holder
(generally the Owner); (iii) attributable to the disability of the taxpayer,
or (iv) which is part of a series of substantially equal periodic payments
made (not less frequently than annually) for the life (or life expectancy) of
the taxpayer or the joint lives (or joint life expectancies) of such taxpayer
and the taxpayer's beneficiary. Other rules may apply to Qualified Policies.

Withholding. The portion of any distribution under a Policy that is
includable in gross income will be subject to federal income tax withholding
unless the recipient of such distribution elects not to have federal income
tax withheld. Election forms will be provided at the time distributions are
requested or made. For certain Qualified Policies, certain distributions are
subject to mandatory withholding.

Qualified Policies. The Qualified Policy is designed for use with several
types of tax-qualified retirement plans. The tax rules applicable to
participants and beneficiaries in tax-qualified retirement plans vary
according to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to
specified commencement and minimum distribution rules; aggregate distributions
in excess of a specified annual amount; and in other specified circumstances.
Some retirement plans are subject to distribution and other requirements that
are not incorporated into PFL's Policy administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Policies comply with applicable law.

PFL makes no attempt to provide more than general information about use of
the Policy with the various types of retirement plans. Purchasers of Policies
for use with any retirement plan should consult their legal counsel and tax
adviser regarding the suitability of the Policy.

Individual Retirement Annuities. In order to qualify as an individual
retirement annuity under Section 408(b) of the Code, a Policy must contain
certain provisions: (i) the Owner must be the Annuitant; (ii) the Policy
generally is not transferable by the Owner, e.g., the Owner may not designate
a new Owner, designate a Contingent Owner or assign the Policy as collateral
security; (iii) the total Premium Payments for any calendar year on behalf of
any individual may not exceed $2,000, except in the case of a rollover amount
or contribution under Sections 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of
the Code; (iv) Annuity Payments or partial withdrawals must begin no later
than April 1 of the calendar year following the calendar year in which the
Annuitant attains age 70 1/2; (v) an Annuity Payment Option with a Period
Certain that will guarantee Annuity Payments beyond the life expectancy of the
Annuitant and the Beneficiary may not be selected; (vi) certain payments of
Death Benefits must be made in the event the Annuitant dies prior to the
distribution of the Policy Value; and (vii) the entire interest of the Owner
is non-forfeitable. Policies intended to qualify as individual retirement
annuities under Section 408(b) of the Code contain such provisions.

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<PAGE>

Section 408 of the Code also indicates that no part of the funds for an
individual retirement account or annuity ("IRA") may be invested in a life
insurance contract, but the regulations thereunder allow such funds to be
invested in an annuity policy that provides a death benefit that equals the
greater of the premiums paid or the Cash Value for the contract. The Policy
provides an enhanced death benefit that could exceed the amount of such a
permissible death benefit, but it is unclear to what extent such an enhanced
death benefit could disqualify the Policy under Section 408 of the Code. The
Internal Revenue Service has not reviewed the Policy for qualification as an
IRA, and has not addressed in a ruling of general applicability whether an
enhanced death benefit provision, such as the provision in the Policy,
comports with IRA qualification requirements.

Section 403(b) Plans. Under Section 403(b) of the Code, payments made by
public school systems and certain tax exempt organizations to purchase
Policies for their employees are excludable from the gross income of the
employee, subject to certain limitations. However, such payments may be
subject to FICA (Social Security) taxes. Additionally, in accordance with the
requirements of the Code, Section 403(b) annuities generally may not permit
distribution of (i) elective contributions made in years beginning after
December 31, 1988, and (ii) earnings on those contributions and (iii) earnings
on amounts attributed to elective contributions held as of the end of the last
year beginning before January 1, 1989. Distributions of such amounts will be
allowed only upon the death of the employee, on or after attainment of age 59
1/2, separation from service, disability, or financial hardship, except that
income attributable to elective contributions may not be distributed in the
case of hardship.

Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Sections
401(a) and 403(a) of the Code permit corporate employers to establish various
types of retirement plans for employees and self-employed individuals to
establish qualified plans for themselves and their employees. Such retirement
plans may permit the purchase of the Policies to accumulate retirement
savings. Adverse tax consequences to the plan, the participant or both may
result if the Policy is assigned or transferred to any individual as a means
to provide benefit payments.

Deferred Compensation Plans. Section 457 of the Code, while not actually
providing for a qualified plan (as that term is not used in the Code),
provides for certain deferred compensation plans with respect to service for
state governments, local governments, political sub-divisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The Policies can be used with
such plans. Under such plans a participant may specify the form of investment
in which his or her participation will be made. All such investments, however,
are owned by, and are subject to, the claims of the general creditors of the
sponsoring employer. Depending on the terms of the particular plan, the
employer may be entitled to draw on deferred amounts for purposes unrelated to
its Section 457 plan obligations. In general, all amounts received under a
Section 457 plan are taxable and are subject to federal income tax withholding
as wages.

Non-natural Persons. Pursuant to Section 72(u) of the Code, an annuity
contract held by a taxpayer other than a natural person generally will not be
treated as an annuity contract under the Code; accordingly, an Owner who is
not a natural person will recognize as ordinary income for a taxable year the
excess of (i) the sum of the Cash Value as of the close of the taxable year
and all previous distributions under the Policy over (ii) the sum of the
Premium Payments paid for the taxable year and any prior taxable year and the
amounts includable in gross income for any prior taxable year with respect to
the Policy. For these purposes, the Policy Value at year end may have to be
increased by any positive Excess Interest Adjustment which could result from a
full surrender at such time. There is, however, no definitive guidance on the
proper tax treatment of Excess Interest Adjustments and the Owner should
contact a competent tax adviser with respect to the potential tax consequences
of an Excess Interest Adjustment. Notwithstanding the preceding sentences in
that paragraph, Section 72(u) of the Code does not apply to (i) a Policy the
nominal Owner of which is not a natural person but the beneficial Owner of
which is a natural person, (ii) a Policy acquired by the estate of a decedent
by reason of such decedent's death, (iii)

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<PAGE>

a Qualified Policy (other than one qualifying under Section 457) or (iv) a
single-payment annuity the Commencement Date for which is no later than one
year from the date of the single Premium Payment; such Policies are taxed as
described above under the heading "Taxation of Annuities."

Possible Changes in Taxation. In past years, legislation has been proposed
in the U.S. Congress that would have adversely modified federal taxation of
certain annuities. For example, one such proposal would have changed the tax
treatment of Nonqualified annuities that did not have "substantial life
contingencies" by taxing income as it is credited to the annuity. Although as
of the date of this Prospectus Congress was not actively considering any
legislation regarding the taxation of annuities, there is always the
possibility that the tax treatment of annuities could change because of
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).

DISTRIBUTOR OF THE POLICIES

As of the date of this Prospectus, AEGON USA Securities, Inc., an affiliate
of PFL, located at 4333 Edgewood Road N.E., Cedar Rapids, Iowa, 52499-0001, is
the principal underwriter of the Policies. AEGON USA Securities, Inc. was
incorporated under the laws of the State of Iowa in 1959 and is registered as
a broker/dealer under the Securities Exchange Act of 1934. It is a member of
the National Association of Securities Dealers, Inc. ("NASD"). It is
anticipated that during 1998, AFSG Securities Corporation, another affiliate
of PFL, will become the principal underwriter of the Policies. AFSG Securities
Corporation was incorporated as a Pennsylvania corporation on March 12, 1986,
is registered as a broker/dealer under the Securities Exchange Act of 1934,
and is a member of the NASD.

Policies are sold by registered representatives of AEGON USA Securities,
Inc. or of broker/dealers who have entered into written sales agreements with
the principal underwriter, who are also licensed through various affiliated or
unaffiliated agencies as insurance agents for PFL. PFL has entered into a
distribution agreement with AEGON USA Securities, Inc. and companion sales
agreements with agencies and/or agents through which agreements the Policies
are sold and the registered representatives are compensated by the agencies
and/or AEGON USA Securities, Inc. Broker/dealers will generally receive sales
commissions of up to 5% of Premium Payments. These commissions are not
deducted from Premium Payments, they are paid by PFL. In addition, certain
production, persistency and managerial bonuses may be paid. Subject to
applicable Federal and State laws and regulations, PFL may also pay
compensation to banks and other financial institutions for their services in
connection with the sale and servicing of the Policies. The level of such
compensation will not exceed that paid to broker/dealers for their sale of the
Policies. No amounts will be retained by AEGON USA Securities, Inc. for acting
as principal underwriter for the Policies. The offering of Policies will be
made on a continuing basis.

VOTING RIGHTS

To the extent required by law, PFL will vote the Underlying Fund shares held
by the Mutual Fund Account at regular and special shareholder meetings of the
Underlying Funds in accordance with instructions received from persons having
voting interests in the portfolios, (although the Underlying Funds do not hold
regular annual shareholders meetings). If, however, the 1940 Act or any
regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result PFL determines that it is permitted to
vote the Underlying Funds' shares in its own right, it may elect to do so.

Before the Annuity Commencement Date, the Owner holds voting interest in the
selected Portfolios. The number of votes that an Owner has the right to
instruct will be calculated separately for each Subaccount. The number of
votes that an Owner has the right to instruct for a particular Subaccount will

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<PAGE>

be determined by dividing the Owner's Policy Value in the Subaccount by the
net asset value per share of the corresponding Portfolio in which the
Subaccount invests. Fractional shares will be counted.

After the Annuity Commencement Date, the person receiving Annuity Payments
has the voting interest, and the number of votes decreases as Annuity Payments
are made and as the reserves for the Policy decrease. The person's number of
votes will be determined by dividing the reserve for the Policy allocated to
the applicable Subaccount by the net asset value per share of the
corresponding Portfolio. Fractional shares will be counted.

The number of votes that the Owner or person receiving income payments has
the right to instruct will be determined as of the date established by the
Underlying Funds for determining shareholders eligible to vote at the meeting
of the Underlying Funds. PFL will solicit voting instructions by sending
Owners or other persons entitled to vote written requests for instructions
prior to that meeting in accordance with procedures established by the
Underlying Funds. Portfolio shares as to which no timely instructions are
received and shares held by PFL in which Owners or other persons entitled to
vote have no beneficial interest will be voted in proportion to the voting
instructions that are received with respect to all Policies participating in
the same Subaccount.

Each person having a voting interest in a Subaccount will receive proxy
material, reports, and other materials relating to the appropriate Portfolio.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Mutual Fund Account is a party
or to which the assets of the Account are subject. PFL is not involved in any
litigation that is of material importance in relation to its total assets or
that relate to the Mutual Fund Account.

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Policy--General Provisions............................................. 3
Owner.................................................................... 3
Entire Policy............................................................ 3
Delay of Payment and Transfers........................................... 3
Misstatement of Age or Sex............................................... 4
Reallocation of Policy Values After the Annuity Commencement Date........ 4
Assignment............................................................... 4
Evidence of Survival..................................................... 4
Non-Participating........................................................ 5
Federal Tax Matters........................................................ 5
Tax Status of the Policy................................................. 5
Taxation of PFL.......................................................... 6
Investment Experience...................................................... 6
State Regulation of PFL.................................................... 10
Administration............................................................. 10
Records and Reports........................................................ 10
Distribution of the Policies............................................... 10
Custody of Assets.......................................................... 11
Historical Performance Data................................................ 11
Money Market Yields...................................................... 11
Other Subaccount Yields.................................................. 12
Total Returns............................................................ 13
Other Performance Data................................................... 13
Adjusted Historical Fund Performance Data................................ 14
Legal Matters.............................................................. 14
Independent Auditors....................................................... 14
Other Information.......................................................... 14
Financial Statements....................................................... 14
</TABLE>

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<PAGE>

APPENDIX A(1)

EXCESS INTEREST ADJUSTMENT

The formula which will be used to determine the Excess Interest Adjustment
(EIA) is:

S*(G - C)* (M/12)

S= Gross amount being withdrawn that is subject to the EIA

G= Guaranteed Interest Rate applicable to S.

C= Current Guaranteed Interest Rate then being offered on new Premium
Payments for the next longer Guaranteed Period than "M". If this policy
form or such a Guaranteed period is no longer offered, "C" will be the
U.S. Treasury rate for the next longer maturity (in whole years) than "M"
on the 25th day of the previous calendar month, plus up to 2%.

M= Number of months remaining in the current Guaranteed Period, rounded up to
the next higher whole number of months.

EXAMPLE 1 (FULL SURRENDER, RATES INCREASE BY 3%):

<TABLE>
<S> <C>
Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3
Policy Value ("PV") at middle of = 50,000* (1.055)R 2.5 = 57,161.18
Contract Year 3
Surrender Charge Free Amount at middle = 57,161.18* .30 = 17,148.35
of Policy Year 3
EIA Free Amount at middle of = 57,161.18 - 50,000 = 7,161.18
Policy Year 3
Amount Subject to EIA = 57,161.18 - 7,161.18 = 50,000.00
EIA Floor = 50,000* (1.03)R 2.5 = 53,834.80

Excess Interest Adjustment

G=.055
C=.085
M=30
Excess Interest Adjustment = S* (G - C)* (M/12)
= 50,000.00* (.055 - .085)* (30/12)
= (- 3,750.00), but Excess Interest
Adjustment cannot cause the Adjusted
Policy Value to fall below the floor,
so the adjustment is limited to
53,834.80
- 57,161.18 = (- 3,326.38)
Adjusted Policy Value = PV + EIA = 57,161.18 + (- 3,326.38)
= 53,834.80
Surrender Charge = (50,000 - 17,148.35)* .06 =
1,971.10
Cash Value at middle of Policy Year 3 = PV + EIA - Surrender Charge
= 57,161.18 + (-3,326.38) - 1,971.10
= 51,863.70
</TABLE>
- --------
(1) * represents multiplication;
R represents exponentiation.

A-1
<PAGE>

<TABLE>
<S> <C>
EXAMPLE 2 (FULL SURRENDER, RATES DECREASE
BY 1%):
Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Full Surrender: Middle of Contract Year 3
Policy Value at middle of Policy Year 3 = 50,000* (1.055)R 2.5 = 57,161.18
Surrender Charge Free Amount at middle of = 57,161.18* .30 = 17,148.35
Policy Year 3
EIA Free Amount at middle of Policy Year 3 = 57,161.18 - 50,000 = 7,161.18
Amount Subject to EIA = 57,161.18 - 7,161.18 = 50,000.00
EIA Floor = 50,000* (1.03)R 2.5 = 53,834.80

Excess Interest Adjustment

G = .055
C = .045
M = 30
Excess Interest Adjustment = S* (G - C)* (M/12) = 50,000*
(.055 - .045)* (30/12) = 1,250.00
Adjusted Policy Value = PV + EIA = 57,161.18 + 1,250.00
= 58,411.18
Surrender Charge = (50,000 - 17,148.35)* .06 =
1,971.10
Cash Value at middle of Policy Year 3 = PV + EIA - Surrender Charge
= 57,161.18 + (1,250) - 1,971.10
= 56,440.08
</TABLE>

On a partial withdrawal, PFL will pay the Owner the full amount of
withdrawal requested (as long as the Policy Value is sufficient). Surrender
Charge--Free withdrawals will reduce the Policy Value by the amount withdrawn.
Amounts withdrawn in excess of the Surrender Charge--Free amount will reduce
the Policy Value by an amount equal to:

X - Y + Z

X= Excess Partial Withdrawal = Requested withdrawal less Surrender Charge--
Free amount

A= Amount of Partial Withdrawal which is subject to Excess Interest
Adjustment = Requested withdrawal - EIA--Free Amount, where EIA--Free
Amount = Cumulative interest credited at time of, but prior to,
withdrawal.

Y= Excess Interest Adjustment = (A)*(G - C)*(M/12) where G, C, and M are
defined above, with "A" substituted for "S" in the definition of G and M.

Z= Surrender Charge on X minus Y.

A-2
<PAGE>

EXAMPLE 3 (PARTIAL WITHDRAWAL, RATES INCREASE BY 1%):

<TABLE>
<S> <C>
Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Partial Surrender: $30,000; Middle of Contract Year 3
Policy Value at middle of Policy Year 3 = 50,000* (1.055)R 2.5 = 57,161.18
Surrender Charge Free Amount at middle of = 57,161.18* .30 = 17,148.35
Policy Year 3
EIA Free Amount at middle of Policy Year 3 = 57,161.18 - 50,000 = 7,161.18
</TABLE>

Excess Interest Adjustment/Surrender Charge

X= 30,000 - 17,148.35 = 12,851.65

A= 30,000 - 7,161.18 = 22,838.82

G= .055

C= .065

M= 30

Y= 22,838.82* (.055 - .065)* (30/12) = - 570.97

Z= .06* [12,851.65 - (- 570.97)] = 805.36

<TABLE>
<S> <C>
Reduction to Policy Value due to
Surrender Charge--Free withdrawal = 17,148.35
Reduction to Policy Value due to Excess = X - Y + Z
Withdrawal = 12,851.65 - (- 570.97) + 805.36
= 14,227.98
Policy Value after withdrawal at middle = 57,161.18 - [17,148.35 + 14,227.98]
of Policy Year 3 = 57,161.18 - [17,148.35 + 12,851.65
- (-570.97) + 805.36]
= 57,161.18 - [30,000 - (-570.97)
+ 805.36]
= 57,161.18 - 31,376.33 = 25,784.85
</TABLE>

A-3
<PAGE>

EXAMPLE 4 (PARTIAL WITHDRAWAL, RATES DECREASE BY 1%):

Excess Interest Adjustment/Surrender Charge

X= 30,000 - 17,148.35 = 12,851.65

A= 30,000 - 7,161.18 = 22,838.82

G= .055

C= .045

M= 30

Y= 22,838.82* (.055 - .045)* (30/12) = 570.97

Z= .06* [12,851.65 - (570.97)] = 736.84

<TABLE>
<S> <C>
Reduction to Policy Value due to
Surrender Charge--Free Withdrawal = 17,148.35
Reduction to Policy Value due to Excess = X - Y + Z
Withdrawal = 12,851.65 - (570.97) + 736.84
= 13,017.52
Policy Value after withdrawal at middle = 57,161.18 - [17,148.35 + 13,017.52]
of Policy Year 3 = 57,161.18 - [17,148.35 + 12,851.65
- (570.97) + 736.84]
= 57,161.18 - [30,000 - (570.97)
+ 736.84]
= 57,161.18 - 30,165.87 = 26,995.31
</TABLE>

A-4
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY
ISSUED THROUGH
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT

Offered by

PFL LIFE INSURANCE COMPANY

4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001

This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Flexible Premium Individual Deferred Variable
Annuity (the "Policy") offered by PFL Life Insurance Company. You may obtain a
copy of the Prospectus dated , 199 , by calling 1-800-525-6205, or by
writing to the Administrative and Service Office, Financial Markets Division-
Variable Annuity Dept., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-
0001. The Prospectus sets forth information that a prospective investor should
know before investing in a Policy. Terms used in the current Prospectus for
the Policy are incorporated in this Statement of Additional Information.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY AND THE FLEXIBLE
PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY.

Dated: , 199
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Policy--General Provisions............................................. 3
Owner.................................................................... 3
Entire Policy............................................................ 3
Delay of Payment and Transfers........................................... 3
Misstatement of Age or Sex............................................... 4
Reallocation of Policy Values After the Annuity Commencement Date........ 4
Assignment............................................................... 4
Evidence of Survival..................................................... 4
Non-Participating........................................................ 4
Federal Tax Matters (50)................................................... 5
Tax Status of the Policy................................................. 5
Taxation of PFL.......................................................... 6
Investment Experience...................................................... 6
State Regulation of PFL.................................................... 10
Administration............................................................. 10
Records and Reports........................................................ 10
Distribution of the Policies (35).......................................... 10
Custody of Assets.......................................................... 10
Historical Performance Data (19)........................................... 11
Money Market Yields...................................................... 11
Other Subaccount Yields.................................................. 12
Total Returns............................................................ 12
Other Performance Data................................................... 13
Adjusted Historical Fund Performance Data................................ 13
Legal Matters.............................................................. 13
Independent Auditors....................................................... 14
Other Information.......................................................... 14
Financial Statements (19).................................................. 14
</TABLE>

(Numbers in parenthesis indicate corresponding pages of the Prospectus).

2
<PAGE>

In order to supplement the description in the Prospectus, the following
provides additional information about PFL and the Policy which may be of
interest to a prospective purchaser.

THE POLICY--GENERAL PROVISIONS

OWNER

The Policy shall belong to the Owner upon issuance of the Policy after
completion of an application and delivery of the initial Premium Payment.
While the Annuitant is living, the Owner may: (1) assign the Policy; (2)
surrender the Policy; (3) amend or modify the Policy with PFL's consent; (4)
receive annuity payments or name a Payee to receive the payments; and (5)
exercise, receive and enjoy every other right and benefit contained in the
Policy. The exercise of these rights may be subject to the consent of any
assignee or irrevocable Beneficiary; and of the Owner's spouse in a community
or marital property state.

A Successor Owner can be named in the Policy application or in a Written
Notice. The Successor Owner will become the new Owner upon the Owner's death,
if the Owner predeceases the Annuitant. If no Successor Owner survives the
Owner and the Owner predeceases the Annuitant, the Owner's estate will become
the Owner.

The Owner may change the ownership of the Policy in a Written Notice. When
this change takes effect, all rights of ownership in the Policy will pass to
the new Owner. A change of ownership may have tax consequences.

When there is a change of Owner or Successor Owner, the change will take
effect as of the date the Owner signs the Written Notice, subject to any
payment PFL has made or action PFL has taken before recording the change.
Changing the Owner or naming a new Successor Owner cancels any prior choice of
Successor Owner, but does not change the designation of the Beneficiary or the
Annuitant.

If ownership is transferred (except to the Owner's spouse) because the Owner
dies before the Annuitant, the Adjusted Policy Value generally must be
distributed to the Successor Owner within five years of the Owner's death, or
if the first payment begins within one year of the Owner's death, payments
must be made for a period certain which does not exceed that Successor Owner's
life expectancy.

ENTIRE POLICY

The Policy and any endorsements thereon and the Policy application
constitute the entire contract between PFL and the Owner. All statements in
the application are representations and not warranties. No statement will
cause the Policy to be void or to be used in defense of a claim unless
contained in the application.

DELAY OF PAYMENT AND TRANSFERS

Payment of any amount due from the Mutual Fund Account in respect of a
surrender, the Death Benefit or the death of the Owner of a Nonqualified
Policy generally will occur within seven business days from the date the
Written Notice (and any other required documentation or information) is
received, except that PFL may be permitted to defer such payment from the
Mutual Fund Account if: (1) the New York Stock Exchange is closed for other
than usual weekends or holidays or trading on the Exchange is otherwise
restricted; or (2) an emergency exists as defined by the SEC or the SEC
requires that trading be restricted; or (3) the SEC permits a delay for the
protection of Owners. In addition, transfers of amounts from the Subaccounts
may be deferred under these circumstances.

Certain delays and restrictions apply to transfers of amounts out of the
Fixed Account. See p. 29 of the Policy Prospectus.

3
<PAGE>

MISSTATEMENT OF AGE OR SEX

If the age or sex of the Annuitant has been misstated, PFL will change the
annuity benefit payable to that which the Premium Payments would have
purchased for the correct age or sex. The dollar amount of any underpayment
made by PFL shall be paid in full with the next payment due such person or the
Beneficiary. The dollar amount of any overpayment made by PFL due to any
misstatement shall be deducted from payments subsequently accruing to such
person or Beneficiary. Any underpayment or overpayment will include interest
at 5% per year, from the date of the wrong payment to the date of the
adjustment. The age of the Annuitant may be established at any time by the
submission of proof satisfactory to PFL.

REALLOCATION OF POLICY VALUES AFTER THE ANNUITY COMMENCEMENT DATE

After the Annuity Commencement Date, the Owner may reallocate the value of a
designated number of Annuity Units of a Subaccount of the Mutual Fund Account
then credited to a Policy into an equal value of Annuity Units of one or more
other Subaccounts of the Mutual Fund Account, or the Fixed Account. The
reallocation shall be based on the relative value of the Annuity Units of the
Account(s) or Subaccount(s) at the end of the Business Day on the next payment
date. The minimum amount which may be reallocated is the lesser of (1) $10 of
monthly income or (2) the entire monthly income of the Annuity Units in the
Account or Subaccount from which the transfer is being made. If the monthly
income of the Annuity Units remaining in an Account or Subaccount after a
reallocation is less than $10, PFL reserves the right to include the value of
those Annuity Units as part of the transfer. The request must be in writing to
PFL's Administrative and Service Office. There is no charge assessed in
connection with such reallocation. PFL reserves the right to limit the number
of times a reallocation of Policy Value may be made in any given Policy Year.

After the Annuity Commencement Date, no transfers may be made from the Fixed
Account to the Mutual Fund Account.

ASSIGNMENT

During the lifetime of the Annuitant the Owner may assign any rights or
benefits provided by a Nonqualified Policy. An assignment will not be binding
on PFL until a copy has been filed at its Administrative and Service Office.
The rights and benefits of the Owner and Beneficiary are subject to the rights
of the assignee. PFL assumes no responsibility for the validity or effect of
any assignment. Any claim made under an assignment shall be subject to proof
of interest and the extent of the assignment. An assignment may have tax
consequences.

Unless the Owner so directs by filing Written Notice with PFL, no
Beneficiary may assign any payments under the Policy before they are due. To
the extent permitted by law, no payments will be subject to the claims of any
Beneficiary's creditors.

Ownership under Qualified Policies is restricted to comply with the Internal
Revenue Code.

EVIDENCE OF SURVIVAL

PFL reserves the right to require satisfactory evidence that a person is
alive if a payment is based on that person being alive. No payment will be
made until PFL receives such evidence.

NON-PARTICIPATING

The Policy will not share in PFL's surplus earnings; no dividends will be
paid.

4
<PAGE>

FEDERAL TAX MATTERS

TAX STATUS OF THE POLICY

Diversification Requirements. Section 817(h) of the Code provides that in
order for a variable contract which is based on a segregated asset account to
qualify as an annuity contract under the Code, the investments made by such
account must be "adequately diversified" in accordance with Treasury
regulations. The Treasury regulations issued under Section 817(h) (Treas. Reg.
(S) 1.817-5) apply a diversification requirement to each of the Subaccounts of
the Mutual Fund Account. The Mutual Fund Account, through the Underlying Funds
and their Portfolios, intends to comply with the diversification requirements
of the Treasury. PFL has entered into agreements regarding participation in
the Policy that require the Underlying Funds and their Portfolios to be
operated in compliance with the Treasury regulations.

Owner Control. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for Federal income tax purposes, of
the assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includable in the variable annuity contractowner's gross income. Several years
ago, the IRS state in published rulings that a variable contract owner will be
considered the owner of separate account assets if the contractowner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. More recently, the Treasury Department
announced, in connection with the issuance of regulations concerning
investment diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of regulations
or rulings on the "extent to which policyholders may direct their investments
to particular subaccounts without being treated as owners of underlying
assets."

The ownership rights under the contract are similar to, but different in
certain respects from those described by the IRS in rulings in which it was
determined that contractowners were not owners of separate account assets. For
example, the Owner of a Policy has the choice of one or more Subaccounts in
which to allocate premiums and Policy Values, and may be able to transfer
among these accounts more frequently than in such rulings. These differences
could result in policyowners being treated as the owners of the assets of the
Mutual Fund Account. In addition, PFL does not know what standards will be set
forth, if any, in the regulations or rulings with the Treasury Department has
stated it expects to issue. PFL therefore reserves the right to modify the
Policies as necessary to attempt to prevent the policyowners from being
considered the owners of a pro rata share of the assets of the Mutual Fund
Account.

Distribution Requirements. The Code also requires that Nonqualified Policies
contain specific provisions for distribution of Policy proceeds upon the death
of the Owner. In order to be treated as an annuity contract for federal income
tax purposes, the Code requires that such Policies provide that if any Owner
dies on or after the Annuity Commencement Date and before the entire interest
in the Policy has been distributed, the remaining portion must be distributed
at least as rapidly as under the method in effect on such Owners death. If any
Owner dies before the Annuity Commencement Date, the entire interest in the
Policy must generally be distributed within 5 years after such Owner's date of
death or be applied to provide an immediate annuity under which payments will
begin within one year of such Owner's death and will be made for the life of
the Beneficiary or for a period not extending beyond the life expectancy of
the Beneficiary. However, if such Owner's death occurs prior to the Annuity
Commencement Death, and such Owner's surviving spouse is named beneficiary,
then the Policy may be continued with the surviving spouse as the new Owner.
If any Owner is not a natural person, then for purposes of these distribution
requirements, the primary Annuitant shall be treated as the Owner and any
death or change of such primary Annuitant shall be treated as the Death of the
Owner. The Policy contains provisions intended to comply with these
requirements of the Code. No regulations interpreting these

5
<PAGE>

requirements of the Code have yet been issued and thus no assurance can be
given that the provisions contained in the Policies satisfy all such Code
requirements. The provisions contained in the Policies will be reviewed and
modified if necessary to maintain their compliance with the Code requirements
when clarified by regulation or otherwise.

TAXATION OF PFL

PFL at present is taxed as a life insurance company under part I of
Subchapter L of the Code. The Mutual Fund Account is treated as part of PFL
and, accordingly, will not be taxed separately as a "regulated investment
company" under Subchapter M of the Code. PFL does not expect to incur any
federal income tax liability with respect to investment income and net capital
gains arising from the activities of the Mutual Fund Account retained as part
of the reserves under the Policy. Based on this expectation, it is anticipated
that no charges will be made against the Mutual Fund Account for federal
income taxes. If, in future years, any federal income taxes are incurred by
PFL with respect to the Mutual Fund Account, PFL may make a charge to the
Mutual Fund Account.

INVESTMENT EXPERIENCE

A "Net Investment Factor" is used to determine the value of Accumulation
Units and Annuity Units, and to determine annuity payment rates.

ACCUMULATION UNITS

Upon allocation to the selected Subaccount of the Mutual Fund Account,
Premium Payments are converted into Accumulation Units of the Subaccount. The
number of Accumulation Units to be credited is determined by dividing the
dollar amount allocated to each Subaccount by the value of an Accumulation
Unit for that Subaccount as next determined after the Premium Payment is
received at the Administrative and Service Office or, in the case of the
initial Premium Payment, when the Policy application is completed, whichever
is later. The value of an Accumulation Unit was arbitrarily established at
$1.000000 at the inception of each Subaccount. Thereafter, the value of an
Accumulation Unit is determined as of the close of trading on each day the New
York Stock Exchange and PFL's Administrative and Service Office are open for
business.

An index (the "Net Investment Factor") which measures the investment
performance of a Subaccount during a Valuation Period, is used to determine
the value of an Accumulation Unit for the next subsequent Valuation Period.
The Net Investment Factor may be greater or less than or equal to one;
therefore, the value of an Accumulation Unit may increase, decrease or remain
the same from one Valuation Period to the next. The Owner bears this
investment risk. The net investment performance of a Subaccount and deduction
of certain charges affect the Accumulation Unit Value.

The Net Investment Factor for any Subaccount for any Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result, where:

(a) is the net result of:

(1) the net asset value per share of the shares held in the
Subaccount determined at the end of the current Valuation Period, plus

(2) the per share amount of any dividend or capital gain distribution
made with respect to the shares held in the Subaccount if the ex-
dividend date occurs during the current Valuation Period, plus or minus

(3) a per share credit or charge for any taxes determined by PFL to
have resulted from the investment operations of the Subaccount;

6
<PAGE>

(b) the net asset value per share of the shares held in the Subaccount
determined as of the end of the immediately preceding Valuation Period; and

(c) is the charge for mortality and expense risk during the Valuation
Period (equal on an annual basis to 1.10% for the Return of Premium Death
Benefit and 1.25% for both the 5% Annually Compounding Death Benefit or the
Annual Step-Up Death Benefit) of the daily net asset value of the
Subaccount, plus the .15% administrative charge for all three Death Benefit
Options.

ILLUSTRATION OF ACCUMULATION UNIT VALUE CALCULATIONS

FORMULA AND ILLUSTRATION FOR DETERMINING
THE NET INVESTMENT FACTOR

ASSUME EITHER THE 5% ANNUALLY COMPOUNDING DEATH BENEFIT
OR THE ANNUAL STEP-UP DEATH BENEFIT IS IN EFFECT.

Investment Experience Factor = A + B - C - E
-----
D

Where: A = The Net Asset Value of an Underlying Fund share as of the end of
the current Valuation Period.
Assume..........................................A = $11.57

B = The per share amount of any dividend or capital gains distribution
since the end of the immediately preceding Valuation Period.
Assume...............................................B = 0

C = The per share charge or credit for any taxes reserved for at the
end of the current Valuation Period.
Assume...............................................C = 0

D = The Net Asset Value of an Underlying Fund share at the end of the
immediately preceding Valuation Period.
Assume..........................................D = $11.40

E = The daily deduction for Mortality and Expense Risk Fee and
Administrative Charges, which totals 1.40% on an annual basis.
On a daily basis............................ = .0000380909

<TABLE>
<S> <C>
Then, the Investment Experience Factor = 11.57 + 0 - 0 - .0000380909 = Z = 1.0148741898
---------
11.40
</TABLE>

FORMULA AND ILLUSTRATION FOR DETERMINING ACCUMULATION UNIT VALUE

Accumulation Unit Value = A X B

Where: The Accumulation Unit Value for the immediately preceding
A = Valuation Period.
Assume.............................................. = $ X

B = The Net Investment Factor for the current Valuation Period.
Assume................................................ = Y

Then, the Accumulation Unit Value = $ X X Y = $ Z

7
<PAGE>

ANNUITY UNIT VALUE AND ANNUITY PAYMENT RATES

The amount of Variable Annuity Payments will vary with Annuity Unit Values.
Annuity Unit Values rise if the net investment performance of the Subaccount
exceeds the assumed interest rate of 5% annually. Conversely, Annuity Unit
Values fall if the net investment performance of the Subaccount is less than
the assumed rate. The value of a variable Annuity Unit in each Subaccount was
established at $1.00 on the date operations began for that Subaccount. The
value of a variable Annuity Unit on any subsequent Business Day is equal to
(a) multiplied by (b) multiplied by (c), where:

(a) is the variable Annuity Unit Value for that Subaccount on the
immediately preceding Business Day;

(b) is the net investment factor for that Subaccount for the valuation
period; and

The investment result adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5% effective
annual Assumed Investment Return. The valuation period is the period from the
close of the immediately preceding Business Day to the close of the current
Business Day.

The net investment factor for the Policy used to calculate the value of a
variable Annuity Unit in each Subaccount for the valuation period is
determined by dividing (i) by (ii) and subtracting (iii) from the result,
where:

(i) is the result of:

(1) the net asset value of a fund share held in that Subaccount
determined at the end of the current valuation period; plus

(2) the per share amount of any dividend or capital gain
distributions made by the fund for shares held in that Subaccount if
the ex-dividend date occurs during the valuation period; plus or minus

(3) a per share charge or credit for any taxes reserved for, which
PFL determines to have resulted from the investment operations of the
Subaccount.

(ii) is the net asset value of a fund share held in that Subaccount
determined as of the end of the immediately preceding valuation period.

(iii) is a factor representing the Mortality and Expense Risk Fee and
Administrative Charge. This factor is equal, on an annual basis, to 1.25%
(for Death Benefit Option A) or 1.40% (for Death Benefit Options B and C)
of the daily net asset value of a fund share held in that Subaccount.

The dollar amount of subsequent Variable Annuity Payments will depend upon
changes in applicable Annuity Unit Values.

The annuity payment rates vary according to the Annuity Option elected and
the sex and adjusted age of the Annuitant at the Annuity Commencement Date.
The Policy also contains a table for determining the adjusted age of the
Annuitant.

8
<PAGE>

ILLUSTRATION OF CALCULATIONS FOR ANNUITY UNIT VALUE
AND VARIABLE ANNUITY PAYMENTS

FORMULA AND ILLUSTRATION FOR DETERMINING ANNUITY UNIT VALUE

Annuity Unit Value = A x B x C

Where: Annuity Unit Value for the immediately preceding Valuation Period.
A = Assume.............................................. = $ X

B = Investment Experience Factor for the Valuation Period for which
the Annuity Unit Value is being calculated.
Assume................................................ = Y

C = A factor to neutralize the assumed interest rate of 5% built into
the Annuity Tables used.
Assume................................................ = Z

Then, the Annuity Unit Value is: $ X X Y X Z = $ Q

FORMULA AND ILLUSTRATION FOR DETERMINING AMOUNT OF FIRST MONTHLY
VARIABLE ANNUITY PAYMENT

First Monthly Variable Annuity Payment = A X B
------
$1,000

Where: The Policy Value as of the Annuity Commencement Date.
A = Assume.............................................. = $ X

B = The Annuity purchase rate per $1,000 based upon the option
selected, the sex and adjusted age of the Annuitant according to
the tables contained in the Policy.
Assume.............................................. = $ Y

Then, the first Monthly Variable Annuity Payment = $ X X $ Y = $ Z
---------
1,000

FORMULA AND ILLUSTRATION FOR DETERMINING THE NUMBER OF ANNUITY
UNITS REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT

Number of Annuity Units = A
---
B

Where: The dollar amount of the first monthly Variable Annuity Payment.
A = Assume.............................................. = $ X

B = The Annuity Unit Value for the Valuation Date on which the first
monthly payment is due.
Assume.............................................. = $ Y

Then, the number of Annuity Units = $ X = Z
-----
$ Y

9
<PAGE>

STATE REGULATION OF PFL

PFL is subject to the laws of Iowa governing insurance companies and to
regulation by the Iowa Division of Insurance. An annual statement in a
prescribed form is filed with the Division of Insurance each year covering the
operation of PFL for the preceding year and its financial condition as of the
end of such year. Regulation by the Division of Insurance includes periodic
examination to determine PFL's contract liabilities and reserves so that the
Division may determine the items are correct. PFL's books and accounts are
subject to review by the Division of Insurance at all times and a full
examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. In addition, PFL is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.

ADMINISTRATION

PFL performs administrative services for the Policies. These services
include issuance of the Policies, maintenance of records concerning the
Policies, and certain valuation services.

RECORDS AND REPORTS

All records and accounts relating to the Mutual Fund Account will be
maintained by PFL. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, PFL will mail to all Policy Owners at
their last known address of record, at least annually, reports containing such
information as may be required under that Act or by any other applicable law
or regulation. Policy Owners will also receive confirmation of each financial
transaction and any other reports required by law or regulation.

DISTRIBUTION OF THE POLICIES

The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws. The offering of the Policies
is continuous and PFL does not anticipate discontinuing the offering of the
Policies. However, PFL reserves the right to discontinue the offering of the
Policies.

As of the date of this Prospectus, AEGON USA Securities, Inc., an affiliate
of PFL, is be the principal underwriter of the Policies. AEGON USA Securities,
Inc. may enter into agreements with broker-dealers for the distribution of the
Policies. It is anticipated that during 1998, AFSG Securities Corporation,
another affiliate of PFL, will become the principal underwriter of the
Policies in place of AEGON USA Securities, Inc.

CUSTODY OF ASSETS

The assets of each of the Subaccounts of the Mutual Fund Account are held by
PFL. The assets of each of the Subaccounts of the Mutual Fund Account are
segregated and held separate and apart from the assets of the other
Subaccounts and from PFL's general account assets. PFL maintains records of
all purchases and redemptions of shares of the Underlying Funds held by each
of the Subaccounts. Additional protection for the assets of the Mutual Fund
Account is afforded by PFL's fidelity bond, presently in the amount of
$5,000,000, covering the acts of officers and employees of PFL.

10
<PAGE>

HISTORICAL PERFORMANCE DATA

MONEY MARKET YIELDS

PFL may from time to time disclose the current annualized yield of the Money
Market Subaccount for a 7-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of
securities and unrealized appreciation and depreciation) at the end of the 7-
day period in the value of a hypothetical account having a balance of 1 unit
at the beginning of the 7-day period, dividing such net change in account
value by the value of the account at the beginning of the period to determine
the base period return, and annualizing this quotient on a 365-day basis. The
net change in account value reflects (i) net income from the Portfolio
attributable to the hypothetical account; and (ii) charges and deductions
imposed under a Policy that are attributable to the hypothetical account. The
charges and deductions include the per unit charges for the hypothetical
account for (i) the Administrative Charges; and (ii) the Mortality and Expense
Risk Fee. Current Yield will be calculated according to the following formula:

Current Yield = ((NCS - ES)/UV) X (365/7)

Where:

NCS= The net change in the value of the Portfolio (exclusive of realized
gains and losses on the sale of securities and unrealized appreciation
and depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 Subaccount unit.

ES = Per unit expenses of the Subaccount for the 7-day period.

UV = The unit value on the first day of the 7-day period.

Because of the charges and deductions imposed under a Policy, the yield for
the Money Market Subaccount will be lower than the yield for the Money Market
Portfolio. The yield calculations do not reflect the effect of any premium
taxes or Surrender Charges that may be applicable to a particular Policy.
Surrender Charges range from 6% to 0% of the amount of Premium Payments
withdrawn based on the number of years since the Premium Payment was made.
However, Surrender Charges will not be assessed after the tenth Policy Year.

PFL may also disclose the effective yield of the Money Market Subaccount for
the same 7day period, determined on a compounded basis. The effective yield is
calculated by compounding the base period return according to the following
formula:

Effective Yield = (1 + ((NCS - ES)/UV))/365/7/-1

Where:

NCS= The net change in the value of the account (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 Subaccount unit.

ES = Per unit expenses of the Subaccount for the 7-day period.

UV = The unit value on the first day of the 7-day period.

The yield on amounts held in the Money Market Subaccount normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market Subaccount actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
Money Market Portfolio, the types and quality of portfolio securities held by
the Money Market Portfolio and its operating expenses.

11
<PAGE>

OTHER SUBACCOUNT YIELDS

PFL may from time to time advertise or disclose the current annualized yield
of one or more of the Subaccounts of the Mutual Fund Account (except the Money
Market Subaccount) for 30-day periods. The annualized yield of a Subaccount
refers to income generated by the Subaccount over a specific 30-day period.
Because the yield is annualized, the yield generated by a Subaccount during
the 30-day period is assumed to be generated each 30-day period over a 12-
month period. The yield is computed by: (i) dividing the net investment income
of the Subaccount less Subaccount expenses for the period, by (ii) the maximum
offering price per unit on the last day of the period times the daily average
number of units outstanding for the period, compounding that yield for a 6-
month period, and (iv) multiplying that result by 2. Expenses attributable to
the Subaccount include (i) the Administrative Charge and (ii) the Mortality
and Expense Risk Fee. The 30-day yield is calculated according to the
following formula:

Yield = 2 X ((((NI - ES)/(U X UV)) + 1)/6/ - 1)

Where:

NI = Net investment income of the Subaccount for the 30-day period
attributable to the Subaccount's unit.

ES = Expenses of the Subaccount for the 30-day period.

U = The average number of units outstanding.

UV = The unit value at the close (highest) of the last day in the 30-day
period.

Because of the charges and deductions imposed by the Mutual Fund Account,
the yield for a Subaccount of the Mutual Fund Account will be lower than the
yield for its corresponding Portfolio. The yield calculations do not reflect
the effect of any premium taxes or Surrender Charges that may be applicable to
a particular Policy. Surrender Charges range from 6% to 0% of the amount of
Premium Payments withdrawn based on the number of years since the Premium
Payment was made. However, Surrender Charges will not be assessed after the
tenth Policy Year.

The yield on amounts held in the Subaccounts of the Mutual Fund Account
normally will fluctuate over time. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. A Subaccount's actual yield is affected by the types and
quality of its investments and its operating expenses.

TOTAL RETURNS

PFL may from time to time also advertise or disclose total returns for one
or more of the Subaccounts of the Mutual Fund Account for various periods of
time. One of the periods of time will include the period measured from the
date the Subaccount commenced operations. When a Subaccount has been in
operation for 1, 5 and 10 years, respectively, the total return for these
periods will be provided. Total returns for other periods of time may from
time to time also be disclosed. Total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
to the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month end practicable, considering the
type and media of the communication and will be stated in the communication.

Total returns will be calculated using Subaccount Unit Values which PFL
calculates on each Business Day based on the performance of the Subaccount's
underlying Portfolio, and the deductions for the Mortality and Expense Risk
Fee and the Administrative Charges. Total return calculations will reflect the

12
<PAGE>

effect of Surrender Charges that may be applicable to a particular period. The
total return will then be calculated according to the following formula:

P(1 + T)/N/ = ERV

Where: T = The average annual total return net of Subaccount recurring
charges.

ERV = The ending redeemable value of the hypothetical account at the
end of the period.

P = A hypothetical initial payment of $1,000.

N = The number of years in the period.

OTHER PERFORMANCE DATA

PFL may from time to time also disclose average annual total returns in a
nonstandard format in conjunction with the standard format described above.
The non-standard format will be identical to the standard format except that
the Surrender Charge percentage will be assumed to be 0%.

PFL may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the Surrender
Charge percentage will be 0%.

CTR = (ERV/P) - 1

Where: CTR = The cumulative total return net of Subaccount recurring charges
for the period.

ERV = The ending redeemable value of the hypothetical investment at
the end of the period.

P = A hypothetical initial payment of $1,000.

All nonstandard performance data will only be advertised if the standard
performance data for the same period, as well as for the required period, is
also disclosed.

ADJUSTED HISTORICAL FUND PERFORMANCE DATA

From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Mutual Fund Account
commenced operations. Such performance information for the Subaccounts will be
calculated based on the performance of the various Portfolios and the
assumption that the Subaccounts were in existence for the same periods as
those indicated for the Portfolios, with the level of Policy charges that were
in effect at the inception of the Subaccounts.

LEGAL MATTERS

Legal advice relating to certain matters under the federal securities laws
applicable to the issue and sale of the Policies has been provided to PFL by
Sutherland, Asbill & Brennan LLP, of Washington D.C.

13
<PAGE>

INDEPENDENT AUDITORS

The Financial Statements of PFL as of December 31, 1996 and 1995, and for
each of the three years in the period ended December 31, 1996, included in
this Statement of Additional Information have been audited by Ernst & Young
LLP, Independent Auditors, Suite 3400, 801 Grand Avenue, Des Moines, Iowa
50309.

OTHER INFORMATION

A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus or this Statement of Additional
Information. Statements contained in the Prospectus and this Statement of
Additional Information concerning the content of the Policies and other legal
instruments are intended to be summaries. For a complete statement of the
terms of these documents, reference should be made to the instruments filed
with the Securities and Exchange Commission.

FINANCIAL STATEMENTS

The values of the interest of Owners in the Mutual Fund Account will be
affected solely by the investment results of the selected Subaccount(s). The
Financial Statements of PFL, which are included in this Statement of
Additional Information, should be considered only as bearing on the ability of
PFL to meet its obligations under the Policies. They should not be considered
as bearing on the investment performance of the assets held in the Mutual Fund
Account.

14
<PAGE>

PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

All required financial statements are included in Part B of this
Registration Statement.

(b) Exhibits:

(1) (a) Resolution of the Board of Directors of PFL Life Insurance
Company authorizing establishment of the Mutual Fund
Account. Note 1.

(2) Not Applicable.

(3) (a) Principal Distribution Agreement by and between PFL Life
Insurance Company on its own behalf and on the behalf of the
Mutual Fund Account, and AEGON USA Securities, Inc. Note 2.

(b) Form of Broker/Dealer Supervision and Sales Agreement by and
between AEGON USA Securities, Inc. and the Broker/Dealer.
Note 2.

(4) Form of Policy for the Retirement Income Builder Variable
Annuity. Note 2

(5) (a) Form of Application for the Retirement Income Builder
Variable Annuity. Note 3

(b) Form of Application for the First Union First Choice
Variable Annuity. Note 5.

(6) (a) Articles of Incorporation of PFL Life Insurance Company.
Note 1.

(b) ByLaws of PFL Life Insurance Company. Note 1.

(7) Not Applicable.

(8) (a) Participation Agreement by and between PFL Life Insurance
Company and Fidelity Distributors Corporation and Addendum
thereto. Note 2

(b) Participation Agreement between Variable Insurance Products
Fund III, Fidelity Distributors Corporation (Underwriter),
and PFL Life Insurance Company (Depositor). Note 3

(c) Participation Agreement by and among AIM Variable Insurance
Funds, Inc., PFL Life Insurance Company, and AEGON USA
Securities, Inc. Note 5

(d) Participation Agreement by and between PFL Life Insurance
Company, Evergreen Variable Trust and Evergreen Asset
Management Corp. Note 5

(e) Amended Exhibit A and Exhibit B to Participation Agreement
by and between PFL Life Insurance Company, Federated
Insurance Series and Federated Securities Corp. Note 5

(f) Participation Agreement among MFS Variable Insurance Trust,
PFL Life Insurance Company and Massachusetts Financial
Services Company. Note 4

(g) Participation Agreement among Oppenheimer Variable Account
Funds, OppenheimerFunds, Inc. and PFL Life Insurance
Company. Note 4

(h) Participation Agreement by and between Putnam Variable
Trust, Putnam Investment Management, Inc. and PFL Life
Insurance Company. Note 5

(9) Opinion and Consent of Counsel. Note 2

<PAGE>

(10) (a) Consent of Independent Auditors. Note 5
(b) Opinion and Consent of Actuary. Note 2

(11) Not applicable.

(12) Not applicable.

(13) Performance Data Calculations. Note 2

(14) Powers of Attorney. Note 1. (Patrick S. Baird, Craig D.
Vermie, William L. Busler, Patrick E. Falconio, Douglas C.
Kolsrud, Robert J. Kontz) Note 2. Brendy K. Clancy.

------------------------

Note 1. Filed with one Initial filing of this Form N-4 Registration
Statement (File No. 333-7509) on July 3, 1996.

Note 2. Filed with Pre-Effective Amendment No. 1 to this Form N-4
Registration Statement (File No. 333-7509) on December 6,
1996.

Note 3. Filed with Post-Effective Amendment No. 1 to this Form N-4
Registration Statement (File No. 333-7509) on April 29,
1997.

Note 4. Filed herewith.

Note 5. To be filed by Amendment.
<PAGE>

Item 25. Directors and Officers of the Depositor

Principal Positions
Name and and Offices with
Business Address Depositor
- ---------------- ---------

William L. Busler Director, Chairman of the Board and
4333 Edgewood Road N.E. President
Cedar Rapids, Iowa 52499-0001

Patrick S. Baird Director, Senior Vice President and
4333 Edgewood Road N.E. Chief Financial Officer
Cedar Rapids, Iowa 52499-0001

Craig D. Vermie Director, Vice President, Secretary and
4333 Edgewood Road N.E. Corporate Counsel
Cedar Rapids, Iowa 52499-0001

Douglas C. Kolsrud Director, Vice President and
4333 Edgewood Road N.E. Corporate Actuary
Cedar Rapids, Iowa 52499-0001

Patrick E. Falconio Director, Senior Vice President and
4333 Edgewood Road N.E. Chief Investment Officer
Cedar Rapids, Iowa 52499-0001

Robert J. Kontz Vice President and
4333 Edgewood Road N.E. Controller
Cedar Rapids, Iowa 52499-0001

Brenda K. Clancy Vice President, Treasurer and Chief
4333 Edgewood Road N.E. Financial Officer
Cedar Rapids, Iowa 52499-0001

Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
<PAGE>

<TABLE>

---------------------------
VERENIGING AEGON
NETHERLANDS MEMBERSHIP
ASSOCIATION
---------------------------
+
53.00%
---------------------------
AEGON N.V.
NETHERLANDS CORPORATION
----------------------------
+
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ + + +
100% 100% 100% 100%
---------------------- ------------------------ ------------------------ -----------------------------
AEGON Netherland N.V. AEGON INTERNATIONAL N.V. AEGON NEWAK HOLDING S.V. GRONINGER FINANCIERINGEN B.V.
Netherlands Corporation Netherlands Corporation Netherlands Corporation Netherlands Corporation
---------------------- ------------------------ ------------------------ -----------------------------
+
DE
-------------------
VOTING TRUST
Trustees: K.J. Storm
Donald J. Sheperd
H.B. Van Wild
Dennis Hersch
-------------------
+
DE 100%
-------------------
AEGON U.S. HOLDING
CORPORATION
-------------------
+ +
++++++++++++++++++++++++++++++++++++ +
+ IA 100%(1)
+ -------------------
+ AEGON USA, INC.
+ -------------------
+ +
+ +++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ + +
+ MD 100% MD
+ ----------------- ------------
+ FIRST AUSA LIFE AUSA HOLDING
+ INSURANCE COMPANY COMPANY
+ ----------------- ------------
+ + +
+ + ++++++++++++++++++++++++++++++++++++++++++++++
+ + + ++
+ + MD 100% IA 100% DE
+ + -------------------- ------------- ++ ----------------------
+ + MONUMENTAL GENERAL AUSA FINACIAL +++ DIVERSIFIED INVESTMENT
+ + INSURANCE GROUP, INC ++ MARKETS, INC. ++ ADVISORS, INC.
+ + -------------------- + ------------- ++ ----------------------
NJ 100% + NY + MD 100% KS 100% + ++
- ----------------- + ------------------- + ----------------- ------------------- + ++
SHORT HILLS + AUSA LIFE INSURANCE +++ MONUMENTAL LIFE Trip Mate Insurance + IA 100% ++ DE 100%
Agency, Inc. + ----------- ++ ---------------------
------------------- + UNIVERSAL ++ DIVERSIFIED INVESTORS
MANAGEMENT COMPANY+ COMPANY, INC + INSURANCE COMPANY++ MD 100% + BENEFITS +++++++ SECURITIES CORP.
- ----------------- + ------------------- + ----------------- + ------------------- + CORPORATION ++ --------------------
+ + + MONUMENTAL GENERAL + ++
+ + + ADMINISTRATORS, INC.+ ----------- ++
+ + MD 100% + ------------------- + ++ IA 100%
NY + ----------------- + ----------------- + + IA 100% ++ ----------------
- ---------------- + LIFE INVESTORS + MONUMENTAL GENERAL+ + + ---------- ++++++++ AEGON USA
CORPA REINSURANCE + INSURANCE COMPANY + CASUALTY COMPANY + + INVESTORS ++ +++ SECURITIES, INC.
COMPANY ++ ++ OF AMERICA ++ ----------------- + MD 100% + WARRANTY ++ + ----------------
- ---------------- ++ ----------------- + MD 100% + ----------------- + OF AMERICA, ++ +
++ + --------------- + EXECUTIVE MANAGE- + INC. ++ +
IN 100% ++ ------------------- + UNITED FINACIAL + MENT AND CONSULT- + ---------- ++ + MD
- ---------------- +++BANKERS UNITED LIFE + SERVICES, INC. +++ ANT SERVICES, INC.+ + IA 100% ++ + -----------------
AEGON MANAGEMENT ++ ASSURANCE COMPANY +++ --------------- + ----------------- + ------------- ++ +++ AEGON USA MANAGED
COMPANY + ------------------- + + MD 100% + MASSACHUSETTS ++ PORTFOLIOS INC.
- ---------------- + + AZ (*) + ------------------ FIDELTY TRUST +++ -----------------
+ ----------------- + ---------------- + MONUMENTAL GENERAL+
DE 100% + PFL LIFE ++++ BANKERS FINACIAL + MASS MARKETING INC.
- ----------------- + INSURANCE COMPANY + LIFE INSURANCE +++ ------------------- COMPANY ++
RCC NORTH AMERICA + ----------------- + COMPANY + ------------ ++
INC. ++ AZ 100% VOTING + ---------------- + DE 100% ++ IA 100%
- ----------------- + CHAIRMAN MD 100% + ------------------ ++ ------------------
---------------------+ -------------- + MONEY SERVICES, INC.++++ AMERICAN FORUM FOR
SOUTHWEST EQUITY LIFE+ THE WHITESTONE + ------------------- ++ FISCAL FITNESS, INC.
INSURANCE COMPANY+++ CORPORATION +++++ CA 100% -------------------
---------------------+ -------------- ------------------- ++ IN 100%
AZ 100% Voting Chairman (2) + IA 100% ZAHORIK COMPANY INC+++ --------------
----------------------- + ------------------ --------------------++ SUPPLEMENTAL
IOWA FIDELITY LIFE +++ CADET HOLDING CORP + ++ INSURANCE
INSURANCE COMPANY + ------------------ AL 100% ++ DIVISION INC.
----------------------- + ---------- +++++++ --------------
OH 100% + ZCI, INC. ++ MI 100%
--------------------- --------- +++++++ ------------------
WESTERN RESERVE LIFE + +++++++++++++++++++++++++++++++++++++ CREDITOR RESOURCES
++++ ASSURANCE CO. OF OHIO+++ DE + ++ INC.
+ --------------------- --------------- + ++ ------------------
+ --------------- INTERSECURITIES+++++++++++++ ++ +
++++++++ WRL SERIES FUND ++++++ INC. +++++ + ++ CN 100%
INC. + --------------- + + ++ -------------------
---------------- + + + ++ CRC CREDITOR
WRL INVESTMENT + CA 100% + + MN 100% RESOURCES CANADIAN
SERVICES, INC. + ---------------- + + ------------------------ ++ DEALER NETWORK, INC.
---------------- + ISI INSURANCE + + AEGON FINANCIAL ++++++++++ -------------------
WRL INVESTMENT + AGENCY INC. AND+++++ + SERVICES GROUP, INC. ++
MANAGEMENT, INC. + ITS SUBSIDIARIES + + ------------------------ ++ IA 100%
---------------- + ---------------- + + DE 100% ++ --------------------
MA + MN 100% + + ---------------------- ++++ AEGON USA INVEST-
--------- + ------------------- + + AEGON ASSET MANAGEMENT+++++++++ MENT MANAGEMENT, INC.
IDEX FUND++++++ ASSOCIATED MARINER ++ + SERVICES, INC. + ---------------------
--------- + FINANCIAL GROUP, INC.+++ + ---------------------- + IA 100%(12)
+ ------------------- + + + -----------------
MA + MI 100% + +++++ AEGON USA REALTY
----------- + ----------------- + + ++++ ADVISORS, INC.
IDEX II +++++++ MARINER FINANCIAL+++++ + + -----------------
SERIES FUND + SERVICES, INC. + + + DE 100%
----------- + ----------------- + + + -----------
MA + + + +++++++ QUANTRA
----------- + MI 100% + + + CORPORATION
IDEX FUND 3 +++++ ------------------ + + + -----------
----------- + MARINER'S PLANNING + + + +
+ CORPORATION + + + DE 100%
+ ------------------ + + + ----------------
+ + + + QUANTRA SOFTWARE
+ MI 100%(10) + + + CORPORATION
+ ------------------- + + + ----------------
+ ASSOCIATED MARINER + + + IA 100%
+ AGENCY INC. AND ITS++++ + + ---------------
+ SUBSIDIARIES + + ++++LANDAUER REALTY
+ ------------------- + + + ADVISORS, INC.
+ MI 100% + + + ---------------
+ ---------------- + + + DE 100%
+ MARINER MORTGAGE + + + ----------------
+ CORP. ++++++ + ++++++ LANDAUER
+ ---------------- + + ASSOCIATES, INC.
+ + + ----------------
+ FL 100% + + IA 100%
+ -------------- + + ----------------
+ IDEX INVESTOR +++++++++++++ ++++++ AEGON USA REALTY
+++++SERVICES, INC. + + MANAGEMENT, INC
+ -------------- + + ----------------
+ DE 50%(7) + + IA 100%(11)
+ --------------- + + ------------------
+ IDEX MANAGEMENT,+++++++++++ +++++ REALTY INFORMATION
++++ INC. SYSTEMS, INC.
--------------- ------------------
IA (4)
----------------
USP REAL ESTATE++++
INVESTMENT TRUST +
---------------- +
(5) +
----------------- +
CEDAR INCOME FUND+++
LTD.
-----------------
</TABLE>

See Footnotes Page 2
Effective January 1, 1997

<PAGE>

Page 2

Footnotes

(1) 150,000 shares of Class B Non-Voting Common Stock owned by Ennia
Reinsurance Antilles N.V.

(2) Ordinary common stock is allowed 60% of total cumulative vote.
Participating common stock is allowed 40% of total cumulative vote.

(3) Denotes relationships as advisor, administrator, sponsor, underwriter or
general partner.

(4) First AUSA Life Insurance Company owns 12.89%. PFL Life Insurance Company
owns 13.11%. Bankers United Life Assurance Company owns 4.86%.

(5) PFL Life Insurance Company owns 16.73%. Bankers United Life Assurance
Company owns 3.77%. Life Investors Insurance Company of America owns
3.38%. AEGON USA Realty Advisors, Inc. owns 1.97%. First AUSA Life
Insurance Company owns .18%.

(6) Class B Common stock is allocated 75% of total cumulative vote. Class A
Common stock is allocated 25% of total cumulative vote.

(7) 50% of Idex Management, Inc. is owned by Janus Capital Corporation, a
Colorado corporation.

(8) RCC Group: FGH Realty Credit Corp., FGH USA, Inc., RCC North America,
Inc., FGH USA Realty, Inc., FGH Eastern Region, Inc., FGH Appraisal
Services, Inc., FGH Western Region, Inc., ALH Properties, Inc., First FGP,
Inc., Second FGP, Inc., Third FGP, Inc., Fourth FGP, Inc., Fifth FGP, Inc.,
Sixth FGP, Inc., Seventh FGP, Inc., FGP Midwood, Inc., FGP Parsippany,
Inc., ALH Properties Two, Inc., ALH Properties Three, Inc., ALH Properties
Four, Inc., ALH Properties Five, Inc., ALH Properties Six, Inc., ALH
Properties Seven, Inc., ALH Properties Eight, Inc., ALH Properties Nine,
Inc., ALH Properties Ten, Inc., ALH Properties Eleven, Inc., ALH Properties
Twelve, Inc., ALH Properties Thirteen, Inc., ALH Properties Fourteen, Inc.,
ALH Properties Fifteen, Inc., ALH Properties Sixteen, Inc., ALH Properties
Seventeen, Inc., FGP Keene, Inc., FGP Broadway, Inc., FGP West Street,
Inc., FGP West Street Two, Inc., FGP 90 West Street, Inc., FGP Branford,
Inc., FGP Franklin, Inc., FGP Bala, Inc., FGP Twenty-One, Inc., FGP Twenty-
Two, Inc., FGP Twenty-Five, Inc., FGP Schenectady, Inc., FGP Country
Estates, Inc., FGP Eleventh Street, Inc., FGP 109th Street, Inc., FGP
Seventy-Second Street, Inc., FGP Gaithersburg, Inc., FGP West 32nd Street,
Inc., FGP Beekman, Inc., Dutch Hotel Management, Inc., FGP Landmark, Inc.,
FGP Islandia, Inc., FGP Bridgeport, Inc., FGP Varick, Inc., The RCC Group,
Inc., FGP Union Gardens, Inc., FGP Burkewood, Inc., FGP Stamford, Inc., FGP
Meadow Lane, Inc., FGP Main Street, Inc., FGP Property Services, Inc., FGP
Merrick, Inc., FGP West 14th Street, Inc., FGP 106 Fulton, Inc., FGP Bush

<PAGE>

Terminal, Inc., FGP Northern Boulevard, Inc., FGP Seventh Avenue, Inc., FGP
Parsons, Inc., FGP City Hall, Inc., FGP West 88th Street, Inc., FGP
Lincoln, Inc., FGP Emerson, Inc., FGP Brooke, Inc., FGP 86th Street, Inc.,
FGP Edison, Inc., FGP Rider Avenue, Inc., FGP Remsen, Inc., FGP Rockbeach,
Inc., FGP Carter Drive, Inc., FGP Centereach, Inc., FGP Colonial Plaza,
Inc., FGP Coram, Inc., FGP Herald Center, Inc., Eighty Six Yorkville, Inc.

(9) Subsidiaries of ISI Insurance Agency, Inc. are: ISI Insurance Agency of
Ohio, Inc., ISI Insurance Agency of Massachusetts, Inc., and ISI Insurance
Agency of Texas, Inc.

(10) Subsidiaries of Associated Mariner Agency, Inc. are Associated Mariner
Agency of Hawaii, Inc., Associated Mariner Insurance Agency of
Massachusetts, Inc., Associated Mariner Agency Ohio, Inc., Associated
Mariner Agency Texas, Inc., and Associated Mariner Agency New Mexico, Inc.

(11) Owns 50% interest in DJA Partners (a.k.a. "Teleres"), a Delaware general
partnership. Also owns 10% interest in Datalytics, Inc., an Ohio
corporation.

(12) Owns 49% of Quantra Consulting, Inc., a Delaware corporation.

*Includes qualifying shares for Directors.

<TABLE>
<CAPTION>
Percent of
Jurisdiction of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>

AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation

AUSA Holding Company Maryland 100% AEGON USA, Holding company
Inc.

Monumental General Maryland 100% AUSA Holding Co. Holding company
Insurance Group, Inc.

Monumental General Maryland 100% Monumental General Provides management srvcs.
Administrators, Inc. Insurance Group Inc. to unaffiliated third party
administrator

Executive Management and Maryland 100% Monumental General Provides actuarial consulting
Consultant Services, Inc. Administrators, Inc. services

Monumental General Mass Maryland 100% Monumental General Marketing arm for sale of
Marketing, Inc. Insurance Group, Inc. mass marketed insurance
coverages

Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.

Diversified Investors Delaware 100% Diversified
Securities Corp. Investment Advsiors, Inc. Broker-Dealer

AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer

American Forum For Fiscal Iowa 100% AUSA Holding Co. Marketing
Fitness, Inc.

Supplemental Ins. Tennessee 100% AUSA Holding Co. Insurance
Division, Inc.

Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance

CRC Creditor Resources Canada 100% Creditor Resource s, Insurance agency
Canadian Dealer Network Inc. Inc

AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.

AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment services

Quantra Corporation Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales

Quantra Software Delaware 100% Quantra Manufacture and sell
Corporation Corporation mortgage loan and security
management software

Landauer Realty Advisors, Iowa 100% AEGON USA Realty Real estate counseling
Inc. Advisors, Inc.

Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.

Realty Information Iowa 100% AEGON USA Realty Information Systems for
Systems, Inc. Advisors, Inc. real estate investment
management

AEGON USA Realty Iowa 100% AEGON USA Real estate management
Management, Inc Realty Advisors, Inc.

USP Real Estate Investment Iowa 21.89% First AUSA Life Real estate investment trust
Trust Ins. Co.
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.

Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Real estate investment trust
Ins. Co.
3.77% Bankers United
Life Assurance Company
3.38% Life Investors
Co. of America
1.97% AEGON USA
Realty Advisors, Inc.
.18% First AUSA
Life Ins. Co.

AUSA Financial Markets, Iowa 100% AUSA Holding Co. Marketing
Inc.

Universal Benefits Iowa 100% AUSA Holding Co. Third party administrator
Corporation

Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts

Massachusetts Fidelity Iowa 100% AUSA Holding Co. Trust company
Trust Co.

Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies

Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer

ZCI, Inc. Alabama 100% Zahorik Company, Insurance agency
Inc.

AUSA Institutional Minnesota 100% AUSA Holding Co. Insurance agency
Marketing Group, Inc.

AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment advisor
Services, Inc.

Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer

ISI Insurance Agency, Inc. California 100% Intersecurities, Insurance agency
Inc.

ISI Insurance Agency Ohio 100% ISI Insurance Insurance agency
of Ohio, Inc. Agency, Inc.

ISI Insurance Agency Texas 100% ISI Insurance Insurance agency
of Texas, Inc. Agency, Inc.

ISI Insurance Agency Massachusetts 100% ISI Insurance Insurance agency
of Massachusetts, Inc. Agency Inc.

Associated Mariner Michigan 100% Intersecurities, Holding co./management
Financial Group, Inc. - Inc. services
Holding company

Mariner Financial Michigan 100% Associated Broker/Dealer
Services, Inc. Mariner Financial
Group, Inc.

Mariner Planning Michigan 100% Mariner Financial Financial planning
Corporation Services, Inc.

Associated Mariner Michigan 100% Associated Insurance agency
Agency, Inc. Mariner Financial Group,
Inc.

Mariner Agency of Hawaii, Hawaii 100% Associated Insurance agency
Inc. Mariner Agency, Inc.

Associated Mariner Ins. Massachusetts 100% Associated Insurance agency
Agency of Massachusetts, Mariner Agency, Inc.
Inc.

Associated Mariner Agency Ohio 100% Associated Insurance agency
Ohio, Inc. Mariner Agency, Inc.

Associated Mariner Agency Texas 100% Associated Insurance agency
Texas, Inc. Mariner Agency, Inc.

Associated Mariner Agency New Mexico 100% Associated Insurance agency
New Mexico, Inc. Mariner Agency, Inc.

Mariner Mortgage Corp. Michigan 100% Associated Mortgage origination
Mariner Financial Group,
Inc.

Idex Investor Services, Florida 100% AUSA Holding Co. Shareholder services
Inc.

Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital Corp.

IDEX II Series Fund Massachusetts Various Mutual fund

IDEX Fund Massachusetts Various Mutual fund

IDEX Fund 3 Massachusetts Various Mutual fund

First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Co.

AUSA Life Insurance Co. New York 100% First AUSA Life Insurance
Inc. Insurance Company

Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America

Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America

PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance

Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.

Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.

Western Reserve Life Assurance Ohio 100% First AUSA Life Ins. Co. Insurance
Co. of Ohio

WRL Series Fund, Inc. Maryland Various Mutual fund

WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund

WRL Investment Florida 100% Western Reserve Life Registered investment advisor
Management, Inc. Assurance Co. of Ohio

Monumental Life Insurance Co. Maryland 100% First AUSA Life Ins. Co. Insurance

Monumental General Casualty Co. Maryland 100% Monumental Life Ins. Co. Insurance

United Financial Services, Inc. Maryland 100% Monumental Life Ins. Co. General agency

Bankers Financial Life Ins. Co. Arizona 100% Monumental Life Insurance
Insurance Company

The Whitestone Corporation Maryland 100% Monumental Life Ins. Co. Insurance agency

Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company

Providian Corporation Delaware 100% AEGON N.V. Holding company

Providian Series Trust Massachusetts N/A Mutual fund

Providian Agency Group, Inc. Kentucky 100% Providian Corp. Provider of services to ins.
cos.

Benefit Plans, Inc. Delaware 100% Providian Corp. TPA for Peoples Security Life
Insurance Company

Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent

Providian Assignment Corp. Kentucky 100% Providian Corp. Administrator of structured
settlements

Providian Financial Services, Inc. Pennsylvania 100% Providian Corp. Financial services

Providian Securities Corporation Pennsylvania 100% Providian Financial Broker-Dealer
Services, Inc.

Wannalancit Corp. Massachusetts 100% Providian Corp. Real estate holding company

Providian Investment Delaware 100% Providian Corp. Registered investment advisor
Advisors, Inc.

Providian Capital Delaware 100% Providian Corp. Provider of investment,
Management, Inc. marketing and admin. services
to ins. cos.

Providian Capital Management Delaware 100% Providian Capital Real estate and mortgage
Real Estate Services, Inc. Management, Inc. holding company

Capital Real Estate Delaware 100% Providian Corp. Furniture and equiment lessor
Development Corporation

Capital General Development Delaware 100% Providian Corp. Holding company
Corporation

Commonwealth Life Kentucky 100% Capital General Insurance company
Insurance Company Development Corporation

Agency Holding I, Inc. Delaware 100% Commonwealth Life Investment subsidiary
Insurance Company

Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc. Investment subsidiary

Commonwealth Agency, Inc. Kentucky 100% Commonwealth Life Special purpose subsidiary
Insurance Company

Camden Asset Management L.P. California 51% Commonwealth Life Investment entity
Insurance Company

Peoples Security Life North Carolina 100% Capital General Insurance company
Insurance Company Development Corporation

Ammest Realty Corporation Texas 100% Peoples Security Life Special purpose subsidiary
Insurance Company

Agency Holding II, Inc. Delaware 100% Peoples Investment
Security Life subsidiary
Insurance
Company

Agency Investments II, Inc. Delaware 100% Agency Investment
Holding II, Inc. subsidiary

Agency Holding III, Inc. Delaware 100% Peoples Investment
Security Life subsidiary
Insurance
Company

Agency Investments III, Inc. Delaware 100% Agency Investment
Holding III, subsidiary
Inc.

JMH Operating Company, Inc. Mississippi 100% Peoples Real estate
Security Life holdings
Insurance
Company

Capital Security Life Ins. North Carolina 100% Capital Insurance company
Co. General
Development
Corporation

Independence Automobile Florida 100% Capital Automobile Club
Association, Inc. Security
Life Insurance
Company

Independence Automobile Georgia 100% Capital Automobile Club
Club, Inc. Security
Life Insurance
Company

Capital 200 Block Delaware 100% Providian Real estate
Corporation Corp. holdings

Capital Broadway Kentucky 100% Providian Real estate
Corporation Corp. holdings

Southlife, Inc. Tennessee 100% Providian Investment
Corp. subsidiary

Providian Insurance Pennsylvania 100% Providian Provider of
Agency, Inc. Corp. management
support services

National Home Life Pennsylvania 100% Providian Special-purpose
Corporation Insurance subsidiary
Agency, Inc.

Compass Rose Development Pennsylvania 100% Providian Special-purpose
Corporation Insurance subsidiary
Agency, Inc.

Association Consultants, Illinois 100% Providian TPA
Inc. Insurance license-holder
Agency, Inc.

Valley Forge Associates, Pennsylvania 100% Providian Furniture &
Inc. Insurance equipment lessor
Agency, Inc.

Veterans Benefits Plans, Pennsylvania 100% Providian Administator of
Inc. Insurance group
Agency, Inc. insurance
programs

Veterans Insurance Delaware 100% Providian Special-purpose
Services, Inc. Insurance subsidiary
Agency, Inc.

Financial Planning Dist. Columbia 100% Providian Special-purpose
Services, Inc. Insurance subsidiary
Agency, Inc.

Providian Auto and Home Missouri 100% Providian Insurance company
Insurance Company Corp.

Academy Insurance Group, Delaware 100% Providian Holding company
Inc. Auto and
Home Insurance
Company

Academy Life Insurance Co. Missouri 100% Academy Insurance company
Insurance
Group, Inc.

Pension Life Insurance New Jersey 100% Academy Insurance company
Company of America Insurance
Group, Inc.

Academy Services, Inc. Delaware 100% Academy Special-purpose
Insurance subsidiary
Group, Inc.

Ammest Development Corp. Kansas 100% Academy Special-purpose
Inc. Insurance subsidiary
Group, Inc.

Ammest Insurance Agency, California 100% Academy General agent
Inc. Insurance
Group, Inc.

Ammest Massachusetts Massachusetts 100% Academy Special-purpose
Insurance Agency, Inc. Insurance subsidiary
Group, Inc.

Ammest Realty, Inc. Pennsylvania 100% Academy Special-purpose
Insurance subsidiary
Group, Inc.

AMPAC, Inc. Texas 100% Academy Managing general
Insurance agent
Group, Inc.

AMPAC Insurance Agency, Inc. Pennsylvania 100% Academy Special-purpose
Insurance subsidiary
Group, Inc.

Data/Mark Services, Inc. Delaware 100% Academy Provider of
Insurance mgmt. services
Group, Inc.

Force Financial Group, Inc. Delaware 100% Academy Special-purpose
Insurance subsidiary
Group, Inc.

Force Financial Services, Massachusetts 100% Force Fin. Special-purpose
Inc. Group, Inc. subsidiary

Military Associates, Inc. Pennsylvania 100% Academy Special-purpose
Insurance subsidiary
Group, Inc.

NCOA Motor Club, Inc. Georgia 100% Academy Automobile club
Insurance
Group, Inc.

NCOAA Management Company Texas 100% Academy Special-purpose
Insurance subsidiary
Group, Inc.

Unicom Administrative Pennsylvania 100% Academy Provider of
Services, Inc. Insurance admin. services
Group, Inc.

Unicom Administrative Germany 100% Unicom Provider of
Services, GmbH Administrative admin. servcies
Services, Inc.

Providian Property and Kentucky 100% Providian Insurance company
Casualty Insurance Auto and
Company Home Insurance
Company

Providian Fire Insurance Kentucky 100% Providian Insurance company
Co. Property
and Casualty
Insurance Co.

Capital Liberty, L.P. Delaware 78% Holding Company
Commonwealth
Life
Insurance
Company
19% Peoples
Security Life
Insurance
Company
3% Providian
Corp.

Providian LLC Turks & 100% Providian Special-purpose
Caicos Islands Corp. subsidiary

Providian Life and Health Missouri 4% Providian Insurance company
Insurance Company Corp.
15% Peoples
Security Life
Insurance
Company
20% Capital
Liberty, L.P.
61%
Commonwealth
Life
Insurance
Company

Veterans Life Insurance Co. Illinois 100% Providian Insurance company
Life and
Health
Insurance
Company

Providian Services, Inc. Pennsylvania 100% Veterans Special-purpose
Life Ins. Co. subsidiary

First Providian Life and New York 100% Veterans Insurance Company
Health Insurance Company Life Ins. Co.
</TABLE>
<PAGE>

Item 27. Number of Contract Owners

As of December 31, 1996, there were 0 Owners of the Policies.

Item 28. Indemnification

The Iowa Code (Sections 490.850 et. seq.) provides for permissive
--------
indemnification in certain situations, mandatory indemnification in other
situations, and prohibits indemnification in certain situations. The Code also
specifies procedures for determining when indemnification payments can be made.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person in connection with the
securities being registered), the Depositor will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>

Item 29. Principal Underwriters

AEGON USA Securities, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001

The directors and officers of
AEGON USA Securities, Inc.
are as follows:

<TABLE>
<S> <C>
Patrick E. Falconio Lisa Wachendorf
Director Vice President

William L. Busler Linda Gilmer
Director Vice President and Treasurer

Brenda K. Clancy Donna M. Craft
Director Vice President

Robert A. Thelen Frank A. Camp
Senior Vice President Secretary

Lorri E. Mehaffey Shelley Davenport
President Assistant Vice President

Billy J. Berger
Vice President and Assistant Treasurer
</TABLE>

- --------------------

The principal business address of each person listed is AEGON USA Securities,
Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001.

Commissions and Other Compensation Received by Principal Underwriter.
- --------------------------------------------------------------------

AEGON USA Securities, Inc. and/or the broker-dealers received $0 from the
Registrant during the last fiscal year for its services in distributing the
Policies. No other commission or compensation was received by the principal
underwriter, directly or indirectly, from the Registrant during the fiscal year.

AEGON USA Securities, Inc. also serves as the principal underwriter for the PFL
Endeavor Variable Annuity Account, the PFL Endeavor Platinum Variable Annuity
Account, and the AUSA Endeavor Variable Annuity Account. These accounts are
separate accounts of PFL Life Insurance Company or AUSA Life Insurance Company,
Inc., life insurance company affiliates of AEGON USA Securities, Inc.

Item 30. Location of Accounts and Records

The records required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained by
PFL Life Insurance Company at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa
52499-0001.
<PAGE>

Item 31. Management Services.

All management Contracts are discussed in Part A or Part B.

Item 32. Undertakings

(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old for so long as Premiums under the Policy may be
accepted.

(b) Registrant undertakes that it will include either (i) a postcard or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information or
(ii) a space in the Policy application that an applicant can check to
request a Statement of Additional Information.

(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to PFL at the address or phone number
listed in the Prospectus.

(d) PFL Life Insurance Company hereby represents that the fees and charges
deducted under the policies, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the
risks assumed by PFL Life Insurance Company.

Section 403(b) Representations
- ------------------------------

PFL represents that it is relying on a no-action letter dated November 28, 1988,
to the American Council of Life Insurance (Ref. No. IP-6-88), regarding Sections
22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, in connection
with redeemability restrictions on Section 403(b) Policies, and that paragraphs
numbered (1) through (4) of that letter will be complied with.

<PAGE>

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Cedar Rapids and State of Iowa, on this 22nd day of
December, 1997.

PFL RETIREMENT BUILDER
VARIABLE ANNUITY ACCOUNT

PFL LIFE INSURANCE COMPANY
Depositor

*
---------------------------------
William L. Busler
President

As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.

Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
* Director December 22, 1997
- -------------------------------
Patrick S. Baird

/s/ Craig D. Vermie Director December 22, 1997
- -------------------------------
Craig D. Vermie

* Director December 22, 1997
- ------------------------------- (Principal Executive Officer)
William L. Busler

* Director December 22, 1997
- -------------------------------
Patrick E. Falconio

* Director December 22, 1997
- -------------------------------
Douglas C. Kolsrud

* Vice President and December 22, 1997
- ------------------------------- Corporate Controller
Robert J. Kontz

/s/ Brenda K. Clancy Treasurer December 22, 1997
- -------------------------------
Brenda K. Clancy

</TABLE>

* By: Craig D. Vermie and Brenda K. Clancy, attorneys in fact.
<PAGE>

EXHIBIT INDEX
-------------

Exhibit No. Description of Exhibit Page No.*
- ----------- ---------------------- --------
<S> <C> <C>

(8)(f) Participation Agreement among MFS Variable Insurance
Trust, PFL Life Insurance Company and Massachusetts
Financial Services Company.

(8)(g) Participation Agreement among Oppenheimer Variable
Account Funds, OppenheimerFunds, Inc. and PFL Life
Insurance Company.
</TABLE>

- -------------------------------
* Page numbers included only in manually executed original.
<PAGE>

Registration No.
333-7509

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,D.C. 20549

----------------

EXHIBITS

FORM N-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

FOR

PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT

----------------

<PAGE>

EXHIBIT (8)(f)
--------------

PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
PFL LIFE INSURANCE COMPANY
AND MASSACHUSETTS FINANCIAL SERVICES COMPANY.

<PAGE>

PARTICIPATION AGREEMENT

AMONG

MFS VARIABLE INSURANCE TRUST,

PFL LIFE INSURANCE COMPANY

AND

MASSACHUSETTS FINANCIAL SERVICES COMPANY

THIS AGREEMENT, made and entered into this 24th day of November 1997,
by and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), PFL LIFE INSURANCE COMPANY, an IOWA STOCK LIFE INSURANCE COMPANY (the
"Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").

WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");

WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;

WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");

WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;

WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;

WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);

WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);

WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");

WHEREAS, AEGON USA SECURITIES, INC., the underwriter for the individual
variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
<PAGE>

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:

ARTICLE I. SALE OF TRUST SHARES
--------------------

1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
--------
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.

1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.

1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles III and VII of this
Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.

1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy owners on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m.
New York time on the next following Business Day.

1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.

-2-
<PAGE>

1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.

1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.

1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Trust shall notify the Company of the number of Shares so issued as
payment of such dividends and distributions.

1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.

ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------

2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established
the Account as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Policies, will
register the Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statements under the 1933 Act
for the Policies and the registration statements under the 1940 Act for
the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only
if and to the extent deemed necessary by the Company.

2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contracts under applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future.

-3-
<PAGE>

2.3. The Company represents and warrants that AEGON USA SECURITIES,
INC. (and its assignees), the underwriter for the individual variable
annuity and the variable life policies, is a member in good standing of
the NASD and is a registered broker-dealer with the SEC. The Company
represents and warrants that the Company and AEGON USA SECURITIES, INC.
(and its assignees) will sell and distribute such policies in
accordance in all material respects with all applicable state and
federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.

2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.

2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.

2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.

2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state securities laws
other than the securities laws of The Commonwealth of Massachusetts and
that it is exempt from registration as an investment adviser under the
securities laws of The Commonwealth of Massachusetts.

2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").

ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
---------------------------------------

3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus

-4-
<PAGE>

portion of such document for distribution to owners of existing
Policies funded by the Shares and the Company to bear the expenses of
printing the portion of such document relating to the Accounts;
provided, however, that the Company shall bear all printing expenses of
--------
such combined documents where used for distribution to prospective
purchasers or to owners of existing Policies not funded by the Shares.
In the event that the Company requests that the Trust or its designee
provides the Trust's prospectus in a "camera ready" or diskette format,
the Trust shall be responsible for providing the prospectus in the
format in which it or MFS is accustomed to formatting prospectuses and
shall bear the expense of providing the prospectus in such format
(e.g., typesetting expenses), and the Company shall bear the expense of
----
adjusting or changing the format to conform with any of its
prospectuses.

3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.

3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.

3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.

3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.

3.6. If and to the extent required by law, the Company shall:

(a) solicit voting instructions from Policy owners;

(b) vote the Shares in accordance with instructions
received from Policy owners; and

(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;

so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust and
MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.

-5-
<PAGE>

ARTICLE IV. SALES MATERIAL AND INFORMATION
------------------------------

4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.

4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy statements for the Trust, or
in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission of
the Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies (i.e., information that
----
is not intended for distribution to Policy owners or prospective Policy
owners) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials.

4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.

4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.

4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the Trust
shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.

-6-
<PAGE>

4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.

4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited
to advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.

ARTICLE V. FEES AND EXPENSES
-----------------

5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.

5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.

5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.

5.4 MFS will quarterly reimburse the Company certain of the
administrative costs and expenses incurred by the Company as a result
of operations necessitated by the beneficial ownership by Policy owners
of shares of the Portfolios of the Trust, equal to 0.20% per annum of
the aggregate net assets of the Trust attributable to such Policy
owners. In no event shall such fee be paid by the Trust, its
shareholders or by the Policy holders.

-7-
<PAGE>

ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
---------------------------------------

6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if
those requirements applied directly to each such Portfolio.

6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).

ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
----------------------------

7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.

7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable
to some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Trust, or submitting to a
vote of all affected contract owners whether to withdraw assets from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.

7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
-------- -------
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.

-8-
<PAGE>

7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with
Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2,
7.3 and 7.4 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.

ARTICLE VIII. INDEMNIFICATION
---------------

8.1. Indemnification by the Company
------------------------------

The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:

(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Policies or contained in the Policies or sales
literature or other promotional material for the
Policies (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading provided that this agreement to indemnify
--------
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Company
or its designee by or on behalf of the Trust or MFS
for use in the registration statement, prospectus or
statement of additional information for the Policies
or in the Policies or sales literature or other
promotional material (or any amendment or supplement)
or otherwise for use in connection with the sale of
the Policies or Shares; or

(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material of the Trust not supplied by the Company or
its designee, or persons under its control and on
which the Company has reasonably relied) or wrongful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Policies or Shares; or

(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Trust, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Trust by or on
behalf of the Company; or

-9-
<PAGE>

(d) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company; or

(e) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement;

as limited by and in accordance with the provisions of this Article
VIII.

8.2. Indemnification by the Trust
----------------------------

The Trust agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:

(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the Trust
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Trust,
MFS, the Underwriter or their respective designees by
or on behalf of the Company for use in the
registration statement, prospectus or statement of
additional information for the Trust or in sales
literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise
for use in connection with the sale of the Policies
or Shares; or

(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by the Trust,
MFS, the Underwriter or any of their respective
designees or persons under their respective control
and on which any such entity has reasonably relied)
or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of
the Policies or Shares; or

(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Accounts or relating to
the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statement or statements
therein not misleading, if such statement or omission
was made in reliance upon information furnished to
the Company by or on behalf of the Trust, MFS or the
Underwriter; or

-10-
<PAGE>

(d) arise out of or result from any material breach of
any representation and/or warranty made by the Trust
in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to
comply with the diversification requirements
specified in Article VI of this Agreement) or arise
out of or result from any other material breach of
this Agreement by the Trust; or

(e) arise out of or result from the materially incorrect
or untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate; or

(f) arise as a result of any failure by the Trust to
provide the services and furnish the materials under
the terms of the Agreement;

as limited by and in accordance with the provisions of this Article
VIII.

8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.

8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement.

8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any Indemnified Party otherwise than under this section. In
case any such action is brought against any Indemnified Party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action,
the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.

8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.

-11-
<PAGE>

8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.

ARTICLE IX. APPLICABLE LAW
--------------

9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.

9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.

ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
----------------------------

The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.

ARTICLE XI. TERMINATION
-----------

11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:

(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or

(b) at the option of the Company to the extent that the
Shares of Portfolios are not reasonably available to
meet the requirements of the Policies or are not
"appropriate funding vehicles" for the Policies, as
reasonably determined by the Company. Without limiting
the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles"
if, for example, such Shares did not meet the
diversification or other requirements referred to in
Article VI hereof; or if the Company would be permitted
to disregard Policy owner voting instructions pursuant
to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and
an explanation of such cause shall be furnished to the
Trust by the Company; or

(c) at the option of the Trust or MFS upon institution of
formal proceedings against the Company by the NASD, the
SEC, or any insurance department or any other regulatory
body regarding the Company's duties under this Agreement
or related to the sale of the Policies, the operation of
the Accounts, or the purchase of the Shares; or

(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or
any state securities or insurance department or any
other regulatory body regarding the Trust's or MFS'
duties under this Agreement or related to the sale of
the Shares; or

-12-
<PAGE>

(e) at the option of the Company, the Trust or MFS upon
receipt of any necessary regulatory approvals and/or
the vote of the Policy owners having an interest in
the Accounts (or any subaccounts) to substitute the
shares of another investment company for the
corresponding Portfolio Shares in accordance with the
terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30)
days' prior written notice to the Trust of the Date
of any proposed vote or other action taken to replace
the Shares; or

(f) termination by either the Trust or MFS by written
notice to the Company, if either one or both of the
Trust or MFS respectively, shall determine, in their
sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its
business, operations, financial condition, or
prospects since the date of this Agreement or is the
subject of material adverse publicity, and such
material adverse change or material adverse publicity
will have a material adverse impact upon their
business operations; or

(g) termination by the Company by written notice to the
Trust and MFS, if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust
or MFS has suffered a material adverse change in this
business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity, and such
material adverse change or material adverse publicity
will have a material adverse impact upon their
business or operations; or

(h) at the option of any party to this Agreement, upon
another party's material breach of any provision of
this Agreement; or

(i) upon assignment of this Agreement, unless made with
the written consent of the parties hereto.

11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.

11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.

11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.

11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.

-13-
<PAGE>

ARTICLE XII. NOTICES
-------

Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.

If to the Trust:

MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary

If to the Company:

PFL Life Insurance Company
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-0001
Facsimile No.: (319) 297-8290
Attn: Financial Markets Division, Legal Department

If to MFS:

Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel

ARTICLE XIII. MISCELLANEOUS
-------------

13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.

13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.

13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.

13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.

13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.

-14-
<PAGE>

13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.

13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.

13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.

-15-
<PAGE>

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.

PFL LIFE INSURANCE COMPANY
By its authorized officer,

By: /s/ William L. Busler
-----------------------

Title: President
-------------------

MFS VARIABLE INSURANCE TRUST, on behalf of the Portfolios
By its authorized officer and not individually,

By: /s/ A. Keith Brodkin
-----------------------
A. Keith Brodkin
Chairman

MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,

By: /s/ Arnold D. Scott
-----------------------
Arnold D. Scott
Senior Executive Vice President

-16-
<PAGE>

As of 11/24/97
---------------

SCHEDULE A

ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------

============================================ =========================================== =======================================
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies

============================================ =========================================== =======================================
<S> <C> <C>
PFL Retirement Builder PFL Life Insurance Company MFS Emerging Growth Series
Variable Annuity Account Policy Form MFS Research Series
March 29, 1996 No. AV288-101-95-796 MFS Total Return Series
(including successor forms, addenda and MFS Utilities Series
endorsements - may vary by state)
under marketing names:
"Retirement Income Builder Variable Annuity"
"First Union First Choice Variable Annuity"
(or successor marketing names)
- -------------------------------------------- ------------------------------------------- ---------------------------------------
</TABLE>

-17-

<PAGE>

EXHIBIT (8)(g)
--------------

PARTICIPATION AGREEMENT
AMONG
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
AND PFL LIFE INSURANCE COMPANY.
<PAGE>

PARTICIPATION AGREEMENT
-----------------------
Among

OPPENHEIMER VARIABLE ACCOUNT FUNDS,
-----------------------------------

OPPENHEIMERFUNDS, INC.
----------------------

and

PFL LIFE INSURANCE COMPANY
--------------------------

THIS AGREEMENT (the "Agreement"), made and entered into as of the 15th
day of December, 1997 by and among PFL Life Insurance Company (hereinafter the
"Company"), on its own behalf and on behalf of each separate account of the
Company named in Schedule 1 to this Agreement, as may be amended from time to
time by mutual consent (hereinafter collectively the "Accounts"), Oppenheimer
Variable Account Funds (hereinafter the "Fund") and OppenheimerFunds, Inc.
(hereinafter the "Adviser").

WHEREAS, the Fund is an open-end management investment company and is
available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies and variable annuity contracts (collectively, the "Variable Insurance
Products") offered by insurance companies (hereinafter "Participating Insurance
Company");

WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio", and each representing the
interests in a particular managed pool of securities and other assets;

WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission ("SEC"), dated July 16, 1986 (File No. 812-6324) granting
Participating Insurance Company and variable annuity and variable life insurance
separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a),
and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
<PAGE>

necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Mixed and Shared Funding
Exemptive Order")

WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act");

WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940;

WHEREAS, the Company has registered or will register certain variable
annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);

WHEREAS, the Accounts are or will be duly organized, validly existing
segregated asset accounts, established by resolution of the Board of Directors
of the Company, to set aside and invest assets attributable to the aforesaid
variable contracts (the Contract(s) and the Account(s) covered by the Agreement
are specified in Schedule 2 attached hereto, as may be modified by mutual
consent from time to time);

WHEREAS, the Company have registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless an exemption from registration
is available);

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intend to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 3 attached
hereto as may be modified by mutual consent from time to time), on behalf of the
Accounts to fund the Contracts named in Schedule 2, as may be amended from time
to time by mutual consent, and the Fund is authorized to sell such shares to
unit investment trusts such as the Accounts at net asset value; and

-2-
<PAGE>

NOW, THEREFORE, in consideration of their mutual promises, the Fund,
the Adviser and the Company agree as follows:

ARTICLE I. Sale of Fund Shares
-------------------

1.1. The Fund agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Account, executing such orders on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives written (or facsimile) notice of
such order by 9:30 a.m. New York time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.

1.2. The Company shall pay for Fund shares on the next Business
Day after it places an order to purchase Fund shares in accordance with Section
1.1 hereof. Payment shall be in federal funds transmitted by wire or by a credit
for any shares redeemed.

1.3. The Fund agrees to make Fund shares available for purchase
at the applicable net asset value per share by the Company for their separate
Accounts listed in Schedule 1 on those days on which the Fund calculates its net
asset value pursuant to rules of the SEC; provided, however, that the Board of
Trustees of the Fund (hereinafter the "Trustees") may refuse to sell shares of
any Portfolio to any person, or suspend or terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees, acting in
good faith and in light of their fiduciary duties under federal and any
applicable state laws, in the best interests of the shareholders of any
Portfolio.

1.4. The Fund agrees to redeem, upon the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of

-3-
<PAGE>

this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption and receipt by such designee shall constitute receipt by
the Fund; provided that the Fund receives written (or facsimile) notice of such
request for redemption by 9:30 a.m. New York time on the next following Business
Day. Payment shall be made within the time period specified in the Fund's
prospectus or statement of additional information, in federal funds transmitted
by wire to the Company's account as designated by the Company in writing from
time to time.

1.5. The Company shall pay for the Fund shares on the next
Business Day after an order to purchase shares is made in accordance with the
provisions of Section 1.4 hereof. Payment shall be in federal funds transmitted
by wire pursuant to the instructions of the Fund's treasurer or by a credit for
any shares redeemed.

1.6. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 3 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information. The
Company shall not permit any person other than a Contract owner to give
instructions to the Company which would require the Company to redeem or
exchange shares of the Fund.

1.7. The Fund shall make the net asset value per share for each
portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:00
p.m. central time) and shall use its best efforts to make such net asset value
per share available by 5:00 p.m. central time.

ARTICLE II. Sales Material, Prospectuses and Other Reports
----------------------------------------------

2.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within ten Business Days after receipt of such
material. "Business Day" shall mean any day in which the New York Stock Exchange
is open for trading and in

-4-
<PAGE>

which the Fund calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission.

2.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sale literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.

2.3. For purposes of this Article II, the phrase "sales
literature or other promotional material" means advertisements (such as material
published, or designed for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape display, signs or
billboard or electronic media), and sales literature (such as brochures,
circulars, market letters and form letters), distributed or made generally
available to customers or the public.

2.4. The Company and the Fund will each provide to the other at
least one complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.

2.5. The Fund or the Adviser shall provide the Company with as
many printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund or the Adviser shall provide camera-ready film
containing the Fund's prospectus and the Statement of Additional Information and
such other assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the prospectus and/or Statement of Additional
Information for the Fund is amended during

-5-
<PAGE>

the year) to have the prospectus for the Contracts and the Fund's prospectus
printed together in one document, and to have the Statement of Additional
Information for the Fund and the Statement of Additional Information for the
Contracts printed together in one document. Alternatively, the Company may print
the Fund's prospectus and/or its Statement of Additional Information in
combination with other fund companies' prospectuses and Statements of Additional
Information. Except as provided in the following three sentences, all expenses
of printing and distributing Fund prospectuses and Statements of Additional
Information shall be the expense of the Company. For prospectuses and Statements
of Additional Information provided by the Company to its existing owners of
Contracts in orders to update disclosure annually as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Fund or the
Adviser. If the Company chooses to receive camera-ready film in lieu of
receiving printed copies of the Fund's prospectus, the Fund or the Adviser will
reimburse the Company in an amount equal to the product of A and B where A is
the number of such prospectuses distributed to owners of the Contracts, and B is
the Fund's per unit cost of typesetting and printing the Fund's prospectus. The
same procedures shall be followed with respect to the Fund's Statement of
additional Information.

The Company agrees to provide the fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.

2.6. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Fund or the Company
(or in the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund or the Fund's transfer agent).

2.7. The Fund or the Adviser, at its expense, shall provide the
Company with copies of the Fund's proxy statements, reports to shareholders, and
other communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 2.5) to

-6-
<PAGE>

shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.

2.8 If and to the extent required by law the Company shall:

(i) solicit voting instructions from Contract owners;

(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and

(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account, so
long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contract owners. The Company
reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent
permitted by law. The Company shall be responsible for
assuring that each of its separate accounts participating in
the Fund calculates voting privileges in a manner consistent
with the voting provisions set forth in the Mixed and Shared
Funding Exemptive Order.

2.9. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders.

ARTICLE III. Fees and Expenses
-----------------

3.1. The Fund and Adviser shall pay no fee or other compensation
to the Company under this agreement, and the Company shall pay no fee or other
compensation to the Fund or Adviser, except as provided herein. Nothing herein
shall prevent the parties from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services related to the Fund and/or to the
Accounts.

-7-
<PAGE>

3.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. The Fund
shall see to it that all its shares are registered and authorized for issuance
in accordance with applicable federal law and, if and to the extent advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law. The Fund or the Adviser shall
bear the expenses of setting the Fund's prospectus in type, setting in type and
printing the Fund's proxy materials and the Fund's reports to shareholders
(including the costs of printing a prospectus that constitutes and annual
report), the preparation of all statements and notices required by any federal
or state law, and all taxes on the issuance or transfer of the Fund's shares.

3.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.

3.4. In the event the Fund adds one or more additional Portfolios
and the parties desire to make such Portfolios available to the respective
Contract owners as an underlying investment medium, a new Schedule 3 or an
amendment to this Agreement shall be executed by the parties authorizing the
issuance of shares of the new Portfolios to the particular Account. The
amendment may also provide for the sharing of expenses for the establishment of
new Portfolios among Participating Insurance Company desiring to invest in such
Portfolios and the provision of funds as the initial investment in the new
Portfolios.

ARTICLE IV. Potential Conflicts
-------------------

4.1. The Board of Trustees of the Fund (the "Board") will monitor
the Fund for the existence of any material irreconcilable conflict between the
interests of the Contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable

-8-
<PAGE>

federal or state insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of Contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof.

4.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. The Company agrees to be bound by the
responsibilities of a participating insurance company as set forth in the Mixed
and Shared Funding Exemptive Order, including without limitation the requirement
that the Company report any potential or existing conflicts of which it is aware
to the Board. The Company will assist the Board in carrying out its
responsibilities in monitoring such conflicts under the Mixed and Shared Funding
Exemptive Order, by providing the Board in a timely manner with all information
reasonably necessary for the Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to inform the Board whenever
Contract owner voting instructions are disregarded and by confirming in writing,
at the Fund's request, that the Company are unaware of any such potential or
existing material irreconcilable conflicts.

4.3. If it is determined by a majority of the Board, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the disinterested trustees), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to an including: (1) withdrawing the assets allocable to some or
all of the separate accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to

-9-
<PAGE>

a vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
-----
contract owners, or variable contract owners of one or more Participating
Insurance Company) that votes in favor of such segregation, or offering to the
affected Contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.

4.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of the six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.

4.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the Account's investment in the Fund and terminate this Agreement
within six months after the Board informs the Company in writing that it has
determined that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund,
subject to applicable regulatory limitation.

-10-
<PAGE>

4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 4.3 to establish a new
funding medium for Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the particular Account's investment in the Fund and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.

ARTICLE V. Indemnification
---------------

5.1. Indemnification By The Company

5.1.(a). The Company agrees to indemnify and hold harmless the
Adviser and the Fund and each trustee of the Board and Officers and each person,
if any, who controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 5.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:

(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration Statement
or prospectus for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of the

-11-
<PAGE>

foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or

(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct of the Company or
persons under its control, with respect to the sale or distribution of the
Contracts or Fund Shares; or

(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or

(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this agreement or arise
out of or result from any other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of Sections 5.1(b)
and 5.1(c) hereof.

5.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's wilful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified

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<PAGE>

Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.

5.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons of other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.

5.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.

5.2. Indemnification by the Adviser

5.2(a) The Adviser agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 5.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the

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<PAGE>

written consent of the Adviser) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect of) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:

(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement or
prospectus or sales literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to the state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Adviser or
Fund by or on behalf of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Contracts or Fund
shares; or

(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sale literature for the Contracts not supplied by the
Adviser or persons under its control) or wrongful conduct of the Fund, Adviser
or Adviser or persons under their control, with respect to the sale of
distribution of the Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; or

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<PAGE>

(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Adviser; as limited by and in accordance with the provisions of Sections 5.2(b)
and 5.2(c) hereof.

5.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.

5.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other expenses

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<PAGE>

subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.

5.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.

5.3. Indemnification By the Fund

5.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 5.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and arise out of or result from any
material breach of any representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Fund; as limited by and in accordance with the provisions of
Sections 5.3(b) and 5.3(c) hereof.

5.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Adviser or each Account, whichever is applicable.

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<PAGE>

5.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund shall also be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.

5.3(d). The Company and the Adviser agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.

ARTICLE VI. Applicable Law
--------------

6.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.

6.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not

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<PAGE>

limited to, the Mixed and Shared Funding Exemptive Order) and the terms hereof
shall be interpreted and construed in accordance therewith.

ARTICLE VII. Termination
-----------

7.1 This Agreement shall terminate with respect to some or all
Portfolios:

(a) at the option of any party upon six month's advance written
notice to the other parties;

(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of its
Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt notice of the
election to terminate for such cause and an explanation of such cause shall be
furnished by the Company; or

7.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 7.1(a) may be exercised for cause
or for no cause.

7.3. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Adviser shall at the option of the Company, continue
to make available additional shares of the Fund pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement for which shares of the Fund serve as the
underlying investment medium (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 7.3 shall not apply
(i) to any terminations under Article IV and the effect of such Article IV
terminations shall be governed by Article IV of this Agreement, or (ii) if the
further sale of additional shares of the Fund to the Contracts is prohibited by
law or by regulatory authorities.

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<PAGE>

ARTICLE VIII. Notices
-------

Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify to the
other party.

If to the Fund:

Oppenheimer Variable Account Funds
c/o OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: Legal Department

If to the Adviser:

OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: General Counsel

If to the Company:

PFL Life Insurance Company
4333 Edgewood Road, NE
Cedar Rapids, IA 52499-0001
Attn: Financial Markets Division, Legal Department

ARTICLE IX. Miscellaneous
-------------

9.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as it may come into the public domain.

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<PAGE>

9.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

9.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

9.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.

9.5. Each party hereto shall cooperate with, and promptly notify each
other party and all appropriate governmental authorities (including without
limitation the Securities and Exchange Commission, the NASD and state insurance
regulators) and shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.

9.6. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.

9.7. It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.

9.8. The Company and the Adviser each understand and agree that the
obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Adviser each represent that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.

9.9. This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.

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<PAGE>

9.10. This Agreement sets forth the entire agreement between the
parties and supersedes all prior communications, agreements and understandings,
oral or written, between the parties regarding the subject matter hereof.

PFL LIFE INSURANCE COMPANY

By: /s/ William L. Busler
----------------------------------
William S. Busler

Title: President
-------------------------------
Date: 12/15/97
--------------------------------

OPPENHEIMER VARIABLE ACCOUNT
FUNDS

By: /s/ Andrew J. Donahue
----------------------------------
Andrew J. Donahue

Title: Vice President
-------------------------------
Date:
--------------------------------

OPPENHEIMERFUNDS, INC.

By: /s/ Wesley M. Mayer
----------------------------------
Wesley M. Mayer

Title: Vice President
-------------------------------
Date: 12/9/97
--------------------------------

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<PAGE>

SCHEDULE 1

Separate Accounts:
-----------------

PFL Retirement Builder
Variable Annuity Account

Established by the Board of Directors
on March 29, 1996

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<PAGE>

SCHEDULE 2

PFL Life Insurance Company
Policy Form No.
AV 288-101-95-796
(including successor forms, addenda
and endorsements - may vary by state)

Under marketing names:
"Retirement Income Builder Variable Annuity"
or
"First Union First Choice Variable Annuity"
(or successor marketing names)

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<PAGE>

SCHEDULE 3

Portfolios of Oppenheimer Variable Account Funds:

Oppenheimer Growth Fund
Oppenheimer Strategic Bond Fund
Oppenheimer Multiple Strategies Fund

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