PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT, 485APOS, 1998-07-16

PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
485APOS, 1998-07-16

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As filed with the Securities and Exchange Commission on July 16, 1998.

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.
---

Post-Effective Amendment No. 5
---
and

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

Amendment No. 6
---

PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
-----------------------------------------------
(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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Title of Securities Being Registered:

Flexible Premium Variable Annuity Policies

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

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) of Rule 485.
- -----

- ----- on May 1, 1998 pursuant to paragraph (b)(1)(iii) of Rule 485.

X 60 days after filing pursuant to paragraph (a)(i) of Rule 485
- -----

on pursuant to paragraph (a)(i) of Rule 485
- ----- ------------

If appropriate, check the following box:

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

<PAGE>
The filing incorporates by reference the Prospectus, Statement of Additional
Information and Part C of the Post-Effective Amendment No. 4 filed on April 30,
1998.

<PAGE>

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

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
-------------------
<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
---------------------------

Item of Form N-4 Part C Caption
- ---------------- --------------
<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>
<PAGE>

PROSPECTUS______________________________________________________ , 1998

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").
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 several investment options to choose from offered through the
Policy. They include the following variable investment options:

AIM VARIABLE INSURANCE FUNDS, INC. DREYFUS STOCK INDEX FUND

AIM V.I. Capital Appreciation Fund DREYFUS VARIABLE INVESTMENT FUND
AIM V.I. Government Securities Fund
AIM V.I. Growth & Income Fund Dreyfus Money Market Portfolio
AIM V.I. Value Fund Dreyfus Small Company Stock Portfolio

OPPENHEIMER VARIABLE ACCOUNT FUNDS

MFS VARIABLE INSURANCE TRUST Oppenheimer Global Securities Fund
Oppenheimer Growth Fund
MFS Emerging Growth Series Oppenheimer Growth & Income Fund
MFS Foreign & Colonial Emerging Oppenheimer High Income Fund
Markets Equity Series Oppenheimer Strategic Bond Fund
MFS Research Series
MFS Total Return Series
MFS Utilities Series

WRL SERIES FUND, INC.
WRL Emerging Growth
WRL Global
WRL Growth

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 Fixed Account is an additional investment option. If you invest in one
of the alternatives available under 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 ("SEC") 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

P.O. Box 3183

Cedar Rapids, Iowa 52406-3183

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

Please Read This Prospectus Carefully.
Keep It For Future Reference.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS................................................................ 5
SUMMARY OF THE POLICY...................................................... 8
ANNUITY POLICY FEE TABLE................................................... 14
CONDENSED FINANCIAL INFORMATION............................................ 19
FINANCIAL STATEMENTS....................................................... 19
HISTORICAL PERFORMANCE DATA................................................ 19
Standardized Performance Data............................................ 19
Dreyfus Money Market Subaccount........................................ 19
Other Subaccounts...................................................... 20
Non-Standardized Performance Data........................................ 20
Adjusted Historical Performance Data................................... 20
PUBLISHED RATINGS.......................................................... 24
PFL LIFE INSURANCE COMPANY................................................. 24
THE RETIREMENT BUILDER ACCOUNTS............................................ 25
The Mutual Fund Account.................................................. 25
The Underlying Funds................................................... 25
Addition, Deletion, or Substitution of Investments..................... 29
The Fixed Account........................................................ 30
Guaranteed Periods..................................................... 30
Dollar Cost Averaging Fixed Account Option............................. 31
Guaranteed Interest Rates.............................................. 32
Transfers................................................................ 32
Reinstatements........................................................... 33
Telephone Transactions................................................... 34
Dollar Cost Averaging (DCA).............................................. 34
Asset Rebalancing........................................................ 35
THE POLICY................................................................. 35
Policy Application and Issuance of Policies--Premium Payments............ 35
Additional Premium Payments............................................ 36
Maximum Total Premium Payments......................................... 36
Allocation of Premium Payments......................................... 36
Payment Not Honored by Bank............................................ 36
Policy Value............................................................. 37
The Mutual Fund Policy Value........................................... 37
Adjusted Policy Value (APV).............................................. 37
Amendments............................................................... 37
Non-participating Policy................................................. 38
DISTRIBUTIONS UNDER THE POLICY............................................. 38
Surrenders............................................................... 38
Policy Loans for 403(b) Policies......................................... 39
Nursing Care and Terminal Condition Withdrawal Option.................... 41
Unemployment Waiver...................................................... 41
Excess Interest Adjustment (EIA)......................................... 41
Systematic Payout Option................................................. 42
Annuity Payments......................................................... 43
Annuity Commencement Date.............................................. 43
Election of Payment Option............................................. 43
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Premium Tax............................................................ 44
Supplementary Contract................................................. 44
Availability as an Immediate Annuity................................... 44
Annuity Payment Options.................................................. 44
Guaranteed Values...................................................... 45
Variable Payment Options............................................... 46
Determination of the First Variable Payment............................ 46
Determination of Additional Variable Payments.......................... 46
Transfers.............................................................. 47
Tax Withholding........................................................ 47
Adjustment of Annuity Payments......................................... 47
Death Benefit............................................................ 47
Death of Annuitant Prior to Annuity Commencement Date.................. 47
Adjusted Partial Withdrawal............................................ 48
Death On or After Annuity Commencement Date............................ 49
Beneficiary............................................................ 49
Death of Owner........................................................... 50
Restrictions Under the Texas Optional Retirement Program................. 50
Restrictions Under Section 403(b) Plans.................................. 50
Restrictions Under Qualified Policies.................................... 50
CHARGES AND DEDUCTIONS..................................................... 50
Surrender Charge......................................................... 51
Mortality and Expense Risk Fee........................................... 51
Administrative Charges................................................... 52
Premium Taxes............................................................ 53
Federal, State and Local Taxes........................................... 53
Transfer Fee............................................................. 53
Other Expenses Including Investment Advisory Fees........................ 53
Employee and Agent Purchases............................................. 53
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 54
Tax Status of the Policy................................................. 54
Taxation of Annuities.................................................... 55
DISTRIBUTOR OF THE POLICIES................................................ 61
VOTING RIGHTS.............................................................. 61
YEAR 2000 MATTERS.......................................................... 62
LEGAL PROCEEDINGS.......................................................... 63
STATEMENT OF ADDITIONAL INFORMATION........................................ 64
APPENDIX A................................................................. 65
</TABLE>

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<PAGE>

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, P.O. Box 3183, Cedar Rapids, Iowa 52406-3183 or 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 upon which Annuity Payments are to
commence. The Annuity Commencement Date may not be later than the last day of
the policy month starting after the Annuitant attains age 85, except as
expressly allowed by PFL, but in no event later than the last day of the
Policy month following the month in which the Annuitant attains age 95. The
Annuity Commencement Date may be required to be earlier for Qualified
Policies.

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.

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<PAGE>

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 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 Partial Withdrawal--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--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, as amended, (the "1940 Act"), 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:

(i) Premium Payments; minus

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

(iii) interest credited in the Fixed Account; plus

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<PAGE>

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

(v) 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.

Subaccount--A subdivision within the Mutual Fund Account, 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"); Dreyfus Variable Investment
Fund and Dreyfus Stock Index Fund, managed by The Dreyfus Corporation; MFS
Variable Insurance Trust, managed by Massachusetts Financial Services Company,
and Oppenheimer Variable Account Funds, managed by OppenheimerFunds, Inc., and
WRL Series Fund, Inc. (WRL Emerging Growth managed by Van Kampen American
Capital Asset Management, Inc.; WRL Global and WRL Growth managed by Janus
Capital Corporation).

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 OF THE POLICY

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 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 has a number of subaccounts for the Policy that invest exclusively
in shares of the designated portfolios of the AIM Variable Insurance Funds,
Inc., the Dreyfus Variable Investment Fund, the Dreyfus Stock Index Fund, MFS
Variable Insurance Trust, Oppenheimer Variable Account Funds, and WRL Series
Fund, Inc., (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. Capital Appreciation Fund

. AIM V.I. Government Securities Fund

. AIM V.I. Growth & Income Fund

. AIM V.I. Value Fund

Managed by The Dreyfus Corporation:

. Dreyfus Money Market Portfolio

. Dreyfus Small Company Stock Portfolio

. Dreyfus Stock Index Fund

Managed by Massachusetts Financial Services Company:

. MFS Emerging Growth Series

. MFS Foreign & Colonial Emerging Markets Equity Series

. MFS Research Series

. MFS Total Return Series

. MFS Utilities Series

Managed by OppenheimerFunds, Inc.:

. Oppenheimer Global Securities Fund

. Oppenheimer Growth Fund

. Oppenheimer Growth & Income Fund

. Oppenheimer High Income Fund

. Oppenheimer Strategic Bond Fund

Managed by Van Kampen American Capital Asset Management, Inc.:

. WRL Emerging Growth

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<PAGE>

Managed by Janus Capital Corporation

.WRL Global

.WRL Growth

Each of the Subaccounts of the Mutual Fund Account invests solely in a
corresponding Portfolio of the Underlying Funds. Because the Policy Value may
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 RETIREMENT
BUILDER ACCOUNTS--The Mutual Fund Account," p. 25.)

The Fixed Account. PFL guarantees an annual credited 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, although certain Dollar Cost Averaging programs may run for shorter
periods. 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 RETIREMENT BUILDER ACCOUNTS--
The Fixed Account," p. 30.)

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 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. (See "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 51 and "CHARGES AND DEDUCTIONS--Premium Taxes," p. 53.)

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%. Allocations
specified by the Owner will be used for 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. 35.)

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 ("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 some states the period
is ten days after the Policy is delivered to the Owner. Some states allow for
a longer period to return the Policy.

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<PAGE>

The amount of the refund will also depend on the state in which the Policy is
issued. Ordinarily the amount of the refund will be the Policy Value. However,
some states may require a return of the Premium Payments, or the greater of
the Premium Payments or the Policy Value. PFL will pay the refund within seven
days after it receives Written Notice of cancellation and the returned Policy
within the applicable period. The Policy will then be deemed void.

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 equal to any or 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 RETIREMENT
BUILDER ACCOUNTS--Transfers," p. 32.) 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 Adjustment," p. 41.) Transfers from the Dollar Cost
Averaging Fixed Account Option, except through a Dollar Cost Averaging
program, are not allowed. (See "THE RETIREMENT BUILDER ACCOUNTS--Dollar Cost
Averaging Fixed Account Option," p. 31.) Transfers currently may be made
either by telephone or by sending Written Notice to PFL's Administrative and
Service Office. (See "THE RETIREMENT BUILDER ACCOUNTS--Telephone
Transactions," p. 34.)

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 RETIREMENT BUILDER ACCOUNTS--Transfers," p. 32.)

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. 38.) 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.

- 10 -
<PAGE>

POLICY LOANS FOR 403(B) POLICIES

An Owner of a Policy used in connection with a Tax Sheltered Annuity Plan
("TSA Plan") under Section 403(b) of the Code, may elect a Policy Loan
Endorsement under which the Policy Owner can receive Policy Loans, subject to
certain restrictions. If the Policy Loan endorsement is available, the Owner
can borrow against the Policy an amount not to exceed: (1) 75% of the Policy
Value when total indebtedness (all Policy Loans and unpaid accrued interest)
is less than or equal to $10,000; or (2) 50% of the Policy Value when total
indebtedness is greater than $10,000 but less than or equal to $50,000. When a
loan is made, an amount equal to the loan will be withdrawn from the
Subaccount(s) and/or Fixed Account(s) specified by the Owner and transferred
to the loan reserve. The loan reserve is part of the Fixed Account used as
collateral for any Policy Loan.

Interest on any loan will be at the Policy Loan rate of 7% in arrears.
Amounts in the loan reserve will earn interest at a minimum guaranteed
effective annual interest rate of 5%. Principal and interest must be repaid in
substantially level quarterly or monthly payments over a 5-year period or, if
the loan is used to acquire the Owner's principal residence, a 10, 15, or 20-
year period, but such an extended period cannot go beyond the Owner's
estimated retirement age. While the Policy is in force and before the Annuity
Commencement Date, any loan may be repaid in full. (See "DISTRIBUTIONS UNDER
THE POLICY--Policy Loans For 403(b) Policies," p. 39)

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): (i) has been confined in a
hospital or nursing facility for 30 consecutive days or (ii) 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 are not imposed on surrenders
or partial withdrawals. (See "DISTRIBUTIONS UNDER THE POLICY--Death Benefit,"
p. 47, "DISTRIBUTIONS UNDER THE POLICY--Nursing Care and Terminal Condition
Withdrawal Option," p. 41, and "DISTRIBUTIONS UNDER THE POLICY--Unemployment
Waiver," p. 41.) (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 (i)
must have been employed full time for at least two years prior to becoming
unemployed, (ii) must have been employed full time on the Policy Date, (iii)
must have been unemployed for at least 60 consecutive days at the time of
withdrawal, and (iv) 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. 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.

- 11 -
<PAGE>

CHARGES AND DEDUCTIONS

Surrender Charge. In order to permit investment of the entire Premium
Payment, PFL generally does not deduct sales or other charges at the time of
investment, (although in some states, a premium tax charge may be deducted).
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 cover expenses relating to
the distribution of the Policies. A Surrender Charge will only be applied to
withdrawals that exceed the amount available under certain listed exceptions.
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. 51.)

In each Policy Year the Owner may request partial withdrawals ($500 minimum)
of up to 10% of the Policy Value 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. 38.) 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 market 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 Adjustment," p. 41.)

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. 51, and "DISTRIBUTIONS UNDER THE POLICY--
Death Benefit," p. 47.)

- 12 -
<PAGE>

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 value of the Mutual Fund Account's net
assets. (See "CHARGES AND DEDUCTIONS--Administrative Charges," p. 52.)

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 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. 52.)

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. 53.)

No charges are currently made against any of the Accounts for federal, state,
or local income taxes. Should PFL determine that any such taxes be imposed with
respect to any of the Accounts, PFL may deduct such taxes from amounts held in
the relevant Account. (See "CHARGES AND DEDUCTIONS--Federal, State and Local
Taxes," p. 53.)

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.

- 13 -
<PAGE>

ANNUITY POLICY FEE TABLE

POLICY OWNER TRANSACTION
EXPENSES
- ------------------------------------------
Sales Load On
Purchase
Payments.............. 0
Maximum
Surrender
Charge (as a %
of Premium
Payments
Surrendered)/(1)(2)/.. 6%
Surrender Fees......... 0
Service
Charge/(2)/........... $30 Per Policy
Transfer
Fee(/2/).............. Currently No Fee

SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF ACCOUNT VALUE)
- ----------------------------------
Mortality and
Expense Risk
Fees/(3)/......... 1.25%
Administrative
Charge............ 0.15%
--------
TOTAL SEPARATE
ACCOUNT ANNUAL
EXPENSES.......... 1.40%

- ------------------------------------------------------------------------------
PORTFOLIO ANNUAL EXPENSES/(4)/
(as a percentage of average net assets and after expense reimbursements)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
RULE PORTFOLIO
MANAGEMENT OTHER 12B-1 ANNUAL
FEES EXPENSES FEES EXPENSES
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation
Fund/(5)/............................. 0.63% 0.05% -- 0.68%
AIM V.I. Government Securities
Fund/(5)/............................. 0.50% 0.37% -- 0.87%
AIM V.I. Growth & Income Fund/(5)/...... 0.63% 0.06% -- 0.69%
AIM V.I. Value Fund/(5)/................ 0.62% 0.08% -- 0.70%
Dreyfus Money Market Portfolio.......... 0.50% 0.12% -- 0.62%
Dreyfus Small Company Stock Portfolio... 0.75% 0.64% -- 1.39%
Dreyfus Stock Index Fund................ 0.25% 0.05% -- 0.30%
MFS Emerging Growth Series/(6)/......... 0.75% 0.12% -- 0.87%
MFS Foreign & Colonial Emerging Markets
Equity Series/(6)/.................... 1.25% 0.25% -- 1.50%
MFS Research Series/(6)/................ 0.75% 0.13% -- 0.88%
MFS Total Return Series/(6)/............ 0.75% 0.25% -- 1.00%
MFS Utilities Series/(6)/............... 0.75% 0.25% -- 1.00%
Oppenheimer Global Securities Fund...... 0.70% 0.06% -- 0.76%
Oppenheimer Growth Fund................. 0.73% 0.02% -- 0.75%
Oppenheimer Growth & Income Fund........ 0.75% 0.08% -- 0.83%
Oppenheimer High Income Fund............ 0.75% 0.07% -- 0.82%
Oppenheimer Strategic Bond Fund......... 0.75% 0.08% -- 0.83%
WRL Emerging Growth/(7)/ ............... 0.80% 0.13% -- 0.93%
WRL Global/(7)/ ........................ 0.80% 0.20% -- 1.00%
WRL Growth/(7)/ ........................ 0.80% 0.07% -- 0.87%
</TABLE>

/(1)/ 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. If
applicable, a Surrender Charge will only be applied to withdrawals that
exceed the amount available under certain listed exceptions. (See
"DISTRIBUTIONS UNDER THE POLICY--Surrenders," p. 38.)
/(2)/ 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

- 14 -
<PAGE>

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.
The Service Charge is the lesser of 2% of the Policy Value or $30 per
Policy. There is no fee for the first 12 transfers per year. For additional
transfers, PFL may charge a fee of $10 per transfer, but currently does not
charge for any transfers. Mutual Fund Account Annual Expenses do not apply
to the Fixed Account (See "CHARGES AND DEDUCTIONS--Other Expenses Including
Investment Advisory Fees," p. 53.)

(/3/Mortality)and Expense Risk Fees (1.25%) shown are for the 5% Annually
Compounding Death Benefit and the Annual Step Up Death Benefit. The
corresponding Fees for the "Return of Premium Death Benefit" is 1.10% for
each Subaccount. (See "DISTRIBUTIONS UNDER THE POLICY--Death Benefit," p.
47.)
(/4/The)fee table information relating to the Underlying Funds is for 1997 and
was provided to PFL by the Underlying Funds, and PFL has not independently
verified such information.

(/5/A)I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its respective fees. Effective May 1, 1998, the Funds reimburse AIM
in an amount up to 0.25% of the average net asset value of each Fund, for
expenses incurred in providing, or assuring that participating insurance
companies provide, certain adminstrative services. Currently, the fee only
applies to the verage net asset value of each Fund in excess of the net
asset value of each Fund as calculated on April 30, 1998.

(/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" for 1997
would be: 0.27% and 0.45%, respectively, for the MFS Total Return Series;
1.02% and 1.20%, respectively, for the MFS Utilities Series; and is
estimated to be 4.67% and 5.92%, respectively, for the MFS Foreign &
Colonial Emerging Markets Equity Series.

(/7/Effective)January 1, 1997, the WRL Series Fund, Inc. adopted a Plan of
Distribution pursuant to Rule 12b-1 under the 1940 Act ("Distribution
Plan") and pursuant to the Distribution Plan, has entered into a
Distribution Agreement with InterSecurities, Inc. ("ISI"), principal
underwriter for the WRL Series Fund, Inc. Under the Distribution Plan, the
WRL Series Fund, Inc., on behalf of the WRL Growth Portfolio, the WRL
Global Portfolio and the WRL Emerging Growth Portfolio is authorized to
pay to various service providers, as direct payment for expenses incurred
in connection with the distribution of a Portfolio's shares, amounts equal
to actual expenses associated with distributing a Portfolio's shares, up
to a maximum rate of 0.15% on an annualized basis of the average daily net
assets. This fee is measured and accrued daily and paid monthly. ISI has
determined that it would not seek payment by the WRL Series Fund, Inc. of
distribution expenses with respect to any portfolio (including the WRL
Growth, WRL Global and WRL Emerging Growth Portfolios) during the fiscal
year ending December 31, 1998. Owners will be notified in advance prior to
ISI's seeking such reimbursement in the future.

- 15 -
<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:

<TABLE>
<CAPTION>
IF THE POLICY IS ANNUITIZED
IF THE POLICY IS AT THE END OF THE APPLICABLE
SURRENDERED AT THE END TIME PERIOD OR IF THE POLICY
OF THE APPLICABLE TIME IS NOT SURRENDERED OR
PERIOD. ANNUITIZED.
-----------------------------------------------
1 3 5 10 1 3 5 10
SUBACCOUNT YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital
Appreciation.......... $74 $103 $116 $232 $ 20 $ 63 $ 108 $ 232
AIM V.I. Government
Securities............ $76 $109 $126 $252 $ 22 $ 68 $ 117 $ 252
AIM V.I. Growth &
Income................ $74 $103 $116 $233 $ 20 $ 63 $ 108 $ 233
AIM V.I. Value.......... $74 $104 $117 $234 $ 20 $ 63 $ 109 $ 234
Dreyfus Money Market.... $73 $101 $113 $226 $ 20 $ 61 $ 104 $ 226
Dreyfus Small Company
Stock................. $81 $125 $152 $304 $ 27 $ 84 $ 143 $ 304
Dreyfus Stock Index..... $70 $ 91 $ 96 $192 $ 16 $ 51 $ 88 $ 192
MFS Emerging Growth..... $76 $109 $126 $252 $ 22 $ 68 $ 117 $ 252
MFS Foreign & Colonial
Emerging Markets
Equity................ $82 $113 $128 $314 $ 28 $ 87 $ 149 $ 314
MFS Research............ $76 $109 $126 $253 $ 22 $ 69 $ 118 $ 253
MFS Total Return........ $77 $113 $132 $265 $ 23 $ 72 $ 124 $ 265
MFS Utilities........... $77 $113 $132 $265 $ 23 $ 72 $ 124 $ 265
Oppenheimer Global
Securities............ $75 $105 $120 $241 $ 21 $ 65 $ 112 $ 241
Oppenheimer Growth...... $75 $105 $120 $240 $ 21 $ 65 $ 111 $ 240
Oppenheimer Growth &
Income................ $76 $108 $124 $248 $ 22 $ 67 $ 115 $ 248
Oppenheimer High
Income................ $75 $107 $123 $247 $ 22 $ 67 $ 115 $ 247
Oppenheimer Strategic
Bond.................. $76 $108 $124 $248 $ 22 $ 67 $ 115 $ 248
WRL Emerging Growth..... $77 $111 $129 $259 $ 23 $ 70 $ 121 $ 259
WRL Global.............. $77 $112 $132 $264 $ 23 $ 72 $ 123 $ 264
WRL Growth.............. $76 $109 $126 $263 $ 22 $ 69 $ 118 $ 253
</TABLE>

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:

<TABLE>
<CAPTION>
IF THE POLICY IS ANNUITIZED
IF THE POLICY IS AT THE END OF THE APPLICABLE
SURRENDERED AT THE END TIME PERIOD OR IF THE POLICY
OF THE APPLICABLE TIME IS NOT SURRENDERED OR
PERIOD. ANNUITIZED.
-----------------------------------------------
1 3 5 10 1 3 5 10
SUBACCOUNT YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital
Appreciation.......... $76 $108 $124 $248 $ 22 $ 67 $ 115 $ 248
AIM V.I. Government
Securities............ $78 $113 $133 $267 $ 24 $ 73 $ 125 $ 267
AIM V.I. Growth &
Income................ $76 $108 $124 $249 $ 22 $ 67 $ 116 $ 249
AIM V.I. Value.......... $76 $108 $125 $250 $ 22 $ 68 $ 116 $ 250
Dreyfus Money Market.... $75 $106 $121 $242 $ 21 $ 65 $ 112 $ 242
Dreyfus Small Company
Stock................. $83 $129 $159 $318 $ 29 $ 88 $ 151 $ 318
Dreyfus Stock Index..... $72 $ 96 $104 $208 $ 18 $ 56 $ 96 $ 208
MFS Emerging Growth..... $78 $113 $133 $267 $ 24 $ 73 $ 125 $ 267
MFS Foreign & Colonial
Emerging Markets
Equity................ $84 $133 $165 $328 $ 30 $ 92 $ 156 $ 328
MFS Research............ $78 $114 $134 $268 $ 24 $ 73 $ 125 $ 268
MFS Total Return........ $79 $117 $140 $280 $ 25 $ 77 $ 131 $ 280
MFS Utilities........... $79 $117 $140 $280 $ 25 $ 77 $ 131 $ 280
Oppenheimer Global
Securities............ $76 $110 $128 $256 $ 23 $ 70 $ 119 $ 256
Oppenheimer Growth...... $76 $110 $127 $255 $ 22 $ 69 $ 119 $ 255
Oppenheimer Growth &
Income................ $77 $112 $131 $263 $ 23 $ 72 $ 123 $ 263
Oppenheimer High
Income................ $77 $112 $131 $262 $ 23 $ 71 $ 122 $ 262
Oppenheimer Strategic
Bond.................. $77 $112 $131 $263 $ 23 $ 72 $ 123 $ 263
WRL Emerging Growth..... $78 $116 $137 $274 $ 24 $ 75 $ 128 $ 274
WRL Global.............. $79 $117 $139 $279 $ 25 $ 77 $ 131 $ 279
WRL Growth.............. $78 $114 $134 $268 $ 24 $ 73 $ 125 $ 268
</TABLE>

- 16 -
<PAGE>

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 1997 expenses of
the Underlying Funds. (See "CHARGES AND DEDUCTIONS," p. 50, 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 LESS 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
EXPENSES HAVE BEEN PROVIDED BY THE UNDERLYING FUNDS FOR 1997 AND PFL HAS NOT
INDEPENDENTLY VERIFIED THEIR ACCURACY.

In these examples, the $30 Service Charge is reflected as a charge of
0.0644% based on an estimated average Policy Value of $46,590.

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 may depend on 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
any Partial Withdrawals, accumulated at 5% until the earlier of the date of
death or the 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 the date of death or prior to the Owner's 81st birthday, plus
any premiums paid, less any premium 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.

- 17 -
<PAGE>

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. 47.)

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 form itself for details regarding these and other terms applicable
to policies sold in New Jersey.

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. 52.)

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 RETIREMENT BUILDER ACCOUNTS--The Fixed
Account," p. 30.)

- 18 -
<PAGE>

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

As of December 31, 1997, the Subaccounts had not commenced operations;
therefore, there is no condensed financial information for the year ended
December 31, 1997.

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 SEC. These yields and
total returns will be based on historical returns only and are not intended to
indicate future performance.

Dreyfus Money Market Subaccount. The yield of the Dreyfus 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.

- 19 -
<PAGE>

Other Subaccounts. The yield of a Subaccount of the Mutual Fund Account
(other than the Dreyfus 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 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. In addition to the standard data discussed above,
similar performance data for other periods may also be shown.

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.

The Subaccounts had not commenced operations as of December 31, 1997;
therefore, no standardized performance data is shown in this Prospectus.

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.

Adjusted Historical Performance Data. 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. This data is
not intended to indicate future performance.

- 20 -
<PAGE>

For instance, as shown in Table 1 and Table 2 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. Table 1 assumes
a complete surrender of the Policy at the end of the period, and THEREFORE THE
SURRENDER CHARGE IS DEDUCTED. Table 2 assumes that the Policy is not
surrendered, and THEREFORE THE SURRENDER CHARGE IS NOT DEDUCTED.

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, 1997, were as
follows:

- 21 -
<PAGE>

TABLE 1
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS
RETURN OF PREMIUM DEATH BENEFIT
(TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.25%)
- ------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
5% ANNUALLY COMPOUNDING DEATH BENEFIT OR ANNUAL STEP-UP DEATH BENEFIT
(TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.40%)
- -------------------------------------------------------------------------------

<CAPTION>
10 YEAR CORRESPONDING
OR PORTFOLIO
SUBACCOUNT 1 YEAR 5 YEAR INCEPTION INCEPTION DATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation... 7.25% -- 17.00% May 5, 1993
AIM V.I. Government Securities.. 1.88% -- 3.65% May 5, 1993
AIM V.I. Growth & Income........ 19.52% -- 19.28% May 2, 1994
AIM V.I. Value.................. 17.48% -- 18.12% May 5, 1993
Dreyfus Small Company Stock..... 15.55% -- 14.22% May 1, 1996
Dreyfus Stock Index............. 26.79% 18.04% 14.22% September 29, 1989
MFS Emerging Growth............. 15.68% -- 20.88% July 24, 1995
MFS Foreign & Colonial Emerging
Markets Equity................ -- -- (15.76%) October 16, 1997
MFS Research.................... 14.03% -- 19.44% July 26, 1995
MFS Total Return................ 15.08% -- 18.57% January 3, 1995
MFS Utilities................... 25.52% -- 25.70% January 3, 1995
Oppenheimer Global Securities... 16.20% 17.16% 10.66% November 12, 1990
Oppenheimer Growth.............. 20.48% 16.96% 15.03% April 3, 1985
Oppenheimer Growth & Income..... 26.30% -- 34.88% July 5, 1995
Oppenheimer High Income......... 5.95% 12.14% 12.70% December 31, 1987+
Oppenheimer Strategic Bond...... 2.43% -- 5.95% May 3, 1993
WRL Emerging Growth............. 15.23% -- 18.70% March 1, 1993
WRL Global...................... 12.51% 18.72% 18.81% December 31, 1992
WRL Growth...................... 11.30% 12.61% 17.01% October 2, 1986+
</TABLE>

+ Ten Year Date

- 22 -
<PAGE>

TABLE 2
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
SUBACCOUNT 1 YEAR 5 YEAR INCEPTION INCEPTION DATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation... 12.07% -- 17.16% May 5, 1993
AIM V.I. Government Securities.. 6.75% -- 3.96% May 5, 1993
AIM V.I. Growth & Income........ 24.20% -- 19.60% May 2, 1994
AIM V.I. Value.................. 22.18% -- 18.26% May 5, 1993
Dreyfus Small Company Stock..... 20.27% -- 16.81% May 1, 1996
Dreyfus Stock Index............. 31.39% 18.21% 14.38% September 29, 1989
MFS Emerging Growth............. 20.40% -- 22.00% July 24, 1995
MFS Foreign & Colonial Emerging
Markets Equity................ -- -- (10.27%) October 16, 1997
MFS Research.................... 18.77% -- 20.61% July 26, 1995
MFS Total Return................ 19.81% -- 19.43% January 3, 1995
MFS Utilities................... 30.14% -- 26.38% January 3, 1995
Oppenheimer Global Securities... 20.92% 17.33% 10.82% November 12, 1990
Oppenheimer Growth.............. 25.15% 17.13% 15.20% April 3, 1985
Oppenheimer Growth & Income..... 30.91% -- 35.61% July 5, 1995
Oppenheimer High Income......... 10.78% 12.30% 12.86% December 31, 1987+
Oppenheimer Strategic Bond...... 7.30% -- 6.23% May 3, 1993
WRL Emerging Growth............. 19.96% -- 18.83% March 1, 1993
WRL Global...................... 17.29% 18.88% 18.97% December 31, 1992
WRL Growth...................... 16.07% 12.78% 17.18% October 2, 1986+
- -------------------------------------------------------------------------------
5% ANNUALLY COMPOUNDING DEATH BENEFIT OR ANNUAL STEP-UP DEATH BENEFIT
(TOTAL MUTUAL FUND ACCOUNT ANNUAL EXPENSES: 1.40%)
- -------------------------------------------------------------------------------
<CAPTION>
10 YEAR CORRESPONDING
OR PORTFOLIO
SUBACCOUNT 1 YEAR 5 YEAR INCEPTION INCEPTION DATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation... 11.91% -- 17.00% May 5, 1993
AIM V.I. Government Securities.. 6.60% -- 3.80% May 5, 1993
AIM V.I. Growth & Income........ 24.03% -- 19.43% May 2, 1994
AIM V.I. Value.................. 22.01% -- 18.10% May 5, 1993
Dreyfus Small Company Stock..... 20.11% -- 16.64% May 1, 1996
Dreyfus Stock Index............. 31.21% 18.04% 14.22% September 29, 1989
MFS Emerging Growth............. 20.24% -- 21.83% July 24, 1995
MFS Foreign & Colonial Emerging
Markets Equity................ -- -- (10.30%) October 16, 1997
MFS Research.................... 18.61% -- 20.44% July 26, 1995
MFS Total Return................ 19.64% -- 19.27% January 3, 1995
MFS Utilities................... 29.96% -- 26.20% January 3, 1995
Oppenheimer Global Securities... 20.75% 17.16% 10.66% November 12, 1990
Oppenheimer Growth.............. 24.98% 16.96% 15.03% April 3, 1985
Oppenheimer Growth & Income..... 30.74% -- 35.43% July 5, 1995
Oppenheimer High Income......... 10.62% 12.14% 12.70% December 31, 1987+
Oppenheimer Strategic Bond...... 7.14% -- 6.07% May 3, 1993
WRL Emerging Growth............. 19.79% -- 18.66% March 1, 1993
WRL Global...................... 17.11% 18.72% 18.81% December 31, 1992
WRL Growth...................... 15.91% 12.61% 17.01% October 2, 1986+
</TABLE>

+ Ten Year Date

- 23 -
<PAGE>

For purposes of the calculations in Table 1 and Table 2 above, 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.

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.

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, 1997, PFL had
assets of approximately $8.7 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

- 24 -
<PAGE>

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 RETIREMENT BUILDER 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 is registered with the SEC under 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.

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
certain management investment companies. The shares available under the Policy
are those of AIM Variable Insurance Funds, Inc. (managed by A I M Advisors,
Inc.), Dreyfus Variable Investment Fund and Dreyfus Stock Index Fund (managed
by The Dreyfus Corporation), MFS Variable Insurance Trust (managed by
Massachusetts Financial Services Company), Oppenheimer Variable Account Funds
(managed by OppenheimerFunds, Inc.), and WRL Series Fund, Inc. (WRL Emerging
Growth managed by Van Kampen American Capital Asset Management, Inc.; WRL
Global and WRL Growth managed by Janus Capital Corporation).

The Mutual Fund Account currently has dedicated twenty Subaccounts. 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 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 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.

These Underlying Funds are not available for purchase directly by the
general public, and are not the same as the mutual funds with very similar or
nearly

- 25 -
<PAGE>

identical names that are sold directly to the public. However, the investment
objectives and policies of certain of the Portfolios are very similar to the
investment objectives and policies of other portfolios that are or may be
managed by the same investment adviser or manager. Nevertheless, the
investment performance and results of the Portfolios available under the
Policies may be lower, or higher, than the investment results of such other
(publicly available) portfolios. There can be no assurance, and no
representation is made, that the investment results of any of the Portfolios
will be comparable to the investment results of any other portfolio or mutual
fund, even if the other portfolio or mutual fund has the same investment
adviser or manager and the same investment objectives and policies, and a very
similar name.

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 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. CAPITAL APPRECIATION FUND seeks capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller
emerging growth companies.

AIM V.I. GOVERNMENT SECURITIES FUND seeks to achieve a high level of current
income consistent with reasonable concern for safety of principal by investing
in debt securities issued, guaranteed or otherwise backed by the United States
Government.

AIM V.I. GROWTH & INCOME FUND seeks growth of capital, with current income
as a secondary objective. Although the amount of the Fund's current income
will vary from time to time, it is anticipated that the current income
realized by the Fund will be generally greater than that realized by mutual
funds whose sole objective is capital growth.

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.

- 26 -
<PAGE>

DREYFUS MONEY MARKET PORTFOLIO seeks to provide as high a level of current
income as is consistent with the preservation of capital and the maintenance
of liquidity.

DREYFUS SMALL COMPANY STOCK PORTFOLIO seeks to provide investment results
that are greater than the total return performance of publicly-traded common
stocks in the aggregate, as represented by the Russell 2500(TM) Index. It
invests primarily in a portfolio of equity securities of small- to medium-
sized domestic issuers, while attempting to maintain volatility and
diversification similar to that of the Russell 2500(TM) Index.

DREYFUS STOCK INDEX FUND seeks to provide investment results that correspond
to the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index. In anticipation of taking a market position, the Fund is permitted to
purchase and sell stock index futures. The Fund is neither sponsored by nor
affiliated with Standard & Poor's. Mellon Equity Associates, an affiliate of
The Dreyfus Corporation, serves as the Fund's index fund manager.

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 FOREIGN & COLONIAL EMERGING MARKETS EQUITY SERIES seeks capital
appreciation.

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 GLOBAL SECURITIES FUND seeks long-term capital appreciation by
investing a substantial portion of its assets in securities of foreign
issuers, "growth-type" companies, cyclical industries and special situations
which are considered to have appreciation possibilities, but which may be
considered to be speculative.

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

OPPENHEIMER GROWTH & INCOME FUND seeks a high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities. From time to time this Fund may focus on small to medium
capitalization common stocks, bonds and convertible securities.

- 27 -
<PAGE>

OPPENHEIMER HIGH INCOME FUND seeks a high level of current income from
investment in high yield fixed-income securities. High Income Fund's
investments include unrated securities or high risk securities in the lower
rating categories, commonly known as "junk bonds," which are subject to a
greater risk of loss of principal and nonpayment of interest than higher-rated
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. Capital appreciation 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.

WRL EMERGING GROWTH PORTFOLIO MANAGED BY VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC. seeks capital appreciation. The portfolio seeks to achieve
its objective by investing primarily in common stocks of small and medium
sized companies. Under normal conditions, at least 65% of the portfolio's
total assets will be invested in common stocks of small and medium sized
companies, both domestic and foreign, in the early stages of their life cycle,
that the portfolio's sub-adviser believes have the potential to become major
enterprises. Investments in such companies may offer greater opportunities for
growth of capital than larger, more established companies, but also involve
certain special risks. Emerging growth companies often have limited product
lines, markets, or financial resources, and they may be dependent upon one or
a few key people for management. The securities of such companies may be
subject to more abrupt or erratic market movements than securities of larger,
more established companies or the market averages in general.

WRL GLOBAL PORTFOLIO MANAGED BY JANUS CAPITAL CORPORATION seeks long-term
growth of capital in a manner consistent with preservation of capital,
primarily through investments in common stocks of foreign and domestic
issuers. The portfolio seeks to invest in companies on a worldwide basis,
regardless of country of organization or place of principal business activity,
as well as domestic and foreign governments, government agencies and other
governmental entities. Realization of income is not a significant investment
consideration and any income realized on the portfolio's investments will,
therefore, be incidental to the portfolio's objective.

WRL GROWTH PORTFOLIO MANAGED BY JANUS CAPITAL CORPORATION seeks growth of
capital. The portfolio will invest substantially all of its assets in common
stocks when the subadviser believes that the relevant market environment
favors profitable investing in those securities. Common stock investments are
selected in industries and companies that the subadviser believes are
experiencing favorable demand for their products and services, and which
operate in a favorable competitive environment and regulatory climate. The
subadviser's analysis and election process focuses on stocks issued by
companies with earnings growth potential. In particular, the Growth Portfolio
intends to buy stocks with earnings growth potential that may not be
recognized by the market. Securities are selected solely for their growth
potential; investment income is not a consideration.

- 28 -
<PAGE>

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 amount of these reimbursements or
revenues, if any, may be based on the amount of assets that PFL or the Mutual
Fund Account invests in the Underlying Funds.

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. Since the Portfolios of the
Underlying Funds are available to registered separate accounts offering
variable annuity products of PFL, as well as variable annuity and variable
life products of other insurance companies, 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
Dreyfus Money Market Portfolio 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 Dreyfus Money Market Portfolio (or in a similar portfolio
of money market instruments) or in another Subaccount, if appropriate.

- 29 -
<PAGE>

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 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 (i) transfer the assets of the Mutual Fund
Account associated with the Policies to another account or accounts, (ii)
restrict or eliminate any voting rights of Owners or other persons who have
voting rights as to the Mutual Fund Account, (iii) create new mutual fund
accounts, (iv) add new Subaccounts to or remove existing Subaccounts from the
Mutual Fund Account, or combine Subaccounts, or (v) 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, as amended, (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 while the staff of the SEC has not reviewed the disclosures in
this Prospectus which relate to the fixed portion, the disclosures may be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of the statements made in the
prospectus.

The Fixed Account is made up of all the general assets of PFL, other than
those in the Mutual Fund Account or in any other segregated asset account. The
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 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.

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

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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.

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 again 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. 41.) No
transfers from any Guaranteed Period Option to any other Investment Option
will be allowed prior to the end of the Guaranteed Period. (See "THE
RETIREMENT BUILDER ACCOUNTS--Transfers," p. 32.)

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).
The Owner bears the risk that PFL will not credit interest in excess of 3% per
year.

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 for amounts in the
DCA Fixed Account and will only be available under a Dollar Cost Averaging
(DCA) program. If the Owner, for any reason, discontinues the DCA program
before its completion, then the interest credited on amounts in the DCA
account may be adjusted downward, but not below the minimum guaranteed
effective annual interest rate of 3%. PFL may credit different interest rates
for DCA programs of varying time periods. Interest credited on the amounts in
the DCA Fixed Account will always be at least an annual effective rate of 3%.

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. Transfers will continue until the elected Subaccount
or DCA Fixed Account value is depleted. The amount transferred each time must
be at least $500. All transfers from the DCA account will be the same amount
as the initial transfer unless subsequently changed. Changes to the amount
transferred will only be allowed after the minimums are satisfied

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<PAGE>

or when additional premium is allocated or a new amount is transferred into
the DCA account. If the amount transferred is changed, the minimums must be
met again (that is, transfers must be scheduled for at least six more but not
more than 24 months, or for at least four more, but not more than eight
quarters). Changes can be made to the Subaccounts to which these transfers are
allocated. Dollar Cost Averaging transfers from the Dollar Cost Averaging
Fixed Account will not be subject to an Excess Interest Adjustment. (See "THE
RETIREMENT BUILDER ACCOUNTS--Dollar Cost Averaging," p. 34.)

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 purchases through periods of both high and low
price levels.

Guaranteed Interest Rates. PFL periodically will establish an applicable
Guaranteed Interest Rate for each of the Guaranteed Period Options within the
Fixed Account, and the Dollar Cost Averaging Fixed Account Option. Current
Guaranteed 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 or transferred will be subject to an Excess
Interest Adjustment, except those at the end of the Guaranteed Period Option.
(See "DISTRIBUTIONS UNDER THE POLICY--Excess Interest Adjustment," p.41.)

The Guaranteed 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 Guaranteed
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 Guaranteed 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.

PFL'S MANAGEMENT HAS COMPLETE AND SOLE DISCRETION TO DETERMINE THE
GUARANTEED INTEREST RATES. PFL CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE
GUARANTEED INTEREST RATES, EXCEPT THAT PFL GUARANTEES THAT FUTURE GUARANTEED
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

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<PAGE>

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 to charge
up to $10 per transfer in excess of 12 per Policy Year.

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 "THE RETIREMENT BUILDER
ACCOUNTS--Dollar Cost Averaging," p.34.)

After the Annuity Commencement Date, transfers out of the Fixed Account are
not permitted. (See "DISTRIBUTIONS UNDER THE POLICY--Annuity Payment Options,"
p.44.)

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 in the applicable
Subaccounts and/or Fixed Accounts as was taken from them 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.

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<PAGE>

TELEPHONE TRANSACTIONS

Owners (or their designated registered representative) may make transfers
and/or change the allocation of Additional 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 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. Discontinuance
of a DCA program may result in PFL reducing interest rates credited to amounts
remaining in the DCA Fixed Account if the conditions established for a
particular DCA program are not met. There is no charge for participation in
this program.

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<PAGE>

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: (i) a Dollar
Cost Averaging program is in effect, or (ii) 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,

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<PAGE>

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.

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%. 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 RETIREMENT BUILDER ACCOUNTS--Telephone Transactions," p.
34). 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.

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<PAGE>

POLICY VALUE

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

(i) Premium Payments; minus

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

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

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

(v) 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.

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<PAGE>

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. 44.) The Policy
cannot be surrendered after the Annuity Commencement Date. (See "DISTRIBUTIONS
UNDER THE POLICY--Annuity Payments," p. 43.)

When requesting a partial surrender ($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 surrender 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 surrenders ($500 minimum)
of up to 10% of the Policy Value 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%

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<PAGE>

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. 49. For a discussion of the Excess Interest Adjustment,
see "DISTRIBUTIONS UNDER THE POLICY--Excess Interest Adjustment," p. 41 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.

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. 54.)

POLICY LOANS FOR 403(B) POLICIES

After the Policy has been in force for at least 30 days and prior to the
Annuity Commencement Date, Owners of Policies used in connection with a TSA
Plan under Section 403(b) of the Code, if the TSA Plan is not subject to the
Employee Retirement Income Security Act of 1974, may elect a Policy Loan
Endorsement under which the Policy Owner can receive Policy Loans. The
availability of Policy Loans will also be governed by the provisions of the
TSA Plans involved. An Owner of a Policy used in connection with a TSA Plan
may be subject to income tax or tax penalties if loans from the plan are not
repaid in accordance with applicable provisions of the Code. In addition,
Internal Revenue Authorities suggest that a Policy Loan may, at least in some
circumstances, result in adverse tax consequences for the TSA Plan.
ACCORDINGLY, A COMPETENT TAX ADVISOR SHOULD BE CONSULTED BEFORE A POLICY LOAN
IS REQUESTED.

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<PAGE>

If the Policy Loan endorsement is available, the Owner can borrow against the
Policy an amount not to exceed: (1) 75% of the Policy Value when total
indebtedness (all Policy Loans and unpaid accrued interest) is less than or
equal to $10,000; or (2) 50% of the Policy Value when total indebtedness is
greater than $10,000 but less than or equal to $50,000. In all events, the
minimum amount that can be borrowed is $2,000 (unless otherwise required by
state law). The Owner has the sole responsibility for requesting loans and
making loan repayments that comply with applicable tax requirements.

When a loan is made, an amount equal to the loan will be withdrawn from the
Subaccount(s) and/or Fixed Account(s) specified by the Owner and transferred to
the loan reserve. The loan reserve is part of the Fixed Account used as
collateral for any Policy Loan. If no Subaccount(s) and/or Fixed Account are
specified, the loan will be made from each Subaccount and/or Fixed Account in
proportion to the portion of the Policy Value (immediately prior to the loan)
in each Subaccount and/or Fixed Account. Amounts transferred to the loan
reserve do not participate in the investment experience of the Subaccount(s)
from which they were withdrawn.

The loan date is the date PFL processes the loan request. A $50 fee will be
charged at the time of each Policy Loan origination (unless otherwise required
by state law). The Policy will be the sole security for the loan. PFL reserves
the right to postpone distributing the proceeds of a Policy Loan from the Fixed
Account for up to six months if required by regulatory authorities. Only one
new loan will be permitted during a Policy Year.

On each Policy Anniversary, PFL will compare the amount of the Policy Loan to
the amount in loan reserve. If the total indebtedness exceeds the amount in the
loan reserve, PFL will withdraw the difference from the Policy's Subaccount(s)
and/or Fixed Account in proportion to the portion of the Policy Value in each
Subaccount and/or Fixed Account and transfer it to the loan reserve. If the
amount of the loan reserve exceeds the amount of the outstanding loan, PFL will
withdraw the difference from the loan reserve and transfer it to the
Subaccount(s) and/or Fixed Account in accordance with the Owner's current
premium payment allocation. However, PFL reserves the right to require the
transfer to the Fixed Account if the amount was transferred from the Fixed
Account to establish the Policy Loan.

If the total indebtedness at any time exceeds the Policy Value, PFL will mail
notices to the last known addresses of the Owner and any assignee of record. If
the total indebtedness is not paid within 20 days after mailing of the notices,
the Policy will terminate without value.

Loan Interest. Interest on any loan will be at the Policy Loan rate of 7% in
arrears. Amounts in the loan reserve will earn interest at a minimum guaranteed
effective annual interest rate of 5%. In its sole discretion, PFL may declare
higher current interest rates from time to time. Different current interest
rates may be applied to the Fixed Account attributable to the loan reserve than
to other portions of the Fixed Account.

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<PAGE>

Repayment of Loans. Principal and interest must be repaid in substantially
level quarterly or monthly payments over a 5-year period or, if the loan is
used to acquire the Owner's principal residence, a 10, 15, or 20-year period,
but such an extended period cannot go beyond the Owner's estimated retirement
age. If a loan installment repayment is not received within 20 days from the
installment's original due date a deemed distribution of the entire amount of
the total indebtedness and any applicable charges under the Policy, including
any Surrender Charge, will take place. A deemed distribution will be reported
to the Internal Revenue Service as a taxable distribution. Under a Qualified
Plan, this distribution may be subject to income tax and a penalty tax, and
may cause the Policy to fail to qualify under the Code.

While the Policy is in force and before the Annuity Commencement Date, any
loan may be repaid in full. If not repaid, loans will automatically reduce the
amount of any Death Proceeds, the amount payable upon a Partial Withdrawal or
Surrender of the Policy, and the amount applied on the Annuity Commencement
Date to provide annuity payments.

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)--(i) has been confined in a
hospital or nursing facility for 30 consecutive days or (ii) 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.) (See DISTRIBUTIONS UNDER
THE POLICY--Nursing Care and Terminal Condition Withdrawal Option," p. 41.)

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 (i)
must have been employed full time for at least two years prior to becoming
unemployed, (ii) must have been employed full time on the Policy Date, (iii)
must have been unemployed for at least 60 consecutive days at the time of
withdrawal, and (iv) 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. 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

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<PAGE>

Adjustment except as provided for under "DISTRIBUTIONS UNDER THE POLICY--
Surrenders," p. 38 or "DISTRIBUTIONS UNDER THE POLICY--Nursing Care and
Terminal Condition Withdrawal Option," p. 41 above or "DISTRIBUTIONS UNDER THE
POLICY--Systematic Payout Option," p. 42.

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%.

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 (that is, Systematic Payouts will start at the end
of the payment mode selected, but not earlier than 30 days from the date of
request).

The Surrender Charge and Excess Interest Adjustment will be waived for
Owners under age 59 1/2 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

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<PAGE>

generally requires payments for life or life expectancy. These payments must
be continued until the later of age 59 1/2 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 1/2 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.

In certain circumstances amounts withdrawn pursuant to a Systematic Payout
may be included in the Owner's gross income and may be subject to penalty
taxes. In addition, Qualified Policies are subject to complex rules with
respect to restrictions on and taxation of distributions, including the
applicability of penalty taxes. 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. 54.)

ANNUITY PAYMENTS

Annuity Commencement Date. Unless the Annuity Commencement Date is changed,
Annuity Payments under a Policy will begin on the Annuity Commencement Date
which 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: (i) at least
thirty (30) days after the date notice of the change is received by PFL and
(ii) not later than the last day of the Policy month starting after the
Annuitant attains age 85. In no event will an Annuity Commencement Date be
permitted to be later than the last day of the Policy month following the
month in which the Annuitant attains age 95. The laws of some states may
require earlier Annuity Commencement Dates. The Annuity Commencement Date may
also be changed by the Beneficiary's election of the Annuity Option after the
Annuitant's death.

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.

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<PAGE>

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 "DISTRIBUTIONS UNDER THE POLICY--Death Benefit," p.47.) 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 an annuity purchased 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.

Availability as an Immediate Annuity. The Policy may be purchased and
immediately annuitized, without the need for an accumulation period. The
Annuity Commencement Date must be a date at least thirty days after notice of
such election is received by PFL.

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. Payment Options 1, 2
and 4 are based on a guaranteed interest rate of 3%. Payment 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.)

Payment 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.

Payment 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.

Payment 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.

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

Payment 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 Payment 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 Payment 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.

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<PAGE>

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
referred to as projection scale G.) The dollar amount of additional 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:

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

l. "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.

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

Certain Payment Options may not be available in some states.

Determination of Additional 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

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<PAGE>

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 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. 54)

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, who is the Annuitant, 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.

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<PAGE>

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. 51).

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. 51.)

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.

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 (i) and (ii), where

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

(ii) The amount that an Excess Partial Withdrawal reduces the Policy Value
(See "DISTRIBUTIONS UNDER THE POLICY--Surrenders," p. 38.) 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.

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<PAGE>

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 (i) be distributed within five years of the
date of the deceased Owner's death, or (ii) 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: (i) within five years after the date of the deceased Owner's
death, or (ii) 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 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.

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<PAGE>

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 (i) the spouse of the deceased Owner is the sole
beneficiary, (ii) the Owner is not a natural person and the primary Annuitant
dies or is changed, or (iii) 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 "DISTRIBUTIONS UNDER THE POLICY--Death Benefit" p. 47.)

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: (i) termination of
employment in the Texas public institutions of higher education; (ii)
retirement; or (iii) 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 1/2, 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, 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. 38.)

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. 41 or
"DISTRIBUTIONS UNDER THE POLICY--Unemployment Waiver," p. 41.) The Surrender
Charge is also waived upon certain Systematic Payouts. (See "DISTRIBUTIONS
UNDER THE POLICY--Systematic Payout Option," p. 42.).

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

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<PAGE>

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
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 an
annual Service Charge from the Policy Value of each Policy.

The 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 an amount 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).

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 0.15% of the net assets in the Mutual Fund Account.

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<PAGE>

PREMIUM TAXES

PFL currently makes no deduction from the Premium Payments for any state
premium taxes PFL pays in connection with Premium Payments it receives under
the Policies. However, PFL will deduct the aggregate premium taxes that it pays
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.

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.

EMPLOYEE AND AGENT PURCHASES

The Policy may be acquired by an employee or registered representative of any
broker/dealer authorized to sell the Policy or their spouse or minor children,
or by an officer, director, trustee or bona-fide full-time employee of PFL or
its affiliated companies or their spouse or minor children. In such a case, PFL
may credit an amount equal to a percentage of each Premium Payment to the
Policy due to lower acquisition costs PFL experiences on those purchases. The
credit will be reported to the Internal Revenue Service as taxable income to
the employee or registered representative. PFL may offer certain employer
sponsored savings plans, in its discretion reduced fees and charges including,
but not limited to, the Surrender Charges, the Mortality and Expense Risk Fee
and the Administrative Charge for certain sales under circumstances which may
result in savings of certain costs and expenses. In addition, there may be
other circumstances of which PFL is not presently aware which could result in
reduced sales or distribution expenses. Credits to the Policy or reductions in
these fees and charges will not be unfairly discriminatory against any Owner.

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<PAGE>

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. 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 an 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), 408(a), 408A 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.

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.

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<PAGE>

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 gross 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. The same aggregation rules apply to Roth
individual retirement annuities and accounts. The Roth IRAs and Traditional
IRAs shall be treated separately for distribution purposes.

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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 Annuity Purchase 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

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<PAGE>

prescribe a complex variety of results, depending on how the allocations were
made among the various types of Annuity Payment Options. Instead, any Owner is
advised to consult a competent tax adviser as to the potential tax effects of
allocating any amount of Adjusted Annuity Purchase 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.

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: (i) if
distributed in a lump sum, they are taxed in the same manner as a full
surrender, as described above, or (ii) 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 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. The withholding rate varies according to the
type of distribution and the Owner's tax status. For qualified policies,
"eligible rollover distributions" from section 401(a) plans and section 403(b)
tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity
form. The 20% withholding does not apply, however, if the Owner chooses a
"direct rollover" from the plan to another tax-qualified plan or IRA.

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<PAGE>

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; 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.

For qualified plans under section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year in which the Owner (or plan participant) reaches age 70
1/2. Each Owner is responsible for requesting distributions under the Policy
that satisfy applicable tax rules.

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 ("IRA"). In order to qualify as a Traditional
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 Traditional individual
retirement annuities under Section 408(b) of the Code contain such provisions.
Amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. Distributions prior to age 59 1/2 (unless certain
exceptions apply) are subject to a 10% penalty tax.

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

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<PAGE>

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.

Roth Individual Retirement Annuities (Roth IRA). The Roth IRA, under Section
408A of the Code, contains many of the same provisions as a Traditional IRA.
However, there are some differences. First, the contributions are not
deductible and must be made in cash or as a rollover or transfer from another
Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA
may be subject to tax and other special rules may apply. You should consult a
tax adviser before combining any converted amounts with any other Roth IRA
contributions, including any other conversion amounts from other tax years. The
Roth IRA is available to individuals with earned income and whose adjusted
gross income is under $110,000 for single filers, $160,000 for married filing
jointly, and $10,000 for married filing separately. The amount per individual
that may be contributed to all IRAs (Roth and Traditional) is $2,000. Secondly,
the distributions are taxed differently. The Roth IRA offers tax-free
distributions when made from assets which have been held in the account for 5
tax years and are made after attaining age 59 1/2, or to pay for qualified
first time homebuyer expenses (lifetime maximum of $10,000), or due to death or
disability. All other distributions are subject to income tax when made from
earnings and may be subject to a premature withdrawal penalty tax unless an
exception applies. Unlike the Traditional IRA, there are no minimum required
distributions during the Owner's lifetime; however, required distributions at
death are the same.

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. The Policy includes a Death Benefit that in some cases
may exceed the greater of the Premium Payments or the Policy Value. The Death
Benefit could be characterized as an incidental benefit, the amount of which is
limited in any tax-sheltered annuity under section 403(b). Because the Death
Benefit may exceed this limitation, employers using the Policy in connection
with such plans should consult their tax adviser. 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, (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.

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<PAGE>

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. The Policy includes a Death Benefit that in some cases may exceed the
greater of the Premium Payments or the Policy Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in an
pension or profit-sharing plan. Because the Death Benefit may exceed this
limitation, employers using the Policy in connection with such plans should
consult their tax adviser.

Deferred Compensation Plans. Section 457 of the Code, while not actually
providing for a qualified plan (as that term is used in the Code), provides for
certain deferred compensation plans with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. 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 the
sponsoring employer, and are subject to the claims of the general creditors of
the sponsoring employer (except for certain governmental plans). 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) 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."

- 60 -
<PAGE>

Possible Changes in Taxation. Although the likelihood of legislative change
in uncertain, there is always the possibility that the tax treatment of the
Policies could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted,
would adversely modify the federal taxation of the Policies. It is also
possible that any change could be retroactive (that is, effective prior to the
date of the change). A tax adviser should be consulted with respect to
legislative developments and their effect on the Policy.

DISTRIBUTOR OF THE POLICIES

AFSG Securities Corporation, like PFL, an indirect wholly-owned subsidiary of
AEGON U.S.A., located at 4333 Edgewood Road N.E., Cedar Rapids, IA 52499-0001,
is the principal underwriter of the Policies. AFSG Securities Corporation is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended. It is a member of the National Association of Securities Dealers, Inc.
("NASD").

Policies are sold by registered representatives of AFSG Securities
Corporation 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 AFSG Securities Corporation 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 AFSG Securities Corporation. 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 AFSG Securities Corporation 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

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<PAGE>

Owner has the right to instruct for a particular Subaccount will 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.

YEAR 2000 MATTERS

In October, 1996, PFL adopted and presently has in place a Year 2000
Assessment and Planning Project (the "Plan") to review and analyze existing
hardware and software systems, as well as voice and data communications
systems, to determine if they are Year 2000 compatible. The Plan provides for
a management process which ensures that when a particular system, or software
application, is determined to be "non-compliant" the proper steps are in place
to either remedy the "non-compliance" or cease using the particular system or
software. The Plan also provides that the Chief Information Officer report to
the Board of Directors as to the status of the efforts under the Plan on a
regular and routine basis. PFL has engaged the services of a third-party
provider that is specialized in Year 2000 issues to work on the project.

The Plan has four specific objectives (i) develop an inventory of all
applications; (ii) evaluate all applications in the inventory to determine the
most prudent manner to move them to Year 2000 compliance, if required; (iii)
estimate budgets, resources and schedules for the migration of the "affected"
applications to Year 2000 compliance; and (iv) define testing and deployment
requirements to successfully manage validation and re-deployment of any
changed code. It is anticipated that all compliance issues will be resolved by
December 1998.

As of the date of this Prospectus, PFL has identified and made available
what it believes are the appropriate resources of hardware, people, and
dollars, including the engagement of outside third parties, to ensure that the
Plan will be completed.

- 62 -

<PAGE>

The Year 2000 computer problem, and its resolution, is complex and
multifaceted, and the success of a response plan cannot be conclusively known
until the Year 2000 is reached (or an earlier date to the extent that the
systems or equipment addresses Year 2000 data prior to the Year 2000). Even
with appropriate and diligent pursuit of a well-conceived response plan,
including testing procedures, there is no certainty that any company will
achieve complete success. Further, notwithstanding its efforts or results,
PFL's ability to function unaffected to and through the Year 2000 may be
adversely affected by actions (or failure to act) of third parties beyond its
knowledge or control.

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, like other life insurance
companies, is a defendant in lawsuits. In some class action and other lawsuits
involving other insurers, substantial damages have been sought and/or material
settlement payments have been made. Although the outcome of any litigation
cannot be predicted with certainty, PFL believes that at the present time there
are no pending or threatened lawsuits that are reasonably likely to have a
material adverse impact on the Mutual Fund Account or PFL.

- 63 -

<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........................................................ 4
Federal Tax Matters........................................................ 5
Tax Status of the Policy................................................. 5
Taxation of PFL.......................................................... 6
Investment Experience...................................................... 6
Historical Performance Data................................................ 9
Money Market Yields...................................................... 9
Other Subaccount Yields.................................................. 10
Total Returns............................................................ 11
Other Performance Data................................................... 11
Hypothetical Performance Data............................................ 12
State Regulation of PFL.................................................... 12
Administration............................................................. 12
Records and Reports........................................................ 12
Distribution of the Policies............................................... 12
Other Products............................................................. 13
Custody of Assets.......................................................... 13
Legal Matters.............................................................. 13
Independent Auditors....................................................... 13
Other Information.......................................................... 13
Financial Statements....................................................... 13
</TABLE>

- 64 -
<PAGE>

APPENDIX A

EXCESS INTEREST ADJUSTMENT(1)

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%):

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
Contract Year 3
= 50,000* (1.055)/\ 2.5 = 57,161.18
Surrender Charge Free Amount at
middle of Policy Year 3
= 57,161.18* .30 = 17,148.35
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)/\ 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
- ----------------------------------
(1) *represents multiplication;
/\ represents exponentiation.

- 65 -
<PAGE>

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

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)/\ 2.5 = 57,161.18
Surrender Charge Free Amount at
middle of Policy Year 3
= 57,161.18* .30 = 17,148.35
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)/\ 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

- 66 -
<PAGE>

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.

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

Single Premium: $50,000
Guarantee Period: 5 Years
Guarantee Rate: 5.50% per annum
Partial Surrender: $30,000; Middle of Contract Year 3

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

Reduction to Policy Value due to
Surrender Charge--Free
withdrawal
= 17,148.35

Reduction to Policy Value due to
Excess Withdrawal
= X-Y + Z
= 12,851.65- (-570.97) + 805.36
= 14,227.98

- 67 -
<PAGE>

Policy Value after withdrawal at
middle of Policy Year 3
= 57,161.18 - [17,148.35 + 14,227.98]
= 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

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

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)/\ 2.5 = 57,161.18
Surrender Charge Free Amount at
middle of Policy Year 3
= 57,161.18* .30 = 17,148.35
EIA Free Amount at middle of
Policy Year 3
= 57,161.18 - 50,000 = 7,161.18

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

Reduction to Policy Value due to
Surrender Charge--Free
Withdrawal
= 17,148.35

Reduction to Policy Value due to
Excess Withdrawal
= X - Y + Z
= 12,851.65 - (570.97) + 736.84
= 13,017.52

Policy Value after withdrawal at
middle of Policy Year 3
= 57,161.18 - [17,148.35 + 13,017.52]
= 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

- 68 -
<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 , 1998, 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 PFL
RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT.

Dated: , 1998

- 1 -
<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 (52)................................................... 5
Tax Status of the Policy................................................. 5
Taxation of PFL.......................................................... 6
INVESTMENT EXPERIENCE...................................................... 6
HISTORICAL PERFORMANCE DATA (19)........................................... 9
Money Market Yields...................................................... 9
Other Subaccount Yields.................................................. 10
Total Returns............................................................ 11
Other Performance Data................................................... 11
Hypothetical Performance Data............................................ 12
STATE REGULATION OF PFL.................................................... 12
ADMINISTRATION............................................................. 12
RECORDS AND REPORTS........................................................ 12
DISTRIBUTION OF THE POLICIES (60).......................................... 12
OTHER PRODUCTS............................................................. 13
CUSTODY OF ASSETS.......................................................... 13
LEGAL MATTERS.............................................................. 13
INDEPENDENT AUDITORS....................................................... 13
OTHER INFORMATION.......................................................... 13
FINANCIAL STATEMENTS (19).................................................. 13
</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. 32 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 Retirement Income Builder 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 which 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 Owner's 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 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

- 5 -
<PAGE>

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;

(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.

- 6 -
<PAGE>

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

Then, the Investment Experience Factor =

11.57 + 0 - 0
------------- - .0000380909 = Z = 1.0148741898
11.40

FORMULA AND ILLUSTRATION FOR DETERMINING ACCUMULATION UNIT VALUE

Accumulation Unit Value = A x B

Where: A = The Accumulation Unit Value for the immediately preceding
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

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;

- 7 -
<PAGE>

(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.

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: A = Annuity Unit Value for the immediately preceding Valuation Period.
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

- 8 -
<PAGE>

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

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

Where: A = The Policy Value as of the Annuity Commencement Date.
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: A = The dollar amount of the first monthly Variable Annuity Payment.
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

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 and income other than
investment income) 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 x 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 and income other than investment
income) for the 7-day period attributable to a hypothetical
account having a balance of 1 Subaccount unit.

- 9 -
<PAGE>

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 7-day 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))/3//6//5///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 and income other than investment
income) 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.

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.

- 10 -
<PAGE>

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
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
non-standard 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%.

- 11 -
<PAGE>

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 non-standard 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.

HYPOTHETICAL 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.

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.

AFSG Securities Corporation, an affiliate of PFL, is the principal
underwriter of the Policies and may enter into agreements with broker-dealers
for the distribution of the Policies.

- 12 -
<PAGE>

OTHER PRODUCTS

PFL makes other variable annuity policies available that may also be funded
through the Mutual Fund Account. These variable annuity policies may have
different features, such as different investment options or charges.

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.

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.

INDEPENDENT AUDITORS

The Financial Statements of PFL as of December 31, 1997 and 1996, and for
each of the three years in the period ended December 31, 1997, 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.

- 13 -
<PAGE>

FINANCIAL STATEMENTS - STATUTORY BASIS

PFL LIFE INSURANCE COMPANY

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>

PFL Life Insurance Company

Financial Statements - Statutory Basis

Years ended December 31, 1997, 1996 and 1995

CONTENTS

<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors................................. 1

Audited Financial Statements

Balance Sheets - Statutory Basis................................ 3
Statements of Operations - Statutory Basis...................... 5
Statements of Changes in Capital and Surplus - Statutory Basis.. 6
Statements of Cash Flows - Statutory Basis...................... 7
Notes to Financial Statements - Statutory Basis................. 9
</TABLE>
<PAGE>

[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]

Report of Independent Auditors

The Board of Directors
PFL Life Insurance Company

We have audited the accompanying statutory-basis balance sheets of PFL Life
Insurance Company as of December 31, 1997 and 1996, and the related statutory-
basis statements of operations, changes in capital and surplus, and cash flows
for each of the three years in the period ended December 31, 1997. Our audits
also included the accompanying statutory-basis financial statement schedules
required by Article 7 of Regulation S-X. These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa, which practices differ from generally accepted accounting principles. The
variances between such practices and generally accepted accounting principles
also are described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.

In our opinion, because of the effects of the matters described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of PFL Life Insurance Company at December 31, 1997 and 1996, or the results of
its operations or its cash flows for each of the three years in the period ended
December 31, 1997.

1
<PAGE>

[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]

Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PFL Life Insurance Company
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with accounting practices prescribed or permitted by the Insurance
Division, Department of Commerce, of the State of Iowa. Also, in our opinion,
the related financial statement schedules, when considered in relation to the
basic statutory-basis financial statements taken as a whole, present fairly in
all material respects the information set forth therein.

/s/ Ernst & Young LLP

February 27, 1998

2
<PAGE>

PFL Life Insurance Company

Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
--------------------------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments $ 23,939 $ 50,737
Bonds 4,913,144 4,773,433
Stocks:
Preferred 2,750 3,097
Common (cost: 1997 - $33,058; 1996 - $23,212) 42,345 32,038
Affiliated entities (cost: 1997 - $10,798; 1996 -
$14,893) 8,031 6,934

Mortgage loans on real estate 935,207 911,705
Real estate, at cost less accumulated depreciation
($8,655 in 1997; $11,338 in 1996):
Home office properties 8,283 10,372
Properties acquired in satisfaction of debt 11,814 12,260
Investment properties 36,416 35,922
Policy loans 57,136 54,214
Other invested assets 29,864 16,343
--------------------------------
Total cash and invested assets 6,068,929 5,907,055

Premiums deferred and uncollected 16,101 16,345
Accrued investment income 69,662 70,401
Short-term notes receivable from affiliate -- 53,900
Federal income taxes recoverable -- 4,018
Transfers from separate accounts 60,193 38,528
Other assets 37,624 31,215
Separate account assets 2,517,365 1,844,515
--------------------------------
Total admitted assets $8,769,874 $7,965,977
================================
</TABLE>

See accompanying notes.

3
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 884,018 $ 736,100
Annuity 4,204,125 4,408,419
Accident and health 169,328 139,269
Policy and contract claim reserves:
Life 8,635 7,369
Accident and health 57,713 66,988
Other policyholders' funds 143,831 126,672
Remittances and items not allocated 153,745 64,064
Asset valuation reserve 69,825 54,851
Interest maintenance reserve 30,287 23,745
Federal income taxes payable 1,889 --
Short-term notes payable to affiliates 16,400 --
Other liabilities 75,070 70,663
Payable to affiliates 13,240 4,975
Separate account liabilities 2,512,406 1,844,515
--------------------------------
Total liabilities 8,340,512 7,547,630

Commitments and contingencies

Capital and surplus:
Common stock, $10 par value, 500 shares authorized,
266 issued and outstanding 2,660 2,660

Paid-in surplus 154,282 154,129
Unassigned surplus 272,420 261,558
--------------------------------
Total capital and surplus 429,362 418,347
--------------------------------
Total liabilities and capital and surplus $8,769,874 $7,965,977
================================
</TABLE>

See accompanying notes.

4
<PAGE>

PFL Life Insurance Company

Statements of Operations - Statutory Basis
(Dollars in thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of
reinsurance:
Life $ 202,435 $ 204,872 $ 114,704
Annuity 657,695 725,966 921,452
Accident and health 207,982 227,862 232,738
Net investment income 446,424 428,337 392,685
Amortization of interest maintenance reserve 3,645 2,434 4,341
Commissions and expense allowances on reinsurance
ceded 49,859 73,931 77,071
--------------------------------------------------------
1,568,040 1,663,402 1,742,991
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits 146,583 147,024 146,346
Surrender benefits 658,071 512,810 498,626
Other benefits 126,495 101,288 88,607
Increase (decrease) in aggregate reserves for
policies and contracts:
Life 149,575 140,126 50,071
Annuity (203,139) 188,002 528,330
Accident and health 30,059 26,790 17,694
Other 16,998 19,969 16,017
--------------------------------------------------------
924,642 1,136,009 1,345,691
Insurance expenses:
Commissions 157,300 177,466 200,706
General insurance expenses 57,571 57,282 57,623
Taxes, licenses and fees 8,715 13,889 15,700
Net transfers to separate accounts 297,480 171,785 42,981
Other expenses 119 526 760
--------------------------------------------------------
521,185 420,948 317,770
--------------------------------------------------------
1,445,827 1,556,957 1,663,461
--------------------------------------------------------

Gain from operations before federal income taxes and
net realized capital gains (losses) on investments 122,213 106,445 79,530

Federal income tax expense 43,381 41,177 33,335
--------------------------------------------------------

Gain from operations before net realized capital
gains (losses) on investments 78,832 65,268 46,195

Net realized capital gains (losses) on investments
(net of related federal income taxes and amounts
transferred to interest maintenance reserve) 7,159 (3,503) (18,096)

--------------------------------------------------------
Net income $ 85,991 $ 61,765 $ 28,099
========================================================
</TABLE>

See accompanying notes.

5
<PAGE>

PFL Life Insurance Company

Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)

<TABLE>
<CAPTION>
TOTAL CAPITAL
COMMON STOCK PAID-IN UNASSIGNED AND SURPLUS
SURPLUS SURPLUS

---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $2,660 $114,129 $211,552 $328,341
Capital contribution - 40,000 - 40,000
Net income for 1995 - - 28,099 28,099
Net unrealized capital losses - - (7,574) (7,574)
Decrease in non-admitted assets - - 50 50
Increase in asset valuation reserve - - (5,946) (5,946)
Surplus effect of ceding commissions
associated with the sale of a division - - 35 35
Cancellation of reinsurance agreement - - 585 585
Amendment of reinsurance agreement - - 419 419
Transfer of subsidiary investment to
stockholder - - (3,250) (3,250)
Change in reserve valuation methodology - - (501) (501)
Increase in liability for reinsurance in
unauthorized companies - - (2,730) (2,730)
---------------------------------------------------------------------
Balance at December 31, 1995 2,660 154,129 220,739 377,528
Net income for 1996 - - 61,765 61,765
Net unrealized capital gains - - 2,351 2,351
Increase in non-admitted assets - - (148) (148)
Increase in asset valuation reserve - - (10,930) (10,930)
Dividend to stockholder - - (20,000) (20,000)
Prior period adjustment - - 5,025 5,025
Surplus effect of sale of a division - - (384) (384)
Surplus effect of ceding commission
associated with the sale of a division - - 29 29
Amendment of reinsurance agreement - - 421 421
Decrease in liability for reinsurance in
unauthorized companies - - 2,690 2,690
---------------------------------------------------------------------
Balance at December 31, 1996 2,660 154,129 261,558 418,347
Capital contribution - 153 - 153
Net income for 1997 - - 85,991 85,991
Net unrealized capital gains - - 3,592 3,592
Increase in non-admitted assets - - (481) (481)
Increase in asset valuation reserve - - (14,974) (14,974)
Dividend to stockholder - - (62,000) (62,000)
Surplus effect of sale of a division - - (161) (161)
Surplus effect of ceding commissions
associated with the sale of a division - - 5 5
Surplus effect of amendment of reinsurance - - 389 389
agreement
Surplus effect of reinsurance agreement - - 402 402
Increase in liability for reinsurance in
unauthorized companies - - (1,901) (1,901)
---------------------------------------------------------------------
Balance at December 31, 1997 $2,660 $154,282 $272,420 $429,362
=====================================================================
</TABLE>

See accompanying notes.

6
<PAGE>

PFL Life Insurance Company

Statements of Cash Flows - Statutory Basis
(Dollars in thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Premiums and other considerations, net of reinsurance $ 1,119,936 $ 1,240,748 $ 1,353,407
Net investment income 452,091 431,456 398,051
Life and accident and health claims (154,383) (147,556) (140,798)
Surrender benefits and other fund withdrawals (658,071) (512,810) (498,626)
Other benefits to policyholders (126,462) (101,254) (88,519)
Commissions, other expenses and other taxes (225,042) (248,321) (278,241)
Net transfers to separate accounts (319,146) (210,312) (42,981)
Federal income taxes, excluding tax on capital gains (47,909) (35,551) (32,905)
Cash paid in conjunction with an amendment of a
reinsurance agreement (4,826) (5,812)
Repayment of intercompany notes and receivables, net - - (48,070)
Cash received in connection with a reinsurance
agreement 1,477 - -

Other, net 89,693 (41,677) 62,345
--------------------------------------------------------------
Net cash provided by operating activities 127,358 368,911 683,663

INVESTING ACTIVITIES
Proceeds from investment sold, matured or repaid:
Bonds and preferred stocks 3,284,095 2,112,831 1,757,229
Common stocks 34,004 27,214 20,338
Mortgage loans on real estate 138,162 74,351 36,550
Real estate 6,897 18,077 23,203
Cash received from ceding commissions associated
with the sale of a division 8 45 55
Other 57,683 22,568 8,258
--------------------------------------------------------------
3,520,849 2,255,086 1,845,633

Cost of investments acquired:
Bonds and preferred stocks (3,411,442) (2,270,105) (2,294,195)
Common stocks (37,339) (29,799) (23,284)
Mortgage loans on real estate (159,577) (324,381) (192,292)
Real estate (2,013) (222) (10,188)
Policy loans (2,922) (1,539) (877)
Cash paid in association with the sale of a division - (539) -
Cash paid in conjunction with sales of a division (591) (123) -
Other (15,674) (6,404) (2,670)
--------------------------------------------------------------
(3,629,558) (2,633,112) (2,523,506)
--------------------------------------------------------------
Net cash used in investing activities (108,709) (378,026) (677,873)
</TABLE>

7
<PAGE>

PFL Life Insurance Company

Statements of Cash Flows - Statutory Basis (continued)
(Dollars in thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C>

FINANCING ACTIVITIES
Issuance of short-term intercompany notes payable $ 16,400 $ - $ 40,000
Capital contribution 153 - -
Dividends to stockholder (62,000) (20,000) -
-----------------------------------------------------------
Net cash provided by (used in) financing activities (45,447) (20,000) 40,000
-----------------------------------------------------------
Increase (decrease) in cash and short-term
investments (26,798) (29,115) 45,790

Cash and short-term investments at beginning of year 50,737 79,852 34,062
-----------------------------------------------------------
Cash and short-term investments at end of year $ 23,939 $ 50,737 $ 79,852
===========================================================
</TABLE>

See accompanying notes.

8
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis
(Dollars in thousands)

December 31, 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

PFL Life Insurance Company ("the Company") is a stock life insurance company and
is a wholly-owned subsidiary of First AUSA Life Insurance Company ("First
AUSA"), which, in turn, is a wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"). AEGON is a wholly-owned subsidiary of AEGON nv, a holding company
organized under the laws of The Netherlands.

In connection with the sale of certain affiliated companies, the Company has
assumed various blocks of business from these former affiliates through mergers.
In addition, the Company has canceled or entered into several coinsurance and
reinsurance agreements with affiliates and non-affiliates. The following is a
description of those transactions:

. During 1996, the Company sold its North Richland Hills, Texas health
administrative operations known as The Insurance Center. The transaction
resulted in the transfer of substantially all employees and office
facilities to United Insurance Companies, Inc. ("UICI"). All inforce
business will continue to be shared by UICI and the Company and its
affiliates through the existing coinsurance agreements. After a short
transition period, all new business produced by United Group Association, an
independent insurance agency, will be written by the insurance subsidiaries
of UICI and will not be shared with the Company and its affiliates through
coinsurance arrangements. As a result of the sale, during 1996 the Company
transferred $123 in assets, substantially all of which was cash, and $70 of
liabilities. The difference between the assets and liabilities of $(53) plus
a tax credit of $19 was charged directly to unassigned surplus. During 1997,
the Company transferred $591 in assets, substantially all of which was cash
and $343 of liabilities. The difference between the assets and liabilities
of $(248) net of a tax credit of $87 was charged directly to unassigned
surplus.

. Effective December 31, 1995, the Company canceled a coinsurance agreement
with its parent, First AUSA. As a result of the cancellation, the Company
transferred $825 of assets and $1,712 of liabilities. The difference between
the assets and liabilities, net of a tax effect of $302 was credited
directly to unassigned surplus.

9
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

. On January 1, 1994, the Company entered into an agreement with a non-
affiliate reinsurer to increase the reinsurance ceded by 2-1/2% each year
(primarily group health business). As a result, the Company transferred
$4,303 in assets and liabilities of $4,467 during 1995. The difference
between the assets and liabilities of $164, plus a tax credit of $255, was
credited directly to unassigned surplus. During 1996, the Company
transferred $5,991 in assets, including $5,812 of cash and short-term
investments and liabilities of $6,146. The difference between the assets and
liabilities of $155, plus a tax credit of $266 was credited directly to
unassigned surplus. During 1997, the Company transferred $5,045 in assets,
including $4,826 of cash and short-term investments, and liabilities of
$5,164. The difference between the assets and liabilities of $119 plus a tax
credit of $270 was credited directly to unassigned surplus.

. During 1993, the Company sold the Oakbrook Division (primarily group health
business). The initial transfer of risk occurred through an indemnity
reinsurance agreement. The policies will then be assumed by the reinsurer by
novation as state regulatory and policyholder approvals are received. During
1996, the Company paid $539 in association with this sale; the payment, net
of a tax credit of $189, were charged directly to unassigned surplus. In
addition, the Company will receive from the third party administrator a
ceding commission of one percent of the premiums collected between January
1, 1994 and December 31, 1996. As a result of the sale, in 1995, the Company
received $55 for ceding commissions; the commissions net of the related tax
effect of $20 was credited directly to unassigned surplus. During 1996, the
Company received $45 for ceding commissions; the commissions net of the
related tax effect of $(16) was charged directly to unassigned surplus. In
1997, the Company received $8 for ceding commissions; the commissions net of
the related tax effect of $3 was credited directly to unassigned surplus.

. During 1997, the Company entered into a reinsurance agreement with a non-
affiliate. As a result of the agreement, the Company received $1,480 of
assets, including $1,477 of cash and short-term securities, and $861 of
liabilities. The difference between the assets and liabilities of $619, net
of a tax effect of $217 was credited directly to unassigned surplus.

NATURE OF BUSINESS

The Company sells individual non-participating whole life, endowment and term
contracts, as well as a broad line of single fixed and flexible premium annuity
products. In addition, the Company offers group life, universal life, and
individual and specialty health coverages. The Company is licensed in 49 states
and the District of Columbia. Sales of the Company's products are primarily
through the Company's agents and financial institutions.

10
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

BASIS OF PRESENTATION

The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract claim reserves, guaranty fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and assumptions
utilized which could have a material impact on the financial statements.

The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa, which practices differ in some
respects from generally accepted accounting principles. The more significant of
these differences are as follows: (a) bonds are generally reported at amortized
cost rather than segregating the portfolio into held-to-maturity (reported at
amortized cost), available-for-sale (reported at fair value), and trading
(reported at fair value) classifications; (b) acquisition costs of acquiring new
business are charged to current operations as incurred rather than deferred and
amortized over the life of the policies; (c) policy reserves on traditional life
products are based on statutory mortality rates and interest which may differ
from reserves based on reasonable assumptions of expected mortality, interest,
and withdrawals which include a provision for possible unfavorable deviation
from such assumptions; (d) policy reserves on certain investment products use
discounting methodologies based on statutory interest rates rather than full
account values; (e) reinsurance amounts are netted against the corresponding
asset or liability rather than shown as gross amounts on the balance sheet; (f)
deferred income taxes are not provided for the difference between the financial
statement and income tax bases of assets and liabilities; (g) net realized gains
or losses attributed to changes in the level of interest rates in the market are
deferred and amortized over the remaining life of the bond or mortgage loan,
rather than recognized as gains or losses in the statement of operations when
the sale is completed; (h) potential declines in the estimated realizable value
of investments are provided for through the establishment of a formula-
determined statutory investment reserve (reported as a liability) changes to
which are charged directly to surplus, rather than through recognition in the
statement of operations for declines in value, when such declines are judged to
be other than temporary; (i) certain assets designated as "non-admitted assets"
have been charged to surplus rather than being reported as assets; (j) revenues
for universal life and investment products consist of premiums received rather
than policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed; (k)
pension expense is recorded as amounts are paid;

11
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) adjustments to federal income taxes of prior years are charged or credited
directly to unassigned surplus, rather than reported as a component of expense
in the statement of operations; (m) gains or losses on dispositions of business
are charged or credited directly to unassigned surplus rather than being
reported in the statement of operations; and (n) a liability is established for
"unauthorized reinsurers" and changes in this liability are charged or credited
directly to unassigned surplus. The effects of these variances have not been
determined by the Company.

The National Association of Insurance Commissioners (NAIC) currently is in the
process of recodifying statutory accounting practices, the result of which is
expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be completed in 1998,
will likely change, to some extent, prescribed statutory accounting practices
and may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements.

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, the Company considers all highly
liquid investments with remaining maturity of one year or less when purchased to
be cash equivalents.

INVESTMENTS

Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the security. The Company reviews its
prepayment assumptions on mortgage and other asset backed securities at regular
intervals and adjusts amortization rates retrospectively when such assumptions
are changed due to experience and/or expected future patterns. Investments in
preferred stocks in good standing are reported at cost. Investments in preferred
stocks not in good standing are reported at the lower of cost or market. Common
stocks of affiliated and unaffiliated companies, which includes shares of mutual
funds (money market and other), are carried at market. Real estate is reported
at cost less allowances for depreciation. Depreciation is computed principally
by the straight-line method. Policy loans are reported at unpaid principal.
Other invested assets consist principally of investments in various joint
ventures and are recorded at equity in underlying net assets. Other "admitted
assets" are valued, principally at cost, as required or permitted by Iowa
Insurance Laws.

12
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve (IMR), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.

Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or on real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. At December 31, 1997, 1996 and 1995, the
Company excluded investment income due and accrued of $177, $1,541 and $2,272,
respectively, with respect to such practices.

The Company uses interest rate swaps and caps as part of its overall interest
rate risk management strategy for certain life insurance and annuity products.
The Company entered into several interest rate swap contracts to modify the
interest rate characteristics of the underlying liabilities. The net interest
effect of such swap transactions is reported as an adjustment of interest income
from the hedged items as incurred.

The Company has entered into interest-rate cap agreements to hedge the exposure
of changing interest rates. The cash flows from the interest rate caps will help
offset losses that might occur from changes in interest rates. The cost of such
agreements is included in interest expense ratably during the life of the
agreement. Income received as a result of the cap agreement will be recognized
in investment income as earned. Unamortized cost of the agreements is included
in other assets.

AGGREGATE POLICY RESERVES

Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables based on
statutorily specified interest rates and valuation methods that will provide, in
the aggregate, reserves that are greater than or equal to the minimum required
by law.

13
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality and
American Experience Mortality Tables. The reserves are calculated using interest
rates ranging from 2.00 to 6.00 percent and are computed principally on the Net
Level Premium Valuation and the Commissioners' Reserve Valuation Methods.
Reserves for universal life policies are based on account balances adjusted for
the Commissioners' Reserve Valuation Method.

Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with and without life contingencies are
equal to the present value of future payments assuming interest rates ranging
from 2.50 to 11.25 percent and mortality rates, where appropriate, from a
variety of tables.

Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.

POLICY AND CONTRACT CLAIM RESERVES

Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.

SEPARATE ACCOUNTS

Assets held in trust for purchases of variable annuity contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. The assets in the separate accounts are valued at market.
Income and gains and losses with respect to the assets in the separate accounts
accrue to the benefit of the policyholders and, accordingly, the operations of
the separate accounts are not included in the accompanying financial statements.
The separate accounts do not have any minimum guarantees and the investment
risks associated with market value changes are borne entirely by the
policyholders. The Company received variable contract premiums of $281,095,
$227,864 and $133,386 in 1997, 1996 and 1995, respectively. All variable account
contracts are subject to discretionary withdrawal by the policyholder at the
market value of the underlying assets less the current surrender charge.

14
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECLASSIFICATIONS

Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation.

2. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, requires disclosure of fair value information
about financial instruments, whether or not recognized in the statutory-basis
balance sheet, for which it is practicable to estimate that value. SFAS No. 119,
Disclosures about Derivative Financial Instruments and Fair Value of Financial
Instruments, requires additional disclosure about derivatives. In cases where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparisons to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument. Statement of
Financial Accounting Standards No. 107 and No. 119 exclude certain financial
instruments and all nonfinancial instruments from their disclosure requirements
and allow companies to forego the disclosures when those estimates can only be
made at excessive cost. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and short-term investments: The carrying amounts reported in the balance
sheet for these instruments approximate their fair values.

Investment securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments. The fair values for equity securities are based on
quoted market prices.

Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal their carrying value.

15
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

2. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash flow
calculations, based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.

Interest rate cap and interest rate swaps: Estimated fair value of the
interest rate cap is based upon the latest quoted market price.

Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.

The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement of
Financial Accounting Standards No. 107 and No. 119:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------ ------------------------------
CARRYING Carrying
VALUE FAIR VALUE Value FAIR VALUE
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Bonds $4,913,144 $5,046,527 $4,773,433 $4,867,770
Preferred stocks 2,750 8,029 3,097 7,133
Common stocks 42,345 42,345 32,038 32,038
Affiliated common stock 8,031 8,031 6,934 6,934
Mortgage loans on real estate 935,207 983,720 911,705 922,010
Policy loans 57,136 57,136 54,214 54,214
Cash and short-term
investments 23,939 23,939 50,737 50,737

Interest rate cap 5,618 1,513 6,797 6,975
Interest rate swaps - 2,546 - -
Separate account assets 2,517,365 2,517,365 1,844,515 1,844,515

LIABILITIES
Investment contract liabilities 4,345,181 4,283,461 4,532,568 4,398,630
Separate account liabilities 2,452,205 2,452,205 1,803,057 1,803,057
</TABLE>

16
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS

The carrying value and estimated fair value of investments in debt securities
were as follows:

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
United States Government and agencies $ 188,241 $ 2,562 $ (21) $ 190,782
State, municipal and other government 61,532 2,584 (1,774) 62,342
Public utilities 121,582 5,384 (2,952) 124,014
Industrial and miscellaneous 1,955,587 85,233 (7,752) 2,033,068
Mortgage-backed securities 2,586,202 55,382 (5,263) 2,636,321
-----------------------------------------------------------------
4,913,144 151,145 (17,762) 5,046,527
Preferred stocks 2,750 5,279 - 8,029
-----------------------------------------------------------------
$4,915,894 $156,424 $(17,762) $5,054,556
=================================================================
DECEMBER 31, 1996
Bonds:
United States Government and agencies $ 136,450 $ 3,301 $ 180 $ 139,571
State, municipal and other government 59,644 1,906 177 61,373
Public utilities 147,918 5,616 1,020 152,514
Industrial and miscellaneous 1,958,681 64,710 8,105 2,015,286
Mortgage-backed securities 2,470,740 43,896 15,610 2,499,026
-----------------------------------------------------------------
4,773,433 119,429 25,092 4,867,770
Preferred stocks 3,097 4,036 - 7,133
-----------------------------------------------------------------
$4,776,530 $123,465 $ 25,092 $4,874,903
=================================================================
</TABLE>

The carrying value and estimated fair value of bonds at December 31, 1997, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
----------------------------
<S> <C> <C>
Due in one year or less $ 132,834 $ 133,608
Due after one year through five years 1,036,862 1,066,474
Due after five years through ten years 886,542 915,229
Due after ten years 270,704 294,895
----------------------------
2,326,942 2,410,206
Mortgage and other asset-backed securities 2,586,202 2,636,321
----------------------------
$4,913,144 $5,046,527
============================
</TABLE>

17
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

A detail of net investment income is presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
Interest on bonds and notes $373,496 $364,356 $342,182
Dividends on equity investments 1,460 1,436 1,822
Interest on mortgage loans 80,266 69,418 52,702
Rental income on real estate 7,501 9,526 10,443
Interest on policy loans 3,400 3,273 3,112
Other investment income 613 1,799 1,803
--------------------------------------

Gross investment income 466,736 449,808 412,064

Investment expenses 20,312 21,471 19,379
--------------------------------------
Net investment income $446,424 $428,337 $392,685
======================================
</TABLE>

Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
----------------------------------------------
<S> <C> <C> <C>
Proceeds $3,284,095 $2,112,831 $1,757,229
==============================================

Gross realized gains $ 30,094 $ 19,876 $ 19,721
Gross realized losses (17,265) (19,634) (34,399)
----------------------------------------------
Net realized gains (losses) $ 12,829 $ 242 $ (14,678)
==============================================
</TABLE>

At December 31, 1997, investments with an aggregate carrying value of $5,944,376
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required by
statute.

18
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

Realized investment gains (losses) and changes in unrealized gains (losses) for
investments are summarized below:

<TABLE>
<CAPTION>
REALIZED
---------------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
---------------------------------------

<S> <C> <C> <C>
Debt securities $ 12,829 $ 242 $(14,678)
Short-term investments (19) (197) 24
Equity securities 6,972 1,798 504
Mortgage loans on real estate 2,252 (5,530) (1,053)
Real estate 4,252 1,210 (1,908)
Other invested assets 1,632 12 (970)
---------------------------------------
27,918 (2,465) (18,081)

Tax effect (10,572) (1,235) 7,878
Transfer to interest maintenance reserve (10,187) 197 (7,891)
---------------------------------------
Net realized gains (losses) $ 7,159 $(3,503) $(18,096)
=======================================

<CAPTION>
CHANGE IN UNREALIZED
---------------------------------------
YEAR ENDED DECEMBER 31
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Debt securities $40,289 $(115,867) $355,560
Equity securities 5,653 2,929 (16,379)
----------------------------------------
Change in unrealized appreciation
(depreciation) $45,942 $(112,938) $339,181
=======================================
</TABLE>

Gross unrealized gains and gross unrealized losses on equity securities were as
follows:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Unrealized gains $10,356 $ 9,590 $ 6,833
Unrealized losses (3,836) (8,723) (8,895)
---------------------------------------
Net unrealized gains (losses) $ 6,520 $ 867 $(2,062)
=======================================

19
</TABLE>
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

During 1997, the Company issued mortgage loans with interest rates ranging from
7.32% to 8.62%. The maximum percentage of any one mortgage loan to the value of
the underlying real estate at origination was 80%. Mortgage loans with a
carrying value of $237 were non-income producing for the previous twelve months.
Accrued interest of $79 related to these mortgage loans was excluded from
investment income. The Company requires all mortgaged properties to carry fire
insurance equal to the value of the underlying property.

During 1996 and 1995, mortgage loans of $13,163 and $1,644, respectively, were
foreclosed and transferred to real estate. No mortgage loans were foreclosed
during 1997. At December 31, 1997 and 1996, the Company held a mortgage loan
loss reserve in the asset valuation reserve of $11,985 and $5,432, respectively.
The mortgage loan portfolio is diversified by geographic region and specific
collateral property type as follows:

<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION PROPERTY TYPE DISTRIBUTION
- -------------------------------------- --------------------------------------
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
--------------- ---------------
<S> <C> <C> <C> <C> <C>
South Atlantic 29% 26% Retail 35% 37%
Pacific 15 13 Office 31 34
E. North Central 12 15 Apartment 14 14
Mountain 10 10 Other 14 12
W. South Central 9 12 Industrial 6 3
E. South Central 8 9
Middle Atlantic 7 6
W. North Central 6 6
New England 4 3
</TABLE>

At December 31, 1997, the Company had the following investments (excluding U. S.
Government guaranteed or insured issues) which individually represented more
than ten percent of capital and surplus and the asset valuation reserve:

<TABLE>
<CAPTION>
DESCRIPTION OF SECURITY OR ISSUER CARRYING VALUE
- -------------------------------------------------- ----------------------
<S> <C>
Bonds:
Structured Asset Securities Corporation $66,650
Countrywide Mortgage Backed Securities, Inc. 94,918
</TABLE>

20
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

3. INVESTMENTS (CONTINUED)

The Company utilizes a variety of off-balance sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of its
investment portfolio attributable to changes in general interest rate levels and
to manage duration mismatch of assets and liabilities. Those instruments include
interest rate exchange agreements (swaps and caps), options, and commitments to
extend credit and all involve elements of credit and market risks in excess of
the amounts recognized in the accompanying financial statements at a given point
in time. The contract or notional amounts of those instruments reflect the
extent of involvement in the various types of financial instruments.

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract) that
would result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance by
a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.

At December 31, 1997 and 1996, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:

<TABLE>
<CAPTION>
NOTIONAL AMOUNT
1997 1996
-----------------------
<S> <C> <C>
Derivative securities:
Interest rate swaps:
Receive fixed pay floating $100,000 $ -
Receive floating (uncapped) - pay floating (capped) 67,229 -
Interest rate cap agreements 500,000 500,000
</TABLE>

4. REINSURANCE

The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to meet
its obligation under the reinsurance treaty.

21
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

4. REINSURANCE (CONTINUED)

Reinsurance assumption and cession treaties are transacted primarily with
affiliates. Premiums earned reflect the following reinsurance assumed and ceded
amounts:

<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
Direct premiums $1,312,446 $1,457,450 $1,591,531
Reinsurance assumed 2,038 1,796 2,356
Reinsurance ceded (246,372) (300,546) (324,993)
--------------------------------------------------
Net premiums earned $1,068,112 $1,158,700 $1,268,894
==================================================
</TABLE>

The Company received reinsurance recoveries in the amount of $183,638, $168,155
and $167,287 during 1997, 1996 and 1995, respectively. At December 31, 1997 and
1996, estimated amounts recoverable from reinsurers that have been deducted from
policy and contract claim reserves totaled $60,437 and $63,226, respectively.
The aggregate reserves for policies and contracts were reduced for reserve
credits for reinsurance ceded at December 31, 1997 and 1996 of $2,434,130 and
$2,737,441, respectively.

At December 31, 1997, amounts recoverable from unauthorized reinsurers of
$73,080 (1996 $73,434) and reserve credits for reinsurance ceded of $78,838
(1996 $55,035) were associated with a single reinsurer and its affiliates. The
Company holds collateral under these reinsurance agreements in the form of trust
agreements totaling $117,686 at December 31, 1997 that can be drawn on for
amounts that remain unpaid for more than 120 days.

5. INCOME TAXES

For federal income tax purposes, the Company joins in a consolidated tax return
filing with certain affiliated companies. Under the terms of a tax-sharing
agreement between the Company and its affiliates, the Company computes federal
income tax expense as if it were filing a separate income tax return, except
that tax credits and net operating loss carryforwards are determined on the
basis of the consolidated group. Additionally, the alternative minimum tax is
computed for the consolidated group and the resulting tax, if any, is allocated
back to the separate companies on the basis of the separate companies'
alternative minimum taxable income.

22
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

5. INCOME TAXES (CONTINUED)

Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before taxes and
realized capital losses for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Computed tax at federal statutory rate (35%) $42,775 $37,256 $27,835
Tax reserve adjustment 2,004 2,211 2,405
Excess tax depreciation (392) (384) (365)
Deferred acquisition costs tax basis 4,308 5,583 4,581
Prior year over accrual (1,016) (499) (306)
Dividend received deduction (941) (454) (56)
Charitable contribution (848) - -
Other items net (2,509) (2,536) (759)
-------------------------------------------
Federal income tax expense $43,381 $41,177 $33,335
===========================================
</TABLE>

Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($20,387 at December 31, 1997). To the extent dividends are paid from
the amount accumulated in the policyholders' surplus account, net earnings would
be reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $7,135.

The Company's federal income tax returns have been examined and closing
agreements have been executed with the Internal Revenue Service through 1987.
During 1996, there was a $5,025 prior period adjustment to the tax accrual. This
included a $2,100 writeoff of an intangible asset for tax purposes, and a
federal income tax refund of $1,829 for tax years 1984-1986 and related interest
of $1,686, net of a tax effect of $590. An examination is underway for years
1988 through 1995.

6. POLICY AND CONTRACT ATTRIBUTES

Participating life insurance policies are issued by the Company which entitle
policyholders to a share in the earnings of the participating policies, provided
that a dividend distribution, which is determined annually based on mortality
and persistency experience of the participating policies, is authorized by the
Company. Participating insurance constituted approximately .9% and 1.0% of
ordinary life insurance in force at December 31, 1997 and 1996, respectively.

23
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relate to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------- --------------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment $ 8,912 0% $ 20,800 0%
Subject to discretionary withdrawal at
book value less surrender charge 755,300 8 794,881 9
Subject to discretionary withdrawal at
market value 2,454,845 27 1,803,057 20
Subject to discretionary withdrawal at
book value (minimal or no charges or
adjustments) 5,821,049 63 6,284,876 69
Not subject to discretionary withdrawal
provision 203,522 2 174,416 2
------------------------------- --------------------------------
9,243,628 100% 9,078,030 100%
Less reinsurance ceded 2,372,495 2,677,432
------------------ ------------------
Total policy reserves on annuities and
deposit fund liabilities $6,871,134 $6,400,598
================== ==================
</TABLE>

A reconciliation of the amounts transferred to and from the separate accounts is
presented below:

<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------
Transfers as reported in the summary of operations of the
separate accounts statement:
<S> <C> <C> <C>
Transfers to separate accounts $281,095 $227,864 $133,386
Transfers from separate accounts 9,819 75,172 104,219
---------------------------------------------------
Net transfers to separate accounts 271,276 152,692 29,167

Reconciling adjustments charges for investment
manage-ment, administration fees and contract guarantees 26,204 19,093 13,814
---------------------------------------------------
Transfers as reported in the summary of operations of the
life, accident and health annual statement $297,480 $171,785 $ 42,981
===================================================
</TABLE>

24
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1997 and 1996, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:

<TABLE>
<CAPTION>
GROSS LOADING NET
----------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1997
Life and annuity:
Ordinary direct first year business $ 2,316 $1,698 $ 618
Ordinary direct renewal business 22,724 6,834 15,890
Group life direct business 1,523 646 877
Reinsurance ceded (1,464) (81) (1,383)
----------------------------------------
25,099 9,097 16,002
Accident and health:
Direct 148 - 148
Reinsurance ceded (49) - (49)
----------------------------------------
Total accident and health 99 - 99
----------------------------------------
$25,198 $9,097 $16,101
========================================

DECEMBER 31, 1996
Life and annuity:
Ordinary direct first year business $ 2,657 $1,865 $ 792
Ordinary direct renewal business 23,307 7,180 16,127
Group life direct business 1,788 1,195 593
Reinsurance ceded (1,706) (438) (1,268)
----------------------------------------
26,046 9,802 16,244
Accident and health:
Direct 104 - 104
Reinsurance ceded (3) - (3)
-----------------------------------------
Total accident and health 101 - 101
----------------------------------------
$26,147 $9,802 $16,345
========================================
</TABLE>

At December 31, 1997 and 1996, the Company had insurance in force aggregating
$69,271 and $69,251, respectively, in which the gross premiums are less than the
net premiums required by the standard valuation standards established by the
Insurance Division, Department of Commerce, of the State of Iowa. The Company
established policy reserves of $1,128 and $1,252 to cover these deficiencies at
December 31, 1997 and 1996, respectively.

25
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

6. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)

In 1994, the NAIC enacted a guideline to clarify reserving methodologies for
contracts that require immediate payment of claims upon proof of death of the
insured. Companies were allowed to grade the effects of the change in reserving
methodologies over five years. A direct charge to surplus of $501 was made for
the year ended December 31, 1995, related to the change in reserve methodology.

7. DIVIDEND RESTRICTIONS

Generally, an insurance company's ability to pay dividends is limited to the
amount that their net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital requirements. However,
payment of such amounts as dividends may be subject to approval by regulatory
authorities.

The Company paid dividends to its parent of $62,000 and $20,000 in 1997 and
1996, respectively. No dividends were paid in 1995.

8. RETIREMENT AND COMPENSATION PLANS

The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The
pension expense is allocated among the participating companies based on the FASB
No. 87 expense as a percent of salaries. The benefits are based on years of
service and the employee's compensation during the highest five consecutive
years of employment. Pension expense aggregated $422, $1,056 and $942 for the
years ended December 31, 1997, 1996 and 1995, respectively. The plan is subject
to the reporting and disclosure requirements of the Employee Retirement and
Income Security Act of 1974.

The Company's employees also participate in a contributory defined contribution
plan sponsored by AEGON which is qualified under Section 401(k) of the Internal
Revenue Service Code. Employees of the Company who customarily work at least
1,000 hours during each calendar year and meet the other eligibility
requirements, are participants of the plan. Participants may elect to contribute
up to fifteen percent of their salary to the plan. The Company will match an
amount up to three percent of the participant's salary. Participants may direct
all of their contributions and plan balances to be invested in a variety of
investment options. The plan is subject to the reporting and disclosure
requirements of the Employee Retirement and Income Security Act of 1974. Expense
related to this plan was $226, $297 and $465 for the years ended December 31,
1997, 1996 and 1995, respectively.

26
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

8. RETIREMENT AND COMPENSATION PLANS (CONTINUED)

AEGON sponsors supplemental retirement plans to provide the Company's senior
management with benefits in excess of normal pension benefits. The plans are
noncontributory and benefits are based on years of service and the employee's
compensation level. The plans are unfunded and nonqualified under the Internal
Revenue Service Code. In addition, AEGON has established incentive deferred
compensation plans for certain key employees of the Company. AEGON also sponsors
an employee stock option plan for individuals employed at least three years and
a stock purchase plan for its producers, with the participating affiliated
companies establishing their own eligibility criteria, producer contribution
limits and company matching formula. These plans have been accrued or funded as
deemed appropriate by management of AEGON and the Company.

In addition to pension benefits, the Company participates in plans sponsored by
AEGON that provide postretirement medical, dental and life insurance benefits to
employees meeting certain eligibility requirements. Portions of the medical and
dental plans are contributory. The expenses of the postretirement plans
calculated on the pay-as-you-go basis are charged to affiliates in accordance
with an intercompany cost sharing arrangement. The Company expensed $62, $184
and $164 for the years ended December 31, 1997, 1996 and 1995, respectively.

9. RELATED PARTY TRANSACTIONS

The Company shares certain offices, employees and general expenses with
affiliated companies.

The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1997, 1996
and 1995, the Company paid $18,705, $17,028 and $14,214, respectively, for these
services, which approximates their costs to the affiliates.

Payable to affiliates and intercompany borrowings bear interest at the thirty-
day commercial paper rate of 5.6% at December 31, 1997. During 1997, 1996 and
1995, the Company paid net interest of $1,188, $174 and $71, respectively, to
affiliates.

During 1997 and 1995, the Company received capital contributions of $153 and
$40,000, respectively, in cash from its parent.

At December 31, 1997, the Company has a $16,400 short-term note payable to an
affiliate. Interest on this note accrues at 5.6%.

27
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

9. RELATED PARTY TRANSACTIONS (CONTINUED)

During 1995, the Company sold real estate with a book value of approximately
$13,270 to an affiliated entity in exchange for a short-term note receivable. No
gain was recognized on this sale. This note matured during 1996.

During the year ended December 31, 1995, the Company restructured demand notes
and accrued interest of $13,250 and $745, respectively, related to an affiliate.
The Company received 9,750 shares of preferred stock from the affiliate for
satisfaction of debt. The Company realized a loss of $8,695 related to this
transaction. At December 31, 1996 and 1995, the preferred stock related to this
affiliate was deemed to have no value and an unrealized loss of $4,555 was
recognized in 1995.

10. COMMITMENTS AND CONTINGENCIES

The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages, in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.

The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. Assessments are charged to operations when received
by the Company except where right of offset against other taxes paid is allowed
by law; amounts available for future offsets are recorded as an asset on the
Company's balance sheet. Potential future obligations for unknown insolvencies
are not determinable by the Company. The future obligation has been based on the
most recent information available from the National Organization of Life and
Health Insurance Guaranty Associations. The Company has established a reserve of
$17,700 and $21,774 and an offsetting premium tax benefit of $7,984 and $8,752
at December 31, 1997 and 1996, respectively, for its estimated share of future
guaranty fund assessments related to several major insurer insolvencies. The
guaranty fund expense (benefit) was $(975), $2,617 and $5,859 for December 31,
1997, 1996 and 1995, respectively.

28
<PAGE>

PFL Life Insurance Company

Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)

11. YEAR 2000 (UNAUDITED)

AEGON has adopted and has in place a Year 2000 Assessment and Planning Project
(the "Project") to review and analyze its information technology and systems to
determine if they are Year 2000 compatible. The Company has begun to convert or
modify, where necessary, critical data processing systems. It is contemplated
that the plan will be substantially completed by early 1999. The Company does
not expect this project to have a significant effect on operations. However, to
mitigate the effect of outside influences upon the success of the project, the
Company has undertaken communications with its significant customers, suppliers
and other third parties to determine their Year 2000 compatibility and
readiness. Management believes that the issues associated with the Year 2000
will be resolved with no material financial impact on the Company.

Since the Year 2000 computer problem, and its resolution is complex and
multifaceted, the success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems or
equipment addresses Year 2000 date data prior to the Year 2000). Even with
appropriate and diligent pursuit of a well-conceived Project, including testing
procedures, there is no certainty that any company will achieve complete
success. Notwithstanding the efforts or results of the Company, its ability to
function unaffected to and through the Year 2000 may be adversely affected by
actions (or failure to act) of third parties beyond its knowledge or control.

29
<PAGE>

PFL Life Insurance Company

Summary of Investments - Other Than
Investments in Related Parties
(Dollars in thousands)

December 31, 1997

SCHEDULE I

<TABLE>
<CAPTION>
AMOUNT AT WHICH
MARKET SHOWN IN THE
TYPE OF INVESTMENT COST (1) VALUE BALANCE SHEET
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED MATURITIES
Bonds:
United States Government and
government agencies and authorities $1,325,817 $1,355,098 $1,325,817
States, municipalities and political
subdivisions 136,058 139,110 136,058
Foreign governments 51,407 51,154 51,407
Public utilities 124,013 124,013 121,582
All other corporate bonds 3,275,849 3,377,152 3,278,280
Redeemable preferred stock 2,750 8,029 2,750
----------------------------------------------------
Total fixed maturities 4,915,894 5,054,556 4,915,894

EQUITY SECURITIES
Common stocks:
Banks, trust and insurance 7,593 9,046 9,046
Industrial, miscellaneous and all other 36,263 41,330 41,330
----------------------------------------------------
Total equity securities 43,856 50,376 50,376

Mortgage loans on real estate 935,207 935,207
Real estate 44,699 44,699
Real estate acquired in satisfaction of
debt 11,814 11,814
Policy loans 57,136 57,136
Other long-term investments 29,864 29,864
Cash and short-term investments 23,939 23,939
-------------- ----------------
Total investments $6,062,409 $6,068,929
============== ================
</TABLE>

(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual of discounts.

30
<PAGE>

PFL Life Insurance Company

Supplementary Insurance Information
(Dollars in thousands)

SCHEDULE III

<TABLE>
<CAPTION>
FUTURE POLICY POLICY AND
BENEFITS AND UNEARNED CONTRACT
EXPENSES PREMIUMS LIABILITIES
--------------------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Individual life $ 882,003 $ - $ 8,550
Individual health 62,033 9,207 12,821
Group life and health 88,211 11,892 44,977
Annuity 4,204,125 - -
--------------------------------------------------
$5,236,372 $21,099 $66,348
==================================================

YEAR ENDED DECEMBER 31, 1996
Individual life $ 734,350 $ - $ 7,240
Individual health 39,219 8,680 13,631
Group life and health 78,418 14,702 53,486
Annuity 4,408,419 - -
--------------------------------------------------
$5,260,406 $23,382 $74,357
==================================================

YEAR ENDED DECEMBER 31, 1995
Individual life $ 594,274 $ - $ 6,066
Individual health 24,225 7,768 11,863
Group life and health 67,994 16,662 58,813
Annuity 4,220,274 -
--------------------------------------------------
$4,906,767 $ 24,430 $76,742
==================================================
</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
NET BENEFITS, CLAIMS OTHER
PREMIUM INVESTMENT LOSSES AND SETTLEMENT OPERATING PREMIUMS
REVENUE INCOME* EXPENSES EXPENSES* WRITTEN
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,175 $ 75,914 $ 211,921 $ 36,185 -
63,548 5,934 37,706 29,216 $ 63,383
146,694 11,888 103,581 91,568 143,580
657,695 352,688 571,434 364,216 -
- ----------------------------------------------------------------------
$ 1,068,112 $446,424 $ 924,642 $521,185
======================================================================

$ 202,082 $ 66,538 $ 197,526 $ 38,067 -
55,871 5,263 32,903 29,511 $ 55,678
174,781 12,877 105,459 122,953 171,320
725,966 343,659 800,121 230,417 -
- ----------------------------------------------------------------------
$ 1,158,700 $428,337 $1,136,009 $420,948
======================================================================

$ 111,918 $ 49,929 $ 97,065 $ 37,933 -
47,692 4,091 25,793 26,033 $ 47,690
187,832 11,665 106,065 139,640 184,545
921,452 327,000 1,116,768 114,164 -
- ----------------------------------------------------------------------
$ 1,268,894 $392,685 $1,345,691 $317,770
======================================================================
</TABLE>

* Allocations of net investment income and other operating expenses are based on
a number of assumptions and estimates, and the results would change if
different methods were applied.

32
<PAGE>

PFL Life Insurance Company

Reinsurance
(Dollars in thousands)

SCHEDULE IV

<TABLE>
<CAPTION>
ASSUMED PERCENTAGE
CEDED TO FROM OF AMOUNT
GROSS OTHER OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER
31, 1997
Life insurance in force $5,025,027 $420,519 $ 35,486 $4,639,994 .8%
=========================================================================
Premiums:
Individual life $ 201,691 $ 3,554 $ 2,038 $ 200,175 1.0%
Individual health 73,593 10,045 - 63,548 -
Group life and health 339,269 192,575 - 146,694 -
Annuity 697,893 40,198 - 657,695 -
-------------------------------------------------------------------------
$1,312,446 $ 246,372 $ 2,038 $1,068,112 .2%
=========================================================================
YEAR ENDED DECEMBER
31, 1996
Life insurance in force $4,863,416 $477,112 $30,685 $4,416,989 .7%
=========================================================================
Premiums:
Individual life $ 204,144 $ 3,858 $ 1,796 $ 202,082 .9%
Individual health 68,699 12,828 - 55,871 -
Group life and health 390,296 215,515 - 174,781 -
Annuity 794,311 68,345 - 725,966 -
-------------------------------------------------------------------------
$1,457,450 $300,546 $ 1,796 $1,158,700 .2%
=========================================================================

YEAR ENDED DECEMBER
31, 1995
Life insurance in force $4,594,434 $468,811 $22,936 $4,148,559 .6%
=========================================================================
Premiums:
Individual life $ 113,934 $ 3,841 $ 1,825 $ 111,918 1.6%
Individual health 60,309 12,617 - 47,692 -
Group life and health 408,097 220,265 - 187,832 -
Annuity 1,009,191 88,270 531 921,452 .05%
-------------------------------------------------------------------------
$1,591,531 $324,993 $ 2,356 $1,268,894 .2%
=========================================================================
</TABLE>

33
<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.

(a)(1) Principal Underwriting Agreement by and between PFL Life
Insurance Company on its own behalf and on behalf of the
Mutual Fund Account, and AFSG Securities Corporation.
Note 5.

(a)(2) Termination of 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 6

(b) Form of Broker/Dealer Supervision and Sales Agreement by and
between AFSG Securities Corporation and the Broker/Dealer.
Note 5.

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

(b) Form of Policy Endorsements for the Retirement Income
Builder Variable Annuity. Note 6.

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

(b) Form of Application for the First Union "Flexible Premium
Individual Deferred" Variable Annuity. Note 5.

(d) Form of Application for the Multi-Manager Retirement Income
Builder "Flexible Premium Individual Deferred Variable
Annuity." Note 6.

(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 AFSG
Securities Corporation. Note 6

(c)(1) Amendment No.1 to Participation Agreement by and among AIM
Variable Insurance Funds, Inc., PFL Life Insurance Company,
AFSG Securities Corporation. Note 6.

(d) Form of Participation Agreement by and between PFL Life
Insurance Company and Evergreen Variable Trust. 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

(f)(1) Addendum to Participation Agreement, dated as of November
24, 1997 by and among MFS Variable Insurance Trust,
Massachusetts Financial Services Company, and PFL Life
Insurance Company.

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

(g)(1) Amendment to Participation Agreement, dated as of December
15, 1997 by and among Oppenheimer Variable Account Funds,
OppenheimerFunds, Inc., and PFL Life Insurance Company.
Note 6.

(h) Participation Agreement by and between Putnam Variable
Trust, Putnam Mutual Funds Corp. and PFL Life Insurance
Company. Note 6

(i) Addendum to Participation Agreement between Variable
Insurance Product Funds, Fidelity Distributors Corporation,
and PFL Life Insurance Company. Note 5.

(j) Amendment to Participation Agreement, dated as of April 15,
1997, between Dreyfus Variable Investment Fund, the Dreyfus
Socially Responsible Growth Fund, Inc., Dreyfus Life and
Annuity Index fund, Inc., (d/b/a Dreyfus Stock Index fund),
and, PFL Life Insurance Company. Note 6.

(k) Amendment No. 5 to Participation Agreement among WRL Series
Fund, Inc., Western Reserve Life Assurance Co. of Ohio, and
PFL Life Insurance Company. Note 7.

(9) Opinion and Consent of Counsel. Note 2

<PAGE>

(10) (a) Consent of Independent Auditors. Note 6
(b) Opinion and Consent of Actuary. Note 6

(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, Douglas C. Kolsrud, Robert J.
Kontz) Note 2. Brendy K. Clancy. Note 6. Larry N.
Norman

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

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 with Post-Effective Amendment No. 2 to this form N-4
Registration Statement (File No. 333-7509) on December 23,
1997.

Note 5. Filed with Post-Effective Amendment No. 4 to this Form N-4
Registration Statement (File No. 333-7509) on April 30,
1998.

Note 6. Filed herewith.

Note 7. To be filed by future Amendment.
<PAGE>

Item 25. Directors and Officers of the Depositor

<TABLE>
<CAPTION>
Principal Positions
Name and and Offices with
Business Address Depositor
- ---------------- ---------
<S> <C>
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 Operating Officer
Cedar Rapids, Iowa 52499-0001

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

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

Larry N. Norman Director and Executive Vice President
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499-0001

Robert J. Kontz Vice President and
4333 Edgewood Road N.E. Corporate 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
</TABLE>

<PAGE>

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

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

AEGON N.V. Netherlands 53.63% of Vereniging Holding company
Corporation AEGON Netherlands
Membership Association

Groninger Financieringen B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

AEGON Netherland N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

AEGON Nevak Holding B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

AEGON International N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

Voting Trust Delaware Voting Trust
Trustees:
K.J. Storm
Donald J. Shepard
H.B. Van Wijk
Dennis Hersch

AEGON U.S. Holding Delaware 100% of Voting Trust Holding company
Corporation

Short Hills Management New Jersey 100% of AEGON U.S. Holding company
Company Holding Corporation

CORPA Reinsurance New York 100% of AEGON U.S. Holding company
Company Holding Corporation

AEGON Management Indiana 100% of AEGON U.S. Holding company
Company Holding Corporation

RCC North America Inc Delaware 100% of AEGON U.S. Holding company
Holding Corporation

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

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

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

Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. insurance
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C> <C>
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 Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advsiors, Inc.

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

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

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

CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network 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 Corporation Delaware 100% Quantra Corporation Manufacture and sell
mortgage loan and security
management software

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

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

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

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

</TABLE>
<PAGE>

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

Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Ins. Co. Real estate investment trust
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.

RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner.

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

Endeavor Investment Advisors California 49.9% AUSA Financial General Partnership
Markets, Inc.

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

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

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

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, Inc. Insurance agency

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, Inc. Insurance agency

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

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

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

</TABLE>
<PAGE>

<TABLE>
<S> <C> <C> <C>
Associated Mariner Financial Michigan 100% Intersecurities, Inc. Holding co./management
Group, Inc. services

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

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

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

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

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

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

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

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

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

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

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
Company

AUSA Life Insurance New York 100% First AUSA Life Insurance
Company, 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

</TABLE>
<PAGE>

<TABLE>
<S> <C> <C> <C>
Life Investors Agency Iowa 100% Life Investors Ins. Marketing
Group, Inc. Company of America

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

AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.

AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
Services Group, Inc. settlements

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

AEGON Special Markets Maryland 100% Monumental Life Ins. Co. Marketing
Group, Inc.

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

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

Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance

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

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

Commonwealth General Delaware 100% AEGON USA Holding company
Corporation ("CGC")

PB Series Trust Massachusetts N/A Mutual fund

Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. to ins. cos.

Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life
Insurance Company
</TABLE>
<PAGE>

<TABLE>
<S> <C> <C> <C>
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent

Commonwealth General. Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements

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

AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer

PB Investment Advisors, Inc. Delaware 100% CGC Registered investment advisor

Diversified Financial Products Inc. Delaware 100% CGC Provider of investment,
marketing and admin.
services to ins. cos.

AEGON USA Real Estate Delaware 100% Diversified Financial Real estate and mortgage
Services, Inc. Products Inc. holding company

Capital Real Estate Delaware 100% CGC Furniture and equiment lessor
Development Corporation

Capital General Development Delaware 100% CGC 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

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 Security Life Investment subsidiary
Insurance Company

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

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

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

</TABLE>
<PAGE>

<TABLE>
<S> <C> <C> <C>
JMH Operating Company, Inc. Mississippi 100% Peoples Security Life Real estate holdings
Insurance Company

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

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

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

Capital 200 Block Corporation Delaware 100% CGC Real estate holdings

Capital Broadway Corporation Kentucky 100% CGC Real estate holdings

Southlife, Inc. Tennessee 100% CGC Investment subsidiary

Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management
(EIN 23-1720755) support services

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

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

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

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

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

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

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

Providian Auto and Home Missouri 100% CGC Insurance company
Insurance Company

Academy Insurance Group, Inc. Delaware 100% CGC Holding company

</TABLE>
<PAGE>

<TABLE>
<S> <C> <C> <C>
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.

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

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

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

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

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

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

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

Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
(EIN 23-2364438) Group, Inc.

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

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

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

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

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

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

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

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

</TABLE>
<PAGE>

<TABLE>
<S> <C> <C> <C>
Providian Property and Casualty Kentucky 100% Providian Auto and Insurance company
Insurance Company Home Insurance Company

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

Capital Liberty, L.P. Delaware 79.2% Commonwealth Life Holding Company
Insurance Company
19.8% Peoples Security Life
Insurance Company
1% CGC

Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands

Providian Life and Health Missouri 3.7% CGC Insurance company
Insurance Company 15.3% Peoples Security Life
Insurance Company
20% Capital Liberty, L.P.
61% Commonwealth Life
Insurance Company

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

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

First Providian Life and New York 100% Veterans Life Ins. Co. Insurance Company
Health Insurance Company

</TABLE>
<PAGE>

Item 27. Number of Contract Owners

As of December 31, 1997, there were 977 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

AFSG Securities Corporation
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499-0001

The directors and officers of
AFSG Securities Corporation
are as follows:

<TABLE>
<S> <C>
Larry N. Norman Sarah J. Strange
Director and President Director and Vice President

Harvey E. Willis Brenda K. Clancy
Vice President and Secretary Vice President

Lisa Wachendorf Michael G. Ayers
Compliance Officer Treasurer/Controller

Debra C. Cubero Colleen S. Lyons
Vice President Assistant Secretary

Gregory J. Garvin John F. Reesor
Vice President Assistant Secretary

Michael F. Lane
Vice President
Anne Spaes
Vice President
</TABLE>

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

The principal business address of each person listed is AFSG Securities
Corporation, 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001.

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

AEGON USA Securities, Inc., the former broker/dealer and/or the broker-dealers
received $2,337,939.76 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.

Prior to May 1, 1998, AEGON USA Securities, Inc. served as the principal
underwriter for the PFL Endeavor VA Separate Account, the PFL Retirement Builder
Variable Annuity Account, the PFL Life Variable Annuity Account A, the PFL
Wright 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.. As of May 1, 1998, AFSG Securities Corporation will serve as
the principal underwriter for the above named Accounts. AFSG Securities
Corporation also serves as principal underwriter for the Separate Account I,
Separate Account II, and Separate Account V of Providian Life and Health
Insurance Company, and for Separate Account C of First Providian Life and Health
Insurance Company.

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 26th day of June,
1998.

PFL RETIREMENT BUILDER
VARIABLE ANNUITY ACCOUNT

PFL LIFE INSURANCE COMPANY
Depositor

/s/ William L. Busler
----------------------
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/ Patrick S. Baird Director June 26, 1998
- -------------------------
Patrick S. Baird

/s/ Craig D. Vermie Director June 26, 1998
- -------------------------
Craig D. Vermie

/s/ William L. Busler Director June 26, 1998
- -------------------------
William L. Busler (Principal Executive Officer)

/s/ Larry N. Norman Director June 26, 1998
- -------------------------
Larry N. Norman

/s/ Douglas C. Kolsrud Director June 26, 1998
- -------------------------
Douglas C. Kolsrud

/s/ Robert J. Kontz Vice President and June 26, 1998
- -------------------------
Robert J. Kontz Corporate Controller

/s/ Brenda K. Clancy Treasurer June 26, 1998
- -------------------------
Brenda K. Clancy

<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 INDEX
-------------

EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.*
- ---------- ---------------------- -------
(3)(a)(2) Termination of Principal Distribution Agreement by and
between PFL Life Insurance Company on its own behalf
and on behalf of the Mutual Fund Account, and AEGON USA
Securities, Inc.

(4)(b) Form of Policy Endorsements for the Retirement Income
Builder Variable Annuity.

(5)(d) Form of Application for the Multi-Manager Retirement Income
Builder "Flexible Premium Individual Deferred Variable Annuity.

(8)(c) Participation Agreement by and among AIM Variable
Insurance Products Funds, Inc., PFL Life Insurance
Company, and AFSG Securities Corporation.

(8)(c)(1) Amendment No. 1 to Participation Agreement by and among
AIM Variable Insurance Products Funds, Inc., PFL Life
Insurance Company, and AFSG Securities Corporation.

(8)(f)(1) Addendum to Participation Agreement, dated as of
November 24, 1997, by and among MFS Variable Insurance
Trust, Massachusetts Financial Services Company, and PFL
Life Insurance Company.

(8)(g)(1) Amendment to Participation Agreement, dated as of
December 15, 1997, by and among Oppenheimer Variable
Account Funds, OppenheimerFunds, Inc., and PFL Life
Insurance Company.

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

(8)(j) Amendment to Participation Agreement, dated as of April
15, 1997, between Dreyfus Variable Investment Fund,
the Dreyfus Socially Responsible Growth Fund, Inc.,
Dreyfus Life and Annuity Index Fund, (d/b/a Dreyfus
Stock Index Fund), and PFL Life Insurance Company.

(10)(a) Consent of Independent Auditors

(10)(b) Opinion and Consent of Actuary

(14) Power of Attorney

_____________________

* Page numbers included only in manually executed original.

<PAGE>

EXHIBIT (3)(A)(2)
-----------------

TERMINATION OF 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.
<PAGE>

TERMINATION OF
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.

WHEREAS, All underwriting and primary distribution activities for variable
annuity or variable life insurance products for the insurance company and the
separate accounts have been assigned effective as of the close of business April
30, 1998, to AFSG Securities Corporation.

THEREFORE, The undersigned parties to the Principal Distribution Agreement dated
November 20, 1996, hereby mutually agree to terminate such Agreement as of the
close of business April 30, 1998.

WITNESSETH:

/S/ William L. Busler April 29, 1998
- -------------------------- -----------------------------------
PFL Life Insurance Company Date Signed

/s/ Lorri E. Mehaffey April 29, 1998
- --------------------------- -----------------------------------
AEGON USA Securities, Inc. Date Signed

<PAGE>

EXHIBIT (4)(B)
--------------

FORM OF POLICY ENDORSEMENTS
FOR THE RETIREMENT INCOME BUILDER VARIABLE ANNUITY

<PAGE>

[LETTERHEAD OF PFL LIFE INSURANCE COMPANY APPEARS HERE]

(Hereafter called the Company, we, our or us)

AMENDATORY ENDORSEMENT

The Policy to which this Amendatory Endorsement is attached is amended as
follows:

The Allocation of Premium Payments provision in Section 3, Premium Payments, is
replaced by the following language:

ALLOCATION OF PREMIUM PAYMENTS

Premium payments may be applied to various Guaranteed Period Options of the
Fixed Account and/or to one or more of the Subaccounts which we make
available. You must indicated what percent of each premium payment to
allocate to various Guaranteed Period Options of the Fixed Account and/or
among one or more of the Subaccounts (making a total of 100%). Each
percent may be either zero or any whole number.

We will use the allocation percentages you choose for all premium payments
until you change the allocation percentages.

This Amendatory Endorsement takes effect and expires concurrently with the
Policy to which it is attached and is subject to all the terms and conditions of
the Policy not inconsistent herewith.

Signed for us at our home office.

/s/ Craig D. Vermie /s/ William L. Buster
SECRETARY PRESIDENT
<PAGE>

10 DAY RIGHT TO CANCEL

You may cancel this policy by delivering or mailing a written notice or sending
a telegram to us or your agent. You must return the policy before midnight of
the tenth day after the day you receive it. Notice given by mail and return of
the policy by mail are effective on being postmarked, properly addressed and
postage prepaid.

We will pay you an amount equal to the sum of:

. the premiums paid; and

. the accumulated gains or losses, if any, in the Separate Account on the
date of cancellation;

unless otherwise required by law.

If this policy is a replacement of another annuity policy, the Right to Cancel
period is extended to 20 days.

<PAGE>

EXHIBIT (5)(D)
--------------

FORM OF APPLICATION FOR THE
MULTI-MANAGER RETIREMENT INCOME BUILDER
"FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY"
<PAGE>

<TABLE>
<S> <C> <C>
RETIREMENT INCOME BUILDER VARIABLE ANNUITY

Issued by: PFL Life Insurance Company ("PFL Life") . 4333 Edgewood Road N.E., Cedar Rapids, IA 52499-0001. Policyholder Service:

800-525-6205 Mail the application and a check payable to: PFL Life Insurance Company . 4333 Edgewood Road N.E., Cedar Rapids, IA
52499-0001, Attn: Variable Annuity Dept.
- ------------------------------------------------------------------------------------------------------------------------------------

OWNERSHIP INFORMATION

1. OWNER(S) Name _____________________________________________ [_] M [_] F Birthdate _______/_______/________
If the owner is a
Trust, please Address ______________________________________________________________________________________________
Street City State Zip
provide verification
of trustees Soc. Sec. No. ____________________________________ Phone No. _______________________________________

Name _____________________________________________ [_] M [_] F Birthdate _______/_______/________

Address ______________________________________________________________________________________________
Street City State Zip
Soc. Sec. No. ____________________________________ Phone No. _______________________________________
....................................................................................................................................

ANNUITANT Name ______________________________________________ [_] M [_] F Birthdate _______/_______/________
Leave this section
blank if Annuitant Address _______________________________________________________________________________________________
Street City State Zip
is same as sole
Owner Soc. Sec. No. ____________________________________ Relationship to Owner ___________________________

. If you, the policy owner, have named someone other than yourself as the annuitant, please select one of

the following regarding payment of the death proceeds. If neither is selected, the first option will be
deemed in effect:
[_] At the named annuitant's death, I wish to become the annuitant and defer payment of death proceeds
until my death.
[_] At the named annuitant's death, I wish to have the death proceeds paid to the named beneficiary.

Policy Owner Signature Required (when applicable) ___________________________________________________
....................................................................................................................................

BENEFICIARY (IES) Primary ___________________________________________ Relationship to Owner __________________________

Contingent ________________________________________ Relationship to Owner __________________________
- ------------------------------------------------------------------------------------------------------------------------------------

YOUR RETIREMENT INCOME BUILDER POLICY

2. PREMIUM Initial Premium $ ____________________ (Min:$2000)
PAYMENT / Investment Allocation (whole % only, no fractions)
PLAN OPTIONS
Variable Options: PFL Life Fixed Rate Options: Death Benefit Option
----------------- --------------------------- --------------------
AIM V.I. Capital Appreciation Fund .0% [_] 1 Year for DCA only .0% (Select only one):
---- ----
AIM V.I. Government Securities Fund .0% (Must complete DCA form) Your selection cannot be changed after the
---- [_] 1 Year .0% policy has been issued. If no option has been
AIM V.I. Growth & Income Fund .0% ----
---- [_] 3 Year .0% specified, the contract will be issued with the
AIM V.I. Value Fund .0% ----
---- [_] 5 Year .0% option for return of premium less distributions
Dreyfus Money Market Portfolio .0% ----
---- [_] 7 Year .0% (Option A).
. Dreyfus Small Company Stock Portfolio .0% ----
---- Total (all) 100% [_] Option A - Return of premiums paid less
. Dreyfus Stock Index Fund .0% distributions taken. Annual Mortality and
---- Expense (M&E) risk fee and administrative
. MFS Emerging Growth Series .0% charge is 1.25%.
---- [_] Option B - 5% Annually Compounding Death
. MFS Foreign & Colonial Emerging Benefit. Maximum issue age of 80:
Markets Series .0% Annual M&E risk fee and administrative
---- charge is 1.40%
. MFS Research Series .0% [_] Option C - Annual Step-Up Death Benefit:
---- Maximum issue age of 80: Annual M&E risk
. MFS Total Return Series .0% fee and administrative charge is 1.40%.
----
. MFS Utilities Series .0%
----
. Oppenheimer Global Securities Fund .0%
----
. Oppenheimer Growth Fund .0%
----
. Oppenheimer Growth & Income Fund .0%
----
. Oppenheimer High Income Fund
. Oppenheimer Strategic Bond Fund
. Additional:
. Additional:
....................................................................................................................................

SPECIAL Please initial one: I authorize my Registered Rep. and myself ______or myself only ______ to make telephone
INSTRUCTIONS transfer requests. Registered Representative's Name _________________________________
....................................................................................................................................

REPLACEMENT Will this annuity replace or change any existing annuity or life insurance? [_] Yes [_] No (If Yes,
INFORMATION complete the following.) Company ________________________________ Policy No. ______________________________
....................................................................................................................................

TAX QUALIFIED [_] Yes [_] No (If Yes, Complete the following.) [_] Other Tax Qualified Plan _________________ (type)
PLAN [_] IRA Rollover: $ _______ [_] IRA: $ ________ Yr. of Contribution:____ [_] IRA Transfer [_] Qualified Plan
Rollover
- ------------------------------------------------------------------------------------------------------------------------------------

. I understand that Policy Values, when allocated to any of the variable options above are not guaranteed as to
a fixed dollar amount.

. When funds are allocated to the Fixed Account Guarantee Periods, Policy Values under the policy may increase
or decrease in accordance with the Excess Interest Adjustment prior to the end of the Guarantee Period.

. Unless we have been notified of a community or marital property interest in this policy, we will rely on our
good faith belief that no such interest exists and will assume no responsibility for inquiry.

. To the best of my knowledge and belief, my answers to the questions on this application are correct and true,
and I agree that this application becomes a part of the annuity policy when issued to me. If this application
is part of an instant issue policy, I acknowledge that I am in receipt of a complete copy of the policy
provisions herewith.

. This application is subject to acceptance by PFL Life. If this application is rejected for any reason, PFL
Life will be liable only for return of premiums paid.

. Send me a copy of the Statement of Additional Information. [_]

. I am in receipt of a current prospectus for this variable annuity.
....................................................................................................................................

SIGNATURE(S) I HAVE REVIEWED MY EXISTING ANNUITY COVERAGE AND FIND THIS POLICY IS SUITABLE FOR MY NEEDS.

Signed at _________________________________________________________________ Date ______ / ______ / ______
City State

Owner(s) __________________________________ Annuitant (if not Owner) ___________________________________
....................................................................................................................................

AGENT USE Do you have reason to believe the annuity applied for will replace or change any existing annuity or life
ONLY insurance? [_] Yes [_] No

I HAVE REVIEWED THE APPLICANT'S EXISTING ANNUITY COVERAGE AND FIND THIS POLICY IS SUITABLE FOR HIS/HER NEEDS.

Registered Rep./ Licensed Agent (Please print) _______________________________ Signed __________________________

Phone No. __________________________ Soc. Sec. No. ___________________ PFL Agent # _______________________

Firm Name ______________________________________ Firm Address ___________________________________________

....................................................................................................................................

SEE YOUR PROSPECTUS AND POLICY PROVISIONS FOR TERM EXPLANATIONS.
</TABLE>

<PAGE>

EXHIBIT (8)(C)
--------------

PARTICIPATION AGREEMENT BY AND AMONG
AIM VARIABLE INSURANCE PRODUCTS FUNDS, INC.,
PFL LIFE INSURANCE COMPANY,
AND AFSG SECURITIES CORPORATION
<PAGE>

PARTICIPATION AGREEMENT

BY AND AMONG

AIM VARIABLE INSURANCE FUNDS, INC.,

A I M DISTRIBUTORS, INC.,

PFL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,

AND

AFSG SECURITIES CORPORATION, AS UNDERWRITER
OF VARIABLE CONTRACTS AND POLICIES
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
Section 1. Available Funds.................................................. 2
1.1 Availability.................................................. 2
1.2 Addition, Deletion or Modification of Funds................... 2
1.3 No Sales to the General Public................................ 2

Section 2. Processing Transactions.......................................... 2
2.1 Timely Pricing and Orders..................................... 2
2.2 Timely Payments............................................... 3
2.3 Applicable Price.............................................. 3
2.4 Dividends and Distributions................................... 4
2.5 Book Entry.................................................... 4

Section 3. Costs and Expenses............................................... 4
3.1 General....................................................... 4
3.2 Parties To Cooperate.......................................... 4

Section 4. Legal Compliance................................................. 4
4.1 Tax Laws...................................................... 4
4.2 Insurance and Certain Other Laws.............................. 7
4.3 Securities Laws............................................... 7
4.4 Notice of Certain Proceedings and Other Circumstances......... 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF..... 9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY..... 10

Section 5. Mixed and Shared Funding......................................... 12
5.1 General....................................................... 12
5.2 Disinterested Directors....................................... 12
5.3 Monitoring for Material Irreconcilable Conflicts.............. 12
5.4 Conflict Remedies............................................. 13
5.5 Notice to LIFE COMPANY........................................ 14
5.6 Information Requested by Board of Directors................... 14
5.7 Compliance with SEC Rules..................................... 15
5.8 Other Requirements............................................ 15

Section 6. Termination...................................................... 15
6.1 Events of Termination......................................... 15
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
6.2 Notice Requirement for Termination.............................. 16
6.3 Funds To Remain Available....................................... 17
6.4 Survival of Warranties and Indemnifications..................... 17
6.5 Continuance of Agreement for Certain Purposes................... 17

Section 7. Parties To Cooperate Respecting Termination...................... 17

Section 8. Assignment....................................................... 17

Section 9. Notices.......................................................... 18

Section 10. Voting Procedures............................................... 18

Section 11. Foreign Tax Credits............................................. 19

Section 12. Indemnification................................................. 19
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER................. 19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM................. 21
12.3 Effect of Notice................................................ 24
12.4 Successors...................................................... 24

Section 13. Applicable Law.................................................. 24

Section 14. Execution in Counterparts....................................... 24

Section 15. Severability.................................................... 24

Section 16. Rights Cumulative............................................... 24

Section 17. Headings........................................................ 25

Section 18. Confidentiality................................................. 25

Section 19. Trademarks and Fund Names....................................... 25

Section 20. Parties to Cooperate............................................ 27
</TABLE>

ii
<PAGE>

PARTICIPATION AGREEMENT

THIS AGREEMENT, made and entered into as of the 1st day of May, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"),
PFL Life Insurance Company, an Iowa life insurance company ("LIFE COMPANY"), on
behalf of itself and each of its segregated asset accounts listed in Schedule A
hereto, as the parties hereto may amend from time to time (each, an "Account,"
and collectively, the "Accounts"); and AFSG Securities Corporation, an affiliate
of LIFE COMPANY and the principal underwriter of the Contracts ("UNDERWRITER")
(collectively, the "Parties").

WITNESSETH THAT:

WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and

WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts
and variable life insurance contracts; and

WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and

WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and

WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and

WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and

1
<PAGE>

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and

WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");

NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:

SECTION 1. AVAILABLE FUNDS
---------------------------

1.1 AVAILABILITY.
------------

AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.

1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
-------------------------------------------

The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.

1.3 NO SALES TO THE GENERAL PUBLIC.
------------------------------

AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.

SECTION 2. PROCESSING TRANSACTIONS
-----------------------------------

2.1 TIMELY PRICING AND ORDERS.
-------------------------

(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share for each Fund by 6:00 p.m. Central
Time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock

2
<PAGE>

Exchange is open for regular trading, (ii) AVIF calculates the Fund's net asset
value, and (iii) LIFE COMPANY is open for business.

(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.

(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.

(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed 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 gain information
shall be reported promptly upon discovery to LIFE COMPANY.

2.2 TIMELY PAYMENTS.
---------------

LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.

2.3 APPLICABLE PRICE.
----------------

(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such

3
<PAGE>

orders by 9:00 a.m. Central Time on the next following Business Day or such
later time as computed in accordance with Section 2.1(b) hereof.

(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.

2.4 DIVIDENDS AND DISTRIBUTIONS.
---------------------------

AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.

2.5 BOOK ENTRY.
----------

Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.

SECTION 3. COSTS AND EXPENSES
------------------------------

3.1 GENERAL.
-------

Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.

3.2 PARTIES TO COOPERATE.
--------------------

Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.

SECTION 4. LEGAL COMPLIANCE
----------------------------

4.1 TAX LAWS.
--------

(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as

4
<PAGE>

amended (the "Code"), and represents that it will use its best efforts to
qualify and to maintain qualification of each Fund as a RIC. AVIF will notify
LIFE COMPANY immediately upon having a reasonable basis for believing that a
Fund has ceased to so qualify or that it might not so qualify in the future.

(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.

(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:

(I) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);

(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;

(iii) LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating, pursuant
to Treasury Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was inadvertent;

(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal
and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof)
with the IRS, any Participant or any other claimant regarding
any claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
provided, however, that LIFE COMPANY will retain control of the
conduct of such conferences discussions, proceedings, contests
or appeals;

(v) any written materials to be submitted by LIFE COMPANY to the
IRS, any Participant or any other claimant in connection with
any of the foregoing proceedings or contests (including,
without limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations Section 1.817-

5
<PAGE>

5(a)(2)), (a) shall be provided by LIFE COMPANY to AVIF
(together with any supporting information or analysis); subject
to the confidentiality provisions of Section 18, at least ten
(10) business days or such shorter period to which the Parties
hereto agree prior to the day on which such proposed materials
are to be submitted, and (b) shall not be submitted by LIFE
COMPANY to any such person without the express written consent
of AVIF which shall not be unreasonably withheld;

(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to review
the relevant books and records of LIFE COMPANY) in order to
facilitate review by AVIF or its advisors of any written
submissions provided to it pursuant to the preceding clause or
its assessment of the validity or amount of any claim against
its arising from such a failure or alleged failure;

(vii) LIFE COMPANY shall not with respect to any claim of the IRS
or any Participant that would give rise to a claim against AVIF
or its affiliates (a) compromise or settle any claim, (b)
accept any adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the express written
consent of AVIF or its affiliates, which shall not be
unreasonably withheld, provided that LIFE COMPANY shall not be
required, after exhausting all administrative penalties, to
appeal any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for taking
such appeal; and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and

(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails to comply
with any of the foregoing clauses (I) through (vii), and such
failure could be shown to have materially contributed to the
liability.

Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.

6
<PAGE>

(d) LIFE COMPANY represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.

(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.

4.2 INSURANCE AND CERTAIN OTHER LAWS.
--------------------------------

(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.

(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Iowa and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under the Iowa Insurance Code and the
regulations thereunder, and (iii) the Contracts comply in all material respects
with all other applicable federal and state laws and regulations.

(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.

4.3 SECURITIES LAWS.
---------------

(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and Iowa
law, (iii) each Account is and will remain registered under the 1940 Act, to the
extent required by the 1940 Act, (iv) each Account does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required, (v) each Account's 1933 Act registration
statement relating to the Contracts, together with any

7
<PAGE>

amendments thereto, will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will
amend the registration statement for its Contracts under the 1933 Act and for
its Accounts under the 1940 Act from time to time as required in order to effect
the continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.

(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.

(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.

(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule 12b-
1 to finance distribution expenses.

(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.

4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
-----------------------------------------------------

(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other

8
<PAGE>

purpose relating to the registration or offering of AVIF's Shares, or (iv) any
other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.

(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.

4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
---------------------------------------------------------

(a) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.

(b) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such
sales literature, until such time as AVIF appoints another designated agent by
giving notice to LIFE COMPANY in the manner required by Section 9 hereof.

9
<PAGE>

(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.

(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers or agents selling the Contracts (i.e., information that
is not intended for distribution to Participants) ("broker only materials") is
so used, and neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.

(e) For the purposes of this Section 4.5, 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, (e.g., on-
line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.

4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
---------------------------------------------------------

(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.

(b) AVIF will provide to LIFE COMPANY camera ready or computer diskette
copies of all AVIF prospectuses and printed copies, in an amount specified by
LIFE COMPANY, of AVIF statements of additional information, proxy materials,
periodic reports to shareholders and other materials required by law to be sent
to Participants who have allocated any Contract value to a Fund. AVIF will
provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE
COMPANY, as the case may be, to print and distribute such materials within the
time required by law to be furnished to Participants.

10
<PAGE>

(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.

(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.

(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.

(f) For purposes of this Section 4.6, 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, (e.g., on-
line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.

11
<PAGE>

SECTION 5. MIXED AND SHARED FUNDING
------------------------------------

5.1 GENERAL.
-------

The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). AVIF will provide a complete copy of such order to
LIFE COMPANY upon execution of this Agreement. The Parties recognize that the
SEC has imposed terms and conditions for such orders that are substantially
identical to many of the provisions of this Section 5. Sections 5.2 through 5.8
below shall apply pursuant to such an exemptive order granted to AVIF. AVIF
hereby notifies LIFE COMPANY that, in the event that AVIF implements Mixed and
Shared Funding, it may be appropriate to include in the prospectus pursuant to
which a Contract is offered disclosure regarding the potential risks of Mixed
and Shared Funding.

5.2 DISINTERESTED DIRECTORS.
-----------------------

AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.

5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
------------------------------------------------

AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:

(a) an action by any state insurance or other regulatory authority;

(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;

12
<PAGE>

(d) the manner in which the investments of any Fund are being managed;

(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;

(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or

(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.

Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants.

5.4 CONFLICT REMEDIES.
-----------------

(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:

(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate, segregating
the assets of any particular group (e.g., annuity Participants,
life insurance Participants or all Participants) that votes in
favor of such segregation, or offering to the affected Participants
the option of making such a change; and

(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management company.

13
<PAGE>

(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.

(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.

(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.

(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
LIFE COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.

5.5 NOTICE TO LIFE COMPANY.
----------------------

AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.

5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
-------------------------------------------

LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request in writing so that the Board of
Directors may fully carry out the obligations imposed upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately

14
<PAGE>

remedies a conflict, will be properly recorded in the minutes of the Board of
Directors or other appropriate records, and such minutes or other records will
be made available to the SEC upon request.

5.7 COMPLIANCE WITH SEC RULES.
-------------------------

If, at any time during which AVIF is serving as an investment medium for
variable life insurance contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-
2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect
to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.

5.8 OTHER REQUIREMENTS.
------------------

AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.

SECTION 6. TERMINATION
-----------------------

6.1 EVENTS OF TERMINATION.
---------------------

Subject to Section 6.4 below, this Agreement will terminate as to a Fund:

(a) at the option of any party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or

(b) at the option of AVIF upon institution of formal proceedings against
LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or

(c) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE
COMPANY reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse

15
<PAGE>

consequences on LIFE COMPANY, or the Subaccount corresponding to the Fund with
respect to which the Agreement is to be terminated; or

(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY; or

(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or

(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or

(g) at the option of LIFE COMPANY if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY
reasonably believes that the Fund may fail to so comply; or

(h) at the option of AVIF if the Contracts issued by LIFE COMPANY cease to
qualify as annuity contracts or life insurance contracts under the Code (other
than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M
of the Code) or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or

(i) upon another Party's breach of any material provision of this
Agreement.

6.2 NOTICE REQUIREMENT FOR TERMINATION.
----------------------------------

No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:

(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;

(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and

(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.

16
<PAGE>

6.3 FUNDS TO REMAIN AVAILABLE.
-------------------------

Notwithstanding any termination of this Agreement, AVIF will, at the option
of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), 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 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.

6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
-------------------------------------------

All warranties and indemnifications will survive the termination of this
Agreement.

6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
---------------------------------------------

If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date
as of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).

SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
-------------------------------------------------------

The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.

SECTION 8. ASSIGNMENT
---------------------

This Agreement may not be assigned by any Party, except with the written
consent of each other Party.

17
<PAGE>

SECTION 9. NOTICES
------------------

Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:

AIM VARIABLE INSURANCE FUNDS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185

Attn: Nancy L. Martin, Esq.

PFL LIFE INSURANCE COMPANY
AFSG SECURITIES CORPORATION
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-0001
Facsimile: (319) 297-8290

Attn: Frank A. Camp, Esq.
Financial Markets Division General Counsel

SECTION 10. VOTING PROCEDURES
-----------------------------

Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive

18
<PAGE>

order obtained by AVIF. AVIF will notify LIFE COMPANY of any changes of
interpretations or amendments to Mixed and Shared Funding exemptive order it has
obtained. AVIF will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, AVIF either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.

SECTION 11. FOREIGN TAX CREDITS
--------------------------------

AVIF agrees to consult in advance with LIFE COMPANY concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.

SECTION 12. INDEMNIFICATION
----------------------------

12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER.
-----------------------------------------------

(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF,
its affiliates, and each person, if any, who controls AVIF or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for purposes of
this Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY
and UNDERWRITER) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:

(I) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to LIFE COMPANY or
UNDERWRITER by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any Account
Prospectus, the

19
<PAGE>

Contracts, or sales literature or advertising or otherwise for
use in connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or

(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied
for use therein by or on behalf of LIFE COMPANY, UNDERWRITER or
their respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of LIFE COMPANY, UNDERWRITER or their respective
affiliates or persons under their control (including, without
limitation, their employees and "Associated Persons," as that
term is defined in paragraph (m) of Article I of the NASD's By-
Laws), in connection with the sale or distribution of the
Contracts or Shares; or

(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature
or advertising of AVIF, or any amendment or supplement to any
of the foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
a statement or omission was made in reliance upon and in
conformity with information furnished to AVIF or its affiliates
by or on behalf of LIFE COMPANY, UNDERWRITER or their
respective affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the foregoing;
or

(iv) arise as a result of any failure by LIFE COMPANY or UNDERWRITER
to perform the obligations, provide the services and furnish
the materials required of them under the terms of this
Agreement, or any material breach of any representation and/or
warranty made by LIFE COMPANY or UNDERWRITER in this Agreement
or arise out of or result from any other material breach of
this Agreement by LIFE COMPANY or UNDERWRITER; or

(v) arise as a result of failure by the Contracts issued by LIFE
COMPANY to qualify as annuity contracts or life insurance
contracts under the Code, otherwise than by reason of any
Fund's failure to comply with Subchapter M or Section 817(h) of
the Code.

(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence

20
<PAGE>

in the performance by that Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or duties (i) under this
Agreement, or (ii) to AVIF.

(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified LIFE COMPANY and UNDERWRITER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action 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 LIFE COMPANY and
UNDERWRITER of any such action shall not relieve LIFE COMPANY and UNDERWRITER
from any liability which they may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, LIFE COMPANY and UNDERWRITER shall be entitled to
participate, at their own expense, in the defense of such action and also shall
be entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from LIFE COMPANY or UNDERWRITER to such Indemnified
Party of LIFE COMPANY's or UNDERWRITER's election to assume the defense thereof,
the Indemnified Party will cooperate fully with LIFE COMPANY and UNDERWRITER and
shall bear the fees and expenses of any additional counsel retained by it, and
neither LIFE COMPANY nor UNDERWRITER will be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.

12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM.
-----------------------------------------------

(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF and/or AIM) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law, or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:

(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus or sales literature
or advertising of AVIF (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

21
<PAGE>

or omission was made in reliance upon and in conformity with
information furnished to AVIF or its affiliates by or on behalf
of LIFE COMPANY, UNDERWRITER or their respective affiliates for
use in AVIF's 1933 Act registration statement, AVIF Prospectus,
or in sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or

(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
AVIF, AIM, or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF, AIM, or its affiliates or persons under its
control (including, without limitation, their employees and
"Associated Persons" as that term is defined in Section (n) of
Article I of the NASD By-Laws), in connection with the sale or
distribution of AVIF Shares; or

(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement
or omission was made in reliance upon and in conformity with
information furnished to LIFE COMPANY, UNDERWRITER or their
respective affiliates by or on behalf of AVIF or AIM for use in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing; or

(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
AVIF in this Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.

(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVIF and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M

22
<PAGE>

of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income taxes and
related penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that LIFE COMPANY reasonably deems necessary or appropriate as a result
of the noncompliance.

(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY,
UNDERWRITER, each Account or Participants.

(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action 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 AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF
and/or AIM to such Indemnified Party of AVIF's or AIM's election to assume the
defense thereof, the Indemnified Party will cooperate fully with AVIF and AIM
and shall bear the fees and expenses of any additional counsel retained by it,
and AVIF will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.

(e) In no event shall either AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any individual or
entity, including, without limitation, LIFE COMPANY, UNDERWRITER or any other
Participating Insurance Company or any Participant, 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 LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under

23
<PAGE>

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
LIFE COMPANY or any Participating Insurance Company to maintain its variable
annuity or life insurance contracts (with respect to which any Fund serves as an
underlying funding vehicle) as annuity contracts or life insurance contracts
under applicable provisions of the Code.

12.3 EFFECT OF NOTICE.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.

12.4 SUCCESSORS.
----------

A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.

SECTION 13. APPLICABLE LAW
---------------------------

This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.

SECTION 14. EXECUTION IN COUNTERPARTS
--------------------------------------

This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.

SECTION 15. SEVERABILITY
-------------------------

If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.

SECTION 16. RIGHTS CUMULATIVE
------------------------------

The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.

24
<PAGE>

SECTION 17. HEADINGS
---------------------

The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.

SECTION 18. CONFIDENTIALITY
----------------------------

AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.

SECTION 19. TRADEMARKS AND FUND NAMES
--------------------------------------

(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other

25
<PAGE>

trade names, trademarks and service marks as may be set forth on Schedule B, as
amended from time to time by written notice from AIM to LIFE COMPANY (the "AIM
licensed marks" or the "licensor's licensed marks") and is authorized to use and
to license other persons to use such marks. LIFE COMPANY and its affiliates are
hereby granted a non-exclusive license to use the AIM licensed marks in
connection with LIFE COMPANY's performance of the services contemplated under
this Agreement, subject to the terms and conditions set forth in this Section
19.

(b) The grant of license to LIFE COMPANY and its affiliates (the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.

(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.

(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor, when requesting
reconsideration of a prior approval, shall assume the reasonable expenses of
withdrawing and replacing such disapproved materials. The licensee shall obtain
the prior written approval of the licensor for the use of any new materials
developed to replace the disapproved materials, in the manner set forth above.

(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.

26
<PAGE>

SECTION 20. PARTIES TO COOPERATE
---------------------------------

Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.

________________________________________

27
<PAGE>

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.

AIM VARIABLE INSURANCE FUNDS, INC.

Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
---------------------- ----------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President

A I M DISTRIBUTORS, INC.

Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
---------------------- ----------------------
Nancy L. Martin
Assistant Secretary Name: Michael J. Cemo
----------------------

Title: President
----------------------

PFL LIFE INSURANCE COMPANY, on behalf
of itself and its separate accounts

Attest: /s/ Ronald L. Ziegler By: /s/ William L. Busler
---------------------- ----------------------

Name: Ronald L. Ziegler Name: William L. Busler
---------------------- ----------------------

Title: VP & Actuary Title: President
---------------------- ----------------------

AFSG SECURITIES CORPORATION

Attest: /s/ Frank A. Camp By: /s/ Larry N. Norman
---------------------- ----------------------

Name: Frank A. Camp Name: Larry N. Norman
---------------------- ----------------------

Title: Secretary Title: President
---------------------- ----------------------

28
<PAGE>

SCHEDULE A

FUNDS AVAILABLE UNDER THE CONTRACTS
- -----------------------------------

. AIM VARIABLE INSURANCE FUNDS, INC.

AIM V.I. Value Fund
AIM V.I. International Equity Fund
AIM V.I. Growth & Income Fund

SEPARATE ACCOUNTS UTILIZING THE FUNDS
- -------------------------------------

PFL Retirement Builder Variable Annuity Account

CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- -----------------------------------------

PFL Life Insurance Company
Policy Form No. AV288-101-95-796
(including successor forms, addenda and endorsements
may vary by state under marketing names:
"Retirement Income Builder Variable Annuity,"
"First Union Variable Annuity" or
successor marketing names.)

29
<PAGE>

SCHEDULE B

. AIM VARIABLE INSURANCE FUNDS, INC.

AIM________________________ Fund

. AIM and Design

[LOGO]

30
<PAGE>

SCHEDULE C

EXPENSE ALLOCATIONS

<TABLE>
<CAPTION>
=====================================================================================================
LIFE COMPANY AVIF / AIM
- ------------------------------------------------------------------------------------------------------
<S> <C>
preparing and filing the Account's preparing and filing the Fund's registration
registration statement statement
- ------------------------------------------------------------------------------------------------------
text composition for Account prospectuses text composition for Fund prospectuses and
and supplements supplements
- ------------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
- ------------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus;
supplements printing costs of Fund prospectus to existing
policy owners with amounts allocated to the
Fund
- ------------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
- ------------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs to mailing and distributing Fund SAIs to policy
policy owners upon request by policy owners owners upon request by policy owners
- ------------------------------------------------------------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal Securities Laws
and to prospective purchasers
- ------------------------------------------------------------------------------------------------------
text composition (Account), printing, mailing, text composition of annual and semi-annual
and distributing annual and semi-annual reports (Fund)
reports for Account (Fund and Account as,
applicable)
- ------------------------------------------------------------------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction solicitation statements and voting instruction solicitation
materials to policy owners with respect to materials to policy owners with respect to
proxies related to the Account proxies related to the Fund
- ------------------------------------------------------------------------------------------------------
preparation, printing and distributing sales
material and advertising relating to the Funds,
insofar as such materials relate to the
Contracts and filing such materials with and
obtaining approval from, the SEC, the NASD,
any state insurance regulatory authority, and
any other appropriate regulatory authority, to
the extent required
======================================================================================================
</TABLE>

<PAGE>

EXHIBIT (8)(C)(1)
-----------------

AMENDMENT NO.1
TO PARTICIPATION AGREEMENT BY AND AMONG
AIM VARIABLE INSURANCE PRODUCTS FUNDS, INC.,
PFL LIFE INSURANCE COMPANY,
AND AFSG SECURITIES CORPORATION
<PAGE>

AMENDMENT NO. 1
PARTICIPATION AGREEMENT

The Participation Agreement (the "Agreement"), dated May 1, 1998, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, PFL Life Insurance Company, an Iowa
life insurance company and AFSG Securities Corporation, a Pennsylvania
corporation, is hereby amended as follows:

Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:

"SCHEDULE A

<TABLE>
<CAPTION>
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
- --------------------- ------------------- -----------------------
<S> <C> <C>
AIM V.I. Capital PFL Retirement Builder PFL Life Insurance Company
Appreciation Fund Variable Annuity Account Policy Form No. AV288-
AIM V.I. Government 1010-95-796 (including
Securities Fund successors forms, addenda
AIM V.I. Growth & Income and endorsements may vary
Fund by state under
AIM V.I. International marketing names:
Equity Fund "Retirement Income Builder
AIM V.I. Value Fund Variable Annuity," "First
Union Variable Annuity" or
successor marketing names.)"
</TABLE>

All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.

Effective Date: June 30, 1998

AIM VARIABLE INSURANCE FUNDS, INC.

Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
---------------------------- -------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President

(SEAL)

1 of 2
<PAGE>

A I M DISTRIBUTORS, INC.

Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
--------------------------- --------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President

(SEAL)

PFL LIFE INSURANCE COMPANY

Attest: /s/ Frank A. Camp By: /s/ William L. Busler
-------------------------- -----------------------------
Name: Frank A. Camp Name: William L. Busler
Title: VP Division General Counsel Title: President

(SEAL)

AFSG SECURITIES CORPORATION

Attest: /s/ Frank A. Camp By: /s/ Lisa A. Wachendorf
-------------------------- -----------------------------
Name: Frank A. Camp Name: Lisa A. Wachendorf
Title: Secretary Title: Vice President

(SEAL)

2 of 2

<PAGE>

EXHIBIT (8)(F)(1)
-----------------

ADDENDUM TO PARTICIPATION AGREEMENT,
DATED AS OF NOVEMBER 24, 1997, BY AND AMONG
MFS VARIABLE INSURANCE TRUST,
MASSACHUSETTS FINANCIAL SERVICES COMPANY,
AND PFL LIFE INSURANCE COMPANY

<PAGE>

ADDENDUM TO PARTICIPATION AGREEMENT
-----------------------------------

Amendment to the Participation Agreement, dated as of November 24, 1997, by
and among MFS VARIABLE INSURANCE TRUST, MASSACHUSETTS FINANCIAL SERVICES
COMPANY, and PFL LIFE INSURANCE COMPANY (the "Agreement").

WHEREAS, AEGON USA SECURITIES, INC. is no longer the underwriter for the
individual variable annuity and the variable life policies; and

WHEREAS, AFSG SECURITIES CORPORATION, the underwriter for the individual
variable annuity and the variable life policies, is registered as a broker-
dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD");

NOW, THEREFORE, the Agreement is hereby amended as follows:

Article II, Section 2.3, is hereby deleted in its entirety and replaced with
the following:

"2.3 The Company represents and warrants that AFSG SECURITIES CORPORATION (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 AFSG SECURITIES CORPORATION (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."

Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:

"SCHEDULE A

ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------

<TABLE>
<CAPTION>
=============================================================================================================
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. AV288-101-985-796 MFS Total Return Series
(including successor forms, MFS Utilities Series
addenda and endorsements - may MFS Foreign & Colonial
vary by state) under marketing Emerging Markets Equity Series"
names:
"Retirement Income Builder
Variable Annuity"
"First Union Variable Annuity"
(or successor marketing names)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.

Effective Date: June 30, 1998

MFS VARIABLE INSURANCE TRUST, MASSACHUSETTS FINANCIAL SERVICES
on behalf of the Portfolios COMPANY

By: /s/ James R. Bordewick, Jr. By: /s/ James R. Bordewick, Jr.
---------------------------- ----------------------------
Name: James R. Bordewick, Jr. Name: James R. Bordewick, Jr.
-------------------------- --------------------------
Title: Assistant Secretary Title: Senior Vice President
------------------------- -------------------------
and Associate Counsel
-------------------------

PFL LIFE INSURANCE COMPANY

By: /s/ William L. Busler
----------------------------
Name: William L. Busler
--------------------------
Title: President
-------------------------

<PAGE>

EXHIBIT (8)(G)(1)
-----------------

AMENDMENT TO PARTICIPATION AGREEMENT,
DATED AS OF DECEMBER 15, 1997, BY AND AMONG
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.,
AND PFL LIFE INSURANCE COMPANY

<PAGE>

[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]

AMENDMENT TO PARTICIPATION AGREEMENT
------------------------------------

The Participation Agreement, dated as of December 15, 1997, by and among
OPPENHEIMER VARIABLE ACCOUNT FUNDS, OPPENHEIMERFUNDS, INC., and PFL LIFE
INSURANCE COMPANY (the "Agreement") is hereby amended as follows:

Schedule 3 of the Agreement is hereby deleted in its entirety and replaced
with the following:

"SCHEDULE 3

Portfolios of Oppenheimer Variable Account Funds:

Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer Strategic Bond Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Global Securities Fund
Oppenheimer High Income Fund"

All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.

Effective Date: June 30, 1998

OPPENHEIMER VARIABLE ACCOUNT OPPENHEIMERFUNDS, INC.
FUNDS

By: /s/ Andrew J. Donahue By: /s/ Andrew J. Donahue
--------------------------------- --------------------------------
Name: Andrew J. Donahue Name: Andrew J. Donahue
Title: Vice President and Secretary Title: Executive Vice President and
General Counsel

PFL LIFE INSURANCE COMPANY

By: /s/ William L. Busler
----------------------------
Name: William L. Busler
Title: President

<PAGE>

EXHIBIT (8)(H)
--------------

PARTICIPATION AGREEMENT BY AND BETWEEN
PUTNAM VARIABLE TRUST,
PUTNAM INVESTMENT MANAGEMENT, INC.,
AND PFL LIFE INSURANCE COMPANY
<PAGE>

PARTICIPATION AGREEMENT

Among

PUTNAM VARIABLE TRUST

PUTNAM MUTUAL FUNDS CORP.

and

PFL LIFE INSURANCE COMPANY

THIS AGREEMENT, made and entered into as of this 1st day of July, 1998,
among PFL LIFE INSURANCE COMPANY (the "Company"), an Iowa corporation, on its
own behalf and on behalf of each separate account of the Company set forth on
Schedule A hereto, as such Schedule may be amended from time to time (each such
account hereinafter referred to as the "Account"), PUTNAM VARIABLE TRUST (the
"Trust"), a Massachusetts business trust, and PUTNAM MUTUAL FUNDS CORP. (the
"Underwriter"), a Massachusetts corporation.

WHEREAS, the Trust is an open-end diversified management investment company
and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into substantially similar Participation Agreements
with the Trust and the Underwriter (the "Participating Insurance Companies");
and

WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and

WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission, dated December 29, 1993 (File No. 812-8612), granting the variable
annuity and variable life insurance separate accounts participating in the Trust
exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares
of the Trust to be sold to and held by variable annuity and variable life
insurance separate accounts of the Participating Insurance Companies (the
"Shared Funding Exemptive Order"); and
<PAGE>

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

WHEREAS, the Company has registered or will register certain variable life
and/or variable annuity contracts under the 1933 Act and any applicable state
securities and insurance law; and

WHEREAS, each Account is a duly organized, validly existing separate
account, established by resolution of the Board of Directors of the Company, on
the date shown for such Account on Schedule A hereto, to set aside and invest
assets attributable to one or more variable insurance contracts (the
"Contracts"); and

WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and

WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the " 1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in certain Funds
("Authorized Funds") on behalf of each Account to fund certain of the Contracts
and the Underwriter is authorized to sell such shares to unit investment trusts
such as each Account at net asset value;

NOW, THEREFORE, in consideration of the promises herein, the Company, the
Trust and the Underwriter agree as follows:

ARTICLE 1. Sale of Trust Shares
--------------------

1.1 The Underwriter agrees, subject to the Trust's rights under Section
1.2 and otherwise under this Agreement, to sell to the Company those Trust
shares representing interests in Authorized Funds which each Account orders,
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 of the
Trust. For purposes of this Section 1.1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 9:30 a.m. Eastern time on the next following Business
Day. "Business Day" shall mean any day on

2
<PAGE>

which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission. The initial Authorized Funds are set forth in Schedule A,
as such schedule is amended from time to time.

1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Trust shall
use reasonable efforts to calculate such net asset value on each day on which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Trustees of the Trust (the "Trustees") may refuse to sell shares of any Fund
to the Company or any other person, or suspend or terminate the offering of
shares of any Fund if such action is required by law or by regulatory
authorities having jurisdiction over the Trust or if the Trustees determine, in
the exercise of their fiduciary responsibilities, that to do so would be in the
best interests of shareholders.

1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.

1.4 The Trust shall redeem its shares in accordance with the terms of its
then current prospectus. For purposes of this Section 1.4, the Company shall be
the designee of the Trust for receipt of requests for redemption from each
Account 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., Eastern time, on the next following Business Day.

1.5 The Company shall purchase and redeem the shares of Authorized Funds
offered by the then current prospectus of the Trust in accordance with the
provisions of such prospectus.

1.6 The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.

1.7 Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded as instructed by the Company to
the Underwriter in an appropriate title for each Account or the appropriate sub-
account of each Account.

3
<PAGE>

1.8 The Underwriter shall furnish prompt notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Underwriter
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.

1.9 The Underwriter shall make the net asset value per share for each
Fund available to the Company on a daily basis as soon as reasonably practical
after the Trust calculates its net asset value per share and each of the Trust
and the Underwriter shall use its best efforts to make such net asset value per
share available by 7:00 p.m. Eastern time.

1.10 The Company agrees that, unless otherwise agreed by the Underwriter,
(a) it will limit distribution of the Contracts to sales through First Union
Brokerage Services, Inc. ("First Union") and its affiliates or in circumstances
where the sale reflects wholesaling activities by First Union or an affiliate
(this agreement does not preclude First Union from entering into an agreement
with a third party as a result of such wholesaling activities, permitting such
third party to sell the Contracts), (b) it will not develop marketing programs
(written or otherwise) which encourage direct transfers from the Putnam Capital
Manager variable annuity (the "PCM Annuity") to the Contracts, (c) it will not
create marketing tools which provide direct comparisons between the PCM Annuity
and the Contracts and (d) it will not directly or indirectly rebate any deferred
sales charges in order to encourage the transfer of assets directly from the PCM
Annuity to the Contracts.

ARTICLE II. REpresentations and Warranties
------------------------------

2.1 The Company represents and warrants that

(a) at all times during the term of this Agreement the Contracts are
or will be registered under the 1933 Act; the Contracts will be issued and sold
in compliance in all material respects with all applicable laws and the sale of
the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a separate account under applicable law and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance

4
<PAGE>

with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts; and

(b) the Contracts are currently treated as endowment, annuity or life
insurance contracts, under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such treatment and that it will notify the Trust and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.

2.2 The Trust represents and warrants that

(a) at all times during the term of this Agreement Trust shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold by the Trust to the Company in compliance with
all applicable laws, subject to the terms of Section 2.4 below, and 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 advisable
by the Trust or the Underwriter in connection with their sale by the Trust to
the Company and only as required by Section 2.4;

(b) it is currently qualified as a Regulated Investment Company
under Subchapter M of the Code, and that it will use its best efforts to
maintain such qualification (under Subchapter M or any successor provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future; and

(c) it is lawfully organized and validly existing under the laws of
the Commonwealth of Massachusetts and that it does and will comply in all
material respects with the 1940 Act.

2.3 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Trust shares
in accordance with all applicable securities laws applicable to it, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.

2.4 Notwithstanding any other provision of this Agreement, the Trust
shall be responsible for the registration and qualification of its shares and of
the Trust

5
<PAGE>

itself under the laws of any jurisdiction only in connection with the sales of
shares directly to the Company through the Underwriter. The Trust shall not be
responsible, and the Company shall take full responsibility, for determining any
jurisdiction in which any qualification or registration of Trust shares or the
Trust by the Trust may be required in connection with the sale of the Contracts
or the indirect interest of any Contract in any shares of the Trust and advising
the Trust thereof at such time and in such manner as is necessary to permit the
Trust to comply.

2.5 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.

ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------

3.1 The Trust shall provide such documentation (including a camera-ready
copy of its prospectus) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if the prospectus for the
Trust is amended) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one or more documents (such printing to be at the
Company's expense).

3.2 The Trust's Prospectus shall state that the Statement of Additional
Information for the Trust is available from the Underwriter or its designee (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust), and the Underwriter (or the Trust), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.

3.3 The Trust, at its expense, shall provide the Company with copies of
its reports to shareholders, proxy material and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to the Contract owners, such distribution to be at the expense of
the Company.

3.4 The Company shall vote all Trust shares as required by law and the
Shared Funding Exemptive Order. The Company reserves the right to vote Trust
shares held in any separate account in its own right, to the extent permitted by
law and the Shared Funding Exemptive Order. The Company shall be responsible for
assuring that each of its separate accounts participating in the Trust
calculates voting privileges in a manner consistent with all legal requirements
and the Shared Funding Exemptive Order.

6
<PAGE>

3.5 The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Trust will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.

ARTICLE IV. Sales Material and Information
------------------------------

4.1 Without limiting the scope or effect of Section 4.2 hereof, the
Company shall furnish, or shall cause to be furnished, to the Underwriter each
piece of sales literature or other promotional material (as defined hereafter)
in which the Trust, its investment adviser or the Underwriter is named at least
15 days prior to its use. No such material shall be used if the Underwriter
objects to such use within five Business Days after receipt of such material.

4.2 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in annual or semi-annual reports or proxy
statements for the Trust, or in sales literature or other promotional material
approved by the Trust or its designee or by the Underwriter, except with the
written permission of the Trust or the Underwriter or the designee of either or
as is required by law.

4.3 The Underwriter or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Underwriter in which the Company
and/or its separate account(s) is named at least 15 days prior to its use. No
such material shall be used if the Company or its designee objects to such use
within five Business Days after receipt of such material.

4.4 Neither the Trust nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or

7
<PAGE>

approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the written permission of the Company or as is required by
law.

4.5 For purposes of this Article IV, 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), sales
literature (i.e. any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all registered representatives.

ARTICLE V. Fees and Expenses
-----------------

5.1 Except as provided in Article VI, the Trust and Underwriter shall pay
no fee or other compensation to the Company under this agreement.

5.2 All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall bear the expenses for the
cost of registration and qualification of the Trust's shares, preparation and
filing of the Trust's prospectus and registration statement, proxy materials and
reports, setting the prospectus and shareholder reports in type, setting in type
and printing the proxy materials, and the preparation of all statements and
notices required by any federal or state law, in each case as may reasonably be
necessary for the performance by it of its obligations under this Agreement.

5.3 The Company shall bear the expenses of (a) printing and distributing
the Trust's prospectus in connection with sales of the Contracts and (b)
distributing the reports to Trust's Shareholders and (c) of distributing the
Trust's proxy materials to owners of the Contracts.

ARTICLE VI. Service Fees
------------

6.1 Provided that the Company complies with its obligations under this
Agreement, the Underwriter shall pay such Company a service fee (the "Service
Fee") on shares of the Funds held in the Accounts at the annual rates specified
in Schedule B (excluding any accounts for the Company's own corporate retirement
plans), subject to Section 6.2 hereof.

8
<PAGE>

6.2 The Company understands and agrees that all Service Fee payments are
subject to the limitations contained in each Fund's Distribution Plan, which may
be varied or discontinued at any time and hereby waives the right to receive
such service fee payments with respect to the Fund if the Fund ceases to pay
Service fees to the Underwriter pursuant to its Distribution Plan.

6.3 (a) The Company's failure to provide the services described in
Section 6.4 or otherwise comply with the terms of this Agreement will render it
ineligible to receive Service Fees; and

(b) the Underwriter may, without the consent of the Company, amend
this Article VI to change the terms of the Service Fee payments with prior
written notice to the Company.

6.4 The Company will provide the following services to the Contract
Owners purchasing Fund shares:

(i) Maintaining regular contact with Contract owners and assisting in
answering inquiries concerning the Funds;

(ii) Assisting in printing and distributing shareholder reports,
prospectuses and other sale and service literature provided by the Underwriter;

(iii) Assisting the Underwriter and its affiliates in the establishment
and maintenance of shareholder and Contract owners accounts and records;

(iv) Assisting Contract owners in effecting administrative changes, such
as exchanging shares in or out of the Funds;

(v) Assisting in processing purchasing purchase and redemption
transactions; and

(vi) Providing any other information or services as the Contract owners or
the Underwriter may reasonably request.

The Company will support the Underwriter's marketing efforts by granting
reasonable requests for visits to the Company's offices by representatives of
the Underwriter.

9
<PAGE>

6.5 The Company's compliance with the service requirement set forth in
this Agreement will be evaluated from time to time by monitoring redemption
levels of Fund shares held in any Account and by such other methods as the
Underwriter deems appropriate.

ARTICLE VII. Diversification
---------------

7.1 The Trust shall use its best efforts to cause each Authorized Fund to
maintain a diversified pool of investments that would, if such Fund were a
segregated asset account, satisfy the diversification provisions of Treas. Reg.
(S) 1.817-5(b)(1) or (2) 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).

ARTICLE VIII. Potential Conflicts
-------------------

8.1 The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. A material irreconcilable conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities law or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trust shall promptly inform the Company if
the Trustees determine that a material irreconcilable conflict exists and the
implications thereof.

8.2 The Company will report any potential or existing conflicts of which
it is aware to the Trustees. The Company will assist the Trustees in carrying
out their responsibilities under the Shared Funding Exemptive Order, by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised. This includes, but is not limited to,
an obligation by the Company to inform the Trustees whenever Contract owner
voting instructions are disregarded.

8.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary

10
<PAGE>

to remedy or eliminate the material irreconcilable conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Fund and reinvesting such assets in a different
investment medium, including (but not limited to) another Fund of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.

8.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in one or more portfolios of the Trust and terminate this Agreement
with respect to such Account; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. No charge or penalty shall be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Trust shall, to the
extent permitted by law and any exemptive relief previously granted to the
Trust, continue to accept and implement orders by the Company for the purchase
(or redemption) of shares of the Trust.

8.5 If a material irreconcilable conflict arises because of a particular
state insurance regulator's decision applicable to the Company to disregard
Contract owner voting instructions and that decision represents a minority
position that would preclude a majority vote, then the Company may be required,
at the Trust's direction, to withdraw the affected Account's investment in one
or more Authorized Funds of the Trust; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented, unless a shorter period is required by law, and until the
end of the foregoing six month period (or such shorter period if required by
law), the Underwriter and Trust shall, to the extent permitted by law and any
exemptive relief previously granted to the Trust, continue to accept and
implement orders by

11
<PAGE>

the Company for the purchase (and redemption) of shares of the Trust. No charge
or penalty will be imposed as a result of such withdrawal.

8.6 For purposes of Sections 8.3 through 8.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict. Neither the
Trust nor the Underwriter shall be required to establish a new funding medium
for the Contracts, nor shall the Company be required to do so, if an offer to do
so has been declined by vote of a majority of Contract owners materially
adversely affected by the material irreconcilable conflict. In the event that
the Trustees determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the Account's
investment in one or more Authorized Funds of the Trust and terminate this
Agreement within six (6) months (or such shorter period as may be required by
law or any exemptive relief previously granted to the Trust) after the Trustees
inform the Company in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty will be imposed as a result of such
withdrawal.

8.7 The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Article VIII shall be carried out
with a view only to the interests of Contract owners.

8.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the 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 Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 8.1, 8.2, 8.3, 8.4 and 8.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.

8.9 The Company has reviewed the Shared Funding Exemption Order and
hereby assumes all obligations referred to therein which are required,
including, without limitation, the obligation to provide reports, material or
data as the Trustees

12
<PAGE>

may request as conditions to such Order, to be assumed or undertaken by the
Company.

ARTICLE IX. INDEMNIFICATION
---------------

9.1. Indemnification by the Company
------------------------------

9.1 (a). The Company shall indemnify and hold harmless the Trust and the
Underwriter and each of the Trustees, directors of the Underwriter, officers,
employees or agents of the Trust or the Underwriter and each person, if any, who
controls the Trust or the Underwriter within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
9.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company which consent may not
be unreasonably withheld) or litigation (including reasonable 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 Trust's shares or the Contracts or
the performance by the parties of their obligations hereunder and:

(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a Registration
Statement, Prospectus or Statement of Additional Information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or on behalf
of the Trust for use in the Registration Statement, Prospectus or Statement
of Additional Information 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 Trust shares; or

(ii) arise out of or as a result of written statements or representations
(other than statements or representations contained in the Trust's
Registration Statement or Prospectus, or in sales literature for Trust
shares not supplied by the Company, or persons under its control) or
wrongful conduct of the
13
<PAGE>

Company or persons under its control, with respect to the sale or
distribution of the Contracts or Trust 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 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 statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Trust or the Underwriter 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 9.1(b) and 9.1(c) hereof.

9.1 (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 to the extent such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Trust, whichever is applicable.

9.1 (c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim 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 Indemnified Party
named in the action. After notice from the Company to such Indemnified Party of
the

14
<PAGE>

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 Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.

9.1 (d) The Underwriter shall promptly notify the Company of the
commencement of any litigation or proceedings against the Trust or the
Underwriter in connection with the issuance or sale of the Trust Shares or the
Contracts or the operation of the Trust.

9.1 (e) The provisions of this Section 9.1 shall survive any termination
of this Agreement.

9.2 Indemnification by the Underwriter
----------------------------------

9.2 (a) The Underwriter shall indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 9.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter which consent may not
be unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Contracts or the performance by
the parties of their obligations hereunder and:

(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the sales literature of the
Trust prepared by or approved by the Trust or Underwriter (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on behalf of the
Company for use in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or

15
<PAGE>

(ii) arise out of or as a result of written statements or representations
(other than statements or representations contained in the Registration
Statement, Prospectus, Statement of Additional Information or sales
literature for the Contracts not supplied by the Underwriter or persons
under its control) of the Underwriter or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares; or

(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus, Statement
of Additional Information 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 Underwriter; or

(iv) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of
Sections 9.2(b) and 9.2(c) hereof.

9.2 (b) The Underwriter 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
each Company or the Account, whichever is applicable.

9.2 (c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Underwriter of any such claim
shall not relieve the Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action

16
<PAGE>

is brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the Indemnified Party named in the action. After notice from the Underwriter to
such Indemnified Party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof other than reasonable costs of investigation.

9.2 (d) The Company shall promptly notify the Underwriter of the Trust 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.

9.2 (e) The provisions of this Section 9.2 shall survive any termination
of this Agreement.

9.3 Indemnification by the Trust
----------------------------

9.3 (a) The Trust shall indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 9.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust which consent may not be
unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
operations of the Trust and:

(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in a Registration Statement,
Prospectus and Statement of Additional Information 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 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

17
<PAGE>

information furnished to the Underwriter or Trust by or on behalf of the
Company for use in the Registration Statement, Prospectus, or Statement of
Additional Information for the Trust (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or

(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement or arise out of or
result from any other material breach of this Agreement by the Trust, as
limited by and in accordance with the provisions of Sections 9.3(b) and
9.3(c) hereof.

9.3 (b) The Trust shall not be liable under the 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 or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Trust, the Underwriter or each Account,
whichever is applicable.

9.3 (c) The Trust shall not be liable under this indemnification
provision with respect to any claim made against any Indemnified Party unless
such Indemnified Party shall have notified the Trust 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) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Trust of any such claim shall
not relieve the Trust 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 Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust'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
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.

9.3 (d) The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its officers
or,

18
<PAGE>

directors, in connection with this Agreement, the issuance or sale of the
Contracts or the sale or acquisition of shares of the Trust.

9.3 (e) The provisions of this Section 9.3 shall survive any termination
of this Agreement.

ARTICLE X. Applicable Law
--------------

10.1 This Agreement shall be construed and the provisions hereof
interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.

10.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.

ARTICLE XI. Termination
-----------

11.1. This Agreement shall terminate:

(a) at the option of any party upon 90 days advance written notice to the
other parties; or

(b) at the option of the Trust or the Underwriter in the event that
formal administrative proceedings are instituted against the Company by the
NASD, the Securities and Exchange Commission, the Insurance Commissioner of the
State of Iowa or any other regulatory body regarding the Company's duties under
this Agreement or related to the sales of the Contracts, with respect to the
operation of any Account, or the purchase of the Trust shares, provided,
however, that the Trust or the Underwriter determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or

(c) at the option of the Company in the event that formal administrative
proceedings are instituted against the Trust or Underwriter by the NASD, the
Securities and Exchange Commission, or any state securities or insurance
department or any other regulatory body in respect of the sale of shares of the
Trust to the Company, provided, however, that the Company determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material

19
<PAGE>

adverse effect upon the ability of the Trust or Underwriter to perform its
obligations under this Agreement; or

(d) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Fund shares of the
Trust in accordance with the terms of the Contracts for which those Fund shares
had been selected to serve as the underlying investment media. The Company will
give 30 days' prior written notice to the Trust of the date of any proposed vote
to replace the Trust's shares; or

(e) at the option of the Company by written notice to the Trust and the
Underwriter with respect to any Fund based upon the Company's determination that
shares of such Fund are not reasonably available to meet the requirments of the
Contracts; or

(f) at the option of the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event any of the Fund's shares are
not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by the Company; or

(g) at the option of the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Trust may fail to so qualify; or

(h) at the option of the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event that such Fund fails to meet
the diversification requirements specified in Article VII hereof.

11.2. 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 any
reason or for no reason.

11.3 No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for such termination. Such prior written notice shall be given
in advance of the effective date of termination as required by this Article XI.

20
<PAGE>

11.4 Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement, the Trust and the Underwriter shall, at the
option of the Company, continue to make available additional shares of the Trust
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, subject
to Section 1.2 of this Agreement, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Trust, redeem investments in the
Trust and/or invest in the Trust upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 11.4 shall
not apply to any termination under Article VIII and the effect of such Article
VIII termination shall be governed by Article VIII of this Agreement.

11.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Underwriter an opinion of counsel for the Company,
reasonably satisfactory to the Trust, to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, subject to Section 1.2
of this Agreement, the Company shall not prevent Contract owners from allocating
payments to an Authorized Fund that was otherwise available under the Contracts
without first giving the Trust or the Underwriter 90 days notice of its
intention to do.

ARTICLE XII. Notices
-------

Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.

If to the Trust:

One Post Office Square
Boston, MA 02109
Attention: John R. Verani

21
<PAGE>

If to the Underwriter:

One Post Office Square
Boston, MA 02109
Attention: General Counsel

If to the Company:

PFL Life Insurance Company
4333 Edgewood Rd. NE
Cedar Rapids, IA 52499-0001
Attention: Financial Markets Division, Legal Department

ARTICLE XIII. Miscellaneous
-------------

13.1 A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of or arising out of this instrument, including without limitation Article VII,
are not binding upon any of the Trustees or shareholders individually but
binding only upon the assets and property of the Trust.

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 two 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 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall pertmit such authorities reasonable access to its books and records in
connection with any

22
<PAGE>

investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.

13.6 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.

13.7 Notwithstanding any other provision of this Agreement, the
obligations of the Trust and the Underwriter are several and, without limiting
in any way the generality of the foregoing, neither such party shall have any
liability for any action or failure to act by the other party, or any person
acting on such other party's behalf.

23
<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 below.

PFL LIFE INSURANCE COMPANY
By its authorized officer,

/s/ William L. Busler
--------------------------------------------
Name: William L. Busler
Title: President

PUTNAM VARIABLE TRUST
By its authorized officer,

/s/ John R. Verani
--------------------------------------------
Name: John R. Verani
Title: Vice President

PUTNAM MUTUAL FUNDS CORP.
By its authorized officer,

/s/ Jeffrey M. Miller
--------------------------------------------
Name: Jeffrey M. Miller
Title: Managing Director

24
<PAGE>

SCHEDULE A

ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED BY SEPARATE ACCOUNT PORTFOLIOS APPLICABLE TO POLICIES
ESTABLISHED BY BOARD OF DIRECTORS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PFL Retirement Builder Variable PFL Life Insurance Company Policy Form Putnam VT Global Growth Fund
Annuity Account March 29, 1996 No. AV288-101-95-796 Putnam VT Money Market Fund
(including successor forms, addenda Putnam VT New Value Fund
and endorsements - may vary by state
under marketing names: "Retirement
Income Builder Variable Annuity"
"First Union First Choice Variable
Annuity"
(or successor marketing names)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

EXHIBIT (8)(J)
--------------

AMENDMENT TO PARTICIPATION AGREEMENT,
DATED AS OF APRIL 15, 1997,
BETWEEN DREYFUS VARIABLE INVESTMENT FUND,
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.,
DREYFUS LIFE AND ANNUNITY INDEX FUND,
(D/B/A DREYFUS STOCK INDEX FUND),
AND PFL LIFE INSURANCE COMPANY

<PAGE>

AMENDMENT TO PARTICIPATION AGREEMENT
------------------------------------

The Participation Agreement, dated as of April 15, 1997, between DREYFUS
VARIABLE INVESTMENT FUND, THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.,
DREYFUS LIFE AND ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX FUND), and
PFL LIFE INSURANCE COMPANY (the "Agreement") is hereby amended as follows:

Exhibit A of the Agreement is hereby deleted in its entirety and replaced
with the following:

"EXHIBIT A

LIST OF PARTICIPATING FUNDS

Dreyfus Variable Investment Fund

. Small Cap Portfolio
. Quality Bond Portfolio
. Capital Appreciation Portfolio
. Growth and Income Portfolio
. Disciplined Stock Portfolio
. Small Company Stock Portfolio
. Money Market Portfolio

Dreyfus Stock Index Fund"

All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.

Effective Date: June 26, 1998

DREYFUS VARIABLE INVESTMENT FUND THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.

By: /s/ Elba Vasquez By: /s/ Elba Vasquez
--------------------------- ---------------------------
Name: Elba Vasquez Name: Elba Vasquez
Title: V.P. and Assistant Secretary Title: V.P. and Assistant Secretary

DREYFUS LIFE AND ANNUITY INDEX FUND, PFL LIFE INSURANCE COMPANY
INC. (d/b/a DREYFUS STOCK INDEX FUND)

By: /s/ Elba Vasquez By: /s/ William L. Busler
--------------------------- ---------------------------
Name: Elba Vasquez Name: William L. Busler
Title: V.P. and Assistant Secretary Title: President

<PAGE>

EXHIBIT (10)(A)
---------------

CONSENT OF INDEPENDENT AUDITORS

<PAGE>

EXHIBIT 10A

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the reference to our firm under the captions "Financial
Statements" in the Prospectus and "Independent Auditors" in the Statement of
Additional Information and to the use of our report dated February 27, 1998 with
respect to the statutory-basis financial statements and schedules of PFL Life
Insurance Company, included in Post-Effective Amendment No. 5 to the
Registration Statement (Form N-4 No. 333-7509) and related Prospectus of the
Flexible Premium Individual Deferred Variable Annuity.

Ernst & Young LLP

Des Moines, Iowa
July 10, 1998

<PAGE>

EXHIBIT (10)(B)
---------------

OPINION AND CONSENT OF ACTUARY
<PAGE>

June 26, 1998

PFL Life Insurance Company
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-0001

RE: PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT REGISTRATION ON FORM N-4
SEC FILE NO. 333-7509

Dear Sir/Madam:

With regard to the above registration statement, I have examined such documents
and made such inquiries as I have deemed necessary and appropriate, and on the
basis of such examination, have the following opinions:

Fees and charges deducted under the Retirement Income Builder Variable Annuity
policies are those deemed necessary to appropriately reflect:

(1) the expenses incurred in the acquisition and distribution of the Policies,

(2) the expenses associated with the development and servicing of the
policies,

(3) the assumption of certain risks arising from the operation and management
of the Policies and that provides for a reasonable margin of profit.

Fees and charges assessed against the policy values in the Variable Account
include:

(i) Service Charge and Administrative Charge

(ii) Contingent Deferred Sales Charge (Surrender Charge)

(iii) Mortality and Expense Risk Fee (M&E)

(iv) Taxes (including Premium and other Taxes if applicable)

The magnitude of each of the individual charges listed above in (i) through (iv)
is established in the pricing of the Retirement Income Builder, to achieve a
reasonable Return on Investment (ROI), which is within the range of industry
practice with respect to comparable variable annuity products.
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PFL Life Insurance Company
Page 2
June 26, 1998

In the process of determining the reasonable ROI, each individual charge is also
established within the reasonable range of industry practice. For example, in
conjunction with the pricing process the company has analyzed publicly available
information pertaining to similar industry products, taking into consideration
such factors as current charge levels, the existence of charge level guarantees,
guaranteed death benefits, and guaranteed annuity rates. The methodology and
results of the comparative surveys included in this analysis are maintained at
the company's administrative offices.

Except by coincidence, it is not expected that actual charges assessed in a
given year would exactly offset actual expenses incurred. Acquisition expenses
(as well as major product and/or systems development expenses) are incurred "up
front" and recovered, with a reasonable profit margin, through future years'
charges. In addition, the company cannot increase certain charges under the
Policies in the pricing process.

Therefore, in my opinion, 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 the company.

I hereby consent to the use of this opinion, which is included as an Exhibit to
the Registration Statement.

/s/ Calvin R. Birkey
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Calvin R. Birkey, FSA, MAAA
Managing Actuary
PFL Life Insurance Company

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EXHIBIT (14)
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POWER OF ATTORNEY
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POWER OF ATTORNEY
WITH RESPECT TO
PFL RETIREMENT BUILDER
VARIABLE ANNUITY ACCOUNT

Know all men by these presents that LARRY N. NORMAN, whose signature appears
below, constitutes and appoints Larry G. Brown and Craig D. Vermie, and each of
them, his attorneys-in-fact, each with the power of substitution, for him in any
and all capacities, to sign any registration statements and amendments thereto
for the PFL Retirement Builder Variable Annuity Account, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute, may do or cause to be done by
virtue hereof.

/s/ Larry N. Norman
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Larry N. Norman
Executive Vice President
PFL Life Insurance Company

June 26, 1998
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Date