<PAGE>
As filed with the Securities and Exchange Commission on November 2, 1999
Registration No. 333 - 78743
811 - 07689
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
The One(R)Income Annuity(SM)
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------
Pre-Effective Amendment No. 2
-----
Post-Effective Amendment No. ___
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16
------
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
PFL LIFE INSURANCE COMPANY
(Name of Depositor)
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499-0001
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (319) 297-8468
Frank A. Camp, Esq.
PFL Life Insurance Company
4333 Edgewood Road, N.E.
Cedar Rapids, IA 52499-0001
(Name and Address of Agent for Service)
Copy to:
Frederick R. Bellamy, Esq.
Sutherland Asbill and Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
Approximate Date of Proposed Public Offering: As soon as practicable after the
- --------------------------------------------
effective date of the registration statement.
Registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Title of Securities Being Registered: Single Premium Immediate Variable Annuity
- ------------------------------------
Contracts
<PAGE>
THE ONE(R) INCOME ANNUITYSM
A Single Premium Variable Annuity
Issued by
PFL LIFE INSURANCE COMPANY
Supplement Dated November 2, 1999
To The
Prospectus Dated November 2, 1999
Optional Annuity Payment Guarantee Riders
Two optional riders, each offering a certain payment guarantee benefit, are
available with THE ONE(R) INCOME ANNUITYSM. These are (1) an initial payment
guarantee, and (2) a step-up payment guarantee. The rights and benefits under
these optional riders are summarized below. However, the description of each
payment guarantee contained in this supplement is qualified in its entirety by
reference to each rider, copies of which are available upon request from PFL
Life Insurance Company ("PFL").
All italicized terms used, which are not defined in this supplement, shall have
the same meaning as the same terms used in the accompanying prospectus.
The initial payment guarantee and the step-up payment guarantee may not be
available in all states at the date of this supplement. Please contact PFL at
(800) 525-6205 for additional information regarding their availability in your
state.
----------------
Payment Guarantees
You may elect to purchase the initial payment guarantee or the step-up payment
guarantee only at the time you purchase your contract. The guarantees only
apply to variable annuity payments.
The initial payment guarantee ensures that the amount of each annuity payment
you receive will not be less than the guaranteed minimum payment. By electing
this benefit, you can participate in the gains of the underlying variable
investment options you select while knowing that you are guaranteed a minimum
payment amount, regardless of the performance of the underlying variable
investment options.
The step-up payment guarantee ensures that the amount of each annuity payment
you receive will never decrease. By electing this benefit, you can participate
in the gains of the underlying variable investment options you select while
knowing that your annuity payment is guaranteed to never decrease, regardless
of the performance of the underlying variable investment options.
The initial payment guarantee and the step-up payment guarantee do not
establish or guarantee performance of any specific subaccount.
This Prospectus Supplement must be accompanied
by the Prospectus for the
THE ONE(R) INCOME ANNUITYSM dated November 2, 1999
<PAGE>
Initial Payment Guarantee
Guaranteed Minimum Payment. With the initial payment guarantee, your annuity
payments are guaranteed to never be less than the guaranteed minimum payment.
Currently, the guaranteed minimum payment is 100% of the initial annuity
payment. We may, at our discretion, change the percentage that we offer to
guarantee in the future, but it will never be less than 75% of the initial
annuity payment. Changes in the amount we guarantee would only apply to new
contracts sold after the date of the change. The guaranteed minimum payment
amount is included on page one of the initial payment guarantee rider.
Stabilized Payments. Your annuity payments will also be "stabilized" or held
constant during each contract year. Each annuity payment during the first
contract year will equal the initial variable annuity payment. On each contract
anniversary, a new stabilized payment will be determined and you will be
notified of the new stabilized payment amount for the up coming contract year.
The new stabilized payment will equal the greater of the guaranteed minimum
payment or the payment supportable by the variable annuity units in the
selected subaccounts at the beginning of the contract year. (See "Supportable
Payment" below). Thus, during the course of each contract year, you will
receive these stabilized, or level, annuity payments instead of variable
payments that can fluctuate monthly. However, from year to year, your annuity
payments will vary with the investment performance of the selected subaccounts,
but will never be less than the guaranteed minimum payment.
Step-up Payment Guarantee
Guaranteed Minimum Payment. With the step-up payment guarantee, your annuity
payments may increase or remain constant but they are guaranteed to never
decrease. On each contract anniversary, your guaranteed minimum payment is
"stepped-up" to equal the new stabilized payment.
Stabilized Payments. Your annuity payments will also be "stabilized" or held
constant during each contract year. Each annuity payment during the first
contract year will equal the initial variable annuity payment. On each contract
anniversary, a new stabilized payment will be determined and you will be
notified of the new stabilized payment amount for the up coming contract year.
The new stabilized payment can increase, but it will not decrease.
The new stabilized payment will equal the greater of {[(a--b) * c] + b} or b
Where: (a) is the payment supportable by the variable annuity units in the
selected subaccounts (see "Supportable Payment" below);
(b)is the current stabilized payment; and
(c) is the immediate payment increase allocation (which determines how
much of the gain in the variable annuity unit values is applied to
the new stabilized payment and how much is used to purchase
additional variable annuity units; see below).
Accordingly, on any contract anniversary:
IF:the supportable payment is greater than the current stabilized payment;
THEN:the stabilized payment will increase.
* * *
IF:the supportable payment is less than or equal to the current stabilized
payment;
THEN:the stabilized payment will remain unchanged.
Currently, the immediate payment increase allocation is 50%. This means that
50% of the gain in the value of the variable annuity units on a contract
anniversary will be received immediately in the form of increased variable
2
<PAGE>
annuity payments and the remaining 50% will be used to purchase additional
variable annuity units. We may, at our discretion, change the immediate payment
increase allocation in the future, but it will never be less than 40%. Changes
in the immediate payment increase allocation would only apply to new contracts
sold after the date of the change.
Supportable Payment
The supportable payment is the total of the variable annuity unit values times
the number of variable annuity units credited to each of the selected
subaccounts. Please note that if you elect one of these riders you receive
stabilized payments, not supportable payments.
Increases and Decreases in Number of Variable Annuity Units
Since your payments are stabilized during each contract year, we will increase
or decrease the number of variable annuity units credited to the contract each
annuity payment date (except on contract anniversaries) to ensure that you
receive the full investment performance, both positive and negative, of the
subaccounts you select. Please note that if all variable annuity units have
been used in an attempt to maintain the stabilized payment at the guaranteed
payment level (that is, the number of units has gone down to zero because of
negative investment performance), all future payments will equal the guaranteed
minimum payment. See the Statement of Additional Information for a more
detailed discussion concerning increases and decreases in the number of
variable annuity units credited to your contract and an illustration showing
hypothetical changes in the number of variable annuity units.
Rider Fee
There is a charge for each rider. A rider fee is reflected in the amount of the
annuity payments that you receive if you select either payment guarantee rider.
It is deducted in the same manner as the separate account charge since it is
reflected in the calculation of the annuity unit values. The rider fee is
identified on page one of your rider.
Initial Payment Guarantee. Currently the initial payment guarantee rider fee is
equal to an annual rate of 0.75% of the daily net asset value in the
subaccounts. We may, at our discretion, change the rider fee in the future, but
it will never be greater than 2.0%. Changes in the rider fee would only apply
to new contracts sold after the date of the change.
Step-up Payment Guarantee. Currently the step-up payment guarantee rider fee is
equal to an annual rate of 2.00% of the daily net asset value in the
subaccounts. We may, at our discretion, change the rider fee in the future, but
it will never be greater than 3.0%. Changes in the rider fee would only apply
to new contracts sold after the date of the change.
Other Terms and Conditions
You must purchase the initial payment guarantee or step-up payment guarantee
when you purchase your contract. You cannot add either payment guarantee after
you purchase your contract.
The payment guarantees are only available with the 3.5% AIR.
You cannot elect either payment guarantee unless you choose one of the four
asset allocation models. We may, at our discretion, change the restrictions on
the subaccounts or models you can select in the future. Changes in the
restrictions would only apply to new contracts sold after the date of the
change. Any restrictions will be identified on the first page of the rider.
3
<PAGE>
Surrender Value
When you have elected either payment guarantee, the amount of the surrender
value, if any, is calculated using the current supportable payment instead of
the stabilized payment. Partial surrenders will reduce the next stabilized
payment, and the guaranteed payment, pro rata. For example, if you surrender
50% of the value of your variable annuity payments, the stabilized payment and
the guaranteed minimum payment, will be reduced by 50%.
Death Benefit
When you have elected either payment guarantee, the amount of the death
benefit, if any, is calculated using the current supportable payment instead of
the stabilized payment.
Transfers
Transfers from variable to fixed annuity payments will reduce the next
stabilized payment, and the guaranteed minimum payment, pro rata. For example,
if you transfer 25% of the value of your variable annuity payments to fixed
annuity payments, the stabilized payment and the guaranteed minimum payment,
will be reduced by 25%. The reduction will be reflected in your next payment.
Transfers from fixed to variable annuity payments are not allowed.
Reduced Payments under Certain Payment Options
If you have selected a Joint and Survivor payment option with reduced payments
to the surviving annuitant, the next stabilized payment, and the guaranteed
minimum payment, will be reduced pro rata at the death of the first annuitant.
For example, if you selected the Joint and 75% Survivor Life Annuity payment
option, upon the death of either annuitant the next stabilized payment, and the
guaranteed minimum payment, will be reduced to 75% of their pre-death values.
Termination
Both the initial payment guarantee and the step-up payment guarantee riders are
irrevocable.
The initial payment guarantee benefit and the step-up payment guarantee benefit
may not be available in all states.
4
<PAGE>
THE ONE(R)
INCOME ANNUITYSM
Issued Through
PFL RETIREMENT BUILDER
VARIABLE ANNUITY ACCOUNT
By
PFL LIFE INSURANCE COMPANY
Prospectus
November 2, 1999
This prospectus and the mutual fund prospectus give you important information
about the contracts and the mutual funds. Please read them carefully before you
invest and keep them for future reference.
If you would like more information about The One Income Annuity, a fixed and
variable single premium immediate annuity contract, you can obtain a free copy
of the Statement of Additional Information (SAI) dated November 2, 1999. Please
call us at (800) 544-3152 or write us at: PFL Life Insurance Company, Financial
Markets Division, Variable Annuity Department, 4333 Edgewood Road N.E., P.O.
Box 3183, Cedar Rapids, Iowa, 52406-3183. A registration statement, including
the SAI, has been filed with the Securities and Exchange Commission (SEC) and
is incorporated herein by reference. Information about the separate account can
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
You may obtain information about the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site
(http://www.sec.gov) that contains the prospectus, the SAI, material
incorporated by reference, and other information. The table of contents of the
SAI is included at the end of this prospectus.
The Securities and Exchange Commission has not approved or disapproved these
securities, or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
The immediate annuity contract has fixed and variable payment options. There
are nine portfolios listed below that you can select from if you choose to
receive variable payments. You can choose any combination of fixed and variable
payments. You bear the investment risk if you choose variable payments.
ONE GROUP(R) INVESTMENT TRUST:
One Group(R) Investment Trust
Bond Portfolio
One Group(R) Investment Trust
Government Bond Portfolio
One Group(R) Investment Trust
Balanced Portfolio
One Group(R) Investment Trust
Large Cap Growth Portfolio
One Group(R) Investment Trust
Equity Index Portfolio
One Group(R) Investment Trust
Diversified Equity Portfolio
One Group(R) Investment Trust
Mid Cap Growth Portfolio
One Group(R) Investment Trust
Diversified Mid Cap Portfolio
One Group(R) Investment Trust
Mid Cap Value Portfolio
Please note that the contracts and the underlying portfolios:
. are not bank deposits or deposits of BANK ONE CORPORATION;
. are not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any other federal or state governmental agency;
. are not endorsed by any bank or government agency;
. are not guaranteed to achieve their goal; and
. involve investment risk, including loss of premium.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
GLOSSARY OF TERMS........................................................... 3
SUMMARY..................................................................... 4
EXPENSE TABLE............................................................... 6
EXAMPLES.................................................................... 7
1. THE ANNUITY CONTRACT..................................................... 8
2. ANNUITY PAYMENTS......................................................... 8
Annuity Payment Dates.................................................... 8
Payments Under the Contract.............................................. 8
Fixed, Variable or Combination Payments.................................. 8
Assumed Investment Rate (AIR)............................................ 8
Payment Options.......................................................... 9
3. PURCHASE................................................................. 12
Contract Issue Requirements.............................................. 12
Premium Payment.......................................................... 12
Allocation of Premium Payment............................................ 12
Variable Annuity Units................................................... 13
4. INVESTMENT CHOICES....................................................... 13
The Separate Account..................................................... 13
Transfers................................................................ 14
5. EXPENSES................................................................. 15
Separate Account Charge.................................................. 15
Expenses of the Portfolios............................................... 15
Premium Taxes............................................................ 15
Other Taxes.............................................................. 15
Surrender Charge......................................................... 15
Transfer Fee............................................................. 15
6. TAXES.................................................................... 15
Annuity Policies in General.............................................. 16
Qualified and Nonqualified Policies...................................... 16
Withdrawals--Nonqualified Policies....................................... 16
Withdrawals--Qualified Policies.......................................... 17
Withdrawals--403(b) Policies............................................. 17
Diversification and Distribution Requirements............................ 17
Taxation of Death Benefit Proceeds....................................... 17
Annuity Payments......................................................... 17
Transfers, Assignments or Exchanges of Policies.......................... 18
Possible Tax Law Changes................................................. 18
7. SURRENDER VALUE.......................................................... 18
Surrenders............................................................... 18
Surrender Value.......................................................... 18
8. PERFORMANCE............................................................. 19
9. DEATH BENEFIT........................................................... 19
10. OTHER INFORMATION....................................................... 19
PFL Life Insurance Company.............................................. 19
The Separate Account.................................................... 20
Voting Rights........................................................... 20
Distributor of the Contracts............................................ 20
Non-participating Contract.............................................. 20
Variations in Contract Provisions....................................... 20
Year 2000 Matters....................................................... 21
IMSA.................................................................... 21
Delay of Payments....................................................... 21
Legal Proceedings....................................................... 21
Financial Statements.................................................... 21
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION................ 22
APPENDIX A
Historical Performance Data................................................. A-1
APPENDIX B
Additional Fund Information................................................. B-1
APPENDIX C
Illustrations of Annuity Payment Values..................................... C-1
</TABLE>
2
<PAGE>
GLOSSARY OF TERMS
Annuitant and Secondary Annuitant--The person upon whose life the annuity
payments are based. For joint options, annuity payments are based upon the
lives of both the annuitant and secondary annuitant. Either the annuitant or
the secondary annuitant generally must be no older than 80 years of age on the
contract issue date.
Annuity Payments--Payments made by us to the payee pursuant to the payment
option chosen. Annuity payments may be either fixed or variable or a
combination of both.
Assumed Investment Return or AIR--The annual effective rate shown in the
contract specifications section of the contract that is used in the calculation
of each variable annuity payment.
Beneficiary(ies)--The person(s) who may receive death proceeds or guaranteed
payments under this contract when there is no longer a living annuitant (or
last annuitant for joint options).
Contract Issue Date--The date the contract becomes effective. This will be
stated in the contract. Generally, the date the initial premium is allocated to
the separate account.
Net Investment Factor--A unit of measure used to reflect the change in variable
annuity unit values in a subaccount from one valuation period to the next
valuation period.
Owner(s)--"You," "your," and "yours." The person or entity named in the
contract specifications section who may, while any annuitant is living,
exercise all rights granted by the contract. The annuitant must be the owner,
if the contract is a qualified contract. If there is a secondary annuitant, he
or she may also be an owner (except for a qualified contract, where only one
owner is permitted). The secondary annuitant is never required to be an owner.
Payee--The person or entity to whom annuity payments are paid.
Payment Date--The date an annuity payment is paid to the payee. We may require
evidence that any annuitant(s) and/or payee is/are alive on the payment date.
Separate Account--PFL Retirement Builder Variable Annuity Account.
Subaccount--The investment options or divisions of the separate account. Each
subaccount invests in a different portfolio of the funds. We may make
additional subaccounts available in the future.
Successor Owner--The person named by the owner to whom ownership of the
contract passes upon the owner's death. If the owner is also the annuitant, the
annuitant's beneficiary is entitled to the death proceeds of the contract. If
no person is named, the owner's estate shall be deemed the successor owner.
Valuation Day--Each day the New York Stock Exchange is open for trading. The
determination of the variable annuity unit value is made at the end of each
valuation day.
Variable Annuity Unit--Variable annuity payments are expressed in terms of
variable annuity units, the value of which fluctuates in relation to the
selected subaccounts.
Variable Annuity Payment Calculation Date--The date, no more than seven
business days before each payment date, when the amount of the variable annuity
payment is determined. If the New York Stock Exchange is closed on a variable
annuity payment calculation date, we will determine the amount of annuity
income on the next day it is open.
3
<PAGE>
SUMMARY
The sections in this summary correspond to sections in this prospectus, which
discuss the topics in more detail. Words printed in italics in this prospectus
are defined in the Glossary.
1. THE ANNUITY CONTRACT
The Fixed and Variable Single Premium Immediate Annuity Contract offered by PFL
Life Insurance Company (PFL, we, us or our) is a contract between you, as the
owner, and PFL, an insurance company. The contract is intended to provide a
stream of income for life or for a specific period of time you select.
2. ANNUITY PAYMENTS
Annuity payments may be either fixed, variable or a combination of fixed and
variable. We guarantee the amount of fixed annuity payments. We do not,
however, guarantee the amount of variable annuity payments. Variable annuity
payment amounts are determined by the investment performance of the subaccounts
you select.
Annuity payments may be scheduled for either monthly or quarterly payments.
Semiannual and annual payments are available only with our approval.
We recommend using electronic funds transfer (EFT) whenever possible.
3. PURCHASE
You purchase this contract with a single premium. You cannot make additional
premium payments. The minimum premium is $25,000, although we can accept a
smaller premium if we want.
You may return your contract for a refund within 10 days after you receive it.
The amount of the refund will generally be the premium plus or minus the
investment performance of the subaccounts to which your premium was allocated,
if any.
We will generally pay the refund within 7 days after we receive written notice
of cancellation and the returned contract. The contract will then be deemed
void. In some states you may have more than 10 days, or receive a refund of
more (or less) than the amount described above.
4. INVESTMENT CHOICES
You choose between fixed or variable annuity payments, or a combination of
both. If you choose variable annuity payments you must also select one or more
of the following portfolios described in the One Group(R) Investment Trust
prospectus:
One Group(R) Investment Trust
Bond Portfolio
One Group(R) Investment Trust
Government Bond Portfolio
One Group(R) Investment Trust
Balanced Portfolio
One Group(R) Investment Trust
Large Cap Growth Portfolio
One Group(R) Investment Trust
Equity Index Portfolio
One Group(R) Investment Trust
Diversified Equity Portfolio
One Group(R) Investment Trust
Mid Cap Growth Portfolio
One Group(R) Investment Trust
Diversified Mid Cap Portfolio
One Group(R) Investment Trust
Mid Cap Value Portfolio
Your variable annuity payments may go up or down with the investment
performance of any of these portfolios. You bear this investment risk.
You may transfer amounts within the various subaccounts. You may also transfer
amounts from variable to fixed annuity payments at any time. If you do, then
the payment option for the fixed annuity payments will be a continuation of the
payment option currently applicable to variable annuity payments. Transfers
from fixed to variable annuity payments are not permitted. We may charge a fee
for excessive transfers (we currently do not charge for transfers).
5. EXPENSES
There is a separate account charge of 1.15% annually of average daily net
assets if you allocate $50,000 or more to variable annuity payments; if you
allocate less than $50,000 to variable annuity payments the separate account
charge is 1.35%. This charge will not increase and does not apply to fixed
annuity payments.
Each portfolio has investment management and other fees charged directly to it.
In 1998, these
4
<PAGE>
ranged from 0.55% to 1.00% annually of average daily net assets.
In some states, a charge for applicable premium taxes ranging from 0% to 3.5%
is deducted from the premium when paid.
There is a charge upon surrender of up to 8% of the premium payment surrendered
from a Certain Only payment option, and up to 4% of the premium payment
surrendered from a Life with Emergency Cash SM payment option. Surrenders are
not allowed under any other payment options.
6. TAXES
You are taxed on the part of your annuity payment considered income. Annuity
payments from nonqualified contracts may be considered partly a return of your
investment in the contract so that part of each payment would not be taxable as
income. Annuity payments from qualified contracts are generally considered as
all taxable income.
7. SURRENDER VALUE
You do not have access to your money and cannot surrender any of your contract
unless you select either the Certain Only payment option or Life with Emergency
Cash SM payment option. No other payment option allows surrenders. If you elect
the Certain Only payment option you may surrender the present value of the
remaining payments. If you select the Life with Emergency Cash SM payment
option, we will provide you with a Life with Emergency Cash SM benefit schedule
that will allow you to determine how much is available to surrender.
Surrenders may have adverse tax consequences. You should consult with your tax
advisor before requesting a surrender.
8. PERFORMANCE
The amount of your variable annuity payments will vary up or down depending
upon the investment performance of the subaccounts you choose. We provide
historical, or past, performance information for the portfolios (adjusted to
reflect the separate account charge) in Appendix A and in the Statement of
Additional Information. This data is not intended to indicate future
performance.
9. DEATH BENEFIT
Some payment options provide a death benefit in the event the annuitant dies
after annuity payments begin or if an owner or annuitant dies before annuity
payments begin.
10. OTHER INFORMATION
This section of the prospectus contains information on:
. PFL Life Insurance Company
. The Separate Account
. Voting Rights
. Distributor of the Contracts
. Non-participating Contracts
. Variations of Contract Provisions
. Year 2000 Matters
. IMSA
. Delay of Payments
. Legal Proceedings
. Financial Statements
Inquiries
If you need more information, please contact us at:
Administrative and Service Office
Financial Markets Division
Variable Annuity Department
PFL Life Insurance Company
4333 Edgewood Road N.E.
P.O. Box 3183
Cedar Rapids, IA 52406-3183
(800) 525-6205
5
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contract Owner Transaction Expenses
- --------------------------------------------------------------------------------
<S> <C>
Sales Load charged to premium.............................................. None
Annual Contract Administration Charge...................................... None
Transfer Fee (for first six transfers in any
contract year)(/1/)...................................................... None
Maximum Surrender Charge (as a % of
premium payments surrendered):
Life with Emergency CashSM payment option................................... 4%
Other Life Contingent payment options....................................... N/A
Certain Only payment option................................................. 8%*
Separate Account Annual Expenses
(as a percentage of average net assets)
- --------------------------------------------------------------------------------
Separate Account Charge:
Mortality and Expense Risk Charge........................................ 1.20%
(This charge is 1.00% if you allocate
$50,000 or more to variable annuity payments)
Administration Charge.................................................... 0.15%
-----
Total.................................................................... 1.35%
- --------------------------------------------------------------------------------
</TABLE>
Portfolio Annual Expenses(/2/)
(as a percentage of average net assets and after expense reimbursements)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Portfolio
Portfolio Management Fees Other Expenses Annual Expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond Portfolio(/3/)(/4/)..... 0.47% 0.28% 0.75%
Government Bond
Portfolio(/3/).............. 0.42% 0.33% 0.75%
Balanced Portfolio........... 0.70% 0.30% 1.00%
Large Cap Growth Portfolio... 0.65% 0.28% 0.93%
Equity Index Portfolio(/3/).. 0.00% 0.55% 0.55%
Diversified Equity
Portfolio(/3/)(/4/)......... 0.70% 0.25% 0.95%
Mid Cap Growth Portfolio..... 0.65% 0.32% 0.97%
Diversified Mid Cap
Portfolio(/3/)(/4/)......... 0.73% 0.22% 0.95%
Mid Cap Value
Portfolio(/3/)(/4/)......... 0.71% 0.24% 0.95%
</TABLE>
(*) The amount of this charge is equal to the difference in the present value
of the remaining payments discounted using a rate in excess of the AIR and
discounted using the AIR. This charge will vary from 0% to 8% of the
premium payment.
(/1/)There is currently no charge for any transfers, although PFL reserves the
right to charge $15 for each transfer in excess of six per year.
(/2/)The fee table information relating to the portfolios is for 1998 and was
provided to PFL by Nationwide Advisory Services, Inc., the administrator
for One Group Investment Trust, and PFL has not independently verified such
information. Future expenses may be higher or lower than these 1998
expenses.
(/3/)In the absence of management fee waiver, management fees, other expenses,
and total portfolio annual expenses, respectively, would be: Bond Portfolio
0.60%, 0.28% and 0.88%; Government Bond Portfolio 0.45%, 0.33% and 0.78%;
Equity Index Portfolio 0.30%, 0.83% and 1.13%; Diversified Equity Portfolio
0.74%, 0.25% and 0.99%; Diversified Mid Cap Portfolio 0.74%, 0.22% and
0.96%; Mid Cap Value Portfolio 0.74%, 0.24% and 0.98%.
(/4/)Expenses shown are based on estimated expenses for the current fiscal year.
6
<PAGE>
EXAMPLES
The following examples indicate the expenses you would pay in various
situations, based on actual or estimated portfolio expenses for 1998, and the
following assumptions:
. a $1,000 investment (and, therefore, a 1.35% separate account charge);
. a 5.0% annual return on assets;
. monthly payments;
. a 3.5% AIR (the expenses using a 5.0% AIR will be no greater than with the
3.5% AIR);
. there are no premium taxes;
. there are no transfers;
. the entire premium is allocated to each subaccount; and
. the annuitant is a 65 year old male.
(Any different assumption(s) would result in different expenses.)
<TABLE>
<CAPTION>
Single Life Annuity
30 Year Certain Only Annuity with Emergency CashSM
--------------------------------------------------------
The contract is The contract is The contract is The contract
not surrendered surrendered not surrendered is surrendered
--------------------------------------------------------
Subaccounts 1 Year 3 Years 1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bond
Portfolio... $ 20.56 $ 60.11 $100.56 $140.11 $ 20.30 $ 58.32 $60.30 $ 98.32
- -------------------------------------------------------------------------------
Government
Bond
Portfolio... $ 20.56 $ 60.11 $100.56 $140.11 $ 20.30 $ 58.32 $60.30 $ 98.32
- -------------------------------------------------------------------------------
Balanced
Portfolio... $ 22.96 $ 66.95 $102.96 $146.95 $ 22.67 $ 64.97 $62.67 $104.97
- -------------------------------------------------------------------------------
Large Cap
Growth
Portfolio... $ 22.29 $ 65.04 $102.29 $145.04 $ 22.01 $ 63.11 $62.01 $103.11
- -------------------------------------------------------------------------------
Equity Index
Portfolio... $ 18.64 $ 54.58 $ 98.64 $134.58 $ 18.40 $ 52.96 $58.40 $ 92.96
- -------------------------------------------------------------------------------
Diversified
Equity
Portfolio... $ 22.48 $ 65.59 $102.48 $145.59 $ 22.20 $ 63.65 $62.20 $103.65
- -------------------------------------------------------------------------------
Mid Cap
Growth
Portfolio... $ 22.67 $ 66.13 $102.67 $146.13 $ 22.39 $ 64.18 $62.39 $104.18
- -------------------------------------------------------------------------------
Diversified
Mid Cap
Portfolio... $ 22.48 $ 65.59 $102.48 $145.59 $ 22.20 $ 63.65 $62.20 $103.65
- -------------------------------------------------------------------------------
Mid Cap Value
Portfolio... $ 22.48 $ 65.59 $102.48 $145.59 $ 22.20 $ 63.65 $62.20 $103.65
</TABLE>
The above tables will assist you in understanding the costs and expenses of the
contract and the underlying funds that you will bear, directly or indirectly.
The expense table assumes that your entire premium is allocated to the separate
account; therefore, it reflects expenses of the separate account as well as the
underlying portfolios.
The tables do not reflect any deductions for taxes. Any applicable premium
taxes are deducted from the premium when you buy the contract.
The examples are not a representation of past or future expenses. Actual
expenses may be more or less than those shown.
Financial Information. The subaccounts had not commenced operations as of
December 31, 1998, therefore there is no condensed financial information to
report as of the date of this prospectus.
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1. THE ANNUITY CONTRACT
This prospectus describes The One Income Annuity. This is a single premium
immediate annuity contract offered by PFL Life Insurance Company.
An annuity is a contract between you, the owner, and an insurance company (in
this case PFL), where the insurance company promises to pay you an income in
the form of annuity payments. You choose the frequency of these payments and
the first payment date.
You can use the contract to provide periodic payments over your lifetime or
some other specific period of time you select.
The contract is "fixed and variable" because you can allocate your premium
between fixed and variable annuity payments. The amount of the fixed annuity
payments will not vary and are guaranteed by PFL. The amount of the variable
annuity payments will vary depending on the investment performance of your
investment choices.
It is a "single premium" contract because you purchase it with a single
premium. You cannot pay additional premiums.
The contract is an "immediate" contract because the annuity payments must
generally begin within 30 days.
2. ANNUITY PAYMENTS
Annuity Payment Dates
We provide annuity payments to the payee on each payment date. You select
either a monthly or quarterly payment frequency when you purchase the contract.
Payments will generally be made by electronic funds transfer. Semi-annual or
annual payment frequencies and other disbursement options may be available, if
we approve. The first payment date is typically 30 days after the contract
issue date. All subsequent payment dates will generally be on the same day of
the month as the first payment date.
Payments Under the Contract
We usually make payments within seven days of the payment date or receipt of
all applicable written notices and/or proofs of death.
We will not pay interest on amounts represented by uncashed annuity payment
checks if the postal or other delivery service is unable to deliver checks to
the payee's address of record. Uncashed variable annuity payments will not
participate in the performance of the portfolios. The payee is responsible for
keeping us informed of their current address of record.
Fixed, Variable or Combination Payments
You allocate your premium between fixed and variable payments under a payment
option when you buy the contract. You may choose all fixed, all variable or a
combination of fixed and variable annuity payments.
Any portion of your premium allocated to a fixed payment option will always
remain allocated to fixed annuity payments. However, you may transfer from
variable annuity payments to fixed annuity payments at any time.
If you choose a combination of fixed and variable annuity payments, a portion
of your annuity payments will be fixed and a portion will vary according to the
investment experience of the portfolios underlying the subaccounts. We will
guarantee the dollar amount of any fixed portion of each annuity payment;
however, the amount of the variable annuity payments will depend upon the
investment experience of the portfolios underlying the subaccounts and is not
guaranteed.
Under certain joint and survivor payment options, the annuity payments decrease
upon the death of the annuitant or secondary annuitant (as described for
payment options 5, 6, 8, and 9) whether they are fixed or variable.
Assumed Investment Return (AIR)
The assumed investment return you choose is used in the calculation of variable
annuity payments.
IF:
. the performance of the applicable subaccounts after all expenses is equal to
the AIR on a modal basis;
THEN:
. the variable annuity payments will remain constant.
8
<PAGE>
* * *
IF:
. the performance of the subaccounts after all expenses exceeds the AIR on a
modal basis;
THEN:
. the variable annuity payments will increase.
* * *
IF:
. the performance of the subaccounts after all expenses is less than the AIR
on a modal basis;
THEN:
. the variable annuity payments will decrease.
* * *
A "modal basis" refers to the frequency of payments. For example, for monthly
payments to increase, the performance of the subaccounts must exceed the
monthly equivalent AIR; for quarterly payments to increase, the performance of
the subaccounts must exceed the quarterly equivalent AIR.
You choose either a 3.5% AIR or a 5% AIR.
IF:
. you choose a 5% AIR instead of a 3.5% AIR;
THEN:
. you will receive a higher initial payment; and
. payments will increase less during periods of good investment performance
(i.e., when investment performance exceeds the AIR) and decrease more during
periods of poor investment performance (i.e., when investment performance is
below the AIR).
* * *
IF:
. you choose a 3.5% AIR instead of a 5% AIR;
THEN:
. you will receive a lower initial payment; and
. payments will increase more during periods of good investment performance
(i.e., when investment performance exceeds the AIR) and decrease less during
periods of poor investment performance (i.e., when investment performance is
below the AIR).
See Appendix C for an illustration of the difference in the two AIRs.
Payment Options
You select the payment option and the number of guaranteed years, if any. You
cannot change the payment option and guarantee period after we issue the
contract. Please note that generally you can only select one payment option. We
currently offer the options described below.
The amount of variable annuity payments will depend on the investment
performance of the portfolio(s) you select. The number of annuity payments may
depend on how long the annuitant or a secondary annuitant, if any, lives.
Therefore, the sum of annuity payments may be less than the premium (except for
options 1 and 10).
1. Certain Only Annuity. This option provides annuity payments for a guaranteed
period (10-30 years). You choose the guaranteed period. If the annuitant dies
prior to the last guaranteed payment date, we will either:
. continue payments as they become due; or
. pay the present value of the remaining guaranteed payments in a lump sum to
the beneficiary when we receive due proof of the annuitant's death.
No additional payments will be made under this option after all the guaranteed
payments have been made.
If the lump sum death benefit is chosen and the payments under this option are
variable, the present value of the remaining guaranteed payments is calculated
as of the date we receive written notice of the annuitant's death, using the
AIR you chose when the contract was issued. If the payments under this option
are fixed, the present value of the remaining guaranteed payments is calculated
using interest rates (determined by PFL) in effect on the date we receive due
proof of death.
Under this option, you, as the owner, can make full or partial surrenders from
the contract prior to the last guaranteed payment date. We may require the
amount of a partial surrender to be at least $2500. If
9
<PAGE>
the remaining surrender value, after you request a partial surrender, would be
less than $25,000, then we reserve the right to require a full surrender. A
partial surrender will reduce all future payments.
See "SURRENDER VALUE."
You should consult a tax advisor before requesting a full or partial surrender.
2. Single Life Annuity. This option provides annuity payments for the
annuitant's lifetime, no matter how long that may be. The final payment will be
the payment made immediately prior to the death of the annuitant. No additional
payments will be made after the annuitant dies.
This option offers you the highest level of annuity payments, due to the risk
that only one annuity payment will be made if the annuitant dies before the
second payment date.
No surrenders are permitted under this option.
3. Single Life Annuity with Period Certain. This option provides annuity
payments for a guaranteed period (5 to 30 years) or for the life of the
annuitant, whichever is later. The final annuity payment will be the later of
either the last guaranteed payment or the scheduled annuity payment immediately
prior to the annuitant's death. If the annuitant dies prior to the last
guaranteed payment date, we will make payments to the beneficiary when we
receive due proof of the annuitant's death. No additional payments will be made
if the annuitant dies after all guaranteed payments have been made.
No surrenders are permitted under this option.
4. 100% Joint and Survivor Life Annuity. This option provides annuity payments
for the annuitant and the secondary annuitant's lifetimes. After the death of
either the annuitant or the secondary annuitant, we will continue to provide
the full amount of annuity payments to the survivor. Annuity payments stop when
both the annuitant and the secondary annuitant die.
No surrenders are permitted under this option.
5. Joint and Survivor Life Annuity with Reduced Annuity Payments to the
Secondary Annuitant. This option is similar to option 4 above, except that
annuity payments are higher while both the annuitant and the secondary
annuitant are living, and then are lower if the annuitant dies before the
secondary annuitant. The final annuity payment will be the one made immediately
before the last surviving annuitant's death. No additional annuity payments
will be made after the death of both annuitants.
If the annuitant dies before the secondary annuitant, the amount of the fixed
annuity payments will be reduced to the percent you select: either 50%, 66.67%
or 75%. For variable annuity payments, the number of variable annuity units
will also be reduced to 50%, 66.67% or 75%.
If the secondary annuitant dies before the annuitant, we will continue to make
annuity payments as they are due, and the amount of the annuity payments will
not go down due to the death.
No surrenders are permitted under this option.
6. Joint and Last Survivor Life Annuity. This option provides annuity payments
for the annuitant's and secondary annuitant's lifetimes. Payments are higher
while both annuitants are living and decrease upon the death of either the
annuitant or the secondary annuitant. The final annuity payment will be the one
made immediately before the death of the last surviving annuitant. No
additional annuity payments will be made after the death of both annuitants.
Upon the first death, the amount of the fixed annuity payments will be reduced
to a percent you select: either 50%, 66.67% or 75%. For variable annuity
payments, the number of variable annuity units will also be reduced to 50%,
66.67% or 75%.
No surrenders are permitted under this option.
7. 100% Joint and Survivor Life Annuity with Period Certain. This option
provides annuity payments for a guaranteed period (5-30 years) or for the
annuitant's and secondary annuitant's lifetimes, whichever is later. The final
annuity payment will be the later of the last guaranteed payment or the annuity
payment made immediately prior to the last surviving annuitant's death. No
additional payments will be made if both annuitants die after all guaranteed
payments have been made.
10
<PAGE>
If both annuitants die prior to the last guaranteed payment date, we will
continue to make guaranteed payments to the beneficiary as they become due for
the remainder of the guaranteed period.
No surrenders are permitted under this option.
8. Joint and Survivor Life Annuity with Period Certain and Reduced Annuity
Payments to the Secondary Annuitant. This option is similar to option 7 above,
except that annuity payments are higher while both the annuitant and the
secondary annuitant are living, and then are lower if the annuitant dies before
the secondary annuitant and after the guaranteed period. The final annuity
payment will be the later of the last guaranteed payment or the annuity payment
made immediately prior to the last surviving annuitant's death. No additional
payments will be made if both annuitants die after all guaranteed annuity
payments have been made.
If the annuitant dies before the secondary annuitant and after the guaranteed
period, the amount of the fixed annuity payments will be reduced to the percent
you select: either 50%, 66.67% or 75%. For variable annuity payments, the
number of variable annuity units will also be reduced to 50%, 66.67% or 75%.
If the secondary annuitant dies before the annuitant, we will continue to make
annuity payments as they are due, and the amount of the annuity payments will
not go down due to the death.
No surrenders are permitted under this option.
9. Joint and Last Survivor Life Annuity with Period Certain. This option
provides annuity payments for a guaranteed period (5-30 years) or for the
annuitant's and secondary annuitant's lifetimes, whichever is later. Payments
are higher while both annuitants are living and decrease after the guarantee
period upon the death of either the annuitant or the secondary annuitant. The
final annuity payment will be the later of the last guaranteed payment or the
annuity payment made immediately prior to the last surviving annuitant's death.
No additional annuity payments will be made after the death of both annuitants.
Upon the first death after the guaranteed period (or the end of the guaranteed
period if the first death occurred prior thereto), the amount of the fixed
annuity payments will be reduced to a percent you select: either 50%, 66.67% or
75%. For variable annuity payments, the number of variable annuity units will
also be reduced to 50%, 66.67% or 75%.
No surrenders are permitted under this option.
10. Life Annuity with Premium Refund Payment. This option provides annuity
payments for the annuitant's lifetime. The final annuity payment will be either
the payment made immediately prior to the annuitant's death or the premium
refund benefit.
We will pay the premium refund benefit to the beneficiary if, at the date of
the annuitant's death, the sum of all the annuity payments made is less than
the premium. The premium refund benefit will be the premium less the sum of the
previously distributed variable and fixed annuity payments.
No surrenders are permitted under this option.
11. Single Life Annuity with Emergency Cash SM. This option provides annuity
payments for the annuitant's lifetime. You can only receive variable payments
under this option. With the Life with Emergency Cash SM feature, you are able
to surrender all or a portion of the Life with Emergency Cash SM benefit. The
Life with Emergency Cash SM benefit will continue through age 100 of the
annuitant.
The amount you surrender must be at least 25% of the Life with Emergency
Cash SM benefit. We will provide you with a Life with Emergency Cash SM benefit
schedule as a rider to the contract that will assist you in determining the
amount you have available to surrender. A partial surrender will reduce all
future payments.
See "SURRENDER VALUE."
You should consult a tax advisor before requesting a full or partial surrender.
The Life with Emergency Cash SM benefit is also a death benefit that is paid
upon the death of the annuitant.
For qualified contracts the death benefit ceases at the date the annuitant
reaches the IRS age limitation (determined at the contract issue date).
11
<PAGE>
12. Joint and Survivor Life Annuity with Emergency Cash SM. This option
provides annuity payments to the annuitant and the secondary annuitant while
both are living. You can only receive variable payments under this option.
After the death of either the annuitant or the secondary annuitant, we will
continue to provide the full amount of annuity payments to the survivor. With
the Life with Emergency Cash SM feature, you are able to surrender all or a
portion of the Life with Emergency Cash SM benefit. The Life with Emergency
Cash SM benefit will continue through age 100 of the younger of the annuitant
and the secondary annuitant.
The amount you surrender must be at least 25% of the Life with Emergency
Cash SM benefit. We will provide you with a Life with Emergency Cash SM benefit
schedule as a rider to the contract that will assist you in determining the
amount you have available to surrender. A partial surrender will reduce all
future payments.
See "SURRENDER VALUE."
You should consult a tax advisor before requesting a full or partial surrender.
The Life with Emergency Cash SM benefit is also a death benefit that is paid
upon the death of the last annuitant. We will provide a Life with Emergency
Cash SM benefit schedule as a rider to the contract.
For qualified contracts the death benefit ceases at the date of the IRS joint
age limitation (determined at the contract issue date.)
Other payment options may be made available.
PLEASE NOTE CAREFULLY THAT IF:
. you choose a Single Life Annuity, 100% Joint and Survivor Life Annuity,
Joint and Survivor Life Annuity with Reduced Annuity Payments to the
Secondary Annuitant, or Joint and Last Survivor Annuity; and
. the annuitant(s) dies before the due date of the second annuity payment;
THEN:
. we may make only the one payment.
Please also note that the federal income tax laws may limit your payment
options where the contract is used as a qualified contract.
3. PURCHASE
Contract Issue Requirements
PFL will issue a contract only IF:
. PFL receives all information needed to issue the contract; and
. PFL receives your entire premium payment.
Premium Payment
The minimum premium for a contract is $25,000. Amounts less than $25,000 may be
accepted with approval from our home office. You cannot make additional premium
payments.
You will allocate the premium to variable, fixed, or to a combination of
variable and fixed payment options. We apply your premium to the contract
within two business days after receipt (at the Administrative and Service
Office) of the later of the premium and a properly completed order form.
If the order form is incomplete, we will request the necessary information. If
the information is not provided within five days, we will return the premium
unless we obtain your specific consent to let us keep it until the order form
is completed.
The date we credit the premium and issue the contract is called the contract
issue date. On the contract issue date, we allocate the premium (net of any
premium tax deduction) as you specify in the order form.
You should make checks for premium payments payable only to PFL Life Insurance
Company and send them to the Administrative and Service Office. Your check must
be honored in order for us to pay any associated payments and benefits due
under the contract.
Allocation of Premium Payment
We will invest the amount of your premium that you allocate to the subaccounts
of the separate account in the designated subaccount(s) on the contract issue
date. You must allocate percentages that are whole numbers, not fractions. Your
allocations must equal 100%.
12
<PAGE>
Variable Annuity Units
Any portion of your premium allocated to the subaccounts will be used to
purchase variable annuity units. We will determine the number of variable
annuity units based upon:
. the premium reduced by any premium taxes,
. the annuitant's age and sex (and the age and sex of the secondary annuitant,
if any),
. the payment option you choose,
. the frequency of payments you choose,
. the AIR you choose,
. the first payment date, and
. the variable annuity unit value of the subaccount(s) you initially select.
The number of variable annuity units allocated to each subaccount will not
change unless you transfer among the subaccounts, transfer from variable to
fixed annuity payments or receive cash through a surrender (if allowed).
However, if you choose a joint and survivor payment option and benefits are
reduced due to the death of one of the annuitants, the number of variable
annuity units will be reduced at that time.
We calculate the amount of your variable annuity payment on the variable
annuity payment calculation date by taking the number of variable annuity units
in each subaccount and multiplying them by the variable annuity unit value of
each subaccount. This calculation is performed for each subaccount, and the sum
of the subaccount calculations will equal the amount of your variable annuity
payment.
The variable annuity unit value in a particular subaccount on any valuation day
is equal to:
. the variable annuity unit value for that subaccount on the immediately
preceding valuation day; multiplied by
. the net investment factor for that subaccount for the valuation period;
multiplied by
. the daily factor for the valuation period.
The daily factor for the valuation period (the period of time beginning at the
close of business each valuation day and ending at the close of business on the
next valuation day) is a discount factor that reflects the AIR. Please refer to
the Statement of Additional Information.
The net investment factor used to calculate the variable annuity unit value for
each subaccount for the valuation period is determined by dividing (a) by (b)
and subtracting (c) from the result, where:
(a) is the net result of:
. the net asset value of a portfolio share held in that subaccount
determined as of the end of the current valuation period, plus
. 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
. a per share credit or charge for any taxes reserved for, which we
determine to have resulted from the investment operation of the
subaccount.
(b) is the net asset value of a portfolio share held in that subaccount
determined as of the end of the immediately preceding valuation period; and
(c) is an amount representing the separate account charge (shown in the
contract specifications section of the contract).
4. INVESTMENT CHOICES
The Separate Account
The separate account currently consists of nine subaccounts.
The Underlying Portfolios. The subaccounts invest in shares of the nine
portfolios of the One Group Investment Trust. Banc One Investment Advisors
Corporation, an indirect subsidiary of Bank One Corporation, provides
investment advice for all of the underlying portfolios offered through this
contract. The following subaccounts are currently offered:
One Group(R) Investment Trust
Bond Portfolio
One Group(R) Investment Trust
Government Bond Portfolio
One Group(R) Investment Trust
Balanced Portfolio
One Group(R) Investment Trust
Large Cap Growth Portfolio
One Group(R) Investment Trust
Equity Index Portfolio
13
<PAGE>
One Group(R) Investment Trust
Diversified Equity Portfolio
One Group(R) Investment Trust
Mid Cap Growth Portfolio
One Group(R) Investment Trust
Diversified Mid Cap Portfolio
One Group(R) Investment Trust
Mid Cap Value Portfolio
The general public may not purchase these underlying portfolios. The investment
objectives and policies may be similar to other portfolios and mutual funds
managed by the same investment adviser or manager that are sold directly to the
public. You should not expect that the investment results of the other
portfolios and mutual funds will be comparable to those of the underlying
portfolios.
Detailed information about the underlying portfolios may be found in the
current prospectus for the One Group Investment Trust. This includes a
description of each portfolio's investment objectives, policies, and
strategies. This prospectus is attached to this prospectus. You should read the
prospectus for the One Group Investment Trust carefully before you invest.
The investment objectives and policies of certain portfolios are similar to the
investment objectives and policies of other portfolios that may be managed by
the same investment advisor or manager. The investment results of the
portfolios, however, may differ from the results of such other 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, even if the other portfolio has the same investment
advisor or manager.
Investment allocation models are offered in connection with this product at no
charge. The models may or may not achieve any desired goals or protect against
a loss. See the Statement of Additional Information for further information
about the models.
See Appendix B for Additional Fund Information.
Transfers
You may transfer all or a part of the value of variable annuity payments to
fixed annuity payments by telephoning us or providing us with a notice you have
signed or an electronic notice that gives us the facts that we need. If you
transfer from variable annuity payments to fixed annuity payments, the fixed
annuity payments will be a continuation of the payment option under which the
variable annuity payments were being made, or a continuation of the fixed
payment option that may already exist.
For example, if you received variable annuity payments for two years under a 10
Year Certain and Life Option and elect to transfer to fixed annuity payments,
your payment option would be an 8 Year Certain and Life Option. If your
variable payment option is Life with Emergency Cash SM, the fixed payment
option will be Life only, Life with Premium Refund or Life with Period Certain.
The period certain cannot be greater than the annuitant's remaining life
expectancy determined at the contract issue date. (Life with Emergency Cash SM
is only available with variable annuity payments.)
Transfers from variable to fixed annuity payments may have tax consequences.
You should consult a tax advisor before making a transfer from variable to
fixed annuity payments.
You may not transfer from fixed to variable annuity payments.
Transfers are made using the variable annuity unit values for the end of the
day when we receive your request (that is, at the end of the valuation period
during which we receive your request).
You may transfer amounts among subaccounts by telephoning us or by providing us
with a notice you have signed or an electronic notice that gives us the facts
that we need.
We reserve the right to impose transfer charges.
The percent of the allocation in each subaccount will change over time with its
investment performance. You should periodically review the allocations in light
of market conditions and financial objectives.
14
<PAGE>
5. EXPENSES
The following are all the charges made under the contract.
Separate Account Charge
A daily charge is deducted from the assets of each subaccount for our
assumption of mortality and expense risks, and our administration expenses. If
the amount you allocate to variable annuity payments is less than $50,000, a
daily mortality and expense risk charge will be deducted at an effective annual
rate of 1.20%; otherwise, the mortality and expense risk charge will be 1.00%.
An administration expense charge will also be deducted daily from the assets of
each subaccount at an effective annual rate of 0.15%. We guarantee that the
mortality and expense risk and administrative charges will never increase.
The mortality risk arises from our obligation to provide annuity income for
your life (and the life of the secondary annuitant, if any) no matter how long
that might be. The expense risk results from our obligation to cover the cost
of issuing and administering the contracts, no matter how long we may incur
such cost or how large that cost may be. The administration expense charge is
for the costs of administering the contracts. We may earn a profit from the
separate account charge (and expect to do so). Any profit can be used for
distribution expenses or for any other purpose.
Expenses of the Portfolios
The portfolios are charged management fees and incur operating expenses. The
effect of these fees and expenses is reflected in the performance of the
portfolios underlying the subaccounts, and therefore affects the variable
annuity unit value.
Premium Taxes
Some states charge a premium tax based on the amount of your premium. State
premium taxes currently range from 0% to 3.5%. In addition, some counties,
cities or towns may charge additional premium taxes. If you live in a place
that has premium taxes, any amount needed to provide for the applicable premium
taxes is deducted from your premium. We allocate the remainder of your premium
to the subaccounts and/or to the purchase of fixed annuity payments.
Other Taxes
We reserve the right to charge for certain taxes (other than premium taxes)
that may be incurred due to the contracts or the separate account. Currently,
we do not charge for any other taxes.
Surrender Charge
If you select a Certain Only payment option, you may surrender all or a portion
of your contract. For variable annuity payments, calculating the present value
of remaining future payments using a discount rate in excess of the AIR can be
viewed as including a surrender charge. The amount of this "charge" will vary
depending on a number of factors, including:
. the variable annuity unit values and the number of variable annuity units
credited to each of the selected subaccounts at the time of surrender;
. the number of payments remaining; and
. the discount rate.
The maximum discount rate we will use is AIR + 1, and the maximum "charge" will
be 8% of the premium payment. If the Life with Emergency Cash SM payment option
is selected, the surrender value calculated using the Emergency Cash SM benefit
schedule in your contract rider includes up to a 4% charge upon surrender.
For a discussion of surrender value, see "SURRENDER VALUE".
Transfer Fee
There is currently no charge for transfers. We reserve the right to charge $15
for each transfer over six per contract year (all transfers made simultaneously
will be treated as a single request).
6. TAXES
NOTE: PFL has prepared the following information on federal income taxes as a
general discussion of the subject. It is not intended as tax advice to any
individual. You should consult your own tax adviser about your own
circumstances. PFL
15
<PAGE>
has included an additional discussion regarding taxes in the Statement of
Additional Information.
Annuity Policies in General
Deferred annuity policies are a way of setting aside money for future needs
like retirement. Congress recognized how important saving for retirement is and
provided special rules in the Internal Revenue Code for annuities.
Simply stated, these rules provide that generally you will not be taxed on the
earnings, if any, on the money held in your annuity policy until you take the
money out. This is referred to as tax deferral. There are different rules as to
how you will be taxed depending on how you take the money out and the type of
policy--qualified or nonqualified (discussed below).
You will not be taxed on increases in the value of your policy until a
distribution occurs--either as a withdrawal or as annuity payments.
When a non-natural person (e.g., corporation or certain other entities other
than tax-qualified trusts) owns a nonqualified policy, the policy will
generally not be treated as an annuity for tax purposes.
Qualified and Nonqualified Policies
If you purchase the policy under an individual retirement annuity, a pension
plan, or specially sponsored program, your policy is referred to as a qualified
policy.
Qualified policies are issued in connection with the following plans:
. Individual Retirement Annuity (IRA): A traditional IRA allows individuals to
make contributions, which may be deductible, to the Contract. A Roth IRA
also allows individuals to make contributions to the Contract, but it does
not allow a deduction for contributions, and distributions may be tax-free
if the owner meets certain rules.
. Tax-Sheltered Annuity (403(b) Plan): A 403(b) Plan may be made available to
employees of certain public school systems and tax-exempt organizations and
permits contributions to the Contract on a pre-tax basis.
. Corporate Pension and Profit-Sharing and H.R. 10 Plan: Employers and self-
employed individuals can establish pension or profit-sharing plans for their
employees or themselves and make contributions to the Contract on a pre-tax
basis.
. Deferred Compensation Plan (457 Plan): Certain governmental and tax-exempt
organizations can establish a plan to defer compensation on behalf of their
employees through contributions to the Contract.
If you purchase the policy as an individual and not under an individual
retirement annuity, 403(b) plan, 457 plan, or pension or profit sharing plan,
your policy is referred to as a nonqualified policy.
Withdrawals--Nonqualified Policies
If you make a withdrawal from your policy before the annuity commencement date,
the Internal Revenue Code treats that withdrawal as first coming from earnings
and then from your premium payments. When you make a withdrawal you are taxed
on the amount of the withdrawal that is earnings. (The excess interest
adjustment resulting from the withdrawal may affect the amount on which you are
taxed.) Different rules apply for annuity payments. See "Annuity Payments"
below.
The Internal Revenue Code also provides that withdrawn earnings may be subject
to a penalty. The amount of the penalty is equal to 10% of the amount that is
includable in income. Some withdrawals will be exempt from the penalty. They
include any amounts:
. paid on or after the taxpayer reaches age 59 1/2;
. paid after the taxpayer dies;
. paid if the taxpayer becomes totally disabled (as that term is defined in
the Internal Revenue Code);
. paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity;
. paid under an immediate annuity; or
. which come from premium payments made prior to August 14, 1982.
All deferred non-qualified annuity policies that are issued by PFL (or its
affiliates) to the same owner during any calendar year are treated as one
annuity
16
<PAGE>
for purposes of determining the amount includable in the owner's income when a
taxable distributions occurs.
Withdrawals--Qualified Policies
The above information describing the taxation of nonqualified policies does not
apply to qualified policies. There are special rules that govern with respect
to qualified policies. Generally, these rules restrict:
. the amount that can be contributed to the policy during any year; and
. the time when amounts can be paid from the policies.
In addition, a penalty tax may be assessed on amounts withdrawn from the policy
prior to the date you reach age 59 1/2, unless you meet one of the exceptions
to this rule. You may also be required to begin taking minimum distributions
from the policy by a certain rule. The terms of the plan may limit the rights
otherwise available to you under the policies.
We have provided more information in the Statement of Additional Information.
You should consult your legal counsel or tax adviser if you are considering
purchasing a policy for use with any retirement plan.
Withdrawals--403(b) Policies
The Internal Revenue Code limits the withdrawal of premium payments from
certain 403(b) policies. Withdrawals can generally only be made when an owner:
. reaches age 59 1/2;
. leaves his/her job;
. dies;
. becomes disabled (as that term is defined in the Internal Revenue Code); or
. in the case of hardship. However, in the case of hardship, the owner can
only withdraw the premium payments and not any earnings.
Diversification and Distribution Requirements
The Internal Revenue Code provides that the underlying investments for a
variable annuity must satisfy certain diversification requirements in order to
be treated as an annuity policy. The policy must also meet certain distribution
requirements at the death of an owner in order to be treated as an annuity
policy. These diversification and distribution requirements are discussed in
the Statement of Additional Information. PFL may modify the policy to attempt
to maintain favorable tax treatment.
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:
. if distributed in a lump sum, these amounts are taxed in the same manner as
a full surrender; or
. if distributed under an annuity payment option, these amounts are taxed in
the same manner as annuity payments.
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.
Annuity Payments
Although the tax consequences may vary depending on the annuity payment option
you select, in general, for nonqualified and certain qualified policies, only a
portion of the annuity payments you receive will be includable in your gross
income.
In general, the excludable portion of each annuity payment you receive will be
determined as follows:
. Fixed payments--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. This is the percentage of each annuity payment
that is excludable.
. Variable payments--by dividing the "investment in the contract" on the
annuity commencement date by the total number of expected periodic payments.
This is the amount of each annuity payment that is excludable.
The remainder of each annuity payment is includable in gross income. Once the
"investment in the contract" has been fully recovered, the full
17
<PAGE>
amount of any additional annuity payments is includable in gross income.
If you select more than one annuity payment option, special rules govern the
allocation of the policy's entire "investment in the contract" to each such
option, for purposes of determining the excludable amount of each payment
received under that option. We advise you to consult a competent tax adviser as
to the potential tax effects of allocating amounts to any particular annuity
payment option.
If, after the annuity commencement date, annuity payments stop because an
annuitant died, the excess (if any) of the "investment in the contract" as of
the annuity commencement date over the aggregate amount of annuity payments
received that was excluded from gross income is generally allowable as a
deduction for your last taxable year.
Transfers, Assignments or Exchanges of Policies
A transfer of ownership or assignment of a policy, the designation of an
annuitant or other beneficiary who is not also the owner, the selection of
certain annuity commencement dates, or a change of annuitant, may result in
certain income or gift tax consequences to the owner that are beyond the scope
of this discussion. An owner contemplating any such transfer, assignment,
selection, or change should contact a competent tax adviser in respect to the
potential tax effects of such a transaction.
Possible Tax Law Changes
Although the likelihood of legislative changes in uncertain, there is always
the possibility that the tax treatment of the policy could change by
legislation or otherwise. You should consult a tax adviser with respect to
legislative developments and their effect on the policy.
7. SURRENDER VALUE
Surrenders
You may not surrender any portion of a contract unless either the Certain Only
or Life with Emergency Cash SM payment option is selected. No other payment
option allows surrenders. If you elect a Certain Only payment option the
surrender value is the present value of the remaining payments. If you select
the Life with Emergency Cash SM payment option, we will provide you with a Life
with Emergency Cash SM benefit schedule that will allow you to determine how
much is available to surrender.
We may require the amount of a partial surrender from a Certain Only payment
option to be at least $2500. If the remaining surrender value in a Certain Only
payment option, after you request a partial surrender, would be less than
$25,000, then we reserve the right to require a full surrender.
A surrender from a Life with Emergency Cash SM payment option must be at least
25% of the full surrender value.
A partial surrender will reduce all future payments. Surrenders may have
adverse tax consequences.
You should consult with your tax advisor before requesting a full or partial
surrender.
Surrender Value
In the cases when the contract can be surrendered (i.e., Certain Only or Life
with Emergency Cash SM options) the determination of a surrender value depends
on specific individual circumstances such as the annuitant's age and sex, the
number of annuitants, the amount of the current payment (when the surrender is
requested), and the number of payments already made.
If you select a Certain Only payment option with fixed and/or variable annuity
payments you may surrender all or a portion of your contract. For fixed annuity
payments the surrender value is 98% of the present value of the remaining
payments (using PFL's declared interest rates in effect at the time of the
surrender). For variable annuity payments, the surrender value is the present
value of future payments (which are assumed to be equal to the total of the
variable annuity unit values times the number of variable annuity units
credited to each of the selected subaccounts on the business day we receive the
surrender request) discounted at an interest rate no greater than 4.5% (if you
have a 3.5% AIR) or no greater than 6% (if you have a 5% AIR).
If the Life with Emergency Cash SM option is selected, please refer to the
Emergency Cash SM
18
<PAGE>
benefit schedule in your contract rider for the information you need to
determine your surrender value.
8. PERFORMANCE
Performance information for the subaccounts may appear in reports and
advertising. The performance information is based on adjusted historical
investment experience of the subaccounts and the underlying portfolios and does
not indicate or represent future performance.
Total returns of the subaccounts may be advertised. Total returns are based on
the overall dollar or percentage change in value of a hypothetical investment.
Total return quotations reflect changes in portfolio share price, the automatic
reinvestment by the separate account of all distributions and the deduction of
applicable annuity charges.
A cumulative total return reflects performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded
return that would have produced the same cumulative total return if the
performance had been constant over the entire period. Because average annual
total returns tend to smooth out variations in a subaccount's returns, you
should recognize that they are not the same as actual year-by-year results.
Some subaccounts may also advertise yield. These measures reflect the income
generated by an investment in the subaccount over a specified period of time.
This income is annualized and shown as a percentage. Yields do not take into
account capital gains or losses.
Appendix A contains performance information that you may find useful. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and future results will not be the same as
the results shown.
9. DEATH BENEFIT
If the owner dies before the first annuity payment, the premium (plus or minus
investment performance) will be paid as a death benefit. More information on
how we pay it is in the Statement of Additional Information.
If an owner, who may or may not also be an annuitant, dies on or after the
annuity starting date, we will pay the remaining portion of the annuity
payments due under the contract, if any, in the same manner and frequency (at
least as rapidly) as under the method of distribution used before such owner's
death.
If the deceased owner's surviving spouse is the sole successor owner, then on
such owner's death such surviving spouse may elect to become the sole owner
under the contract and to continue the contract as his or her own.
If a non-natural person is named as an owner, then the primary annuitant, as
defined in the Code, shall be treated as an owner solely for the purposes of
the distribution at death rules. The entire interest in the contract must be
distributed upon the annuitant's death, if the annuitant dies prior to the
first payment date.
If the deceased owner was also the annuitant, then the beneficiary is entitled
to the proceeds described above in this section (unless the deceased owner's
surviving spouse is the sole successor owner). If no person is named as the
beneficiary, the owner's estate shall be deemed the beneficiary.
Note carefully. In instances where the owner's estate is deemed to be the
successor owner or beneficiary, it may be necessary to open a probate estate in
order to exercise ownership rights to, or receive death proceeds from, the
contract. If no probate estate is opened because the owner has precluded the
opening of a probate estate by means of a trust or other instrument, unless we
have received written notice of the trust as a successor owner or beneficiary
prior to the owner's death, that trust may not exercise ownership rights to, or
receive death proceeds from, the contract.
In all events, distributions upon the death of an owner will comply with
section 72(s) of the Code.
10. OTHER INFORMATION
PFL Life Insurance Company
PFL Life Insurance Company was incorporated under the laws of the State of Iowa
on April 19, 1961 as NN Investors Life Insurance Company, Inc. It sells life
and health insurance and annuity contracts. PFL
19
<PAGE>
is a wholly-owned indirect subsidiary of AEGON USA, Inc. All of the stock of
AEGON USA, Inc., is indirectly owned by AEGON N.V. of The Netherlands, the
securities of which are publicly traded. AEGON N.V., a holding company,
conducts its business through subsidiary companies engaged primarily in the
insurance business. PFL is licensed in the District of Columbia, Guam, and in
all states except New York.
All obligations arising under the contracts, including the promise to make
annuity payments, are general corporate obligations of PFL.
The Separate Account
PFL established a separate account, called the PFL Retirement Builder Variable
Annuity Account, under the laws of the State of Iowa on March 29, 1996. The
separate account receives and currently invests the premium payments under the
contracts that are allocated to it for investment only in shares of One Group
Investment Trust. Detailed information about the One Group Investment Trust
portfolios is contained in the prospectus that is attached to this prospectus.
You should read the prospectus for each of the underlying portfolios of the One
Group Investment Trust before you invest.
The separate account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940. However, the SEC does not supervise
the management, the investment practices, or the policies of the separate
account or PFL. The obligations to pay the benefits due under the contract are
PFL's responsibility.
The assets of the separate account are held in PFL's name on behalf of the
separate account and belong to PFL. However, those assets that underlie the
contracts are not chargeable with liabilities arising out of any other business
PFL may conduct.
Information about the separate account can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. You may obtain information about the
operation of the public reference room by calling the Commission at 1-800-SEC-
0330. In addition, the SEC maintains a web site (http://www.sec.gov) that
contains other information regarding the separate account.
Voting Rights
PFL will vote all shares of the underlying portfolios in accordance with
instructions we receive from you and other owners that have voting interests in
the portfolios. We will send you and other owners written requests for
instructions on how to vote those shares. When we receive those instructions,
we will vote all of the shares in proportion to those instructions. If,
however, we determine that we are permitted to vote the shares in our own
right, we may do so.
Each person having a voting interest will receive proxy material, reports, and
other materials relating to the appropriate portfolio.
Distributor of the Contracts
AFSG Securities Corporation is the principal underwriter of the contracts. Like
PFL, it is an indirect wholly-owned subsidiary of AEGON USA, Inc. It is located
at 4333 Edgewood Road N.E., Cedar Rapids, IA 52499-0001. AFSG Securities
Corporation is registered as a broker/dealer under the Securities Exchange Act
of 1934. It is a member of the National Association of Securities Dealers, Inc.
(NASD). It was incorporated in Pennsylvania in 1986.
Commissions of up to 6% of premium payments will be paid to broker/dealers who
sell the contracts under agreements with AFSG Securities Corporation. These
commissions are not deducted from premium payments. In addition, certain
production, persistency and managerial bonuses may be paid. PFL may also pay
compensation to banks and other financial institutions for their services in
connection with the sale and servicing of the contracts.
Non-participating Contract
The contract does not participate or share in the profits or surplus earnings
of PFL. No dividends are payable on the contract.
Variations in Contract Provisions
Certain provisions of the contracts may vary from the descriptions in this
prospectus in order to comply with different state laws. See your contract
20
<PAGE>
for variations since any such state variations will be included in your
contract or in riders or endorsements attached to your contract.
Year 2000 Matters
We have in place a Year 2000 Project Plan (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 compliant. As of the
date of this prospectus, all of our mission-critical systems are Year 2000
compliant and ready. The Year 2000 Project Plan is continuing as scheduled, as
we continue with the validation of our mission-critical and non-mission-
critical systems, including revalidation testing in 1999. In addition, PFL has
undertaken aggressive initiatives to test all systems that interface with any
third parties and other business partners. All of these steps are aimed at
allowing current operations to remain unaffected by the Year 2000 date change.
As of the date of this prospectus, we have identified and made available what
we believe are the appropriate resources of hardware, people, and dollars,
including the engagement of outside third parties, to ensure that the Plan will
be completed.
Our actions under The Year 2000 Project Plan are intended to significantly
reduce PFL's risk of a material business interruption based on the Year 2000
issues. Resolving the Year 2000 computer problem is complex and multifaceted.
We cannot know conclusively whether a response plan is successful until the
Year 2000 arrives (or an earlier date if the systems or equipment address Year
2000 data prior to the Year 2000). In spite of 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 our knowledge
or control.
This statement is a Year 2000 Readiness Disclosure pursuant to Section 3(9) of
the Year 2000 Information and Readiness Disclosure Act, 15 U.S.C. (S) 1 (1998).
See the prospectus for the One Group Investment Trust for information on its
preparation for Year 2000.
IMSA
PFL is a member of the Insurance Marketplace Standards Association (IMSA). IMSA
members subscribe to a set of ethical standards involving the sales and service
of individually sold life insurance and annuities. As a member, we may use the
IMSA logo and language in advertisements.
Delay of Payments
PFL may be permitted to delay any payments from the separate account if:
. the New York Stock Exchange is closed other than for usual weekends or
holidays or trading on the Exchange is otherwise restricted; or
. an emergency exists as defined by the SEC or the SEC requires that trading
be restricted; or
. the SEC permits a delay for the protection of owners.
In addition, transfers of amounts from and within the subaccounts may be
deferred under these circumstances.
Pursuant to the requirements of certain state laws, we reserve the right to
defer fixed annuity payments for up to six months.
If a check has been submitted as the premium, we have the right to defer any
payments until the check has been honored.
Legal Proceedings
There are no legal proceedings to which the separate account is a party or to
which the assets of the account are subject. PFL, like other life insurance
companies, is involved 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 separate account or PFL.
Financial Statements
The statutory-basis financial statements of PFL are in the Statement of
Additional Information. The
21
<PAGE>
subaccounts began operations in 1999, and do not yet have any financial
history.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Glossary of Terms
The Contract-General Provisions
Federal Tax Matters
Investment Experience
State Regulation of PFL
Administration
Records and Reports
Distribution of the Contracts
Other Products
Custody of Assets
Historical Performance Data
Legal Matters
Independent Auditors
Other Information
Financial Statements
</TABLE>
22
<PAGE>
APPENDIX A
HISTORICAL PERFORMANCE DATA
The following graphs show how your annuity payments can fluctuate based on past
investment performance (net of all charges) of the portfolios through December
31, 1998. The information presented is for periods prior to the inception date
of the subaccounts. PFL did not sell the contracts prior to the date of this
prospectus, and therefore, the graphs illustrate what annuity payments might
have been under a contract had one existed during the years shown.
The graphs are based on the adjusted historical performance of the portfolios,
which means that the 1.35% separate account charge and the actual net expenses
of each portfolio for the year ended December 31, 1998, are reflected in the
graph for each portfolio. The graphs do not reflect any premium tax charge.
Each graph shows the effect that the portfolio's investment performance would
have had on the value of an annuity unit and, thus, the value of an annuity
payment if a contract with an AIR of 3.5%, providing an initial monthly annuity
payment of $500.00, was purchased on the date the portfolio commenced
operations. Each graph assumes that the entire premium of the hypothetical
contract was allocated to the subaccount being illustrated. Annuity payments
increase for a given month if the performance of the portfolio underlying the
subaccounts, net of all charges, for that month is higher than the AIR, and
decreases for a given month if the performance of the portfolio underlying the
subaccounts, net of all charges, for that month is lower than the AIR. The
premium necessary for an initial monthly annuity payment of $500.00 will vary
depending on the age and sex of the annuitant (and secondary annuitant, if
any), the payment option and the first annuity payment date. For example,
suppose that a 65 year old male who lives in a state that does not charge a
premium tax wishes to purchase $500.00 of an initial monthly variable annuity
payment beginning on the contract issue date with a life only payment option.
If there is no secondary annuitant, no guarantee period and he chooses a 3.5%
AIR, the premium needed would be $86,784. If the purchaser were female, the
premium necessary would be $96,221. This is because females have a longer life
expectancy than males.
The monthly payments depicted in the graphs are not based on actual contracts.
They are based on adjusted historical performance results of the portfolios and
are not projections or indications of future results. PFL does not guarantee
and does not suggest that any subaccount or contract issued by PFL will
generate these or similar average monthly payments for any period of time. The
graphs are for illustration purposes only and do not represent future variable
annuity payments or future investment returns. Variable annuity payments under
a real contract may be more or less than those forming the basis for the
monthly payments shown in these graphs, if the actual returns of the portfolios
selected by you are different from the adjusted historical returns of the
portfolios. It is very likely that a portfolio's investment performance will
fluctuate over time; therefore, you can expect that your variable annuity
payments will fluctuate. The total amount of variable annuity payments
ultimately received will depend upon the payment option selected by you.
* * *
A-1
<PAGE>
BOND PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--May 1997**
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return* (Periods Ended
Year Amounts at End Historical Annual 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 N/A N/A 1 Year 7.21%
- ---------------------------------------------------------------------------------
1995 N/A N/A 5 Years N/A
- ---------------------------------------------------------------------------------
1996 N/A N/A 10 Years N/A
- ---------------------------------------------------------------------------------
1997 $524 N/A Since Inception 8.75%
- ---------------------------------------------------------------------------------
1998 $543 7.21%
- ---------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return* (Periods Ended
12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
-------------------------------
<S> <C> <C> <C> <C>
1 Year (0.99%)
-------------------------------
5 Years N/A
-------------------------------
10 Years N/A
-------------------------------
Since Inception 4.00%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Bond Portfolio, adjusted to reflect the 1.35% separate
account charge.
** The performance information and fund inception date reflect that the Bond
Portfolio inherited the financial history of the Pegasus Variable Bond Fund.
A-2
<PAGE>
GOVERNMENT BOND PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--August 1994
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return* (Periods Ended
Year Amounts at End Historical Annual 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 $486 N/A 1 Year 5.89%
- ---------------------------------------------------------------------------------
1995 $540 15.14% 5 Years N/A
- ---------------------------------------------------------------------------------
1996 $529 1.31% 10 Years N/A
- ---------------------------------------------------------------------------------
1997 $553 8.20% Since Inception 6.44%
- ---------------------------------------------------------------------------------
1998 $566 5.89%
- ---------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return* (Periods Ended
12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
-------------------------------
<S> <C> <C> <C> <C>
1 Year (2.29%)
-------------------------------
5 Years N/A
-------------------------------
10 Years N/A
-------------------------------
Since Inception 4.72%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Government Bond Portfolio, adjusted to reflect the 1.35%
separate account charge.
A-3
<PAGE>
BALANCED PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--August 1994
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return*
Year Amounts at End Historical Annual (Periods Ended 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 $484 N/A 1 Year 17.51%
- --------------------------------------------------------------------------------
1995 $556 19.09% 5 Years N/A
- --------------------------------------------------------------------------------
1996 $594 10.43% 10 Years N/A
- --------------------------------------------------------------------------------
1997 $696 21.28% Since Inception 14.79%
- --------------------------------------------------------------------------------
1998 $790 17.51%
- --------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return*
(Periods Ended 12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
------------------------------
<S> <C> <C> <C> <C>
1 Year 9.26%
------------------------------
5 Years N/A
------------------------------
10 Years N/A
------------------------------
Since Inception 13.20%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Balanced Portfolio, adjusted to reflect the 1.35% separate
account charge.
A-4
<PAGE>
LARGE CAP GROWTH PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--August 1994
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return*
Year Amounts at End Historical Annual (Periods Ended 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 $ 493 N/A 1 Year 39.42%
- --------------------------------------------------------------------------------
1995 $ 583 22.49% 5 Years N/A
- --------------------------------------------------------------------------------
1996 $ 649 15.12% 10 Years N/A
- --------------------------------------------------------------------------------
1997 $ 816 30.20% Since Inception 23.71%
- --------------------------------------------------------------------------------
1998 $1,099 39.42%
- --------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return*
(Periods Ended 12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
------------------------------
<S> <C> <C> <C> <C>
1 Year 31.07%
------------------------------
5 Years N/A
------------------------------
10 Years N/A
------------------------------
Since Inception 22.05%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Large Cap Growth Portfolio, adjusted to reflect the 1.35%
separate account charge.
A-5
<PAGE>
EQUITY INDEX PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--May 1998
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return* (Periods Ended
Year Amounts at End Historical Annual 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 N/A N/A 1 Year N/A
- ---------------------------------------------------------------------------------
1995 N/A N/A 5 Years N/A
- ---------------------------------------------------------------------------------
1996 N/A N/A 10 Years N/A
- ---------------------------------------------------------------------------------
1997 N/A N/A Since Inception 8.20%
- ---------------------------------------------------------------------------------
1998 $529 N/A
- ---------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return* (Periods Ended
12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
-------------------------------
<S> <C> <C> <C> <C>
1 Year N/A
-------------------------------
5 Years N/A
-------------------------------
10 Years N/A
-------------------------------
Since Inception (0.05%)
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Equity Index Portfolio, adjusted to reflect the 1.35%
separate account charge.
A-6
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--March 1995**
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return*
Year Amounts at End Historical Annual (Periods Ended 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 N/A N/A 1 Year 11.59%
- --------------------------------------------------------------------------------
1995 $567 22.49% 5 Years N/A
- --------------------------------------------------------------------------------
1996 $642 17.23% 10 Years N/A
- --------------------------------------------------------------------------------
1997 $777 25.11% Since Inception 18.73%
- --------------------------------------------------------------------------------
1998 $837 11.59%
- --------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return*
(Periods Ended 12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
------------------------------
<S> <C> <C> <C> <C>
1 Year 3.29%
------------------------------
5 Years N/A
------------------------------
10 Years N/A
------------------------------
Since Inception 17.50%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Diversified Equity Portfolio, adjusted to reflect the 1.35%
separate account charge.
** The performance information and fund inception date reflect that the
Diversified Equity Portfolio inherited the financial history of the Pegasus
Variable Growth and Value Fund.
A-7
<PAGE>
MID CAP GROWTH PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--August 1994
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return*
Year Amounts at End Historical Annual (Periods Ended 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 $ 475 N/A 1 Year 36.99%
- --------------------------------------------------------------------------------
1995 $ 562 22.42% 5 Years N/A
- --------------------------------------------------------------------------------
1996 $ 620 14.13% 10 Years N/A
- --------------------------------------------------------------------------------
1997 $ 767 28.10% Since Inception 21.52%
- --------------------------------------------------------------------------------
1998 $1,016 36.99%
- --------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return*
(Periods Ended 12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
------------------------------
<S> <C> <C> <C> <C>
1 Year 28.31%
------------------------------
5 Years N/A
------------------------------
10 Years N/A
------------------------------
Since Inception 19.74%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Mid Cap Growth Portfolio, adjusted to reflect the 1.35%
separate account charge.
A-8
<PAGE>
DIVERSIFIED MID CAP PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--March 1995**
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return*
Year Amounts at End Historical Annual (Periods Ended 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 N/A N/A 1 Year 3.50%
- ---------------------------------------------------------------------------------
1995 $534 N/A 5 Years N/A
- ---------------------------------------------------------------------------------
1996 $634 22.87% 10 Years N/A
- ---------------------------------------------------------------------------------
1997 $765 24.96% Since Inception 15.92%
- ---------------------------------------------------------------------------------
1998 $765 3.50%
- ---------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return*
(Periods Ended 12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
-------------------------------
<S> <C> <C> <C> <C>
1 Year (4.77%)
-------------------------------
5 Years N/A
-------------------------------
10 Years N/A
-------------------------------
Since Inception 14.68%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Diversified Mid Cap Portfolio, adjusted to reflect the 1.35%
separate account charge.
** The performance information and fund inception date reflect that the
Diversified Mid-Cap Portfolio inherited the financial history of the Pegasus
Variable Mid-Cap Opportunity Fund.
A-9
<PAGE>
MID CAP VALUE PORTFOLIO
Chart Specifications:
. 3.5% AIR
. $500 initial monthly annuity payment
. Fund inception date--May 1997**
<TABLE>
<CAPTION>
Adjusted Historical Average Annual
Monthly Payment Adjusted Total Return*
Year Amounts at End Historical Annual (Periods Ended 12/31/1998)
of Years Total Return* The contract cannot be surrendered
or is not surrendered
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 N/A N/A 1 Year (4.61)%
- --------------------------------------------------------------------------------
1995 N/A N/A 5 Years N/A
- --------------------------------------------------------------------------------
1996 N/A N/A 10 Years N/A
- --------------------------------------------------------------------------------
1997 $566 N/A Since Inception 6.22%
- --------------------------------------------------------------------------------
1998 $522 (4.61)%
- --------------------------------------------------------------------------------
<CAPTION>
Adjusted Historical Average Annual
Total Return*
(Periods Ended 12/31/1998)
30 Year Certain Only Annuity, the
contract is surrendered
------------------------------
<S> <C> <C> <C> <C>
1 Year (12.74%)
------------------------------
5 Years N/A
------------------------------
10 Years N/A
------------------------------
Since Inception 1.75%
</TABLE>
* The subaccount had not commenced operations as of the date of this
prospectus. Historical returns for periods prior to that date are total
returns for the Mid Cap Value Portfolio, adjusted to reflect the 1.35%
separate account charge.
** The performance information and fund inception date reflect that the Mid Cap
Value Portfolio inherited the financial history of the Pegasus Variable
Intrinsic Value Fund.
A-10
<PAGE>
APPENDIX B
ADDITIONAL FUND INFORMATION
Banc One Investment Advisors is the investment advisor for the underlying
portfolios and is a registered investment advisor under the Investment Advisors
Act of 1940. Banc One Investment Advisors is an indirect wholly-owned
subsidiary of Bank One Corporation. It makes the day-to-day investment
decisions for the portfolios and continuously reviews, supervises and
administers each portfolio's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision of, and policies
established by, the Trustees of One Group Investment Trust. Banc One Investment
Advisors has served as investment advisor to the Trust since its inception. In
addition, Banc One Investment Advisors serves as investment advisor to other
mutual funds and individual corporate charitable, and retirement accounts. As
of December 31, 1998, Banc One Investment Advisors managed over $59 billion in
assets. Banc One Investment Advisors is entitled to a fee, which is calculated
daily and paid monthly, of the annual percentages of the average daily net
assets of each portfolio.
There is no assurance that any of the portfolios will achieve its investment
objective.
The One Group Investment Trust prospectus should be read carefully before any
decision is made concerning the allocation of the premium to a particular
subaccount.
An investment in the separate account, or in any portfolio, is not insured or
guaranteed by the U.S. government or any government agency.
The investment objectives and policies of certain portfolios are similar to the
investment objectives and policies of other portfolios that may be managed by
Banc One Investment Advisors. The investment results of the portfolios,
however, may differ from the results of such other 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, even if the other portfolio has the same investment advisor or
manager.
Addition, Deletion, or Substitution of Investments. We cannot and do not
guarantee that any of the subaccounts will always be available to receive
premium allocations or transfers. We retain the right, subject to any
applicable law, to make certain changes in the separate account and its
investments. We reserve the right to eliminate the shares of any portfolio held
by a subaccount and to substitute shares of another portfolio of the 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 our judgment, investment in any portfolio would be
inappropriate in view of the purposes of the separate 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
separate account from purchasing other securities for other series or classes
of variable annuity contracts or from effecting an exchange between series or
classes of variable annuity contracts on the basis of requests made by owners.
New subaccounts may be established when, in our sole discretion, marketing,
tax, investment or other conditions warrant. Any new subaccounts may be made
available to existing owners on a basis to be determined by us. Each additional
subaccount will purchase shares in a mutual fund portfolio or other investment
vehicle. We may also eliminate one or more subaccounts if, in our sole
discretion, marketing, tax, investment or other conditions warrant such change.
In the event any subaccount is eliminated, we will notify owners and request a
reallocation of the amounts invested in the eliminated subaccount.
B-1
<PAGE>
In the event of any such substitution or change, we may, by appropriate
endorsement, make such changes in the contracts 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 contracts,
the separate account may be:
. operated as a management company under the 1940 Act or any other form
permitted by law,
. deregistered under the 1940 Act in the event such registration is no longer
required, or
. combined with one or more other separate accounts.
To the extent permitted by applicable law, we also may
. transfer the assets of the separate account associated with the contracts to
another account or accounts,
. restrict or eliminate any voting rights of owners or other persons who have
voting rights as to the separate account,
. create new separate accounts,
. add new subaccounts to or remove existing subaccounts from the separate
account or combine subaccounts, or
. add new underlying funds, or substitute a new fund for an existing fund.
Resolving Material Conflicts. The One Group Investment Trust portfolios are
available to separate accounts offering variable annuity and variable life
products of other participating insurance companies, as well as to the separate
account and other separate accounts we establish. Although we do not anticipate
any disadvantages to this, there is a possibility that a material conflict may
arise between the interest of the separate account and one or more of the other
separate accounts investing in the One Group Investment Trust. A conflict may
occur due to a change in law affecting the operations of variable life
insurance and variable annuity separate accounts, differences in the voting
instructions we receive and instructions received by other companies, or some
other reason. In the event of a conflict, it is possible that the separate
account might be required to withdraw its investment in the underlying
portfolios. In the event of any conflict, we will take any steps necessary to
protect owners, annuitants, secondary annuitants and beneficiaries.
B-2
<PAGE>
APPENDIX C
ILLUSTRATIONS OF ANNUITY PAYMENT VALUES
The following graphs have been prepared to show how investment performance
affects your variable annuity payments over time. The graphs incorporate
hypothetical rates of return and PFL does not guarantee that you will earn
these returns for any one year or any sustained period of time. PFL did not
sell contracts prior to the date of this prospectus, and, therefore, the graphs
represent what annuity payments might have been under a contract had one
existed during the years shown. The graphs are for illustrative purposes only
and do not represent past or future investment returns.
Your variable annuity payment may be more or less than the income shown if the
actual returns of the subaccounts are different than those illustrated. Since
it is very likely that your investment returns will fluctuate over time, you
can expect that the amount of your annuity payment will also fluctuate. The
total amount of annuity payments ultimately received will, in addition to the
investment performance of the subaccounts, also depend on how long you live and
whether you choose a guarantee period option.
Another factor that determines the amount of your variable annuity payment is
the assumed investment return (AIR). Annuity payments will increase from one
variable annuity payment calculation date to the next if the performance of the
portfolio underlying the subaccounts, net of all charges, is greater than the
AIR and will decrease if the performance of the portfolio underlying the
subaccounts, net of all charges, is less than the AIR.
The "Hypothetical Illustration" graph below illustrates differences in monthly
variable annuity payments assuming different investment returns. The graph
assumes a single premium of $49,820; the entire premium was allocated to
variable annuity payments; the AIR is 3.5%; the payment option is Single Life
Annuity; a 80 year old male, and separate account charges of 1.35% and average
portfolio expenses of 0.87%. This results in the receipt of an initial annuity
payment in the amount of $500. The graph illustrates gross returns of 0.00%,
6.00%, and 10.00% (net returns after expenses are (2.22)%, 3.78%, and 7.78%,
respectively).
C-1
<PAGE>
Monthly Payments Assuming Different Gross Portfolio Returns
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Monthly Payment at the End of
Contract Year Gross Portfolio Returns*
-------------------------------------------------------------
0.0% 6.0% 10.0%
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumed First Monthly Payment $500 $500 $ 500
1 $472 $501 $ 521
2 $446 $503 $ 542
3 $422 $504 $ 565
4 $398 $505 $ 588
5 $376 $507 $ 612
6 $355 $508 $ 638
7 $336 $510 $ 664
8 $317 $511 $ 691
9 $300 $512 $ 720
10 $283 $514 $ 750
11 $268 $515 $ 781
12 $253 $516 $ 813
13 $239 $518 $ 847
14 $226 $519 $ 882
15 $213 $521 $ 918
16 $201 $522 $ 956
17 $190 $523 $ 996
18 $180 $525 $1,037
19 $170 $526 $1,080
20 $160 $528 $1,124
</TABLE>
* The corresponding net returns are (2.22)%, 3.78%, and 7.78%.
C-2
<PAGE>
The "Monthly Payment Amounts with Different AIRs" graph below illustrates the
differences in variable annuity payments between selecting the 3.5% and 5% AIR.
The graph assumes a single premium of $49,820; the entire premium was allocated
to variable annuity payments; the payment option is a single Life Annuity; 80
year old male; separate account charges of 1.35%; average portfolio expenses of
0.87%; and an annual return of the portfolios, after all expenses of 6%.
Monthly variable annuity payments are shown with the 3.5% AIR and the 5% AIR.
C-3
<PAGE>
Monthly Payments Assuming Different AIRs
(Net Portfolio Return = 6%, Gross Portfolio Return=8.22%)
<TABLE>
- -------------------------------------------------------------------------------------------
<CAPTION>
Monthly Payment at the End of Year AIR
------------------------------------------------------
3.5% 5%
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Assumed First Monthly Payment $500 $547
1 $512 $552
2 $524 $557
3 $537 $563
4 $550 $568
5 $563 $574
6 $577 $579
7 $591 $585
8 $605 $590
9 $620 $596
10 $635 $601
11 $650 $607
12 $666 $613
13 $682 $619
14 $698 $625
15 $715 $631
16 $733 $637
17 $750 $643
18 $768 $649
19 $787 $655
20 $806 $661
</TABLE>
The annuity payment amounts shown reflect the deduction of all fees and
expenses. Actual fees and expenses under the contract may be higher or lower,
will vary from year to year, and will depend on how you allocate among the
portfolios. The separate account charge is assumed to be at an annual rate of
1.35% of the average daily net assets.
Upon request, we will furnish a customized illustration based on your
individual circumstances and choice of annuity options.
C-4
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE ONE INCOME 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 One Income Annuity Contract offered by PFL Life
Insurance Company. You may obtain a copy of the prospectus dated November 2,
1999 by calling 1-800-544-3152, 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
contract. Terms used in the current prospectus for the contract 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 contract and the PFL
Retirement Builder Variable Annuity Account.
Dated: November 2, 1999
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GLOSSARY OF TERMS.......................................................... 3
THE CONTRACT--GENERAL PROVISIONS........................................... 4
Transfers................................................................ 4
Delay of Transfers....................................................... 4
Entire Contract.......................................................... 4
Assignment............................................................... 5
Beneficiary.............................................................. 5
Change of Beneficiary.................................................... 5
Incontestability......................................................... 5
Misstatement of Sex or Age............................................... 5
Modification of Contract................................................. 5
Nonparticipating......................................................... 5
Owner.................................................................... 5
Proof of Death........................................................... 6
Proof of Survival........................................................ 6
Death Before First Payment Date.......................................... 6
Protection of Proceeds................................................... 6
Optional Annuity Payment Guarantee Rider................................. 6
Asset Allocation Models.................................................. 8
FEDERAL TAX MATTERS........................................................ 9
Tax Status of the Contracts.............................................. 9
Diversification Requirements............................................. 9
Owner Control............................................................ 9
Required Distributions................................................... 9
Taxation of PFL.......................................................... 10
INVESTMENT EXPERIENCE...................................................... 10
Annuity Unit Value and Annuity Payment Rates............................. 10
STATE REGULATION OF PFL.................................................... 12
ADMINISTRATION............................................................. 12
RECORDS AND REPORTS........................................................ 12
DISTRIBUTION OF THE CONTRACTS.............................................. 13
OTHER PRODUCTS............................................................. 13
CUSTODY OF ASSETS.......................................................... 13
HISTORICAL PERFORMANCE DATA................................................ 13
Subaccount Yields........................................................ 13
Total Returns............................................................ 14
Other Performance Data................................................... 14
Adjusted Historical Performance Data..................................... 15
LEGAL MATTERS.............................................................. 15
INDEPENDENT AUDITORS....................................................... 15
OTHER INFORMATION.......................................................... 15
FINANCIAL STATEMENTS....................................................... 15
</TABLE>
2
<PAGE>
GLOSSARY OF TERMS
Annuitant and Secondary Annuitant--The person upon whose life the annuity
payments are based. For joint options, annuity payments are based upon the
lives of both the annuitant and secondary annuitant. Either the annuitant or
the secondary annuitant generally must be no older than 80 years of age on the
contract issue date.
Annuity Payments--Payments made by us to the payee pursuant to the payment
option chosen. Annuity payments may be either fixed or variable or a
combination of both.
Application--A written application, order form, or any other information
received electronically or otherwise upon which the policy is issued and/or is
reflected on the data or specifications page.
Assumed Investment Return or AIR--The annual effective rate shown in the
contract specifications section of the contract that is used in the
calculation of each variable annuity payment.
Beneficiary(ies)--The person(s) who may receive death proceeds or guaranteed
payments under this contract when there is no longer a living annuitant (or
last annuitant for joint options).
Contract Issue Date--The date the contract becomes effective. This will be
stated in the contract. Generally, the date the initial premium is allocated
to the separate account.
Net Investment Factor--A unit of measure used to reflect the change in
variable annuity unit values in a subaccount from one valuation period to the
next valuation period.
Owner(s)--"You," "your," and "yours." The person or entity named in the
contract specifications section who may, while any annuitant is living,
exercise all rights granted by the contract. The annuitant must be the owner,
if the contract is a qualified contract. If there is a secondary annuitant, he
or she may also be an owner (except for a qualified contract, where only one
owner is permitted). The secondary annuitant is never required to be an owner.
Payee--The person or entity to whom annuity payments are paid.
Payment Date--The date an annuity payment is paid to the payee. We may require
evidence that any annuitant(s) and/or payee is/are alive on the payment date.
Separate Account--PFL Retirement Builder Variable Annuity Account.
Subaccount--The investment options or divisions of the separate account. Each
subaccount invests in a different portfolio of the funds. We may make
additional subaccounts available in the future.
Successor Owner--The person named by the owner to whom ownership of the
contract passes upon the owner's death. If the owner is also the annuitant,
the annuitant's beneficiary is entitled to the death proceeds of the contract.
If no person is named, the owner's estate shall be deemed the successor owner.
Valuation Day--Each day the New York Stock Exchange is open for trading and
any other day when the Securities and Exchange Commission requires mutual
funds or unit investment trusts to be valued. The determination of the
variable annuity unit value is made at the end of each valuation day.
Variable Annuity Unit--Variable annuity payments are expressed in terms of
variable annuity units, the value of which fluctuates in relation to the
selected subaccounts.
Variable Annuity Payment Calculation Date--The date, no more than seven
business days before each payment date, when the amount of the variable
annuity payment is determined. If the New York Stock Exchange is closed on a
variable annuity payment calculation date, we will determine the amount of
annuity income on the next day it is open.
3
<PAGE>
In order to supplement the description in the prospectus, the following
provides additional information about PFL and the contract which may be of
interest to a prospective purchaser. Words printed in italics in this
Statement of Additional Information are defined in the Glossary of Terms,
found on page 3.
THE CONTRACT--GENERAL PROVISIONS
Transfers
You may transfer amounts within the various subaccounts. You may also transfer
amounts from variable to fixed annuity payments at any time. If you do, then
the payment option for the fixed annuity payments will be a continuation of
the payment option currently applicable to variable annuity payments.
Transfers from fixed to variable annuity payments are not permitted. We may
charge a fee for excessive transfers (we currently do not charge for
transfers) or decline to accept excessive transfers.
Excessive trading activity can disrupt portfolio management strategy and
increase portfolio expenses, which are borne by everyone participating in the
portfolio regardless of their transfer activity.
In some cases, contracts may be sold to individuals who independently utilize
the services of a firm or individual engaged in market timing. Generally,
market timing services obtain authorization from contract owner(s) to make
transfers and exchanges among the subaccounts on the basis of perceived market
trends. Because the large transfers of assets associated with market timing
services may disrupt the management of the portfolios of the underlying funds,
such transactions may hurt contract owners not utilizing the market timing
service. Therefore, we may restrict or eliminate the right to make transfers
among subaccounts if such rights are executed by a market timing firm or
similar third party authorized to initiate transfers or exchange transactions
on behalf of a contract owner(s).
In modifying such rights, we may, among other things, decline to accept:
. transfer or exchange instructions of any agent acting under a power of
attorney on behalf of more than one contract owner, or
. transfer or exchange instructions of individual contract owners who have
executed pre-authorized transfer or exchange forms which are submitted by
market timing firms or other third parties on behalf of more than one
contract owner at the same time.
We will impose such restrictions only if we believe that doing so will prevent
harm to other contract owners.
Delay of Transfers
When you transfer amounts among the subaccounts, we will redeem shares of the
appropriate portfolios at their prices as of the end of the current valuation
period. Generally any subaccount you transfer to is credited at the same time.
However, we may wait to credit the amount to a new subaccount until a
subaccount you transfer from becomes liquid. This will happen only if (1) the
subaccount you transfer to invests in a portfolio that accrues dividends on a
daily basis and requires federal funds before accepting a purchase order, and
(2) the subaccount you transfer from is investing in an equity portfolio in an
illiquid position due to substantial redemptions or transfers that require it
to sell portfolio securities in order to make funds available. The subaccount
you transfer from will be liquid when it receives proceeds from sales of
portfolio securities, the purchase of new contracts, or otherwise. During any
period that we wait to credit a subaccount for this reason, the amount you
transfer will be uninvested. After seven days the transfer will be made even
if the subaccount you transfer from is not liquid.
Entire Contract
The entire contract is made up of the contract, and any riders, endorsements,
or application (including any application supplement or investment allocation
form). No change in or waiver of any provision of the contract is valid unless
the change or waiver is signed by the President or Secretary of PFL.
4
<PAGE>
Assignment
The option to assign is only available for non-tax qualified annuities. Only
you may make an assignment of this contract. You must notify us in writing to
assign this contract. No change will apply to any action taken by us before
the written notice was received. We are not responsible for the validity or
the effect of an assignment.
Beneficiary
The beneficiary is named in the contract specifications section of the
contract or in a subsequent endorsement. More than one beneficiary may be
named. The rights of any beneficiary will be subject to all the provisions of
the contract. You may impose other limitations with our consent.
If any primary or contingent beneficiary dies before the annuitant, that
beneficiary's interest in this contract ends with that beneficiary's death.
Only those beneficiaries living at the time of the annuitant's death will be
eligible to receive their share of the death benefits. In the event no
contingent beneficiaries have been named and all primary beneficiaries have
died before the death benefits become payable, the owner(s) will become the
beneficiary(ies) unless elected otherwise. If both primary and contingent
beneficiaries have been named, payment will be made to the named primary
beneficiaries living at the time the death proceeds become payable. If there
is more than one beneficiary and you failed to specify their interest, they
will share equally. Payment will be made to the named contingent
beneficiary(ies) only if all primary beneficiaries have died before the death
benefits become payable. If any primary beneficiary is alive at the time the
death benefits become payable, but dies before receiving their payment, their
share will be paid to their estate.
Change of Beneficiary
You may change the beneficiary while the annuitant is living, unless an
irrevocable one has been named. Change is made by written notice. The change
takes effect on the date the written notice was signed, and the written notice
must have been postmarked on or before the date of the annuitant's death. No
change will apply to any annuity payment made before the written notice was
received. We may require return of the contract for endorsement before making
a change.
Incontestability
The contract is incontestable from the contract issue date.
Misstatement of Sex or Age
If the age or sex of any annuitant has been misstated, the annuity payments
will be those which the premium paid would have purchased for the correct age
and sex. Any underpayment made by us will be paid with the next annuity
payment. Any overpayment made by us will be deducted from future annuity
payments. Any underpayment or overpayment will include interest at 5% per
year, from the date of the incorrect payment to the date of the adjustment.
Modification of Contract
No change in the contract is valid unless made in writing.
Nonparticipating
Your contract is nonparticipating. This means we do not pay dividends on it.
Your contract will not share in our profits or surplus earnings.
Owner
You, the owner, are named in the contract specifications section. You may,
while any annuitant is living, exercise all rights granted by the contract.
These rights are subject to the rights of any assignee or living irrevocable
beneficiary. "Irrevocable" means that you have given up your right to change
the beneficiary named.
5
<PAGE>
Unless we have been notified of a community or marital property interest in
the contract, we will rely on our good faith belief that no such interest
exists and will assume no responsibility for inquiry.
Proof of Death
Any beneficiary claiming an interest in the contract must provide us in
writing with due proof of death of the payee/annuitant and/or secondary
annuitant (if any). We will not be responsible for annuity payments made
before we receive due proof of death at the Administrative and Service Office.
Proof of Survival
If annuity payments under the contract depend on a person being alive on a
given date, proof of survival may be required by us prior to making annuity
payments.
Death Before First Payment Date
If any owner, who is an annuitant, dies before the first payment date, the
amount of the death proceeds is the premium plus or minus the investment
performance of the subaccounts. If any owner, who is not an annuitant, dies
before the first payment date, the successor owner may direct the owner's
interest in the contract to be distributed as follows:
. one cash lump sum to be distributed within five years of the deceased
owner's death; or
. annuitize the value of the annuity payments over the lifetime of the
successor owner with payments to begin within one year of the owner's
death; or
. annuitize the value of the annuity payments over a period that does not
exceed the life expectancy of the successor owner, as defined by the
Internal Revenue Code of 1986, as amended (Code), with payments to begin
within one year of the owner's death.
If the deceased owner was also an annuitant, the annuitant's beneficiary is
entitled to the benefit described above. If no person is named as the
successor owner, the owner's estate shall be deemed the successor owner.
Non-natural successor owners may only choose a lump sum distribution. For
qualified contracts, any option chosen must meet the requirements of the Code.
Protection of Proceeds
Unless you so direct by filing written notice with us, no beneficiary may
assign payments under the contract before the same are due. To the extent
permitted by law, no payments under the contract will be subject to the claims
of creditors of any beneficiary.
Optional Annuity Payment Guarantee Rider
The stabilized payment is determined once each year. However, with stabilized
payments, on each annuity payment date throughout the contract year, we
calculate the value of the variable annuity units (that is, the supportable
payment) and adjust the number of variable annuity units credited to your
contract. If the supportable payment at any payment date, other than a
contract anniversary, is greater than the current stabilized payment, we will
increase the number of variable annuity units to reflect the difference.
Conversely, if the supportable payment is less than the current stabilized
payment, we will reduce the number of variable annuity units. This means that
during the course of a contract year, instead of reflecting positive
investment performance by increasing the dollar amount of an annuity payment,
we credit that investment performance to your contract by increasing the
number of variable annuity units. Similarly, we reflect negative investment
performance by decreasing the number of variable annuity units credited to
your contract instead of decreasing the dollar amount of an annuity payment.
6
<PAGE>
Increases or decreases in the number of variable annuity units will be
allocated on a pro rata basis within the selected subaccounts.
Since we only change the stabilized payment once each year, the increase or
decrease in the number of variable annuity units ensures that you receive the
full investment performance, both positive and negative, of the subaccounts
you select. For example, if your monthly stabilized payment is $500, and
positive investment performance results in a supportable payment of $510 at
the end of the first month, your payment is $500 but we increase the number of
variable annuity units credited to your contract to give you credit for the
$10. In the case of an increase in the number of variable annuity units, your
participation in the future investment performance will be increased since
more variable annuity units are credited to your contract. Conversely, in the
case of a reduction of the number of variable annuity units, your
participation in the future investment performance will be decreased since
fewer variable annuity units are credited to your contract.
PFL bears the risk that it must continue to make the guaranteed minimum or
stabilized payments, even if the supportable payments would be lower because
some variable annuity units have been used to maintain the stabilized
payments. In addition, PFL bears the risk that it will need to continue to
make payments even if all variable annuity units have been used in an attempt
to maintain the stabilized payments at the guaranteed payment level (that is,
the number of units has gone down to zero). If all the variable annuity units
have been used, all future payments will equal the guaranteed minimum payment
and the amount of your future variable annuity payment will not increase or
decrease and will not depend upon the performance of any variable investment
option. To compensate PFL for this and other risks, a rider fee will be
deducted.
The following table demonstrates, on a purely hypothetical basis, the changes
in the number of variable annuity units under either of the optional annuity
payment guarantee riders to reflect investment performance during the course
of a single contract year. The change in the number of variable annuity units
reflects not only the dollar amount of the difference between the supportable
payment and the stabilized payment, but also the age and sex of the annuitant
and the annuity payment option. The changes in the variable annuity unit
values reflect the investment performance of the applicable mutual fund
portfolio as well as the separate account charge and rider fee. The
calculations would be done separately for each applicable subaccount.
<TABLE>
<S> <C>
AIR: 3.50%
Life & 10 Years Certain
Male aged 65
Guaranteed Minimum Pay-
ment: $500
</TABLE>
<TABLE>
<CAPTION>
Beginning Unit Monthly Change in Ending
Annuity Annuity Value Stabilized Annuity Annuity
Units Unit Values Total* Payment Units Units
--------- ----------- ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
At
Issue: 1/1/1999 400.0000 1.250000 $500.00 400.0000
1st
Payment 2/1/1999 400.0000 1.254526 $501.81 $500.00 0.0080 400.0080
3/1/1999 400.0080 1.253122 $501.26 $500.00 0.0056 400.0137
4/1/1999 400.0137 1.247324 $498.95 $500.00 (0.0047) 400.0089
5/1/1999 400.0089 1.247818 $499.14 $500.00 (0.0039) 400.0051
6/1/1999 400.0051 1.244178 $497.68 $500.00 (0.0105) 399.9946
7/1/1999 399.9946 1.250422 $500.16 $500.00 0.0007 399.9953
8/1/1999 399.9953 1.245175 $498.06 $500.00 (0.0088) 399.9865
9/1/1999 399.9865 1.251633 $500.64 $500.00 0.0029 399.9894
10/1/1999 399.9894 1.253114 $501.23 $500.00 0.0056 399.9950
11/1/1999 399.9950 1.261542 $504.61 $500.00 0.0208 400.0158
12/1/1999 400.0158 1.265963 $506.41 $500.00 0.0289 400.0447
1/1/2000 400.0447 1.270547 $508.28 $500.00 0.0373 400.0820
</TABLE>
- -------------------------
* This is the supportable payment.
7
<PAGE>
Asset Allocation Models
General. Rather than selecting individual portfolios (i.e., being "Self-
Directed") you can select one of four investment allocation models that are
listed on the Investment Allocation Form (which is part of the application).
The amount invested in each subaccount will vary depending on the model's
particular asset allocation percentages. The asset allocation percentages for
each model are shown on the Investment Allocation Form. The four investment
allocation models, listed in descending percentage of equity holdings, are:
. Growth Model
. Growth & Income Model
. Balanced Model
. Conservative Growth Model
The models are general asset mixes. They were developed by Banc One Investment
Advisors Corporation and may or may not be appropriate for you. Banc One
Investment Advisors Corporation serves as an investment advisor to the One
Group Investment Trust Portfolios for which it receives a fee. Banc One
Investment Advisors is not providing investment advice or any other service to
you. There is no guarantee that the models will achieve any desired results or
objectives.
The models should not be considered personal investment advice or serve as the
sole or primary basis for making investment decisions. You should consider
factors such as your age, goals and risk tolerance in selecting a model. You
are solely responsible for determining if a model is right for you.
Before selecting a model, please note:
. only one model can be used at a time;
. you cannot allocate premium to any other subaccount if you select a model;
. each model's allocation percentages may change (which terminates that
model);
. transfers you make between the various subaccounts will terminate your
model; and
. transfers from variable to fixed payments will be pro rata from the
applicable subaccounts.
Rebalancing. Each model will be automatically rebalanced each year on the
contract anniversary date. Rebalancing a model may involve transferring from
subaccounts with higher returns into subaccounts with relatively lower returns
in order to maintain the model's asset allocation percentages. Transfers made
as a result of automatic rebalancing are not counted against your 6 free
transfers (in the event transfer fees are imposed in the future). Automatic
rebalancing ends upon the termination of a model.
Termination. You can stop using (i.e., terminate) a model at any time by
notifying us at our administrative and service office or by transferring
amounts between the various subaccounts.
A model will also terminate if you are notified that it will be replaced with
a "new" model with different asset allocation percentages. Before you can use
the "new" model, you must sign and return to us within 45 days after the date
of the notice, a consent form accepting the new asset allocation percentages.
Absent your timely affirmative consent, you will:
. keep your current asset allocation percentages;
. be considered "Self-Directed"; and
. not receive automatic rebalancing.
8
<PAGE>
FEDERAL TAX MATTERS
Tax Status of the Contracts
The discussion in the prospectus assumes that the contracts qualify as
"annuity contracts" for federal income tax purposes under the Code.
Diversification Requirements. Section 817(h) of the Code provides that
separate account investments underlying a contract must be "adequately
diversified" in accordance with Treasury Department regulations in order for
the contract to qualify as an annuity contract under Section 72 of the Code.
The separate account, through each underlying fund, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various subaccounts may be
invested. Although PFL does not have direct control over the underlying funds
in which the separate account invests, PFL believes that each fund will meet
the diversification requirements, and therefore, the contract will be treated
as an annuity contract under the Code.
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 contract owner's gross income. The IRS has
stated in published rulings that a variable contract owner will be considered
the owner of separate account assets if the contract owner possessed incidents
of ownership in those assets, such as the ability to exercise investment
control over the assets. The Treasury Department has also 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 (i.e., the contract owner), 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 policy-holders may direct
their investments to particular Sub-Accounts without being treated as owners
of the underlying assets."
The ownership rights under the contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets.
For example, the contract owner has the choice of several subaccounts in which
to allocate the premium, and may be able to transfer among subaccounts more
frequently than in such rulings. In addition, the contract provides for more
subaccounts than did the variable contracts that were the subject of such
rulings. These differences could result in a contract owner being treated as
the owner of the assets of the separate 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 contract as necessary to attempt to prevent
the contract owner from being considered the owner of the separate account's
assets.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, section 72(s) of the Code requires any non-
qualified contract to provide that: (a) if any contract owner dies on or after
the Annuity Starting Date (as defined in the prospectus) but prior to the time
the entire interest in the contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that contract owner's
death; and (b) if any contract owner dies prior to the Annuity Staring Date,
the entire interest in the contract will be distributed within five years
after the date of the contract owner's death. These requirements will be
considered satisfied as to any portion of the contract owner's interest that
is payable to or for the benefit of a "designated beneficiary," and that is
distributed over the life of such designated beneficiary or over a period not
extending beyond the life expectancy of that beneficiary, provided that such
distributions begin within one year of that contract owner's death. The
"designated beneficiary" for these purposes is the person who becomes the new
owner of the contract upon a contract owner's death and must be a natural
person. However, if the contract owner's sole designated beneficiary is the
surviving spouse of the contract owner, the contract may be continued with the
surviving spouse as the new contract owner. The Code further provides that if
the contract owner is not an individual, the primary annuitant shall be
treated as the contract owner for purposes of making distributions that are
required to be made upon the death of the
9
<PAGE>
contract owner. (The primary annuitant is the individual the events in the
life of whom are of primary importance in effecting the timing and amount of
the payout under the contract. If there is a change in the primary annuitant,
such change shall be treated as the death of the contract owner. The contract
does not permit a change of the annuitants, however.
Non-qualified contracts contain provisions that are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. PFL will review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code Section 72(s) when clarified by regulation or otherwise.
Qualified contracts are subject to similar provisions.
Taxation of PFL
PFL at present is taxed as a life insurance company under part I of Subchapter
L of the Code. The separate 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. We do not expect to incur any federal income
tax liability with respect to investment income and net capital gains arising
from the activities of the separate account retained as part of the reserves
under the contract. Based on this expectation, it is anticipated that no
charges will be made against the separate account for federal income taxes.
If, in future years, any federal income taxes are incurred by PFL with respect
to the separate account, we may make a charge to the separate account.
INVESTMENT EXPERIENCE
A "net investment factor" is used to determine the value of variable annuity
units and to determine the amount of annuity payments as follows:
Annuity Unit Value and Annuity Payment Rates
The amount of variable annuity payments will vary with variable annuity unit
values. Variable annuity unit values rise if the net investment performance of
the subaccount exceeds the assumed investment return. Conversely, variable
annuity unit values fall if the net investment performance of the subaccount
is less than the assumed rate. The value of a variable annuity unit in each
subaccount was established at $1.00 on the date operations began for that
subaccount. The value of a variable annuity unit on any subsequent business
day is equal to (a) multiplied by (b) multiplied by (c), where:
(a) is the variable annuity unit value for that subaccount on the
immediately preceding business day;
(b) is the net investment factor for that subaccount for the valuation
period; and
(c) is the daily factor for the valuation period.
The daily factor for the valuation period is a discount factor that reflects
the 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 contract used to calculate the value of a
variable annuity unit in each subaccount for the 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 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 we
determine to have resulted from the investment operations of the
subaccount;
10
<PAGE>
(b) is the net asset value of a fund share held in that subaccount
determined as of the end of the immediately preceding valuation period; and
(c) is an amount representing the separate account charge as shown in the
specifications section of the contract.
The dollar amount of subsequent variable annuity payments will depend upon
changes in applicable variable annuity unit values.
Illustrations of Calculations for Annuity Unit Value and Variable Annuity
Payments
Formula and Illustration for Determining Annuity Unit Value in each Subaccount
Variable annuity unit value = V = A x B x C
Where: A=variable annuity unit value for the immediately preceding valuation
period.
B=net investment factor for the valuation period for which the variable
annuity unit value is being calculated.
C=a daily factor to neutralize the assumed investment return built into
the annuity tables used.
C=(1/(1 + AIR)) /\(1/365) = 0.999905754 (3.5% AIR) or 0.999866337 (5%
AIR)
For example, if the AIR is 5% and: A=$20 on the day prior to the first payment
B=1.01
C=1/(1.05) /\ (/1///365/) = 0.999866337
Then, the variable annuity unit value is equal to V
=A x B x C
=$20 x 1.01 x .999866337
=20.1973
Formula and Illustration for Determining Amount of First Monthly Variable
Annuity Payment
First monthly variable annuity payment = P = (D x E)/$1,000
Where: D=the contract value as of the contract issue date.
E=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 contract.
For example if:
D=$100,000
E=7.00
Then, the first monthly variable annuity payment is equal to P =(D x E)/$1,000
=($100,000 x 7.00)/$1,000
=$700
Formula and Illustration for Determining the Number of Annuity Units
Represented by Each
Monthly Variable Annuity Payment (assuming investment in only one Subaccount)
Number of variable annuity units = U = P/V
Where: P=the dollar amount of the first monthly variable annuity payment.
V=the variable annuity unit value for the valuation date on which
the first monthly payment is due.
11
<PAGE>
For example if:
P=$700
V=20.1973
Then, the variable annuity units is equal to U=P/V
=$700/20.1973
=34.6581 units
Formula and Illustration for Determining a Future Monthly Variable Annuity
Payment
(assuming investment in only one Subaccount)
Monthly variable annuity payment = P = U x V
Where: U=the variable annuity units
V=the variable annuity unit value for the valuation date on which
the future monthly payment is due.
For example if:
U=34.6581
V=20.6970 (the variable annuity unit value increased since issue)
Then, the amount of the monthly variable annuity payment
=U x V
=34.6581 x 20.6970
=$717.32
If the variable annuity unit value had actually decreased to V = 19.6970, the
resulting monthly variable annuity payment would =U x V
=34.6581 x 19.6970
=$682.66
Illustration 4 assumes that no transfers or surrenders are made between
determining the number of variable annuity units and determining the future
monthly variable annuity payment; therefore, the number of variable annuity
units in Illustrations 3 and 4 are the same.
STATE REGULATION OF PFL
We are 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 our
operation 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 our contract liabilities and reserves so that the
Division may determine the items are correct. Our 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, we are subject to
regulation under the insurance laws of other jurisdictions in which we may
operate.
ADMINISTRATION
We perform administrative services for the contracts. These services include
issuance of the contracts, maintenance of records concerning the contracts,
and certain valuation services.
RECORDS AND REPORTS
All records and accounts relating to the separate account will be maintained
by us. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, we will mail to all owners at their last
12
<PAGE>
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. Owners will also receive confirmation of each financial
transaction and any other reports required by law or regulation.
DISTRIBUTION OF THE CONTRACTS
The contracts are offered to the public through brokers licensed under the
federal securities laws and state insurance laws. The offering of the
contracts is continuous and we do not anticipate discontinuing the offering of
the contracts. However, we reserve the right to discontinue the offering of
the contracts.
AFSG Securities Corporation, an affiliate of PFL, is the principal underwriter
of the contracts and may enter into agreements with broker-dealers for the
distribution of the contracts.
OTHER PRODUCTS
We make other variable annuity contracts available that may also be funded
through the separate account. These variable annuity contracts may have
different features, such as different investment options or charges.
CUSTODY OF ASSETS
The assets of each of the subaccounts of the separate account are held by us.
The assets of each of the subaccounts of the separate account are segregated
and held separate and apart from the assets of the other subaccounts and from
our general account assets. We maintain 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 separate account is afforded by
our fidelity bond, presently in the amount of $5,000,000, covering the acts of
our officers and employees.
HISTORICAL PERFORMANCE DATA
Subaccount Yields
We may from time to time advertise or disclose the current annualized yield of
one or more of the subaccounts of the separate account 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 the separate account
charge. The 30-day yield is calculated according to the following formula:
Yield = 2 x ((((NI-ES)/(U x UV)) + 1)/6/-1)
Where:
NI = net investment income of the subaccount for the 30-day period
attributable to the subaccount's unit.
ES = expenses of the subaccount for the 30-day period.
U = the average number of units outstanding.
UV
= the unit value at the close (highest) of the last day in the 30-day
period.
13
<PAGE>
Because of the charges imposed by the separate account, the yield for a
subaccount of the separate 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
contract.
The yield on amounts held in the subaccounts of the separate 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
We may from time to time also advertise or disclose total returns for one or
more of the subaccounts of the separate 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 we
calculate on each business day based on the performance of the subaccount's
underlying portfolio, and the deduction for the separate account charge. 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
We may from time to time also disclose average annual total returns in a non-
standard format in conjunction with the standard format described above.
We 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. The charges reflected in the
cumulative total returns include the actual total annual portfolio expenses of
the applicable fund and the separate account charge of 1.35%.
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.
14
<PAGE>
Adjusted Historical Performance Data
From time to time, sales literature or advertisements may quote average annual
total returns for periods prior to the date the separate 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 contract charges that
were in effect at the inception of the subaccounts.
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities laws
applicable to the issue and sale of the contracts has been provided to us by
Sutherland, Asbill & Brennan LLP, of Washington D.C.
INDEPENDENT AUDITORS
The statutory-basis financial statements and schedules of PFL as of December
31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, 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
contracts 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 contracts
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 separate account will be affected
solely by the investment results of the selected subaccount(s). The statutory-
basis financial statements of PFL, which are included in this Statement of
Additional Information, should be considered only as bearing on PFL's ability
to meet its obligations under the contracts. They should not be considered as
bearing on the investment performance of the assets held in the separate
account.
15
<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
Separate Account. Note 1
(2) Not Applicable.
(3) (a) Principal Underwriting Agreement by and between PFL
Life Insurance Company, on its own behalf and on
behalf of the Separate Account, and AFSG Securities
Corporation. Note 3
(b) Form of Broker/Dealer Supervision and Sales Agreement
by and between AFSG Securities Corporation and the
Broker/Dealer. Note 3
(4) (a) Form of the Contract for The One Income Annuity. Note
5
(5) (a) Form of Application for The One Income 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 among One Group
Investment Trust, Nationwide Advisory Services,
Nationwide Investors Services and PFL Life Insurance
Company. Note 8
(9) Opinion and Consent of Counsel. Note 6
(10) (a) Consent of Independent Auditors. Note 8
(10) (b) Opinion and Consent of Actuary. Note 6
(11) Not applicable.
(12) Not applicable.
(13) Performance Data Calculations. Note 9
(14) Powers of Attorney. (P.S. Baird, C.D. Vermie, W.L.
Busler, L.N. Norman, D.C. Kolsrud, R.J. Kontz, B.K.
Clancy) Note 8.
<PAGE>
Note 1. Incorporated herein by reference to the Initial filing of
Registrants Form N-4 Registration Statement (File No. 333-7509) on
July 3, 1996.
Note 2. Incorporated herein by reference to the Registrants filing of Pre-
Effective Amendment No. 1 to Form N-4 Registration Statement (File
No. 333-7509) on December 6, 1996.
Note 3. Incorporated herein by reference to the Registrant's filing of
Post-Effective Amendment No. 4 to Form N-4 Registration Statement
(File No. 333-7509) on April 30, 1998.
Note 4. Incorporated herein by reference to the Registrant's filing of
Post-Effective Amendment No. 5 to Form N-4 Registration Statement
(File No. 333-7509) on July 16, 1998.
Note 5. Incorporated herein by reference to the Registrant's filing of Pre-
Effective Amendment No. 1 to Form N-4 Registration Statement (File
No. 333-7509) on December 11, 1998.
Note 6. Filed with the Initial Form N-4 Registration Statement (File 333-
78743) on May 19, 1999.
Note 7. Filed with Pre-Effective Amendment No. 1 to Form N-4 Registration
Statement (File 333-78743) on July 26, 1999.
Note 8. Filed herewith.
Note 9. To be filed by amendment.
<PAGE>
Item 25. Directors and Officers of the Depositor (PFL Life Insurance Company)
Name and Business Address Principal Positions and Offices with Depositor
------------------------- ----------------------------------------------
William L. Busler Director, Chairman of the Board and President
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
Patrick S. Baird Director, Senior Vice President and Chief
4333 Edgewood Road, N.E. Officer Operating
Cedar Rapids, Iowa 52499-0001
Craig D. Vermie Director, Vice President, Secretary
4333 Edgewood Road, N.E. and General Counsel
Cedar Rapids, Iowa 52499-0001
Douglas C. Kolsrud Director, Senior Vice President,
4333 Edgewood Road, N.E. Chief Investment Officer and Corporate
Cedar Rapids, Iowa 52499-0001 Actuary
Larry N. Norman Director and Executive Vice President
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
Robert J. Kontz Vice President and Corporate Controller
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
Brenda K. Clancy Vice President, Treasurer and Chief Financial
4333 Edgewood Road, N.E. Officer
Cedar Rapids, Iowa 52499-0001
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
<TABLE>
<CAPTION>
Jurisdiction 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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
Monumental General Maryland 100% Monumental General Provides management
Administrators, Inc. Insurance Group, Inc. srvcs. to unaffiliated
third party administrator
Executive Management and Maryland 100% Monumental General Provides actuarial
Consultant Services, Inc. Administrators, Inc. consulting services
Monumental General Mass Maryland 100% Monumental General Marketing arm for
Marketing, Inc. Insurance Group, Inc. sale of mass marketed
insurance coverages
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment
Advisors, Inc. advisor
Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advisors, Inc.
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer
Supplemental Ins. Division, Inc. Tennessee 100% AUSA Holding Co. Insurance
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
USP Real Estate Investment Trust Iowa 21.89% First AUSA Life Real estate investment
Ins. Co , 13.11% PFL Life trust
Ins. Co. 4.86% Bankers
United Life Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Limited Partnership
Partnership Advisors 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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
Services, Inc. advisor
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
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 Series Fund Massachusetts Various Mutual fund
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding Company
company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AUSA Life Insurance New York 100% First AUSA Life Insurance
Company, Inc. Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Insurance
Company of America Ins. Co.
Life Investors Alliance, LLC Delaware 100% LIICA Purchases, own, and hold
the equity interest of other
entities
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
Life Investors Agency Iowa 100% Life Investors Ins. Marketing
Group, Inc. Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Insurance
Ins. Co.
AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.
AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
of Kentucky Services Group, Inc. settlements
AEGON Assignment Corporation Illinois 100% AEGON Financial Administrator of structured
Services Group settlements
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Insurance
Stock
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Insurance
Stock
First AUSA Life Ins. Co.
Western Reserve Life Assurance Ohio 100% First AUSA Life Insurance
Co. of Ohio Ins. Co.
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
Management, Inc. Assurance Co. of Ohio advisor
AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance agency
Assurance Co. of Ohio
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
Assurance Co. of Ohio
ISI Insurance Agency Ohio 100% ISI Insurance Insurance agency
of Ohio, Inc. Agency Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
ISI Insurance Agency Texas 100% ISI Insurance Insurance agency
of Texas, Inc. Agency Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Insurance Agency
of Massachusetts, Inc. Agency Inc.
Monumental Life Insurance Co. Maryland 100% First AUSA Life Insurance
Ins. Co.
AEGON Special Markets Maryland 100% Monumental Life Marketing
Group, Inc. Ins. Co.
Monumental General Casualty Co. Maryland 100% First AUSA Life Insurance
Ins. Co.
United Financial Services, Inc. Maryland 100% First AUSA Life General agency
Ins. Co.
Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Insurance
Ins. Co.
The Whitestone Corporation Maryland 100% First AUSA Life Insurance agency
Ins. Co.
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Ins. Co.
Commonwealth General Delaware 100% AEGON USA, Inc. 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
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Commonwealth General. Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Capital Real Estate Delaware 100% CGC Furniture and equipment
Development Corporation lessor
Capital General Development Delaware 100% CGC Holding company
Corporation
Ammest Realty Corporation Texas 100% Peoples Security Life Special purpose subsidiary
Insurance Company
JMH Operating Company, Inc. Mississippi 100% Peoples Security Life Real estate holdings
Insurance Company
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.
Frazer Association Consultants, Illinois 100% Ampac Insurance TPA license-holder
Inc. Agency, Inc.
Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment
Agency, Inc. lessor
Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administrator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Academy Insurance Group, Inc. Delaware 100% CGC Holding company
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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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, Inc. Group, Inc. services
Unicom Administrative Germany 100%Unicom Administrative Provider of admin.
Services, GmbH Services, Inc. services
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
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20% Capital Liberty, L.P.
76.3% Monumental Life
Insurance Co.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
</TABLE>
Item 27. Number of Contract Owners
As of December 31, 1998, there were no Contract owners.
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 producers for determining when indemnification payments can
be made.
Insofar as indemnification for liabilities arising under the Securities Act
of 933 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.
Item 29. Principal Underwriters
AFSG Securities Corporation
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
The directors and officers of AFSG Securities Corporation are as follows:
Larry N. Norman Sarah J. Strange
Director and President Director and Vice President
Frank A. Camp Bob Warner
Director and Secretary Assistant Compliance Office
Lisa Wachendorf Linda Gilmer
Vice President and Treasurer/Controller
Chief Compliance Officer
Priscilla Hechler
Debra C. Cubero Assistant Vice President anistant Secretary
Vice President
Emily Bates Thomas Pierpan
Assistant Treasurer Assistant Vice President anistant Secretary
Clifton Flenniken Darin D. Smith
Assistant Treasurer Assistant Vice President anistant Secretary
The principal business address of each person listed is AFSG Securities
Corporation, 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001.
<PAGE>
Commissions and Other Compensation Received by Principal Underwriter.
---------------------------------------------------------------------
AFSG Securities Corporation, the broker/dealer, received $0 from the
Registrant for the year ending December 31, 1998, 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.
AFSG Securities Corporation serves 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. AFSG Securities Corporation also serves as
principal underwriter for Separate Account I, Separate Account II, Separate
Account IV and Separate Account V of Peoples Benefit Life Insurance
Company, and for Separate Account B and Separate Account C of AUSA Life
Insurance Company, Inc.
Item 30. Location of Accounts and Records
The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are
maintained by PFL Life Insurance Company at 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499-0001.
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 Contract 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 contracts, 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.
<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 28th day of
October, 1999.
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.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Patrick S. Baird Director October 28, 1999
- -------------------------------
Patrick S. Baird
/s/ Craig D. Vermie Director October 28, 1999
- -------------------------------
Craig D. Vermie
/s/ William L. Busler Director October 28, 1999
- ------------------------------- (Principal Executive Officer)
William L. Busler
/s/ Larry N. Norman Director October 28, 1999
- -------------------------------
Larry N. Norman
/s/ Douglas C. Kolsrud Director October 28, 1999
- -------------------------------
Douglas C. Kolsrud
/s/ Robert J. Kontz Vice President and October 28, 1999
- ------------------------------- Corporate Controller
Robert J. Kontz
/s/ Brenda K. Clancy Treasurer October 28, 1999
- -------------------------------
Brenda K. Clancy
</TABLE>
<PAGE>
Registration No.
333-78743
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
TO
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
THE ONE INCOME ANNUITY
---------------
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit Page No.*
- ----------- ---------------------- ---------
(8)(a) Participation Agreement by and among One
Group Investment Trust, Nationwide
Advisory Serivces, Nationwide Investors
Services and PFL Life Insurance Company.
(10)(a) Consent of Independent Auditors
(14) Powers of Attorney
- --------
* Page numbers included only in manually excuted original.
<PAGE>
EXHIBIT (8)(a)
--------------
PARTICIPATION AGREEMENT
<PAGE>
FUND PARTICIPATION AGREEMENT
Among
ONE GROUP(R) INVESTMENT TRUST, BANC ONE INVESTMENT ADVISORS CORPORATION
NATIONWIDE ADVISORY SERVICES, INC., NATIONWIDE INVESTORS SERVICES, INC.
and
PFL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into effective as of the second day of
August 1999, by and among PFL LIFE INSURANCE COMPANY, (hereinafter the
"Company"), an Iowa corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account;" collectively, the "Accounts"), ONE GROUP INVESTMENT TRUST, a business
trust organized under the laws of Massachusetts (hereinafter the "Trust"), BANC
ONE INVESTMENT ADVISORS CORPORATION, an Ohio corporation (hereinafter the
"Adviser"), NATIONWIDE ADVISORY SERVICES, INC., an Ohio corporation (hereinafter
the "Administrator") and NATIONWIDE INVESTORS SERVICES, INC., an Ohio
corporation (hereinafter the "Transfer Agent").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Trust as an
investment vehicle under their Variable Insurance Products are required to enter
into participation agreements with the Trust and the Administrator (hereinafter
the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available for Variable Insurance Products of Participating Insurance Companies;
and
WHEREAS, the Trust intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Account(s); and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, granting 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 (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by Variable Insurance Product separate accounts of both affiliated and
unaffiliated insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and its shares
are registered under the Securities Act of 1933, as amended (the "1933 Act");
and
WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940 (the "Advisers Act") and any
applicable state securities law; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Trust; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts ("Contracts") under the 1933 Act;
and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
1
<PAGE>
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Trust is authorized to sell such shares to unit investment trusts such as
each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust, the Adviser, the Administrator, and the Transfer Agent agree as
follows:
ARTICLE I. Sale of Trust Shares
1.1. The Trust agrees to make available for purchase by the Company
shares of the Portfolio and shall execute orders placed for each Account on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of such order. 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 Transfer Agent receives notice of such order by 10:00 a.m. Eastern Time on
the next following Business Day ("Trade Date plus 1"). Notwithstanding the
following, the Company shall use its best efforts to provide the Transfer Agent
with notice of such orders by 9:30 a.m. Eastern Time on Trade Date plus 1. The
Administrator shall fax a confirmation of each trade by 1:00 Eastern Time on
Trade Date plus 1. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission, as set
forth in the Trust's prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Trust (hereinafter
the "Board") may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies for their Variable Insurance Products and, in
the Trust's discretion, to qualified pension and retirement plans. No shares of
any Portfolio will be sold to the general public.
1.3. The Trust and the Transfer Agent agree to redeem for cash, on the
Company's request, any full or fractional shares of the Trust held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 1.3, 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 on Trade Date plus 1 in
accordance with the timing rules described in Section 1.1.
1.4. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the Contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, shall be invested in the Trust, in such
other Trusts advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, or in the Company's general account, provided that such
amounts may also be invested in an investment company other than the Trust if
(a) such other investment company, or series thereof, has investment objectives
or policies that are substantially different from the investment objectives and
policies of all the Portfolios of the Trust; or (b) the Company gives the Trust
45 days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Trust prior to their signing
this Agreement (a list of such funds appearing on Schedule C to this Agreement);
or (d) the Trust consents to the use of such other investment company.
2
<PAGE>
1.5. The Company will place orders to purchase or redeem shares
separately for each Portfolio. Each order shall describe the net amount of
shares and dollar amount of each Portfolio to be purchased or redeemed. In the
event of net purchases, the Company shall pay for Portfolio shares on Trade Date
plus 1. Payment shall be in federal funds transmitted by wire which will be sent
or received no later than 2:00 p.m. Eastern Time. For purposes of Section 2.10
and 2.11, upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust. In the event of net redemptions, the Portfolio
shall pay the redemption proceeds in federal funds transmitted by wire on the
next Business Day after an order to redeem Portfolio shares is made in
accordance with the provisions of Section 1.3 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day would
require the Portfolio to dispose of Portfolio securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds shall
be wired to the Company within seven (7) days and the Portfolio shall notify in
writing the person designated by the Company as the recipient for such notice of
such delay by 3:00 p.m. Eastern Time on Trade Date plus 1.
1.6. 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 in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.7. The Administrator shall furnish same day notice by 5:00 p.m. in
its local time zone (by wire or telephone, followed by written confirmation) to
the Company of any income, dividends or capital gain distributions payable on
the Trust's shares. Such dividends shall be declared and paid in accordance with
policies established by the Board of Trustees as amended from time to time. The
Administrator shall notify the Company of any amendment to the Trust's dividend
policy within a reasonable time after such amendment. The Company hereby elects
to receive all such income dividends and capital gain distributions as are
payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8. The Administrator shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern Time) and shall use its best efforts to make such net asset value
per share available by 5:30 p.m. Eastern Time. In the event that the
Administrator is unable to meet the 6:30 Eastern Time stated immediately above,
then the Administrator shall provide the Company with additional time to notify
the Administrator of purchase or redemption orders pursuant to Sections 1.1 and
1.3, respectively, above. Such additional time shall be equal to the additional
time that the Administrator takes to make the net asset values available to the
Company; provided, however, that notification must be made by 11:00 a.m. Eastern
Time on the Business Day such order is to be executed, regardless of when net
asset value is made available.
1.9. If the Administrator provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Trust shares purchased or redeemed to
reflect the correct net asset value per share as subsequently determined by the
Administrator. The determination of the materiality of any net asset value
pricing error shall be based on the Trust's policy for correction of pricing
errors (the "Pricing Policy"). The Company shall correct such error in its
records and in the records prepared by it for Contract owners in accordance with
information provided by the Administrator. 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 the Company.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 508A.1 of the Iowa Insurance Code and has registered or, prior to
any issuance or sale of the Contracts, will register and will maintain the
registration of each Account as a
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unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts. The Company shall amend
its registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance in accordance with any applicable laws of the state of Massachusetts
and sold in compliance with all applicable federal and state securities laws and
that the Trust is and shall remain registered under the 1940 Act. The Trust
shall amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
2.3. The Trust, the Administrator and the Adviser represent that each
Portfolio is currently qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") and
that each will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that each will notify
the Company immediately upon having a reasonable basis for believing that the
Trust has ceased to so qualify or that the Trust might not so qualify in the
future.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Trust 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. The Company further represents that the Account(s) are
eligible to purchase shares of the Trust.
2.5. The Trust represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust
undertakes to have a board of trustees, a majority of whom are not interested
persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. 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.
2.7. The Trust represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply in all
material respects with the 1940 Act.
2.8. The Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that the Adviser shall perform its obligations for the Trust
in compliance in all material respects with any applicable state and federal
securities laws.
2.9. The Administrator and the Transfer Agent each represents and
warrants that each complies with all applicable federal and state laws and
regulations and that each will perform its obligations for the Trust and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.10. The Trust represents and warrants that it is and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Trust in an amount no 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. Such bond shall include coverage for larceny
and embezzlement and shall be issued by a relevant bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are covered by a blanket fidelity
bond or similar coverage for the benefit of the Trust, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Trust in the
event that such coverage no longer applies.
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ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Trust shall provide the Company with as many printed copies of
the Trust's current prospectus and Statement of Additional Information as the
Company may reasonably request. If requested by the Company in lieu thereof, the
Trust shall provide camera-ready film containing the Trust's prospectus and
Statement of Additional Information, and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus and/or Statement of Additional Information for the Trust is amended
during the year) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document. The Company may print the Trust's
prospectus and/or its Statement of Additional Information in combination with
other fund companies' prospectuses and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2, all expenses
of printing and distributing Trust prospectuses and Statements of Additional
Information shall be the expense of the Company. For prospectuses and Statements
of Additional Information provided by the Company to its existing owners of
Contracts in order to update disclosure annually as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Trust. If the
Company chooses to receive camera-ready film in lieu of receiving printed copies
of the Trust's prospectus, the Trust will reimburse the Company in an amount
equal to the product of A and B where A is the number of such prospectuses
distributed to owners of the Contracts, and B is the Trust's per unit cost of
typesetting and printing the Trust's prospectus. The same procedures shall be
followed with respect to the Trust's Statement of Additional Information. The
Trust shall not pay any costs of typesetting, printing and distributing the
Trust's prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Trust, at the Company's expense, shall provide the Company
with copies of Annual and Semi-Annual Reports (the "Reports") in such quantity
as the Company shall reasonably require for distributing to Contract owners. The
Trust, at its expense, shall provide the Contract owners designated by the
Company with copies of its proxy statements and other communications to
shareholders (except for prospectuses and statements of additional information,
and which are covered in Section 3.2(a) above, and Reports). The Trust shall not
pay any costs of distributing Reports and other communications to prospective
Contract owners.
3.2(c). The Company agrees to provide the Trust or its designee with
such information as may be reasonably requested by the Trust to assure that the
Trust's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2(d). The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Trust may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Trust in writing.
3.2(e) All expenses, including expenses to be borne by the Trust
pursuant to Section 3.2 hereof, incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares.
3.3. If and to the extent required by law, the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions
received from Contract owners; and
(iii) vote Trust shares for which no instructions have been
received in a particular Account in the same proportion as Trust shares
of such portfolio for which instructions have been received in that
separate account, so long as and to the extent that the Securities and
Exchange Commission continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners. The
Company reserves
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the right to vote Trust shares held in any segregated asset account in
its own right, to the extent permitted by law.
3.4. The Trust will comply with all 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. The Company shall furnish, or shall cause to be furnished, to the
Trust, the Adviser, the Administrator or their designee, drafts of the Account
prospectuses and statements of additional information and each piece of sales
literature or other promotional material in which the Trust, the Adviser or the
Administrator is described, at least fifteen Business Days prior to its use. No
such material shall be used if the Trust, the Adviser, the Administrator or
their designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company and its designees 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 reports or proxy statements for the Trust,
or in sales literature or other promotional material approved by the Trust or
its designee, except with the permission of the Trust or its designee
4.3. The Adviser or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its Account(s), is named
at least fifteen Business Days prior to its use. No such material shall be used
if the Company or its designee reasonably objects to such use within fifteen
Business Days after receipt of such material.
4.4. Neither the Trust, the Administrator, the Transfer Agent nor the
Adviser 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 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 permission of
the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Trust or its shares, promptly
after the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Trust: 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
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published article), and educational or training materials or other
communications distributed or made generally available to some or all agents or
employees.
ARTICLE V. Diversification
5.1. The Trust will at all times comply with Section 817(h) of the Code
and Treasury Regulation 1.817-5, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any amendments
or other modifications to such Section or Regulations. In the event the Trust
ceases to so qualify, it will take all reasonable steps (a) to notify Company of
such event and (b) to adequately diversify the Trust so as to achieve compliance
within the grace period afforded by Regulation 1.817-5.
ARTICLE VI. Potential Conflicts
6.1. The Board 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. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of contract owners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
6.2. The Company will report in writing any potential or existing
material irreconcilable conflict of which it is aware to the Administrator. Upon
receipt of such report, the Administrator shall report the potential or existing
material irreconcilable conflict to the Board. The Administrator shall also
report to the Board on a quarterly basis whether the Company has reported any
potential or existing material irreconcilable conflicts during the previous
calendar quarter. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
6.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, or
submitting the question 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 policy
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. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
6.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account (at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
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6.5. For purposes of Sections 6.3 through 6.4 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 6.3 through 6.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict.
6.6. 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 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.
6.7. Each of the Company and the Adviser shall at least annually submit
to the Board such reports, materials or data as the Board may reasonably request
so that the Board may fully carry out the obligations imposed upon them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. Without limiting the generality of the foregoing or the Company's
obligations under Section 6.2, the Company shall provide to the Administrator a
written report to the Board in writing no later than January 15th of each year
indicating whether any material irreconcilable conflicts have arisen during the
prior fiscal year of the Trust. All reports received by the Board of potential
or existing conflicts, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board or other
appropriate records, and such minutes or other records shall be made available
to the Securities and Exchange Commission upon request.
ARTICLE VII. Indemnification
7.1. Indemnification By The Company
------------------------------
7.1 (a). The Company agrees to indemnify and hold harmless the Trust,
the Administrator, the Transfer Agent, the Adviser, and each member of their
respective Boards and officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the 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 or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Trust
not supplied by the Company, or persons under its control and other
than statements or representations authorized by the Trust) or unlawful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Trust shares; or
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(iii) arise out of or as a result 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 and in conformity with
information furnished to the Trust by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company; as limited by and in accordance with the provisions of
Section 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at as 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 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 shall 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.
7.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
7.2. Indemnification by Administrator
--------------------------------
7.2(a). The Administrator agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Administrator) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the 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
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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 Trust or the Administrator by or on behalf
of the Company, the Adviser, the Transfer Agent, Counsel for the Trust,
the independent public accountant to the Trust, or any person or entity
that is not acting as agent for or controlled by the Administrator for
use in the registration statement or prospectus for the Trust or in
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Administrator; or
(iii) arise as a result of any failure by the Administrator
to provide the services and furnish the materials under the terms of
this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Administrator in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Administrator; as limited by and in accordance
with the provisions of Section 7.2(b) and 7.2(c) hereof.
7.2(b). The Administrator 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.
7.2(c). The Administrator 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 Administrator in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Administrator
of any such claim shall not relieve the Administrator 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 Administrator will be
entitled to participate, at its own expense, in the defense thereof. The
Administrator also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from the
Administrator to such Indemnified Party of the Administrator'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 Administrator 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.
7.2(d). The Company agrees promptly to notify the Administrator 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 in which the Portfolios are made available.
7.3. Indemnification by the Adviser
------------------------------
7.3(a). The Adviser agrees to indemnify and hold harmless the Company
and its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 7.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Adviser)
or litigation (including legal and other expenses) to which the Indemnified
Parties may become
10
<PAGE>
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:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the 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 information furnished to
the Adviser or the Trust by or on behalf of the Company, the
Administrator, the Transfer Agent, Counsel for the Trust, the
independent public accountant to the Trust, or any person or entity
that is not acting as agent for or controlled by the Adviser for use in
the registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Adviser; or
(iii) arise as a result of any failure by the Adviser to
provide the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Adviser; as limited by and in accordance with the provisions of
Section 7.3(b) and 7.3(c) hereof.
7.3(b). The Adviser 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 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.
7.3(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Adviser to such Indemnified Party of
the Adviser's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Adviser will not be liable to such 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 then reasonable costs
of investigation.
7.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
11
<PAGE>
7.4. Indemnification by the Trust
----------------------------
7.4(a). The Trust agrees to indemnify and hold harmless the Company and
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 7.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the 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 information furnished the
Trust by or on behalf of the Adviser, the Company, the Transfer Agent,
or the Administrator for use in the registration statement or
prospectus for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Trust; or
(iii) arise as a result of any failure by the Trust to
provide the services and furnish the materials under the terms of this
Agreement; or
(iv) 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
Section 7.4(b) and 7.4(c) hereof.
7.4(b). The Trust 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 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.
7.4(c). The Trust 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 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), 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 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 then reasonable costs
of investigation.
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<PAGE>
7.4(d). The Company agrees to promptly notify the Trust of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
7.5. Indemnification by Transfer Agent
---------------------------------
7.5(a). The Transfer Agent agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.5)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Transfer Agent) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the 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 information furnished to
the Trust or the Transfer Agent by or on behalf of the Company, the
Adviser, the Administrator, Counsel for the Trust, the independent
public accountant to the Trust, or any person or entity that is not
acting as agent for or controlled by the Transfer Agent for use in the
registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Transfer
Agent; or
(iii) arise as a result of any failure by the Transfer Agent
to provide the services and furnish the materials under the terms of
this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Transfer Agent in this
Agreement or arise out of or result from any other material breach of
his Agreement by the Transfer Agent; as limited by and in accordance
with the provisions of Section 7.5(b) and 7.5(c) hereof.
7.5(b). The Transfer Agent 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.
7.5(c). The Transfer Agent 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 Transfer Agent in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Transfer Agent
of any such claim shall not relieve the Transfer Agent 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 Transfer Agent will be
entitled to participate, at its own expense, in the defense thereof.
13
<PAGE>
The Transfer Agent also shall be entitled to assume the defense thereof, with
counsel satisfactory to the Indemnified Party named in the action. After notice
from the Transfer Agent to such Indemnified Party of the Transfer Agent'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 Transfer
Agent 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.
7.5(d). The Company agrees promptly to notify the Transfer Agent 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 in which the Portfolios are made available.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Massachusetts.
8.2. 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 and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by ninety (90)
days advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the
Trust, the Adviser, the Transfer Agent and the Administrator with
respect to any Portfolio based upon the Company's determination that
shares of such Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the
Trust, the Adviser, the Transfer Agent, and the Administrator with
respect to any Portfolio in the event any of the Portfolio's shares are
not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the
Trust, the Adviser, the Transfer Agent, and the Administrator with
respect to any Portfolio 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
(e) termination by the Company by written notice to the
Trust, the Adviser, the Transfer Agent, and the Administrator with
respect to any Portfolio in the event that such Portfolio fails to meet
the diversification requirements specified in Article V hereof; or
(f) termination by either the Trust, the Adviser, the
Transfer Agent or the Administrator by written notice to the Company,
if either one or more of the Trust, the Adviser, the Transfer Agent or
the Administrator respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its
business or financial condition or is the subject of material adverse,
provided that the Trust, the Adviser, the Transfer Agent or the
Administrator will give the Company sixty (60) days' advance written
notice of such determination of its intent to terminate this Agreement,
and provided further that after consideration of the actions taken by
the Company and any other changes in circumstances since the giving of
such notice, the
14
<PAGE>
determination of the Trust, the Adviser, the Transfer Agent or the
Administrator shall continue to apply on the 60th day since giving of
such notice, then such 60th day shall be the effective date of
termination; or
(g) termination by the Company by written notice to the
Trust, the Adviser, the Transfer Agent or the Administrator if the
Company shall determine, in its sole judgment reasonably exercised in
good faith, that either the Trust, the Adviser, the Transfer Agent or
the Administrator has suffered a material adverse change in its
business or financial condition or is the subject of material adverse
publicity and such material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of the Company provided that the Company will give the
Trust, the Adviser, the Transfer Agent and the Administrator sixty (60)
days' advance written notice of such determination of its intent to
terminate this Agreement, and provided further that after consideration
of the actions taken by the Trust, the Adviser, the Transfer Agent or
the Administrator and any other changes in circumstances since the
giving of such notice, the determination of the Company shall continue
to apply on the 60th day since giving of such notice, then such 60th
day shall be the effective date of termination; or
(h) termination by the Trust, the Advisor, the Transfer
Agent, or the Administrator by written notice to the Company, if the
Company gives the Trust and the Underwriter the written notice
specified in Section 1.4(b) hereof and at the time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however any termination under
this Section 9.1(h) shall be effective forty five (45) days after the
notice specified in Section 1.4(b) was given.
9.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust 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") unless such
further sale of Trust shares is proscribed by law, regulation or applicable
regulatory body, or unless the Trust determines that liquidation of the Trust
following termination of this Agreement is in the best interests of the Trust
and its shareholders.. Specifically, without limitation, 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 9.2 shall not apply to any terminations under Article VI and
the effect of such Article VI terminations shall be governed by Article VI of
this Agreement.
9.3. The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Adviser the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Adviser) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE X. 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 Group Investment Trust
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Jr.
15
<PAGE>
If to the Administrator:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: Karen Tackett, Director Strategic Development
If to the Transfer Agent:
Nationwide Investors Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn.: Karen Tackett
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
Attn: Mark A. Beeson
If to the Company:
PFL Life Insurance Company
4333 Edgewood Road, N E
Cedar Rapids, Iowa 52499-0001
Attention: Financial Markets Division, Legal Department
ARTICLE XI Miscellaneous
11.1. All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust.
11.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
16
<PAGE>
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
11.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
11.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement. The Company shall
promptly notify the Trust and the Adviser of any change in control of the
Company.
11.9. The Company shall furnish, or shall cause to be furnished, to
the Trust or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event within 45
days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or policyholders,
as soon as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
11.10. The names "One Group(R) Investment Trust" and `Trustees of One
Group(R) Investment Trust" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated June 7, 1993 to which reference is
hereby made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of `One
Group Investment Trust' entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
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<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: /s/ Ronald L. Ziegler
------------------------------------------
Title: Vice President & Actuary
---------------------------------------
ONE GROUP INVESTMENT TRUST
By: /s/ Karen R. Tackett
------------------------------------------
Title: Vice President and Assistant Treasurer
---------------------------------------
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ Mark A. Beeson
------------------------------------------
Title: Sr. Managing Director
---------------------------------------
NATIONWIDE ADVISORY SERVICES, INC.
By: /s/ James F. Laird, Jr.
------------------------------------------
Title: Vice President - General Manager
---------------------------------------
NATIONWIDE INVESTORS SERVICES, INC.
By: /s/ Christopher A. Cray
------------------------------------------
Title: Treasurer
---------------------------------------
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<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
- --------------------------------------------------------------------------------
Name of Separate Account and Date Form Numbers
Established by Board of Directors Funded by Separate Account
- --------------------------------------------------------------------------------
PFL Retirement Builder Variable Contract Form Nos:
------------------
Annuity Account AV288-101-985-796 (may vary by state)
- --------------------------------------------------------------------------------
March 29, 1996 AVI200 1 998 (may vary by state)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE>
Schedule B
----------
Portfolios of the Trust
- -----------------------
One Group Investment Trust Bond Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Mid Cap Value Portfolio
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<PAGE>
SCHEDULE C
OTHER INVESTMENT COMPANIES AND FUNDS
<TABLE>
<S> <C>
Variable Insurance Products Fund (VIP) Evergreen Variable Trust
VIP Money Market Portfolio Evergreen VA Fund
VIP High Income Portfolio Evergreen VA Foundation Fund
VIP Equity-Income Portfolio Evergreen VA Growth and Income Fund
VIP Growth Portfolio Evergreen VA Global Leaders Fund
VIP Overseas Portfolio Evergreen VA International Growth Fund
VIP High Income Portfolio (Service Class) Federated Insurance Series
Variable Insurance Products Fund II (VIP II) Federated High Income Bond Fund II
VIP II Investment Grade Bond Portfolio Mentor Variable Investment Products
VIP II Asset Manager Portfolio Mentor VIP Capital Growth
VIP II Asset Manager: Growth Portfolio Mentor VIP Growth
VIP II Contrafund Portfolio Mentor VIP High Income
VIP II Index 500 Portfolio Putnam Variable Trust
Variable Insurance Products Fund III (VIP III) Putnam VT Global Growth Fund
VIP III Balanced Portfolio Putnam VT Money Market Fund
VIP III Growth Opportunities Portfolio Putnam VT New Value Fund
VIP III Growth & Income Portfolio Templeton Variable Product Series Fund
VIP III Mid Cap Portfolio Templeton Asset Allocation Fund
VIP III Growth Opportunities Portfolio Templeton International Fund
(Service Class) Franklin Small Cap Investments Fund
AIM Variable Insurance Funds, Inc. One Group(R) Investment Trust
AIM V.I. Capital Appreciation Fund One Group(R) Investment Trust Bond Portfolio
AIM V.I. Government Securities Fund One Group(R) Investment Trust Government
AIM V.I. Growth & Income Fund Bond Portfolio
AIM V.I. International Equity Fund One Group(R) Investment Trust
AIM V.I. Value Fund Balanced Portfolio
Dreyfus Stock Index Fund One Group(R) Investment Trust Large Cap
Dreyfus Variable Investment Fund Growth Portfolio
Dreyfus Money Market Portfolio One Group(R) Investment Trust Equity
Dreyfus Small Company Stock Portfolio Index Portfolio
MFS Variable Insurance Trust One Group(R) Investment Trust Diversified
MFS Emerging Growth Series Equity Portfolio
MFS Foreign & Colonial Emerging One Group(R) Investment Trust Mid Cap
Markets Equity Series Growth Portfolio
MFS Research Series One Group(R) Investment Trust Diversified
MFS Total Return Series Mid Cap Portfolio
MFS Utilities Series One Group(R) Investment Trust Mid Cap
Oppenheimer Variable Account Funds Value Portfolio
Oppenheimer Global Securities Fund
Oppenheimer Growth Fund
Oppenheimer Growth & Income Fund
Oppenheimer High Income fund
Oppenheimer Strategic Bond Fund
Oppenheimer Mutiple Strategies Fund
WRL Series Fund, Inc.
WRL VKAM Emerging Growth
WRL Janus Global
WRL Janus Growth
</TABLE>
21
<PAGE>
EXHIBIT (10)(a)
---------------
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our report dated
February 19, 1999 with respect to the statutory-basis financial statements and
schedules of PFL Life Insurance Company, included in Pre-Effective Amendment
No. 2 to the Registration Statement (Form N-4 No. 333-78743) and related
Prospectus of The One Income Annuity.
/s/ Ernst & Young LLP
Des Moines, Iowa
November 1, 1999
<PAGE>
EXHIBIT (14)
------------
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Patrick S. Baird, whose signature appears
below, constitutes and appoints Craig D. Vermie and Brenda K. Clancy, 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/ Patrick S. Baird
------------------------------------
Patrick S. Baird
Senior Vice President
PFL Life Insurance Company
October 11, 1999
- -----------------------------------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Craig D. Vermie, whose signature appears
below, constitutes and appoints Craig D. Vermie and Brenda K. Clancy, 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/ Craig D. Vermie
------------------------------------
Craig D. Vermie
Vice President
PFL Life Insurance Company
October 11, 1999
- -----------------------------------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
Know all men by these presents that William L. Busler, whose signature appears
below, constitutes and appoints Craig D. Vermie and Brenda K. Clancy, 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/ William L. Busler
------------------------------------
William L. Busler
President
PFL Life Insurance Company
October 11, 1999
- -----------------------------------------
Date
<PAGE>
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 Craig D. Vermie and Brenda K. Clancy, 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
------------------------------------
Larry N. Norman
Executive Vice President
PFL Life Insurance Company
October 11, 1999
- -----------------------------------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Douglas C. Kolsrud, whose signature appears
below, constitutes and appoints Craig D. Vermie and Brenda K. Clancy, 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/ Douglas C. Kolsrud
------------------------------------
Douglas C. Kolsrud
Senior Vice President
PFL Life Insurance Company
October 11, 1999
- -----------------------------------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Robert J. Kontz, whose signature appears
below, constitutes and appoints Craig D. Vermie and Brenda K. Clancy, 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/ Robert J. Kontz
------------------------------------
Robert J. Kontz
Vice President
PFL Life Insurance Company
October 11, 1999
- -----------------------------------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL RETIREMENT BUILDER VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Brenda K. Clancy, whose signature appears
below, constitutes and appoints Craig D. Vermie and Brenda K. Clancy, and each
of them, her attorneys-in-fact, each with the power of substitution, for her 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 her substitute, may do or cause to be done by
virtue hereof.
/s/ Brenda K. Clancy
------------------------------------
Brenda K. Clancy
Vice President
PFL Life Insurance Company
October 11, 1999
- -----------------------------------------
Date
