<PAGE>
As filed with the Securities and Exchange Commission on February 24, 2000
Registration No. 333-61063
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811-7689
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
Immediate Income Builder
FORM N-4
REGISTRATION STATEMENT UNDER THE [ ]
SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. 5 [X]
and
REGISTRATION STATEMENT UNDER [_]
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 [X]
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
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
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effective date of the Registration statement.
Title of Securities Being Registered: Single Premium Immediate Variable Annuity
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Contracts
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485.
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on ____________________ pursuant to paragraph (b) of Rule 485.
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60 days after filing pursuant to paragraph (a)(1) of Rule 485.
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X on May 1, 2000 pursuant to paragraph (a)(1) of Rule 485.
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If appropriate, check the following box:
This post-effective amendment designates a new effective date
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for a previously filed post-effective amendment.
<PAGE>
PFL IMMEDIATE
INCOME BUILDER
Issued Through
PFL RETIREMENT BUILDER
VARIABLE ANNUITY ACCOUNT
By
PFL LIFE INSURANCE COMPANY
Prospectus
May 1, 2000
This prospectus and the mutual fund prospectuses 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 PFL Immediate Income Builder, a
fixed and variable single premium immediate annuity contract, you can obtain a
free copy of the Statement of Additional Information (SAI) dated May 1, 2000 .
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.
Please note that the contracts and the underlying portfolios:
. are not bank deposits;
. are not federally insured;
. are not endorsed by any bank or government agency;
. are not guaranteed to achieve their goal; and
. are subject to risks, including loss of premium.
The immediate annuity contract has fixed and variable payment options. There are
fourteen portfolios 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.
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY:
Variable Insurance Products Fund
(VIP) - Initial Class
Fidelity - VIP Money Market
Fidelity - VIP High Income
Fidelity - VIP Equity-Income
Fidelity - VIP Growth
Fidelity - VIP Overseas
Variable Insurance Products Fund II
(VIP II) - Initial Class
Fidelity - VIP II Investment Grade Bond
Fidelity - VIP II Asset Manager
Fidelity - VIP II Asset Manager: Growth
Fidelity - VIP II Index 500
Fidelity - VIP II Contrafund
Variable Insurance Products Fund III
(VIP III) - Initial Class
Fidelity - VIP III Balanced
Fidelity - VIP III Growth & Income
Fidelity - VIP III Growth Opportunities
Fidelity - VIP III Mid Cap
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
GLOSSARY OF TERMS....................................................
SUMMARY..............................................................
EXPENSE TABLE........................................................
EXAMPLES.............................................................
1. THE ANNUITY CONTRACT............................................
2. PURCHASE........................................................
Contract Issue Requirements.....................................
Premium Payment.................................................
Allocation of Premium Payment...................................
Variable Annuity Units..........................................
3. ANNUITY PAYMENTS................................................
Annuity Payment Dates...........................................
Payments Under the Contract.....................................
Fixed, Variable or Combination Payments.........................
Assumed Investment Rate (AIR)...................................
Payment Options.................................................
4. INVESTMENT CHOICES..............................................
The Separate Account............................................
Transfers.......................................................
5. EXPENSES.........................................................
Separate Account Charge..........................................
Expenses of the Funds............................................
Premium Taxes....................................................
Other Taxes......................................................
Surrender Charge.................................................
Transfer Fee.....................................................
Payment Guarantee Rider Fee......................................
6. TAXES............................................................
Annuity Contract in General......................................
Qualified and Nonqualified Contracts.............................
Partial and Full Surrenders - Nonqualified Contracts.............
Withdrawals -- Qualified Contracts...............................
Withdrawals -- 403(b) Contracts..................................
Diversification and Distribution Requirements....................
Taxation of Death Benefit Proceeds...............................
Annuity Payments.................................................
Transfers, Assignments or Exchangees.............................
Possible Tax Law Changes.........................................
Other Tax Consequences...........................................
7. SURRENDERS.......................................................
Surrender of Certain Only Payment Option.........................
Surrender of Life With Emergency Cash(SM) Payment Option.........
8. PERFORMANCE......................................................
9. DEATH BENEFIT....................................................
10. PAYMENT GUARANTEE RIDERS.........................................
Initial Payment Guarantee........................................
Step-up Payment Guarantee........................................
Rider Fees.......................................................
Other Terms and Conditions.......................................
Adjustments to the Guaranteed Payment............................
11. OTHER INFORMATION................................................
PFL Life Insurance Company.......................................
The Separate Account.............................................
Voting Rights....................................................
Distributor of the Contracts.....................................
Variations in Contract Provisions................................
IMSA.............................................................
Delay of Payments................................................
Legal Proceedings................................................
Financial Statements.............................................
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION..........
APPENDIX A
Condensed Financial Information
APPENDIX B
Historical Performance Data...........................................
APPENDIX C
Additional Fund Information...........................................
APPENDIX D
Illustrations of Annuity Payment Values...............................
</TABLE>
No one is authorized to give any information or to make any representations that
are not in this prospectus and the SAI (or any sales literature approved by
PFL). You should rely only on the information contained in these documents. The
contracts are not available in all states. This prospectus is not an offer
anywhere that would be unlawful.
2
<PAGE>
GLOSSARY OF TERMS
Annuitant and Secondary Annuitant--The person(s) 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 variable or a combination of fixed
and variable.
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.
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. The payment
amount will be determined no more than seven business days before each payment
date. 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.
Stabilized Payment--The variable annuity payment you receive. Stabilized
payments are determined annually at your contract anniversary and are paid in
according to the annuity payment frequency you select. You can choose not to
stabilize your variable annuity payments in which case each payment fluctuates
based on the performance of the selected subaccounts.
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(ies) is entitled to the death proceeds of the contract.
If no person is named, the owner's estate shall be deemed the successor owner.
Supportable Payment--The payment equal to the sum of the variable annuity unit
values times the number of variable annuity units in each of the selected
subaccounts. The variable annuity units will be adjusted to reflect the year-
to-date difference between stabilized and non-stabilized payments.
Valuation Day--Each day the New York Stock Exchange is open for trading.
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. The determination of the variable annuity unit value is
made at the end of each valuation day.
<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. 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 with approval from our home office.
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 we receive 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.
3. ANNUITY PAYMENTS
Annuity payments may be 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. However,
you can purchase a minimum payment guarantee rider to ensure a minimum payment
amount. See Section 10 for more information.
Annuity payments may be scheduled either monthly, quarterly, semiannually or
annually.
We recommend using electronic funds transfer (EFT) to receive your annuity
payments whenever possible.
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 underlying fund prospectuses:
MANAGED BY FIDELITY MANAGEMENT & RESEARCH COMPANY
Fidelity - VIP Money Market
Fidelity - VIP High Income
Fidelity - VIP Equity-Income
Fidelity - VIP Growth
Fidelity - VIP Overseas
Fidelity - VIP II Investment Grade Bond
Fidelity - VIP II Asset Manager
Fidelity - VIP II Asset Manager: Growth
Fidelity - VIP II Index 500
Fidelity - VIP II Contrafund
Fidelity - VIP III Balanced
Fidelity - VIP III Growth & Income
Fidelity - VIP III Growth Opportunities
Fidelity - VIP III Mid Cap
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.
4
<PAGE>
Each portfolio has investment management and other fees charged directly to it.
In 1999 , these ranged from ____ % to ____ % 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.
If you surrender from a Certain Only payment option we will deduct a surrender
charge of up to 7% of the premium payment surrendered within the first nine
years. If you surrender from a Life with Emergency Cash /SM/ payment option, we
will deduct a surrender charge of up to 4% of the premium payment surrendered
within the first four years. Surrenders are not allowed under any other payment
options.
There is an extra charge if you elect one of the optional payment guarantee
riders.
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 or Life with Emergency Cash(SM)
payment option. No other payment option allows surrenders. If you elect a
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 estimate how much is available to surrender. The minimum amount
you may surrender is $2,500.
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 B 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. PAYMENT GUARANTEE RIDERS
Two optional riders are available:
. The initial payment guarantee--Your variable annuity payments will never be
less than the initial variable annuity payment.
. The step-up payment guarantee--Your variable annuity payments will never
decrease.
There is an extra charge for these riders.
11. OTHER INFORMATION
This section of the prospectus contains information on:
. PFL Life Insurance Company
. The Separate Account
. Voting Rights
. Distributor of the Contracts
. Variations of Contract Provisions
. IMSA
. Delay of Payments
. Legal Proceedings
. Financial Statements
12. INQUIRIES
If you need more information, please contact or Administrative and Services
Office at:
PFL Life Insurance Company
Variable Annuity Department
4333 Edgewood Road N.E.
P.O. Box 3183
Cedar Rapids, IA 52406-3183
(800) 544 -3152
5
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<TABLE>
<CAPTION>
====================================================================================================================================
EXPENSE TABLE
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Separate Account Annual Expenses
Contract Owner Transaction Expenses (as a percentage of average net assets)
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<S> <C>
Sales Load charged to premium None Separate Account Charge:
Annual Contract Administration Charge None Mortality and Expense Risk Charge 1.20%
Transfer Fee (for first six transfers in any contract (This charge is 1.00% if you allocate $50,000 or
year)/(1)/ None more to variable annuity payments)
Maximum Surrender Charge (as a % of premium Administration Charge. 0.15%
payment surrendered): Total 1.35%
. Life with Emergency Cash(SM) payment option 4%
. Other Life Contingent payment options N/A
. Certain Only payment option (variable) 7%
====================================================================================================================================
Portfolio Annual Expenses/(2)/
(as a percentage of average net assets and after expense reimbursements)
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Total
Portfolio
Management Other Annual
Fees Expenses Expenses
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Fidelity - VIP Money Market
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Fidelity - VIP High Income
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Fidelity - VIP Equity-Income /(3)/
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Fidelity - VIP Growth /(3)/
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Fidelity - VIP Overseas /(3)/
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Fidelity - VIP II Investment Grade Bond
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Fidelity - VIP II Asset Manager/(3)/
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Fidelity - VIP II Asset Manager: Growth /(3)/
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Fidelity - VIP II Index 500 /(3)/
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Fidelity - VIP II Contrafund /(3)/
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Fidelity - VIP III Balanced /(3)/
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Fidelity - VIP III Growth & Income /(3)/
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Fidelity - VIP III Growth Opportunities/(3)/
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Fidelity - VIP III Mid Cap/(3)/
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Optional Rider Charges
Initial Payment Guarantee....................................... 1.25% (of average net assets)
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Step-up Payment Guarantee....................................... 2.50% (of average net assets)
====================================================================================================================================
</TABLE>
/(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 1999 and was
provided to PFL by Fidelity Management & Research Company, and PFL has not
independently verified such information. Expenses may be higher or lower
than these 1999 expenses.
/(3)/ A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of
certain funds, have entered into arrangements with their custodian whereby
credits realized as a result of uninvested cash balances were used to
reduce custodian expenses. The total operating expenses, after
reimbursement for the Fidelity - VIP II Index 500 Portfolio and the
Fidelity - VIP III Mid Cap Portfolio do not reflect these reductions in
the table above. The numbers after these reductions would be ______ and
_____, respectively.
6
<PAGE>
EXAMPLES
The following examples indicate the expenses you would pay in various
situations, based on actual portfolio expenses for 1999, 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% AIR will be no greater than with the 3.5%
AIR);
. there are no premium taxes;
. no optional payment guarantee rider is elected;
. 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>
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30 Year Certain Only Annuity
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The contract is The contract is
not surrendered surrendered
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Subaccounts 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity - VIP Money Market
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Fidelity - VIP High Income
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Fidelity - VIP Equity-Income
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Fidelity - VIP Growth
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Fidelity - VIP Overseas
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Fidelity - VIP II Investment Grade
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Fidelity - VIP II Asset Manager
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Fidelity - VIP II Asset Manager:
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Fidelity - VIP II Index 500
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Fidelity - VIP II Contrafund
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Fidelity - VIP III Balanced
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Fidelity - VIP III Growth & Income
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Fidelity - VIP III Growth
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Fidelity - VIP III Mid Cap
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</TABLE>
<TABLE>
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Single Life Annuity with Emergency Cash(SM)
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The contract is The contract is
not surrendered surrendered
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Subaccounts 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity - VIP Money Market
- --------------------------------------------------------------------------------------------
Fidelity - VIP High Income
- --------------------------------------------------------------------------------------------
Fidelity - VIP Equity-Income
- --------------------------------------------------------------------------------------------
Fidelity - VIP Growth
- --------------------------------------------------------------------------------------------
Fidelity - VIP Overseas
- --------------------------------------------------------------------------------------------
Fidelity - VIP II Investment Grade
- --------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager
- --------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager:
- --------------------------------------------------------------------------------------------
Fidelity - VIP II Index 500
- --------------------------------------------------------------------------------------------
Fidelity - VIP II Contrafund
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Fidelity - VIP III Balanced
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Fidelity - VIP III Growth & Income
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Fidelity - VIP III Growth
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Fidelity - VIP III Mid Cap
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</TABLE>
7
<PAGE>
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. Condensed financial information for the subaccounts is
in Appendix A to this prospectus.
8
<PAGE>
1. THE ANNUITY CONTRACT
This prospectus describes the PFL Immediate Income Builder. 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 annuity 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 is guaranteed by PFL. The amount of the variable
annuity payments will vary depending on the investment performance of your
investment choices.
The contract 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. PURCHASE
Contract Issue Requirements
PFL will not issue a contract unless:
. PFL receives all information needed to issue the contract; and
. PFL receives your entire single 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.
We apply your premium to the contract within two business days after receipt (at
the Administrative and Service Office) of both the premium and all necessary
information.
If the information 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 necessary
information 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 your premium payment payable only to PFL Life
Insurance Company and send it 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 subaccount(s)
on the contract issue date. You must allocate percentages that are whole
numbers, not fractions. Your allocations must equal 100%, and you must allocate
at least $25,000 to subaccount of the separate account.
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 change if
you transfer among the subaccounts, transfer from variable to fixed annuity
payments or receive cash through a surrender (if allowed). 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. Additionally, with stabilized payments, your variable annuity units will
be adjusted on your contract anniversary.
9
<PAGE>
3. ANNUITY PAYMENTS
Annuity Payment Dates
We provide annuity payments to the payee on each payment date. You select either
a monthly, quarterly, semiannual or annual payment frequency when you purchase
the contract. Payments will generally be made by electronic funds transfer.
Other disbursement options may be available, if we approve. The first payment
date is typically 30 days after the entire single premium we receive and must be
within one year of 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.
Stabilized Payments
You will receive variable annuity payments that are "stabilized" or held
constant during each contract year, unless you elect to receive non-stabilized
variable annuity payments where each payment will go up or down to reflect
investment performance. With Stabilized payments, your payment amount will only
go up or down to reflect investment performance on an annual basis. Please note
that stabilized payments do not include any amounts allocated to fixed payments.
During the first contract year each stabilized payment 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 upcoming contract year.
See Section 10 of this prospectus for information about the optional payment
guarantee riders.
See the Statement of Additional Information for a more detailed discussion of
stabilized payments and changes in the number of variable annuity units credited
to your contract and an illustration showing hypothetical changes in the number
of variable annuity units.
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 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. 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 underlying portfolios and is not guaranteed.
Under some 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;
THEN:
. the variable annuity payments will remain constant.
IF:
. the performance of the subaccounts after all expenses exceeds the AIR;
THEN:
. the variable annuity payments will increase.
IF:
. the performance of the subaccounts after all expenses is less than the AIR;
THEN:
. the variable annuity payments will decrease.
10
<PAGE>
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 D for an illustration of the difference in the two AIRs.
Calculation of Variable Payments
We calculate the amount of your non-stabilized variable annuity payment 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.
We calculate the amount of your supportable payment by taking the number of
variable annuity units in each subaccount and multiplying them by the variable
annuity unit value of each subaccount. The variable annuity units are adjusted
to reflect the year-to-date difference between stabilized and non-stabilized
payments. This calculation is performed for each subaccount, and the sum of the
subaccount calculations will equal the amount of your variable annuity payment.
On each contract anniversary, the stabilized payment is set equal to the current
supportable payment (unless you have elected one of the optional payment
guarantees).
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 portfolio 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 and any applicable
rider charge (shown in the contract specifications section of the contract).
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 dollar amount of each variable annuity payment will depend on the investment
performance of the portfolio(s) you select. The dollar amount will also depend
on the payment option you select (it may be different for each of the various
payment options). The number of annuity payments may depend on how long the
annuitant or a secondary annuitant, if any, lives. It is possible
11
<PAGE>
than the premium (except for option 10--Life Annuity with Premium Refund
Payments).
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 payments in a lump sum to the
beneficiary when we receive due proof of the annuitant's death.
If the lump sum death benefit is chosen and the payments under this option are
variable, the present value of the remaining payments are 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.
No additional payments will be made under this option after all the guaranteed
payments have been made.
If you choose the Certain Only payment option and you have stabilized payments,
then your final stabilized payment will equal the current supportable payment.
Under this option, you can make full or partial surrenders from the contract
prior to the last payment date. The amount you surrender must be at least
$2,500. A partial surrender will reduce all future payments. A surrender charge
may apply and there may be tax consequences.
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.
With this option there is the risk that only one (or a few) annuity payment will
be made if the annuitant dies shortly after the payments begin.
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
12
<PAGE>
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.
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 annuitant(s) 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 (not fixed). 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 amount you surrender must be at least $2,500. 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. A surrender charge may
apply and there may be tax consequences. The Life with Emergency Cash(SM)
benefit will continue through age 100 of the annuitant.
You should consult a tax advisor before requesting a full or partial surrender.
13
<PAGE>
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).
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 (not
fixed). 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 amount you surrender
must be at least $2,500. 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. A surrender charge may apply and there may be tax consequences.
The Life with Emergency Cash(SM) benefit will continue through age 100 of the
younger of the annuitant and the secondary annuitant.
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.
4. INVESTMENT CHOICES
The Separate Account
The separate account currently consists of fourteen subaccounts.
The Underlying Funds. The subaccounts invest in shares of the underlying funds.
- --------------------
Fidelity Management & Research Company (FMR) provides investment advice and
administrative services for all of the underlying funds offered through this
contract. The following subaccounts are currently offered:
VARIABLE INSURANCE PRODUCTS FUND (VIP):
Fidelity - VIP Money Market
Fidelity - VIP High Income
Fidelity - VIP Equity-Income
Fidelity - VIP Growth
Fidelity - VIP Overseas
VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
Fidelity - VIP II Investment Grade Bond
Fidelity - VIP II Asset Manager
Fidelity - VIP II Asset Manager: Growth
Fidelity - VIP II Index 500
Fidelity - VIP II Contrafund
VARIABLE INSURANCE PRODUCTS FUND III (VIP III):
Fidelity - VIP III Balanced
Fidelity - VIP III Growth & Income
Fidelity - VIP III Growth Opportunities
Fidelity - VIP III Mid Cap
The general public may not purchase these underlying funds. 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 funds.
Detailed information about the underlying portfolios may be found in their
current prospectuses. This includes a description of each portfolio's investment
objectives, policies, and strategies. These prospectuses are attached to this
prospectus. You should read the prospectuses for each of the underlying funds
carefully before you invest. PFL may receive expense reimbursements or other
revenues from the funds or FMR. The amount of these reimbursements or revenues,
if any, may be based on the amount of assets that PFL (or its affiliates) or the
separate account invests in the underlying funds.
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<PAGE>
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.
See Appendix C for Additional Fund Information.
Transfers
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).
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.
The contract you are purchasing was not designed for professional market timing
organizations or other persons that use programmed, large, or frequent
transfers. The use of such transfers may be disruptive to an underlying
portfolio. We reserve the right to reject any transfer request from any person,
if, in our judgment, an underlying portfolio would be unable to invest
effectively in accordance with its investment objectives and policies or would
otherwise be potentially adversely affected.
Transfers Among Subaccounts. You may transfer amounts among subaccounts by
telephoning us or by providing us with a notice that you have signed or an
electronic notice that gives us the facts that we need.
Transfers From Variable to Fixed Payments.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 payment option for 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.
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.
15
<PAGE>
Expenses of the Funds
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 the Certain Only payment option, you may surrender all or a
portion of your contract. For Certain Only variable annuity payments, the
following schedule shows the surrender charges that apply during the first nine
years:
- ----------------------------------------------------
Surrender Charge
----------------
Number of Years Since (as a percentage of
--------------------- -------------------
Premium Payment Date premium withdrawn)
- ----------------------------------------------------
0-1 7%
- ----------------------------------------------------
1-2 7%
- ----------------------------------------------------
2-3 6%
- ----------------------------------------------------
3-4 6%
- ----------------------------------------------------
4-5 5%
- ----------------------------------------------------
5-6 4%
- ----------------------------------------------------
6-7 3%
- ----------------------------------------------------
7-8 2%
- ----------------------------------------------------
8-9 1%
- ----------------------------------------------------
9 or more 0%
- ----------------------------------------------------
If you select the Life with Emergency Cash(SM) payment option, you may also
surrender all or a portion of your contract. The following schedule shows the
surrender charges that apply during the first four years for the Life with
Emergency Cash(SM) payment option:
- ---------------------------------------------------
Surrender Charge
----------------
Number of Years Since (as a percentage of
--------------------- -------------------
Premium Payment Date premium withdrawn)
- ---------------------------------------------------
0-1 4%
- ---------------------------------------------------
1-2 3%
- ---------------------------------------------------
2-3 2%
- ---------------------------------------------------
3-4 1%
- ---------------------------------------------------
4 or more 0%
- ---------------------------------------------------
For surrender charge purposes, premium is considered to be withdrawn before
earnings.
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).
Payment Guarantee Rider Fee
If you elect the initial payment guarantee, there is an annual rider fee of
1.25% of the daily net asset value.
If you elect the step-up payment guarantee, there is an annual rider fee of
2.50% of the daily net asset value.
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 has included an additional discussion regarding taxes in the
Statement of Additional Information.
Annuity Contracts in General
Generally you will not be taxed on your annuity contract until you take the
money out. There are different rules as to how you will be taxed depending on
how you take the money out and the type of contract--qualified or nonqualified
(discussed below).
You will not be taxed on your contract until a distribution occurs--either as a
withdrawal or as annuity payments.
Qualified and Nonqualified Contracts
If you purchase the contract under an individual retirement annuity, a pension
plan, or specially sponsored program, your contract is referred to as a
qualified contract.
16
<PAGE>
Qualified contracts 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 contract as an individual and not under an individual
retirement annuity, 403(b) plan, 457 plan, or pension or profit sharing plan,
your contract is referred to as a nonqualified contract.
Partial and Full Surrenders--Nonqualified Contracts
The Internal Revenue Service currently takes the position that a withdrawal
(i.e., a partial surrender) from an immediate annuity contract like the contract
is fully taxable, with no change in the tax treatment of subsequent annuity
payments. If you surrender your contract, the amount that is taxable is the
excess of the amount distributed to you over the unrecovered investment in the
contract. The investment in the contract is your premium payment. You should
consult a tax advisor before partially or fully surrendering your contract.
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 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 non-qualified annuity contracts that are issued by PFL (or its affiliates)
to the same owner during any contract year are treated as one annuity for
purposes of determining the amount includable in the owner's income when a
distributions occurs.
Withdrawals--Qualified Contracts
The above information describing the taxation of nonqualified contracts does not
apply to qualified contracts. There are special rules that govern with respect
to qualified contracts. Generally, these rules restrict:
. the amount that can be contributed to the contract during any year; and
. the time when amounts can be paid from the contracts.
In addition, a penalty tax may be assessed on amounts withdrawn from the
contract 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 contract by a certain rule. The terms of the plan may
limit the rights otherwise available to you under the contracts.
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 contract for use with any retirement plan.
Withdrawals--403(b) Contracts
The Internal Revenue Code limits the withdrawal of premium payments from certain
403(b) contracts. 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.
17
<PAGE>
Diversification and Distribution Requirements
The Internal Revenue Code provides that the underlying investments for a
variable annuity must satisfy certain diversification requirements in order for
a nonqualified contract to be treated as an annuity contract. The contract must
also meet certain distribution requirements at the death of an owner in order to
be treated as an annuity contract. These diversification and distribution
requirements are discussed in the Statement of Additional Information. PFL may
modify the contract to attempt to maintain favorable tax treatment.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the contract 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 premium payment (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 contracts, 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 contract
issue 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
contract issue date by the total number of expected periodic payments. This
is the amount of each annuity payment that is excludable. (PFL believes that
stabilized payments will be taxed as variable payments, although there is no
authority on this point.)
The remainder of each annuity payment is includable in gross income. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional annuity payments is includable in gross income.
If you select more than one annuity payment option, special rules govern the
allocation of the contract'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 contract issue date, annuity payments stop because an annuitant
died, the excess (if any) of the "investment in the contract" as of the
contract issue 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 Contracts
A transfer of ownership or assignment of a contract, 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 contract could change by legislation
or otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the contract.
7. 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. The amount you surrender must be at least $2,500. A
partial surrender will reduce all future payments. Surrenders may have adverse
tax consequences. If you do not specify which investment option(s) the surrender
should come out of, then it will be taken out pro rata from your existing
allocations.
18
<PAGE>
You should consult with your tax advisor before requesting a full or partial
surrender.
Surrender of Certain Only Payment Option
If you elect a Certain Only payment option the surrender value is the present
value of the remaining payments less any applicable surrender charge.
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 less any applicable surrender charge. For
information concerning the calculation of the present value of future payments,
please refer to the Statement of Additional Information.
Surrender of Life with Emergency Cash(SM) Payment Option
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
estimate how much is available to surrender.
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 funds 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.
The Fidelity - VIP Money Market Subaccount may advertise its current and
effective yield. Current yield reflects the income generated by an investment in
the subaccount over a seven day period. Effective yield is calculated in a
similar manner except that income earned is assumed to be reinvested. The
Fidelity - VIP II Investment Grade Bond and the Fidelity - VIP High Income
Subaccounts may advertise a 30 day yield which reflects the income generated by
an investment in the subaccount over a 30 day period.
Appendix B 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 received by us
(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.
Death Benefits under Payment Options 10, 11, and 12 will be paid in a lump
sum.
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.
19
<PAGE>
If the deceased owner was also the annuitant, then the annuitant's 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. PAYMENT GUARANTEE RIDERS
You may elect to purchase either (a) the initial payment guarantee or (b) the
step-up payment guarantee only at the time you purchase your contract. The
guarantees only apply to variable annuity payments. There is an additional
charge for these guarantees. If you do not purchase one of the payment
guarantees you will receive non-guaranteed stabilized payments unless you elect
otherwise.
The initial payment guarantee and the step-up payment guarantee do not establish
or guarantee the performance of any subaccount.
Initial Payment Guarantee
With the initial payment guarantee, you receive stabilized payments that are
guaranteed to never be less than the initial payment (i.e., the guaranteed
payment).
Step-up Payment Guarantee
With the step-up payment guarantee, you receive stabilized payments that are
guaranteed to never decrease. On each contract anniversary, we allocate a
portion of any positive investment performance of the subaccounts to the
stabilized payment for the following year, and the remainder is used to increase
the number of variable annuity units. For information concerning the annual
calculation of the step-up payment amount, please refer to the Statement of
Additional Information.
Rider Fees
There is a charge for each of the initial payment guarantee rider and the step-
up payment guarantee rider. This 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 initial payment guarantee rider fee is equal to an annual rate of 1.25% of
the daily net asset value in the subaccounts.
The step-up payment guarantee rider fee is equal to an annual rate of 2.50% of
the daily net asset value in the subaccounts.
Other Terms and Conditions
You must purchase the initial payment guarantee or step-up payment guarantee
when you purchase your contract. You cannot add or delete either payment
guarantee after you purchase your contract.
The payment guarantees are only available with the 3.5% AIR.
Termination. Both the initial payment guarantee rider and the step-up payment
guarantee rider are irrevocable.
The initial payment guarantee benefit and the step-up payment guarantee benefit
may not be available in all states.
11. 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 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.
20
<PAGE>
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 the Variable
Insurance Products Fund, the Variable Insurance Products Fund II, and the
Variable Insurance Products Fund III. Fidelity Management & Research Company
manages these funds.
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 funds 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.
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 for
variations since any such state variations will be included in your contract,
riders or endorsements attached to your contract.
IMSA
PFL is a charter member of the Insurance Marketplace Standards Association
(IMSA). IMSA is an independent, voluntary organization of life insurance
companies. It promotes high ethical standards in the sales, advertising and
servicing of individual life insurance and annuity products. Companies must
undergo a rigorous self and independent assessment of their practices to become
a member of IMSA.
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.
21
<PAGE>
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 financial statements of PFL and the separate account are in the Statement of
Additional Information.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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
For a free copy of the Statement of Additional Information 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.
22
<PAGE>
APPENDIX A
----------
CONDENSED FINANCIAL INFORMATION
-------------------------------
The annuity unit values and the number of variable annuity units outstanding for
each subaccount from the date of inception are shown in the following
tables.
<TABLE>
<CAPTION>
==========================================================================================================
Annuity Unit Value Annuity Unit Value Number of Annuity
------------------ ------------------ -------------------
at Beginning of Year at End of Year Units at End of Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity - VIP Money Market
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP High Income
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP Equity-Income
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP Growth
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP Overseas
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP II Investment Grade Bond
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager: Growth
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP II Index 500
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP II Contrafund
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP III Balanced
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP III Growth & Income
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP III Growth Opportunities
1999....................................
- ----------------------------------------------------------------------------------------------------------
Fidelity - VIP III Mid Cap
1999....................................
==========================================================================================================
</TABLE>
23
<PAGE>
APPENDIX B
HISTORICAL PERFORMANCE DATA
Standardized Performance Data
PFL may advertise historical yields and total returns for the subaccounts of the
separate account. These figures are based on historical earnings and are
calculated according to guidelines from the SEC. They do not indicate future
performance.
Fidelity - VIP Money Market Subaccount. The yield of the Fidelity - VIP Money
Market Subaccount for a contract refers to the annualized income generated by an
investment under a contract in the subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment under a contract in the
subaccount is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
Other Subaccounts. The yield of a subaccount of the separate account (other than
the Fidelity - VIP Money Market Subaccount) for a contract refers to the
annualized income generated by an investment under a contract in the subaccount
over a specified 30-day period. The yield is calculated by assuming that the
income generated by the investment during that 30-day period is generated each
30-day period over a 12-month period and is shown as a percentage of the
investment.
The total return of a subaccount of the separate account refers to return
quotations assuming an investment under a contract has been held in the
subaccount for various periods of time including a period measured from the date
the subaccount commenced operations. When a subaccount has been in operation for
1, 5, and 10 years, respectively, the total return for these periods will be
provided. The total return quotations for a subaccount will represent the
average annual compounded rates of return that equate an initial investment of
$1,000 in the subaccount to the redemption value of that investment as of the
last day of each of the periods for which total return quotations are provided.
The yield and total return calculations for a subaccount do not reflect the
effect of any premium taxes that may be applicable to a particular contract, and
they assume you do not elect one of the optional payment guarantee riders. The
yield calculations also do not reflect the effect of any surrender charge that
may be applicable to a particular contract. To the extent that any or all of a
premium tax and/or surrender charge is applicable to a particular contract, the
yield and/or total return of that contract will be reduced. For additional
information regarding yields and total returns calculated using the standard
formats briefly summarized above, please refer to the Statement of Additional
Information.
Based on the method of calculation described in the Statement of Additional
Information, the average annual total returns for periods from inception of the
subaccounts to December 31, 1999, and for the one and five year periods ended
December 31, 1999 are shown in Table 1 below. Total returns shown reflect
deductions for the mortality and expense risk fee (1.20%) and the administrative
charges (0.15%). Standard total return calculations will reflect the effect of
surrender charges that may be applicable to a particular period.
24
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TABLE 1
STANDARD AVERAGE ANNUAL TOTAL RETURNS
[30 Year] Certain Only Annuity
- -------------------------------------------------------------------------------------------------------------------
Inception
1 Year 5 Year of the Subaccount
Ended Ended Subaccount Inception
Subaccount 12/31/99 12/31/99 to 12/31/99 Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity - VIP Money Market
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP High Income
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP Equity-Income
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP Growth
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP Overseas
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Investment Grade Bond
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager: Growth
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Index 500
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Contrafund
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Balanced
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Growth & Income
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Growth Opportunities
- -------------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Mid Cap
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Non-Standardized Performance Data
In addition to the standard data discussed above, similar performance data for
other periods may also be shown.
PFL may also advertise or disclose average annual total return or other
performance data in non-standard formats for a subaccount of the separate
account. The non-standard performance data may assume that no surrender charge
is applicable, and may also make other assumptions such as the amount invested
in a subaccount, differences in time periods to be shown, or the effect of
partial withdrawals.
All non-standard performance data will be advertised only if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information.
The non-standardized average annual total return figures shown in Table 2 are
based on the assumption that the contract is not surrendered, and therefore the
surrender charge is not imposed. Also, Table 2 does not reflect the rider charge
for either optional payment guarantee.
25
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
TABLE 2
NON-STANDARD AVERAGE ANNUAL TOTAL RETURNS
The contract can not be surrendered or is not surrendered
- -----------------------------------------------------------------------------------------------------------------
Inception
1 Year 5 Year of the Subaccount
Ended Ended Subaccount Inception
Subaccount 12/31/99 12/31/99 To 12/31/99 Date
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity - VIP Money Market
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP High Income
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP Equity-Income
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP Growth
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP Overseas
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Investment Grade Bond
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Asset Manager: Growth
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Index 500
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP II Contrafund
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Balanced
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Growth & Income
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Growth Opportunities
- -----------------------------------------------------------------------------------------------------------------
Fidelity - VIP III Mid Cap
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Adjusted Historical Performance Data
The following graph shows how your annuity payments can fluctuate based on past
investment performance (net of all charges) of the portfolios through December
31, 1999. The information presented includes periods prior to the inception date
of the subaccounts, 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, 1999, 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 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. Each graph also
assumes variable payments (not stabilized payments) and that neither optional
payment guarantee was elected. 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 5% AIR, the premium needed would be $________.
If the purchaser were female, the premium necessary would be $______. 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.
26
<PAGE>
FIDELITY - VIP MONEY MARKET PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--March 1982
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP Money Market Portfolio, adjusted to reflect the 1.35%
separate account charge.
27
<PAGE>
FIDELITY - VIP HIGH INCOME PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--September 1985
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP High Income Portfolio, adjusted to reflect the 1.35%
separate account charge.
28
<PAGE>
FIDELITY - VIP EQUITY-INCOME PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--October 1986
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP Equity-Income Portfolio, adjusted to reflect the 1.35%
separate account charge.
29
<PAGE>
FIDELITY - VIP GROWTH PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--October 1986
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP Growth Portfolio, adjusted to reflect the 1.35%
separate account charge.
30
<PAGE>
FIDELITY - VIP OVERSEAS PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--January 1987
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP Overseas Portfolio, adjusted to reflect the 1.35%
separate account charge.
31
<PAGE>
FIDELITY - VIP II INVESTMENT GRADE BOND PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--June 1989
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return/*/
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP II Investment Grade Bond Portfolio, adjusted to
reflect the 1.35% separate account charge.
32
<PAGE>
FIDELITY - VIP II ASSET MANAGER PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--May 1990
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP II Asset Manager Portfolio, adjusted to reflect the
1.35% separate account charge.
33
<PAGE>
FIDELITY - VIP II ASSET MANAGER: GROWTH PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--January 1995
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP II Asset Manager: Growth Portfolio, adjusted to
reflect the 1.35% separate account charge.
34
<PAGE>
FIDELITY - VIP II INDEX 500 PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--August 1992
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP II Index 500 Portfolio, adjusted to reflect the 1.35%
separate account charge.
35
<PAGE>
FIDELITY - VIP II CONTRAFUND PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--January 1995
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP II Contrafund Portfolio, adjusted to reflect the 1.35%
separate account charge.
36
<PAGE>
FIDELITY - VIP III BALANCED PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--January 1995
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP III Balanced Portfolio, adjusted to reflect the 1.35%
separate account charge.
37
<PAGE>
FIDELITY - VIP III GROWTH & INCOME PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--December 1996
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP III Growth & Income Portfolio, adjusted to reflect the
1.35% separate account charge.
38
<PAGE>
FIDELITY - VIP III GROWTH OPPORTUNITIES PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--January 1995
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP III Growth Opportunities Portfolio, adjusted to reflect
the 1.35% separate account charge.
39
<PAGE>
FIDELITY - VIP III MID CAP PORTFOLIO
LOGO
Chart Specifications:
. 5% AIR
. $500 initial monthly annuity payment
. Fund inception date--December 1998
<TABLE>
<CAPTION>
===================================================================================================
Adjusted Historical Average Annual
Monthly Adjusted Total Return*
Payment Historical (Periods Ended 12/31/1999)
Amounts at End Annual Total The contract cannot be surrendered
Year of Years Return* or is not surrendered
----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
1982 1 Year %
----------------------------------------------------------- ---------------------------------------
1983 5 Years %
----------------------------------------------------------- ---------------------------------------
1984 10 Years %
----------------------------------------------------------- ---------------------------------------
1985 Since Inception %
----------------------------------------------------------- ---------------------------------------
1986
----------------------------------------------------------- =======================================
1987 Adjusted Historical Average Annual
------------------------------------------------------------
1988 Total Return*
------------------------------------------------------------
1989 (Periods Ended 12/31/1999)
------------------------------------------------------------
1990 Certain Only Annuity,
------------------------------------------------------------
1991 the contract is surrendered
------------------------------------------------------------ --------------------------------------
1992 1 Year %
------------------------------------------------------------ --------------------------------------
1993 5 Years %
------------------------------------------------------------ --------------------------------------
1994 10 Years %
------------------------------------------------------------ --------------------------------------
1995 Since Inception %
------------------------------------------------------------ --------------------------------------
1996
------------------------------------------------------------
1997
------------------------------------------------------------
1998
------------------------------------------------------------
1999
===================================================================================================
</TABLE>
* Historical returns for periods prior to the inception date are total returns
for the Fidelity - VIP III Mid Cap Portfolio, adjusted to reflect the 1.35%
separate account charge.
40
<PAGE>
APPENDIX C
ADDITIONAL FUND INFORMATION
Fidelity Management & Research Company (FMR) is the investment advisor for the
underlying funds. FMR is a registered investment advisor under the Investment
Advisors Act of 1940. FMR is the original Fidelity company and was founded in
1946. It provides numerous mutual funds and other clients with investment
research and portfolio management services. It maintains a large staff of
experienced investment personnel and a full complement of related support
facilities. As of December 31, 1999 , it advised funds having more than ____
million shareholder accounts with a total value of more than $______ billion.
FMR charges the portfolios an investment management fee. These fees are part of
the portfolios' operating expenses. See the attached prospectuses for the
underlying funds for discussions of the Underlying funds' expenses.
There is no assurance that any of the portfolios will achieve its investment
objective.
PFL may receive expense reimbursements or other revenues from the funds or FMR.
The amount of these reimbursements or revenues, if any, may be based on the
amount of assets that PFL (or its affiliates) or the separate account invests in
the underlying funds.
The underlying funds' prospectuses 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, including the
Fidelity - VIP Money Market 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
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.
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. If no such
reallocation is provided by the owner, we will reinvest the amounts invested in
the eliminated subaccount in the subaccount that invests in the Money Market
Portfolio (or in a similar portfolio of money market instruments) or in another
subaccount, if appropriate.
In the event of any such substitution or change, 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.
41
<PAGE>
Resolving Material Conflicts. The underlying funds 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
participating in an underlying fund. 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 funds. In the event of any conflict,
we will take any steps necessary to protect owners, annuitants, secondary
annuitants and beneficiaries.
42
<PAGE>
APPENDIX D
ILLUSTRATIONS OF ANNUITY PAYMENT VALUES
The following graphs have been prepared to show how different variables affect
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 an optional payment guarantee rider. The graph assumes no
optional payment guarantee rider was selected.
Another factor which 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 $______; the entire premium was allocated to
variable annuity payments; the AIR is 5%; the payment option is Single Life
Annuity; a 79 year old male, and separate account charges of 1.35% and average
portfolio expenses of 0._____ %. 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 (_____ )%, ______ %,
and _____ %, respectively).
LOGO
43
<PAGE>
Hypothetical Illustration
<TABLE>
<CAPTION>
==========================================================================
Monthly Payments Assuming Different Gross Portfolio Returns
- --------------------------------------------------------------------------
Monthly Payment at the
End of Contract Year Gross Portfolio Returns*
-----------------------------
<S> <C> <C> <C>
0.0% 6.0% 10.0%
- --------------------------------------------------------------------------
Assumed First Monthly Payment $ 500 $500 $ 500
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
==========================================================================
</TABLE>
* The corresponding net returns are (____ )%, _____ %, and _____ %.
44
<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 $______ ; the entire premium was allocated
to variable annuity payments; the payment option is a single Life Annuity; 79
year old male; separate account charges of 1.35%; average portfolio expenses of
0._____ %; variable payments (not stabilized payments); no optional payment
guarantee rider; 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.
LOGO
45
<PAGE>
Hypothetical Illustration
<TABLE>
<CAPTION>
==================================================================================================================
Monthly Payments Assuming Different AIRs
(Net Portfolio Return = 6%, Gross Portfolio Return = ______ %)
- ------------------------------------------------------------------------------------------------------------------
Monthly Payment at the End of Year AIR
-----------------------------------------------------------
<S> <C> <C>
3.5% 5%
- ------------------------------------------------------------------------------------------------------------------
Assumed First Monthly Payment $455 $500
1 $466 $505
2 $477 $510
3 $489 $514
4 $501 $519
5 $513 $524
6 $525 $529
7 $538 $534
8 $551 $539
9 $564 $545
10 $578 $550
11 $592 $555
12 $606 $560
13 $621 $566
14 $636 $571
15 $651 $576
16 $667 $582
17 $683 $587
18 $699 $593
19 $716 $599
20 $733 $604
==================================================================================================================
</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.
46
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PFL IMMEDIATE INCOME BUILDER
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 PFL Immediate Income Builder Annuity Contract offered
by PFL Life Insurance Company. You may obtain a copy of the prospectus dated
May 1, 2000, 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: May 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GLOSSARY OF TERMS.............................................
THE CONTRACT--GENERAL PROVISIONS..............................
Transfers.....................................................
Delay of Transfers............................................
Entire Contract...............................................
Assignment....................................................
Beneficiary ..................................................
Change of Beneficiary.........................................
Incontestability..............................................
Misstatement of Age or Sex ...................................
Modification of Contract......................................
Nonparticipating..............................................
Owner.........................................................
Proof of Death................................................
Proof of Survival.............................................
Death Before First Payment Date...............................
Protection of Proceeds........................................
1035 Exchanges................................................
Present Value of Future Payments..............................
Stabilized Payments...........................................
Optional Payment Guarantee Riders.............................
Adjustments to Guaranteed Payment.............................
Optional Payment Guarantee Riders............................
Calculation of New Stabilized Payment Under
Step-up Payment Guarantee.....................................
FEDERAL TAX MATTERS...........................................
Tax Status of the Contract....................................
Diversification Requirements..................................
Owner Control.................................................
Required Distributions........................................
Taxation of PFL...............................................
INVESTMENT EXPERIENCE.........................................
Annuity Unit Value and Annuity Payment Rates..................
STATE REGULATION OF PFL.......................................
ADMINISTRATION................................................
RECORDS AND REPORTS...........................................
DISTRIBUTION OF THE CONTRACTS.................................
OTHER PRODUCTS................................................
CUSTODY OF ASSETS.............................................
HISTORICAL PERFORMANCE DATA...................................
Money Market Yields...........................................
Other Subaccount Yields.......................................
Total Returns.................................................
Other Performance Data........................................
Adjusted Hypothetical Performance Data........................
LEGAL MATTERS.................................................
INDEPENDENT AUDITORS..........................................
OTHER INFORMATION.............................................
FINANCIAL STATEMENTS..........................................
</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 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 (or Fidelity Management &
Research Company believes) 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. 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.
Assignment
The option to assign is only available for non-tax qualified annuities. Only you
may make an assignment of this
4
<PAGE>
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.
Unless we have been notified of a community or marital property interest in the
contract, we will rely on our good
5
<PAGE>
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.
1035 Exchanges
If your purchase is a section 1035 exchange, you may exchange two or more
annuities for this one. In these instances, we will start your contract on the
date we receive the first premium installment. Each premium installment will be
invested in the investment options you select when it is received. When we
receive the final premium installment, we will purchase annuity units with the
entire premium (the final premium installment plus the current value of the
previous premium installments).
If you exchange one or more deferred annuities for this one, please contact a
tax adviser.
Present Value of Future Variable Payments
The present value of future variable payments is calculated by taking (a) the
supportable payment on the business day we receive the surrender request, times
(b) the number of payments remaning, discounted using a rate equal to the
AIR.
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<PAGE>
Stabilized Payments
The stabilized payments remain constant and are adjusted on your contract
anniversary. Had you not selected stabilized payments, each payment throughout
the year would fluctuate based on the performance of your selected subaccounts.
To reflect the difference in these payments we adjust, both increase and
decrease as appropriate, the number of annuity units. The units are adjusted
when we calculate the supportable payment. Supportable payments are used to in
the calculation of surrender values, death benefits and transfers. On your
contract anniversary we set the new stabilized payment to the current
supportable payment. 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 account.
The following table demonstrates, on a purely hypothetical basis, the changes in
the number of variable annuity units. The changes in the variable annuity unit
values reflect the investment performance of the applicable subaccounts as well
as the separate account charge.
<TABLE>
<CAPTION>
Hypothetical Changes in Annuity Units with Stabilized Payments*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AIR 3.50%
- ------------------------------------------------------------------------------------------------------------------------------
Life & 10 Years Certain
- ------------------------------------------------------------------------------------------------------------------------------
Male aged 65
- ------------------------------------------------------------------------------------------------------------------------------
First Variable Payment $500
- ------------------------------------------------------------------------------------------------------------------------------
Monthly Adjustments Cumulative
Beginning Annuity Payment Monthly in Adjusted
Annuity Unit Without Stabilized Annuity Annuity
Units Values Stabilization Payment Units Units
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
At Issue: January 1 400.0000 1.250000 $500.00 -- -- 400.0000
- ------------------------------------------------------------------------------------------------------------------------------
February 1 400.0000 1.254526 $501.81 $500.00 0.0084 400.0084
- ------------------------------------------------------------------------------------------------------------------------------
March 1 400.0000 1.253122 $501.25 $500.00 0.0058 400.0142
- ------------------------------------------------------------------------------------------------------------------------------
April 1 400.0000 1.247324 $498.93 $500.00 (0.0050) 400.0092
- ------------------------------------------------------------------------------------------------------------------------------
May 1 400.0000 1.247818 $499.13 $500.00 (0.0040) 400.0051
- ------------------------------------------------------------------------------------------------------------------------------
June 1 400.0000 1.244178 $497.67 $500.00 (0.0109) 399.9943
- ------------------------------------------------------------------------------------------------------------------------------
July 1 400.0000 1.250422 $500.17 $500.00 0.0008 399.9951
- ------------------------------------------------------------------------------------------------------------------------------
August 1 400.0000 1.245175 $498.07 $500.00 (0.0090) 399.9861
- ------------------------------------------------------------------------------------------------------------------------------
September 1 400.0000 1.251633 $500.65 $500.00 0.0030 399.9891
- ------------------------------------------------------------------------------------------------------------------------------
October 1 400.0000 1.253114 $501.25 $500.00 0.0058 399.9949
- ------------------------------------------------------------------------------------------------------------------------------
November 1 400.0000 1.261542 $504.62 $500.00 0.0212 400.0161
- ------------------------------------------------------------------------------------------------------------------------------
December 1 400.0000 1.265963 $506.39 $500.00 0.0293 400.0454
- ------------------------------------------------------------------------------------------------------------------------------
January 1 400.0000 1.270547 $508.22 $500.00 0.0387 400.0841
- ------------------------------------------------------------------------------------------------------------------------------
February 1 400.0841 1.275148 $510.17 $508.33 0.0086 400.0927
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Expenses included in the calculations are 1.35% Separate Account Charge and
0.63% portfolio expenses, and no option payment guarantee has been selected.
Surrender Value. When you have elected stabilized payments, 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 will be reduced by 50%.
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<PAGE>
Death Benefit. When you have elected stabilized payments, 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 pro rata. For example, if you transfer 25% of the value
of your variable annuity payments to fixed annuity payments, the stabilized
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 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
will be reduced to 75% of their pre-death values.
Certain Only Payment Option. Please note that if you have chosen a Certain Only
- ---------------------------
payment option, your final payment will be the supportable payment (or the
guaranteed payment if you selected one of the payment guarantees and the
supportable payment is less than the guaranteed payment). This is done to ensure
you receive the full investment performance, both positive and negative, of the
subaccounts you selected.
Optional Payment Guarantee Riders
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.
Adjustments to Guaranteed Payment Under Optional Payment Guarantee Riders
Partial Surrenders. Partial surrenders will reduce the guaranteed payment pro
- ------------------
rata. For example, if you surrender 50% of the value of your variable annuity
payments, the guaranteed payment will be reduced by 50%.
Transfers. Transfers from variable to fixed annuity payments will reduce the
- ---------
guaranteed payment pro rata. For example, if you transfer 25% of the value of
your variable annuity payments to fixed annuity payments, the guaranteed payment
will be reduced by 25%. 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 guaranteed 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 guaranteed payment will
be reduced to 75% of its pre-death value.
Calculation of New Stabilized Payment Under Step-up Payment Guarantee
If you elect the Step-up Payment Guarantee, then on each contract anniversary, a
new stabilized step-up payment will be determined and you will be notified of
the new payment amount for the upcoming contract year. The new stabilized
payment can increase, but it will not decrease.
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<PAGE>
The new stabilized payment will equal the greater of [(a-b) * c] + b or b,
where:
(a) is the current supportable payment;
(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.
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 annuity payments and
the remaining 50% will be used to purchase additional variable annuity
units.
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 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. PFL 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
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<PAGE>
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
Starting 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 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.
ANNUITY UNIT VALUES AND VARIABLE ANNUITY PAYMENTS
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 investment return. 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
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<PAGE>
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;
(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 and any rider fees,
if applicable.
The dollar amount of subsequent variable annuity payments will depend upon
changes in applicable variable annuity unit values.
Illustrations of Calculation for Annuity Unit Value and Nonstabilized Variable
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/(1.055) (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 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.
12
<PAGE>
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. Prior to April 30, 1998, AEGON USA Securities,
Inc. (also an affiliate of PFL) was the principal underwriter. During 1999, 1998
and 1997, the amount paid to AFSG Securities Corporation, AEGON USA Securities,
Inc. and/or the broker-dealers for their services related to the Immediate
Income Builder policies was $___________. $________ and $_______. No fees had
been paid to any broker/dealers for their services prior to _______________.
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 subaccounts0. 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
Money Market Yields
We may from time to time disclose the current annualized yield of the Money
Market Subaccount for a 7-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation and income other than investment
income) at the end of the 7-day period in the value of a hypothetical account
having a balance of 1 unit at the beginning of the 7-day period, dividing such
net change in account value by the value of the account at the beginning of the
period to determine the base period return, and annualizing this quotient on a
365-day basis. The net change in account value reflects (i) net income from the
portfolio attributable to the hypothetical account; and (ii) charges and
deductions imposed under a contract that are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for the separate account charge. Current Yield will be
calculated according to the following formula:
Current Yield = ((NCS x ES)/UV) x (365/7)
Where:
NCS = the net change in the value of the portfolio (exclusive of realized
gains and losses on the sale of securities and unrealized appreciation
and depreciation and income other than investment income) for the 7-day
period attributable to a hypothetical account having a balance of 1
subaccount unit.
ES = per unit expenses of the subaccount for the 7-day period.
UV = the unit value on the first day of the 7-day period.
Because of the charges and deductions imposed under a contract, the yield for
the Money Market Subaccount will be lower than the yield for the Money Market
Portfolio. The yield calculations do not reflect the effect of any premium taxes
or surrender charges that may be applicable to a particular contract.
We may also disclose the effective yield of the Money Market Subaccount for the
same 7-day period, determined on
13
<PAGE>
a compounded basis. The effective yield is calculated by compounding the base
period return according to the following formula:
Effective Yield = (1 + ((NCS-ES)/UV))365/7-1
Where:
NCS = the net change in the value of the account (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation and income other than investment income) for the 7-day
period attributable to a hypothetical account having a balance of 1
subaccount unit.
ES = per unit expenses of the subaccount for the 7-day period.
UV = the unit value on the first day of the 7-day period.
The yield on amounts held in the Money Market Subaccount normally will fluctuate
on a daily basis. Therefore, the disclosed yield for any given past period is
not an indication or representation of future yields or rates of return. The
Money Market Subaccount actual yield is affected by changes in interest rates on
money market securities, average portfolio maturity of the Money Market
Portfolio, the types and quality of portfolio securities held by the Money
Market Portfolio and its operating expenses. For the seven days ended December
31, 1999, the yield of the Money Market Subaccount was ______%, and the
effective yield was _____%.
Other 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 (except the Money Market
Subaccount) for 30-day periods. The annualized yield of a subaccount refers to
income generated by the subaccount over a specific 30-day period. Because the
yield is annualized, the yield generated by a subaccount during the 30-day
period is assumed to be generated each 30-day period over a 12-month period. The
yield is computed by: (i) dividing the net investment income of the subaccount
less subaccount expenses for the period, by (ii) the maximum offering price per
unit on the last day of the period times the daily average number of units
outstanding for the period, compounding that yield for a 6-month period, and
(iv) multiplying that result by 2. Expenses attributable to the subaccount
include 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
ES = expenses of the subaccount for the 30-day period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the 30-day
period.
Because of the charges 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,
14
<PAGE>
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.
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,
1999 and 1998, and for each of the three years in the period ended December 31,
1999, and the financial statements of certain subaccounts of the PFL Retirement
Builder Variable Annuity Account which are available for investment by PFL
Immediate Income Builder contract owners, as of December 31, 1999 and for the
period May 28, 1999 (commencement of operations) through December 31, 1999,
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.
15
<PAGE>
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). Financial
Statements of certain subaccounts of PFL Retirement Builder Variable Annuity
Account which are available for investment by PFL Immediate Income Builder
contract owners are contained herein. 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.
16
<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.
/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./4/
(b) Form of Broker/Dealer Supervision and Sales Agreement by
and between AFSG Securities Corporation and the
Broker/Dealer./9/
(4) (a) Form of Contract for the PFL Immediate Income Annuity./7/
(5) (a) Form of Application for the PFL Immediate Income Annuity.
/7/
(6) (a) Articles of Incorporation of PFL Life Insurance Company./1/
(b) ByLaws of PFL Life Insurance Company./1/
(7) Not Applicable.
(8) (a) Participation Agreement by and between Variable Insurance
Product Funds and Variable Insurance Products Fund II,
Fidelity Distributors Corporation, and PFL Life Insurance
Company, and Addendums thereto./2/
(b) Participation Agreement between Variable Insurance Products
Fund III, Fidelity Distributors Corporation, and PFL Life
Insurance Company./3/
(c) Amended Schedule A to Participation Agreement by and
between Variable Insurance Product Funds and Variable
Insurance Products Fund II, Fidelity Distributors
Corporation, and PFL Life Insurance Company./8/
<PAGE>
(d) Amended Schedule A to Participation Agreement between
Variable Insurance Products Fund III, Fidelity Distributors
Corporation, and PFL Life Insurance Company./8/
(9) Opinion and Consent of Counsel./6/
(10) (a) Consent of Independent Auditors./10/
(10) (b) Opinion and Consent of Actuary./10/
(11) Not applicable.
(12) Not applicable.
(13) Performance Data Calculations./8/
(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 9.
/1/ Incorporated herein by reference to the Initial filing of Registrants
Form N-4 Registration Statement (File No. 333-7509) on July 3, 1996.
/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.
/3/ Incorporated herein by reference to the Registrant's filing of Post-
Effective Amendment No. 1 to Form N-4 Registration Statement (File No.
333-7509) on April 29, 1997.
/4/ 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.
/5/ 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.
/6/ Filed with the initial Form N-4 Registration Statement (File No. 333-
61063) on August 10, 1998.
/7/ Filed with Pre-Effective Amendment No. 1 to Form N-4 Registration
Statement (File No. 333-61063) on December 11, 1998.
/8/ Filed with Post-Effective Amendment No. 2 to Form N-4 Registration
Statement (File No. 333-61063) on April 28, 1999.
/9/ Filed with Post-Effective Amendment No. 3 to Form N-4 Registration
Statement (File No. 333-61063) on November 2, 1999.
/10/ To be filed by amendment.
<PAGE>
Item 25. Directors and Officers of the Depositor (PFL Life Insurance Company)
<TABLE>
<CAPTION>
Name and Business Address Principal Positions and Offices with
- ------------------------- ------------------------------------
Depositor
---------
<S> <C>
William L. Busler Director, Chairman of the Board and
4333 Edgewood Road, N.E. President
Cedar Rapids, Iowa 52499-0001
Patrick S. Baird Director, Senior Vice President and Chief
4333 Edgewood Road, N.E. Operating Officer
Cedar Rapids, Iowa 52499-0001
Craig D. Vermie Director, Vice President, Secretary and
4333 Edgewood Road, N.E. General Counsel
Cedar Rapids, Iowa 52499-0001
Douglas C. Kolsrud Director, Senior Vice President, Chief
4333 Edgewood Road, N.E. Investment Officer and Corporate Actuary
Cedar Rapids, Iowa 52499-0001
Larry N. Norman Director and Executive Vice President
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
Robert J. Kontz Vice President and 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
</TABLE>
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AEGON Nevak Holding B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation
AEGON International N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation
Voting Trust Delaware Voting Trust
Trustees:
K.J. Storm
Donald J. Shepard
H.B. Van Wijk
Dennis Hersch
AEGON U.S. Holding Delaware 100% of Voting Trust Holding company
Corporation
Short Hills Management New Jersey 100% of AEGON U.S. Holding company
Company Holding Corporation
CORPA Reinsurance New York 100% of AEGON U.S. Holding company
Company Holding Corporation
AEGON Management Indiana 100% of AEGON U.S. Holding company
Company Holding Corporation
RCC North America Inc. Delaware 100% of AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Trip Mate Insurance Kansas 100% Monumental General Sale/admin. of travel
Agency, Inc. 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
advisor
Advisors, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Diversified Investors Delaware 100% Diversified Broker-Dealer
Securities Corp. Investment Advisors, Inc.
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer
Supplemental Ins. Tennessee 100% AUSA Holding Co. Insurance
Division, Inc.
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Insurance agency
Canadian Dealer Network Inc. Resources, Inc.
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment services
Quantra Corporation Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and
sales
Quantra Software Delaware 100% Quantra Corporation Manufacture and sell
Corporation 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 Iowa 100% AEGON USA Realty Information Systems for
Systems, Inc. Advisors, Inc. real estate investment
management
AEGON USA Realty Iowa 100% AEGON USA Real estate management
Management, Inc Realty Advisors, Inc.
USP Real Estate Investment Iowa 21.89% First AUSA Real estate investment
Life Ins. Co. trust
Trust 13.11% PFL Life 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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Endeavor Investment Advisors California 49.9% AUSA Financial General Partnership
Markets, Inc.
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial
counseling for employees
and agents of affiliated
companies
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company,Inc. Insurance agency
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment
advisor
Services, Inc.
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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 Delaware 100% LIICA Purchases, own, and hold
Alliance, LLC 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 Marketing
Group, Inc. Co.
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, Inc. 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
Aegon Equity Florida 100% Western Reserve Life Insurance Agency
Group, Inc. Assurance Co. of Ohio
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
Assurance Co. of Ohio
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
ISI Insurance Agency Ohio 100% ISI Insurance Insurance agency
of Ohio, Inc. Agency Inc.
ISI Insurance Agency Texas 100% ISI Insurance Insurance agency
of Texas, Inc. Agency Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Insurance Agency
of Massachusetts, Inc. Agency Inc.
Monumental Life Insurance Maryland 100% First AUSA Life Insurance
Co. Ins. Co.
AEGON Special Markets Maryland 100% Monumental Life Marketing
Group, Inc. Ins. Co.
Monumental General Maryland 100% First AUSA Life Insurance
Casualty Co. Ins. Co.
United Financial Services, Maryland 100% First AUSA Life General agency
Inc. Ins. Co.
Bankers Financial Life Arizona 100% First AUSA Life Insurance
Ins. Co. 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, Kentucky 100% CGC Provider of srvcs. to ins.
Inc. cos.
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security
Life Insurance Company
Durco Agency, Inc. Virginia 100% Benefit Plans, General agent
Inc.
Commonwealth General Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements
AFSG Securities Pennsylvania 100% CGC Broker-Dealer
Corporation
PB Investment Advisors, Delaware 100% CGC Registered investment
Inc. advisor
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Diversified Financial Delaware 100% CGC Provider of investment,
Products Inc. marketing and admin.
services to ins. cos.
AEGON USA Real Estate Delaware 100% Diversified Real estate and mortgage
Services, Inc. Financial holding company
Products Inc.
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 Special purpose
Life Insurance Company subsidiary
JMH Operating Company, Inc. Mississippi 100% Peoples Security Real estate holdings
Life 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 Delaware 100% CGC Real estate holdings
Corporation
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Capital Broadway Kentucky 100% CGC Real estate holdings
Corporation
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Ampac Insurance Agency, Pennsylvania 100% CGC Provider of management
Inc. (EIN 23-1720755) support services
National Home Life Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
Valley Forge Associates, Pennsylvania 100% Ampac Insurance Furniture & equipment
Inc. Agency, Inc. lessor
Veterans Benefits Plans, Pennsylvania 100% Ampac Insurance Administrator of group
Inc. Agency, Inc. insurance programs
Veterans Insurance Delaware 100% Ampac Insurance Special-purpose subsidiary
Services, Inc. Agency, Inc.
Financial Planning Dist. Columbia 100% Ampac Insurance Special-purpose subsidiary
Services, Inc. Agency, Inc.
Academy Insurance Group, Delaware 100% CGC Holding company
Inc.
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.
Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Kansas 100% Academy Insurance Special-purpose subsidiary
Inc. Group, Inc.
Ammest Insurance Agency, California 100% Academy Insurance General agent
Inc. Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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, Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Inc. (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, Massachusetts 100% Force Fin. Group, Special-purpose subsidiary
Inc. Inc.
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.
Unicom Administrative Germany 100% Unicom Provider of admin. services
Services, GmbH Administrative Services,
Inc.
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20% Capital Liberty, L.P.
76.3% Monumental
Life Insurance Co.
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Pennsylvania 100% Veterans Life Ins. Special-purpose subsidiary
Inc. Co.
</TABLE>
Item 27. Number of Contract Owners
As of December 31, 1999, there were ___ 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
<PAGE>
The directors and officers of AFSG Securities Corporation are as follows:
<TABLE>
<CAPTION>
<S> <C>
Larry N. Norman Sarah J. Stange
Director and President Director and Vice President
Frank A. Camp Bob Warner
Director and Secretary Assistant Compliance Officer
Lisa Wachendorf Linda Gilmer
Vice President and Chief Compliance Officer Treasurer/Controller
Debra C. Cubero Priscilla Hechler
Vice President Assistant Secretary and Assistant Vice President
Emily Bates Thomas Pierpan
Assistant Treasurer Assistant Secretary and Assistant Vice President
Clifton Flenniken Darin D. Smith
Assistant Treasurer Assistant Secretary and Assistant Vice President
</TABLE>
The principal business address of each person listed is AFSG Securities
Corporation, 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499-0001.
Commissions and Other Compensation Received by Principal Underwriter.
- --------------------------------------------------------------------
AFSG Securities Corporation, the broker/dealer, received $_________ and $0 from
the Registrant for the year ending December 31, 1999 and from May 1, 1998
through December 31, 1998 respectively, 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 Variable Annuity Account, the PFL Endeavor Platinum Variable Annuity
Account, the PFL Retirement Builder Variable Annuity Account, the PFL Life
Variable Annuity Account A, the PFL Life Variable Annuity Account C, the PFL
Life Variable Annuity Account D, 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.
<PAGE>
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 24th day of
February, 2000.
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 February 24, 2000
- -----------------------
Patrick S. Baird
/s/ Craig D. Vermie Director February 24, 2000
- -----------------------
Craig D. Vermie
/s/ William L. Busler Director February 24, 2000
- -----------------------
William L. Busler (Principal Executive Officer)
/s/ Larry N. Norman Director February 24, 2000
- -----------------------
Larry N. Norman
/s/ Douglas C. Kolsrud Director February 24, 2000
- -----------------------
Douglas C. Kolsrud
/s/ Robert J. Kontz Vice President and February 24, 2000
- -----------------------
Robert J. Kontz Corporate Controller
/s/ Brenda K. Clancy Treasurer February 24, 2000
- -----------------------
Brenda K. Clancy
</TABLE>
