<PAGE>
As filed with the Securities and Exchange Commission on April 27, 2000
Registration No. 333-94489
811-09777
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
ACCESS VARIABLE ANNUITY
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No. ___
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1
PFL LIFE VARIABLE ANNUITY ACCOUNT D
(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>
Title of Securities Being Registered: Flexible Premium Variable Annuity
- ------------------------------------
Policies
Approximate Date of Proposed Public Offering:
- --------------------------------------------
As soon as practicable after the effective date of the Registration statement.
Registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
ACCESS
VARIABLE
ANNUITY
Issued Through
PFL LIFE VARIABLE ANNUITY ACCOUNT D
by
PFL LIFE INSURANCE COMPANY
Prospectus
May 1, 2000
This prospectus and the mutual fund prospectuses give you important information
about the policies 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 Access Variable Annuity, you can
obtain a free copy of the Statement of Additional Information (SAI) dated May
1, 2000. Please call us at (800) 525-6205 or write us at: PFL Life Insurance
Company, Financial Markets Division, Variable Annuity Department, 4333 Edgewood
Road N.E., Cedar Rapids, Iowa, 52499-0001. 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 policies and the mutual funds:
. are not bank deposits
. are not federally insured
. are not endorsed by any bank or government agency
. are not guaranteed to achieve their goal
. are subject to risks, including loss of premium
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.
This flexible premium deferred (group or individual) annuity policy has many
investment choices. There is a fixed account, which offers interest at rates
that are guaranteed by PFL Life Insurance Company (PFL), and twenty-six mutual
fund portfolios offered by the underlying funds listed below. You can choose
any combination of these investment choices. You bear the entire investment
risk for all amounts you put in the mutual fund portfolios.
ENDEAVOR SERIES TRUST
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
Endeavor Enhanced Index Portfolio
Endeavor High Yield Portfolio
Endeavor Janus Growth Portfolio
Endeavor Opportunity Value Portfolio
Endeavor Value Equity Portfolio
Endeavor Select Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price International Stock Portfolio
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Transamerica VIF Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND (VIP) - SERVICE CLASS 2
Fidelity - VIP Equity-Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (VIP II) - SERVICE CLASS 2
Fidelity - VIP II Contrafund(R) Portfolio
VARIABLE INSURANCE PRODUCTS FUND III (VIP III) - SERVICE CLASS 2
Fidelity - VIP III Growth Opportunities Portfolio
Fidelity - VIP III Mid Cap Portfolio
WRL SERIES FUND, INC.
WRL Alger Aggressive Growth
WRL Goldman Sachs Growth
WRL Janus Global
WRL NWQ Value Equity
WRL Pilgrim Baxter Mid Cap Growth
WRL Salomon All Cap
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
<PAGE>
<TABLE>
<CAPTION>
Page
TABLE OF CONTENTS ----
<S> <C>
GLOSSARY OF TERMS.......................................................... 3
SUMMARY ................................................................... 4
ANNUITY POLICY FEE TABLE................................................... 8
EXAMPLES................................................................... 12
1. THE ANNUITY POLICY..................................................... 14
2. PURCHASE............................................................... 14
Policy Issue Requirements.............................................. 14
Premium Payments....................................................... 14
Initial Premium Requirements........................................... 14
Additional Premium Payments............................................ 15
Maximum Total Premium Payments......................................... 15
Allocation of Premium Payments......................................... 15
Policy Value........................................................... 15
3. INVESTMENT CHOICES..................................................... 15
The Separate Account................................................... 15
The Fixed Account...................................................... 16
Transfers.............................................................. 17
4. PERFORMANCE............................................................ 18
5. EXPENSES............................................................... 18
Excess Interest Adjustment............................................. 18
Mortality and Expense Risk Fee......................................... 18
Administrative Charges................................................. 19
Premium Taxes.......................................................... 19
Federal, State and Local Taxes......................................... 19
Transfer Fee........................................................... 19
Family Income Protector................................................ 19
Portfolio Management Fees.............................................. 19
6. ACCESS TO YOUR MONEY................................................... 19
Surrenders............................................................. 19
Delay of Payment and Transfers......................................... 20
Excess Interest Adjustment............................................. 20
7. ANNUITY PAYMENTS (THE INCOME PHASE)................................... 21
Annuity Payment Options................................................ 21
8. DEATH BENEFIT.......................................................... 22
When We Pay A Death Benefit............................................ 22
When We Do Not Pay A Death Benefit..................................... 23
Amount of Death Benefit................................................ 23
</TABLE>
<TABLE>
<S> <C>
Guaranteed Minimum Death Benefit........................................ 23
Adjusted Partial Withdrawal............................................. 24
9. TAXES................................................................... 24
Annuity Policies in General............................................. 24
Qualified and Nonqualified Policies .................................... 25
Withdrawals--Qualified Policies......................................... 25
Withdrawals--403(b) Policies............................................ 25
Diversification and Distribution Requirements........................... 25
Withdrawals--Nonqualified Policies...................................... 26
Taxation of Death Benefit Proceeds...................................... 26
Annuity Payments........................................................ 26
Transfers, Assignments or Exchanges of Policies......................... 27
Possible Tax Law Changes................................................ 27
10. ADDITIONAL FEATURES..................................................... 27
Systematic Payout Option................................................ 27
Family Income Protector................................................. 27
Nursing Care and Terminal Condition Withdrawal Option................... 29
Unemployment Waiver..................................................... 29
Telephone Transactions.................................................. 30
Dollar Cost Averaging Program........................................... 30
Asset Rebalancing....................................................... 31
11. OTHER INFORMATION....................................................... 31
Ownership............................................................... 31
Assignment.............................................................. 31
PFL Life Insurance Company.............................................. 31
The Separate Account.................................................... 31
Mixed and Shared Funding................................................ 31
Reinstatements.......................................................... 32
Voting Rights........................................................... 32
Distributor of the Policy............................................... 32
Variations in Certain Provisions........................................ 32
IMSA.................................................................... 32
Legal Proceedings....................................................... 32
Financial Statements.................................................... 33
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION................ 33
APPENDIX A
Historical Performance Data............................................. 34
</TABLE>
2
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit--An accounting unit of measure used in calculating the policy
value in the separate account before the annuity commencement date.
Adjusted Policy Value--An amount equal to the policy value increased or
decreased by any excess interest adjustments.
Annuitant--The person during whose life any annuity payments involving life
contingencies will continue.
Annuity Commencement Date--The date upon which annuity payments are to
commence. This date may be any date at least thirty days after the policy date
and may not be later than the last day of the policy month starting after the
annuitant attains age 85, except as expressly allowed by PFL. In no event will
this date be later than the last day of the month following the month in which
the annuitant attains age 95.
Annuity Payment Option--A method of receiving a stream of annuity payments
selected by the owner.
Cash Value--The policy value increased or decreased by an excess interest
adjustment, less the annual service charge, and less any applicable premium
taxes and family income protector rider fee.
Excess Interest Adjustment--A positive or negative adjustment to amounts
withdrawn upon partial withdrawals, full surrenders, or transfers from the
guaranteed period options, or to amounts applied to annuity payment options.
The adjustment reflects changes in the interest rates declared by PFL since the
date any payment was received by (or an amount was transferred to) the
guaranteed period option. The excess interest adjustment can either decrease or
increase the amount to be received by the owner upon full surrender or
commencement of annuity payments, depending upon whether there has been an
increase or decrease in interest rates, respectively.
Fixed Account--One or more investment choices under the policy that are part of
PFL's general assets and are not in the separate account.
Guaranteed Period Options--The various guaranteed interest rate periods of the
fixed account which PFL may offer and into which premium payments may be paid
or amounts transferred.
Owner--Depending upon the state of issue, owner means either:
. the individual or entity that owns a certificate under a group contract; or
. the individual or entity that owns an individual policy.
Policy--Depending upon the state of issue, policy means either:
. the individual certificate under a group contract; or
. the individual policy.
Policy Value--On or before the annuity commencement date, the policy value is
equal to the owner's:
. premium payments; minus
. partial withdrawals (including the net effect of any applicable excess
interest adjustments on such withdrawals); plus
. interest credited in the fixed account; plus or minus
. accumulated gains or losses in the separate account; minus
. service charges, rider fees, premium taxes, and transfer fees, if any.
Policy Year--A policy year begins on the date in which the policy becomes
effective and on each anniversary thereof.
Separate Account--PFL Life Variable Annuity Account D, a separate account
established and registered as a unit investment trust under the Investment
Company Act of 1940, as amended (the "1940 Act"), to which premium payments
under the policies may be allocated.
Subaccount--A subdivision within the separate account, the assets of which are
invested in specified portfolios of the underlying funds.
(Note: The SAI contains a more extensive Glossary.)
3
<PAGE>
SUMMARY
The sections in this summary correspond to sections in this prospectus, which
discuss the topics in more detail.
1. THE ANNUITY POLICY
The flexible premium variable annuity policy offered by PFL Life Insurance
Company (PFL, we, us or our) provides a way for you to invest on a tax-deferred
basis in the following investment choices: twenty-six subaccounts of the
separate account and a fixed account of PFL. The policy is intended to
accumulate money for retirement or other long-term investment purposes.
This policy offers twenty-six subaccounts in the separate ccount that are
listed in Section 3. Each subaccount invests exclusively in shares of one of
the portfolios of the underlying funds. The policy value may depend on the
investment experience of the selected subaccounts. Therefore, you bear the
entire investment risk with respect to all policy value in any subaccount. You
could lose the amount that you invest.
The fixed account offers an interest rate that PFL guarantees. We guarantee to
return your investment with interest credited for all amounts allocated to the
fixed account.
You can transfer money between any of the investment choices. We reserve the
right to impose a $10 fee for each transfer in excess of 12 transfers per
policy year.
The policy, like all deferred annuities, has two phases: the "accumulation
phase" and the "income phase." During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as ordinary income when you
take them out of the policy. The income phase occurs when you begin receiving
regular payments from your policy. The money you can accumulate during the
accumulation phase will largely determine the income payments you receive
during the income phase.
2. PURCHASE
You can buy a nonqualified or qualified policy with $25,000 or more, under most
circumstances. You can add as little as $50 at any time during the accumulation
phase.
3. INVESTMENT CHOICES
You can allocate your premium payments to one or more of the following
portfolios which are described in the underlying fund prospectuses:
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
Endeavor Enhanced Index Portfolio
Endeavor High Yield Portfolio
Endeavor Janus Growth Portfolio
Endeavor Opportunity Value Portfolio
Endeavor Value Equity Portfolio
Endeavor Select Portfolio(/1/)
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price International Stock Portfolio
Transamerica VIF Growth Portfolio
Fidelity - VIP Equity-Income Portfolio - Service Class 2
Fidelity - VIP II Contrafund(R) Portfolio - Service Class 2
Fidelity - VIP III Growth Opportunities Portfolio - Service Class 2
Fidelity - VIP III Mid Cap Portfolio - Service Class 2
WRL Alger Aggressive Growth
WRL Goldman Sachs Growth
WRL Janus Global
WRL NWQ Value Equity
WRL Pilgrim Baxter Mid Cap Growth
WRL Salomon All Cap
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
(/1/Formerly)known as Endeavor Select 50 Portfolio.
Depending upon their investment performance, you can make or lose money in any
of these portfolios.
You can also allocate your premium payments to the fixed account.
4. PERFORMANCE
The value of the policy will vary up or down depending upon the investment
performance of
4
<PAGE>
the subaccounts you choose. We provide performance information in Appendix A
and in the SAI. This data is not intended to indicate future performance.
5. EXPENSES
No deductions are made from premium payments at the time you buy the policy so
that the full amount of each premium payment is invested in one or more of your
investment choices.
Full surrenders, partial withdrawals, and transfers from a guaranteed period
option of the fixed account may be subject to an excess interest adjustment,
which may increase or decrease the amount you receive. This adjustment may also
apply to amounts applied to an annuity payment option from a guaranteed period
option of the fixed account.
We deduct daily mortality and expense risk fees and administrative charges at
an annual rate of either 1.70% or 1.85% per year from the assets in each
subaccount (depending on the death benefit you select).
During the accumulation phase, we deduct an annual service charge of no more
than $30 from the policy value on each policy anniversary and at the time of
surrender. The charge is waived if either the policy value or the sum of all
premium payments, minus all partial withdrawals, is at least $50,000.
We will deduct state premium taxes, which currently range from 0% to 3.50%,
upon total surrender, payment of a death benefit, or when annuity payments
begin.
If you elect the "family income protector" rider, then there is an annual fee
during the accumulation phase of 0.30% of the minimum annuitization value. If
you receive annuity payments under the rider, then during the income phase
there is a guaranteed payment fee at an annual rate of 1.25% of the daily net
asset value in the separate account.
The value of the net assets of the subaccounts will reflect the management fee
and other expenses incurred by the underlying portfolios.
6. ACCESS TO YOUR MONEY
You can generally take out $500 or more anytime during the accumulation phase
(except under certain qualified policies).
If you have policy value in the fixed account, you may take the 10% free of
excess interest adjustments. Amounts withdrawn in the first year, or in excess
of the 10% free amount, may be subject to excess interest adjustments. You may
have to pay income tax and a tax penalty on any money you take out.
Access to amounts held in qualified policies may be restricted or prohibited.
7. ANNUITY PAYMENTS (THE INCOME PHASE)
The policy allows you to receive income under one of five annuity payment
options. You may choose from fixed payment options, variable payment options,
or a combination of both. If you select a variable payment option, the dollar
amount of your payments may go up or down.
8. DEATH BENEFIT
If you are both the owner and the annuitant and you die before the income phase
begins, then your beneficiary will receive a death benefit.
Naming different persons as owner and annuitant can affect whether the death
benefit is payable and to whom amounts will be paid. Use care when naming
owners, annuitants and beneficiaries, and consult your agent if you have
questions.
You may choose one of the following guaranteed minimum death benefits:
. 5% Annually Compounding through age 80
. Annual Step-Up through age 80
. Return of Premium
The charges deducted from policy value are higher for the 5% Annually
Compounding and Annual Step-Up guaranteed minimum death benefits than for the
Return of Premium death benefit.
5
<PAGE>
There is no guaranteed minimum death benefit if the owner or annuitant is age
85 or older on the policy date. In this case, the death benefit will be the
greater of the policy value or the cash value as of the date of death.
If the owner is not the annuitant, no death benefit is paid if the owner dies.
9.TAXES
Your earnings, if any, are not taxed until you take them out. If you take money
out during the accumulation phase, earnings come out first for federal tax
purposes, and are taxed as ordinary income. If you are younger than 59 1/2 when
you take money out, you may be charged a 10% federal penalty tax. Payments
during the income phase may be considered partly a return of your original
investment so that part of each payment would not be taxable as income.
10.ADDITIONAL FEATURES
This policy has additional features that might interest you. These include the
following:
. You can arrange to have money automatically sent to you monthly, quarterly,
semi-annually or annually while your policy is in the accumulation phase.
This feature is referred to as the "systematic payout option." Amounts you
receive may be included in your gross income, and in certain circumstances,
may be subject to penalty taxes.
. You can elect an optional rider that guarantees you a minimum annuitization
value. This feature is called the "family income protector." It may vary by
state.
. Under certain medically related circumstances, we will allow you to
surrender or partially withdraw your policy value without an excess interest
adjustment. This feature is called the "nursing care and terminal condition
withdrawal option."
. Under certain unemployment circumstances, you may withdraw all or a portion
of the policy value free of excess interest adjustments. This feature is
called the "unemployment waiver."
. You may make transfers and/or change the allocation of additional premium
payments by telephone.
. You can arrange to have a certain amount of money (at least $500)
automatically transferred from the fixed account, the Endeavor Money Market
Subaccount, or the Dreyfus U.S. Government Securities Subaccount, either
monthly or quarterly, into your choice of subaccounts. This feature is
called "dollar cost averaging."
. We will, upon your request, automatically transfer amounts among the
subaccounts on a regular basis to maintain a desired allocation of the
policy value among the various subaccounts. This feature is called "asset
rebalancing."
These features are not available in all states and may not be suitable for your
particular situation.
11.OTHER INFORMATION
Right to Cancel Period. You may return your policy for a refund. The amount of
time you have to return the policy will depend on the state where the policy
was issued. It is generally only 20 days. The amount of the refund will
generally be the policy value. We will pay the refund within 7 days after we
receive written notice of cancellation and the returned policy. The policy will
then be deemed void. In some states you may have more or less than 20 days to
return a policy, or receive a refund of more (or less) than the policy value.
No Probate. Usually, when the annuitant dies, the person you choose as your
beneficiary will receive the death benefit under this policy without going
through probate. State laws vary on how the amount that may be paid is treated
for estate tax purposes.
Who should purchase the Policy? This policy is designed for people seeking
long-term tax-deferred accumulation of assets, generally for retirement or
other long-term purposes; and for persons who have maximized their use of other
retirement savings methods, such as 401(k) plans. The tax-deferred feature is
most attractive to people in high federal and state tax
6
<PAGE>
brackets. The tax deferral features of variable annuities are unnecessary when
purchased to fund a qualified plan. You should not buy this policy if you are
looking for a short-term investment or if you cannot take the risk of losing
money that you put in.
There are various fees and charges associated with variable annuities. You
should consider whether the features and benefits of this policy, such as the
opportunity for lifetime income payments, a guaranteed death benefit, the
guaranteed level of certain charges, and the family income protector, make this
policy appropriate for your needs.
Financial Statements. Financial Statements for PFL are in the SAI.
12.INQUIRIES
If you need more information, please contact us at:
Administrative and Service Office
Financial Markets Division
Variable Annuity Department
PFL Life Insurance Company
4333 Edgewood Road N.E.
P.O. Box 3183
Cedar Rapids, IA 52406-3183
You may check your policy at www.pfllife.com/fmd. Follow the logon procedures.
You will need your pre-assigned Personal Identification Number ("PIN") to
access information about your policy.
7
<PAGE>
ANNUITY POLICY FEE TABLE
<TABLE>
<CAPTION>
Policy Owner Transaction Expenses
- ------------------------------------
<S> <C>
Sales Load On Purchase
Payments...................... 0
Annual Service Charge(/1/).. $30 Per
Policy
Transfer Fee(/1/).. Currently No Fee
</TABLE>
<TABLE>
<CAPTION>
Separate Account Annual Expenses (as
a percentage of
average account value)
<S> <C>
Mortality and Expense Risk
Fee(/2/)..................... 1.45%
Administrative Charge......... 0.40%
-----
TOTAL SEPARATE ACCOUNT ANNUAL
EXPENSES .................... 1.85%
</TABLE>
- ------------------------------------------------------------------------------
Portfolio Annual Expenses(/3/)
(as a percentage of average net assets and after expense reimbursements)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Total Account
Rule Portfolio and
Management Other 12b-1 Annual Portfolio
Fees Expenses Fees(/4/) Expenses Expenses
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dreyfus Small Cap
Value(/5/)............... 0.80% 0.10% 0.32% 1.22% 3.07%
Dreyfus U.S. Government
Securities(/6/).......... 0.65% 0.12% -- 0.77% 2.62%
Endeavor Asset
Allocation(/7/).......... 0.75% 0.10% 0.02% 0.87% 2.72%
Endeavor Money Market..... 0.50% 0.05% -- 0.55% 2.40%
Endeavor Enhanced Index... 0.75% 0.03% -- 0.78% 2.63%
Endeavor High Yield(/8/).. 0.746% 0.504% -- 1.25% 3.10%
Endeavor Janus
Growth(/9/).............. 0.775% 0.055% -- 0.83% 2.68%
Endeavor Opportunity
Value(/10/).............. 0.80% 0.05% 0.06% 0.91% 2.76%
Endeavor Value
Equity(/11/)............. 0.80% 0.07% 0.08% 0.95% 2.80%
Endeavor Select........... 1.00% 0.39% -- 1.39% 3.24%
T. Rowe Price Equity
Income(/12/)............. 0.80% 0.07% 0.01% 0.88% 2.73%
T. Rowe Price Growth
Stock(/13/).............. 0.80% 0.07% 0.01% 0.88% 2.73%
T. Rowe Price
International
Stock(/14/).............. 0.90% 0.10% -- 1.00% 2.85%
Transamerica VIF
Growth(/15/)............. 0.70% 0.15% -- 0.85% 2.70%
Fidelity - VIP Equity-
Income -
Service Class 2(/16/).... 0.48% 0.10% 0.25% 0.83% 2.68%
Fidelity - VIP II
Contrafund(R) -
Service Class 2(/16/).... 0.58% 0.12% 0.25% 0.95% 2.80%
Fidelity - VIP III Growth
Opportunities -Service
Class 2(/16/)............ 0.58% 0.13% 0.25% 0.96% 2.81%
Fidelity - VIP III Mid
Cap -
Service Class 2(/16/).... 0.57% 0.43% 0.25% 1.25% 3.10%
WRL Alger Aggressive
Growth................... 0.80% 0.09% -- 0.89% 2.74%
WRL Goldman Sachs
Growth(/17/)(/18/)....... 0.90% 0.10% -- 1.00% 2.85%
WRL Janus Global(/19/).... 0.80% 0.12% -- 0.92% 2.77%
WRL NWQ Value Equity...... 0.80% 0.10% -- 0.90% 2.75%
WRL Pilgrim Baxter Mid Cap
Growth(/17/)(/20/)....... 0.90% 0.10% -- 1.00% 2.85%
WRL Salomon All
Cap(/17/)(/21/).......... 0.90% 0.10% -- 1.00% 2.85%
WRL T. Rowe Price Dividend
Growth(/17/)(/22/)....... 0.90% 0.10% -- 1.00% 2.85%
WRL T. Rowe Price Small
Cap(/17/)(/23/).......... 0.75% 0.25% -- 1.00% 2.85%
</TABLE>
8
<PAGE>
/(1)/ The service charge applies to the fixed account and the separate account,
and is assessed on a pro rata basis relative to each account's policy
value as a percentage of the policy's total policy value. The service
charge is deducted on each policy anniversary and at the time of
surrender. There is no transfer fee for the first 12 transfers per year.
For additional transfers, PFL may charge a fee of $10 per transfer, but
currently does not charge for any transfers.
/(2)/ The mortality and expense risk fee shown (1.45%) applies to the 5%
Annually Compounding through age 80 death benefit and the Annual Step-Up
through age 80 death benefit. This reflects a fee that is 0.15% per year
higher than the 1.30% corresponding fee for the Return of Premium death
benefit.
/(3)/ The fee table information relating to the underlying funds was provided
to PFL by the underlying funds, their investment advisers or managers,
and PFL has not independently verified such information. Actual future
expenses of the portfolios may be greater or less than those shown in the
Table.
/(4)/ The Board of Trustees of Endeavor Series Trust (the "Trust") have
authorized an arrangement whereby, subject to best price and execution,
executing brokers will share commissions with the Trust's affiliated
broker. Under supervision of the Trustees, the affiliated broker will use
the "recaptured commission" to promote marketing of the Trust's shares.
The staff of the Securities and Exchange Commission believes that,
through the use of these recaptured commissions, the Trust is indirectly
paying for distribution expenses and such amounts are shown as 12b-1 fees
in the above table. This use of recaptured commissions to promote the
sale of the Trust's shares involves no additional costs to the Trust or
any owner. Endeavor Series Trust, based on advice of counsel, does not
believe that recaptured brokerage commissions should be treated as 12b-1
fees. For more information on the Trust's Brokerage Enhancement Plan, see
the Trust's prospectus accompanying this prospectus.
/(5)/ For the Dreyfus Small Cap Value Portfolio, the management fees were 0.80%
and other expenses before reimbursements were 0.10%. Therefore, Total
Portfolio Annual Expenses before reimbursements (reduced by custodial
offset arrangements) for the period ended December 31, 1999 were 0.90%.
/(6)/ For the Dreyfus U.S. Government Securities Portfolio, the management fees
were 0.65% and other expenses (reduced by custodial offset arrangements)
before reimbursements were 0.08%. Therefore, Total Portfolio Annual
Expenses for the period ended December 31, 1999 were 0.73%.
/(7)/ For the Endeavor Asset Allocation Portfolio, the management fees were
0.75% and other expenses before reimbursements were 0.09%. Therefore,
Total Portfolio Annual Expenses and other expenses before reimbursements
(reduced by custodial offset arrangements) for the period ended December
31, 1999 were 0.84%.
/(8)/ For the Endeavor High Yield Portfolio, the management fees before waivers
were 0.775% (after waivers 0.746%) and other expenses were 0.47%.
Therefore, Total Portfolio Annual Expenses after waivers (reduced by
custodial offset arrangements) for the period ended December 31, 1999
were 1.22%.
/(9)/ For the Endeavor Janus Growth Portfolio, the management fees before
waivers were 0.80% (after waivers 0.775%) and other expenses were 0.055%.
Therefore, Total Portfolio Annual Expenses after waivers (reduced by
custodial offset arrangements) for the period ended December 31, 1999
were 0.83%.
/(10)/For the Endeavor Opportunity Value Portfolio, the management fees were
0.80% and other expenses before reimbursements were 0.05%. Therefore,
Total Portfolio Annual Expenses before reimbursements
9
<PAGE>
(reduced by custodial offset arrangements) for the period ended December
31, 1999 were 0.85%.
/(11)/ For the Endeavor Value Equity Portfolio, the management fees were 0.80%
and other expenses before reimbursements were 0.08%. Therefore, Total
Portfolio Annual Expenses before reimbursements (reduced by custodial
offset arrangements) for the period ended December 31, 1999 were 0.88%.
/(12)/ For the T. Rowe Price Equity Income Portfolio, the management fees were
0.80% and other expenses before reimbursements were 0.07%. Therefore,
Total Portfolio Annual Expenses before reimbursements (reduced by
custodial offset arrangements) for the period ended December 31, 1999
were 0.87%.
/(13)/ For the T. Rowe Price Growth Stock, the management fees were 0.80% and
other expenses before reimbursements were 0.08%. Therefore, Total
Portfolio Annual Expenses before reimbursements (reduced by custodial
offset arrangements) for the period ended December 31, 1999 were 0.87%.
/(14)/ For the T. Rowe Price International Stock Portfolio, the management fees
were 0.90% and other expenses (reduced by custodial offset arrangements)
were 0.01%. Therefore, Total Portfolio Annual Expenses for the period
ended December 31, 1999 were 0.91%.
/(15)/ For the Transamerica VIF Growth Portfolio, the management fees before
waivers were 0.75% and other expenses before reimbursements were 0.15%.
Therefore, Total Portfolio Annual Expenses before waivers and other
expenses before reimbursements (reduced by custodial offset arrangements)
for the period ended December 31, 1999 were 0.90%.
/(16)/ Service Class 2 expenses are based on estimated expenses for the first
year. VIP expenses are without any reimbursements.
/(17)/ Because WRL Goldman Sachs Growth, WRL T. Rowe Price Dividend Growth, WRL
T. Rowe Price Small Cap, WRL Salomon All Cap and WRL Pilgrim Baxter Mid
Cap Growth commenced operations on May 3, 1999, the percentages set forth
as "Other Expenses" and "Total Portfolio Annual Expenses" are estimated.
/(18)/ For WRL Goldman Sachs Growth, the management fees before waivers were
0.90% and other expenses before reimbursements were 1.78%. Therefore,
Total Portfolio Annual Expenses before waivers and other expenses before
reimbursements (reduced by custodial offset arrangements) for the period
ended December 31, 1999 were 2.68%.
/(19)/ For WRL Janus Global, the investment adviser currently waives 0.025% of
its advisory fee on portfolio average daily net assets over $2 billion
(net fee 0.775%). This waiver is voluntary and will be terminated on June
25, 2000.
10
<PAGE>
/(20)/ For WRL Pilgrim Baxter Mid Cap Growth, the management fees before waivers
were 0.90% and other expenses before reimbursements were 0.50%.
Therefore, Total Portfolio Annual Expenses before waivers and other
expenses before reimbursements (reduced by custodial offset arrangements)
for the period ended December 31, 1999 were 1.40%.
/(21)/ For WRL Salomon All Cap, the management fees before waivers were 0.90%
and other expenses before reimbursements were 1.97%. Therefore, Total
Portfolio Annual Expenses before waivers and other expenses before
reimbursements (reduced by custodial offset arrangements) for the period
ended December 31, 1999 were 2.87%.
/(22)/ For WRL T. Rowe Price Dividend Growth, the management fees before waivers
were 0.90% and other expenses before reimbursements were 1.45%.
Therefore, Total Portfolio Annual Expenses before waivers and other
expenses before reimbursements (reduced by custodial offset arrangements)
for the period ended December 31, 1999 were 2.35%.
/(23)/ For WRL T. Rowe Price Small Cap, the management fees before waivers were
0.75% and other expenses before reimbursements were 1.71%. Therefore,
Total Portfolio Annual Expenses before waivers and other expenses before
reimbursements (reduced by custodial offset arrangements) for the period
ended December 31, 1999 were 2.46%
11
<PAGE>
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a
hypothetical 5% annual return on assets, assuming the entire policy value is in
the applicable subaccount and assuming the family income protector rider has
not been selected:
The expenses reflect different mortality and expense risk fees depending on
which death benefit you select:
A = 5% Annually Compounding through age 80 and Annual Step-Up through age 80
(1.45%)
B = Return of Premium (1.30%)
<TABLE>
<CAPTION>
If the Policy is annuitized at
If the Policy is surrendered the end of the applicable time
at the end of the applicable period or if the Policy is still
time period. in the accumulation phase.
------------------------------------------------------------
1 3 1 3
Subaccounts Year Years Year Years
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Dreyfus Small Cap Value A $32 $ 98 $32 $ 98
---------------------------------------------------------------
B $31 $ 93 $31 $ 93
- --------------------------------------------------------------------------------------------
Dreyfus U.S. Government
Securities A $28 $ 84 $28 $ 84
---------------------------------------------------------------
B $26 $ 80 $26 $ 80
- --------------------------------------------------------------------------------------------
Endeavor Asset
Allocation A $29 $ 87 $29 $ 87
---------------------------------------------------------------
B $27 $ 83 $27 $ 83
- --------------------------------------------------------------------------------------------
Endeavor Money Market A $25 $ 78 $25 $ 78
---------------------------------------------------------------
B $24 $ 73 $27 $ 73
- --------------------------------------------------------------------------------------------
Endeavor Enhanced Index A $28 $ 85 $28 $ 85
---------------------------------------------------------------
B $26 $ 80 $26 $ 80
- --------------------------------------------------------------------------------------------
Endeavor High Yield A $32 $ 99 $32 $ 99
---------------------------------------------------------------
B $31 $ 94 $31 $ 94
- --------------------------------------------------------------------------------------------
Endeavor Janus Growth A $28 $ 86 $28 $ 86
---------------------------------------------------------------
B $27 $ 82 $27 $ 82
- --------------------------------------------------------------------------------------------
Endeavor Opportunity
Value A $29 $ 89 $29 $ 89
---------------------------------------------------------------
B $27 $ 84 $27 $ 84
- --------------------------------------------------------------------------------------------
Endeavor Value Equity A $29 $ 90 $29 $ 90
---------------------------------------------------------------
B $28 $ 85 $28 $ 85
- --------------------------------------------------------------------------------------------
Endeavor Select A $34 $103 $34 $103
---------------------------------------------------------------
B $32 $ 98 $32 $ 98
- --------------------------------------------------------------------------------------------
T. Rowe Price Equity
Income A $29 $ 88 $29 $ 88
---------------------------------------------------------------
B $27 $ 83 $27 $ 83
- --------------------------------------------------------------------------------------------
T. Rowe Price Growth
Stock A $29 $ 88 $29 $ 88
---------------------------------------------------------------
B $27 $ 83 $27 $ 83
- --------------------------------------------------------------------------------------------
T. Rowe Price
International Stock A $30 $ 91 $30 $ 91
---------------------------------------------------------------
B $28 $ 87 $28 $ 87
- --------------------------------------------------------------------------------------------
Transamerica VIF Growth A $29 $ 88 $29 $ 88
---------------------------------------------------------------
B $27 $ 84 $27 $ 84
- --------------------------------------------------------------------------------------------
Fidelity - VIP Equity-
Income A $28 $ 86 $28 $ 86
---------------------------------------------------------------
Service Class 2 B $27 $ 82 $27 $ 82
</TABLE>
12
<PAGE>
EXAMPLES continued
<TABLE>
<CAPTION>
If the Policy is annuitized at
If the Policy is surrendered the end of the applicable time
at the end of the applicable period or if the Policy is still
time period. in the accumulation phase.
-------------------------------------------------------------
1 3 1 3
Subaccounts Year Years Year Years
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Fidelity - VIP II
Contrafund(R) A $ 29 $ 90 $29 $ 90
----------------------------------------------------------------
Service Class 2 B $ 28 $ 85 $28 $ 85
- ---------------------------------------------------------------------------------------------
Fidelity - VIP III
Growth Opportunities A $ 29 $ 90 $29 $ 90
----------------------------------------------------------------
Service Class 2 B $ 28 $ 86 $28 $ 86
- ---------------------------------------------------------------------------------------------
Fidelity - VIP III Mid
Cap A $ 32 $ 99 $32 $ 99
----------------------------------------------------------------
Service Class 2 B $ 31 $ 94 $31 $ 94
- ---------------------------------------------------------------------------------------------
WRL Alger Aggressive
Growth A $ 29 $ 88 $29 $ 88
----------------------------------------------------------------
B $ 27 $ 84 $27 $ 84
- ---------------------------------------------------------------------------------------------
WRL Goldman Sachs Growth A $ 30 $ 91 $30 $ 91
----------------------------------------------------------------
B $ 28 $ 87 $28 $ 87
- ---------------------------------------------------------------------------------------------
WRL Janus Global A $ 29 $ 89 $29 $ 89
----------------------------------------------------------------
B $ 28 $ 84 $28 $ 84
- ---------------------------------------------------------------------------------------------
WRL NWQ Value Equity A $ 28 $ 84 $28 $ 84
----------------------------------------------------------------
B $ 26 $ 80 $26 $ 80
- ---------------------------------------------------------------------------------------------
WRL Pilgrim Baxter Mid
Cap Growth A $ 35 $107 $35 $107
----------------------------------------------------------------
B $ 34 $103 $34 $103
- ---------------------------------------------------------------------------------------------
WRL Salomon All Cap A $ 30 $ 91 $30 $ 91
----------------------------------------------------------------
B $ 28 $ 87 $28 $ 87
- ---------------------------------------------------------------------------------------------
WRL T. Rowe Price
Dividend Growth A $ 30 $ 91 $30 $ 91
----------------------------------------------------------------
B $ 28 $ 87 $28 $ 87
- ---------------------------------------------------------------------------------------------
WRL T. Rowe Price Small
Cap A $ 30 $ 92 $30 $ 92
----------------------------------------------------------------
B $ 29 $ 88 $29 $ 88
</TABLE>
The above tables should assist you in understanding the costs and expenses that
you will bear, directly or indirectly. These include the 1999 expenses of the
underlying portfolios, except for Endeavor Janus Growth, WRL Goldman Sachs
Growth, WRL T. Rowe Price Dividend Growth, WRL T. Rowe Price Small Cap, WRL
Salomon All Cap, and WRL Pilgrim Baxter Mid Cap Growth (whose expenses listed
above are estimated for the first full year of operations). In addition to the
expenses listed above, premium taxes may be applicable.
These examples should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. The
assumed 5% annual return is hypothetical and should not be considered a
representation of past or future annual returns, which may be greater or less
than the assumed rate.
In the examples, the $30 annual service charge is reflected as a charge of
0.1000% based on an anticipated average policy value of $30,000.00.
These examples do not reflect the annual fee of 0.30% of the minimum
annuitization value for the family income protector rider. The above expense
figures would be approximately $3 per year higher if you elected that rider.
Financial Information. The subaccounts had not commenced operations as of
December 31, 1999, therefore there is no condensed financial information to
report as of the date of this prospectus.
13
<PAGE>
1.THE ANNUITY POLICY
This prospectus describes the Access Variable Annuity policy 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. These payments begin on a designated date,
referred to as the annuity commencement date. Until the annuity commencement
date, your annuity is in the accumulation phase and the earnings (if any) are
tax deferred. Tax deferral means you generally are not taxed on your annuity
until you take money out of your annuity. After the annuity commencement date,
your annuity switches to the income phase.
The Access Variable Annuity consists of either:
. a group annuity contract that we, PFL Life Insurance Company, issue to the
contract holder and an individual certificate that we issue to you; or
. an individual policy that we issue to you.
This prospectus describes your individual certificate or policy (both are
referred to as the policy in this prospectus). The policy is a flexible premium
variable annuity. You can use the policy to accumulate funds for retirement or
other long-term financial planning purposes. Your individual investment and
your rights are determined primarily by your own policy.
The policy is a "flexible premium" policy because after you purchase it, you
can generally make additional investments of any amount of $50 or more, until
the annuity commencement date. However, you are not required to make additional
investments.
The policy is a "variable" annuity because the value of your investments can go
up or down based on the performance of your investment choices. If you invest
in the separate account, the amount of money you are able to accumulate in your
policy during the accumulation phase depends upon the performance of your
investment choices. The amount of annuity payments you receive during the
income phase from the separate account also depends upon the investment
performance of your investment choices for the income phase. However, if you
annuitize under the family income protector rider, then PFL will guarantee a
minimum amount of your annuity payments.
The policy also contains a fixed account. The fixed account offers interest at
rates that we guarantee will not decrease during the selected guaranteed
period. There may be different interest rates for each different guaranteed
period that you select.
2.PURCHASE
Policy Issue Requirements
PFL will not issue a policy unless:
. PFL receives all information needed to issue the policy;
. PFL receives a minimum initial premium payment; and
. The annuitant and any joint owner are age 94 or younger.
Premium Payments
You should make checks for premium payments payable only to PFL Life Insurance
Company and send them to the administrative and service office. Your check must
be honored in order for PFL to pay any associated payments and benefits due
under the policy.
Initial Premium Requirements
The initial premium payment for nonqualified and qualified policies must be at
least $25,000. There is no minimum initial premium payment for policies issued
under section 403(b) of the Internal Revenue Code; however, your premium must
be received within 90 days of the policy date or your policy will be canceled.
We will credit your initial premium payment to your policy within two business
days after the day we receive it and your complete policy information. If we
are unable to credit your initial premium payment, we will contact you within
five business days and explain why. We will also
14
<PAGE>
return your initial premium payment at that time unless you tell us to keep it
and credit it as soon as possible.
The date on which we credit your initial premium payment to your policy is the
policy date. The policy date is used to determine policy years, policy months
and policy anniversaries.
Additional Premium Payments
You are not required to make any additional premium payments. However, you can
make additional premium payments as often as you like during the lifetime of
the annuitant and during the accumulation phase. Additional premium payments
must be at least $50. We will credit additional premium payments to your policy
as of the business day we receive your premium and required information.
Additional premium payments must be received before the New York Stock Exchange
closes to get same-day pricing of the additional premium payment.
Maximum Total Premium Payments
We allow premium payments up to a total of $1,000,000 without prior approval
for issue ages 0 - 80. For issue ages 81 - 94, we allow premium payments up to
$500,000.
Allocation of Premium Payments
When you purchase a policy, we will allocate your premium payment to the
investment choices you select. Your allocation must be in whole percentages and
must total 100%. We will allocate additional premium payments the same way,
unless you request a different allocation.
If you allocate premium payments to the dollar cost averaging fixed account,
you must give us directions regarding the subaccount(s) to which transfers are
to be made or we cannot accept your premium payment.
You may change allocations for future additional premium payments by sending us
written instructions or by telephone, subject to the limitations described
under "Telephone Transactions." The allocation change will apply to premium
payments received on or after the date we receive the change request.
Policy Value
You should expect your policy value to change from valuation period to
valuation period. A valuation period begins at the close of trading on the New
York Stock Exchange on each business day and ends at the close of trading on
the next succeeding business day. A business day is each day that the New York
Stock Exchange is open. The New York Stock Exchange generally closes at 4:00
p.m. eastern time. Holidays are generally not business days.
3. INVESTMENT CHOICES
The Separate Account
There are currently twenty-six variable subaccounts available under the
policies.
The subaccounts invest in shares of the various underlying fund portfolios. The
companies that provide investment advice and administrative services for the
underlying fund portfolios offered through this policy are listed below. The
following mutual fund investment choices are currently offered through this
policy:
ENDEAVOR SERIES TRUST
Subadvised by The Dreyfus Corporation
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Subadvised by Morgan Stanley Asset Management
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
Subadvised by J.P. Morgan Investment Management Inc.
Endeavor Enhanced Index Portfolio
Subadvised by Massachusetts Financial Services Company
Endeavor High Yield Portfolio
Subadvised by Janus Capital Corporation
Endeavor Janus Growth Portfolio
Subadvised by OpCap Advisors
Endeavor Opportunity Value Portfolio
Endeavor Value Equity Portfolio
15
<PAGE>
Subadvised by Montgomery Asset Management, LLC
Endeavor Select Portfolio
Subadvised by T. Rowe Price Associates, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Subadvised by Rowe Price-Fleming International, Inc.
T. Rowe Price International Stock Portfolio
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
Managed by Transamerica Investment Management, LLC
Transamerica VIF Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND - SERVICE CLASS 2
Managed by Fidelity Management & Research Company
Fidelity - VIP Equity-Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II - SERVICE CLASS 2
Managed by Fidelity Management & Research Company
Fidelity - VIP II Contrafund(R) Portfolio
VARIABLE INSURANCE PRODUCTS FUND III - SERVICE CLASS 2
Managed by Fidelity Management & Research Company
Fidelity - VIP III Growth Opportunities Portfolio
Fidelity - VIP III Mid Cap Portfolio
WRL SERIES FUND, INC.
Subadvised by Fred Alger Management, Inc.
WRL Alger Aggressive Growth
Subadvised by Goldman Sachs Asset Management
WRL Goldman Sachs Growth
Subadvised by Janus Capital Corporation
WRL Janus Global
Subadvised by NWQ Investment Management Company, Inc.
WRL NWQ Value Equity
Subadvised by Pilgrim Baxter & Associates, Ltd.
WRL Pilgrim Baxter Mid Cap Growth
Subadvised by Salomon Brothers Asset Management Inc
WRL Salomon All Cap
Subadvised by T. Rowe Price Associates, Inc.
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
The general public may not purchase shares of these underlying fund portfolios.
The investment objectives and policies may be similar to other portfolios and
mutual funds managed by the same investment adviser or manager that are sold
directly to the public. You should not expect that the investment results of
the underlying fund portfolios to be the same as those of the other portfolios
or mutual funds.
More detailed information, including an explanation of the portfolio's
investment objectives, may be found in the current prospectuses for the
underlying funds, which are attached to this prospectus. You should read the
prospectuses for the underlying funds carefully before you invest.
We may receive expense reimbursements or other revenues from the underlying
funds or their managers. The amount of these reimbursements or revenues, if
any, may be different for different funds or portfolios and may be based on the
amount of assets that PFL or the separate account invests in the underlying
fund portfolios.
We do not guarantee that any of the subaccounts will always be available for
premium payments, allocations, or transfers. See the SAI for more information
concerning the possible addition, deletion, or substitution of investments.
The Fixed Account
Premium payments allocated and amounts transferred to the fixed account become
part of PFL's general account. Interests in the general account have not been
registered under the Securities Act of 1933 (the "1933 Act"), nor is the
general account registered as an investment company under the 940 Act.
Accordingly, neither the general account nor any
16
<PAGE>
interests therein are generally subject to the provisions of the 1933 or 1940
Acts. PFL has been advised that the staff of the SEC has not reviewed the
disclosures in this prospectus which relate to the fixed account.
We guarantee that the interest credited to the fixed account will not be less
than 3% per year. At the end of a guaranteed period option you selected, the
value in that guaranteed period option will automatically be transferred into a
new guaranteed period option of the same length (or the next shorter period if
the same period is no longer offered) at the current interest rate for that
period. You can transfer to another investment choice by giving us notice
within 30 days before the end of the expiring guaranteed period.
Surrenders or partial withdrawals from a guaranteed period option of the fixed
account are subject to an excess interest adjustment. This adjustment may
increase or decrease the amount of interest credited to your policy. The excess
interest adjustment will not decrease the interest credited to your policy
below 3% per year, however. You bear the risk that we will not credit interest
greater than 3% per year. We determine credited rates, which are guaranteed for
at least one year, in our sole discretion.
If you select the fixed account, your money will be placed with PFL's other
general assets. The amount of money you are able to accumulate in the fixed
account during the accumulation phase depends upon the total interest credited.
The amount of annuity payments you receive during the income phase from the
fixed portion of your policy will remain level for the entire income phase.
Transfers
During the accumulation phase, you may make transfers to or from any subaccount
or fixed account as often as you wish within certain limitations.
Transfers out of a guaranteed period option of the fixed account are limited to
the following:
. Within 30 days prior to the end of the guaranteed period you must notify us
that you wish to transfer the amount in that guaranteed period option to
another investment choice. No excess interest adjustment will apply.
. Transfers of amounts equal to interest credited. This may affect your
overall interest-crediting rate, because transfers are deemed to come from
the oldest premium payment first.
. Other than at the end of a guaranteed period, transfers of amounts from the
guaranteed period option (in excess of interest credited), are subject to an
excess interest adjustment. If the adjustment is negative, then the maximum
amount you can transfer is 25% of the amount in that guaranteed period
option, less any previous transfers during the current policy year. If the
adjustment is positive, then we do not limit the amount that you can
transfer.
There are no transfers permitted out of the dollar cost averaging fixed account
option except through the dollar cost averaging program.
Transfers out of a subaccount must be at least $500, or the entire subaccount
value. Transfers of guaranteed period option amounts equal to interest credited
must be at least $50. If less than $500 remains, then we reserve the right to
either deny the transfer or include that amount in the transfer. Transfers must
be received while the New York Stock Exchange is open to get same day pricing
of the transaction.
During the income phase of your policy, you may transfer values out of any
subaccount up to four times per year. However, you cannot transfer values out
of the fixed account in this phase. The minimum amount that can be transferred
during this phase is the lesser of $10 of monthly income, or the entire monthly
income of the annuity units in the subaccount from which the transfer is being
made.
Transfers may be made by telephone, subject to the limitations described below
under "Telephone Transactions."
17
<PAGE>
Currently, there is no charge for transfers and no limit on the number of
transfers during the accumulation phase. However, in the future the number of
transfers permitted may be limited and a $10 charge per transfer may apply. We
reserve the right to prohibit transfers to the fixed account if we are
crediting an effective annual interest rate of 3.0% (the guaranteed minimum).
The policy 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 premium payment or 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 or if an
underlying portfolio would reject our purchase order.
4. PERFORMANCE
PFL periodically advertises performance of the various subaccounts. We may
disclose at least four different kinds of performance. First, we may calculate
performance by determining the percentage change in the value of an
accumulation unit by dividing the increase (decrease) for that unit by the
value of the accumulation unit at the beginning of the period. This performance
number reflects the deduction of the mortality and expense risk fees and
administrative charges. It does not reflect the deduction of any applicable
premium taxes. The deduction of any applicable premium taxes would reduce the
percentage increase or make greater any percentage decrease.
Second, any advertisement will also include total return figures, which reflect
the deduction of the mortality and expense risk fees and administrative
charges.
Third, for periods starting prior to the date the annuities were first offered,
the performance will be based on the historical performance of the
corresponding investment portfolios for the periods commencing from the date on
which the particular investment portfolio was made available through the
separate account.
Fourth, in addition, for certain investment portfolios, performance may be
shown for the period commencing from the inception date of the investment
portfolio. These figures should not be interpreted to reflect actual historical
performance of the separate account.
We also may, from time to time, include in our advertising and sales materials,
tax deferred compounding charts and other hypothetical illustrations, which may
include, comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
Appendix A contains performance information that you may find useful. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and future results will not be the same as
the results shown.
5. EXPENSES
There are charges and expenses associated with your policy that reduce the
return on your investment in the policy.
Excess Interest Adjustment
Withdrawals of cash value from the fixed account may be subject to an excess
interest adjustment. This adjustment could retroactively reduce (or increase)
the interest credited in the fixed account to the guaranteed minimum of 3% per
year. See "Excess Interest Adjustment" in Section 6 of this prospectus.
Mortality and Expense Risk Fee
We charge a fee as compensation for bearing certain mortality and expense risks
under the policy. Examples include a guarantee of annuity rates, the death
benefits, certain expenses of the policy, and assuming the risk that the
current charges will be insufficient in the future to cover costs of
administering the policy. For the 5% Annually Compounding through age 80 death
benefit and the Annual Step-Up through age 80 death benefit the mortality and
expense risk fee is at an annual rate of 1.45%. For the Return of Premium death
benefit the mortality and
18
<PAGE>
expense risk fee is at an annual rate of 1.30%. This annual fee is assessed
daily based on the net asset value of each subaccount.
If this charge does not cover our actual costs, we absorb the loss. Conversely,
if the charge more than covers actual costs, the excess is added to our
surplus. We expect to profit from this charge. We may use any profit for any
proper purpose, including distribution expenses.
Administrative Charges
We deduct an administrative charge to cover the costs of administering the
policy (including certain distribution-related expenses). This daily charge is
equal to an annual rate of 0.40% of the daily net asset value of the separate
account.
In addition, an annual service charge of $30 (but not more than 2% of the
policy value) is charged on each policy anniversary and at surrender. The
service charge is waived if your policy value is at least $50,000 or if the sum
of your premiums, less all partial withdrawals, is at least $50,000.
Premium Taxes
Some states assess premium taxes on the premium payments you make. We currently
do not deduct for these taxes at the time you make a premium payment. However,
we will deduct the total amount of premium taxes, if any, from the policy value
when:
. you elect to begin receiving annuity payments;
. you surrender the policy; or
. you die and a death benefit is paid (you must also be the annuitant for the
death benefit to be paid).
Generally, premium taxes range from 0% to 3.50%, depending on the state.
Federal, State and Local Taxes
We may in the future deduct charges from the policy for any taxes we incur
because of the policy. However, no deductions are being made at the present
time.
Transfer Fee
You are allowed to make 12 free transfers per year before the annuity
commencement date. If you make more than 12 transfers per year, we reserve the
right to charge $10 for each additional transfer. Premium payments, asset
rebalancing and dollar cost averaging transfers are not considered transfers.
All transfer requests made at the same time are treated as a single request.
Family Income Protector
If you elect the family income protector, there is an annual rider fee during
the accumulation phase of 0.30% of the minimum annuitization value, and a
guaranteed payment fee during the income phase of 1.25% of the daily net asset
value if you annuitize under the rider. The annual rider fee is also deducted
if you surrender the policy.
Portfolio Management Fees
The value of the assets in each subaccount will reflect the fees and expenses
paid by the underlying fund. A description of these expenses is found in the
prospectuses for the underlying funds.
6.ACCESS TO YOUR MONEY
During the accumulation phase, you can have access to the money in your policy
in several ways:
. by making a withdrawal (either a complete or partial withdrawal); or
. by taking systematic payouts.
Surrenders
If you want to make a complete withdrawal, you will receive:
. the value of your policy; plus or minus
. any excess interest adjustment; minus
. any applicable premium taxes, service charges, and family income protector
rider fees.
If you want to take a partial withdrawal, in most cases it must be for at least
$500. Unless you tell
19
<PAGE>
us otherwise, we will take the withdrawal from each of the investment choices
in proportion to the policy value.
Remember that any withdrawal you take will reduce the policy value, and might
reduce the amount of the death benefit. See Section 8, Death Benefit, for more
details.
Withdrawals from the fixed account may also be subject to an excess interest
adjustment. Income taxes, federal tax penalties and certain restrictions may
apply to any withdrawals you make.
Withdrawals from qualified policies may be restricted or prohibited.
During the income phase, you will receive annuity payments under the annuity
payment option you select; however, you generally may not take any other
withdrawals, either complete or partial.
Delay of Payment and Transfers
Payment of any amount due from the separate account for a withdrawal, a death
benefit, or the death of the owner of a nonqualified policy, will generally
occur within seven business days from the date PFL receives all required
information. PFL may defer such 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;
. 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 the subaccounts may be deferred under
these circumstances.
Pursuant to the requirements of certain state laws, we reserve the right to
defer payment of the cash value from the fixed account for up to six months. We
may defer payment of any amount until your premium check has cleared your bank.
Excess Interest Adjustment
Money that you withdraw from a guaranteed period option of the fixed account
before the end of its guaranteed period (the number of years you specified the
money would remain in the guaranteed period option) may be subject to an excess
interest adjustment. At the time you request a withdrawal, if interest rates
set by PFL have risen since the date of the initial guarantee, the excess
interest adjustment will result in a lower cash value on surrender. However, if
interest rates have fallen since the date of the initial guarantee, the excess
interest adjustment will result in a higher cash value on surrender.
Generally, all withdrawals from a guaranteed payment option during the first
policy year are subject to an excess interest adjustment. Any amount withdrawn
during a subsequent policy year in excess of 10% of your cumulative premium
payments is also generally subject to an excess interest adjustment. Beginning
in the second policy year, you can, however, withdraw up to 10% of your
cumulative premium payments each policy year, in one or more withdrawals,
without an excess interest adjustment. This is referred to as the "free
percentage."
There will be no excess interest adjustment on any of the following:
. lump sum withdrawals of the free percentage available;
. nursing care and terminal condition withdrawals;
. unemployment withdrawals;
. withdrawals to satisfy any minimum distribution requirements; and
. systematic payout option payments, which do not exceed 10% of your
cumulative premium payments divided by the number of payouts made per year.
Please note that in these circumstances you will not receive a higher cash
value if interest rates have fallen nor will you receive a lower cash value if
interest rates have risen.
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7. ANNUITY PAYMENTS (THE INCOME PHASE)
You choose the annuity commencement date. You can change this date by giving us
30 days written notice before the current annuity commencement date. The new
annuity commencement date must be at least 30 days after we receive notice of
the change. The latest annuity commencement date generally cannot be after the
policy month following the month in which the annuitant attains age 85 (in
certain cases, we may allow the date to be up to the last day of the month
following the month in which the annuitant attains age 95).
Election of Annuity Payment Option. Before the annuity commencement date, if
- ----------------------------------
the annuitant is alive, you may choose an annuity payment option or change your
election. If the annuitant dies before the annuity commencement date, the
beneficiary may elect to receive the death benefit in a lump sum or under one
of the annuity payment options (unless you become the annuitant).
Unless you specify otherwise, the annuitant will receive the annuity payments.
After the annuitant's death, the beneficiary will receive any remaining
guaranteed payments.
Annuity Payment Options
The policy provides five annuity payment options that are described below. You
may choose any combination of annuity payment options. We will use your
adjusted policy value to provide these annuity payments (under some
circumstances, the family income protector rider could provide a higher
annuitization value). The adjusted policy value is the policy value increased
or decreased by any applicable excess interest adjustment. If the adjusted
policy value on the annuity commencement date is less than $2,000, PFL reserves
the right to pay it in one lump sum in lieu of applying it under an annuity
payment option. You can receive annuity payments monthly, quarterly, semi-
annually, or annually. (We reserve the right to change the frequency if
payments would be less than $50.)
Unless you choose to receive variable payments under annuity payment options 3
or 5, the amount of each payment will be set on the annuity commencement date
and will not change. You may, however, choose to receive variable payments
under payment options 3 and 5. The dollar amount of the first variable payment
will be determined in accordance with the annuity payment rates set forth in
the applicable table contained in your policy. The dollar amount of additional
variable payments will vary based on the investment performance of the
subaccount(s). The dollar amount of each variable payment after the first may
increase, decrease, or remain constant. If the actual investment performance
exactly matched the assumed investment return of 5% at all times, the amount of
each variable annuity payment would remain equal. If actual investment
performance exceeds the assumed investment return, the amount of the variable
annuity payments would increase. Conversely, if actual investment performance
is lower than the assumed investment return, the amount of the variable annuity
payments would decrease.
A charge for premium taxes and an excess interest adjustment may be made when
annuity payments begin.
The annuity payment options are explained below. Options 1, 2, and 4 are fixed
only. Options 3 and 5 can be fixed or variable.
Payment Option 1--Interest Payments. We will pay the interest on the amount we
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use to provide annuity payments in equal payments, or this amount may be left
to accumulate for a period of time to which you and PFL agree. You and PFL will
agree on withdrawal rights when you elect this option.
Payment Option 2--Income for a Specified Period. We will make level payments
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only for the fixed period you choose. No funds will remain at the end.
Payment Option 3--Life Income. You may choose between:
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Fixed Payments
. No Period Certain--We will make level payments only during the annuitant's
lifetime.
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. 10 Years Certain--We will make level payments for the longer of the
annuitant's lifetime or ten years.
. Guaranteed Return of Policy Proceeds--We will make level payments for the
longer of the annuitant's lifetime or until the total dollar amount of
payments we make to you equals the amount applied to this option.
Variable Payments
. No Period Certain--Payments will be made only during the lifetime of the
annuitant.
. 10 Years Certain--Payments will be made for the longer of the annuitant's
lifetime or ten years.
Payment Option 4--Income of a Specified Amount. Payments are made for any
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specified amount until the amount applied to this option, with interest, is
exhausted. This will be a series of level payments followed by a smaller final
payment.
Payment Option 5--Joint and Survivor Annuity.
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You may choose between:
Fixed Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either person
is living.
Variable Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either person
is living.
Other annuity payment options may be arranged by agreement with PFL. Certain
annuity payment options may not be available in all states.
NOTE CAREFULLY:
IF:
. you choose Life Income with No Period Certain or a Joint and Survivor
Annuity; and
. the annuitant(s) dies before the due date of the second (third, fourth,
etc.) annuity payment;
THEN:
. we may make only one (two, three, etc.) annuity payments.
IF:
. you choose Income for a Specified Period, Life Income with 10 years Certain,
Life Income with Guaranteed Return of Policy Proceeds, or Income of a
Specified Amount;
and
. the person receiving payments dies prior to the end of the guaranteed
period;
THEN:
. the remaining guaranteed payments will be continued to that person's
beneficiary, or their present value may be paid in a single sum.
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. The person receiving payments is responsible for
keeping PFL informed of their current address.
8. DEATH BENEFIT
We will pay a death benefit to your beneficiary, under certain circumstances,
if the annuitant dies before the annuity commencement date and the annuitant
was also an owner. (If the annuitant was not an owner, a death benefit may or
may not be paid. See below.) The beneficiary may choose an annuity payment
option, or may choose to receive a lump sum.
When We Pay A Death Benefit
Before the Annuity Commencement Date
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We will pay a death benefit to your beneficiary IF:
. you are both the annuitant and an owner of the policy; and
. you die before the annuity commencement date.
If the only beneficiary is your surviving spouse, then he or she may elect to
continue the policy as the new annuitant and owner, instead of receiving the
death benefit.
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We will also pay a death benefit to your beneficiary IF:
. you are not the annuitant; and
. the annuitant dies before the annuity commencement date; and
. you specifically requested that the death benefit be paid upon the
annuitant's death.
Distribution requirements apply to the policy value upon the death of any
owner. These requirements are detailed in the SAI.
After the Annuity Commencement Date
The death benefit payable, if any, on or after the annuity commencement date
depends on the annuity payment option selected.
IF:
. you are not the annuitant; and
. you die on or after the annuity commencement date; and
. the entire interest in the policy has not been paid to you;
THEN:
. the remaining portion of such interest in the policy will be distributed at
least as rapidly as under the method of distribution being used as of the
date of your death.
When We Do Not Pay A Death Benefit
No death benefit is paid in the following cases:
IF:
. you are not the annuitant; and
. the annuitant dies prior to the annuity commencement date; and
. you did not specifically request that the death benefit be paid upon the
annuitant's death;
THEN:
. you will become the new annuitant and the policy will continue.
IF:
. you are not the annuitant; and
. you die prior to the annuity commencement date;
THEN:
. the new owner (unless it is your spouse) must generally surrender the policy
within five years of your death for the policy value increased or decreased
by an excess interest adjustment.
Note carefully. If the owner does not name a contingent owner, the owner's
estate will become the new owner. If no probate estate is opened (because, for
example, the owner has precluded the opening of a probate estate by means of a
trust or other instrument), and PFL has not received written notice of the
trust as a successor owner signed prior to the owner's death, then that trust
may not exercise ownership rights to the policy. It may be necessary to open a
probate estate in order to exercise ownership rights to the policy if no
contingent owner is named in a written notice received by PFL.
Amount of Death Benefit
Death benefit provisions may differ from state to state. The death benefit may
be paid as a lump sum or as annuity payments. The death benefit will be the
greatest of:
. policy value on the date we receive the required information; or
. cash value on the date we receive the required information (this will be
more than the policy value if there is a positive excess interest
adjustment); or
. guaranteed minimum death benefit, if any (discussed below).
Guaranteed Minimum Death Benefit
On the policy application, you generally may choose one of the three guaranteed
minimum death benefit options listed below.
After the policy is issued, you cannot make an election and the death benefit
cannot be changed.
A guaranteed minimum death benefit is not available if the owner or annuitant
is 85 or older on the policy date. In that case, the death
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benefit will be the greater of the policy value or cash value as of the date of
death.
A. 5% Annually Compounding through age 80 Death Benefit
The 5% Annually Compounding through age 80 Death Benefit is:
. the total premium payments;
. less any adjusted partial withdrawals (discussed below);
. plus interest at an effective annual rate of 5%, from the premium
payment date or withdrawal date, to the earlier of the date of death or
the owner's 81st birthday.
We deduct higher charges for this guaranteed minimum death benefit than for the
Return of Premium Death Benefit.
B. Annual Step-Up through age 80 Death Benefit
The Annual Step-Up through age 80 Death Benefit is:
. the largest policy value on the policy date or on any policy anniversary
prior to the earlier of the date of death or the owner's 81st birthday;
. plus any premium payments since the date of the policy anniversary with
the largest policy value;
. minus any adjusted partial withdrawals (discussed below) since the date
of the policy anniversary with the largest policy value.
The Annual Step-Up death benefit is not available if the owner or annuitant
is 81 or older on the policy date.
We deduct higher charges for this guaranteed minimum death benefit than for
the Return of Premium Death Benefit.
C. Return of Premium Death Benefit
The Return of Premium Death Benefit is:
. the total premium payments;
. less any adjusted partial withdrawals (discussed below) as of the date
of death.
The Return of Premium death benefit is not available if the owner or
annuitant is 85 or older on the policy date.
Under all three guaranteed minimum death benefits, IF:
. the surviving spouse elects to continue the policy instead of receiving the
death benefit; and
. the guaranteed minimum death benefit is greater than the policy value;
THEN:
. we will increase the policy value to be equal to the guaranteed minimum
death benefit. This increase is made only at the time the surviving spouse
elects to continue the policy.
Adjusted Partial Withdrawal
When you request a partial withdrawal, your guaranteed minimum death benefit
will be reduced by an amount called the adjusted partial withdrawal. Under
certain circumstances, the adjusted partial withdrawal may be more than the
amount of your withdrawal request. It is also possible that if a death benefit
is paid after you have made a partial withdrawal, then the total amount paid
could be less than the total premium payments. We have included a detailed
explanation of this adjustment in the SAI.
9. 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
SAI.
Annuity Policies in General
Deferred annuities are a way of setting aside money for future needs like
retirement. Congress recognized how important saving for retirement is and
provided special rules in the Internal Revenue Code for annuities.
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Simply stated, these rules provide that generally you will not be taxed on the
earnings, if any, on the money held in your annuity policy until you take the
money out. This is referred to as tax deferral. There are different rules as to
how you will be taxed depending on how you take the money out and the type of
policy--qualified or nonqualified (discussed below).
You will not be taxed on increases in the value of your policy until a
distribution occurs-- either as a withdrawal or as annuity payments.
When a non-natural person (e.g., corporation or certain other entities other
than tax-qualified trusts) owns a nonqualified policy, the policy will
generally not be treated as an annuity for tax purposes.
Qualified and Nonqualified Policies
If you purchase the policy under an individual retirement annuity, a pension
plan, or specially sponsored program, your policy is referred to as a qualified
policy.
Qualified policies are issued in connection with the following plans:
. Individual Retirement Annuity (IRA): A traditional IRA allows individuals to
make contributions, which may be deductible, to the policy. A Roth IRA also
allows individuals to make contributions to the policy, 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 policy 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 policy 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 policy.
If you purchase the policy as an individual and not under an individual
retirement annuity, 403(b) plan, 457 plan, or pension or profit sharing plan,
your policy is referred to as a nonqualified policy.
Withdrawals--Qualified Policies
The information herein describing the taxation of nonqualified policies does
not apply to qualified policies.
There are special rules that govern with respect to qualified policies.
Generally, these rules restrict:
. the amount that can be contributed to the policy during any year; and
. the time when amounts can be paid from the policy.
In addition, a penalty tax may be assessed on amounts withdrawn from the policy
prior to the date you reach age 59 1/2, unless you meet one of the exceptions
to this rule. You may also be required to begin taking minimum distributions
from the policy by a certain date. The terms of the plan may limit the rights
otherwise available to you under the policy. We have provided more information
in the SAI.
You should consult your legal counsel or tax adviser if you are considering
purchasing a policy for use with any retirement plan.
Withdrawals--403(b) Policies
The Internal Revenue Code limits withdrawal from certain 403(b) annuities.
Withdrawals can generally only be made when a owner:
. reaches age 59 1/2;
. leaves his/her job;
. dies;
. becomes disabled (as that term is defined in the Internal Revenue Code); or
. in the case of hardship. However, in the case of hardship, the owner can
only withdraw the premium payments and not any earnings.
Diversification and Distribution Requirements
The Internal Revenue Code provides that the underlying investments for a
variable annuity
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<PAGE>
must satisfy certain diversification requirements in order to be treated as an
annuity. The annuity must also meet certain distribution requirements at the
death of an owner in order to be treated as an annuity policy. These
diversification and distribution requirements are discussed in the SAI. PFL may
modify the policy to attempt to maintain favorable tax treatment.
Withdrawals--Nonqualified Policies
If you make a withdrawal from your policy before the annuity commencement date,
the Internal Revenue Code treats that withdrawal as first coming from earnings
and then from your premium payments. When you make a withdrawal you are taxed
on the amount of the withdrawal that is earnings. (The excess interest
adjustment resulting from the withdrawal may affect the amount on which you are
taxed. The tax treatment of excess interest adjustments is uncertain. You
should consult a tax adviser if a withdrawal results in an excess interest
adjustment.) Different rules apply for annuity payments. See "Annuity Payments"
below.
The Internal Revenue Code also provides that withdrawn earnings may be subject
to a penalty. The amount of the penalty is equal to 10% of the amount that is
includable in income. Some withdrawals will be exempt from the penalty. They
include any amounts:
. paid on or after the taxpayer reaches age 59 1/2;
. paid after an owner dies;
. paid if the taxpayer becomes totally disabled (as that term is defined in
the Internal Revenue Code);
. paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity;
. paid under an immediate annuity; or
. which come from premium payments made prior to August 14, 1982.
All deferred non-qualified policies that are issued by PFL (or its affiliates)
to the same owner during any calendar year are treated as one annuity for
purposes of determining the amount includable in the owner's income when a
taxable distributions occurs.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the policy because of the death of an owner or
the annuitant. Generally, such amounts are includable in the income of the
recipient:
. if distributed in a lump sum, these amounts are taxed in the same manner as
a full surrender; or
. if distributed under an annuity payment option, these amounts are taxed in
the same manner as annuity payments.
For these purposes, the "investment in the contract" is not affected by the
owner's or annuitant's death. That is, the "investment in the contract" remains
generally the total premium payments (less amounts received which were not
includable in gross income). The same tax treatment applies to any amounts
distributed after an owner's death.
Annuity Payments
Although the tax consequences may vary depending on the annuity payment option
you select, in general, for nonqualified and certain qualified policies, only a
portion of the annuity payments you receive will be includable in your gross
income.
In general, the excludable portion of each annuity payment you receive will be
determined as follows:
. Fixed payments--by dividing the "investment in the contract" on the annuity
commencement date by the total expected value of the annuity payments for
the term of the payments. This is the percentage of each annuity payment
that is excludable.
. Variable payments--by dividing the "investment in the contract" on the
annuity commencement date by the total number of expected periodic payments.
This is the amount of each annuity payment that is excludable.
The remainder of each annuity payment is includable in gross income. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional annuity payments is includable in gross income.
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If you select more than one annuity payment option, special rules govern the
allocation of the policy's entire "investment in the contract" to each such
option, for purposes of determining the excludable amount of each payment
received under that option. We advise you to consult a competent tax adviser as
to the potential tax effects of allocating amounts to any particular annuity
payment option.
If, after the annuity commencement date, annuity payments stop because an
annuitant died, the excess (if any) of the "investment in the contract" as of
the annuity commencement date over the aggregate amount of annuity payments
received that was excluded from gross income is generally allowable as a
deduction for your last taxable year.
Transfers, Assignments or Exchanges of Policies
A transfer of ownership or assignment of a policy, the designation of an
annuitant or payee 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 with
respect to the potential tax effects of such a transaction.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is always
the possibility that the tax treatment of the policy could change by
legislation or otherwise. You should consult a tax adviser with respect to
legal developments and their effect on the policy.
10. ADDITIONAL FEATURES
Systematic Payout Option
You can select at any time (during the accumulation phase) to receive regular
payments from your policy by using the systematic payout option. Payments can
be made monthly, quarterly, semi-annually, or annually. Each payment must be at
least $50. If payments are from the fixed account, then they cannot exceed the
free percentage divided by the number of payments per year. Monthly and
quarterly payments must be made by electronic funds transfer directly to your
checking or savings account. There is no charge for this benefit.
Family Income Protector
The family income protector may vary by state and may not be available in all
states.
The optional "family income protector" rider assures you of a minimum level of
income in the future by guaranteeing a minimum annuitization value (discussed
below) after 10 years. You may elect to purchase this benefit, which guarantees
a minimum amount you will have to apply to a family income protector annuity
payment option and which guarantees a minimum level of those payments once you
begin to receive them. By electing this benefit, you can participate in the
gains of the underlying variable investment options you select while knowing
that you are guaranteed a minimum level of income in the future, regardless of
the performance of the underlying variable investment options.
You can annuitize under the family income protector (subject to the conditions
described below) at the greater of the adjusted policy value or the minimum
annuitization value.
Minimum Annuitization Value. The minimum annuitization value is:
- ---------------------------
. the policy value on the date the rider is issued; plus
. any additional premium payments; minus
. an adjustment for any withdrawals made after the date the rider is issued;
. which is accumulated at the annual growth rate written on page one of the
rider; minus
. any premium taxes.
The annual growth rate is currently 6% per year. PFL may, at its discretion,
change the rate in the future, but the rate will never be less than 3% per
year. Once the rider is added to your policy, the annual growth rate will not
vary during the life of that rider. Withdrawals may reduce the
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minimum annuitization value on a basis greater than dollar-for-dollar. See the
SAI for more information.
The minimum annuitization value may only be used to annuitize using the family
income protector payment options and may not be used with any of the other
annuity payment options listed in Section 7 of this prospectus. The family
income protector payment options are:
. Life Income--An election may be made for "No Period Certain" or "10 Years
Certain". In the event of the death of the annuitant prior to the end of the
chosen period certain, the remaining period certain payments will be
continued to the beneficiary.
. Joint and Full Survivor--An election may be made for "No Period Certain" or
"10 Years Certain". Payments will be made as long as either the annuitant or
joint annuitant is living. In the event of the death of both the annuitant
and joint annuitant prior to the end of the chosen period certain, the
remaining period certain payments will be continued to the beneficiary.
The minimum annuitization value is used solely to calculate the family income
protector annuity payments. The family income protector does not establish or
guarantee policy value or guarantee performance of any investment option.
Because this benefit is based on conservative actuarial factors, the level of
lifetime income that it guarantees may be less than the level that would be
provided by application of the policy value at otherwise applicable adjusted
annuity factors. Therefore, the family income protector should be regarded as a
safety net. The costs of annuitizing under the family income protector include
the guaranteed payment fee, and also the lower payout levels inherent in the
annuity tables used for those minimum payouts. These costs should be balanced
against the benefits of a minimum payout level.
In addition to the annual growth rate, other benefits and fees under the rider
(the rider fee, the fee waiver threshold, guaranteed payment fee, and the
waiting period before the family income protector can be exercised, as well as
the annual growth rate) are also guaranteed not to change after the rider is
added. However, all of these benefit specifications may change if you elect to
upgrade the minimum annuitization value.
Minimum Annuitization Value Upgrade. You can upgrade your minimum annuitization
value to the policy value within 30 days after any policy anniversary before
your 85th birthday (earlier if required by state law). For your convenience, we
will put the last date to upgrade on page one of the rider.
If you upgrade:
. the current rider will terminate and a new one will be issued with its own
specified guaranteed benefits and fees;
. the new rider's specified benefits and fees may not be as advantageous as
before; and
. you will have a new ten year waiting period before you can exercise the
family income protector.
It generally will not be to your advantage to upgrade unless your policy value
exceeds your minimum annuitization value on the applicable policy anniversary.
Conditions of Exercise of the Family Income Protector. You can only annuitize
using the family income protector within the 30 days after the tenth or later
policy anniversary after the family income protector is elected or, in the case
of an upgrade of the minimum annuitization value, the tenth or later policy
anniversary following the upgrade. PFL may, at its discretion, change the
waiting period before the family income protector can be exercised in the
future. You cannot, however, annuitize using the family income protector after
the policy anniversary after your 94th birthday (earlier if required by state
law). For your convenience, we will put the first and last date to annuitize
using the family income protector on page one of the rider.
Note Carefully--If you annuitize at any time other than indicated above, you
cannot use the family income protector.
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Guaranteed Minimum Stabilized Payments. Annuity payments under the family
income protector are guaranteed to never be less than the initial payment. See
the SAI for information concerning the calculation of the initial payment. The
payments will also be "stabilized" or held constant during each policy year.
During the first policy year after annuitizing using the family income
protector, each stabilized payment will equal the initial payment. On each
policy anniversary thereafter, the stabilized payment will increase or decrease
depending on the performance of the investment options you selected (but will
never be less than the initial payment), and then be held constant at that
amount for that policy year. The stabilized payment on each policy anniversary
will equal the greater of the initial payment or the payment supportable by the
annuity units in the selected investment options. See the SAI for additional
information concerning stabilized payments.
Family Income Protector Rider Fee. A rider fee, currently 0.30% of the minimum
annuitization value on the policy anniversary, is charged annually prior to
annuitization. We will also charge this fee if you take a complete withdrawal.
The rider fee is deducted from each variable investment option in proportion to
the amount of policy value in each subaccount.
The rider fee on any given policy anniversary will be waived if the policy
value exceeds the fee waiver threshold. The fee waiver threshold currently is
two times the minimum annuitization value. PFL may, at its discretion, change
the fee waiver threshold in the future, but it will never be greater than two
and one-half times the minimum annuitization value.
Guaranteed Payment Fee. A guaranteed payment fee, currently equal to an
effective annual rate of 1.25% of the daily net asset value in the separate
account, is reflected in the amount of the variable payments you receive if you
annuitize under the family income protector rider. The guaranteed payment fee
is included on page one of the rider.
Termination. The family income protector is irrevocable. You have the option
not to use the benefit but you will not receive a refund of any fees you have
paid. The family income protector will terminate upon the earliest of the
following:
. annuitization (you will still get guaranteed minimum stabilized payments if
you annuitize using the minimum annuitization value under the family income
protector);
. upgrade of the minimum annuitization value (although a new rider will be
issued);
. termination of your policy; or
. 30 days after the policy anniversary after your 94th birthday (earlier if
required by state law).
Nursing Care and Terminal Condition Withdrawal Option
No excess interest adjustment will apply if you or your spouse has been:
. confined in a hospital or nursing facility for 30 days in a row; or
. diagnosed with a terminal condition (usually a life expectancy of 12 months
or less).
This benefit is also available to the annuitant or annuitant's spouse if the
owner is not a natural person.
You may exercise this benefit at any time (during the accumulation phase) and
there is no charge for this benefit.
This benefit may not be available in all states. See the policy or endorsement
for details and conditions.
Unemployment Waiver
No excess interest adjustment will apply to withdrawals if you or your spouse
is unemployed. In order to qualify, you (or your spouse, whichever is
applicable) must have been:
. employed full time for at least two years prior to becoming unemployed; and
. employed full time on the policy date; and
. unemployed for at least 60 days in a row at the time of the withdrawal; and
. must have a minimum cash value at the time of withdrawal of $5,000.
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<PAGE>
You must provide written proof from your State's Department of Labor, which
verifies that you qualify for and are receiving unemployment benefits at the
time of withdrawal.
You may exercise this benefit at any time (during the accumulation phase) and
there is no charge for this benefit.
This benefit is also available to the annuitant or annuitant's spouse if the
owner is not a natural person. This benefit may not be available in all
states. See the policy for details.
Telephone Transactions
You may make transfers and change the allocation of additional premium
payments by telephone IF:
. you select the "Telephone Transfer/Reallocation Authorization" box in the
policy enrollment form or enrollment information; or
. you later complete an authorization form.
You will be required to provide certain information for identification
purposes when requesting a transaction by telephone and we may record your
telephone call. We may also require written confirmation of your request. We
will not be liable for following telephone requests that we believe are
genuine.
Telephone requests must be received while the New York Stock Exchange is open
to get same-day pricing of the transaction. We may discontinue this option at
any time.
Dollar Cost Averaging Program
During the accumulation phase, you may instruct us to automatically transfer
money from the dollar cost averaging fixed account option, the Endeavor Money
Market Subaccount, or the Dreyfus U.S. Government Securities Subaccount, into
any other subaccounts. There is no charge for this program.
Complete and clear instructions must be received before a dollar cost
averaging program will begin. The instructions must include:
. the subaccounts into which money from the dollar cost averaging fixed
account (or other subaccount(s) used for dollar cost averaging) is to be
transferred; and
. either the dollar amount to transfer monthly or quarterly (each transfer
must be at least $500) or the number of transfers (minimum of 6 monthly or
4 quarterly and maximum of 24 monthly or 8 quarterly).
Transfers must begin within 30 days. We will make the transfers on the 28th
day of the applicable month. You may change your allocations at anytime.
Only one dollar cost averaging program can run at one time. This means that
any addition to a dollar cost averaging program must change either the length
of the program or the dollar amount of the transfers. New instructions must be
received each time there is an addition to a dollar cost averaging program.
Any amount in the dollar cost averaging fixed account (or other subaccount(s)
used for dollar cost averaging) for which we have not received complete and
clear instructions will remain in the dollar cost averaging fixed account (or
other such subaccount) until we receive the instructions. If we have not
received complete and clear instructions within 30 days, the interest credited
in the dollar cost averaging fixed account may be adjusted downward, but not
below the guaranteed effective annual interest rate of 3%.
Dollar cost averaging buys more accumulation units when prices are low and
fewer accumulation units when prices are high. It does not guarantee profits
or assure that you will not experience a loss. You should consider your
ability to continue the dollar cost averaging program during all economic
conditions.
We may credit different interest rates for dollar cost averaging programs of
varying time periods. If you discontinue the dollar cost averaging program
before its completion, then the interest credited on amounts in the dollar
cost averaging fixed account may be adjusted downward, but not below the
minimum guaranteed effective annual interest rate of 3%.
30
<PAGE>
Asset Rebalancing
During the accumulation phase you can instruct us to automatically rebalance
the amounts in your subaccounts to maintain your desired asset allocation. This
feature is called asset rebalancing and can be started and stopped at any time
free of charge. However, we will not rebalance if you are in the dollar cost
averaging program or if any other transfer is requested. If a transfer is
requested, we will honor the requested transfer and discontinue asset
rebalancing. Asset rebalancing ignores amounts in the fixed account. You can
choose to rebalance monthly, quarterly, semi-annually, or annually.
11.OTHER INFORMATION
Ownership
You, as owner of the policy, exercise all rights under the policy. You can
change the owner at any time by notifying us in writing. An ownership change
may be a taxable event.
Assignment
You can also assign the policy any time during your lifetime. PFL will not be
bound by the assignment until we receive written notice of the assignment. We
will not be liable for any payment or other action we take in accordance with
the policy before we receive notice of the assignment. There may be limitations
on your ability to assign a qualified policy. An assignment may have tax
consequences.
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 is engaged in
the sale of life and health insurance and annuity policies. PFL is a
Transamerica Company and a wholly owned indirect subsidiary of AEGON USA, Inc.
which conducts most of its operations through subsidiary companies engaged in
the insurance business or in providing non-insurance financial services. All of
the stock of AEGON USA, Inc., is indirectly owned by AEGON N.V. of The
Netherlands, the securities of which are publicly traded. AEGON N.V., a holding
company, conducts its business through subsidiary companies engaged primarily
in the insurance business. PFL is licensed in the District of Columbia, Guam,
and in all states except New York.
All obligations arising under the policy, including the promise to make annuity
payments, are general corporate obligations of PFL.
The Separate Account
PFL established a separate account, called PFL Life Variable Annuity Account D,
under the laws of the State of Iowa on February 20, 1997. The separate account
receives and currently invests the premium payments that are allocated to it
for investment in shares of the underlying mutual fund portfolios.
The separate account is registered with the SEC as a unit investment trust
under the 1940 Act. However, the SEC does not supervise the management, the
investment practices, or the policies of the separate account or PFL. Income,
gains and losses, whether or not realized, from assets allocated to the
separate account are, in accordance with the policies, credited to or charged
against the separate account without regard to PFL's other income, gains or
losses.
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 underly the
policy are not chargeable with liabilities arising out of any other business
PFL may conduct. The separate account includes other subaccounts that are not
available under the policy.
Mixed and Shared Funding
Before making a decision concerning the allocation of premium payments to a
particular subaccount, please read the prospectuses for the underlying funds.
The underlying funds are not limited to selling their shares to this separate
account and can accept investments from any separate account or qualified
retirement plan. Since the portfolios of the underlying funds are available to
registered separate accounts offering variable annuity products of PFL, as well
as variable annuity and
31
<PAGE>
variable life products of other insurance companies, and qualified retirement
plans, there is a possibility that a material conflict may arise between the
interests of this separate account and one or more of the other accounts of
another participating insurance company. In the event of a material conflict,
the affected insurance companies, including PFL, agree to take any necessary
steps to resolve the matter. This includes removing their separate accounts
from the underlying funds. See the underlying funds' prospectuses for more
details.
Reinstatements
You may surrender your policy and transfer your money directly to another life
insurance company (sometimes referred to as a 1035 Exchange or a trustee-to-
trustee transfer). You may also ask us to reinstate your policy after such a
transfer by returning the same total dollar amount of funds to the applicable
investment choices. The dollar amount will be used to purchase new accumulation
units at the then current price. Because of changes in market value, your new
accumulation units may be worth more or less than the units you previously
owned. We recommend that you consult a tax professional to explain the possible
tax consequences of exchanges and/or reinstatements.
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 Policy
AFSG Securities Corporation is the principal underwriter of the policy. Like
PFL, it is a Transamerica Company and 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.
Commissions of up to 1.40% of premium payments plus an annual continuing fee
based on policy values will be paid to broker/dealers who sell the policy 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 financial
institutions for their services in connection with the sale and servicing of
the policy.
Variations in Certain Provisions
Certain provisions of the policy may vary from the descriptions in this
prospectus in order to comply with different state laws. See your policy for
variations since any such state variations will be included in your policy or
in riders or endorsements attached to your policy.
IMSA
PFL is a 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 and advertising 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. The IMSA
logo in our sales literature shows our ongoing commitment to these standards.
Legal Proceedings
There are no legal proceedings to which the separate account is a party or to
which the assets of the separate account are subject. PFL, like other life
insurance companies, is involved in lawsuits. In some class action and other
lawsuits involving other insurers, substantial
32
<PAGE>
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 are included in the SAI. As of the date of this
prospectus the separate account had not commenced operations, therefore there
are no financial statements to report at this time.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Glossary of
Terms
The Policy -- General Provisions
Certain Federal Income Tax
Consequences
Investment Experience
Family Income Protector--Additional
Information
Historical Performance Data
Published Ratings
State Regulation of PFL
Administration
Records and Reports
Distribution of the Policies
Voting Rights
Other Products
Custody of Assets
Legal Matters
Independent Auditors
Other Information
Financial Statements
</TABLE>
33
<PAGE>
APPENDIX A
HISTORICAL PERFORMANCE DATA
Standardized Performance Data
PFL may advertise historical yields and total returns for the subaccounts of
the separate account. In addition, PFL may advertise the effective yield of the
subaccount investing in the Endeavor Money Market Portfolio (the "Endeavor
Money Market Subaccount"). These figures are calculated according to
standardized methods prescribed by the SEC. They are based on historical
earnings and are not intended to indicate future performance.
Endeavor Money Market Subaccount. The yield of the Endeavor Money Market
- --------------------------------
Subaccount for a policy refers to the annualized income generated by an
investment under a policy in the subaccount over a specified seven-day period.
The yield is calculated by assuming that the income generated for that seven-
day period is generated each seven-day period over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment under a
policy in the subaccount is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
Other Subaccounts. The yield of a subaccount (other than the Endeavor Money
- -----------------
Market Subaccount) for a policy refers to the annualized income generated by an
investment under a policy in the subaccount over a specified thirty-day period.
The yield is calculated by assuming that the income generated by the investment
during that thirty-day period is generated each thirty-day period over a 12-
month period and is shown as a percentage of the investment.
The total return of a subaccount refers to return quotations assuming an
investment under a policy has been held in the subaccount for various periods
of time including a period measured from the date the subaccount commenced
operations. When a subaccount has been in operation for one, five, and ten
years, respectively, the total return for these periods will be provided. The
total return quotations for a subaccount will represent the average annual
compounded rates of return that equate an initial investment of $1,000 in the
subaccount to the redemption value of that investment as of the last day of
each of the periods for which total return quotations are provided.
The yield and total return calculations for a subaccount do not reflect the
effect of any premium taxes that may be applicable to a particular policy and
they do not reflect the rider charge for the optional family income protector.
To the extent that any or all of a premium tax or rider charge is applicable to
a particular policy, the yield and/or total return of that policy will be
reduced. For additional information regarding yields and total returns
calculated using the standard formats briefly summarized above, please refer to
the SAI, a copy of which may be obtained from the administrative and service
office upon request.
Non-Standardized Performance Data
In addition to the standardized 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-standardized performance data may make other assumptions such
as the amount invested in a subaccount, differences in time periods to be
shown, or the effect of partial withdrawals or annuity payments.
All non-standardized performance data will be advertised only if the
standardized performance data is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the SAI.
34
<PAGE>
Adjusted Historical Performance. The following performance data is historic
- -------------------------------
performance data for the underlying portfolios since their inception reduced by
some or all of the fees and charges under the policy. Such adjusted historic
performance includes data that precedes the inception dates of the subaccounts.
This data is designed to show the performance that would have resulted if the
policy had been in existence during that time, based on the performance of the
applicable portfolio and the assumption that the applicable subaccount was in
existence for the same period as the portfolio with a level of charges equal to
those currently assessed under the policy. This data is not intended to
indicate future performance.
For instance, as shown in Table 1, PFL Life may disclose average annual total
returns for the portfolios reduced by all fees and charges under the policy, as
if the policy had been in existence since the inception of the portfolio. Such
fees and charges include the mortality and expense risk fee and administrative
charge. Table 1 does reflect the rider charge for the optional family income
protector.
The following information is also based on the method of calculation described
in the SAI. The adjusted historical average annual total returns for periods
ended December 31, 1999, were as follows:
TABLE 1 - A
Adjusted Historical Average Annual Total Returns(/1/)
(Assuming No Family Income Protector)
- --------------------------------------------------------------------------------
5% Annually Compounding through age 80 and Annual Step-Up through age 80
(Total Separate Account Annual Expenses: 1.85%)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10 Year Corresponding
or Portfolio
Portfolio 1 Year 5 Year Inception Inception Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Small Cap Value(/2/)..... 27.06% 15.75% 12.66% May 4, 1993
Dreyfus U.S. Government
Securities...................... (2.69%) 4.52% 3.71% May 13, 1994
Endeavor Asset Allocation........ 24.12% 18.90% 13.58% April 8, 1991
Endeavor Enhanced Index.......... 16.02% N/A 25.10% May 1, 1997
Endeavor High Yield.............. 3.89% N/A (0.27%) June 1, 1998
Endeavor Janus Growth............ N/A N/A 34.85% May 1, 1999
Endeavor Opportunity Value....... 2.87% N/A 6.67% November 18, 1996
Endeavor Value Equity............ (4.84%) 14.63% 11.54% May 27, 1993
Endeavor Select.................. 47.84% N/A 26.94% February 3, 1998
T. Rowe Price Equity Income...... 1.57% N/A 15.59% January 3, 1995
T. Rowe Price Growth Stock....... 19.99% N/A 25.09% January 3, 1995
T. Rowe Price International
Stock(/3/)...................... 29.98% 12.71% 7.78% April 8, 1991
Transamerica VIF Growth(/4/)..... 35.32% 46.75% 27.96%+ February 26, 1969
Fidelity - VIP Equity-Income -
Service Class 2(/5/)............ 4.31% 16.42% 12.39%+ October 9, 1986
Fidelity - VIP II Contrafund(R) -
Service Class 2(/5/)............ 21.91% N/A 25.39% January 3, 1995
Fidelity - VIP III Growth
Opportunities -Service Class
2(/5/).......................... 2.28% N/A 19.30% January 3, 1995
Fidelity - VIP III Mid Cap -
Service Class 2(/5/)............ 46.30% N/A 50.31% December 28, 1998
WRL Alger Aggressive Growth...... 66.02% 34.17% 28.00% March 1, 1994
WRL Goldman Sachs Growth......... N/A N/A 16.09% May 3, 1999
WRL Janus Global................. 68.10% 30.56% 25.61% December 3, 1992
WRL NWQ Value Equity............. 5.97% N/A 8.74% May 1, 1996
WRL Pilgrim Baxter Mid Cap
Growth.......................... N/A N/A 75.97% May 3, 1999
WRL Salomon All Cap.............. N/A N/A 14.18% May 3, 1999
WRL T. Rowe Price Dividend
Growth.......................... N/A N/A (8.54%) May 3, 1999
WRL T. Rowe Price Small Cap...... N/A N/A 36.86% May 3, 1999
</TABLE>
- --------------------------------------------------------------------------------
+Ten Year Date
- --------------------------------------------------------------------------------
35
<PAGE>
TABLE 1 - B
Adjusted Historical Average Annual Total Returns(/1/)
(Assuming No Family Income Protector)
- --------------------------------------------------------------------------------
Return of Premium
(Total Separate Account Annual Expenses: 1.70%)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Corresponding
10 Year or Portfolio
Portfolio 1 Year 5 Year Inception Inception Date
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Small Cap Value(/2/).... 27.25% 15.92% 12.83% May 4, 1993
Dreyfus U.S. Government
Securities..................... (2.54%) 4.68% 3.87% May 13, 1994
Endeavor Asset Allocation....... 24.30% 19.08% 13.75% April 8, 1991
Endeavor Enhanced Index......... 16.19% N/A 25.28% May 1, 1997
Endeavor High Yield............. 4.04% N/A (0.12%) June 1, 1998
Endeavor Janus Growth........... N/A N/A 34.98% May 1, 1999
Endeavor Opportunity Value...... 3.03% N/A 6.83% November 18, 1996
Endeavor Value Equity........... (4.70%) 14.80% 11.71% May 27, 1993
Endeavor Select................. 47.84% N/A 26.94% February 3, 1998
T. Rowe Price Equity Income..... 1.73% N/A 15.76% January 3, 1995
T. Rowe Price Growth Stock...... 20.17% N/A 25.27% January 3, 1995
T. Rowe Price International
Stock(/3/)..................... 30.17% 12.88% 7.94% April 8, 1991
Transamerica VIF Growth(/4/).... 35.52% 46.31% 27.86%+ February 26, 1969
Fidelity - VIP Equity-Income -
Service Class 2(/5/)........... 4.47% 16.59% 12.56%+ October 9, 1986
Fidelity - VIP II Contrafund(R)
-
Service Class 2(/5/)........... 22.09% N/A 25.58% January 3, 1995
Fidelity - VIP III Growth
Opportunities - Service Class
2(/5/)......................... 2.43% N/A 19.48% January 3, 1995
Fidelity - VIP III Mid Cap -
Service Class 2(/5/)........... 46.51% N/A 50.53% December 28, 1998
WRL Alger Aggressive Growth..... 66.26% 34.37% 28.19% March 1, 1994
WRL Goldman Sachs Growth........ N/A N/A 16.21% May 3, 1999
WRL Janus Global................ 68.34% 30.75% 25.80% December 3, 1992
WRL NWQ Value Equity............ 6.13% N/A 8.90% May 1, 1996
WRL Pilgrim Baxter Mid Cap
Growth......................... N/A N/A 76.13% May 3, 1999
WRL Salomon All Cap............. N/A N/A 14.30% May 3, 1999
WRL T. Rowe Price Dividend
Growth......................... N/A N/A (8.45%) May 3, 1999
WRL T. Rowe Price Small Cap..... N/A N/A 36.99% May 3, 1999
- ------------------------------------------------------------------------------
</TABLE>
+Ten Year Date
/(1)/ The calculation of total return performance for periods prior to
inception of the subaccounts reflects deductions for the mortality and
expense risk fee and administrative charge on a monthly basis, rather
than a daily basis. The monthly deduction is made at the beginning of
each month and generally approximates the performance that would have
resulted if the subaccounts had actually been in existence since the
inception of the portfolio.
/(2)/ Effective September 16, 1996, The Dreyfus Corporation became the adviser
to the Dreyfus Small Cap Value Portfolio, formerly known as Quest for
Value Small Cap Portfolio. The portfolio was previously advised by OpCap
Advisors.
/(3)/ Effective January 1, 1995, Rowe Price-Fleming International, Inc. became
the new adviser to the Global Growth Portfolio. The Portfolio's name
changed to the T. Rowe Price International Stock Portfolio and the
Portfolio's shareholders approved a change in investment objective from
investments in small capitalization companies on a global basis to
investments in a broad range of companies on an international basis (that
is, non-U.S. companies).
/(4)/ The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc.,
is the successor to Separate Account Fund C of Transamerica Occidental
Life Insurance Company, a management investment company funding variable
annuities, through a reorganization on November 1, 1996. Accordingly, the
performance data for the Transamerica VIF Growth Portfolio include
performance of its predecessor.
/(5)/ Returns prior to January 12, 2000 for the portfolios are based on
historical returns for Initial Class Shares.
The figures for the "five year" and "from inception" periods in the above
tables reflect waiver of advisory fees and reimbursement of other expenses for
all portfolios except the T. Rowe Price Equity Income Portfolio and the T. Rowe
Price Growth Stock Portfolio. In the absence of such waivers, the average
annual total return figures above for the five year and from inception periods
would have been lower.
36
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ACCESS VARIABLE ANNUITY
Issued through
PFL LIFE VARIABLE ANNUITY ACCOUNT D
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 Access Variable Annuity offered by PFL Life
Insurance Company. You may obtain a copy of the prospectus dated May 1, 2000 by
calling 1-800-525-6205, or by writing to the Administrative and Service Office,
Financial Markets Division--Variable Annuity Dept., 4333 Edgewood Road, N.E.,
Cedar Rapids, Iowa 52499-0001. Terms used in the current prospectus for the
variable annuity are incorporated in this Statement of Additional Information.
This Statement of Additional Information (SAI) is not a prospectus and should
be read only in conjunction with the prospectuses for the policy and the
underlying fund portfolios.
Dated: May 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GLOSSARY OF TERMS.......................................................... 3
THE POLICY--GENERAL PROVISIONS............................................. 5
Owner.................................................................... 5
Entire Contract.......................................................... 5
Misstatement of Age or Sex............................................... 6
Addition, Deletion or Substitution of Investments........................ 6
Excess Interest Adjustment............................................... 6
Reallocation of Annuity Units After the Annuity Commencement Date........ 9
Annuity Payment Options.................................................. 10
Death Benefit............................................................ 11
Death of Owner........................................................... 13
Assignment............................................................... 13
Evidence of Survival..................................................... 14
Non-Participating........................................................ 14
Amendments............................................................... 14
Employee and Agent Purchases............................................. 14
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 14
Tax Status of the Policy................................................. 15
Taxation of PFL.......................................................... 18
INVESTMENT EXPERIENCE...................................................... 19
Accumulation Units....................................................... 19
Annuity Unit Value and Annuity Payment Rates............................. 20
FAMILY INCOME PROTECTOR--ADDITIONAL INFORMATION............................ 22
HISTORICAL PERFORMANCE DATA................................................ 24
Money Market Yields...................................................... 24
Other Subaccount Yields.................................................. 25
Total Returns............................................................ 26
Other Performance Data................................................... 26
Adjusted Historical Performance Data--The Separate Account............... 27
PUBLISHED RATINGS.......................................................... 27
STATE REGULATION OF PFL.................................................... 27
ADMINISTRATION............................................................. 28
RECORDS AND REPORTS........................................................ 28
DISTRIBUTION OF THE POLICIES............................................... 28
VOTING RIGHTS.............................................................. 28
OTHER PRODUCTS............................................................. 29
CUSTODY OF ASSETS.......................................................... 29
LEGAL MATTERS.............................................................. 29
INDEPENDENT AUDITORS....................................................... 29
OTHER INFORMATION.......................................................... 29
FINANCIAL STATEMENTS....................................................... 29
</TABLE>
-2-
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit--An accounting unit of measure used in calculating the policy
value in the separate account before the annuity commencement date.
Adjusted Policy Value--An amount equal to the policy value increased or
decreased by any excess interest adjustments.
Administrative and Service Office--Financial Markets Division--Variable Annuity
Dept., PFL Life Insurance Company, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa
52499-0001.
Annuitant--The person during whose life any annuity payments involving life
contingencies will continue.
Annuity Commencement Date--The date upon which annuity payments are to
commence. This date may be any date at least thirty days after the policy date
and may not be later than the last day of the policy month starting after the
annuitant attains age 85, except as expressly allowed by PFL. In no event will
this date be later than the last day of the month following the month in which
the annuitant attains age 95.
Annuity Payment Option--A method of receiving a stream of annuity payments
selected by the owner.
Annuity Unit--An accounting unit of measure used in the calculation of the
amount of the second and each subsequent variable annuity payment.
Beneficiary--The person who has the right to the death benefit set forth in the
policy.
Business Day--A day when the New York Stock Exchange is open for business.
Cash Value--The policy value increased or decreased by an excess interest
adjustment, less the annual service charge, and less any applicable premium
taxes and family income protector rider fee.
Code--The Internal Revenue Code of 1986, as amended.
Enrollment form--A written application, order form, or any other information
received electronically or otherwise upon which the policy is issued and/or is
reflected on the data or specifications page.
Excess Interest Adjustment--A positive or negative adjustment to amounts
withdrawn upon partial withdrawals, full surrenders or transfers from the
guaranteed period options, or to amounts applied to annuity payment options.
The adjustment reflects changes in the interest rates declared by PFL since the
date any payment was received by, or an amount was transferred to, the
guaranteed period option. The excess interest adjustment can either decrease or
increase the amount to be received by the owner upon full surrender or
commencement of annuity payments, depending upon whether there has been an
increase or decrease in interest rates, respectively.
Fixed Account--One or more investment choices under the policy that are part of
PFL's general assets and which are not in the separate account.
Guaranteed Period Options--The various guaranteed interest rate periods of the
fixed account, which PFL may offer, into which premiums may be paid or amounts
may be transferred.
Nonqualified Policy--A policy other than a qualified policy.
-3-
<PAGE>
Owner--Depending upon the state of issue, owner means either:
.the individual or entity that owns a certificate under a group contract; or
.the individual or entity that owns an individual policy.
Participant--A person who makes premium payments or for whom premium payments
are made under the policy.
Policy--Depending upon the state of issue, policy means either:
.the individual certificate under a group contract; or
.the individual policy.
Policy Value--On or before the annuity commencement date, the policy value is
equal to the owner's:
.premium payments; minus
.partial withdrawals (including any applicable excess interest adjustments on
such withdrawals); plus
.interest credited in the fixed account; plus or minus
.accumulated gains or losses in the separate account; minus
.service charges, premium taxes, rider fees, and transfer fees, if any.
Policy Year--A policy year begins on the date in which the policy becomes
effective and on each anniversary thereof.
Premium Payment--An amount paid to PFL by the owner or on the owner's behalf as
consideration for the benefits provided by the policy.
Qualified Policy--A policy issued in connection with retirement plans that
qualify for special federal income tax treatment under the Code.
Separate Account--PFL Life Variable Annuity Account D, a separate account
established and registered as a unit investment trust under the Investment
Company Act of 1940, as amended (the "1940 Act"), to which premium payments
under the policies may be allocated.
Service Charge--An annual charge on each policy anniversary (and a charge at
the time of surrender during any policy year) for policy maintenance and
related administrative expenses. This annual charge is $30, but will not exceed
2% of the policy value.
Subaccount--A subdivision within the separate account, the assets of which are
invested in specified portfolios of the underlying funds.
Successor Owner--A person appointed by the owner to succeed to ownership of the
policy in the event of the death of the owner who is not the annuitant before
the annuity commencement date.
Valuation Period--The period of time from one determination of accumulation
unit values and annuity unit values to the next subsequent determination of
values. Such determination shall be made on each business day.
Variable Annuity Payments--Payments made pursuant to an annuity payment option
which fluctuate as to dollar amount or payment term in relation to the
investment performance of the specified subaccounts within the separate
account.
Written Notice or Written Request--Written notice, signed by the owner, that
gives PFL the information it requires and is received at the administrative and
service office. For some transactions, PFL may accept an electronic notice such
as telephone instructions. Such electronic notice must meet the requirements
PFL establishes for such notices.
-4-
<PAGE>
In order to supplement the description in the prospectus, the following
provides additional information about PFL and the policy, which may be of
interest to a prospective purchaser.
THE POLICY--GENERAL PROVISIONS
Owner
The policy shall belong to the owner upon issuance of the policy after
completion of an enrollment form and delivery of the initial premium payment.
While the annuitant is living, the owner may: (1) assign the policy; (2)
surrender the policy; (3) amend or modify the policy with PFL's consent; (4)
receive annuity payments or name a payee to receive the payments; and (5)
exercise, receive and enjoy every other right and benefit contained in the
policy. The exercise of these rights may be subject to the consent of any
assignee or irrevocable beneficiary, and of your spouse in a community or
marital property state.
Unless PFL has been notified of a community or marital property interest in the
policy, it will rely on its good faith belief that no such interest exists and
will assume no responsibility for inquiry.
A successor owner can be named in the enrollment form, information provided in
lieu thereof, or in a written notice. The successor owner will become the new
owner upon your death, if you predecease the annuitant. If no successor owner
survives you and you predecease the annuitant, your estate will become the
owner.
Note Carefully. If the owner does not name a contingent owner, the owner's
estate will become the new owner. 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 PFL has received written notice of the trust as a
successor owner signed prior to the owner's death, that trust may not exercise
ownership rights to the policy. It may be necessary to open a probate estate in
order to exercise ownership rights to the policy if no contingent owner is
named in a written notice received by PFL.
The owner may change the ownership of the policy in a written notice. When this
change takes effect, all rights of ownership in the policy will pass to the new
owner. A change of ownership may have tax consequences.
When there is a change of owner or successor owner, the change will not be
effective until it is recorded in our records. Once recorded, it will take
effect as of the date the owner signs the written notice, subject to any
payment PFL has made or action PFL has taken before recording the change.
Changing the owner or naming a new successor owner cancels any prior choice of
successor owner, but does not change the designation of the beneficiary or the
annuitant.
If ownership is transferred (except to the owner's spouse) because the owner
dies before the annuitant, the cash value generally must be distributed to the
successor owner within five years of the owner's death, or payments must be
made for a period certain or for the successor owner's lifetime so long as any
period certain does not exceed that successor owner's life expectancy, if the
first payment begins within one year of your death.
Entire Contract
The policy, any endorsements thereon, the enrollment form, or information
provided in lieu thereof constitute the entire contract between PFL and the
owner. All statements in the enrollment form are representations and not
warranties. No statement will cause the policy to be void or to be used in
defense of a claim unless contained in the enrollment form or information
provided in lieu thereof.
-5-
<PAGE>
Misstatement of Age or Sex
If the age or sex of the annuitant or owner has been misstated, PFL will change
the annuity benefit payable to that which the premium payments would have
purchased for the correct age or sex. The dollar amount of any underpayment
made by PFL shall be paid in full with the next payment due such person or the
beneficiary. The dollar amount of any overpayment made by PFL due to any
misstatement shall be deducted from payments subsequently accruing to such
person or beneficiary. Any underpayment or overpayment will include interest at
5% per year, from the date of the wrong payment to the date of the adjustment.
The age of the annuitant or owner may be established at any time by the
submission of proof satisfactory to PFL.
Addition, Deletion, or Substitution of Investments
PFL cannot and does not guarantee that any of the subaccounts will always be
available for premium payments, allocations, or transfers. PFL retains the
right, subject to any applicable law, to make certain changes in the separate
account and its investments. PFL reserves the right to eliminate the shares of
any portfolio held by a subaccount and to substitute shares of another
portfolio of the underlying funds, or of another registered open-end management
investment company for the shares of any portfolio, if the shares of the
portfolio are no longer available for investment or if, in PFL's judgment,
investment in any portfolio would be inappropriate in view of the purposes of
the separate account. To the extent required by the 1940 Act, substitutions of
shares attributable to your interest in a subaccount will not be made without
prior notice to you and the prior approval of the Securities and Exchange
Commission ("SEC"). Nothing contained herein shall prevent the separate account
from purchasing other securities for other series or classes of variable
annuities, or from effecting an exchange between series or classes of variable
annuities on the basis of your requests.
New subaccounts may be established when, in the sole discretion of PFL,
marketing, tax, investment or other conditions warrant. Any new subaccounts may
be made available to existing owners on a basis to be determined by PFL. Each
additional subaccount will purchase shares in a mutual fund portfolio or other
investment vehicle. PFL may also eliminate one or more subaccounts if, in its
sole discretion, marketing, tax, investment or other conditions warrant such
change. In the event any subaccount is eliminated, PFL will notify you and
request a reallocation of the amounts invested in the eliminated subaccount. If
no such reallocation is provided by you, PFL will reinvest the amounts in the
subaccount that invests in the Endeavor Money Market Portfolio (or in a similar
portfolio of money market instruments), in another subaccount, or in the fixed
account, if appropriate.
In the event of any such substitution or change, PFL may, by appropriate
endorsement, make such changes in the policy as may be necessary or appropriate
to reflect such substitution or change. Furthermore, if deemed to be in the
best interests of persons having voting rights under the policies, the separate
account may be (i) operated as a management company under the 1940 Act or any
other form permitted by law, (ii) deregistered under the 1940 Act in the event
such registration is no longer required or (iii) combined with one or more
other separate accounts. To the extent permitted by applicable law, PFL also
may transfer the assets of the separate account associated with the policies to
another account or accounts.
Excess Interest Adjustment
Money that you withdraw from, transfer out of, or apply to an annuity payment
option from a guaranteed period option of the fixed account before the end of
its guaranteed period (the number of years you specified the money would remain
in the guaranteed period option) may be subject to an excess interest
adjustment. At the time you request a withdrawal, if interest rates PFL set
have risen since the date of the initial guarantee, the excess interest
adjustment will result in a lower policy value. However, if interest rates have
fallen since the date of the initial guarantee, the excess interest adjustment
will result in a higher policy value.
-6-
<PAGE>
Excess interest adjustments will not reduce the adjusted policy value for a
guaranteed period option below the premium payments and transfers to that
guaranteed period option, less any prior partial withdrawals and transfers from
the guaranteed period option, plus interest at the policy's minimum guaranteed
effective annual interest rate of 3%. This is referred to as the excess
interest adjustment floor.
The formula that will be used to determine the excess interest adjustment is:
S* (G-C)* (M/12)
S= Gross amount being withdrawn that is subject to the excess interest
adjustment
G= Guaranteed Interest Rate in effect for the policy
C= Current Guaranteed Interest Rate then being offered on new premiums for the
next longer option period than "M". If this policy or such an option period
is no longer offered, "C" will be the U.S. Treasury rate for the next longer
maturity (in whole years) than "M" on the 25th day of the previous calendar
month, plus up to 2%.
M= Number of months remaining in the current option period, rounded up to the
next higher whole number of months.
*= multiplication
/\= exponentiation
Example 1 (Surrender, rates increase by 3%):
<TABLE>
<S> <C>
Single Premium: $50,000
- ------------------------------------------------------------------------------------------
Guarantee Period: 5 Years
- ------------------------------------------------------------------------------------------
Guarantee Rate: 5.50% per annum
- ------------------------------------------------------------------------------------------
Surrender: Middle of Policy Year 3
- ------------------------------------------------------------------------------------------
Policy Value at middle of Policy Year 3 = 50,000* (1.055)/\ 2.5 = 57,161.18
- ------------------------------------------------------------------------------------------
Penalty Fee Amount at middle of Policy Year = 50,000* .10 = 5,000.00
3
- ------------------------------------------------------------------------------------------
Amount Subject to Excess Interest = 57,161.18-5,000.00 = 52,161.18
Adjustment
- ------------------------------------------------------------------------------------------
Excess Interest Adjustment Floor = 50,000* (1.03)/\ 2.5 = 53,834.80
- ------------------------------------------------------------------------------------------
Excess Interest Adjustment
G = .055
C = .085
M = 30
- ------------------------------------------------------------------------------------------
Excess Interest Adjustment = S* (G-C)* (M/12)
= 52,161.18* (.055-.085)* (30/12)
= -3,912.09, but excess interest
adjustment cannot cause the adjusted policy
value to fall below the excess interest
adjustment floor, so the adjustment is
limited to 53,834.80-57,161.18
= -3,326.38
- ------------------------------------------------------------------------------------------
Adjusted Policy Value = Policy Value + Excess Interest
Adjustment = 57,161.18 + (-3,326.38)
- ------------------------------------------------------------------------------------------
= 53,834.80
- ------------------------------------------------------------------------------------------
Cash Value at middle of Policy Year 3 = 53,834.80
</TABLE>
-7-
<PAGE>
Example 2 (Surrender, rates decrease by 1%):
<TABLE>
<S> <C>
Single Premium: $50,000
- ---------------------------------------------------------------------------------
Guarantee Period: 5 Years
- ---------------------------------------------------------------------------------
Guarantee Rate: 5.50% per annum
- ---------------------------------------------------------------------------------
Surrender: Middle of Policy Year 3
- ---------------------------------------------------------------------------------
Policy Value at middle of Policy Year 3 = 50,000* (1.055)/\ 2.5 = 57,161.18
- ---------------------------------------------------------------------------------
Penalty Free Amount at middle of Policy = 50,000* .10 = 5,000
Year 3
- ---------------------------------------------------------------------------------
Amount Subject to Excess Interest = 57,161.18-5,000 = 52,161.18
Adjustment
- ---------------------------------------------------------------------------------
Excess Interest Adjustment Floor = 50,000* (1.03)/\ 2.5 = 53,834.80
- ---------------------------------------------------------------------------------
Excess Interest Adjustment
G = .055
C = .045
M = 30
- ---------------------------------------------------------------------------------
Excess Interest Adjustment = S* (G-C)* (M/12)
- ---------------------------------------------------------------------------------
= 52,161.18* (.055-.045)* (30/12)
- ---------------------------------------------------------------------------------
= 1,304.03
- ---------------------------------------------------------------------------------
Adjusted Policy Value = 57,161.18 + 1,304.03 = 58,465.21
- ---------------------------------------------------------------------------------
Cash Value at middle of Policy Year 3 = 58,465.21
</TABLE>
On a partial withdrawal, PFL will pay the owner the full amount of withdrawal
requested (as long as the policy value is sufficient). Amounts withdrawn will
reduce the policy value by an amount equal to:
R - E
R=the requested partial withdrawal;
E=the excess interest adjustment.
-8-
<PAGE>
Example 3 (Partial Withdrawal, rates increase by 1%):
<TABLE>
<S> <C>
Single Premium: $50,000
- ----------------------------------------------------------------------------------
Guarantee Period: 5 Years
- ----------------------------------------------------------------------------------
Guarantee Rate: 5.50% per annum
- ----------------------------------------------------------------------------------
Partial Withdrawal: $20,000; Middle of Policy Year 3
- ----------------------------------------------------------------------------------
Policy Value at middle of Policy Year 3 = 50,000* (1.055)/\ 2.5 = 57,161.18
- ----------------------------------------------------------------------------------
Penalty Free Amount at middle of Policy = 50,000* .10 = 5,000
Year 3
- ----------------------------------------------------------------------------------
Excess Interest Adjustment
S = 20,000-5,000 = 15,000
G = .055
C = .065
M = 30
E = 15,000* (.055-.065)* (30/12) = -375
- ----------------------------------------------------------------------------------
Remaining Policy Value at middle of
Policy Year 3 = 57,161.18-(R-E)
- ----------------------------------------------------------------------------------
= 57,161.18-(20,000-375)
- ----------------------------------------------------------------------------------
= 36,786.18
</TABLE>
Example 4 (Partial Withdrawal, rates decrease by 1%):
<TABLE>
<S> <C>
Single Premium: $50,000
- ----------------------------------------------------------------------------------
Guarantee Period: 5 Years
- ----------------------------------------------------------------------------------
Guarantee Rate: 5.50% per annum
- ----------------------------------------------------------------------------------
Partial Withdrawal: $20,000; Middle of Policy Year 3
- ----------------------------------------------------------------------------------
Policy Value at middle of Policy Year 3 = 50,000* (1.055)/\ 2.5 = 57,161.18
- ----------------------------------------------------------------------------------
Penalty Free Amount at middle of Policy = 50,000* .10 = 5,000
Year 3
- ----------------------------------------------------------------------------------
Excess Interest Adjustment
S = 20,000-5,000 = 15,000
G = .055
C = .045
M = 30
E = 15,000* (.055-.045)* (30/12) = 375
- ----------------------------------------------------------------------------------
Remaining Policy Value at middle of
Policy Year 3 = 57,161.18-(R-E)
- ----------------------------------------------------------------------------------
= 57,161.18-(20,000-375)
- ----------------------------------------------------------------------------------
= 36,366.18
</TABLE>
Reallocation of Annuity Units After the Annuity Commencement Date
After the annuity commencement date, you may reallocate the value of a
designated number of annuity units of a subaccount then credited to a policy
into an equal value of annuity units of one or more other subaccounts or the
fixed account. The reallocation shall be based on the relative value of the
annuity units of the account(s) or subaccount(s) at the end of the business day
on the next payment date. The minimum amount which may be reallocated is the
lesser of (1) $10 of monthly
-9-
<PAGE>
income or (2) the entire monthly income of the annuity units in the account or
subaccount from which the transfer is being made. If the monthly income of the
annuity units remaining in an account or subaccount after a reallocation is
less than $10, PFL reserves the right to include the value of those annuity
units as part of the transfer. The request must be in writing to PFL's
administrative and service office. There is no charge assessed in connection
with such reallocation. A reallocation of annuity units may be made up to four
times in any given policy year.
After the annuity commencement date, no transfers may be made from the fixed
account to the separate account.
Annuity Payment Options
During the lifetime of the annuitant and prior to the annuity commencement
date, the owner may choose an annuity payment option or change the election,
but written notice of any election or change of election must be received by
PFL at its administrative and service office at least thirty (30) days prior to
the annuity commencement date. If no election is made prior to the annuity
commencement date, annuity payments will be made under (i) Payment Option 3,
life income with level payments for 10 years certain, using the existing
adjusted policy value of the fixed account, or (ii) under Payment Option 3,
life income with variable payments for 10 years certain using the existing
policy value of the separate account, or (iii) in a combination of (i) and
(ii).
The person who elects an annuity payment option can also name one or more
successor payees to receive any unpaid amount PFL has at the death of a payee.
Naming these payees cancels any prior choice of a successor payee.
A payee who did not elect the annuity payment option does not have the right to
advance or assign payments, take the payments in one sum, or make any other
change. However, the payee may be given the right to do one or more of these
things if the person who elects the option tells PFL in writing and PFL agrees.
Variable Payment Options. The dollar amount of the first variable annuity
payment will be determined in accordance with the annuity payment rates set
forth in the applicable table contained in the policy. The tables are based on
a 5% effective annual Assumed Investment Return and the "1983 Table a" (male,
female, and unisex if required by law) mortality table with projection using
Scale G factors, assuming a maturity date in the year 2000. ("The 1983 Table a"
mortality rates are adjusted based on improvements in mortality since 1983 to
more appropriately reflect increased longevity. This is accomplished using a
set of improvement factors referred to as projection scale G.) The dollar
amount of additional variable annuity payments will vary based on the
investment performance of the subaccount(s) of the separate account selected by
the annuitant or beneficiary.
Determination of the First Variable Payment. The amount of the first variable
payment depends upon the sex (if consideration of sex is allowed under state
law) and adjusted age of the annuitant. The adjusted age is the annuitant's
actual age nearest birthday, on the annuity commencement date, adjusted as
follows:
<TABLE>
<CAPTION>
Annuity Commencement Date Adjusted Age
------------------------- ------------------
<S> <C>
Before 2001 Actual Age
2001-2010 Actual Age minus 1
2011-2020 Actual Age minus 2
2021-2030 Actual Age minus 3
2031-2040 Actual Age minus 4
After 2040 Actual Age minus 5
</TABLE>
This adjustment assumes an increase in life expectancy, and therefore it
results in lower payments than without such an adjustment.
-10-
<PAGE>
Determination of Additional Variable Payments. All variable annuity payments
other than the first are calculated using annuity units and are credited to the
policy. The number of annuity units to be credited in respect of a particular
subaccount is determined by dividing that portion of the first variable annuity
payment attributable to that subaccount by the annuity unit value of that
subaccount on the annuity commencement date. The number of annuity units of
each particular subaccount credited to the policy then remains fixed, assuming
no transfers to or from that subaccount occur. The dollar value of variable
annuity units in the chosen subaccount will increase or decrease reflecting the
investment experience of the chosen subaccount. The dollar amount of each
variable annuity payment after the first may increase, decrease or remain
constant. This amount is equal to the sum of the amounts determined by
multiplying the number of annuity units of each particular subaccount credited
to the policy by the annuity unit value for the particular subaccount as of the
first business day of each month.
Death Benefit
Adjusted Partial Withdrawal. The amount of your guaranteed minimum death
benefit is reduced due to a partial withdrawal called the adjusted partial
withdrawal. The reduction amount depends on the relationship between your
guaranteed minimum death benefit and policy value. The adjusted partial
withdrawal is equal to (1) multiplied by (2), where:
(1) is the gross partial withdrawal, where gross partial withdrawal =
requested withdrawal minus excess interest adjustment; and
(2) is the adjustment factor = current death benefit prior to the
withdrawal divided by the current policy value prior to the withdrawal.
The following examples describe the effect of a withdrawal on the guaranteed
minimum death benefit and policy value.
Example 1
(Assumed Facts for Example)
<TABLE>
- ------------------------------------------------------------------------------
<C> <S>
$75,000 current Guaranteed Minimum Death Benefit before withdrawal
- ------------------------------------------------------------------------------
$50,000 current policy value before withdrawal
- ------------------------------------------------------------------------------
$75,000 current death benefit (larger of policy value and Guaranteed Minimum
Death Benefit)
- ------------------------------------------------------------------------------
$15,000 requested withdrawal
- ------------------------------------------------------------------------------
$40,000 Cumulative Premium Payments
- ------------------------------------------------------------------------------
$ 100 excess interest adjustment
(assumes interest rates have increased since initial guarantee)
- ------------------------------------------------------------------------------
$14,900 reduction in policy value = 15,000-100 = 14,900
- ------------------------------------------------------------------------------
$22,350 adjusted partial withdrawal = 14,900* (75,000/50,000)
- ------------------------------------------------------------------------------
$52,650 New guaranteed minimum death benefit (after withdrawal) = 75,000-
22,350
- ------------------------------------------------------------------------------
$35,100 New policy value (after withdrawal) = 50,000-14,646
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Summary:
- --------
<S> <C>
Reduction in guaranteed minimum death benefit = $22,350
Reduction in policy value = $14,900
</TABLE>
Note, guaranteed minimum death benefit is reduced more than the policy value
since the guaranteed minimum death benefit was greater than the policy value
just prior to the withdrawal.
Example 2
(Assumed Facts for Example)
<TABLE>
- ------------------------------------------------------------------------------
<C> <S>
$50,000 current Guaranteed Minimum Death Benefit before withdrawal
- ------------------------------------------------------------------------------
$75,000 current policy value before withdrawal
- ------------------------------------------------------------------------------
$75,000 current death benefit (larger of policy value and Guaranteed Minimum
Death Benefit)
- ------------------------------------------------------------------------------
$15,000 requested withdrawal
- ------------------------------------------------------------------------------
$60,000 Cumulative Premium Payments
- ------------------------------------------------------------------------------
$- 100 excess interest adjustment
(assumes interest rates have increased since initial guarantee)
- ------------------------------------------------------------------------------
$15,100 reduction in policy value = 15,000-(-100) = 15,100
- ------------------------------------------------------------------------------
$15,100 adjusted partial withdrawal = (15,100* (75,000/75,000)
- ------------------------------------------------------------------------------
$34,900 New guaranteed minimum death benefit (after withdrawal) = 50,000-
15,100
- ------------------------------------------------------------------------------
$59,900 New policy value (after withdrawal) = 75,000-15,100
</TABLE>
<TABLE>
<CAPTION>
Summary:
- --------
<S> <C>
Reduction in guaranteed minimum death benefit = $15,100
Reduction in policy value = $15,100
</TABLE>
-12-
<PAGE>
Note, the guaranteed minimum death benefit and policy value are reduced by the
same amount since the policy value was higher than the guaranteed minimum death
benefit just prior to the withdrawal.
Due proof of death of the annuitant is proof that the annuitant that is the
owner died prior to the commencement of annuity payments. A certified copy of a
death certificate, a certified copy of a decree of a court of competent
jurisdiction as to the finding of death, a written statement by the attending
physician, or any other proof satisfactory to PFL will constitute due proof of
death. Upon receipt of this proof and an election of a method of settlement and
return of the policy, the death benefit generally will be paid within seven
days, or as soon thereafter as PFL has sufficient information about the
beneficiary to make the payment. The beneficiary may receive the amount payable
in a lump sum cash benefit, or, subject to any limitation under any state or
federal law, rule, or regulation, under one of the annuity payment options
described above, unless a settlement agreement is effective at the death of the
owner preventing such election.
If the annuitant was the owner, and the beneficiary was not the annuitant's
spouse, the death benefit must (1) be distributed within five years of the date
of the deceased owner's death, or (2) payments under an annuity payment option
must begin no later than one year after the deceased owner's death and must be
made for the beneficiary's lifetime or for a period certain (so long as any
period certain does not exceed the beneficiary's life expectancy). Death
proceeds which are not paid to or for the benefit of a natural person, must be
distributed within five years of the date of the deceased owner's death. If the
sole beneficiary is the deceased owner's surviving spouse, such spouse may
elect to continue the policy as the new annuitant and owner instead of
receiving the death benefit.
If the annuitant is not the owner, and the owner dies prior to the annuity
commencement date, a successor owner may surrender the policy at any time for
the amount of the adjusted policy value. If the successor owner is not the
deceased owner's spouse, however, the adjusted policy value must be
distributed: (1) within five years after the date of the deceased owner's
death, or (2) payments under an annuity payment option must begin no later than
one year after the deceased owner's death and must be made for the successor
owner's lifetime or for a period certain (so long as any period certain does
not exceed the successor owner's life expectancy).
Beneficiary. The beneficiary designation in the enrollment form will remain in
effect until changed. The owner may change the designated beneficiary by
sending written notice to PFL. The beneficiary's consent to such change is not
required unless the beneficiary was irrevocably designated or law requires
consent. (If an irrevocable beneficiary dies, the owner may then designate a
new beneficiary.) The change will take effect as of the date the owner signs
the written notice, whether or not the owner is living when the notice is
received by PFL. PFL will not be liable for any payment made before the written
notice is received. If more than one beneficiary is designated, and the owner
fails to specify their interests, they will share equally.
Death of Owner
Federal tax law requires that if any owner (including any joint owner or any
successor owner who has become a current owner) dies before the annuity
commencement date, then the entire value of the policy must generally be
distributed within five years of the date of death of such owner. Certain rules
apply where (1) the spouse of the deceased owner is the sole beneficiary, (2)
the owner is not a natural person and the primary annuitant dies or is changed,
or (3) any owner dies after the annuity commencement date. See "Certain Federal
Income Tax Consequences" for more information about these rules. Other rules
may apply to qualified policies.
Assignment
During the lifetime of the annuitant you may assign any rights or benefits
provided by the policy if your policy is a nonqualified policy. An assignment
will not be binding on PFL until a copy has been filed at its administrative
and service office. Your rights and benefits and those of the beneficiary are
-13-
<PAGE>
subject to the rights of the assignee. PFL assumes no responsibility for the
validity or effect of any assignment. Any claim made under an assignment shall
be subject to proof of interest and the extent of the assignment. An assignment
may have tax consequences.
Unless you so direct by filing written notice with PFL, no beneficiary may
assign any payments under the policy before they are due. To the extent
permitted by law, no payments will be subject to the claims of any
beneficiary's creditors.
Ownership under qualified policies is restricted to comply with the Code.
Evidence of Survival
PFL reserves the right to require satisfactory evidence that a person is alive
if a payment is based on that person being alive. No payment will be made until
PFL receives such evidence.
Non-Participating
The policy will not share in PFL's surplus earnings; no dividends will be paid.
Amendments
No change in the policy is valid unless made in writing by PFL and approved by
one of PFL's officers. No registered representative has authority to change or
waive any provision of the policy.
PFL reserves the right to amend the policy to meet the requirements of the
Code, regulations or published rulings. You can refuse such a change by giving
written notice, but a refusal may result in adverse tax consequences.
Employee and Agent Purchases
The policy may be acquired by an employee or registered representative of any
broker/dealer authorized to sell the policy or their spouse or minor children,
or by an officer, director, trustee or bona-fide full-time employee of PFL or
its affiliated companies or their spouse or minor children. In such a case, PFL
may credit an amount equal to a percentage of each premium payment to the
policy due to lower acquisition costs PFL experiences on those purchases. The
credit will be reported to the Internal Revenue Service as taxable income to
the employee or registered representative. PFL may offer certain employer
sponsored savings plans, in its discretion reduced fees and charges including,
but not limited to, the annual service charge, the mortality and expense risk
fee and the administrative charge for certain sales under circumstances which
may result in savings of certain costs and expenses. In addition, there may be
other circumstances of which PFL is not presently aware which could result in
reduced sales or distribution expenses. Credits to the policy or reductions in
these fees and charges will not be unfairly discriminatory against any owner.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary does not constitute tax advice. It is a general
discussion of certain of the expected federal income tax consequences of
investment in and distributions with respect to a policy, based on the Code, as
amended, proposed and final Treasury Regulations thereunder, judicial
authority, and current administrative rulings and practice. This summary
discusses only certain federal income tax consequences to "United States
Persons," and does not discuss state, local, or foreign tax consequences.
United States Persons means citizens or residents of the United States,
domestic corporations, domestic partnerships and trusts or estates that are
subject to United States federal income tax regardless of the source of their
income.
-14-
<PAGE>
Tax Status of the Policy
The following discussion is based on the assumption that the policy qualifies
as an annuity contract for federal income tax purposes.
Distribution Requirements. The Code requires that nonqualified policies
contain specific provisions for distribution of policy proceeds upon the death
of any owner. In order to be treated as an annuity contract for federal income
tax purposes, the Code requires that such policies provide that if any owner
dies on or after the annuity commencement date and before the entire interest
in the policy has been distributed, the remaining portion must be distributed
at least as rapidly as under the method in effect on such owner's death. If
any owner dies before the annuity commencement date, the entire interest in
the policy must generally be distributed within 5 years after such owner's
date of death or be used to purchase an immediate annuity under which payments
will begin within one year of such owner's death and will be made for the life
of the beneficiary or for a period not extending beyond the life expectancy of
the "designated beneficiary" as defined in section 72(s) of the Code. However,
if upon such owner's death prior to the annuity commencement date, such
owner's surviving spouse becomes the sole new owner, then the policy may be
continued with the surviving spouse as the new owner. Under the policy, the
beneficiary is the designated beneficiary of an owner/annuitant and the
successor owner is the designated beneficiary of an owner who is not the
annuitant. If any owner is not a natural person, then for purposes of these
distribution requirements, the primary annuitant shall be treated as an owner
and any death or change of such primary annuitant shall be treated as the
death of an owner. The nonqualified policies contain provisions intended to
comply with these requirements of the Code. No regulations interpreting these
requirements of the Code have yet been issued and thus no assurance can be
given that the provisions contained in the policy satisfy all such Code
requirements. The provisions contained in the policy will be reviewed and
modified if necessary to assure that they comply with the Code requirements
when clarified by regulation or otherwise.
Diversification Requirements. Section 817(h) of the Code provides that in
order for a variable contract which is based on a segregated asset account to
qualify as an annuity contract under the Code, the investments made by such
account must be "adequately diversified" in accordance with Treasury
regulations. The Treasury regulations issued under Section 817(h) (Treas. Reg.
(S)1.817-5) apply a diversification requirement to each of the subaccounts.
The separate account, through its underlying funds and their portfolios,
intends to comply with the diversification requirements of the Treasury. PFL
has entered into agreements with each underlying fund company which requires
the portfolios to be operated in compliance with the Treasury regulations.
Owner Control. Incertain 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. Several
years ago, the IRS stated in published rulings that a variable annuity
contract owner will be considered the owner of separate account assets if the
contract owner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets.
More recently, the Treasury Department announced in connection with the
issuance of regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause
the investor (i.e., you), rather than the insurance company, to be treated as
the owner of the assets in the account." This announcement also stated that
guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular subaccounts
without being treated as owners of the underlying assets."
The ownership rights under the contract are similar to, but different in
certain respects from those described by the IRS in rulings in which it was
determined that contract owners were not owners of
-15-
<PAGE>
separate account assets. For example, you have the choice of one or more
subaccounts in which to allocate premiums and policy values, and may be able to
transfer among these accounts more frequently than in such rulings. These
differences could result in you being treated as the owner of the assets of the
separate account. In addition, PFL does not know what standards will be set
forth, if any, in the regulations or rulings that the Treasury Department has
stated it expects to issue. PFL therefore reserves the right to modify the
policies as necessary to attempt to prevent you from being considered the owner
of a pro rata share of the assets of the separate account.
Withholding. The portion of any distribution under a policy that is includable
in gross income will be subject to federal income tax withholding unless the
recipient of such distribution elects not to have federal income tax withheld.
Election forms will be provided at the time distributions are requested or
made. The withholding rate varies according to the type of distribution and the
owner's tax status. For qualified policies, "eligible rollover distributions"
from Section 401(a) plans, Section 403(a) annuities, and Section 403(b) tax-
sheltered annuities are subject to a mandatory federal income tax withholding
of 20%. An eligible rollover distribution is the taxable portion of any
distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity
form. The 20% withholding does not apply, however, if the owner chooses a
"direct rollover" from the plan to another tax-qualified plan or IRA. Different
withholding requirements may apply in the case of non-United States persons.
Qualified Policies. The qualified policy is designed for use with several types
of tax-qualified retirement plans. The tax rules applicable to participants and
beneficiaries in tax-qualified retirement plans vary according to the type of
plan and the terms and conditions of the plan. Special favorable tax treatment
may be available for certain types of contributions and distributions. Adverse
tax consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; and in other specified circumstances. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into the policies or our administration procedures. Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the policies comply with applicable law.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year in which the owner (or plan participant ) reaches age 70
1/2. Each owner is responsible for requesting distributions under the policy
that satisfy applicable tax rules.
PFL makes no attempt to provide more than general information about use of the
policy with the various types of retirement plans. Purchasers of a policy for
use with any retirement plan should consult their legal counsel and tax adviser
regarding the suitability of the policy.
Individual Retirement Annuities. In order to qualify as a traditional
individual retirement annuity under Section 408(b) of the Code, a policy must
contain certain provisions: (i) the owner must be the annuitant; (ii) the
policy generally is not transferable by the owner, e.g., the owner may not
designate a new owner, designate a contingent owner or assign the policy as
collateral security; (iii) the total premium payments for any calendar year may
not exceed $2,000, except in the case of a rollover amount or contribution
under Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code; (iv)
annuity payments or withdrawals must begin no later than April 1 of the
calendar year following the calendar year in which the annuitant attains age 70
1/2; (v) an annuity payment option with a period certain that will guarantee
annuity payments beyond the life expectancy of the annuitant and the
-16-
<PAGE>
beneficiary may not be selected; and (vi) certain payments of death benefits
must be made in the event the annuitant dies prior to the distribution of the
policy value. Policies intended to qualify as traditional individual retirement
annuities under Section 408(b) of the Code contain such provisions. Amounts in
the IRA (other than nondeductible contributions) are taxed when distributed
from the IRA. Distributions prior to age 59 1/2 (unless certain exceptions
apply) are subject to a 10% penalty tax.
No part of the funds for an individual retirement account (including a Roth
IRA) or annuity should be invested in a life insurance contract, but the
regulations thereunder allow such funds to be invested in an annuity contract
that provides a death benefit that equals the greater of the premiums paid or
the cash value for the contract. The policy provides an enhanced death benefit
that could exceed the amount of such a permissible death benefit, but it is
unclear to what extent such an enhanced death benefit could disqualify the
policy as an IRA. The Internal Revenue Service has not reviewed the policy for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether an enhanced death benefit provision, such as the
provision in the policy, comports with IRA qualification requirements.
Roth Individual Retirement Annuities (Roth IRA). The Roth IRA, under Section
408A of the Code, contains many of the same provisions as a traditional IRA.
However, there are some differences. First, the contributions are not
deductible and must be made in cash or as a rollover or transfer from another
Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA
may be subject to tax and other special rules may apply to the rollover or
conversion and to distributions attributable thereto. You should consult a tax
adviser before combining any converted amounts with any other Roth IRA
contributions, including any other conversion amounts from other tax years. The
Roth IRA is available to individuals with earned income and whose modified
adjusted gross income is under $110,000 for single filers, $160,000 for married
filing jointly, and $10,000 for married filing separately. The amount per
individual that may be contributed to all IRAs (Roth and traditional) is
$2,000. Secondly, the distributions are taxed differently. The Roth IRA offers
tax-free distributions when made 5 tax years after the first contribution to
any Roth IRA of the individual and made after attaining age 59 1/2, to pay for
qualified first time homebuyer expenses (lifetime maximum of $10,000) or due to
death or disability. All other distributions are subject to income tax when
made from earnings and may be subject to a premature withdrawal penalty tax
unless an exception applies. Unlike the traditional IRA, there are no minimum
required distributions during the owner's lifetime; however, required
distributions at death are generally the same.
Section 403(b) Plans. Under Section 403(b) of the Code, payments made by public
school systems and certain tax exempt organizations to purchase policies for
their employees are excludable from the gross income of the employee, subject
to certain limitations. However, such payments may be subject to FICA (Social
Security) taxes. The policies include a death benefit that in some cases may
exceed the greater of the premium payments or the policy value. The death
benefit could be characterized as an incidental benefit, the amount of which is
limited in any tax-sheltered annuity under section 403(b). Because the death
benefit may exceed this limitation, employers using the policies in connection
with such plans should consult their tax adviser. Additionally, in accordance
with the requirements of the Code, Section 403(b) annuities generally may not
permit distribution of (i) elective contributions made in years beginning after
December 31, 1988, and (ii) earnings on those contributions and (iii) earnings
on amounts attributed to elective contributions held as of the end of the last
year beginning before January 1, 1989. Distributions of such amounts will be
allowed only upon the death of the employee, on or after attainment of age 59
1/2, separation from service, disability, or financial hardship, except that
income attributable to elective contributions may not be distributed in the
case of hardship.
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans. Sections 401(a)
and 403(a) of the Code permit corporate employers to establish various types of
retirement plans for employees and self-employed individuals to establish
qualified plans for themselves and their employees. Such
-17-
<PAGE>
retirement plans may permit the purchase of the policies to accumulate
retirement savings. Adverse tax consequences to the plan, the participant or
both may result if the policy is assigned or transferred to any individual as a
means to provide benefit payments. The policies include a death benefit that in
some cases may exceed the greater of the premium payments or the policy value.
The death benefit could be characterized as an incidental benefit, the amount
of which is limited in a pension or profit sharing plan. Because the death
benefit may exceed this limitation, employers using the policies in connection
with such plans should consult their tax adviser.
Deferred Compensation Plans. Section 457 of the Code, while not actually
providing for a qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service for state
governments, local governments, political sub-divisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. The policies can be used with such plans. Under such plans a
participant may specify the form of investment in which his or her
participation will be made. For non-governmental Section 457 plans, all such
investments, however, are owned by, and are subject to, the claims of the
general creditors of the sponsoring employer. Depending on the terms of the
particular plan, a non-government employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan obligations. In general,
all amounts received under a Section 457 plan are taxable and are subject to
federal income tax withholding as wages.
Non-natural Persons. Pursuant to Section 72(u) of the Code, an annuity contract
held by a taxpayer other than a natural person generally will not be treated as
an annuity contract under the Code; accordingly, an owner who is not a natural
person will recognize as ordinary income for a taxable year the excess of (i)
the sum of the policy value as of the close of the taxable year and all
previous distributions under the policy over (ii) the sum of the premium
payments paid for the taxable year and any prior taxable year and the amounts
includable in gross income for any prior taxable year with respect to the
policy. For these purposes, the policy value at year-end may have to be
increased by any positive excess interest adjustment, which could result from a
full surrender at such time. There is, however, no definitive guidance on the
proper tax treatment of excess interest adjustments, and the owner should
contact a competent tax adviser with respect to the potential tax consequences
of an excess interest adjustment. Notwithstanding the preceding sentences in
this paragraph, Section 72(u) of the Code does not apply to (i) a policy where
the nominal owner is not a natural person but the beneficial owner is a natural
person, (ii) a policy acquired by the estate of a decedent by reason of such
decedent's death, (iii) a qualified policy (other than one qualified under
Section 457) or (iv) a single-payment annuity where the annuity commencement
date is no later than one year from the date of the single premium payment;
instead, such policies are taxed as described above under the heading "Taxation
of Annuities."
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 "regulated investment companies" under
Subchapter M of the Code. PFL does not expect to incur any federal income tax
liability with respect to investment income and net capital gains arising from
the activities of the separate account retained as part of the reserves under
the policy. Based on this expectation, it is anticipated that no charges will
be made against the separate account for federal income taxes. If, in future
years, any federal income taxes are incurred by PFL with respect to the
separate account, PFL may make a charge to that account.
-18-
<PAGE>
INVESTMENT EXPERIENCE
A "net investment factor" is used to determine the value of accumulation units
and annuity units, and to determine annuity payment rates.
Accumulation Units
Allocations of a premium payment directed to a subaccount are credited in the
form of accumulation units. Each subaccount has a distinct accumulation unit
value. The number of units credited is determined by dividing the premium
payment or amount transferred to the subaccount by the accumulation unit value
of the subaccount as of the end of the valuation period during which the
allocation is made. For each subaccount, the accumulation unit value for a
given business day is based on the net asset value of a share of the
corresponding portfolio of the underlying funds less any applicable charges or
fees.
Upon allocation to the selected subaccount, premium payments are converted into
accumulation units of the subaccount. The number of accumulation units to be
credited is determined by dividing the dollar amount allocated to each
subaccount by the value of an accumulation unit for that subaccount as next
determined after the premium payment is received at the administrative and
service office or, in the case of the initial premium payment, when the
enrollment form is completed, whichever is later. The value of an accumulation
unit for the subaccounts was arbitrarily established at $1 at the inception of
each subaccount. Thereafter, the value of an accumulation unit is determined as
of the close of trading on each day the New York Stock Exchange is open for
business.
For the separate account, an index (the "net investment factor") which measures
the investment performance of a subaccount during a valuation period is used to
determine the value of an accumulation unit for the next subsequent valuation
period. The net investment factor may be greater or less than or equal to one;
therefore, the value of an accumulation unit may increase, decrease or remain
the same from one valuation period to the next. You bear this investment risk.
The net investment performance of a subaccount and deduction of certain charges
affect the accumulation unit value.
The net investment factor for any subaccount for any valuation period is
determined by dividing (a) by (b) and subtracting (c) from the result, where:
(a) is the net result of:
. the net asset value per share of the shares held in the subaccount
determined at the end of the current valuation period, plus
. the per share amount of any dividend or capital gain distribution
made with respect to the shares held in the subaccount if the ex-
dividend date occurs during the current valuation period, plus or
minus
. a per share credit or charge for any taxes determined by PFL to have
resulted during the valuation period from the investment operations
of the subaccount;
(b) is the net asset value per share of the shares held in the subaccount
determined as of the end of the immediately preceding valuation period;
(c) is the mortality and expense risk fee during the valuation period,
equal on an annual basis to 1.45% (for both the 5% Annually Compounding
through age 80 Death Benefit and the Annual Step-Up through age 80 Death
Benefit) or 1.30% (for the Return of Premium Death Benefit) of the daily
net asset value of the subaccount, plus the 0.40% administrative charge.
-19-
<PAGE>
Illustration of Separate Account Accumulation Unit Value Calculations
Formula and Illustration for Determining the Net Investment Factor
Net Investment Factor = (A + B - C) - E
-----------
D
<TABLE>
<C> <S> <C>
Where: A = The net asset value of an underlying fund share as of the end of
the current valuation period.
Assume.....................................A = $11.57
B = The per share amount of any dividend or capital gains distribution
since the end of the immediately preceding valuation period.
Assume..........................................B = 0
C = The per share charge or credit for any taxes reserved for at the
end of the current valuation period.
Assume..........................................C = 0
D = The net asset value of an underlying fund share at the end of the
immediately preceding valuation period.
Assume.....................................D = $11.40
E = The daily deduction for the mortality and expense risk fee and the
administrative charge, which totals 1.70%-1.85% (depending on the
death benefit) on an annual basis for the first seven years and
1.30% thereafter. On a daily basis, E = .000050223.
Assume......................................E = 1.85%
</TABLE>
Then, the net investment factor = (11.57 + 0 - 0) - .000050223 = Z = 1.014862058
---------------
(11.40)
Formula and Illustration for Determining Accumulation Unit Value
Accumulation Unit Value = A * B
<TABLE>
<C> <S> <C>
Where: A = The accumulation unit value for the immediately preceding valuation
period.
Assume............................................ = $X
B = The net investment factor for the current valuation period.
Assume............................................. = Y
</TABLE>
Then, the accumulation unit value = $X * Y = $Z
Annuity Unit Value and Annuity Payment Rates
For the separate account, the amount of variable annuity payments will vary
with annuity unit values. Annuity unit values rise if the net investment
performance of the subaccount exceeds the assumed interest rate of 5% annually.
Conversely, annuity unit values fall if the net investment performance of the
subaccount is less than the assumed rate. The value of a variable annuity unit
in each subaccount was established at $1.00 on the date operations began for
that subaccount. For the separate account, 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 on the immediately preceding
business day;
(b) is the net investment factor for the valuation period; and
(c) is the investment result adjustment factor for the valuation period.
-20-
<PAGE>
The investment result adjustment factor for the valuation period is the product
of discount factors of .99986634 per day to recognize the 5% effective annual
assumed investment return. The valuation period is the period from the close of
the immediately preceding business day to the close of the current business
day.
The dollar amount of subsequent variable annuity payments will depend upon
changes in applicable annuity unit values.
The annuity payment rates vary according to the annuity option elected and the
sex and adjusted age of the annuitant at the annuity commencement date. The
policy also contains a table for determining the adjusted age of the annuitant.
Illustration of Calculations for Annuity Unit Value
and Variable Annuity Payments
Formula and Illustration for Determining Annuity Unit Value
Annuity Unit Value = A * B * C
<TABLE>
<C> <S> <C>
Where: A = annuity unit value for the immediately preceding valuation period.
Assume........................................... = $X
B = Net investment factor for the valuation period for which the
annuity unit value is being calculated.
Assume........................................... = Y
C = A factor to neutralize the assumed interest rate of 5% built into
the Annuity Tables used.
Assume........................................... = Z
</TABLE>
Then, the annuity unit value is:
$X * Y * Z = $Q
Formula and Illustration for Determining Amount of
First Monthly Variable Annuity Payment
First monthly variable annuity payment = A * B
------
$1,000
<TABLE>
<C> <S> <C>
Where: A = The adjusted policy value as of the annuity commencement date.
Assume.............................................= $X
B = The Annuity purchase rate per $1,000 of adjusted policy value based
upon the option selected, the sex and adjusted age of the annuitant
according to the tables contained in the policy.
Assume.............................................= $Y
</TABLE>
Then, the first monthly variable annuity payment = $X * $Y = $Z
-------
1,000
-21-
<PAGE>
Formula and Illustration for Determining the Number of Annuity Units
Represented by Each Monthly Variable Annuity Payment
Number of annuity units = A
-
B
<TABLE>
<C> <S> <C>
Where: A = The dollar amount of the first monthly variable annuity payment.
Assume............................................= $X
B = The annuity unit value for the valuation date on which the first
monthly payment is due.
Assume............................................= $Y
</TABLE>
Then, the number of annuity units = $X = Z
--
$Y
FAMILY INCOME PROTECTOR -- ADDITIONAL INFORMATION
The amounts shown below are hypothetical guaranteed minimum monthly payment
amounts under the "family income protector" for a $100,000 premium when annuity
payments do not begin until the rider anniversary indicated in the left-hand
column. These figures assume the following:
. there were no subsequent premium payments or withdrawals;
. there were no premium taxes;
. the $100,000 premium is subject to the family income protector;
. the annuitant is (or both annuitants are) 60 years old when the rider is
issued;
. the annual growth rate is 6.0% (once established, an annual growth rate
will not change during the life of the family income protector rider);
and
. there was no upgrade of the minimum annuitization value.
Six different annuity payment options are illustrated: a male annuitant, a
female annuitant and a joint and survivor annuity, each on a Life Only and a
Life with 10-Year Certain basis. The figures below, which are the amount of the
first monthly payment, are based on an assumed investment return of 3%.
Subsequent payments will never be less than the amount of the first payment
(although subsequent payments are calculated using a 5% assumed investment
return).
Illustrations of guaranteed minimum payments based on other assumptions will be
provided upon request.
Life Only = Life Annuity with No Period Certain
Life 10 = Life Annuity with 10 Years Certain
<TABLE>
<CAPTION>
Rider Anniversary at
Exercise Date Male Female Joint & Survivor
- ------------------------------------------------------------------------------
Life Only Life 10 Life Only Life 10 Life Only Life 10
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 (age 70) $1,135 $1,067 $ 976 $ 949 $ 854 $ 852
- ------------------------------------------------------------------------------
15 1,833 1,634 1,562 1,469 1,332 1,318
- ------------------------------------------------------------------------------
20 (age 80) 3,049 2,479 2,597 2,286 2,145 2,078
</TABLE>
This hypothetical illustration should not be deemed representative of past or
future performance of any underlying variable investment option.
Withdrawals will affect the minimum annuitization value as follows: Each policy
year, withdrawals up to the limit of the total free amount (the minimum
annuitization value on the last policy anniversary
-22-
<PAGE>
multiplied by the annual growth rate) reduce the minimum annuitization value on
a dollar-for-dollar basis. Withdrawals over this free amount will reduce the
minimum annuitization value on a pro rata basis by an amount equal to the
minimum annuitization value immediately prior to the excess withdrawal
multiplied by the percentage reduction in the policy value resulting from the
excess withdrawal. The free amount will always be a relatively small fraction
of the minimum annuitization value.
Examples of the effect of withdrawals on the minimum annuitization value are as
follows:
<TABLE>
<CAPTION>
Example 1
Assumptions
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
. minimum annuitization value on last pol-
icy anniversary: $10,000
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annuitization value at time of
distribution: $10,500
- ------------------------------------------------------------------------------------------------------------------------------------
. policy value at time of distribution: $15,000
- ------------------------------------------------------------------------------------------------------------------------------------
. distribution amount: $ 500
- ------------------------------------------------------------------------------------------------------------------------------------
. prior distribution in current policy
year: None
- ------------------------------------------------------------------------------------------------------------------------------------
Calculations
- ------------------------------------------------------------------------------------------------------------------------------------
. maximum annual free amount: $10,000 X 6% = $600
- ------------------------------------------------------------------------------------------------------------------------------------
. policy value after distribution: $15,000-$500 = $14,500
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annual value after distribution: $10,500-$500 = $10,000
- ------------------------------------------------------------------------------------------------------------------------------------
Example 2
Assumptions
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annuitization value on last pol-
icy anniversary: $10,000
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annuitization value at time of
distribution: $10,500
- ------------------------------------------------------------------------------------------------------------------------------------
. policy value at time of distribution: $15,000
- ------------------------------------------------------------------------------------------------------------------------------------
. distribution amount: $ 1,500
- ------------------------------------------------------------------------------------------------------------------------------------
. prior distribution in current policy
year: $ 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
Calculations
- ------------------------------------------------------------------------------------------------------------------------------------
. maximum annual free amount: $ 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
(prior distributions have exceeded the
current year free amount of $600 [$10,000
X 6% = $600])
- ------------------------------------------------------------------------------------------------------------------------------------
. policy value after distribution: $15,000-$1,500 = $13,500
- ------------------------------------------------------------------------------------------------------------------------------------
(since the policy value is reduced 10%
($1,500/$15,000), the minimum
annuitization value is also reduced 10%)
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annual value after distribution: $10,500-(10% X $10,500) = $9,450
- ------------------------------------------------------------------------------------------------------------------------------------
Example 3
Assumptions
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annuitization value on last pol-
icy anniversary: $10,000
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annuitization value at time of
distribution: $10,500
- ------------------------------------------------------------------------------------------------------------------------------------
. policy value at time of distribution: $ 7,500
- ------------------------------------------------------------------------------------------------------------------------------------
. distribution amount: $ 1,500
- ------------------------------------------------------------------------------------------------------------------------------------
. prior distribution in current policy
year: $ 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
Calculations
- ------------------------------------------------------------------------------------------------------------------------------------
.maximum annual free amount: $ 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
(prior distributions have exceeded the
current year free amount of $600 [$10,000
X 6% = $600])
- ------------------------------------------------------------------------------------------------------------------------------------
. policy value after distribution: $ 7,500-$1,500 = $6,000
- ------------------------------------------------------------------------------------------------------------------------------------
(since the policy value is reduced 20%
($1,500/$7,500), the minimum annuitization
value is also reduced 20%)
- ------------------------------------------------------------------------------------------------------------------------------------
. minimum annual value after distribution: $10,500-(20% X $10,500) = $8,400
</TABLE>
-23-
<PAGE>
The amount of the first payment provided by the family income protector will be
determined by multiplying each $1,000 of minimum annuitization value by the
applicable annuity factor shown on Schedule I of the family income protector
rider. The applicable annuity factor depends upon the annuitant's (and joint
annuitant's, if any) sex (or without regard to gender if required by law), age,
and the family income protector payment option selected and is based on a
guaranteed interest rate of 3% and the "1983 Table a" mortality table with
projection using Scale G factors, assuming a maturity date in the year 2000.
Subsequent payments will be calculated as described in the family income
protector rider using a 5% assumed investment return. Subsequent payments may
fluctuate annually in accordance with the investment performance of the annuity
subaccounts. However, subsequent payments are guaranteed to never be less than
the initial payment.
The stabilized payment on each subsequent policy anniversary after
annuitization using the family income protector will equal the greater of the
initial payment or the payment supportable by the annuity units in the selected
subaccounts. The supportable payment is equal to the number of variable annuity
units in the selected subaccounts multiplied by the variable annuity unit
values in those subaccounts on the date the payment is made. The variable
annuity unit values used to calculate the supportable payment will assume a 5%
assumed investment return. If the supportable payment at any payment date
during a policy year is greater than the stabilized payment for that policy
year, the excess will be used to purchase additional annuity units. Conversely,
if the supportable payment at any payment date during a policy year is less
than the stabilized payment for that policy year, there will be a reduction in
the number of annuity units credited to the policy to fund the deficiency. In
the case of a reduction, you will not participate as fully in the future
investment performance of the subaccounts you selected since fewer annuity
units are credited to your policy. Purchases and reductions will be allocated
to each subaccount on a proportionate basis.
PFL bears the risk that it will need to make payments if all annuity units have
been used in an attempt to maintain the stabilized payment at the initial
payment level. In such an event, PFL will make all future payments equal to the
initial payment. Once all the annuity units have been used, the amount of your
payment will not increase or decrease and will not depend upon the performance
of any subaccounts. To compensate PFL for this risk, a guaranteed payment fee
will be deducted.
HISTORICAL PERFORMANCE DATA
Money Market Yields
PFL may from time to time disclose the current annualized yield of the Endeavor
Money Market Subaccount, which invests in the Endeavor Money Market Portfolio,
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 Endeavor Money Market
Portfolio or on its 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 of the Endeavor
Money Market Subaccount at the beginning of the 7-day period, dividing such net
change in account value by the value of the account at the beginning of the
period to determine the base period return, and annualizing this quotient on a
365-day basis. The net change in account value reflects (i) net income from the
portfolio attributable to the hypothetical account; and (ii) charges and
deductions imposed under a policy that are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for (i) the administrative charges; and (ii) the mortality
and expense risk fee. Current yield will be calculated according to the
following formula:
Current Yield = ((NCS - ES)/UV) * (365/7)
-24-
<PAGE>
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 policy, the yield for the
Endeavor Money Market Subaccount will be lower than the yield for the Endeavor
Money Market Portfolio. The yield calculations do not reflect the effect of any
premium taxes that may be applicable to a particular policy.
PFL may also disclose the effective yield of the Endeavor Money Market
Subaccount for the same 7-day period, determined on a compounded basis. The
effective yield is calculated by compounding the base period return according
to the following formula:
Effective Yield = (1 + ((NCS - ES)/UV))/365/7/ - 1
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.
The yield on amounts held in the Endeavor 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 Endeavor Money Market Subaccount's actual yield is affected by
changes in interest rates on money market securities, average portfolio
maturity of the Endeavor Money Market Portfolio, the types and quality of
portfolio securities held by the Endeavor Money Market Portfolio and its
operating expenses. There is no yield or effective yield for the Endeavor Money
Market Subaccount for the seven days ended December 31, 1999, because the
subaccount had not commenced operations as of that date.
Other Subaccount Yields
PFL may from time to time advertise or disclose the current annualized yield of
one or more of the subaccounts (except the Endeavor 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, (iii) compounding that yield for a 6-month period,
and (iv) multiplying that result by 2. Expenses attributable to the subaccount
include (i) the administrative charges; and (ii) the mortality and expense risk
fee. The 30-day yield is calculated according to the following formula:
Yield = 2 * ((((NI - ES)/(U--UV)) + 1)/6/ -1)
-25-
<PAGE>
Where:
NI= Net investment income of the subaccount for the 30-day period
attributable to the subaccount's unit.
ES= Expenses of the subaccount for the 30-day period.
U= The average number of units outstanding.
UV= The unit value at the close (highest) of the last day in the 30-day
period.
Because of the charges and deductions imposed by the separate account, the
yield for a subaccount will be lower than the yield for its corresponding
portfolio. The yield calculations do not reflect the effect of any premium
taxes that may be applicable to a particular policy.
The yield on amounts held in the subaccounts 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. The types and quality of
its investments and its operating expenses affect a subaccount's actual yield.
Total Returns
PFL may from time to time also advertise or disclose total returns for one or
more of the subaccounts for various periods of time. One of the periods of time
will include the period measured from the date the subaccount commenced
operations. When a subaccount has been in operation for 1, 5 and 10 years,
respectively, the total return for these periods will be provided. Total
returns for other periods of time may from time to time also be disclosed.
Total returns represent the average annual compounded rates of return that
would equate an initial investment of $1,000 to the redemption value of that
investment as of the last day of each of the periods. The ending date for each
period for which total return quotations are provided will be for the most
recent month end practicable, considering the type and media of the
communication and will be stated in the communication.
Total returns will be calculated using subaccount unit values which PFL
calculates on each business day based on the performance of the separate
account's underlying portfolio and the deductions for the mortality and expense
risk fee and the administrative charges. The total return will then be
calculated according to the following formula:
P (1 + T)N = ERV
Where:
T= The average annual total return net of subaccount recurring charges.
ERV= The ending redeemable value of the hypothetical account at the end of the
period.
P= A hypothetical initial payment of $1,000.
N= The number of years in the period.
Other Performance Data
PFL may from time to time also disclose average annual total returns in a non-
standard format in conjunction with the standard format described above. The
non-standard format will be identical to the standard format.
-26-
<PAGE>
PFL may from time to time also disclose cumulative total returns in conjunction
with the standard format described above. The cumulative returns will be
calculated using the following formula.
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-standardized performance data will only be advertised if the
standardized performance data for the same period, as well as for the required
period, is also disclosed.
Adjusted Historical Performance Data--The Separate Account
From time to time, sales literature or advertisements may quote average annual
total returns for periods prior to the date a particular subaccount commenced
operations. Such performance information for the subaccounts will be calculated
based on the performance of the various portfolios and the assumption that the
subaccounts were in existence for the same periods as those indicated for the
portfolios, with the level of policy charges that are currently in effect.
PUBLISHED RATINGS
PFL may from time to time publish in advertisements, sales literature and
reports to owners, the ratings and other information assigned to it by one or
more independent rating organizations such as A.M. Best Company, Standard &
Poor's Insurance Ratings Services, Moody's Investors Service and Duff & Phelps
Credit Rating Co. The purpose of the ratings is to reflect the financial
strength and/or claims-paying ability of PFL. The ratings should not be
considered as bearing on the investment performance of assets held in the
separate account or of the safety or riskiness of an investment in the separate
account. Each year the A.M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, the claims-paying ability of PFL
as measured by Standard & Poor's Insurance Ratings Services, Moody's Investors
Service or Duff & Phelps Credit Rating Co. may be referred to in advertisements
or sales literature or in reports to owners. These ratings are opinions of an
operating insurance company's financial capacity to meet the obligations of its
insurance policies in accordance with their terms. Claims-paying ability
ratings do not refer to an insurer's ability to meet non-policy obligations
(i.e., debt/commercial paper).
STATE REGULATION OF PFL
PFL is subject to the laws of Iowa governing insurance companies and to
regulation by the Iowa Division of Insurance. An annual statement in a
prescribed form is filed with the Division of Insurance each year covering the
operation of PFL for the preceding year and its financial condition as of the
end of such year. Regulation by the Division of Insurance includes periodic
examination to determine PFL's contract liabilities and reserves so that the
Division may determine the items are correct. PFL's books and accounts are
subject to review by the Division of Insurance at all times and a full
examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. In addition, PFL is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
-27-
<PAGE>
ADMINISTRATION
PFL performs administrative services for the policy. These services include
issuance of the policy, maintenance of records concerning the policy, and
certain valuation services.
RECORDS AND REPORTS
All records and accounts relating to the separate account will be maintained by
PFL. As presently required by the 1940 Act, and regulations promulgated
thereunder, PFL 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.
DISTRIBUTION OF THE POLICIES
The policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws. The offering of the policies
is continuous and PFL does not anticipate discontinuing the offering of the
policies, however, PFL reserves the right to do so.
AFSG Securities Corporation, an affiliate of PFL, is the principal underwriter
of the policies and may enter into agreements with broker-dealers for the
distribution of the policies. Distribution of the policies did not begin until
the date of this SAI.
VOTING RIGHTS
To the extent required by law, PFL will vote the underlying funds' shares held
by the separate account at regular and special shareholder meetings of the
underlying funds in accordance with instructions received from persons having
voting interests in the portfolios, although none of the underlying funds hold
regular annual shareholder meetings. If, however, the 1940 Act or any
regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result PFL determines that it is permitted to
vote the underlying fund shares in its own right, it may elect to do so.
Before the annuity commencement date, you hold the voting interest in the
selected portfolios. The number of votes that you have the right to instruct
will be calculated separately for each subaccount. The number of votes that you
have the right to instruct for a particular subaccount will be determined by
dividing your policy value in the subaccount by the net asset value per share
of the corresponding portfolio in which the subaccount invests. Fractional
shares will be counted.
After the annuity commencement date, the person receiving annuity payments has
the voting interest, and the number of votes decreases as annuity payments are
made and as the reserves for the policy decrease. The person's number of votes
will be determined by dividing the reserve for the policy allocated to the
applicable subaccount by the net asset value per share of the corresponding
portfolio. Fractional shares will be counted.
The number of votes that you or the person receiving income payments has the
right to instruct will be determined as of the date established by the
underlying fund for determining shareholders eligible to vote at the meeting of
the underlying fund. PFL will solicit voting instructions by sending you, or
other persons entitled to vote, written requests for instructions prior to that
meeting in accordance with procedures established by the underlying fund.
Portfolio shares as to which no timely
-28-
<PAGE>
instructions are received and shares held by PFL in which you, or other persons
entitled to vote, have no beneficial interest will be voted in proportion to
the voting instructions that are received with respect to all policies
participating in the same subaccount.
Each person having a voting interest in a subaccount will receive proxy
material, reports, and other materials relating to the appropriate portfolio.
OTHER PRODUCTS
PFL makes other variable annuities available that may also be funded through
the separate account. These variable annuities may have different features,
such as different investment options or charges.
CUSTODY OF ASSETS
PFL holds assets of each of the subaccounts. The assets of each of the
subaccounts are segregated and held separate and apart from the assets of the
other subaccounts and from PFL's general account assets. PFL maintains records
of all purchases and redemptions of shares of the underlying funds held by each
of the subaccounts. Additional protection for the assets of the separate
account is afforded by PFL's fidelity bond, presently in the amount of
$5,000,000, covering the acts of officers and employees of PFL.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP, of Washington D.C. has provided legal advice
to PFL relating to certain matters under the federal securities laws applicable
to the issue and sale of the policies.
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, included in this SAI have been audited by Ernst & Young LLP,
Independent Auditors, 801 Grand Avenue, Suite 3400, Des Moines, Iowa 50309.
There are no financial statements of the separate account because it had not
commenced operations as of December 31, 1999.
OTHER INFORMATION
A registration statement has been filed with the SEC, under the Securities Act
of 1933 as amended, with respect to the policies discussed in this SAI. Not all
of the information set forth in the Registration Statement, amendments and
exhibits thereto has been included in the prospectus or this SAI. Statements
contained in the prospectus and this SAI concerning the content of the policies
and other legal instruments are intended to be summaries. For a complete
statement of the terms of these documents, reference should be made to the
instruments filed with the SEC.
FINANCIAL STATEMENTS
The values of your interest in the separate account will be affected solely by
the investment results of the selected subaccount(s). The statutory-basis
financial statements of PFL, which are included in this SAI, should be
considered only as bearing on the ability of PFL to meet its obligations under
the policies. They should not be considered as bearing on the investment
performance of the assets held in the separate account.
-29-
<PAGE>
Financial Statements--Statutory Basis
PFL Life Insurance Company
Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors
<PAGE>
PFL Life Insurance Company
Financial Statements--Statutory Basis
Years ended December 31, 1999, 1998 and 1997
Contents
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. 1
Audited Financial Statements
Balance Sheets--Statutory Basis........................................... 3
Statements of Operations--Statutory Basis................................. 5
Statements of Changes in Capital and Surplus--Statutory Basis............. 6
Statements of Cash Flows--Statutory Basis................................. 7
Notes to Financial Statements--Statutory Basis............................ 9
Statutory-Basis Financial Statement Schedules
Summary of Investments--Other Than Investments in Related Parties......... 28
Supplementary Insurance Information....................................... 29
Reinsurance............................................................... 31
</TABLE>
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]
Report of Independent Auditors
The Board of Directors
PFL Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of PFL Life
Insurance Company, an indirect wholly-owned subsidiary of AEGON N.V., as of
December 31, 1999 and 1998, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each of the
three years in the period ended December 31, 1999. Our audits also included
the accompanying statutory-basis financial statement schedules required by
Article 7 of Regulation S-X. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa, which practices differ from accounting principles generally accepted in
the United States. The variances between such practices and accounting
principles generally accepted in the United States also are described in Note
1. The effects on the financial statements of these variances are not
reasonably determinable but are presumed to be material.
In our opinion, because of the effect of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly,
in conformity with accounting principles generally accepted in the United
States, the financial position of PFL Life Insurance Company at December 31,
1999 and 1998, or the results of its operations or its cash flows for each of
the three years in the period ended December 31, 1999.
1
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of PFL Life Insurance
Company at December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting practices prescribed or permitted by the
Insurance Division, Department of Commerce, of the State of Iowa. Also, in our
opinion, the related financial statement schedules, when considered in
relation to the basic statutory-basis financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 18, 2000
2
<PAGE>
PFL Life Insurance Company
Balance Sheets--Statutory Basis
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31
1999 1998
----------- ----------
<S> <C> <C>
Admitted Assets
Cash and invested assets:
Cash and short-term investments........................ $ 53,695 $ 83,289
Bonds.................................................. 4,892,156 4,822,442
Stocks:
Preferred............................................ 17,074 14,754
Common (cost: 1999--$61,813; 1998--$34,731).......... 71,658 49,448
Affiliated entities (cost: 1999--$10,318; 1998--
$8,060)............................................. 6,764 5,613
Mortgage loans on real estate.......................... 1,339,202 1,012,433
Real estate, at cost less accumulated depreciation
($10,891 in 1999; $9,500 in 1998):
Home office properties............................... 7,829 8,056
Properties acquired in satisfaction of debt.......... 16,336 11,778
Investment properties................................ 33,707 44,325
Policy loans........................................... 59,871 60,058
Other invested assets.................................. 123,722 76,482
----------- ----------
Total cash and invested assets..................... 6,622,014 6,188,678
Premiums deferred and uncollected....................... 14,656 15,318
Accrued investment income............................... 65,364 65,308
Receivable from affiliate............................... -- 643
Federal income taxes recoverable........................ 1,335 639
Transfers from separate accounts due or accrued......... 92,309 70,866
Other assets............................................ 30,119 29,511
Separate account assets................................. 4,905,374 3,348,611
----------- ----------
Total admitted assets................................... $11,731,171 $9,719,574
=========== ==========
</TABLE>
3
<PAGE>
PFL Life Insurance Company
Balance Sheets--Statutory Basis
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31
1999 1998
----------- ----------
<S> <C> <C>
Liabilities and Capital and Surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life................................................. $ 1,552,781 $1,357,175
Annuity.............................................. 4,036,751 3,925,293
Accident and health.................................. 254,571 205,736
Policy and contract claim reserves:
Life................................................. 8,681 9,101
Accident and health.................................. 37,466 48,906
Other policyholders' funds............................. 172,774 162,266
Remittances and items not allocated.................... 33,020 19,690
Asset valuation reserve................................ 103,193 91,588
Interest maintenance reserve........................... 36,120 50,575
Short-term notes payable to affiliates................. 144,500 9,421
Other liabilities...................................... 70,717 76,766
Payable for securities................................. 15,136 57,645
Payable to affiliates.................................. 11,517 --
Separate account liabilities........................... 4,899,289 3,342,884
----------- ----------
Total liabilities....................................... 11,376,516 9,357,046
Commitments and contingencies (Note 10)
Capital and surplus:
Common stock, $10 par value, 500,000 shares autho-
rized, 266,000 issued and outstanding................. 2,660 2,660
Paid-in surplus........................................ 154,282 154,282
Unassigned surplus..................................... 197,713 205,586
----------- ----------
Total capital and surplus............................... 354,655 362,528
----------- ----------
Total liabilities and capital and surplus............... $11,731,171 $9,719,574
=========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
PFL Life Insurance Company
Statements of Operations--Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of
reinsurance:
Life.................................... $ 227,510 $ 516,111 $ 202,435
Annuity................................. 1,413,049 667,920 657,695
Accident and health..................... 160,570 178,593 207,982
Net investment income..................... 437,549 446,984 446,424
Amortization of interest maintenance re-
serve.................................... 7,588 8,656 3,645
Commissions and expense allowances on
reinsurance ceded........................ 24,741 32,781 49,859
Separate account fee income............... 49,826 37,137 --
---------- ---------- ----------
2,320,833 1,888,182 1,568,040
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health benefits... 115,621 135,184 146,583
Surrender benefits...................... 1,046,611 732,796 658,071
Other benefits.......................... 169,479 152,209 126,495
Increase (decrease) in aggregate
reserves for policies and contracts:
Life.................................... 195,606 473,158 149,575
Annuity................................. 111,427 (278,665) (203,139)
Accident and health..................... 48,835 36,407 30,059
Other................................... 10,480 17,550 16,998
---------- ---------- ----------
1,698,059 1,268,639 924,642
Insurance expenses:
Commissions............................... 167,146 136,569 157,300
General insurance expenses................ 54,191 48,018 57,571
Taxes, licenses and fees.................. 12,382 19,166 8,715
Net transfers to separate accounts........ 309,307 302,839 297,480
Other expenses............................ 229 1,016 119
---------- ---------- ----------
543,255 507,608 521,185
---------- ---------- ----------
2,241,314 1,776,247 1,445,827
---------- ---------- ----------
Gain from operations before federal income
tax expense and net realized capital gains
on investments............................. 79,519 111,935 122,213
Federal income tax expense.................. 25,316 49,835 43,381
---------- ---------- ----------
Gain from operations before net realized
capital gains on investments............... 54,203 62,100 78,832
Net realized capital gains on investments
(net of related federal income taxes and
amounts transferred to interest maintenance
reserve)................................... 6,365 3,398 7,159
---------- ---------- ----------
Net income.................................. $ 60,568 $ 65,498 $ 85,991
========== ========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
PFL Life Insurance Company
Statements of Changes in Capital and Surplus--Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Total
Capital
Common Paid-in Unassigned and
Stock Surplus Surplus Surplus
------ -------- ---------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $2,660 $154,129 $261,558 $418,347
Capital contribution.................... -- 153 -- 153
Net income.............................. -- -- 85,991 85,991
Change in net unrealized capital gains.. -- -- 3,592 3,592
Change in non-admitted assets........... -- -- (481) (481)
Change in asset valuation reserve....... -- -- (14,974) (14,974)
Dividend to stockholder................. -- -- (62,000) (62,000)
Surplus effect of sale of a division.... -- -- (161) (161)
Surplus effect of ceding commissions
associated with the sale of a
division............................... -- -- 5 5
Amendment of reinsurance agreement...... -- -- 389 389
Surplus effect of reinsurance
agreement.............................. -- -- 402 402
Change in liability for reinsurance in
unauthorized companies................. -- -- (1,901) (1,901)
------ -------- -------- --------
Balance at December 31, 1997 2,660 154,282 272,420 429,362
Net income.............................. -- -- 65,498 65,498
Change in net unrealized capital gains.. -- -- 4,504 4,504
Change in non-admitted assets........... -- -- (260) (260)
Change in asset valuation reserve....... -- -- (21,763) (21,763)
Dividend to stockholder................. -- -- (120,000) (120,000)
Increase in liability for reinsurance in
unauthorized companies................. -- -- 2,036 2,036
Tax benefit on stock options exercised.. -- -- 2,476 2,476
Change in surplus in separate accounts.. -- -- 675 675
------ -------- -------- --------
Balance at December 31, 1998 2,660 154,282 205,586 362,528
Net income.............................. -- -- 60,568 60,568
Change in net unrealized capital gains.. -- -- (20,217) (20,217)
Change in non-admitted assets........... -- -- (980) (980)
Change in asset valuation reserve....... -- -- (11,605) (11,605)
Dividend to stockholder................. -- -- (40,000) (40,000)
Tax benefit on stock options exercised.. -- -- 1,305 1,305
Change in surplus in separate accounts.. -- -- 245 245
Settlement of prior period tax returns
and other tax-related adjustments...... -- -- 2,811 2,811
------ -------- -------- --------
Balance at December 31, 1999.............. $2,660 $154,282 $197,713 $354,655
====== ======== ======== ========
</TABLE>
See accompanying notes.
6
<PAGE>
PFL Life Insurance Company
Statements of Cash Flows--Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities
Premiums and other considerations, net
of reinsurance......................... $ 1,830,365 $ 1,396,428 $ 1,119,936
Net investment income................... 441,737 469,246 452,091
Life and accident and health claims..... (124,178) (138,249) (154,383)
Surrender benefits and other fund
withdrawals............................ (1,046,611) (732,796) (658,071)
Other benefits to policyholders......... (169,476) (152,167) (126,462)
Commissions, other expenses and other
taxes.................................. (238,192) (197,135) (225,042)
Net transfers to separate accounts...... (280,923) (276,375) (319,146)
Federal income taxes.................... (24,709) (72,176) (47,909)
Cash paid in conjunction with an
amendment of a reinsurance agreement... -- -- (4,826)
Cash received in connection with a
reinsurance agreement.................. -- -- 1,477
Other, net.............................. (23,047) (93,095) 89,693
----------- ----------- -----------
Net cash provided by operating
activities............................. 364,966 203,681 127,358
Investing activities
Proceeds from investments sold, matured
or repaid:
Bonds and preferred stocks............ 3,283,038 3,347,174 3,284,095
Common stocks......................... 60,293 34,564 34,004
Mortgage loans on real estate......... 158,739 192,210 138,162
Real estate........................... 13,367 5,624 6,897
Policy loans.......................... 186 -- --
Cash received from ceding commissions
associated with the sale of a
division............................. -- -- 8
Other................................. 6,133 7,210 57,683
----------- ----------- -----------
3,521,756 3,586,782 3,520,849
Cost of investments acquired:
Bonds and preferred stocks............ (3,398,158) (3,251,822) (3,411,442)
Common stocks......................... (76,200) (36,379) (37,339)
Mortgage loans on real estate......... (480,750) (257,039) (159,577)
Real estate........................... (7,568) (11,458) (2,013)
Policy loans.......................... -- (2,922) (2,922)
Cash paid in association with the sale
of a division........................ -- -- (591)
Other................................. (48,719) (44,514) (15,674)
----------- ----------- -----------
(4,011,395) (3,604,134) (3,629,558)
----------- ----------- -----------
Net cash used in investing activities... (489,639) (17,352) (108,709)
</TABLE>
7
<PAGE>
PFL Life Insurance Company
Statements of Cash Flows--Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Financing activities
Issuance (repayment) of short-term intercompany
notes payable................................... $135,079 $ (6,979) $16,400
Capital contribution............................. -- -- 153
Dividends to stockholder......................... (40,000) (120,000) (62,000)
-------- -------- -------
Net cash provided by (used in) financing
activities...................................... 95,079 (126,979) (45,447)
-------- -------- -------
Increase (decrease) in cash and short-term
investments..................................... (29,594) 59,350 (26,798)
Cash and short-term investments at beginning of
year............................................ 83,289 23,939 50,737
-------- -------- -------
Cash and short-term investments at end of year... $ 53,695 $ 83,289 $23,939
======== ======== =======
</TABLE>
See accompanying notes.
8
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis
(Dollars in thousands)
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization
PFL Life Insurance Company ("the Company") is a stock life insurance company
and is a wholly-owned subsidiary of First AUSA Life Insurance Company ("First
AUSA"), which, in turn, is a wholly-owned subsidiary of AEGON USA, Inc.
("AEGON"). AEGON is an indirect wholly-owned subsidiary of AEGON N.V., a
holding company organized under the laws of The Netherlands.
Nature of Business
The Company sells individual non-participating whole life, endowment and term
contracts, as well as a broad line of single fixed and flexible premium
annuity products. In addition, the Company offers group life, universal life,
and individual and specialty health coverages. The Company is licensed in 49
states and the District of Columbia and Guam. Sales of the Company's products
are primarily through the Company's agents and financial institutions.
Basis of Presentation
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract claim reserves, guaranty fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and
assumptions utilized which could have a material impact on the financial
statements.
The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa ("Insurance Department"), which
practices differ in some respects from generally accepted accounting
principles. The more significant of these differences are as follows: (a)
bonds are generally reported at amortized cost rather than segregating the
portfolio into held-to-maturity (reported at amortized cost), available-for-
sale (reported at fair value), and trading (reported at fair value)
classifications; (b) acquisition costs of acquiring new business are charged
to current operations as incurred rather than deferred and amortized over the
life of the policies; (c) policy reserves on traditional life products
9
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
are based on statutory mortality rates and interest which may differ from
reserves based on reasonable assumptions of expected mortality, interest, and
withdrawals which include a provision for possible unfavorable deviation from
such assumptions; (d) policy reserves on certain investment products use
discounting methodologies based on statutory interest rates rather than full
account values; (e) reinsurance amounts are netted against the corresponding
asset or liability rather than shown as gross amounts on the balance sheet;
(f) deferred income taxes are not provided for the difference between the
financial statement and income tax bases of assets and liabilities; (g) net
realized gains or losses attributed to changes in the level of interest rates
in the market are deferred and amortized over the remaining life of the bond
or mortgage loan, rather than recognized as gains or losses in the statement
of operations when the sale is completed; (h) potential declines in the
estimated realizable value of investments are provided for through the
establishment of a formula-determined statutory investment reserve (reported
as a liability), changes to which are charged directly to surplus, rather than
through recognition in the statement of operations for declines in value, when
such declines are judged to be other than temporary; (i) certain assets
designated as "non-admitted assets" have been charged to surplus rather than
being reported as assets; (j) revenues for universal life and investment
products consist of premiums received rather than policy charges for the cost
of insurance, policy administration charges, amortization of policy initiation
fees and surrender charges assessed; (k) pension expense is recorded as
amounts are paid; (l) stock options settled in cash are recorded as expense of
the Company's indirect parent rather than charged to current operations; (m)
adjustments to federal income taxes of prior years are charged or credited
directly to unassigned surplus, rather than reported as a component of expense
in the statement of operations; (n) gains or losses on dispositions of
business are charged or credited directly to unassigned surplus rather than
being reported in the statement of operations; and (o) a liability is
established for "unauthorized reinsurers" and changes in this liability are
charged or credited directly to unassigned surplus. The effects of these
variances have not been determined by the Company but are presumed to be
material.
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
codified statutory accounting principles ("Codification") effective January 1,
2001. Codification will likely change, to some extent, prescribed statutory
accounting practices and may result in changes to the accounting practices
that the Company uses to prepare its statutory-basis financial statements.
Codification will require adoption by the various states before it becomes the
prescribed statutory basis of accounting for insurance companies domesticated
within those states. Accordingly, before Codification becomes effective for
the Company, the State of Iowa must adopt Codification as the prescribed basis
of accounting on which domestic insurers must report their statutory-basis
results to the Insurance Department. At this time, it is anticipated that the
State of Iowa will adopt Codification. However, based on current guidance,
management believes that the impact of Codification will not be material to
the Company's statutory-basis financial statements.
10
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Cash and Short-Term Investments
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with remaining maturity of one year or less when purchased
to be short-term investments.
Investments
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the investment. The Company reviews its
prepayment assumptions on mortgage and other asset-backed securities at
regular intervals and adjusts amortization rates retrospectively when such
assumptions are changed due to experience and/or expected future patterns.
Investments in preferred stocks in good standing are reported at cost.
Investments in preferred stocks not in good standing are reported at the lower
of cost or market. Common stocks of unaffiliated and affiliated companies,
which includes shares of mutual funds and real estate investment trusts, are
carried at market value. Real estate is reported at cost less allowances for
depreciation. Depreciation is computed principally by the straight-line
method. Policy loans are reported at unpaid principal. Other invested assets
consist principally of investments in various joint ventures and are recorded
at equity in underlying net assets. Other "admitted assets" are valued,
principally at cost, as required or permitted by Iowa Insurance Laws.
Net realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve ("AVR") is established by the Company to provide for
potential losses in the event of default by issuers of certain invested
assets. These amounts are determined using a formula prescribed by the NAIC
and are reported as a liability. The formula for the AVR provides for a
corresponding adjustment for realized gains and losses. Under a formula
prescribed by the NAIC, the Company defers, in the Interest Maintenance
Reserve ("IMR"), the portion of realized gains and losses on sales of fixed
income investments, principally bonds and mortgage loans, attributable to
changes in the general level of interest rates and amortizes those deferrals
over the remaining period to maturity of the security.
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or on real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. During 1999, 1998 and 1997, the Company
excluded investment income due and accrued of $530, $102 and $177,
respectively, with respect to such practices.
11
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
The Company uses interest rate swaps and caps as part of its overall interest
rate risk management strategy for certain life insurance and annuity products.
The Company entered into several interest rate swap contracts to modify the
interest rate characteristics of the underlying liabilities. The net interest
effect of such swap transactions is reported as an adjustment of interest
income from the hedged items as incurred.
The Company has entered into an interest rate cap agreement to hedge the
exposure of changing interest rates. The cash flows from the interest rate cap
will help offset losses that might occur from changes in interest rates. The
cost of such agreement is included in interest expense ratably during the life
of the agreement. Income received as a result of the cap agreement will be
recognized in investment income as earned. Unamortized cost of the agreement
is included in other invested assets.
Aggregate Policy Reserves
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables based on
statutorily specified interest rates and valuation methods that will provide,
in the aggregate, reserves that are greater than or equal to the minimum
required by law.
The aggregate policy reserves for life insurance policies are based
principally upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary
Mortality and American Experience Mortality Tables. The reserves are
calculated using interest rates ranging from 2.00 to 6.00 percent and are
computed principally on the Net Level Premium Valuation and the Commissioners'
Reserve Valuation Methods. Reserves for universal life policies are based on
account balances adjusted for the Commissioners' Reserve Valuation Method.
Deferred annuity reserves are calculated according to the Commissioners'
Annuity Reserve Valuation Method including excess interest reserves to cover
situations where the future interest guarantees plus the decrease in surrender
charges are in excess of the maximum valuation rates of interest. Reserves for
immediate annuities and supplementary contracts with life contingencies are
equal to the present value of future payments assuming interest rates ranging
from 2.50 to 11.25 percent and mortality rates, where appropriate, from a
variety of tables.
Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.
12
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported
to the Company and claims incurred but not yet reported through the statement
date. These reserves are estimated using either individual case-basis
valuations or statistical analysis techniques. These estimates are subject to
the effects of trends in claim severity and frequency. The estimates are
continually reviewed and adjusted as necessary as experience develops or new
information becomes available.
Separate Accounts
Assets held in trust for purchases of variable annuity contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. The assets in the separate accounts are valued at
market. Income and gains and losses with respect to the assets in the separate
accounts accrue to the benefit of the contract owners and, accordingly, the
operations of the separate accounts are not included in the accompanying
financial statements. The separate accounts do not have any minimum guarantees
and the investment risks associated with market value changes are borne
entirely by the contract owners. The Company received variable contract
premiums of $486,282, $345,319 and $281,095 in 1999, 1998 and 1997,
respectively. All variable account contracts are subject to discretionary
withdrawal by the contract owner at the market value of the underlying assets
less the current surrender charge.
Stock Option Plan
AEGON N.V. sponsors a stock option plan for eligible employees of the Company.
Under this plan, certain employees have indicated a preference to immediately
sell shares received as a result of their exercise of the stock options; in
these situations, AEGON N.V. has settled such options in cash rather than
issuing stock to these employees. These cash settlements are paid by the
Company, and AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any expense
related to this plan, as the expense is recognized by AEGON N.V. However, the
Company is allowed to record a deduction in the consolidated tax return filed
by the Company and certain affiliates. The tax benefit of this deduction has
been credited directly to surplus.
Reclassifications
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
13
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments
Statement of Financial Accounting Standard ("SFAS") No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments, requires additional disclosure about
derivatives. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by
comparisons to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. SFAS No. 107 and No. 119 exclude
certain financial instruments and all nonfinancial instruments from their
disclosure requirements and allow companies to forego the disclosures when
those estimates can only be made at excessive cost. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values
are estimated using values obtained from independent pricing services or,
in the case of private placements, are estimated by discounting expected
future cash flows using a current market rate applicable to the yield,
credit quality, and maturity of the investments. The fair values for equity
securities, including affiliated mutual funds and real estate investment
trusts, are based on quoted market prices.
Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal their carrying
amount.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash
flow calculations, based on interest rates currently being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued.
14
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
Interest rate cap and interest rate swaps: Estimated fair value of the
interest rate cap is based upon the latest quoted market price. Estimated
fair value of interest rate swaps are based upon the pricing differential
for similar swap agreements.
Short-term notes payable to affiliates: The fair values for short-term
notes payable to affiliates are assumed to equal their carrying amount.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure
to changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
The following sets forth a comparison of the fair values and carrying amounts
of the Company's financial instruments subject to the provisions of SFAS No.
107 and No. 119:
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Admitted assets
Cash and short-term investments... $ 53,695 $ 53,695 $ 83,289 $ 83,289
Bonds............................. 4,892,156 4,757,325 4,822,442 4,900,516
Preferred stocks.................. 17,074 15,437 14,754 14,738
Common stocks..................... 71,658 71,658 49,448 49,448
Affiliated common stock........... 6,764 6,764 5,613 5,613
Mortgage loans on real estate..... 1,339,202 1,299,160 1,012,433 1,089,315
Policy loans...................... 59,871 59,871 60,058 60,058
Interest rate cap................. 4,959 1,784 4,445 725
Interest rate swaps............... 8,134 10,609 1,916 6,667
Separate account assets........... 4,905,374 4,905,374 3,348,611 3,348,611
Liabilities
Investment contract liabilities... 4,207,369 4,059,842 4,084,683 4,017,509
Separate account liabilities...... 4,377,676 4,212,615 3,271,005 3,213,251
Short-term notes payable to
affiliates....................... 144,500 144,500 9,421 9,421
</TABLE>
15
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
3. Investments
The carrying amounts and estimated fair values of investments in debt
securities were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Amount Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1999
Bonds:
United States Government and
agencies........................ $ 141,390 $ 142 $ 4,520 $ 137,012
State, municipal and other
government...................... 137,745 5,168 1,627 141,286
Public utilities................. 219,791 1,148 6,777 214,162
Industrial and miscellaneous..... 2,078,145 20,042 84,919 2,013,268
Mortgage and other asset-backed
securities...................... 2,315,085 24,214 87,702 2,251,597
---------- -------- -------- ----------
4,892,156 50,714 185,545 4,757,325
Preferred stocks................... 17,074 2 1,639 15,437
---------- -------- -------- ----------
$4,909,230 $ 50,716 $187,184 $4,772,762
========== ======== ======== ==========
December 31, 1998
Bonds:
United States Government and
agencies........................ $ 150,085 $ 2,841 $ 321 $ 152,605
State, municipal and other
government...................... 62,948 918 1,651 62,215
Public utilities................. 139,732 5,053 2,555 142,230
Industrial and miscellaneous..... 2,068,086 78,141 34,493 2,111,734
Mortgage and other asset-backed
securities...................... 2,401,591 45,185 15,044 2,431,732
---------- -------- -------- ----------
4,822,442 132,138 54,064 4,900,516
Preferred stocks................... 14,754 75 91 14,738
---------- -------- -------- ----------
$4,837,196 $132,213 $ 54,155 $4,915,254
========== ======== ======== ==========
</TABLE>
The carrying amounts and estimated fair values of bonds at December 31, 1999,
by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
---------- ----------
<S> <C> <C>
Due in one year or less............................... $ 194,654 $ 192,453
Due after one year through five years................. 1,151,170 1,121,353
Due after five years through ten years................ 908,926 873,402
Due after ten years................................... 322,321 318,520
---------- ----------
2,577,071 2,505,728
Mortgage and other asset-backed securities............ 2,315,085 2,251,597
---------- ----------
$4,892,156 $4,757,325
========== ==========
</TABLE>
16
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
3. Investments (continued)
A detail of net investment income is presented below:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest on bonds and preferred stock............... $347,639 $374,478 $373,496
Dividends on equity investments..................... 734 1,357 1,460
Interest on mortgage loans.......................... 92,325 77,960 80,266
Rental income on real estate........................ 7,322 6,553 7,501
Interest on policy loans............................ 4,141 4,080 3,400
Other investment income............................. 7,978 2,576 613
-------- -------- --------
Gross investment income............................. 460,139 467,004 466,736
Less investment expenses............................ 22,590 20,020 20,312
-------- -------- --------
Net investment income............................... $437,549 $446,984 $446,424
======== ======== ========
</TABLE>
Proceeds from sales and maturities of debt securities and related gross
realized gains and losses were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Proceeds.................................... $3,283,038 $3,347,174 $3,284,095
========== ========== ==========
Gross realized gains........................ $ 21,171 $ 48,760 $ 30,094
Gross realized losses....................... (32,259) (8,072) (17,265)
---------- ---------- ----------
Net realized gains (losses)................. $ (11,088) $ 40,688 $ 12,829
========== ========== ==========
</TABLE>
At December 31, 1999, investments with an aggregate carrying value of
$6,346,831 were on deposit with regulatory authorities or were restrictively
held in bank custodial accounts for the benefit of such regulatory authorities
as required by statute.
17
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
3. Investments (continued)
Realized investment gains (losses) and changes in unrealized gains (losses)
for investments are summarized below:
<TABLE>
<CAPTION>
Realized
----------------------------
Year ended December 31
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Debt securities......... $(11,088) $ 40,688 $ 12,829
Equity securities....... 11,433 (879) 6,972
Mortgage loans on real
estate................. 4,661 12,637 2,252
Real estate............. 900 3,176 4,252
Short-term investments.. (1,407) 1,533 (19)
Other invested assets... 534 (2,523) 1,632
-------- -------- --------
5,033 54,632 27,918
Tax effect.............. (5,535) (22,290) (10,572)
Transfer from (to)
interest maintenance
reserve................ 6,867 (28,944) (10,187)
-------- -------- --------
Net realized gains...... $ 6,365 $ 3,398 $ 7,159
======== ======== ========
<CAPTION>
Change in Unrealized
----------------------------
Year ended December 31
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Bonds................... $(12,711) $ (836) $ 2,498
Preferred stocks........ (2,753) -- --
Common stocks........... (3,980) 3,751 1,097
Mortgage loans.......... (147) (150) --
Other invested assets... (626) 1,739 (3)
-------- -------- --------
Change in unrealized.... $(20,217) $ 4,504 $ 3,592
======== ======== ========
Gross unrealized gains and gross unrealized losses on equity securities are as
follows:
<CAPTION>
December 31
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Unrealized gains........ $ 11,369 $ 15,980 $ 10,356
Unrealized losses....... (5,078) (3,710) (3,836)
-------- -------- --------
Net unrealized gains.... $ 6,291 $ 12,270 $ 6,520
======== ======== ========
</TABLE>
18
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
3. Investments (continued)
During 1999, the Company issued mortgage loans with interest rates ranging
from 6.42% to 8.67%. The maximum percentage of any one mortgage loan to the
value of the underlying real estate at origination was 84%. Mortgage loans
with a carrying value of $248 were non-income producing for the previous
twelve months. Accrued interest of $95 related to these mortgage loans was
excluded from investment income. The Company requires all mortgaged properties
to carry fire insurance equal to the value of the underlying property.
At December 31, 1999 and 1998, the Company held a mortgage loan loss reserve
in the asset valuation reserve of $15,173 and $16,104, respectively. The
mortgage loan portfolio is diversified by geographic region and specific
collateral property type as follows:
Geographic Distribution
<TABLE>
<CAPTION>
December 31
1999 1998
----- -----
<S> <C> <C>
South Atlantic.......... 27% 32%
Pacific................. 18 15
E. North Central........ 17 16
Middle Atlantic......... 15 10
Mountain................ 9 10
W. South Central........ 6 6
W. North Central........ 4 5
E. South Central........ 3 3
New England............. 1 3
</TABLE>
<TABLE>
<CAPTION>
Property Type Distribution
December 31
1999 1998
----- -----
<S> <C> <C>
Office.................. 39% 30%
Retail.................. 28 35
Industrial.............. 18 21
Apartment............... 11 12
Other................... 4 2
</TABLE>
At December 31, 1999, the Company had no investments (excluding U. S.
Government guaranteed or insured issues) which individually represented more
than ten percent of capital and surplus and the asset valuation reserve,
collectively.
19
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
3. Investments (continued)
The Company utilizes a variety of off-balance sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of
its investment portfolio attributable to changes in general interest rate
levels and to manage duration mismatch of assets and liabilities. These
instruments include interest rate swaps and caps. All involve elements of
credit and market risks in excess of the amounts recognized in the
accompanying financial statements at a given point in time. The contract or
notional amounts of those instruments reflect the extent of involvement in the
various types of financial instruments.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract)
that would result in an accounting loss and replacement cost risk (i.e., the
cost to replace the contract at current market rates should the counterparty
default prior to settlement date). Credit loss exposure resulting from
nonperformance by a counterparty for commitments to extend credit is
represented by the contractual amounts of the instruments.
At December 31, 1999 and 1998, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:
<TABLE>
<CAPTION>
Notional Amount
1999 1998
-------- --------
<S> <C> <C>
Derivative securities:
Interest rate swaps:
Receive fixed--pay floating............................... $115,000 $100,000
Receive floating--pay fixed............................... 64,017 --
Receive floating (uncapped)--pay floating (capped)........ 41,617 53,011
Receive floating (LIBOR--pay floating (S&P)............... 60,000 60,000
Interest rate cap agreements................................ 500,000 500,000
</TABLE>
4. Reinsurance
The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to
meet its obligation under the reinsurance treaty.
20
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
4. Reinsurance (continued)
Reinsurance assumption and cession treaties are transacted primarily with
affiliates. Premiums earned reflect the following reinsurance assumed and
ceded amounts:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums.......................... $1,942,716 $1,533,822 $1,312,446
Reinsurance assumed...................... 2,723 2,366 2,038
Reinsurance ceded........................ (144,310) (173,564) (246,372)
---------- ---------- ----------
Net premiums earned...................... $1,801,129 $1,362,624 $1,068,112
========== ========== ==========
</TABLE>
The Company received reinsurance recoveries in the amount of $139,138,
$173,297 and $183,638 during 1999, 1998 and 1997, respectively. At December
31, 1999 and 1998, estimated amounts recoverable from reinsurers that have
been deducted from policy and contract claim reserves totaled $35,511 and
$47,956, respectively. The aggregate reserves for policies and contracts were
reduced for reserve credits for reinsurance ceded at December 31, 1999 and
1998 of $1,870,190 and $2,163,905, respectively.
At December 31, 1999, amounts recoverable from unauthorized reinsurers of
$39,996 (1998--$55,379) and reserve credits for reinsurance ceded of $48,297
(1998--$49,835) were associated with a single reinsurer and its affiliates.
The Company holds collateral under these reinsurance agreements in the form of
trust agreements totaling $85,431 at December 31, 1999, that can be drawn on
for amounts that remain unpaid for more than 120 days.
5. Income Taxes
For federal income tax purposes, the Company joins in a consolidated tax
return filing with certain affiliated companies. Under the terms of a tax-
sharing agreement between the Company and its affiliates, the Company computes
federal income tax expense as if it were filing a separate income tax return,
except that tax credits and net operating loss carryforwards are determined on
the basis of the consolidated group. Additionally, the alternative minimum tax
is computed for the consolidated group and the resulting tax, if any, is
allocated back to the separate companies on the basis of the separate
companies' alternative minimum taxable income.
21
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
5. Income Taxes (continued)
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before federal
income tax expense and net realized capital gains (losses) on investments for
the following reasons:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Computed tax at federal statutory rate (35%)..... $27,832 $39,177 $42,775
IMR amortization................................. (2,656) (3,030) (1,276)
Tax reserve adjustment........................... 1,390 607 2,004
Excess tax depreciation.......................... (219) (223) (392)
Deferred acquisition costs-- tax basis........... 5,979 11,827 4,308
Prior year under (over) accrual ................. (3,492) 1,750 (1,016)
Dividend received deduction...................... (1,666) (1,053) (941)
Charitable contributions......................... -- -- (848)
Other items--net................................. (1,852) 780 (1,233)
------- ------- -------
Federal income tax expense....................... $25,316 $49,835 $43,381
======= ======= =======
</TABLE>
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to realized gains (losses) due to the
differences in book and tax asset bases at the time certain investments are
sold.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of
1959, a portion of statutory income was not subject to current taxation but
was accumulated for income tax purposes in a memorandum account referred to as
the policyholders' surplus account. No federal income taxes have been provided
for in the financial statements on income deferred in the policyholders'
surplus account ($20,387 at December 31, 1999). To the extent dividends are
paid from the amount accumulated in the policyholders' surplus account, net
earnings would be reduced by the amount of tax required to be paid. Should the
entire amount in the policyholders' surplus account become taxable, the tax
thereon computed at current rates would amount to approximately $7,135.
In 1999, the Company reached a final settlement with the Internal Revenue
Service for 1990 and 1991, resulting in a tax refund of $904 and interest
received of $548. These amounts were credited directly to unassigned surplus.
The Company also corrected an error in 1999 which related to the 1997 tax-
sharing agreement between the Company and various affiliates. This resulted in
a credit to unassigned surplus of $1,359.
The Company's federal income tax returns have been examined and closing
agreements have been executed with the Internal Revenue Service through 1992.
An examination is underway for years 1993 through 1997.
22
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
6. Policy and Contract Attributes
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relate to liabilities established on
a variety of the Company's annuity and deposit fund products. There may be
certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics, are summarized as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
------------------- ------------------
Percent Percent
of of
Amount Total Amount Total
----------- ------- ---------- -------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment................ $ 114,544 1% $ 82,048 1%
Subject to discretionary withdrawal at
book value less surrender charge....... 828,490 8 515,778 5
Subject to discretionary withdrawal at
market value........................... 4,313,445 41 3,211,896 34
Subject to discretionary withdrawal at
book value (minimal or no charges or
adjustments)........................... 5,021,762 48 5,519,265 58
Not subject to discretionary withdrawal
provision.............................. 248,444 2 228,030 2
----------- --- ---------- ---
10,526,685 100% 9,557,017 100%
Less reinsurance ceded.................. 1,863,810 2,124,769
----------- ----------
Total policy reserves on annuities and
deposit fund liabilities............... $ 8,662,875 $7,432,248
=========== ==========
</TABLE>
A reconciliation of the amounts transferred to and from the separate accounts
is presented below:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Transfers as reported in the summary of
operations of the separate accounts statement:..
Transfers to separate accounts................. $486,282 $345,319 $281,095
Transfers from separate accounts............... (175,822) (42,671) (9,819)
-------- -------- --------
Net transfers to separate accounts............... 310,460 302,648 271,276
Reconciling adjustments--change in miscellaneous
income.......................................... (1,153) 191 26,204
-------- -------- --------
Transfers as reported in the summary of
operations of the life, accident and health
annual statement................................ $309,307 $302,839 $297,480
======== ======== ========
</TABLE>
23
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next
anniversary date. At December 31, 1999 and 1998, these assets (which are
reported as premiums deferred and uncollected) and the amounts of the related
gross premiums and loadings, are as follows:
<TABLE>
<CAPTION>
Gross Loading Net
------- ------- -------
<S> <C> <C> <C>
December 31, 1999
Life and annuity:
Ordinary direct first year business................ $ 2,823 $2,085 $ 738
Ordinary direct renewal business................... 20,950 6,289 14,661
Group life direct business......................... 638 243 395
Reinsurance ceded.................................. (1,269) (16) (1,253)
------- ------ -------
23,142 8,601 14,541
Accident and health:
Direct............................................. 138 -- 138
Reinsurance ceded.................................. (23) -- (23)
------- ------ -------
Total accident and health............................ 115 -- 115
------- ------ -------
$23,257 $8,601 $14,656
======= ====== =======
December 31, 1998
Life and annuity:
Ordinary direct first year business................ $ 3,346 $2,500 $ 846
Ordinary direct renewal business................... 21,435 6,365 15,070
Group life direct business......................... 1,171 536 635
Reinsurance ceded.................................. (1,367) (44) (1,323)
------- ------ -------
24,585 9,357 15,228
Accident and health:
Direct............................................. 108 -- 108
Reinsurance ceded.................................. (18) -- (18)
------- ------ -------
Total accident and health............................ 90 -- 90
------- ------ -------
$24,675 $9,357 $15,318
======= ====== =======
</TABLE>
At December 31, 1999 and 1998, the Company had insurance in force aggregating
$41,720 and $44,233, respectively, in which the gross premiums are less than
the net premiums required by the standard valuation standards established by
the Insurance Division, Department of Commerce, of the State of Iowa. The
Company established policy reserves of $871 and $998 to cover these
deficiencies at December 31, 1999 and 1998, respectively.
24
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
7. Dividend Restrictions
The Company is subject to limitations, imposed by the State of Iowa, on the
payment of dividends to its parent company. Generally, dividends during any
twelve-month period may not be paid, without prior regulatory approval, in
excess of the greater of (a) 10 percent of statutory capital and surplus as of
the preceding December 31, or (b) statutory gain from operations before net
realized capital gains (losses) on investments for the preceding year. Subject
to the availability of unassigned surplus at the time of such dividend, the
maximum payment which may be made in 2000, without the prior approval of
insurance regulatory authorities, is $54,203.
The Company paid dividends to its parent of $40,000, $120,000 and $62,000 in
1999, 1998 and 1997, respectively.
8. Retirement and Compensation Plans
The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The
pension expense is allocated among the participating companies based on the
SFAS No. 87 expense as a percent of salaries. The benefits are based on years
of service and the employee's compensation during the highest five consecutive
years of employment. Pension expense aggregated $408, $380 and $422 for the
years ended December 31, 1999, 1998 and 1997, respectively. The plan is
subject to the reporting and disclosure requirements of the Employee
Retirement and Income Security Act of 1974.
The Company's employees also participate in a contributory defined
contribution plan sponsored by AEGON which is qualified under Section 401(k)
of the Internal Revenue Service Code. Employees of the Company who customarily
work at least 1,000 hours during each calendar year and meet the other
eligibility requirements, are participants of the plan. Participants may elect
to contribute up to fifteen percent of their salary to the plan. The Company
will match an amount up to three percent of the participant's salary.
Participants may direct all of their contributions and plan balances to be
invested in a variety of investment options. The plan is subject to the
reporting and disclosure requirements of the Employee Retirement and Income
Security Act of 1974. Expense related to this plan was $267, $233 and $226 for
the years ended December 31, 1999, 1998 and 1997, respectively.
25
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
8. Retirement and Compensation Plans (continued)
AEGON sponsors supplemental retirement plans to provide the Company's senior
management with benefits in excess of normal pension benefits. The plans are
noncontributory, and benefits are based on years of service and the employee's
compensation level. The plans are unfunded and nonqualified under the Internal
Revenue Service Code. In addition, AEGON has established incentive deferred
compensation plans for certain key employees of the Company. AEGON also
sponsors an employee stock option plan for individuals employed at least three
years and a stock purchase plan for its producers, with the participating
affiliated companies establishing their own eligibility criteria, producer
contribution limits and company matching formula. These plans have been
accrued or funded as deemed appropriate by management of AEGON and the
Company.
In addition to pension benefits, the Company participates in plans sponsored
by AEGON that provide postretirement medical, dental and life insurance
benefits to employees meeting certain eligibility requirements. Portions of
the medical and dental plans are contributory. The expenses of the
postretirement plans are charged to affiliates in accordance with an
intercompany cost sharing arrangement. The Company expensed $28, $62 and $62
for the years ended December 31, 1999, 1998 and 1997, respectively.
9. Related Party Transactions
The Company shares certain offices, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1999,
1998 and 1997, the Company paid $19,983, $18,706 and $18,705, respectively,
for these services, which approximates their costs to the affiliates.
Payables to affiliates bear interest at the thirty-day commercial paper rate
of 5.7% at December 31, 1999. During 1999, 1998 and 1997, the Company paid net
interest of $1,994, $1,491 and $1,188, respectively, to affiliates.
During 1997, the Company received a capital contribution of $153 in cash from
its parent.
At December 31, 1999 and 1998, the Company has short-term notes payable to an
affiliate of $144,500 and $9,421, respectively. Interest on these notes
accrues at rates ranging from 4.85% to 5.90% at December 31, 1999 and 5.13% to
5.52% at December 31, 1998.
26
<PAGE>
PFL Life Insurance Company
Notes to Financial Statements--Statutory Basis--(continued)
(Dollars in thousands)
9. Related Party Transactions (continued)
During 1998, the Company issued life insurance policies to certain affiliated
companies, covering the lives of certain employees of those affiliates.
Premiums of $174,000 related to these policies were recognized during the
year, and aggregate reserves for policies and contracts are $190,299 and
$181,720 at December 31, 1999 and 1998, respectively.
10. Commitments and Contingencies
The Company has issued Trust (synthetic) GIC contracts to plan sponsors
totaling $374,124 at December 31, 1999, pursuant to terms under which the plan
sponsor retains ownership of the assets related to these contracts. The
Company guarantees benefit responsiveness in the event that plan benefit
requests and other contractual commitments exceed plan cash flows. The plan
sponsor agrees to reimburse the Company for such benefit payments with
interest, either at a fixed or floating rate, from future plan and asset cash
flows. In return for this guarantee, the Company receives a premium which
varies based on such elements as benefit responsive exposure and contract
size. The Company underwrites the plans for the possibility of having to make
benefit payments and also must agree to the investment guidelines to ensure
appropriate credit quality and cash flow matching. The assets relating to such
contracts are not recognized in the Company's statutory-basis financial
statements.
The Company is a party to legal proceedings incidental to its business.
Although such litigation sometimes includes substantial demands for
compensatory and punitive damages, in addition to contract liability, it is
management's opinion, after consultation with counsel and a review of
available facts, that damages arising from such demands will not be material
to the Company's financial position.
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance
companies for the benefit of policyholders and claimants in the event of
insolvency of other insurance companies. Assessments are charged to operations
when received by the Company except where right of offset against other taxes
paid is allowed by law; amounts available for future offsets are recorded as
an asset on the Company's balance sheet. Potential future obligations for
unknown insolvencies are not determinable by the Company. The future
obligation has been based on the most recent information available from the
National Organization of Life and Health Insurance Guaranty Associations. The
Company has established a reserve of $19,662 and $17,901 and an offsetting
premium tax benefit of $7,429 and $7,631 at December 31, 1999 and 1998,
respectively, for its estimated share of future guaranty fund assessments
related to several major insurer insolvencies. The guaranty fund expense
(benefit) was $1,994, $1,985 and $(975) for the years ended December 31, 1999,
1998 and 1997, respectively.
27
<PAGE>
PFL Life Insurance Company
Summary of Investments--Other than
Investments in Related Parties
(Dollars in thousands)
December 31, 1999
SCHEDULE I
<TABLE>
<CAPTION>
Amount at Which
Market Shown in the
Type of Investment Cost(1) Value Balance Sheet
------------------ ---------- --------- ---------------
<S> <C> <C> <C>
Fixed maturities
Bonds:
United States Government and government
agencies and authorities............... $ 195,119 $ 189,752 $ 195,119
States, municipalities and political
subdivisions........................... 545,562 535,945 545,562
Foreign governments..................... 134,584 138,767 134,584
Public utilities........................ 219,791 214,162 219,791
All other corporate bonds............... 3,797,100 3,678,699 3,797,100
Redeemable preferred stock................ 17,074 15,437 17,074
---------- --------- ----------
Total fixed maturities.................... 4,909,230 4,772,762 4,909,230
Equity securities
Common stocks:
Banks, trust and insurance.............. 2,676 2,809 2,809
Industrial, miscellaneous and all
other.................................. 59,137 68,849 68,849
---------- --------- ----------
Total equity securities................... 61,813 71,658 71,658
Mortgage loans on real estate............. 1,339,202 1,339,202
Real estate............................... 41,536 41,536
Real estate acquired in satisfaction of
debt..................................... 16,336 16,336
Policy loans.............................. 59,871 59,871
Other long-term investments............... 123,722 123,722
Cash and short-term investments........... 53,695 53,695
---------- ----------
Total investments......................... $6,605,405 $6,615,250
========== ==========
</TABLE>
(1) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and adjusted for amortization of premiums or
accrual of discounts.
28
<PAGE>
PFL Life Insurance Company
Supplementary Insurance Information
(Dollars in thousands)
SCHEDULE III
<TABLE>
<CAPTION>
Future
Policy Policy
Benefits and
and Unearned Contract
Expenses Premiums Liabilities
---------- -------- -----------
<S> <C> <C> <C>
Year ended December 31, 1999
Individual life................................. $1,550,188 $ -- $ 8,607
Individual health............................... 133,214 10,311 10,452
Group life and health........................... 105,035 8,604 27,088
Annuity......................................... 4,036,751 -- --
---------- ------- -------
$5,825,188 $18,915 $46,147
========== ======= =======
Year ended December 31, 1998
Individual life................................. $1,355,283 $ -- $ 8,976
Individual health............................... 94,294 9,631 12,123
Group life and health........................... 93,405 10,298 36,908
Annuity......................................... 3,925,293 -- --
---------- ------- -------
$5,468,275 $19,929 $58,007
========== ======= =======
Year ended December 31, 1997
Individual life................................. $ 882,003 $ -- $ 8,550
Individual health............................... 62,033 9,207 12,821
Group life and health........................... 88,211 11,892 44,977
Annuity......................................... 4,204,125 -- --
---------- ------- -------
$5,236,372 $21,099 $66,348
========== ======= =======
</TABLE>
29
<PAGE>
PFL Life Insurance Company
Supplementary Insurance Information
(Dollars in thousands)
SCHEDULE III
<TABLE>
<CAPTION>
Benefits,
Claims
Net Losses and Other
Premium Investment Settlement Operating Premiums
Revenue Income* Expenses Expenses* Written
---------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1999
Individual life........... $ 226,456 $104,029 $ 274,730 $141,030 $ --
Individual health......... 77,985 10,036 58,649 35,329 77,716
Group life and health..... 83,639 10,422 61,143 38,075 81,918
Annuity................... 1,413,049 313,062 1,303,537 278,995 --
---------- -------- ---------- --------
$1,801,129 $437,549 $1,698,059 $493,429
========== ======== ========== ========
Year ended December 31,
1998
Individual life........... $ 514,194 $ 85,258 $ 545,720 $ 87,455 $ --
Individual health......... 68,963 8,004 48,144 30,442 68,745
Group life and health..... 111,547 11,426 82,690 54,352 108,769
Annuity................... 667,920 342,296 592,085 298,222 --
---------- -------- ---------- --------
$1,362,624 $446,984 $1,268,639 $470,471
========== ======== ========== ========
Year ended December 31,
1997
Individual life........... $ 200,175 $ 75,914 $ 211,921 $ 36,185 $ --
Individual health......... 63,548 5,934 37,706 29,216 63,383
Group life and health..... 146,694 11,888 103,581 91,568 143,580
Annuity................... 657,695 352,688 571,434 364,216 --
---------- -------- ---------- --------
$1,068,112 $446,424 $ 924,642 $521,185
========== ======== ========== ========
</TABLE>
- -------------------------
* Allocations of net investment income and other operating expenses are based
on a number of assumptions and estimates, and the results would change if
different methods were applied.
30
<PAGE>
PFL Life Insurance Company
Reinsurance
(Dollars in thousands)
SCHEDULE IV
<TABLE>
<CAPTION>
Assumed Percentage
Ceded to From of Amount
Gross Other Other Net Assumed
Amount Companies Companies Amount to Net
---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1999
Life insurance in
force.................. $6,538,901 $(500,192) $415,910 $6,454,619 6.4%
========== ========= ======== ========== ===
Premiums:
Individual life....... $ 227,363 $ 3,967 $ 2,723 $ 226,119 1.2%
Individual health..... 83,489 5,504 -- 77,985 --
Group life and
health............... 205,752 122,113 -- 83,639 --
Annuity............... 1,426,112 12,726 -- 1,413,386 --
---------- --------- -------- ---------- ---
$1,942,716 $ 144,310 $ 2,723 $1,801,129 0.2%
========== ========= ======== ========== ===
Year ended December 31,
1998
Life insurance in
force.................. $6,384,095 $ 438,590 $ 39,116 $5,984,621 .6%
========== ========= ======== ========== ===
Premiums:
Individual life....... $ 515,164 $ 3,692 $ 2,366 $ 513,838 .5%
Individual health..... 76,438 7,475 -- 68,963 --
Group life and
health............... 255,848 144,301 -- 111,547 --
Annuity............... 686,372 18,096 -- 668,276 --
---------- --------- -------- ---------- ---
$1,533,822 $ 173,564 $ 2,366 $1,362,624 .2%
========== ========= ======== ========== ===
Year ended December 31,
1997
Life insurance in
force.................. $5,025,027 $ 420,519 $ 35,486 $4,639,994 .8%
========== ========= ======== ========== ===
Premiums:
Individual life....... $ 201,691 $ 3,554 $ 2,038 $ 200,175 1.0%
Individual health..... 73,593 10,045 -- 63,548 --
Group life and
health............... 339,269 192,575 -- 146,694 --
Annuity............... 697,893 40,198 -- 657,695 --
---------- --------- -------- ---------- ---
$1,312,446 $ 246,372 $ 2,038 $1,068,112 .2%
========== ========= ======== ========== ===
</TABLE>
31
<PAGE>
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits:
(1) (a) Resolution of the Board of Directors of PFL Life Insurance
Company authorizing establishment of the Mutual Fund
Account. Note 5.
(2) Not Applicable.
(3) (a) Principal Underwriting Agreement by and between PFL Life
Insurance Company, on its own behalf and on the behalf of
the Mutual Fund Account, and AFSG Securities Corporation.
Note 5.
(b) Form of Broker/Dealer Supervision and Sales Agreement by
and between AFSG Securities Corporation and the
Broker/Dealer. Note 5.
(4) (a) Form of Group Master Policy and Optional Riders for the
Access Variable Annuity. Note 6.
(b) Form of Group Certificate for the Access Variable Annuity.
Note 6.
(c) Form of Individual Policy for the Access Variable Annuity.
Note 5.
(5) (a) Form of Group Master Application for the Access Variable
Annuity. Note 6.
(b) Form of Group Certificate Enrollment Application for the
Access Variable Annuity. Note 6.
(c) Form of Individual Application for the Access Variable
Annuity. Note 5.
(6) (a) Articles of Incorporation of PFL Life Insurance Company.
Note 5.
(b) ByLaws of PFL Life Insurance Company. Note 5.
(7) Not Applicable.
(8) (a) Participation Agreement by and between PFL Life Insurance
Company, Endeavor Management Co. and Endeavor Series
Trust. Note 1.
(a)(1) Amendment No. 6 to Participation Agreement by and between
PFL Life Insurance Company, Endeavor Management Co. and
Endeavor Series Trust. Note 5.
(b) Participation Agreement among WRL Series Fund, Inc.,
Western Reserve Life Assurance Co. of Ohio, and PFL Life
Insurance Company, and Addendums thereof. Note 2.
<PAGE>
(b)(1) Amendment No. 12 to Participation Agreement among WRL
Series Fund, Inc., PFL Life Insurance Company, AUSA Life
Insurance Company, Inc., and Peoples Benefit Life
Insurance Company. Note 5.
(c) Participation Agreement by and between PFL Life Insurance
Company and Transamerica Variable Insurance Fund, Inc.
Note 6.
(d) 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. Note 3.
(d)(1) 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. Note 6
(e) Participation Agreement between Variable Insurance
Products Fund III, Fidelity Distributors Corporation, and
PFL Life Insurance Company. Note 4.
(e)(1) Amended Schedule A to Participation Agreement between
Variable Insurance Products Fund III, Fidelity
Distributors Corporation, and PFL Life Insurance Company.
Note 6
(9) Opinion and Consent of Counsel. Note 6.
(10) (a) Consent of Independent Auditors. Note 6.
(10) (b) Opinion and Consent of Actuary. Note 6.
(11) Not applicable.
(12) Not applicable.
(13) Performance Data Calculations. Note 7.
(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
5.
Note 1. Incorporated herein by reference to the Endeavor Series Trust Post-
Effective Amendment No. 14, Exhibit No. 6 (File No. 33-27352), filed
on April 29, 1996.
Note 2. Incorporated herein by reference to the Atlas Portfolio Builder
Variable Annuity filing of Post-Effective Amendment No. 1 to Form N-4
Registration Statement (File No. 333-26209) on April 29, 1998.
Note 3. Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-
4 Registration Statement (File No. 333-7509) on December 6, 1996.
Note 4. Incorporated by reference to Post-Effective Amendment No. 1 to Form
N-4 Registration Statement (File No. 333-7509) on April 29, 1997.
Note 5. Filed with Initial Filing on Form N-4 Registration No. 333-94489 on
January 12, 2000.
Note 6. Filed Herewith
Note 7. 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 President
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
Patrick S. Baird Director, Senior Vice President and Chief
4333 Edgewood Road, N.E. 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
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
AEGON N.V. Netherlands 51.16% of Vereniging Holding company
AEGON Netherlands
Membership Association
Groninger Financieringen B.V. Netherlands 100% AEGON N.V. Holding company
AEGON Netherland N.V. Netherlands 100% AEGON N.V. Holding company
AEGON Nevak Holding B.V. Netherlands 100% AEGON N.V. Holding company
AEGON International N.V. Netherlands 100% AEGON N.V. Holding company
Voting Trust Trustees: Delaware Voting Trust
K.J. Storm
Donald J. Shepard H.B.
Van Wijk Dennis Hersch
AEGON U.S. Holding Corporation Delaware 100% Voting Trust Holding company
Short Hills Management Company New Jersey 100% AEGON U.S. Holding company
Holding Corporation
CORPA Reinsurance Company New York 100% AEGON U.S. Holding company
Holding Corporation
AEGON Management Company Indiana 100% AEGON U.S. Holding company
Holding Corporation
RCC North America Inc. Delaware 100% AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
Transamerica Holding Company Delaware 100% AEGON USA, Inc. Holding Company
AEGON Funding Corp. Delaware 100% Transamerica Issue debt securities-net
Holding Company proceeds used to make
loans to affiliates
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Company
AUSA Life Insurance New York 82.33% First AUSA Life Insurance
Company, Inc. Insurance Company
17.67% Veterans Life
Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America
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Life Investors Alliance, LLC Delaware 100% LIICA Purchase, own, and hold the
equity interest of other entities
Great American Insurance Iowa 100% LIICA Marketing
Agency, Inc.
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.
AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
of Kentucky Services Group, Inc. settlements
AEGON Assignment Corporation Illinois 100% AEGON Financial Administrator of structured
Services Group, Inc. settlements
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Western Reserve Life Assurance Ohio 100% First AUSA Life Ins. Co. Insurance
Co. of Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund
WRL Investment Florida 100% Western Reserve Life Registered investment advisor
Management, Inc. Assurance Co. of Ohio
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
And Subsidiaries Assurance Co. of Ohio
ISI Insurance Agency Alabama 100% ISI Insurance Agency, Inc. Insurance Agency
of Alabama, Inc.
ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
of Massachusetts, Inc.
ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.
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ISI Insurance Agency Hawaii 100% ISI Insurance Insurance agency
of Hawaii, Inc. Agency, Inc.
ISI Insurance Agency New Mexico 100% ISI Insurance Insurance agency
New Mexico, Inc. Agency, Inc.
AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance Agency
Assurance Co. of Ohio
Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance
United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency
Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance
The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Monumental General Life Puerto Rico 51% First AUSA Life Insurance
Insurance Company of Insurance Company
Puerto Rico 49% Baldrich & Associates
of Puerto Rico
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. insurance
Monumental General Maryland 100% Monumental General Provides management srvcs.
Administrators, Inc. Insurance Group, Inc. to unaffiliated third party
administrator
Executive Management and Maryland 100% Monumental General Provides actuarial consulting
Consultant Services, Inc. Administrators, Inc. services
Monumental General Mass Maryland 100% Monumental General Marketing arm for sale of
Marketing, Inc. Insurance Group, Inc. mass marketed insurance
coverages
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Transamerica Capital, Inc. California 100% AUSA Holding Co. Broker/Dealer
Endeavor Management Company California 100% AUSA Holding Co. Investment Management
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
</TABLE>
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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
ADB Corporation Delaware 100% Money Services, Inc. Special purpose limited
Liability company
ORBA Insurance Services, Inc. California 10.56% Money Services, Inc. Insurance agency
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
Zahorik Texas, Inc. Texas 100% Zahorik Company, Inc. Insurance agency
Long, Miller & Associates, L.L.C. California 33-1/3% AUSA Holding Co. 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
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.
Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services
Idex Management, Inc. Delaware 100% AUSA Holding Co. Investment advisor
IDEX Mutual Funds Massachusetts Various Mutual fund
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.
Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advisors, Inc.
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George Beram & Company, Inc. Massachusetts 100% Diversified Investment Employee benefit and
Advisors, Inc. actuarial consulting
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer (De-registered)
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.
Weiner Agency, Inc. Maryland 100% Creditor Resources, Inc. Insurance agency
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
AEGON USA Real Estate Delaware 100% AEGON USA Realty Real estate and mortgage
Services, Inc. Advisors, Inc. holding company
QSC Holding, Inc. Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales
LRA, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Realty Associates, Inc. Texas 100% Landauer Associates, Inc. Real estate counseling
Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management
USP Real Estate Investment Trust Iowa 12.89% First AUSA Life Ins. Co. Real estate investment trust
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner.
Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")
AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life
Insurance Company
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Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Capital 200 Block Corporation Delaware 100% CGC Real estate holdings
Capital Real Estate Delaware 100% CGC Furniture and equipment
Development Corporation lessor
Commonwealth General. Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements
Diversified Financial Products Inc. Delaware 100% CGC Provider of investment,
marketing and admin. services
to ins. cos.
Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. to ins. cos.
PB Investment Advisors, Inc. Delaware 100% CGC Registered investment advisor
(de-registered)
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands
Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management
(EIN 23-1720755) support services
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
National Home Life Corporation Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment lessor
Agency, Inc.
Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administrator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
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Academy Insurance Group, Inc. Delaware 100% CGC Holding company
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Life Insurance company
Company of America Insurance Company
FED Financial, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
(EIN 23-2364438) Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.
Unicom Administrative Germany 100% Unicom Administrative Provider of admin. services
Services, GmbH Services, Inc.
</TABLE>
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Capital General Development Delaware 100% CGC Holding company
Corporation
Monumental Life Maryland 73.23% Capital General Insurance company
Insurance Company Development Company
26.77% First AUSA Life
Insurance Company
AEGON Special Markets Maryland 100% Monumental Life Marketing company
Group, Inc. Insurance Company
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20.0% Capital Liberty, L.P.
76.3% Monumental Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
Coverna Direct Insurance Maryland 100% Peoples Benefit Insurance agency
Insurance Services, Inc. Life Insurance Company
Ammest Realty Corporation Texas 100% Monumental Life Special purpose subsidiary
Insurance Company
JMH Operating Company, Inc. Mississippi 100% Monumental Life Real estate holdings
Insurance Company
Capital Liberty, L.P. Delaware 99.0% Monumental Life Holding Company
Insurance Company
1.0% CGC
Transamerica Corporation Delaware 100% AEGON NV Major interest in insurance
and finance
Transamerica Pacific Insurance Hawaii 100% Transamerica Corp. Life insurance
Company, Ltd.
TREIC Enterprises, Inc. Delaware 100% Transamerica Corp. Investments
ARC Reinsurance Corporation Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Transamerica Management, Inc. Delaware 100% ARC Reinsurance Corp. Asset management
Inter-America Corporation California 100% Transamerica Corp. Insurance Broker
</TABLE>
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Pyramid Insurance Company, Ltd. Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Pacific Cable Ltd. Bmda. 100% Pyramid Ins. Co., Ltd. Sold 25% of TC Cable, Inc.
stock in 1998
Transamerica Business Tech Corp. Delaware 100% Transamerica Corp. Telecommunications and
data processing
Transamerica CBO I, Inc. Delaware 100% Transamerica Corp. Owns and manages a pool of
high-yield bonds
Transamerica Corporation (Oregon) Oregon 100% Transamerica Corp. Name holding only-Inactive
Transamerica Finance Corp. Delaware 100% Transamerica Corp. Commercial & Consumer
Lending & equip. leasing
TA Leasing Holding Co., Inc. Delaware 100% Transamerica Fin. Corp. Holding company
Trans Ocean Ltd. Delaware 100% TA Leasing Hldg Co. Inc. Holding company
Trans Ocean Container Corp. Delaware 100% Trans Ocean Ltd. Intermodal Leasing
("TOCC")
SpaceWise Inc. Delaware 100% TOCC Intermodal leasing
Trans Ocean Container
Finance Corp. Delaware 100% TOCC Intermodal leasing
Trans Ocean Leasing
Deutschland GmbH Germany 100% TOCC Intermodal leasing
Trans Ocean Leasing PTY Ltd. Austria 100% TOCC Intermodal leasing
Trans Ocean Management S.A. Switzerland 100% TOCC Intermodal leasing
Trans Ocean Regional
Corporate Holdings California 100% TOCC Holding company
Trans Ocean Tank Services Corp. Delaware 100% TOCC Intermodal leasing
Transamerica Leasing Inc. Delaware 100% TA Leasing Holding Co. Leases & Services intermodal
equipment
Transamerica Leasing Holdings Delaware 100% Transamerica Leasing Inc. Holding Company
Inc. ("TLHI")
Greybox Logistics Services Inc. Delaware 100% TLHI Intermodal Leasing
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Greybox L.L.C. Delaware 100% TLHI Intermodal freight container
interchange facilitation
service
Transamerica Trailer France 100% Greybox L.L.C. Leasing
Leasing S.N.C.
Greybox Services Limited U.K. 100% TLHI Intermodal Leasing
Intermodal Equipment, Inc. Delaware 100% TLHI Intermodal leasing
Transamerica Leasing N.V. Belg. 100% Intermodal Equipment Inc. Leasing
Transamerica Leasing SRL Italy 100% Intermodal Equipment Inc. Leasing
Transamerica Distribution Delaware 100% TLHI Provided door-to-door
Services, Inc. services for the domestic
transportation of temperature-
sensitive products
Transamerica Leasing Belg. 100% TLHI Leasing
Coordination Center
Transamerica Leasing do Braz. 100% TLHI Container Leasing
Brasil Ltda.
Transamerica Leasing GmbH Germany 100% TLHI Leasing
Transamerica Leasing Limited U.K. 100% TLHI Leasing
ICS Terminals (UK) Limited U.K. 100% Transamerica. Leasing
Leasing Limited
Transamerica Leasing Pty. Ltd. Australia 100% TLHI Leasing
Transamerica Leasing (Canada) Inc. Canada 100% TLHI Leasing
Transamerica Leasing (HK) Ltd. H.K. 100% TLHI Leasing
Transamerica Leasing S. Africa 100% TLHI Intermodal leasing
(Proprietary) Limited
Transamerica Tank Container Australia 100% TLHI The Australian (domestic)
Leasing Pty. Limited leasing of tank containers
Transamerica Trailer Holdings I Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Holdings II, Inc. Delaware 100% TLHI Holding company
</TABLE>
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Transamerica Trailer Holdings III, Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Leasing AB Swed. 100% TLHI Leasing
Transamerica Trailer Leasing AG Swetzerland 100% TLHI Leasing
Transamerica Trailer Leasing A/S Denmark 100% TLHI Leasing
Transamerica Trailer Leasing GmbH Germany 100% TLHI Leasing
Transamerica Trailer Leasing Belgium 100% TLHI Leasing
(Belgium) N.V.
Transamerica Trailer Leasing Netherlands 100% TLHI Leasing
(Netherlands) B.V.
Transamerica Trailer Spain S.A. Spain 100% TLHI Leasing
Transamerica Transport Inc. New Jersey 100% TLHI Dormant
Transamerica Commercial Delaware 100% Transamerica Fin. Corp. Holding company for
Finance Corporation, I ("TCFCI") Commercial/consumer
finance subsidiaries
Transamerica Equipment Financial Delaware 100% TCFCI
Services Corporation
BWAC Credit Corporation Delaware 100% TCFCI
BWAC International Corporation Delaware 100% TCFCI
BWAC Twelve, Inc. Delaware 100% TCFCI Holding company for
premium finance subsidiaries
TIFCO Lending Corporation Illinois 100% BWAC Twelve, Inc. General financing & other
services in the US &
elsewhere
Transamerica Insurance Finance Maryland 100% BWAC Twelve, Inc. Provides insurance premium
Corporation ("TIFC") financing in the US with the
exception of CA and HI
Transamerica Insurance Finance Maryland 100% TIFC Provides Insurance premium
Company (Europe) financing in California
Transamerica Insurance Finance California 100% TIFC Disability ins. & holding co.
Corporation, California for various insurance
subsidiaries of Transamerica
Corporation
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Transamerica Insurance Finance ON 100% TIFC Provides ins. premium
Corporation, Canada financing in Canada
Transamerica Business Credit Delaware 100% TCFCI Provides asset based lending
Corporation ("TBCC") leasing & equip. financing
Transamerica Mezzanine Delaware 100% TBCC Holds investments in several
Financing, Inc. joint ventures/partnerships
Transamerica Business Advisory Grp. Delaware 100% TBCC
Bay Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Coast Funding Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Transamerica Small Business Delaware 100% TBCC
Capital, Inc. ("TSBC")
Emergent Business Capital Delaware 100% TSBC
Holdings, Inc.
Gulf Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Direct Capital Equity Investment, Inc. Delaware 100% TBCC Small business loans
TA Air East, Corp Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air I, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air II, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air III, Corp. Delaware 100% TBCC special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
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TA Air IV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air V, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air VIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air IX, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air X, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
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TA Marine I Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TA Marine II Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TBC I, Inc. Delaware 100% TBCC Special purpose corp.
TBC II, Inc. Delaware 100% TBCC Special purpose corp.
TBC III, Inc. Delaware 100% TBCC Special purpose corp.
TBC IV, Inc. Delaware 100% TBCC Special purpose corp.
TBC V, Inc. Delaware 100% TBCC Special purpose corp.
TBC VI, Inc. Delaware 100% TBCC Special purpose corp.
TBC Tax I, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax II, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax III, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IV, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax V, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VI, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VIII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IX, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
</TABLE>
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The Plain Company Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft.
Transamerica Distribution Delaware 100% TCFCI Holding corp. for inventory,
Finance Corporation ("TDFC") comm. Leasing, retail finance
comm. Recovery service and
accounts
Transamerica Accounts Holding Corp. Delaware 100% TDFC
Transamerica Commercial Delaware 100% TDFC Wholesale floor plan for
Finance Corporation ("TCFC") appliances, electronics,
computers, office equip. and
marine equipment.
Transamerica Acquisition Canada 100% TCFC Holding company
Corporation, Canada
Transamerica Distribution Finance Delaware 100% TCFC
Corporation - Overseas, Inc.
("TDFCO")
TDF Mauritius Limited Mauritius 100% TDFCO Mauritius holding company
of our Indian Joint Venture
Inventory Funding Trust Delaware 100% TCFC
Inventory Funding Company, LLC Delaware 100% Inventory Funding Trust
TCF Asset Management Corporation Colorado 100% TCFC A depository for foreclosed
real and personal property
Transamerica Joint Ventures, Inc. Delaware 100% TCFC To enter into general partner-
ships for the ownership of
comm. & finance business
Transamerica Inventory Delaware 100% TDFC Holding co. for inventory
Finance Corporation ("TIFC") finance subsidiaries
Transamerica GmbH, Inc. Delaware 100% TIFC Commercial lending in
Germany
Transamerica Fincieringsmaatschappij
B.V. Netherlands 100% Trans. GmbH, Inc. Commercial lending in
Europe
</TABLE>
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BWAC Seventeen, Inc. Delaware 100% TIFC Holding co. for principal
Canadian operation, Trans-
America Comm. Finance
Corp, Canada
Transamerica Commercial ON 100% BWAC Seventeen, Inc. Shell corp.- Dormant
Finance Canada, Limited
Transamerica Commercial Canada 100% BWAC Seventeen, Inc. Commercial finance
Finance Corporation, Canada
BWAC Twenty-One, Inc. Delaware 100% TIFC Holding co. for United
Kingdom operation, Trans-
America Comm. Finance
Limited
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Commercial lending in the
Finance Limited ("TCFL") United Kingdom.
Whirlpool Financial Corporation 100% TCFL Inactive commercial finance
Polska Spzoo Company in Poland
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Holding Company
Holdings Limited
Transamerica Commercial Finance U.K. 100% Trans. Commercial
Limited Holdings Limited
Transamerica Commercial Finance France 100% BWAC Twenty-One Inc. Carries out factoring trans-
France S.A. actions in France & abroad
Transamerica GmbH Inc. Delaware 100% BWAC Twenty-One Inc. Holding co. for Transamerica
Financieringsmaatschappij
B.V.
Transamerica Retail Financial Delaware 100% TIFC Provides retail financing
Services Corporation ("TRFSC")
Transamerica Bank, NA Delaware 100% TRFSC Bank (Credit Cards)
Transamerica Consumer Finance Delaware 100% TRFSC Consumer finance holding
Holding Company ("TCFHC") company
Transamerica Mortgage Company Delaware 100% TCFHC Consumer mortgages
Transamerica Consumer Mortgage Delaware 100% TCFHC Securitization company
Receivables Company
Metropolitan Mortgage Company Florida 100% TCFHC Consumer mortgages
</TABLE>
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Easy Yes Mortgage, Inc. Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Easy Yes Mortgage, Inc. Georgia 100% Metropolitan Mtg. Co. No active business/Name
holding only
First Florida Appraisal Services, Inc. Georgia 100% Metropolitan Mtg. Co. Appraisal and inspection
services
First Georgia Appraisal Services, Inc. Georgia 100% First FL App. Srvc, Inc. Appraisal services
Freedom Tax Services, Inc. Florida 100% Metropolitan Mtg. Co. Property tax information
services
J.J. & W. Advertising, Inc. Florida 100% Metropolitan Mtg. Co. Advertising and marketing
services
J.J. & W. Realty Corporation Florida 100% Metropolitan Mtg. Co. To hold problem REO
properties
Liberty Mortgage Company of Florida 100% Metropolitan Mtg. Co. No active business/Name
Ft. Myers, Inc. holding only
Metropolis Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Perfect Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Transamerica Vendor Financial Srvc. Delaware 100% TDFC Provides commercial lease
Transamerica Distribution Finance 100% TCFCI
Corporation de Mexico ("TDFCM")
TDF de Mexico Mexico 100% TDFCM
Transamerica Corporate Services 100% TDFCM
De Mexico
Transamerica Home Loan California 100% TFC Consumer mortgages
Transamerica Lending Company Delaware 100% TFC Consumer lending
Transamerica Financial Products, Inc. California 100% Transamerica Corp. Service investments
Transamerica Insurance Corporation California 100% Transamerica Corp. Provides insurance premium
of California ("TICC") financing in California
</TABLE>
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Arbor Life Insurance Company Arizona 100% TICC Life insurance, disability
insurance
Plaza Insurance Sales Inc. California 100% TICC Casualty insurance placement
Transamerica Advisors, Inc. California 100% TICC Retail sale of investment
advisory services
Transamerica Annuity Services Corp. New Mexico 100% TICC Performs services required for
structured settlements
Transamerica Financial Resources, Inc. Delaware 100% TICC Retail sale of securities
products
Financial Resources Insurance Texas 100% Transamerica Fin. Res. Retail sale of securities
Agency of Texas products
TBK Insurance Agency of Ohio, Inc. Ohio 100% Transamerica Fin. Res. Variable insurance contract
sales in state of Ohio
Transamerica Financial Resources Alabama 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Alabama, Inc.
Transamerica Financial Resources Ins. Massachusetts 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Massachusetts, Inc.
Transamerica International Insurance Delaware 100% TICC Holding & administering
Services, Inc. ("TIIS") foreign operations
Home Loans and Finance Ltd. U.K. 100% TIIS Inactive
Transamerica Occidental Life California 100% TICC Licensed in all forms of life
Insurance Company ("TOLIC") insurance, accident and
sickness insurance
NEF Investment Company California 100% TOLIC Real estate development
Transamerica Life Insurance and N. Carolina 100%TOLIC Writes life and pension ins.
Annuity Company ("TLIAC") originally incorporated in CA
April 14, 1966
Transamerica Assurance Company Missouri 100% TLIAC Life and disability insurance
Gemini Investments, Inc. Delaware 100% TLIAC Investment subsidiary
Transamerica Life Insurance Company Canada 100% TOLIC Sells individual life insurance
of Canada & investment products in all
provinces and territories of
Canada
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Transamerica Life Insurance Company New York 100% TOLIC Licensed in NY to market life
of New York insurance, annuities and
health
insurance
Transamerica South Park Delaware 100% TOLIC Provide market analysis of
Resources, Inc. certain undeveloped land
holdings held by TOLIC
Transamerica Variable Insurance Maryland 100% TOLIC Mutual Fund
Fund, Inc.
USA Administration Services, Inc. Kansas 100% TOLIC Third party administrator
Transamerica Products. Inc. California 100% TICC Parent co. of various
subsidiary corp. which are
formed to be co-general
partners of proprietary limited
Transamerica Securities Sales Corp. Maryland 100% Transamerica Prod. Inc. Retail sale of the variable life
ins. and variable annuity
products of the Transamerica
life companies
Transamerica Service Company Delaware 100% Transamerica Prod. Inc. Passive loss tax service for
Lloyd's U.S. names
Transamerica Intellitech, Inc. Delaware 100% TICC Real estate information and
technology services
Transamerica International Delaware 100% TICC Investments
Holdings, Inc.
Transamerica Investment Services, Inc. Delaware 100% TICC Investment adviser
Transamerica Income Shares, Inc. Maryland 100% Trans. Invest. Srvc. Inc. Transamerica investment
services
Transamerica LP Holdings Corp. Delaware 100% TICC Limited partnership
Investment (initial limited
partner of Transamerica
Delaware, L.P.)
Transamerica Real Estate Tax Service N/A 100% TICC Real estate tax reporting and
(A Division of Transamerica Corp) processing services
Transamerica Realty Services, Inc. Delaware 100% TICC Responsible for real estate
investments for Transamerica
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Bankers Mortgage Company of CA California 100% Transamerica Realty Srv. Holds bank account and owns
certain residual investments in
certain French real estate
projects which are managed
special purpose company for
the purchase of real estate tax
liens.
Pyramid Investment Corporation Delaware 100% Transamerica Realty Srv. Owns office buildings in San
Francisco and other properties
The Gilwell Company California 100% Transamerica Realty Srv. Ground lessee of 517
Washington Street,
San Francisco
Transamerica Affordable Housing, Inc. California 100% Transamerica Realty Srv. Owns general partnership
interests in low-income
housing tax credit
partnerships
Transamerica Minerals Company California 100% Transamerica Realty Srv. Owner and lessor of oil and
gas properties
Transamerica Oakmont Corporation California 100% Transamerica Realty Srv. General partner in
Transamerica/Oakmont
Retirement Associates
Transamerica Senior Properties, Inc. Delaware 100% TICC Owns congregate care and
assisted living retirement
Properties
Transamerica Senior Living, Inc. Delaware 100% Trans. Sr. Prop. Inc. Manages congregate care and
assisted living retirement
properties.
</TABLE>
<PAGE>
Item 27. Number of Contract Owners
As of December 31, 1999, there were no Contract owners.
Item 28. Indemnification
The Iowa Code (Sections 490.850 et. seq.) provides for permissive
--------
indemnification in certain situations, mandatory indemnification in other
situations, and prohibits indemnification in certain situations. The Code
also specifies producers for determining when indemnification payments can be
made.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Depositor of expenses incurred or paid by a director, officer or controlling
person in connection with the securities being registered), the Depositor
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
AFSG Securities Corporation
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
The directors and officers of AFSG Securities Corporation are as follows:
Larry N. Norman Ann Spaes
Director and President Director and Vice President
Frank A. Camp Bob Warner
<PAGE>
Secretary Assistant Compliance Officer
Lisa Wachendorf Linda Gilmer
Director, Vice President and Treasurer/Controller
Chief Compliance Officer
Thomas R. Moriarty Priscilla Hechler
Vice President Assistant Vice President and Assistant Secretary
Emily Bates Thomas Pierpan
Assistant Treasurer Assistant Vice President and Assistant Secretary
Clifton Flenniken Darin D. Smith
Assistant Treasurer Assistant Vice President and Assistant Secretary
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 $0 from the Registrant
for the year ending December 31, 1999, 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.
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
<PAGE>
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 hereby certifies that this Amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Registration Statement to be signed on its behalf,
in the City of Cedar Rapids and State of Iowa, on this 26th day of April, 2000.
PFL LIFE VARIABLE
ANNUITY ACCOUNT D
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 April 26, 2000
- -------------------------------
Patrick S. Baird
/s/ Craig D. Vermie Director April 26, 2000
- -------------------------------
Craig D. Vermie
/s/ William L. Busler Director April 26, 2000
- -------------------------------(Principal Executive Officer)
William L. Busler
/s/ Larry N. Norman Director April 26, 2000
- -------------------------------
Larry N. Norman
/s/ Douglas C. Kolsrud Director April 26, 2000
- -------------------------------
Douglas C. Kolsrud
/s/ Robert J. Kontz Vice President and April 26, 2000
- ------------------------------- Corporate Controller
Robert J. Kontz
/s/ Brenda K. Clancy Treasurer April 26, 2000
- -------------------------------
Brenda K. Clancy
</TABLE>
<PAGE>
Registration No.
333-94489
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
EXHIBITS
TO
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
ACCESS VARIABLE ANNUITY
_______________
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page No.*
- ----------- ---------------------- ---------
<S> <C> <C>
(4)(a) Form of Group Master Policy and Optional Riders for the
Access Variable Annuity
(4)(b) Form of Group Certificate for the Access Variable Annuity
(5)(a) Form of Group Master Application for the Access Variable
Annuity
(5)(b) Form of Group Certificate Enrollment Application for the
Access Variable Annuity
(8)(c) Participation Agreement by and between PFL Life
Insurance Company and Transamerica Variable Insurance
Fund, Inc.
(8)(d)(1) 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)(e)(1) Amended Schedule A to Participation Agreement by and
between Variable Insurance Products Fund III, Fidelity
Distributors Corporation, and PFL Life Insurance Company
(9) Opinion and Consent of Counsel
(10)(a) Consent of Independent Auditors
(10)(b) Opinion and Consent of Actuary
</TABLE>
- ----------------------------------
* Page numbers included only in manually executed original.
<PAGE>
Exhibit (4)(a)
Form of group master policy
and optional riders for the
Access Variable Annuity
<PAGE>
[LOGO OF PFL LIFE INSURANCE COMPANY]
PFL Life Insurance Company
A Stock Company
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
(Hereafter called the Company, we, our or us) (319) 398-8511
GROUP CONTRACT OWNER: Securities Customers DRL Insurance Trust II
GROUP CONTRACT NUMBER: PV0005
GROUP CONTRACT DATE: March 1, 2000
WE AGREE
. To provide annuity payments as set forth in Section 10 of this Contract,
. Or to pay withdrawal benefits in accordance with Section 5 of this Contract.
. Or to pay death proceeds in accordance with Section 9 of this Contract.
These agreements are subject to the provisions of this Contract This Contract is
issued in consideration of the application, if any, and payment of the premiums
as provided.
This Contract may be applied for and issued to qualify as a tax-qualified
annuity under the applicable sections of the Internal Revenue Code.
Signed for us at our home office.
/s/ Craig D. [ILLEGIBLE] /s/ William L. Busler
SECRETARY PRESIDENT
This Contract is a legal contract between the Contract Owner and the Company.
READ YOUR CONTRACT CAREFULLY
Group Flexible Premium Variable Annuity Contract Income
Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount (See Sections 6 and 10C)
AV432 101 .114 199 Non-Participating
<PAGE>
SECTION 1
DEFINITIONS
ADJUSTED POLICY VALUE
The Policy Value increased or decreased by any Excess Interest Adjustment.
ANNUITANT
The Participant to whom annuity payments will be made, unless another payee is
named.
ANNUITY COMMENCEMENT DATE
Date the Annuitant will begin receiving payments from this annuity, which may
not be later than the last day of the Certificate month starting after the
Annuitant attains age 85, except as expressly allowed by us, but in no event
later than the last day of the month following the month in which the Annuitant
attains age 95.
CASH VALUE
Amount defined in Section 5, that can be withdrawn if the annuity Certificate is
surrendered.
CERTIFICATE
The document issued under the Group Contract to the eligible Participants who
apply for coverage. The Certificate is not a part of the Group Contract.
CERTIFICATE ANNIVERSARY
The anniversary of the Certificate Date for each year this Certificate remains
in force.
CERTIFICATE DATE
The date shown on page 3 of the Certificate and the date on which the
Certificate becomes effective.
CERTIFICATE OWNER
The owner of the annuity Certificate. Unless otherwise specified on the
Certificate Data page, the Annuitant and the Certificate Owner shall be one and
the same person.
CERTIFICATE YEAR
The 12 month periods following the Certificate Date shown on the Certificate
Data page. The first Certificate Year starts on the Certificate Date. Each
subsequent year starts on the anniversary of the Certificate Date.
DISTRIBUTION
A withdrawal or disbursement of funds from the Policy Value or Cash Value.
GROUP CONTRACT
The Contract issued to the Group Contract Owner, under which Certificates are
issued to eligible Participants.
GROUP CONTRACT OWNER
The entity, as shown on the Contract Data Page, which applies for the Group
Contract.
INVESTMENT OPTIONS
Any of the Guaranteed Period Options of the Fixed Account, the Dollar Cost
Averaging Fixed Account Option, and any of the Subaccounts of the Separate
Account(s).
PARTICIPANT
A person who makes premium payments or for whom premium payments are made under
the Group Contract.
PAYEE
The person to whom annuity payments will be made.
PAYMENT OPTIONS
Options through which the distribution of the Adjusted Policy Value can be
directed.
POLICY VALUE
The amount (defined in Section 4) applicable under the Certificate that can be
used to fund one of the Payment Options.
SEPARATE ACCOUNT
The separate investment accounts) established by us, as described in Section 6.
SUBACCOUNT
A division of a Separate Account, as described in Section 6.
SURRENDER
A partial or full withdrawal of funds from the Policy Value or Cash Value.
WITHDRAWAL
A distribution of funds from the Policy Value or Cash Value.
YIELD
The effective annual interest rate applicable to the Fixed Account.
YOU,YOUR
The owner of this Certificate. Unless otherwise specified on the Certificate
Data Page, the Annuitant and the Certificate Owner shall be one and the same
person.
PAGE 2
<PAGE>
SECTION 2 - CONTRACT DATA
GROUP CONTRACT NUMBER: PV0005
GROUP CONTRACT DATE: March 1, 2000
GROUP CONTRACT OWNER: Securities Customers DRL Insurance Trust II
SEPARATE ACCOUNT: PFL Life Variable Annuity Account D
DCA SUBACCOUNT(S): Money Market Portfolio,
U.S. Government Securities Portfolio
PREMIUM PAYMENT MINIMUMS (PER CERTIFICATE)
Initial Premium Payment, Nonqualified: $25,000.00
Initial Premium Payment, Qualified*: $25,000.00
*Waived for 403(b) annuities
Subsequent Premium Payments: $50.00
SERVICE CHARGE: $30
Before the Annuity Commencement Date:
Death Benefit Option C - 5% Annually Compounding through age 80
Mortality and Expense Risk Fee and Administrative Charge: 1.85%
Death Benefit Option S - Annual Step-Up through age 80
Mortality and Expense Risk Fee and Administrative Charge: 1.85%
Death Benefit Option R - Return of Premium
Mortality and Expense Risk Fee and Administrative Charge: 1.70%
*If Certificate Owners) or Annuitant is age 85 or older on the Certificate
Date, there is no Guaranteed Minimum Death Benefit Option, the death benefit
is the greater of Policy Value or Cash Value at the time of death.
Mortality and Expense Risk Fee and Administrative Charge: 1.70%
After the Annuity Commencement Date: Mortality and Expense Risk Fee and
Administrative Charge: 1.70%
SERVICE CHARGE: $30
FIXED ACCOUNT GUARANTEED MINIMUM EFFECTIVE ANNUAL INTEREST RATE: 3%
SURRENDER CHARGE: None
AV432 101 114 799 MSP Page 3
<PAGE>
SECTION 2 - CONTRACT DATA - CONT
SCHEDULE OF ADDITIONAL BENEFITS:
Form No. Additional Benefit(s)
AE 1074 199 Service Charge Waiver
AE 1063 199 Guaranteed Minimum Death Benefit
AE 1061 199 Guaranteed Minimum Death Benefit
AE 1062 199 Guaranteed Minimum Death Benefit
AE 1069 199 Lump Sum Partial Withdrawal Option
AE 1065 199 Systematic Payout Option
RGMI 4 499 Guaranteed Minimum Income Benefit Rider
AV432 101 114 799 Page 3 (A)
<PAGE>
SECTION 3 - PREMIUM PAYMENTS
PAYMENT OF PREMIUMS
Premium payments may be made any time on or after the effective date of the
Certificate and before the Annuity Commencement Date. The Certificate Owner may
start or stop, increase or decrease, or skip any premium payments.
MAXIMUM AND MINIMUM PREMIUM PAYMENT
The premium payments may not be more than the amount permitted by law if this is
a tax-qualified annuity. The minimum premium payments we will accept are
specified on page 3. The maximum total premium payments, per Participant, which
we will accept without prior Company . approval is $1,000,000.
PREMIUM PAYMENT DATE
The premium payment date is the date on which the premium payment is credited to
the Certificate. The initial premium payment less any premium taxes will be
credited to the Certificate within two business days of receipt of such payment
and the required information. Subsequent additional premium payments will be
credited to the Certificate as of the business day when the premium payment and
required information are received. A business day is any day on which the New
York Stock Exchange is open for trading.
ALLOCATION OF PREMIUM PAYMENTS
Premium payments may be applied to the various Investment Options which we make
available. The Certificate Owner must tell us what percent. of each premium
payment to allocate to the various Investment Options. Each percent may be
either zero or any whole number; however, the allocation among all Investment
Options must total 100%.
CHANGE OF ALLOCATION
The Certificate Owner may change the allocation of premium payments to the
various Investment Options. The Certificate Owner must tell us in a signed
notice which gives us the facts that we need Premium payments received after the
date on which we receive the notice will be applied on the basis of the new
allocation.
PREMIUM TAXES
A state may impose a premium tax. It may be imposed when a premium payment is
made, or on the Annuity Commencement Date, on the date of death, or on the date
of full surrender. When permitted by state law, we will not deduct the tax until
the Annuity Commencement Date, date of death, or date of full surrender.
SECTION 4 - POLICY VALUE
POLICY VALUE
On or before the Annuity Commencement Date, the Policy Value of each Certificate
is equal to the:
(a) premium payments; minus
(b) Gross Partial Withdrawals; plus
(c) interest credited to the Fixed Account; plus
(d) accumulated gains in the Separate Account; minus
(e) accumulated losses in the Separate Account;
minus
(f) service charges, premium taxes and transfer fees,
if any.
ADJUSTED POLICY VALUE
The Adjusted Policy Value is the Policy Value Increased or decreased by any
Excess Interest Adjustment.
The Adjusted Policy Value may be used on the Annuity Commencement Date to
provide lifetime income or income for a period of no less than 60 months under
the Payment Options in Section 10.
SERVICE CHARGE
On each Certificate Anniversary and at the time of surrender during any
Certificate Year before the Annuity Commencement Date, we reserve the right to
charge an amount up to the amount of the Service Charge shown on page 3 for
administration expenses. It will be deducted from each Investment Option in
proportion to the portion of Policy Value (prior to such charge) in each
Investment Option, respectively, on that Certificate Anniversary, or at the time
of surrender. In no event will the Service Charge exceed 2% of the Policy Value
at the time it is deducted.
PAGE 4
<PAGE>
SECTION 5 - CASH VALUE AND PARTIAL WITHDRAWALS
CASH VALUE
The Cash Value may be partially withdrawn or will be paid in the event of a
full surrender of the Certificate. We must receive written withdrawal or
surrender request from the Certificate Owner at or before the commencement of
annuity payments.
Information on the current amount of a Certificate's Cash Value is available
upon request The Cash Value is equal to the Adjusted Policy Value less any
Surrender Charges. There is no Cash Value after annuity payments have commenced.
EXCESS INTEREST ADJUSTMENT
Full Surrenders, Partial Withdrawals, transfers, and amounts applied to a
Payment Option from the Fixed Account Guaranteed Period Options described in
Section 7 will be subject to an Excess Interest Adjustment except as provided
for in the Partial Withdrawals provision below.
An Excess Interest Adjustment applies in the following situations:
1) When the Certificate Owner withdraws all or any portion of their Cash Value,
2) When the Certificate Owner exercises Annuity Payment Options,
3) When death proceeds are calculated. However, death proceeds will not be
reduced if the Excess Interest Adjustment is negative.
The Excess Interest Adjustment is only applied to transactions affecting the
Guaranteed Period Options of the Fixed Account (see Section 7) and is based on
any change in interest rates from the time the affected Guaranteed Period(s)
started until the time the Excess Interest Adjustment occurs. The Excess
Interest Adjustment is applied as follows:
1) The Excess Interest Adjustment is only applied when the transactions occur
prior to the end of any Guaranteed Period Option;
2) Transfers to the Guaranteed Period Options of the Fixed Account are
considered Premium Payments for purposes of determining the Excess Interest
Adjustment;
3) The Excess Interest Adjustment is distinct from, and is applied prior to,
the Surrender Charge;
4) The Excess Interest Adjustment may affect the death proceeds defined in
Section 9;
5) If interest rates have decreased from the time the affected Guaranteed
Period(s) started until the time the transaction occurs, the Excess Interest
Adjustment will result in additional funds available to the Certificate
Owner;
6) If interest rates have increased from the time the affected Guaranteed
Period(s) started until the time the transaction occurs, the Excess Interest
Adjustment will result in a decrease in the funds available to the
Certificate-Owner.
7) Certain amounts are not subject to the Excess Interest Adjustment as
provided in Sections 5, 7 and 8.
The formula for determining the amount of the Excess Interest Adjustment is as
follows:
Excess Interest Adjustment = S x (G-C) x (M/ 12)
where: S is the gross (that is, before surrender charges and premium taxes, if
any) amount being surrendered, partially withdrawn, transferred, or
applied to a. Payment Option that is subject to the Excess Interest
Adjustment.
G is the guaranteed interest rate for the Guaranteed Period applicable
to S.
M is the number of months remaining in the Guaranteed Period for S,
rounded up to the next higher whole number of months.
C is the current guaranteed interest rate then being offered on new
Premium Payments for the next longer Guaranteed Period than "M". If
the Certificate form or such a Guaranteed Period Option is no longer
offered, "C' will be the U.S. Treasury rate for the next longer
maturity (in whole years) than "M" on the 25th day of the previous
calendar month, plus up to 2%.
Upon full surrender, the Excess Interest Adjustment (EIA) for each Guaranteed
Period Option will not reduce the Adjusted Policy Value for that Guaranteed
Period Option below the amount paid into, less any prior withdrawals and
transfers from, that Guaranteed Period Option, plus interest at the 3%
guaranteed effective annual interest rate.
PAGE 5
<PAGE>
SECTION 5 - CONT
PARTIAL WITHDRAWALS
We will pay the Certificate Owner a portion of the Cash Value as a Partial
Withdrawal provided we receive a written request while the Certificate is in
effect and before the Annuity Commencement Date. When the Certificate Owner
requests a Partial Withdrawal they must tell us how it is to be allocated from
among the Investment Options. If the request for a Partial Withdrawal from any
Investment Option is less than or equal to the Cash Value in that option, or
Subaccount, we will pay the amount of the request. However, if the request for a
Partial Withdrawal from any Investment Option is greater than the Cash Value in
that option, we will pay the Cash Value of that Investment Option.
The Gross Partial Withdrawal is the total amount which will be deducted from the
Certificate's Policy Value as a result of each Partial Withdrawal. The Gross
Partial Withdrawal may be more or less than the requested Partial Withdrawal
amount, depending on whether Surrender Charges and/or Excess Interest
Adjustments apply at the time the Partial Withdrawal is requested.
The Excess Partial Withdrawal amount is the portion of the requested Partial
Withdrawal that is subject to Surrender Charge (that is, the portion which is in
excess of the Surrender Charge-free portion). For example, if the requested
withdrawal amount is $1,000, and the Surrender Charge-free amount is $200, then
the Excess Partial Withdrawal would be $800. Excess Partial Withdrawals will
reduce the Policy Value by an amount equal to (X-Y+Z) where:
X = Excess Partial Withdrawal
A = Amount of Partial Withdrawal subject to Excess Interest Adjustment
Y = Excess Interest Adjustment = (A) x (G-C) x
(M/12) where G, C and M are defined in the Excess Interest Adjustment
provision above, with "A" substituted for "S" in the definitions of G and
M.
Z = Surrender Charge on X minus Y.
The formula for determining the Gross Partial Withdrawal is as follows:
Gross Partial Withdrawal = R - E + SC
where: R is the requested Partial Withdrawal;
E is the Excess Interest Adjustment; and
SC is the Surrender Charge on (EPW - E);
where
EPW is the Excess Partial Withdrawal amount.
If any Partial Withdrawal reduces the Cash Value below $500, we reserve the
right to pay the full Cash Value and terminate the Certificate.
We may delay payment of the Cash Value from the Fixed Account for up to 6 months
after we receive the request. If the Certificate Owner dies after we receive the
request, but before the request is processed, the request will be processed
before the death proceeds are determined.
Each Partial Withdrawal consists of a portion that is subject to Surrender
Charge (that is, the Excess Partial Withdrawal) and a remaining portion that is
free from Surrender Charge (that is, the Surrender Charge-free amount). Either
portion may be zero 10(greater than) depending on the Partial Withdrawal
requested and prior amounts withdrawn.
Partial Withdrawals may be made free from Surrender Charges and free from Excess
Interest Adjustments
as follows:
MINIMUM REQUIRED DISTRIBUTION
For tax-qualified plans, Partial Withdrawals taken to satisfy minimum
distribution requirements under Section 401(a)(9) of the Internal Revenue
Code (IRC) are available with no Surrender Charges and no Excess Interest
Adjustments. The amount available from each Certificate with respect to the
minimum distribution requirement is based solely on this Certificate.
The Certificate Owner must be at least 70 1/2 years old in the calendar
year of distribution, must submit a written request to us and must take the
distribution before year end. If the Certificate Owner attains age 70 1/2 in
the calendar year of distribution, a written request which is postmarked no
later than the end of the current calendar year must be submitted to us.
Systematic minimum distributions must be at least $50 or a lump sum
distribution is available if minimum required distributions are less than
$50.
Any amount requested in excess of the IRC minimum required distribution will
have the appropriate Surrender Charges and Excess Interest Adjustments
applied, unless the excess distribution qualifies as Surrender Charge- free
or Excess Interest Adjustment-free under any additional options provided.
PAGE 5(A)
<PAGE>
SECTION 5 - CONT
NURSING CARE AND TERMINAL CONDITION WITHDRAWAL OPTION
Beginning in the first Certificate Year, if the Certificate Owner or
Certificate Owner's spouse (annuitant or annuitant's spouse if the
Certificate Owner is not a natural person) has been 1) confined in a Hospital
or Nursing Facility for 30 consecutive days or 2) diagnosed as having a
Terminal Condition, the Certificate Owner may elect to withdraw all or a
portion of the Policy Value without Surrender Charges and without Excess
Interest Adjustment. The minimum withdrawal under this option is $1000.
For Nursing Care, we must receive each withdrawal request and proof of
eligibility with each request no later than 90 days following the date that
confinement has ceased, unless it can be shown that it was not reasonably
possible to provide the notice and proof within the above
time period and that the notice and proof were given as soon as reasonably
possible. However, in no event, except the absence of legal capacity, shall
the notice and proof be provided later than one year following the date that
confinement has ceased. For a Terminal Condition, we must receive each
withdrawal request and the applicable proof
of eligibility no later than one year following diagnosis of the Terminal
Condition. Proof of a Terminal Condition is required only with the initial
withdrawal request and must be furnished by the
Annuitant's, Annuitant's spouse's, Certificate Owner's, or Certificate
Owner's spouse's physician. Proof of confinement may be a physician's
statement or a statement from a hospital or nursing facility administrator.
UNEMPLOYMENT WAIVER
Beginning in the first Certificate Year, the Certificate Owner may withdraw
all or a portion of the Policy Value free of Surrender Charges and free of
any Excess Interest Adjustment if the Certificate Owner or Certificate
Owner's spouse (annuitant or annuitant's spouse, if the Certificate Owner is
not a natural person) becomes unemployed. In order to qualify, the
Certificate Owner 1) must have been employed full time for at least two years
prior to becoming unemployed, 2) must have been employed full time on the
Certificate Date, 3) must have been unemployed for at least 60 consecutive
days at the time of withdrawal and 4) must have a minimum Cash Value at the
time of withdrawal of $5000. Proof of unemployment will consist of providing
us with a determination letter from the applicable State's Department of
Labor which verifies that the Certificate Owner qualifies for and is
receiving unemployment benefits at the time of withdrawal. The determination
letter must be received by us no later than 15 days following the date of the
withdrawal request.
PAGE 5(B)
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SECTION 5 - CONT
SURRENDER CHARGES
Amounts withdrawn in excess of any Surrender Charge-free Partial Withdrawals are
subject to a Surrender Charge. If applicable, this charge will either apply for
a number of years following each premium payment date or for a number of years
following the Certificate Date as shown on page 3. The amount of this charge, if
any, will be a percentage, (as shown on page 3 of each Certificate) of the
amount of premium withdrawn.
For Surrender Charge purposes, the oldest premium payment is considered to be
withdrawn first. If the amount withdrawn exceeds this, the next oldest premium
payment is considered to be withdrawn, and so on until the most recent premium
payment is considered to be withdrawn. For Surrender Charge purposes, premium
payments are deemed to be withdrawn before earnings.
After all premium payments are considered to be withdrawn, the remaining
Adjusted Policy Value may be withdrawn free from any Surrender Charge.
GUARANTEED RETURN OF FIXED ACCOUNT PREMIUM PAYMENTS
Upon full surrender of the Certificate, the Certificate Owner will always
receive at least the premium payments made to, less prior withdrawals and
transfers from, the Fixed Account.
MINIMUM VALUES
Benefits available under the Certificate are not less than those required by
any statute of the state in which the Certificate is delivered.
SECTION 6 - SEPARATE ACCOUNT
SEPARATE ACCOUNT
We have established and will maintain one or more Separate Account(s), indicated
on the Certificate Data Page, under the laws of the state of Iowa: Any realized
or unrealized income, net gains and losses from the assets of the Separate
Account are credited to or charged against it without regard to our other
income, gains or losses. Assets are put in the Separate Account for the
Certificate, as well as for other variable annuity policies and Certificates.
Any Separate Account may invest assets in shares of one or more mutual fund
portfolios, or in the case of a managed Separate Account, direct investments in
stocks or other securities as permitted by law. Fund Shares refer to shares of
underlying mutual funds or prorata ownership of the assets held in a Subaccount
of a managed Separate Account. Fund shares are purchased, redeemed and valued on
behalf of the Separate Account.
The Separate Account is divided into Subaccounts. Each Subaccount invests
exclusively in shares of one of the portfolios of an underlying mutual fund. We
reserve the right to add or remove any Subaccount of the Separate Account.
The assets of the Separate Account are our property. These assets will equal or
exceed the reserves and other contract liabilities of the Separate Account These
assets will not be chargeable with liabilities arising out of any other business
we conduct. We reserve the right, subject to regulations governing the Separate
Account, to transfer assets of a Subaccount, in excess of the reserves and other
contract liabilities with respect to that Subaccount, to another Subaccount or
to our General Account.
We will determine the fair market value of the assets of the Separate Account in
accordance with a method of valuation which we establish in good faith.
Valuation Period means the period of time from one determination of the value of
each Subaccount to the next. Such determinations are made when the value of the
assets and liabilities of each Subaccount is calculated. This is generally the
close of business on each day on which the New York Stock Exchange is open.
We also reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of Certificates to which the
Certificate belongs, to another separate account. If this type of transfer is
made, the term "Separate Account", as used in this contract and in the
Certificate, shall then mean the separate account to which the assets were
transferred.
We also reserve the right to:
(a) deregister the Separate Account under the Investment Company Act of 1940;
(b) manage the Separate Account under the direction of a committee at any time;
(c) restrict or eliminate any voting rights of Certificate Owners or other
persons who have voting rights as to the Separate Account; and
(d) combine the Separate Account with one or more other separate accounts;
(e) create new Separate Accounts;
(f) add new Subaccounts to or remove existing Subaccounts from the Separate
Account, or combine Subaccounts;
(g) add new underlying mutual funds, remove existing mutual funds, or
substitute a new fund for an existing fund.
PAGE 6
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SECTION 6 - SEPARATE ACCOUNT - CONT
The Net Asset Value of a fund share is the per-share value calculated by the
mutual fund or, in the case of a managed Separate Account, by the Company. The
Net Asset Value is computed by adding the value of the Subaccount's investments,
cash and other assets, subtracting its liabilities, and then dividing by the
number of shares outstanding. Net Asset Values of fund shares reflect investment
advisory fees and other expenses incurred in managing a mutual fund or a managed
Separate Account.
CHANGE IN INVESTMENT OBJECTIVE OR POLICY OF A MUTUAL FUND
If required by law or regulation, an investment policy of the Separate Account
will only be changed if approved by the appropriate insurance official of the
state of Iowa or deemed approved in accordance with such law or regulation. If
so required, the process for obtaining such approval is filed with the insurance
official of the state or district in which this contract is delivered.
CHARGES AND DEDUCTIONS
The Mortality and Expense Risk Fee and the Administrative Charge are each
deducted both before and after the Annuity Commencement Date to compensate for
changes in mortality and expenses not anticipated by the mortality and
administration charges guaranteed in the contract.
Any applicable Service Charge is deducted prior to the Annuity Commencement Date
only.
Any applicable Distribution Financing Charge is deducted prior to the Annuity
Commencement Date only, to compensate for costs of distributing the
policy.
If the Mortality and Expense Risk Fee(s) and/or Distribution Financing Charges
are more than sufficient, the Company will retain the balance as
profit or reduce these fees and charges in the future.
ACCUMULATION UNITS
The Policy Value in the Separate Account before the Annuity Commencement Date is
represented by accumulation units. The dollar value of accumulation units for
each Subaccount will change from day to day reflecting the investment experience
of the Subaccount.
Premium payments allocated to and any amounts transferred to the Subaccounts
will be applied to provide accumulation units in those Subaccounts. The number
of accumulation units purchased in a Subaccount will be determined by dividing
the premium payment allocated to or any amount transferred to that Subaccount,
by the value of an accumulation unit for that Subaccount on the premium payment
or transfer date.
The number of accumulation units withdrawn or transferred from the Subaccounts
will be determined by dividing the amount withdrawn or transferred by
the value of an accumulation unit for that Subaccount on the withdrawal or
transfer date.
The value of an accumulation unit on any business day is determined by
multiplying the value of that unit at the end of the immediately preceding
valuation period by the net investment factor for the valuation period.
The net investment factor used to calculate the value of an accumulation 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 result of:
(1) the net asset value of a fund share held in that Subaccount determined
as of the end of the current valuation period; plus
(2) the per share amount of any dividend or capital gain distributions made
by the fund for shares held in that Subaccount if the ex-dividend date
occurs during the valuation period; plus or minus
(3) a per share credit or charge for any taxes reserved for, which we
determine to have resulted from the investment operations of that
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.
(d) is a factor representing the Mortality and Expense Risk Fee and
Administrative Charge before the Annuity Commencement Date, plus any
applicable Distribution Financing Charge. This factor is less than or equal
to, on an annual basis, the sum of the applicable percentages shown on page
3 of the daily net asset value of a fund share held in that Subaccount.
Since the net investment factor may be greater or less than one, the
accumulation unit value may increase or decrease.
PAGE 7
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SECTION -7 - FIXED ACCOUNT
FIXED ACCOUNT
Premium payments applied to and any amounts transferred to the Fixed Account
will reflect a fixed interest rate. The interest rates we set will be credited
for increments of at least one year measured from each premium payment or
transfer date. These rates will never be less than an effective annual interest
rate of 3%.
GUARANTEED PERIODS
We may offer optional Guaranteed Period Options, into which premium payments may
be paid or amounts transferred The current interest rate we set for funds
entering each Guaranteed Period Option (GPO) is guaranteed until the end of that
option's Guaranteed Period At that time, the premium payment made or amount
transferred into the GPO, less any withdrawals or transfers from that GPO, plus
accrued interest, will be rolled into a new GPO or may be transferred to any
Subaccount(s) within the Separate Account(s).
The Certificate Owner may choose the Investment Options) they want the funds
rolled into by giving us a written notice within 30 days before the end of the
expiring option's Guaranteed Period However, any Guaranteed Period elected may
not extend beyond the maximum Annuity Commencement Date defined in Section 7 1.
In the absence of such election, the funds will be rolled into a new GPO which
is the same as the expiring GPO unless that GPO is no longer offered, in which
case, the next shorter GPO offered will be used The Certificate Owner will be
mailed a notice of completion of the rollover with the new interest rate
applicable. The new GPO will be deemed as accepted if we do not receive a
written rejection within 30 days from the postmark date of the completion
notice.
We reserve the right for new premium payments, transfers, or rollovers to offer
or not to offer any GPO, except that we will always offer at least a one year
GPO.
For purposes of crediting interest when funds are withdrawn from or transferred
into a GPO, the amount of the oldest premium payment or rollover into that GPO
is considered to be withdrawn first If the amount withdrawn exceeds this amount,
the next oldest premium payment or rollover is considered to be withdrawn next,
and so on until the most recent premium payment or rollover is considered to be
withdrawn (this is a "First-In, First-Out" or FIFO procedure). Premium payments)
or rollovers) are deemed to be withdrawn first, then credited interest.
Partial withdrawals, Surrenders, transfers, and amounts applied to a Payment
Option from the Guarantee Period Options) are subject to an Excess Interest
Adjustment as described in Section 5.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
We may offer a Dollar Cast Averaging (DCA) Fixed Account Option separate from
the Guaranteed Period Options. This option will have a one year interest rate
guarantee. The current interest rate we set for the DCA Fixed Account may differ
from the rates credited on the one year GPO in the Fixed Account In addition,
the current interest rate we credit may vary on different portions of the DCA
Fixed Account The credited interest rate will never be less than the minimum
effective annual interest rate of 3%. The DCA Fixed Account Option will only be
available under a Dollar Cost Averaging program as described in Section 8.
SECTION 8 - TRANSFERS TRANSFERSTRANSFERS
A. TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the Annuity Commencement Date, the Certificate Owner may transfer the
value of the accumulation units from one Investment Option to another. The
Certificate Owner must sign a notice to transfer which gives us the facts that
we need.
Transfers of Policy Value from the Guaranteed Period Options (GPO) of the Fixed
Account prior to the end of that GPO are subject to an Excess Interest
Adjustment If the Excess Interest Adjustment at the time of such Policy Value
transfer is a negative adjustment, then the maximum Policy Value transfer is 25%
of that GPO's Policy Value, less Policy Values previously transferred out of
that GPO during the current certificate year. If the Excess Interest Adjustment
at the time of such Policy Value transfer is a positive adjustment, no maximum
will apply to such Policy Values transferred from the GPO. No Excess Interest
Adjustment will apply to Policy Value transfers at the end of a Guaranteed
Period.
Transfers of interest credited in the GPOs to other Investment Options are
allowed on a "First-In, First-Out" basis. Such transfers may be made monthly,
quarterly, semi-annually, or annually. Each such transfer must be at least $50
and will not be subject to an Excess Interest Adjustment.
Transfers of Policy Value from the Separate Account are subject to a minimum of
$500 or the entire Subaccount Policy Value, if less. However, if the remaining
Subaccount Policy Value is less than $500, we reserve the right to include that
amount as part of the transfer.
The Certificate Owner may choose which GPO to transfer to or from, however, any
GPO elected may not extend beyond the maximum Annuity Commencement Date defined
in Section 11.
PAGE 8
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SECTION 8 - TRANSFERS - CONT
No transfers will be allowed out of the Dollar Cost Averaging Fixed Account
Option except through the Dollar Cost Averaging Option.
We reserve the right to limit transfers to no more than 12 in any one
Certificate Year. Any transfers in excess of 12 per Certificate Year may be
charged a $10 per transfer fee. Transfers among multiple Investment Options will
be treated as one transfer in determining the number of transfers that have
occurred. We also reserve the right to prohibit transfers to the Fixed Account
if we are crediting an effective annual interest rate of 3%.
DOLLAR COST AVERAGING OPTION
Prior to the Annuity Commencement Date, the Date, the Certificate Owner may
instruct us to automatically transfer a specified amount from the Dollar Cost
Averaging (DCA) Fixed Account Option or from the Dollar Cost Averaging
Subaccount(s), if any, shown on page 3 to any Subaccount(s) of the Separate
Account The automatic transfers can occur monthly or quarterly. If the Dollar
Cost Averaging request as received prior to .the 28th day of any month, the
first transfer will occur on the 28th day of that month: If the Dollar Cost
Averaging request is received on or after the 28th day of any month, the first
transfer will occur on the 28th day of the following month.
Prior to the Annuity Commencement Date, no transfers, (except through Dollar
Cost Averaging) will be allowed from a DCA Fixed Account Transfers will continue
until the elected Subaccount or DCA Fixed Account value is depleted The amount
transferred each time must be at least $500. All transfers from the DCA account
will be the same amount as the initial transfer. Changes to the amount
transferred will only be allowed when additional premium is allocated or a new
amount is transferred into the DCA Account Changes to the Subaccounts to which
these transfers are allocated are not restricted. Transfers must be scheduled
for at least 6 but not more than 24 months or for at least 4 but not more than 8
quarters each time the Dollar Cost Averaging program is started or restarted
following termination of the program for any reason.
Dollar Cost Averaging results in, the purchase of more accumulation units when
the value of the accumulation unit is low, and fewer accumulation units when the
value of the accumulation unit is high. However, there is no guarantee that the
Dollar Cost Averaging program will result in higher Policy Values or will
otherwise be successful.
The Dollar Cost Averaging may be discontinued after satisfying the minimum
number of required transfers by sending written notice to us. While Dollar Cost
Averaging is in effect, Asset Rebalancing is not available.
ASSET REBALANCING
Prior to the Annuity Commencement Date, the Certificate Owner may instruct us to
automatically transfer amounts among the Subaccounts of the Separate Account on
a regular basis to maintain a desired allocation of the Policy Value among the
various Subaccounts offered Rebalancing will occur on a monthly, quarterly,
semi-annual or annual basis, beginning on a date selected. The Certificate Owner
must select the percentage of the Policy Value desired in each of the various
Subaccounts offered (totaling 10001. Any amounts in the Fixed Account are
ignored for the purposes of asset rebalancing. Rebalancing can be started,
stopped or changed at any time. Asset Rebalancing is not available while Dollar
Cost Averaging is in effect Rebalancing will cease as soon as we receive a
request for any other transfer.
B. TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
After the Annuity Commencement Date, the Certificate Owner may transfer the
value of the variable annuity units from one Subaccount to another within the
Separate Account or to the Fixed Account If the Certificate Owner wants to
transfer the value of the variable annuity units, the Certificate Owner must
tell us in a signed notice which gives us the facts that we need We reserve the
right to limit transfers between the Subaccounts or to the Fixed Accounts to
once per Certificate Year.
The minimum amount which may be transferred is the lesser of $10 monthly income
or the entire monthly income of the variable annuity units in the Subaccount
from which the transfer is being made. If the monthly income of the remaining
units in a Subaccount is less than $10, we have the right to include the value
of those variable annuity units as part of the transfer.
After the Annuity Commencement Date, no transfers may be made from the Fixed
Account to any other Investment Options.
PAGE 9
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SECTION 9 - DEATH PROCEEDS
A. DEATH PROCEEDS PRIOR TO ANNUITY COMMENCEMENT DATE
The amount of death proceeds will be the greater of the Cash Value, the Policy
Value, or any guaranteed minimum death benefit.
If no payment option is selected by the date of death, the beneficiary may make
such election within one year of the date we receive due proof of death. The
beneficiary may elect to receive the death proceeds as a lump sum payment or may
use the death proceeds to provide any of the annuity payment options described
in Section 10. Interest on death proceeds will be paid as required by law.
B. DEATH PRIOR TO ANNUITY COMMENCEMENT DATE
Death proceeds are payable contingent upon the relationships between the
Certificate Owner, Annuitant, successor Certificate Owner and beneficiary as
outlined below. The Certificate must be surrendered upon settlement and will be
terminated upon receiving proof of death.
I. Certificate Owner is also the Annuitant.
When we have due proof that the Certificate Owner died before the Annuity
Commencement Date,. we will provide the death proceeds to the beneficiary.
a) Beneficiary is the deceased Certificate Owner's surviving spouse. The
beneficiary may elect to continue the Certificate rather than receiving
the death proceeds. If the Certificate is continued, an amount equal to
the excess, if any, of any guaranteed minimum death benefit over the
Policy Value will then be added to the Policy Value. This amount will be
added only once, at the time of such election. Furthermore, all future
Surrender Charges will be waived
If this beneficiary elects to have the death proceeds paid, the death
proceeds must be distributed:
1) by the end of 5 years after the date of the deceased Certificate
Owner's death, or
(2) payments must begin no later than one year after the deceased
Certificate Owner's death and must be made for a period certain or for
this beneficiary's lifetime, so-long as any period certain does not
exceed this beneficiary's life expectancy.
b) Beneficiary is not the deceased Certificate Owner's surviving spouse.
The death proceeds must be distributed as provided in I.a)(1) or I.a)(2)
above.
c) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
deceased Certificate Owner's death.
II. Annuitant and Certificate Owner are different and the Annuitant dies.
When we have due proof that the Annuitant died prior to the Annuity
Commencement Date, the Certificate Owner will become the new Annuitant and
no death proceeds are payable. If the Certificate Owner is also the
deceased Annuitant's surviving spouse, an amount equal to the excess, if
any, of any guaranteed minimum death benefit over the Policy Value will
then be added to the Policy Value. This amount will be added only once at
the time of such election. Furthermore, all future Surrender Charges will
be waived.
However, in lieu of becoming the new Annuitant, the Certificate Owner may
elect to have the death proceeds distributed to the beneficiary on the
death of the Annuitant This election must be in writing and must be
received by us prior to the Annuitant's death In such case, when we have
due proof that the Annuitant died prior to the Annuity Commencement Date,
we will provide the death proceeds to the beneficiary.
a) If the Certificate Owner has elected to have the death proceeds paid as
a lump sum, the beneficiary must, within 60 days of our receipt of due
proof of the Annuitant's death, either:
1) receive the lump sum proceeds; or
2) elect to receive annuity payments. Such payments must begin within
one year of our receipt of due proof of the Annuitant's death and
must be made for a period certain or for this beneficiary's
lifetime, so long as any period certain does not exceed this
beneficiary's life expectancy.
b) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
Annuitant's death
III. Annuitant and Certificate Owner are different and the Certificate Owner
dies.
If the Certificate Owner dies prior to the Annuity Commencement Date and
before the entire interest in the Certificate is distributed, the successor
Certificate Owner will become the new Certificate Owner. The remaining
portion of any interest in the policy must be distributed to the extent
provided below in Ill.a), III.b), III.c), or III.d).
a) Successor Certificate Owner is the deceased Certificate Owner's
surviving spouse. The successor Certificate Owner may elect to continue
this Certificate rather than receive the Adjusted Policy Value. If the
Certificate is continued, all future Surrender Charges will be waived
If the successor Certificate Owner elects to receive the Adjusted
Policy Value, the Adjusted Policy Value must be distributed
PAGE 10
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SECTION 9 - DEATH PROCEEDS - CONT
(1) by the end of 5 years after the date of the deceased Certificate
Owner's death, or
(2) payments must begin no later than one year after the deceased
Certificate Owner's death and must be made for a period certain or for
the successor Certificate Owner's lifetime, so long as any period
certain does not exceed the successor Certificate Owner's life
expectancy.
b) Successor Certificate Owner is not the deceased Certificate Owner's
surviving spouse: The Adjusted Policy Value must be distributed as
provided in III.a)(1) or III.a)(2) above.
c) Successor Certificate Owner is not a natural person. The Adjusted
Policy Value must be distributed as provided in Ill.a)( 1) above.
d) No successor Certificate Owner survives the deceased Certificate Owner.
The deceased Certificate Owner's estate will become the new Certificate
Owner (or the estate may name a new Certificate Owner). The executor or
Administrator must be named in a form acceptable to us. The Adjusted
Policy Value must be distributed by the end of 5 years after the date
of the deceased Certificate Owner's death.
IV. More than one Certificate Owner.
If there is more than one Certificate Owner, then the death of any
Certificate Owner will be treated the same as the death of the Certificate
Owner.
D. DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
The death proceeds on or after the Annuity Commencement Date depend on the
payment option selected. If any Certificate Owner dies on or after the Annuity
Commencement Date, but before the entire interest in the Certificate is
distributed, the remaining portion of such interest in the Certificate will be
distributed at least as rapidly as under the method of distribution being used
as of the date of that Certificate Owner's death.
E. AN OWNER IS NOT AN INDIVIDUAL
In the case of a non tax-qualified annuity, if any Certificate Owner or
beneficial Certificate Owner is not an individual, then for purposes of the
federal income tax mandatory distribution provisions in subsection C or D above,
(1) the Annuitant will be treated as the Certificate Owner of the Certificate,
and (2) if there is any change, in the Annuitant, such a change will be treated
as the death of the Certificate Owner.
SECTION 10 - ANNUITY PAYMENTS
A. GENERAL PAYMENT PROVISIONS
Payment
If the Certificate is in force on the Annuity Commencement Date, we will use the
Fixed Account portion and/or the Separate Account portion of the Adjusted Policy
Value to make annuity payments to the Payee under Option 3 and/or 3-V,
respectively, with 10 years certain, or if elected, under one or more of the
other options described in this section. However, the options) elected must
provide for lifetime income or income for a period of at least 60 months. The
Certificate Owner will become the Annuitant at the Annuity Commencement Date.
Payments will be made at 1, 3, 6 or 12 month intervals. We reserve the right to
change the frequency of payments to avoid making payments of less than $50.
Before the Annuity Commencement Date, if the death proceeds become. payable or
if the Certificate is surrendered, we will pay any proceeds in one sum, or if
elected, all or part of these proceeds may be placed under one or more of the
options described in this section. If we agree, the proceeds may be placed under
some other method of payment instead.
Adjusted Age
Payments under Options 3 and 5, and the first payment under Options 3-V and 5-V
are determined based on the adjusted age of the Annuitant The adjusted age is
the Annuitant's actual age on the Annuitant's nearest birthday, at the Annuity
Commencement Date, adjusted as follows:
Annuity
Commencement Date Adjusted Age
----------------- ------------
Before 2001 Actual Age
2001 - 2010 Actual Age minus 1
2011 - 2020 Actual Age minus 2
2021 - 2030 Actual Age minus 3
2031 - 2040 Actual Age minus 4
After 2040 . Actual Age minus 5
Election of Optional Method of Payment
Before the Annuity Commencement Date the Certificate Owner can elect or change a
payment option. The Certificate Owner may elect, in a signed notice which gives
us the facts that we need, annuity payments that. may be either variable, fixed,
or a combination of both If a combination is elected, they must also tell us
what part of the proceeds on the Annuity Commencement Date are to be applied to
provide each type of payment (It must also specify which Subaccounts.) The
amount of a combined payment will be the sum of the variable and fixed payments.
Payments under a variable payment option will reflect the investment performance
of the selected Subaccount of the Separate Account.
PAGE 11
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SECTION 10 - ANNUITY PAYMENTS - CONT
Payee
Unless specified otherwise, the Payee shall be the Annuitant, or the beneficiary
as specified in the Beneficiary provision.
Proof of Age
We may require proof of the age of any person who
has an annuity purchased under Options 3, 3-V, 5 and 5-V of this section before
we make the first payment.
Minimum Proceeds
If the proceeds are less than $2,000, we reserve the right to pay them out as a
lump sum instead of applying them to a payment option.
Premium Tax
We may be required by law to pay premium tax on the amount applied to a payment
option. If the requirement is applicable to the issue state, we will deduct the
premium tax before applying the proceeds.
B. FIXED ACCOUNT PAYMENTS
Guaranteed Payment Options
The fixed - account payment is determined by multiplying each $1,000 of proceeds
allocated to a fixed Payment Option by the amounts shown on page 12 for the
option selected Options 1, 2 and 4 are based on a guaranteed interest rate of
3%.
Options 3 and 5 are based on a guaranteed interest rate of 3% and the "1983
Table a" (male, female, and unisex if required by law) mortality table improved
to the year 2000 with projection scale G. (The "1983. Table a" mortality rates
are adjusted based on improvements in mortality since 1983 to more appropriately
reflect increased longevity. This is accomplished using a set of improvement
factors referred to as projection scale G.)
Option 1 - Interest Payments
We will pay the interest` on the amount we use to provide annuity payments in
equal payments or this amount may be left to accumulate for a period of time we
and the Certificate Owner agree to. We and the Certificate Owner will agree on
withdrawal rights when the Certificate Owner elects this option The interest
rate we declare for this option may be different than the interest rate(s)
credited prior to the Annuity Commencement Date.
Option 2 - Income for a Specified Period
We will make level payments only for the fixed period the Certificate Owner
chooses. In the event of the death of the person receiving payments prior to the
end of the fixed period elected, payments will be continued to that person's
beneficiary or their present value may be paid in a single sum. No funds will
remain at the end.
Option 3 - Life Income - The Certificate Owner may choose between:
1. No Period Certain -. We will make level payments only during the Annuitant's
lifetime.
2. 10 Years Certain - We will make level payments for the longer of the
Annuitant's lifetime. or ten years.
3. Guaranteed Return of Policy Proceeds - We will make level payments for the
longer of the Annuitant's lifetime or until the total dollar amount of
payments we made to the Payee equals the amount applied to this option.
Option 4 - Income of a Specified Amount
Payments are made for any specified amount until the amount applied to this
option, with ,interest, are exhausted. This will be a series of level payments
followed by a smaller final payment In the event of the death of the person
receiving payments prior to the time proceeds with interest are exhausted,
payments will be continued to that person's beneficiary or their present value
may be paid in a single sum.
Option 5 - Joint and Survivor Annuity
Payments are made during the joint lifetime of the Payee and a joint Payee of
the Certificate Owner's selection. Payments will be made as long as either
person is living.
Current Payment Options
The amounts shown in the tables on page 12 are the guaranteed amounts. Current
amounts offered to individuals of the same class may be obtained from us.
PAGE 11 (A)
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SECTION 10 - ANNUITY PAYMENTS - CONT
C. VARIABLE ACCOUNT PAYMENT OPTIONS
Variable Annuity Units
The proceeds chosen by the Certificate Owner to apply to a variable payment
option will be used to purchase variable annuity units in Subaccounts chosen by
the Certificate Owner. The dollar value of variable annuity units in the chosen
Subaccounts will increase or decrease reflecting the investment experience of
the chosen Subaccounts. The value of a variable annuity unit in a particular
Subaccount on any 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 Assumed Investment Return adjustment factor for the Valuation Period.
The Assumed Investment Return adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5.0% effective
annual Assumed Investment Return.
The net investment factor 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
as of the end of the current valuation period; plus
(2) the per share amount of any dividend or capital gain distributions made
by the fund for shares held in that Subaccount if the ex-dividend date
occurs during the Valuation Period; plus or minus
(3) a per share credit or charge 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.
(c) is a factor representing -the Mortality and Expense Risk Fee and
Administrative Charge applicable after the Annuity Commencement Date. This
factor is less than or equal to, on an annual basis, the percentage shown
on page 3 of the daily net asset value of a fund share held in the Separate
Account for that Subaccount.
Determination of the First Variable Payment
The amount of the first, variable payment is determined by multiplying each
61,000 of proceeds allocated to a variable payment option by the amounts shown
on page 13 for the variable option the Certificate Owner selects. the tables are
based on a 5% effective annual Assumed Investment Return and the "1983 Table a"
(male, female, and unisex if required by law) mortality table improved to the
year 2000 with projection scale G. (The "1983 Table a" mortality rates are
adjusted based on improvements in mortality since 1983 to more appropriately
reflect increased longevity. This is accomplished using a set of improvement
factors referred to as projection scale G.)
Option 3V - Life Income
The Certificate Owner may choose between:
1. "No Period Certain" - Payments will be made only during the lifetime of the
Annuitant.
2. "10 Years Certain" - Payments will be made for the longer of the Annuitant's
lifetime or ten years. In the event of the death of the person receiving
payments prior to the end of the period for which the election was made,
payments will be continued to that person's beneficiary or their present
value may be paid in a single sum.
Option 5V - Joint and Survivor Annuity
Payments are made as long as either the Payee or the joint Payee is living.
Determination of Subsequent Variable Payments
The amount of each variable annuity payment after the first will increase or
decrease according to the value of the variable annuity units which reflect the
investment experience of the selected Subaccounts. Each variable annuity payment
after the first will be equal to the number of variable annuity units in the
selected Subaccounts multiplied by the variable annuity unit value on the date
the payment is made. The number of variable annuity units in each selected
Subaccount is determined by dividing the first. variable annuity payment
allocated to the Subaccount by the variable annuity unit value of that
Subaccount on the Annuity Commencement Date.
PAGE 11 (B)
<PAGE>
GUARANTEED FIXED ACCOUNT PAYMENT OPTIONS
The amounts shown in these tables are the guaranteed amounts for each $1,000 of
the proceeds. Higher current amounts may be available at the time of settlement.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Option 2, Table I Option 3, Table II Option 3, Table III Option 3, Table IV
- --------------------------------------------------------------------------------------------------------------------
Monthly Installment for
Number Amount of Monthly Installment for Monthly Installment for Life
Of Years Monthly Life Life Guaranteed Return of
Payable Installment No Period Certain 10 Years Certain Proceeds
- --------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex Male Female Unisex
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.87 $3.55 $3.71 $3.84 $3.54 $3.70 $3.73 $3.49 $3.61
51 3.93 3.60 3.77 3.90 3.59 3.75 3.79 3.53 3.66
52 4.00 3.65 3.83 3.97 3.64 3.81 3.84 3.58 3.71
53 4.07 3.71 3.90 4.04 3.70 3.87 3.90 3.63 3.76
5 $17.91 54 4.15 3.77 3.97 4.11 3.75 3.94 3.96 3.68 3.82
6 15.14 55 4.23 3.83 4.04 4.19 3.82 4.01 4.03 3.73 3.88
7 13.16 56 4.32 3.90 4.11 4.27 3.88 4.08 4.10 3.79 3.94
8 11.68 57 4.41 3.97 4.19 4.35 3.95 4.15 4.17 3.85 4.00
9 10.53 58 4.50 4.05 4.28 4.44 4.02 4.24 4.24 3.91 4.07
10 9.61 59 4.61 4.13 4.37 4.53 4.10 4.32 4.32 3.97 4.14
11 8.86 60 4.72 4.21 4.47 4.63 4.18 4.41 4.40 4.04 4.22
12 8.24 61 4.84 4.30 4.57 4.74 4.26 4.51 4.49 4.12 4.30
13 7.71 62 4.96 4.40 4.68 4.85 4.35 4.61 4.58 4.19 4.38
14 7.26 63 5.10 4.50 4.80 4.97 4.45 4.71 4.68 4.28 4.47
15 6.87 64 5.24 4.61 4.93 5.09 4.55 4.83 4.78 4.36 4.56
16 6.53 65 5.40 4.73 5.06 5.22 4.66 4.95 4.88 4.45 4.66
17 6.23 66 5.56 4.85 5.21 5.36 4.77 5.07 4.99 4.55 4.76
18 5.96 67 5.74 4.99 5.36 5.50 4.89 5.20 5.11 4.65 4.87
19 5.73 68 5.93 5.13 5.53 5.65 5.02 5.34 5.24 4.76 4.98
20 5.51 69 6.13 5.29 5.71 5.80 5.15 5.49 5.37 4.87 5.10
70 6.34 5.45 5.90 5.96 5.30 5.64 5.51 4.99 5.23
- --------------------------------------------------------------------------------------------------------------------
Option 5, Table V
- --------------------------------------------------------------------------------------------------------------------
Monthly Installment For Joint and Full Survivor
- --------------------------------------------------------------------------------------------------------------------
Age of Age of Female Annuitant*
Male
Annuitant*
- --------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- --------------------------------------------------------------------------------------------------------------------
50 $2.99 $3.05 $3.11 $3.18 $3.25 $3.32 $3.39
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.31 4.53 4.77 5.02
- --------------------------------------------------------------------------------------------------------------------
Monthly Installment For Unisex Joint and Full Survivor
- --------------------------------------------------------------------------------------------------------------------
Age of Age of Joint Annuitant*
First
Annuitant*
- --------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
First First First First First First First
- --------------------------------------------------------------------------------------------------------------------
50 $3.04 $3.09 $3.15 $3.21 $3.27 $3.33 $3.39
55 3.17 3.24 3.32 3.40 3.48 3.56 3.63
60 3.34 3.44 3.54 3.64 3.75 3.85 3.95
65 3.57 3.70 3.83 3.97 4.11 4.26 4.39
70 3.87 4.04 4.22 4.42 4.62 4.82 5.01
- --------------------------------------------------------------------------------------------------------------------
*Adjusted Age as defined in Section 10.A.
- --------------------------------------------------------------------------------------------------------------------
The annual, semi-annual or quarterly installments under Option 2 shall be the monthly installment shown multiplied
by 11.84, 5.96 or 2.99 respectively, and for Options 3 and 5 the monthly installment shown multiplied by 11.80,
5.95 or 2.99 respectively.
- --------------------------------------------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be calculated on the same basis as those
shown and may be obtained from the Company.
</TABLE>
PAGE 12
<PAGE>
VARIABLE PAYMENT OPTIONS
BASED ON ASSUMED INVESTMENT RETURN
The amounts shown in these tables are the initial payment amounts based on a
5.0% Assumed Investment Return for each $1,000 of the proceeds.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Option 3 - V, Table II Option 3 - V, Table III
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Installment for Life Monthly Installment for Life
No Period Certain 10 Years Certain
- -----------------------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $5.11 $4.81 $4.96 $5.07 $4.79 $4.94
51 5.17 4.85 5.02 5.13 4.83 4.99
52 5.24 4.90 5.07 5.19 4.88 5.04
53 5.31 4.95 5.13 5.25 4.93 5.10
54 5.38 5.01 5.20 5.32 4.98 5.16
55 5.46 5.06 5.26 5.39 5.04 5.22
56 5.54 5.12 5.34 5.47 5.09 5.28
57 5.63 5.19 5.41 5.54 5.16 5.36
58 5.72 5.26 5.49 5.63 5.22 5.43
59 5.82 5.34 5.58 5.72 5.29 5.51
60 5.93 5.42 5.68 5.81 5.37 5.60
61 6.04 5.50 5.78 5.91 5.44 5.69
62 6.17 5.60 5.89 6.02 5.53 5.78
63 6.30 5.69 6.00 6.13 5.62 5.88
64 6.44 5.80 6.13 6.25 5.71 5.99
65 6.60 5.91 6.26 6.37 5.82 6.10
66 6.76 6.04 6.40 6.50 5.92 6.22
67 6.94 6.17 6.56 6.63 6.04 6.35
68 7.13 6.31 6.72 6.77 6.16 6.48
69 7.33 6.46 6.90 6.92 6.29 6.62
70 7.55 6.63 7.09 7.07 6.43 6.76
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Option 5V, Table V
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Installment For Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of
Male
Annuitant* Age of Female Annuitant*
- -----------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
50 $4.32 $4.36 $4.41 $4.46 $4.51 $4.57 $4.62
55 4.42 4.47 4.53 4.60 4.67 4.75 4.83
60 4.54 4.62 4.70 4.80 4.90 5.01 5.12
65 4.71 4.82 4.94 5.07 5.22 5.37 5.53
70 4.95 5.10 5.27 5.46 5.67 5.89 6.13
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Monthly Installment For Unisex Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of
First
Annuitant* Age of Joint Annuitant*
- -----------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
First First First First First First First
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.40 $4.45 $4.50 $4.55 $4.61 $4.67 $4.72
55 4.52 4.59 4.66 4.73 4.81 4.89 4.96
60 4.69 4.78 4.87 4.97 5.08 5.19 5.29
65 4.91 5.04 5.17 5.31 5.46 5.62 5.77
70 5.22 5.40 5.59 5.79 6.02 6.24 6.47
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Adjusted Age as defined in Section 10.A.
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly installments shall be the monthly
installment shown for Options 3-V and 5-V multiplied by 11.70, 5.93 or 2.99
respectively.
- --------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be
calculated on the same basis as those shown and may be obtained from the
Company.
- --------------------------------------------------------------------------------
PAGE 13
<PAGE>
SECTION 11 - GENERAL PROVISIONS
THE CONTRACT
The entire contract consists of this contract, riders, and the attached
application. All statements in the application or in the enrollment form for a
Participant Certificate are representations and not warranties. No statement
will cause this contract to be void or be used in defense of a claim unless
contained in the application.
PARTICIPANT CERTIFICATES
We will issue a Certificate to each Participant Such Certificates are not a part
of this contract.
MODIFICATION OF CONTRACT
No change in this Contract or the Group Certificate is valid unless made in
writing by us and approved by one of our officers. No registered representative
has authority to change or waive any provision of the Group Certificate or this
Contract.
TAX QUALIFICATION
This Contract is intended to qualify as an annuity. contract for federal income
tax purposes. The provisions of this Contract are to be interpreted to maintain
such qualification. To maintain such tax qualification, we reserve the right to
amend this Contract to reflect any clarifications that may be needed or are
appropriate to maintain such tax qualification or to conform this Contract to
any applicable changes in the tax qualification requirements. We will send the
Certificate Owner a copy in the event of any such amendment If such an amendment
is refused, it must be by giving us written notice, and refusal may result in
adverse tax consequences.
NON-PARTICIPATING
The Group Contract and Group Certificates will not share in our surplus
earnings.
AGE OR SEX CORRECTIONS
If the age or sex of the Annuitant has been misstated, the benefits will be
those which the premiums paid would have purchased f pr the correct age and sex.
If required by law to ignore differences .in the sex of the Annuitant, the
payment options will be determined using the unisex factors in Section 10.
Any underpayment made by us will be paid with the next payment Any overpayment
made by us will be deducted from future payments. Any underpayment or
overpayment, will include interest at 5% per year, from the date of the wrong
payment to the date of the adjustment.
INCONTESTABILITY
This Contract shall be incontestable from the Contract Date.
EVIDENCE OF SURVIVAL
We have the right to require satisfactory evidence that a person was alive if a
payment is based on that person being alive. No payment will be made until we
receive the evidence.
SETTLEMENT
Any payment by us under the Certificate is payable at our Home Office.
RIGHTS OF CERTIFICATE OWNER
The Certificate Owner may, while the Annuitant is living:
1. Assign the Certificate.
2. Surrender the Certificate to us.
3. Amend or modify the Certificate with our consent.
4. Receive annuity payments or name a Payee to receive the payments.
5. Exercise, receive and enjoy every other right and benefit contained in the
Certificate.
The use of these rights may be subject to the consent of any assignee or
irrevocable beneficiary; and of the spouse in a community or marital property
state.
Unless we have been notified of a community or marital property interest in the
Certificate, we will rely on our good faith belief that no such interest exists
and will assume no responsibility for inquiry.
SUCCESSOR CERTIFICATE OWNER
A successor Certificate Owner can be named in any enrollment form, or in a
notice the Certificate Owner signs which gives us the facts that we need The
successor Certificate Owner will become the new Certificate Owner when the
Certificate Owner dies, if the Certificate Owner dies before the Annuitant If no
successor Certificate Owner survives the Certificate Owner and the Certificate
Owner dies before the Annuitant, the Certificate Owner's estate will become the
new Certificate Owner.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date annuity payments begin. This date may
not be later than the last day of the Certificate month starting .after the
Annuitant attains age 85, except as expressly allowed by us, but in no event
later than the last day of the Certificate month following the month in which
the Annuitant attains age 95. The Certificate Owner may change the Annuity
Commencement Date at any time before the Annuity Commencement Date by giving us
30 days' written notice.
PAGE 14
<PAGE>
SECTION 11 - GENERAL PROVISIONS - CONT
ASSIGNMENT
(a) In the case of a non-tax qualified annuity, the Certificate may be
assigned. The assignment must be in writing and filed with us.
(b) We assume no responsibility for the validity of any assignment Any claim
made under an assignment shall be subject to proof of interest and the
extent of the assignment.
(c) The Certificate may be applied for and issued to qualify as a tax-qualified
annuity under certain sections of the Internal Revenue Code. This will be
specified in the enrollment form, or information provided in lieu thereof.
Ownership of the Certificate then is restricted so that it will comply with
provisions of the Internal Revenue Code.
Assignment of the Certificate may result in adverse tax consequences.
BENEFICIARY
Death proceeds, when payable in accordance with Section 9, are payable to the
designated beneficiary or beneficiaries. Such beneficiary(ies) must be named in
the enrollment form, or information provided in lieu thereof, and may be changed
without consent (unless irrevocably designated or required by law) by notifying
us in writing on a form acceptable to us. The change will take effect upon the
date signed, whether or not you are living when we receive it The notice must
have been postmarked (or show other evidence of delivery that is acceptable to
us) on or before the date of death The most recent change of beneficiary notice
will replace any prior beneficiary designations. No change will apply to any
payment we made before the written notice was received. If an irrevocable
beneficiary dies, the Certificate Owner may designate a new beneficiary.
The Certificate Owner may direct that the beneficiary shall not have the right
to withdraw, assign or commute any sum payable under an option. In the absence
of such election or direction, the beneficiary may change the manner of payment
or make an election of any option.
If any primary or contingent beneficiary dies before the Annuitant, that
beneficiary's interest in the Certificate 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 Proceeds. In the event no
contingent beneficiaries have been named and all primary beneficiaries have died
before the death proceeds become payable, the Certificate Owner(s) will become
the beneficiary(ies) unless elected otherwise in accordance with Section 9. 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 the Certificate Owner 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 proceeds become payable. If any primary beneficiary is alive at
the time the death proceeds become payable, but dies before receiving their
payment, their share will be paid to their estate.
In cases where the annuitant dies and the Certificate Owner (who is not the
annuitant) elected to receive the death proceeds in accordance with Section 9,
if the annuitant's estate has been named as beneficiary, then payment will be
made to the Certificate Owner.
PROTECTION OF PROCEEDS
Unless the Certificate Owner so directs by filing written notice with us, no
beneficiary may assign any payments under the Certificate before the same are
due. To the extent permitted by law, no payments under the Certificate will be
subject to the claims of creditors of the Certificate Owner or any beneficiary.
DEFERMENT
We will pay any Partial Withdrawals or surrender proceeds from the Separate
Account(s) within 7 days after we receive all requirements that we need.
However, it may happen that the New York Stock Exchange is closed for trading
(other than the usual weekend or holiday closings), or the Securities and
Exchange Commission restricts trading or determines that an emergency exists. If
so, it may not be practical for us to determine the investment experience of the
Separate Account In that case, we may defer transfers among the Subaccounts and
to the Fixed Account, and determination or payment of Partial Withdrawals or
surrender proceeds.
When permitted by law, we may defer paying any Partial Withdrawals or surrender
proceeds from the Fixed Account for up to 6 months from the date we receive the
request If the Certificate Owner dies after the request is received, but before
the request is processed, the request will be processed before the death
proceeds are determined. Interest will be paid on any amount deferred for 30
days or more. This rate will be computed at the rate of interest currently paid
on proceeds left under the Interest Payments Settlement Option.
REPORTS TO OWNER
We will give the Certificate Owner an annual report at least once each
Certificate Year. This report will show the number and value of the accumulation
units held in each of the Subaccounts as well as the value of the Fixed Account
It will also give the Death Benefit, Cash Value, and any other facts required by
law or regulation.
PAGE 15
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
SERVICE CHARGE WAIVER
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate Data page.
The Service Charge provision in Section 4, Policy Value, is amended to include
the following language:
The Service Charge will not be deducted on a Certificate Anniversary or at
the time of surrender if, at such time, either (1) the sum of all premium
payments made less the sum of all withdrawals taken equals or exceeds
$50,000 or (2) the Policy Value equals or exceeds $50,000.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
GUARANTEED MINIMUM DEATH BENEFIT
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on
the Contract/Certificate page.
The Death Proceeds Prior to Annuity Commencement Date Provision in Section 9,
Death Proceeds, is replaced with the following language:
The amount of the death proceeds will be the greatest of (a), (b), or (c),
where:
(a) is the Policy Value on the date we receive due proof of death and an
election of a method of settlement;
(b) is .the Cash Value on the date we receive due proof of death and an
election of a method of settlement, and ; .
(c) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional
premium payments received, less any Gross Partial Withdrawals from the date
of death to the date of payment of death proceeds.
If no payment option is selected by the date of death, the beneficiary may
make such election within 60 days of the date we receive due proof of death
The beneficiary may elect to receive the death proceeds as a lump sum
payment or may use the death proceeds to provide any of the annuity payment
options described in Section 10. Interest on death proceeds will be paid as
required by law.
The Guaranteed Minimum Death Benefit is the 5% Annually Compounding Death
Benefit. The GMDB is equal to the total premiums paid for the Certificate;
less any Adjusted Partial Withdrawals, accumulated at 5% interest per annum
from the payment or withdrawal date to the earlier of the date of death or
the Certificate Owner's 81st birthday.
If the Certificate Owner is a nonnatural person, or if the Certificate
Owner has elected to have the death proceeds paid upon the death of the
annuitant, the Guaranteed Minimum Death Benefit will be based upon the
annuitant's age.
The Adjusted Partial Withdrawal is the total amount deducted from the GMDB
as a result of a Partial Withdrawal as used in the GMDB provision. It is
equal to the Gross Partial Withdrawal described in Section 5, multiplied by
an Adjustment Factor. The Adjustment Factor is equal to the amount of the
death proceeds prior to the Partial Withdrawal divided by the Policy Value
prior to the Partial Withdrawal.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
GUARANTEED MINIMUM DEATH BENEFIT
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate page.
The Death Proceeds Prior to Annuity Commencement Date Provision in Section 9,
Death Proceeds, is replaced with the following language:
The amount of the death proceeds will be the greatest of (a), (b), or (c),
where:
(a) is the Policy Value on the date we receive due proof of death and an
election of a method of settlement;
(b) is the Cash Value on the date we receive due proof of death and an
election of a method of settlement, and;
(c) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional
premium payments. received, less any Gross Partial Withdrawals from the
date of death to the date of payment of death proceeds.
If no payment option is selected by the date of death, the beneficiary may
make such election within 60 days of the date we receive due proof of
death. The beneficiary may elect to receive the death proceeds as a lump
sum payment or may use the death proceeds to provide any of the annuity
payment options described in Section 10. Interest on death proceeds will be
paid as required by law.
The Guaranteed Minimum Death Benefit is the Return of Premium Death Benefit
The GMDB is equal to the total premiums paid for the Certificate, less any
Partial Withdrawals, as of the date of death.
The Adjusted Partial Withdrawal is the total amount deducted from the GMDB
as a result of a Partial Withdrawal as used in the GMDB provision. It is
equal to the Gross Partial Withdrawal described in Section 5, multiplied by
an Adjustment Factor. The Adjustment Factor is equal to the amount of the
death proceeds prior to the Partial Withdrawal divided by the Policy Value
prior to the Partial Withdrawal.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
GUARANTEED MINIMUM DEATH BENEFIT
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate page.
The Death Proceeds Prior to Annuity Commencement Date Provision in Section 9,
Death Proceeds is replaced with the following language:
The amount of the death proceeds will be the greatest of (a), (b), or (c),
where:
(a) is the Policy Value on the date we receive due proof of death and an
election of a method of settlement ;
(b) is the Cash Value on the date we receive due proof of death and an
election of a method of settlement, and;
(c) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional
premium payments received, less any Gross Partial Withdrawals from the date
of death to the date of payment of death proceeds.
If no payment option is selected by the date of death, the beneficiary may
make such election within 60 days of the date we receive due proof of
death. The beneficiary may elect to receive the death proceeds as a lump
sum payment or may use the death proceeds to provide any of the annuity
payment options described in Section 10. Interest on death proceeds will be
paid as required by law.
The Guaranteed Minimum Death Benefit is the Step-Up Death Benefit The GMDB
is equal to the largest Policy Value. on the Certificate Date or on any
Certificate Anniversary prior to the earlier of the date of death or the
Certificate Owner's 81st birthday, plus any Premium Payments made since
then, minus any Adjusted Partial withdrawals made since then.
If the Certificate Owner is a nonnatural person, or if the Certificate
Owner has elected to have the death proceeds paid upon the death of the
annuitant, the Guaranteed Minimum Death Benefit will be based upon the
annuitant's age.
The Adjusted Partial Withdrawal is the total amount deducted from the GMDB
as a result of a Partial Withdrawal as used in the GMDB provision. It is
equal to the Gross Partial Withdrawal described in Section 5, multiplied by
an Adjustment Factor. The Adjustment Factor is equal to the amount of the
death proceeds prior to the Partial Withdrawal divided by the Policy Value
prior to the Partial Withdrawal.
This Rider takes effect arid expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
LUMP SUM PARTIAL WITHDRAWAL OPTION
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate Data page.
The Partial Withdrawals provision in Section 5, Cash Value and Partial
Withdrawals, is amended to include the following language:
Beginning in the 2nd .Certificate Year amounts ($500 minimum) up to 10'0 of
the Cumulative Premium Payments immediately prior to the Partial Withdrawal
are available as a Lump Sum distribution once per Certificate Year with no
Surrender Charges and no Excess Interest Adjustment.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
SYSTEMATIC PAYOUT OPTION
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate Data page.
The Partial Withdrawals provision in Section 5, Cash Value and Partial
Withdrawals, is amended to include the following language:
Beginning in the 1st Certificate Year, a Systematic Payout Option (SPO) is
available on a monthly, quarterly, semi-annual or annual basis. At the time
a SPO payout is made, such payout must be at least $50 and may not exceed
10'0 of the cumulative premium payments immediately prior to the Partial
Withdrawal, divided by the number of payouts made per year (e.g. 12 for
monthly). No Surrender Charges, or Excess Interest Adjustment will apply to
the SPO payout Monthly and quarterly payouts must be sent through
electronic funds transfer directly to a checking or savings account The
Certificate Owner may start or stop SPO payouts at anytime; however, 30
days written notice is required to stop SPO payout& Once stopped, the
Certificate Owner must wait until the first day of the next Certificate
Year to begin a new SPO.
Once the Certificate Owner has elected a SPO, the Certificate Owner must
wait a minimum time before the first SPO payment : one month for a monthly
SPO, three months for quarterly, six months for semi-annual, or twelve
months for annual.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith:
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
GUARANTEED MINIMUM INCOME BENEFIT RIDER
This rider provides a Minimum Annuitization Value which can only be used with
the Annuity Factors shown in Schedule I of this rider. This Minimum
Annuitization value is guaranteed by us, regardless of the performance of the
variable annuity's investments.
This rider is attached to and made part of the Contract as of the Contract Date.
This rider may only be terminated as provided herein This rider is subject to
all of the provisions in the Contract that do not conflict with the provisions
of this rider. The Rider Payment Options provide for variable annuity payments.
Subsequent payments may fluctuate with the investment performance of the
Subaccounts, but will never be less than the initial payment .
DEFINITIONS
The following definitions used in this Rider are for reference only.
Annuitant
The Annuitant is designated on the Certificate Data Page. The variable annuity
payments are paid to the Annuitant (or surviving Joint Annuitant).
Annuity Factor
A factor for the applicable Annuitant age, sex and Rider Payment Option is shown
in schedule I or Schedule II of this rider. For the Rider Payment Option chosen,
the Annuity Factor from Schedule I and the Minimum Annuitization Value will be
used to determine the applicable annuity payments. For Annuitants age 85 or
older at the time of annuitization, the age 85 Annuity Factor will be used for
Schedule I. Factors not shown are available from us upon request Schedule I and
Schedule 11 are based on the " 1983 Table a" mortality table, improved to the
year 2000 with projection scale G.
Election Date
A date that the Certificate Owner elects to begin Guaranteed Minimum Income
Benefit payments. The Election Date must be within 30 days following a
Certificate Anniversary. The first and last dates to elect a Rider Payment
Option are shown on page one of the rider attached to the Certificate.
Minimum Annuitization Value
The amount we will use to determine the Guaranteed Minimum Income Benefit
payments.
Rider Date
The date that the rider is added to the Certificate. This date may only be the
issue date of the Certificate or a Certificate Anniversary date. This is also
the Certificate Anniversary that the Certificate Owner most recently elected to
upgrade the Minimum Annuitization Value, if applicable.
Supportable Payment
The Supportable Payment is equal to the number of variable annuity units in the
selected Subaccounts multiplied by the variable annuity unit values in those
Subaccounts on the date the payment is made.
1
<PAGE>
GUARANTEED MINIMUM INCOME BENEFIT
On the Election Date, the Certificate Owner may use the Minimum Annuitization
Value and the applicable Annuity Factor to provide variable payments to the
Annuitant The first variable payment is determined by multiplying each $1,000 of
Minimum Annuitization Value by the Annuity Factor on Schedule L Each subsequent
payment will be calculated as described in the Contract, using a.5% Assumed
Investment Return.
For subsequent payments, an annual Mortality and Expense Risk Fee and
Administrative Charge (which includes an investment risk fee) will be charged.
This total fee may be different than the Mortality and
Expense Risk Fee and Administrative Charge in effect prior to the Election Date.
It may also be different than the Mortality and Expense Risk Fee and
Administrative Charge for the settlement options shown in the Certificate.
The subsequent payments may fluctuate in accordance with the investment
performance of the annuity. Subaccounts. However, such payments will never be
less than the initial payment.
MINIMUM ANNUITIZATION VALUE
The Minimum Annuitization Value is used to determine the Guaranteed Minimum
Income Benefit payments.
On the Rider Date, the Minimum Annuitization Value is the value of the
Certificate. Thereafter, based upon the effective Annual Growth Rate (shown on
page one of the rider attached to the Certificate), it will be the value of the
Certificate on the Rider Date, plus any additional payments made after the Rider
Date, minus policy Withdrawals (adjusted as described below),. minus any premium
taxes.
Withdrawals
In any Certificate Year, the Minimum Annuitization Value will only be reduced by
the actual amount of a withdrawal as long as the withdrawal does not exceed a
maximum annual free' amount Withdrawals in excess of the maximum annual free
amount will reduce the Minimum Annuitization Value by an amount equal to (A)
divided by (B) multiplied by (C) where:
(A) is the amount of the excess withdrawal;
(B) is the value of the Certificate after the current Certificate Year
maximum annual free amount has been withdrawn,. but prior to the withdrawal
of the excess portion; and
(C) is the Minimum Annuitization Value after the current Certificate Year
maximum annual free amount has been withdrawn, but prior to withdrawal of
the excess portion.
For each Certificate Year, the maximum annual free amount is equal to the.
Minimum Annuitization Value, as of the beginning of e Certificate Year,
multiplied by the effective Annual Growth Rate as shown on page one of the rider
attached to the Certificate. Withdrawals during a Certificate Year will reduce
the available maximum annual free amount by the amount of the Withdrawal.
RIDER FEE
We will deduct a fee from the value of the Certificate on. each Certificate
Anniversary and on the termination date of this rider. The Rider Fee is the
Minimum Annuitization Value at the time the fee is deducted, multiplied by the
Rider Fee Percentage shown on the first page of the rider attached to the
Certificate. The fee will be deducted from each Subaccount in proportion to the
amount of value of the Certificate in each Subaccount This fee will not be
deducted after the Election Date or if the Certificate terminates due to the.
death of the Certificate Owner.
WAIVER OF RIDER FEE
If the value - of the Certificate, on a particular Certificate Anniversary,
exceeds an amount equal to the Rider Fee Waiver Threshold (shown on page one of
the rider attached to the Certificate) multiplied by the Minimum Annuitization
Value, the Rider Fee will be waived for that Certificate Anniversary.
MINIMUM ANNUITIZATION VALUE UPGRADE
The Certificate Owner may elect, in writing, to upgrade the Minimum
Annuitization Value to the value of the Certificate on a Certificate
Anniversary. This may be done within 30 days immediately following any
Certificate Anniversary, and prior to the Last Date to Upgrade shown on page one
of the rider attached to the Certificate.
If an upgrade is elected, the rider attached to the Certificate will terminate
and a new rider will be issued with a new Rider Date, Election Date and its own
guaranteed benefits. The new annual Rider Fee Percentage may be different than
this rider's, but it will never be greater than 0.50%.
2
<PAGE>
RIDER PAYMENT OPTIONS
The Minimum Annuitization Value and applicable Annuity Factors from Schedule I
may be applied to the following payment options:
Life Income - An election may be made for "No Period Certain" or "10 Years
Certain". In the event of the death of the person receiving payments prior
to the end of the chosen period certain, the remaining. period certain
payments will be continued to the beneficiary.
Joint and Full Survivor - An election may be made for "No Period Certain"
or "10 Years Certain". Payments will be made as long as either the
Annuitant or Joint Annuitant is living. In the event of the death of both
the Annuitant and the Joint Annuitant prior to the end of the chosen period
certain, the remaining period certain payments will be continued to the
beneficiary.
GUARANTEED MINIMUM PAYMENT
On the Election Date, the Certificate Owner will receive guaranteed minimum
payments. The annual Mortality and Expense Risk Fee and Administrative Charge
for these payments is shown on page one of the rider attached to the
Certificate. The percentage shown on page one of the rider attached to the
Certificate also includes a fee to cover investment risk associated with
guaranteeing a minimum payment.
The first payment is based on the Annuity Factors in Schedule I. We guarantee
that each subsequent payment will be equal to or greater than the initial
payment.
During the first Certificate Year following annuitization, each payment will be
stabilized to equal the initial payment On each Certificate Anniversary
following annuitization, the stabilized payment will be increased or decreased
(but never below the initial payment) and held level for that Certificate Year.
On each Certificate Anniversary following annuitization, the stabilized payment
will equal the greater of the initial payment or the Supportable Payment at that
time.
If the Supportable Payment (at any payment date) is greater than the stabilized
payment for that year, the excess will be used to purchase additional annuity
units as described below. If the Supportable Payment (at any payment date) is
less than the stabilized payment for that year, annuity units will be redeemed
as described below to fund the deficiency.
Purchase /Redemption of Annuity Units:
The number of annuity units purchased or redeemed is equal to the annuity
income purchased or redeemed, respectively, divided by the annuity unit
value for each respective Subaccount Purchases and redemptions of annuity
income will be allocated to each Subaccount on a proportionate basis. The
amount of annuity income purchased or redeemed is the difference between
the Supportable Payment and the stabilized payment, times the attained age
nearest birthday Annuity- Factors shown in Schedule II, divided by $1,000.
These factors will reflect the remaining certain period, if any, but will
be calculated on the same basis as the Schedule II factors.
The Company bears the risk that it will need to make payments if all annuity
units have been redeemed in an attempt to maintain the stabilized payment at the
initial payment level. In such an event, the Company will make all future
payments equal to the initial payment.
ASSIGNMENT
Payments made under this rider may not be pledged or assigned Payments will only
be made to the Annuitant or Joint Annuitant named in the policy.
TERMINATION
This rider will be terminated, with respect to each Certificate, upon the
earliest of:
a the Election Date;
b. 30 days after the Last Date to Elect Benefit shown on the first page of the
rider attached to the Certificate.
c. the date the Certificate terminates;
d. the date the Certificate Owner elects to apply the value of the Certificate
to annuitize the Certificate; and
e. the date the Certificate Owner elects to upgrade their Minimum
Annuitization Value.
This rider cannot be terminated prior to the earliest of the above dates.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
3
<PAGE>
SCHEDULE I - ANNUITY FACTORS
The amounts shown in these tables are the Annuity Factors for each $1,000 of the
Minimum Annuitization Value and assume a 3% Assumed Investment Return.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Annuity Factor for Monthly Annuity Factor For
Life With No Period Certain Life With 10 Years Certain
- -----------------------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $3.87 $3.55 $3.71 $3.84 $3.54 $3.70
51 3.93 3.60 3.77 3.90 3.59 3.75
52 4.00 3.65 3.83 3.97 3.64 3.81
53 4.07 3.71 3.90 4.04 3.70 3.87
54 4.15 3.77 3.97 4.11 3.75 3.94
55 4.23 3.83 4.04 4.19 3.82 4.01
56 4.32 3.90 4.11 4.27 3.88 4.08
57 4.41 3.97 4.19 4.35 3.95 4.15
58 4.50 4.05 4.28 4.44 4.02 4.24
59 4.61 4.13 4.37 4.53 4.10 4.32
60 4.72 4.21 4.47 4.63 4.18 4.41
61 4.84 4.30 4.57 4.74 4.26 4.51
62 4.96 4.40 4.68 4.85 4.35 4.61
63 5.10 4.50 4.80 4.97 4.45 4.71
64 5.24 4.61 4.93 5.09 4.55 4.83
65 5.40 4.73 5.06 5.22 4.66 4.95
66 5.56 4.85 5.21 5.36 4.77 5.07
67 5.74 4.99 5.36 5.50 4.89 5.20
68 5.93 5.13 5.53 5.65 5.02 5.34
69 6.13 5.29 5.71 5.80 5.15 5.49
70 6.34 5.45 5.90 5.96 5.30 5.64
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Monthly Annuity Factor For Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of Age of Female Annuitant*
Male
Annuitant*
- -----------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- -----------------------------------------------------------------------------------------------------------------------------------
50 $2.99 $3.05 $3.11 $3.18 $3.25 $3.32 $3.39
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.31 4.53 4.77 5.02
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Annuity Factor For Joint and Full Survivor with 10 Year Period Certain
- -----------------------------------------------------------------------------------------------------------------------------------
Age of Age of Female Annuitant*
Male
Annuitant*
- -----------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- -----------------------------------------------------------------------------------------------------------------------------------
50 $2.99 $3.05 $3.11 $3.18 $3.24 $3.31 $3.38
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.30 4.52 4.76 4.99
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Age nearest birthday
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly Annuity Factor shall be the monthly
Annuity Factor shown multiplied by 11.80, 5.95 or 2.99 respectively.
- --------------------------------------------------------------------------------
Annuity Factors not shown in the above tables will be calculated on the same
basis as those shown and may be obtained from the Company.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE II - ANNUITY FACTORS
The amounts shown in these tables are the Annuity Factors for each $1,000 of the
Minimum Annuitization Value and assume a 5% Assumed Investment Return.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Annuity Factor for Monthly Annuity Factor For
Life With No Period Certain Life With 10 Years Certain
- -----------------------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $5.14 $4.83 $4.99 $5.09 $4.80 $4.95
51 5.20 4.87 5.04 5.15 4.85 5.00
52 5.27 4.92 5.10 5.21 4.89 5.05
53 5.34 4.98 5.16 5.27 4.94 5.11
54 5.41 5.03 5.22 5.34 4.99 5.17
55 5.49 5.09 5.29 5.41 5.05 5.23
56 5.57 5.15 5.36 5.48 5.11 5.30
57 5.66 5.22 5.44 5.56 5.17 5.37
58 5.75 5.29 5.52 5.65 5.24 5.45
59 5.85 5.37 5.61 5.74 5.31 5.53
60 5.96 5.45 5.71 5.83 5.38 5.61
61 6.08 5.53 5.81 5.93 5.46 5.70
62 6.20 5.63 5.92 6.04 5.55 5.80
63 6.34 5.73 6.04 6.15 5.64 5.90
64 6.48 5.83 6.16 6.27 5.73 6.01
65 6.64 5.95 6.30 6.39 5.84 6.12
66 6.81 6.07 6.44 6.52 5.94 6.24
67 6.99 6.21 6.60 6.66 6.06 6.37
68 7.18 6.35 6.77 6.80 6.18 6.50
69 7.39 6.51 6.95 6.94 6.31 6.64
70 7.61 6.68 7.14 7.09 6.45 6.78
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Monthly Annuity Factor For Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of
Male
Annuitant* Age of Female Annuitant*
- -----------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
50 $4.34 $4.38 $4.43 $4.48 $4.53 $4.59 $4.65
55 4.43 4.49 4.55 4.62 4.70 4.77 4.85
60 4.56 4.64 4.73 4.82 4.92 5.03 5.15
65 4.74 4.84 4.96 5.10 5.24 5.40 5.56
70 4.98 5.13 5.30 5.49 5.70 5.93 6.17
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Monthly Annuity Factor For Joint and Full Survivor with 10 Year Period Certain
- -----------------------------------------------------------------------------------------------------------------------------------
Age of
Male
Annuitant* Age of Female Annuitant*
- -----------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.34 $4.38 $4.43 $4.48 $4.53 $4.59 $4.65
55 4.43 4.49 4.55 4.62 4.70 4.77 4.85
60 4.56 4.64 4.72 4.82 4.92 5.03 5.14
65 4.73 4.84 4.96 5.09 5.24 5.39 5.55
70 4.97 5.12 5.29 5.48 5.69 5.91 6.14
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Age nearest birthday
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly Annuity Factor shall be the monthly
Annuity Factor shown multiplied by 11.70, 5.93 or 2.99 respectively.
- --------------------------------------------------------------------------------
Annuity Factors not shown in the above tables will be calculated on the same
basis as those shown and may be obtained from the Company.
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
[LOGO OF PFL LIFE]
Group Flexible Premium Variable Annuity Contract
Income Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount
(See Sections 6 and 10C.)
Non-Participating
INDEX
Page
Accumulation Units................................................... 7
Adjusted Age (Settlement Options).................................... 7
Age or Sex Corrections............................................... 14
Annuity Commencement Date............................................ 14
Annuity Payments..................................................... 11, 11(A)
Assignment........................................................... 15
Beneficiary.......................................................... 15
Cash Value........................................................... 5, 6
Certificate Data Page................................................ 3
Death Proceeds....................................................... 10, 11
Definitions.......................................................... 2
Dollar Cost Averaging................................................ 9
Excess Interest Adjustment........................................... 5
Evidence of Survival................................................. 14
Fixed Account........................................................ 8
Guaranteed Return of Fixed Account Premium Payments.................. 6
Guaranteed Period.................................................... 8
Incontestability..................................................... 14
Modification of Contract............................................. 14
Nonparticipation..................................................... 14
Nursing Care and Terminal Condition
Withdrawal Option.................................................... 5(B)
Partial Withdrawals.................................................. 5, 6
Payee................................................................ 11(A)
Payment Option Tables................................................ 12, 13
Policy Value......................................................... 4
Premium Payments..................................................... 4
Proof of Age......................................................... 11(A)
Protection of Proceeds............................................... 15
Right to Cancel...................................................... 1
Separate Account..................................................... 6, 7
Service Charge....................................................... 4
Settlement........................................................... 14
Surrender Charges.................................................... 6
Transfers............................................................ 9
Unemployment Waiver.................................................. 5(B)
<PAGE>
Exhibit (4)(b)
Form of Group Certificate
for the Access Variable Annuity
<PAGE>
[LOGO OF PFL LIFE]
PFL Life Insurance Company
A Stock Company
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
(Hereafter called the Company, we, our or us) (319) 398-8511
ANNUITANT: JEROME R SIEGEL
CERTIFICATE OWNER(S): PAINEWEBBER FBO
CERTIFICATE NUMBER: 07-109740
CERTIFICATE DATE: October 23, 1995
WE AGREE
. To provide annuity payments as set forth in Section 10 of this Certificate,
. Or to pay withdrawal benefits in accordance with Section 5 of this
Certificate,
. Or to pay death proceeds in accordance with Section 9 of this Certificate.
Withdrawals, transfers and amounts applied to a Payment Option may be subject to
an Excess Interest Adjustment in accordance with Sections 5, 8, and 10,
respectively, of this Certificate.
These agreements are subject to the provisions of this Certificate. This
Certificate is issued in consideration of the enrollment form, or information
provided in lieu thereof, and payment of the premiums as provided.
This Certificate may be applied for and issued to qualify as a tax-qualified
annuity under the applicable sections of the Internal Revenue Code.
20 DAY RIGHT TO CANCEL
You may cancel this Certificate by delivering or mailing a written notice to us.
You must return this Certificate before midnight of the 20th day after the day
you receive it Notice given by mail and return of this Certificate by mail are
effective on being postmarked, properly addressed and postage prepaid.
We will pay you an amount equal to the sum of:
. the premiums paid; and
. the accumulated gains or losses, if any, in the Separate Account(s) on the
date of cancellation; unless otherwise required by law.
Signed for us at our home office.
/S/ Craig D. Vermie /S/ William L. Busler
SECRETARY PRESIDENT
READ YOUR CERTIFICATE CAREFULLY
Group Flexible Premium Variable Annuity Certificate
Income Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount (See Sections 6 and 10C)
AV432 101 114 199 CRT Non-Participating
<PAGE>
SECTION 1
DEFINITIONS
ADJUSTED POLICY VALUE
The Policy Value increased or decreased by any Excess Interest Adjustment
ANNUITANT
The Participant to whom annuity payments will be made, unless another payee is
named.
ANNUITY COMMENCEMENT DATE
Date the Annuitant will begin receiving payments from this annuity, which may
not be later than the last day of the Certificate month starting after the
Annuitant attains age 85, except as expressly allowed by us, but in no event
later than the last day of the month following the month in which the Annuitant
attains age 95.
CASH VALUE
Amount defined in Section 5, that can be withdrawn if this annuity Certificate
is surrendered.
CERTIFICATE
The document issued under the Group Contract to the eligible Participants who
apply for coverage. The Certificate is not a part of the Group Contract
CERTIFICATE ANNIVERSARY
The anniversary of the Certificate Date for each year this Certificate remains
in force.
CERTIFICATE DATE
The date shown on page 3 of this Certificate and the date on which this
Certificate becomes effective.
CERTIFICATE OWNER
The owner of the annuity Certificate. Unless otherwise specified on the
Certificate Data page, the Annuitant and the Certificate Owner shall be one and
the same person.
CERTIFICATE YEAR
The 12 month periods following the Certificate Date shown on the Certificate
Data page. The first Certificate Year starts on the Certificate Date. Each
subsequent year starts on the anniversary of the Certificate Date.
DISTRIBUTION
A withdrawal or disbursement of funds from the Policy Value or Cash Value.
GROUP CONTRACT
The Contract issued to the Group Contract Owner, under which Certificates are
issued to eligible Participants.
GROUP CONTRACT OWNER
The entity, as shown on the Certificate Data Page, which applies for the Group
Contract
INVESTMENT OPTIONS
Any of the Guaranteed Period Options of the Fixed Account, the Dollar Cost
Averaging Fixed Account Option, and any of the Subaccounts of the Separate
Account(s).
PARTICIPANT
A person who makes premium payments or for whom premium payments are made under
the Group Contract
PAYEE
The person to whom annuity payments will be made.
PAYMENT OPTIONS
Options through which the distribution of the Adjusted Policy Value can be
directed.
POLICY VALUE
The amount (defined in Section 4) applicable under the Certificate that can be
used to fund one of the Payment Options.
SEPARATE ACCOUNT
The separate investment account(s) established by us, as described in Section 6.
SUBACCOUNT
A division of a Separate Account, as described in Section 6.
SURRENDER
A partial or full withdrawal of funds from the Policy Value or Cash Value.
WITHDRAWAL
A distribution of funds from the Policy Value or Cash Value.
YIELD
The effective annual interest rate applicable to the Fixed Account.
YOU,YOUR
The owner of this Certificate. Unless otherwise specified on the Certificate
Data Page, the Annuitant and the Certificate Owner shall be one and the same
person.
PAGE 2
<PAGE>
SECTION 2 - CERTIFICATE DATA
GROUP CONTRACT NUMBER: PV0005 GROUP CONTRACT OWNER: SECURITIES CUSTOMERS
DRL INSURANCE TRUST II
CERTIFICATE NUMBER: 07-109740 ANNUITANT: JEROME R. SIEGEL
INITIAL PREMIUM ISSUE AGE/SEX: 35/male
PAYMENT: $25,000.00
CERTIFICATE DATE: October 23, 1995 CERTIFICATE
OWNER(S): PAINEWEBBER FBO
ANNUITY
COMMENCEMENT
DATE: February 14, 2021
Premium Enhancement Percentage on Initial Premium Payment None
SEPARATE ACCOUNT(S): PFL Life Variable Annuity Account D
DCA SUBACCOUNT(S): Money Market Portfolio, U.S. Government Securities
Portfolio
PREMIUM PAYMENT MINIMUMS
Initial Premium Payment, Nonqualified: $25,000
Initial Premium Payment*, Qualified:
*Waived for 403(b) annuities $25,000
Subsequent Premium Payments: $50.00
Before the Annuity Commencement Date: Mortality and Expense Risk Fee and
Administrative Charge: 1.70%
Distribution Financing Charge: 00%
Number of Certificate Years that
the charge is deducted: 0
After the Annuity Commencement Date: Mortality and Expense Risk Fee
and Administrative Charge: 1.70%
SERVICE CHARGE: $30
FIXED ACCOUNT GUARANTEED MINIMUM EFFECTIVE ANNUAL INTEREST RATE: 3%
SURRENDER CHARGE: None
Page 3
<PAGE>
SECTION 2 - CONTRACT DATA - CONT
SCHEDULE OF ADDITIONAL BENEFITS:
Form No. Additional Benefit(s)
AE 1074 199 Service Charge Waiver
AE 1061 199 Guaranteed Minimum Death Benefit
AE 1069 199 Lump Sum Partial Withdrawal Option
AE 1065 199 Systematic Payout Option
RGMI 4 499(CRT) Guaranteed Minimum Income Benefit Ride
Page 3(A)
<PAGE>
SECTION 2 - CERTIFICATE DATA
GROUP CONTRACT NUMBER: PV0005 GROUP CONTRACT OWNER: SECURITIES CUSTOMERS
DRL INSURANCE TRUST II
CERTIFICATE NUMBER: 07-109740 ANNUITANT: JEROME R. SIEGEL
INITIAL PREMIUM ISSUE AGE/SEX:
PAYMENT: $25,000.00
CERTIFICATE DATE: October 23, 1995 CERTIFICATE
OWNER(S): PAINEWEBBER FBO
ANNUITY
COMMENCEMENT
DATE: February 14, 2021
Premium Enhancement Percentage on Initial Premium Payment None
SEPARATE ACCOUNT(S): PFL Life Variable Annuity Account D
DCA SUBACCOUNT(S): Money Market Portfolio, U.S. Government Securities
Portfolio
PREMIUM PAYMENT MINIMUMS
Initial Premium Payment, Nonqualified: $25,000
Initial Premium Payment*, Qualified:
*Waived for 403(b) annuities $25,000
Subsequent Premium Payments: $50.00
Before the Annuity Commencement Date: Mortality and Expense Risk Fee
and Administrative Charge: 1.85%
Distribution Financing Charge: 00%
Number of Certificate Years
that the charge is deducted: 0
After the Annuity Commencement Date: Mortality and Expense Risk Fee
and Administrative Charge: 1.70%
SERVICE CHARGE: $30
FIXED ACCOUNT GUARANTEED MINIMUM EFFECTIVE ANNUAL INTEREST RATE: 3%
SURRENDER CHARGE: None
Page 3
<PAGE>
SECTION 2 - CONTRACT DATA - CONT
SCHEDULE OF ADDITIONAL BENEFITS:
Form No. Additional Benefit(s)
AE 1074 199 Service Charge Waiver
AE 1062 199 Guaranteed Minimum Death Benefit
AE 1069 199 Lump Sum Partial Withdrawal Option
AE 1065 199 Systematic Payout Option
RGMI 4 499(CRT) Guaranteed Minimum Income Benefit Ride
Page 3(A)
<PAGE>
SECTION 2 - CERTIFICATE DATA
GROUP CONTRACT NUMBER: PV0005 GROUP CONTRACT OWNER: SECURITIES CUSTOMERS
DRL INSURANCE TRUST II
CERTIFICATE NUMBER: 07-109740 ANNUITANT: JEROME R. SIEGEL
INITIAL PREMIUM ISSUE AGE/SEX:
PAYMENT: $25,000.00
CERTIFICATE DATE: October 23, 1995 CERTIFICATE
OWNER(S): PAINEWEBBER FBO
ANNUITY
COMMENCEMENT
DATE: February 14, 2021
Premium Enhancement Percentage on Initial Premium Payment None
SEPARATE ACCOUNT(S): PFL Life Variable Annuity Account D
DCA SUBACCOUNT(S): Money Market Portfolio, U.S. Government Securities
Portfolio
PREMIUM PAYMENT MINIMUMS
Initial Premium Payment, Nonqualified: $25,000
Initial Premium Payment*, Qualified:
*Waived for 403(b) annuities $25,000
Subsequent Premium Payments: $50.00
Before the Annuity Commencement Date: Mortality and Expense Risk Fee
and Administrative Charge: 1.85%
Distribution Financing Charge: 00%
Number of Certificate Years
that the charge is deducted: 0
After the Annuity Commencement Date: Mortality and Expense Risk Fee
and Administrative Charge: 1.70%
SERVICE CHARGE: $30
FIXED ACCOUNT GUARANTEED MINIMUM EFFECTIVE ANNUAL INTEREST RATE: 3%
SURRENDER CHARGE: None
Page 3
<PAGE>
SECTION 2 - CONTRACT DATA - CONT
SCHEDULE OF ADDITIONAL BENEFITS:
Form No. Additional Benefit(s)
AE 1074 199 Service Charge Waiver
AE 1063 199 Guaranteed Minimum Death Benefit
AE 1069 199 Lump Sum Partial Withdrawal Option
AE 1065 199 Systematic Payout Option
RGMI 4 499(CRT) Guaranteed Minimum Income Benefit Ride
Page 3(A)
<PAGE>
SECTION 3 - PREMIUM PAYMENTS
PAYMENT OF PREMIUMS
Premium payments may be made any time while this Certificate is in force before
the Annuity Commencement Date. You may start or stop, increase or decrease, or
skip any premium payments.
MAXIMUM AND MINIMUM PREMIUM PAYMENT
The premium payments may not be more than the amount permitted by law if this is
a tax-qualified annuity. The minimum premium payments we will accept are
specified on page 3. The maximum total premium payments, per Participant, which
we will accept without prior Company approval is $1,000,000.
PREMIUM PAYMENT DATE
The premium payment date is the date on which the premium payment is credited to
the Certificate. The initial premium payment less any premium taxes will be
credited to the Certificate within two business days of receipt of such payment
and the required information. Subsequent additional premium payments will be
credited to the Certificate as of the business day when the premium payment and
required information are received. A business day is any day on which the New
York Stock Exchange is open for trading.
ALLOCATION OF PREMIUM PAYMENTS
Premium payments may be applied to the various Investment Options which we make
available. You must tell us what percent of each premium payment to allocate to
the various Investment Options. Each percent may be either zero or any whole
number; however, the allocation among all Investment Options must total 100%.
CHANGE OF ALLOCATION
You may change the allocation of premium payments to the various Investment
Options. You must tell us in a signed notice which gives us the facts that we
need. Premium payments received after the date on which we receive the notice
will be applied on the basis of the new allocation.
PREMIUM TAXES
A state may impose a premium tax. It may be imposed when a premium payment is
made, on the Annuity Commencement Date, on the date of death, or on the date of
full surrender. When permitted by state law, we will not deduct the tax until
the Annuity Commencement Date, date of death, or date of full surrender.
SECTION 4 - POLICY VALUE
POLICY VALUE
On or before the Annuity Commencement Date, the Policy Value is equal to your:
(a) premium payments; minus
(b) Gross Partial Withdrawals (as defined in Section 5); plus
(c) interest credited to the Fixed Account (see Section 7); plus
(d) accumulated gains in the Separate Account(s) (see Section 6); minus
(e) accumulated losses in the Separate Account(s)(see Section 6); minus
(f) service charges, premium taxes and transfer fees, if any.
ADJUSTED POLICY VALUE
The Adjusted Policy Value is the Policy Value increased or decreased by any
Excess Interest Adjustment.
The Adjusted Policy Value may be used on the Annuity Commencement Date to
provide lifetime income or income for a period of no less than 60 months under
the Payment Options in Section 10.
SERVICE CHARGE
On each Certificate Anniversary and at the time of surrender during any
Certificate Year before the Annuity Commencement Date, we reserve the right to
charge an amount up to the amount of the Service Charge shown on page 3 for
administrative expenses. It will be deducted from each Investment Option in
proportion to the portion of Policy Value (prior to such charge) in each
Investment Option, respectively, on that Certificate Anniversary or at the time
of surrender. In no event will the Service Charge exceed 2% of the Policy Value
at the time it is deducted.
PAGE 4
<PAGE>
SECTION 5 - CASH VALUE AND PARTIAL WITHDRAWALS
CASH VALUE
On or before the Annuity Commencement Date, the Cash Value is equal to the
Adjusted Policy Value less any Surrender Charges. Information on the current
amount of a Certificate's Cash Value is available upon request. The Cash Value
may be partially withdrawn or will be paid in the event of a full surrender of
the Certificate. We must receive your written partial withdrawal or surrender
request before the Annuity Commencement Date.
There is no Cash Value once an Annuity Payment Option has been selected.
EXCESS INTEREST ADJUSTMENT
Full Surrenders, Partial Withdrawals, transfers, and amounts applied to a
Payment Option from the Fixed Account Guaranteed Period Options described in
Section 7 will be subject to an Excess Interest Adjustment except as provided
for in the Partial Withdrawals provision below.
An Excess Interest Adjustment applies in the following situations:
1) When you withdraw all or any portion of your Cash Value,
2) When you exercise Annuity Payment Options,
3) When death proceeds are calculated. However, death proceeds will not be
reduced if the Excess Interest Adjustment is negative.
The Excess Interest Adjustment is only applied to transactions affecting the
Guaranteed Period Options of the Fixed Account (see Section 7) and is based on
any change in interest rates from the time the affected Guaranteed Periods)
started until the time the Excess Interest Adjustment occurs. The Excess
Interest Adjustment is applied as follows:
1) The Excess Interest Adjustment is only applied when the transactions occur
prior to the end of any Guaranteed Period Option;
2) Transfers to the Guaranteed Period Options of the Fixed Account are
considered Premium Payments for purposes of determining the Excess Interest
Adjustment;
3) The Excess Interest Adjustment is distinct from, and is applied prior to,
the Surrender Charge; U987
4) The Excess Interest Adjustment may affect the death proceeds defined in
Section 9;
5) If interest rates have decreased from the time the affected Guaranteed
Periods) started until the time the transaction occurs, the Excess Interest
Adjustment will result in additional funds available to you;
6) If interest rates have increased from the time the affected Guaranteed
Period(s) started until the time the transaction occurs, the Excess
Interest Adjustment will result in a decrease in the funds available to
you.
7) Certain amounts are not subject to the Excess Interest Adjustment as
provided in Sections 5, 7 and 8.
The formula for determining the amount of the Excess Interest Adjustment is as
follows:
Excess Interest Adjustment = S x (G-C) x (M/12)
where:S is the gross (that is, before surrender charges and premium taxes, if
any) amount being surrendered, partially withdrawn, transferred, or
applied to a Payment Option that is subject to the Excess Interest
Adjustment.
G is the guaranteed interest rate for the Guaranteed Period applicable
to S.
M is the number of months remaining in the Guaranteed Period for S,
rounded up to the next higher whole number of months.
C is the current guaranteed interest rate then being offered on new
Premium Payments for the next longer Guaranteed Period than "M". If
this Certificate form or such a Guaranteed Period Option is no longer
offered, "C" will be the U.S. Treasury rate for the next longer
maturity (in whole years) than "M" on the 25th day of the previous
calendar month, plus up to 2%.
Upon full surrender, the Excess Interest Adjustment (EIA) for each Guaranteed
Period Option will not reduce the Adjusted Policy Value for that Guaranteed
Period Option below the amount paid into, less any prior withdrawals and
transfers from, that Guaranteed Period Option, plus interest at the 3%
guaranteed effective annual interest rate.
PAGE 5
<PAGE>
SECTION 5 - CONT
PARTIAL WITHDRAWALS
We will pay you a portion of the Cash Value as a Partial Withdrawal provided we
receive your written request while the Certificate is in effect and before the
Annuity Commencement Date. When you request a Partial Withdrawal you must tell
us how it is to be allocated from among the Investment Options. If your request
for a Partial Withdrawal from any Investment Option is less than or equal to the
Cash Value in that option, we will pay the amount of your request. However, if
your request for a Partial Withdrawal from any Investment Option is greater than
the Cash Value in that option, we will pay you the Cash Value of that Investment
Option.
The Gross Partial Withdrawal is the total amount which will be deducted from
your Policy Value as a result of each Partial Withdrawal. The Gross Partial
Withdrawal may be more or less than your requested Partial Withdrawal amount,
depending on whether Surrender Charges and/or Excess Interest Adjustments apply
at the time you request the Partial Withdrawal.
The Excess Partial Withdrawal amount is the portion of the requested Partial
Withdrawal that is subject to Surrender Charge (that is, the portion which is in
excess of the Surrender Charge-free portion). For example, if the requested
withdrawal amount is
$1,000, and the Surrender Charge-free amount is $200, then the Excess Partial
Withdrawal would be $800. Excess Partial Withdrawals will reduce the Policy
Value by an amount equal to (X-Y+Z) where:
X = Excess Partial Withdrawal
A = Amount of Partial Withdrawal subject to Excess Interest Adjustment
Y = Excess Interest Adjustment = (A) x (G-C) x (M/ 12) where G, C and M are
defined in the Excess Interest Adjustment provision above, with "A"
substituted for "S" in the definitions of G and M.
Z = Surrender Charge on X minus Y.
The formula for determining the Gross Partial Withdrawal is as follows:
Gross Partial Withdrawal = R - E + SC
where: R is the requested Partial Withdrawal;
E is the Excess Interest Adjustment; and
SC is the Surrender Charge on (EPW - E);
where
EPW is the Excess Partial Withdrawal amount.
If any Partial Withdrawal reduces the Cash Value below $500, we reserve the
right to pay the full Cash Value and terminate the Certificate.
We may delay payment of the Cash Value from the Fixed Account for up to 6 months
after we receive the request. If the Certificate Owner dies after we receive the
request, but before the request is processed, the request will be processed
before the death proceeds are determined.
Each Partial Withdrawal consists of a portion that is subject to Surrender
Charge (that is, the Excess Partial Withdrawal) and a remaining portion that is
free from Surrender Charge (that is, the Surrender Charge-free amount). Either
portion may be zero (0) depending on the Partial Withdrawal requested and prior
amounts withdrawn.
Partial Withdrawals may be made free from Surrender Charges and free from Excess
Interest Adjustments as follows:
MINIMUM REQUIRED DISTRIBUTION
For tax-qualified plans, Partial Withdrawals taken to satisfy minimum
distribution requirements under Section 401(a)(9) of the Internal Revenue
Code (IRC) are available with no Surrender Charges and no Excess Interest
Adjustments. The amount available from each Certificate with respect to the
minimum distribution requirement is based solely on this Certificate.
The Certificate Owner must be at least 70 1 /2 years old in the calendar
year of distribution, must submit a written request to us and must take the
distribution before year end. If the Certificate Owner attains age 70 1 /2
in the calendar year of distribution, a written request which is postmarked
no later than the end of the current calendar year must be submitted to us.
Systematic minimum distributions must be at least $50 or a lump sum
distribution is available if minimum required distributions are less than
$50.
Any amount requested in excess of the IRC minimum required distribution
will have the appropriate Surrender Charges and Excess Interest Adjustments
applied, unless the excess distribution qualifies as Surrender Charge- free
or Excess Interest Adjustment-free under any additional options provided.
PAGE 5(A)
<PAGE>
SECTION 5 - CONT
NURSING CARE AND TERMINAL CONDITION WITHDRAWAL OPTION
Beginning in the first Certificate Year, if the Certificate Owner or
Certificate Owner's spouse (annuitant or annuitant's spouse if the
Certificate Owner is not a natural person) has been 1) confined in a
Hospital or Nursing Facility for 30 consecutive days or 2) diagnosed as
having a Terminal Condition, you may elect to withdraw all or a portion of
the Policy Value without Surrender Charges and without Excess Interest
Adjustment. The minimum withdrawal under this option is $1000.
For Nursing Care, we must receive each withdrawal request and proof of
eligibility with each request no later than 90 days following the date that
confinement has ceased, unless it can be shown that it was not reasonably
possible to provide the notice and proof within the above time period and
that the notice and proof were given as soon as reasonably possible.
However, in no event, except the absence of legal capacity, shall the
notice and proof be provided later than one year following the date that
confinement has ceased. For a Terminal Condition, we must receive each
withdrawal request and the applicable proof of eligibility no later than
one year following diagnosis of the Terminal Condition. Proof of a Terminal
Condition is required only with the initial withdrawal request and must be,
furnished by the Annuitant's, Annuitant's spouse's, Certificate Owner's, or
Certificate Owner's spouse's physician. Proof of confinement may be a
physician's statement or a statement from a hospital or nursing facility
administrator.
UNEMPLOYMENT WAIVER
Beginning in the first Certificate Year, you may withdraw all or a portion
of the Policy Value free of Surrender Charges and free of any Excess
Interest Adjustment if the Certificate Owner or Certificate Owner's spouse
(annuitant or annuitant's spouse, if the Certificate Owner is not a natural
person) becomes unemployed. In order to qualify, you 1) must have been
employed full time for at least two years prior to your becoming
unemployed, 2) must have been employed full time on your Certificate Date,
3) must have been unemployed for at least 60 consecutive days at the time
of withdrawal and 4) must have a minimum Cash Value at the time of
withdrawal of $5000. Proof of unemployment will consist of providing us
with a determination letter from the applicable State's Department of Labor
which verifies that you qualify for and are receiving unemployment benefits
at the time of withdrawal. The determination letter must be received by us
no later than 15 days following the date of the withdrawal request.
PAGE 5(B)
<PAGE>
SECTION 5 - CONT
SURRENDER CHARGES
Amounts withdrawn in excess of any Surrender Charge-free Partial Withdrawals are
subject to a Surrender Charge. If applicable, this charge will either apply for
a number of years following each premium payment date or for a number of years
following the Certificate Date as shown on page 3. The amount of this charge, if
any, will be a percentage, (as shown on page 3 of each Certificate) of the
amount of premium withdrawn.
For Surrender Charge purposes, the oldest premium payment is considered to be
withdrawn first. If the amount withdrawn exceeds this, the next oldest premium
payment is considered to be withdrawn, and so on until the most recent premium
payment is considered to be withdrawn. For Surrender Charge purposes, premium
payments are deemed to be withdrawn before earnings.
After all premium payments are considered to be withdrawn, the remaining
Adjusted Policy Value may be withdrawn free from any Surrender Charge.
GUARANTEED RETURN OF FIXED ACCOUNT PREMIUM PAYMENTS
Upon full surrender of the Certificate, you will always receive at least the
premium payments made to, less prior withdrawals and transfers from, the Fixed
Account.
MINIMUM VALUES
Benefits available under this Certificate are not less than those required by
any statute of the state in which the Certificate is delivered.
SECTION 6 - SEPARATE ACCOUNT
SEPARATE ACCOUNT
We have established and will maintain one or more Separate Account(s), indicated
on the Certificate Data Page, under the laws of the state of Iowa. Any realized
or unrealized income, net gains and tosses from the assets of the Separate
Account are credited to or charged against it without regard to our other
income, gains or losses. Assets are put in the Separate Account for this
Certificate, as well as for other variable annuity policies and Certificates.
Any Separate Account may invest assets in shares of one or more mutual fund
portfolios, or in the case of a managed Separate Account, direct investments in
stocks or other securities as permitted by law. Fund Shares refer to shares of
underlying mutual funds or prorata ownership of the assets held in a Subaccount
of a managed Separate Account. Fund shares are purchased, redeemed and valued on
behalf of the Separate Account.
The Separate Account is divided into Subaccounts. Each Subaccount invests
exclusively in shares of one of the portfolios of an underlying mutual fund. We
reserve the right to add or remove any Subaccount of the Separate Account.
The assets of the Separate Account are our property. These assets will equal or
exceed the reserves and other contract liabilities of the Separate Account.
These assets will not be chargeable with liabilities arising out of any other
business we conduct. We reserve the right, subject to regulations governing the
Separate Account, to transfer assets of a Subaccount, in excess of the reserves
and other contract liabilities with respect to that Subaccount, to another
Subaccount or to our General Account.
We will determine the fair market value of the assets of the Separate Account in
accordance with a method of valuation which we establish in good faith.
Valuation Period means the period of time from one determination of the value of
each Subaccount to the next. Such determinations are made when the value of the
assets and liabilities of each Subaccount is calculated. This is generally the
close of business on each day on which the New York Stock Exchange is open.
We also reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of Certificates to which this
Certificate belongs, to another separate account. If this type of transfer is
made, the term "Separate Account", as used in the contract and in the
Certificate, shall then mean the separate account to which the assets were
transferred.
We also reserve the right, when permitted by law to:
(a) deregister the Separate Account under the Investment Company Act of 1940;
(b) manage the Separate Account under the direction of a committee at any time;
(c) restrict or eliminate any voting rights of Certificate Owners or other
persons who have voting rights as to the Separate Account; and
(d) combine the Separate Account with one or more other separate accounts;
(e) create new Separate Accounts;
(f) add new Subaccounts to or remove existing Subaccounts from the Separate
Account, or combine Subaccounts;
(g) add new underlying mutual funds, remove existing mutual funds, or
substitute a new fund for an existing fund.
PAGE 6
<PAGE>
SECTION 6 - SEPARATE ACCOUNT - CONT
The Net Asset Value of a fund share is the per- share value calculated by the
mutual fund or, in the case of a managed Separate Account, by the Company. The
Net Asset Value is computed by adding the value of the Subaccount's investments,
cash and other assets, subtracting its liabilities, and then dividing by the
number of shares outstanding. Net Asset Values of fund shares reflect investment
advisory fees other expenses incurred in managing a mutual fund or a managed
Separate Account.
CHANGE IN INVESTMENT OBJECTIVE OR POLICY OF A MUTUAL FUND
If required by law or regulation, an investment policy of the Separate Account
will only be changed if approved by the appropriate insurance official of the
state of Iowa or deemed approved in accordance with such law or regulation. If
so required, the process for obtaining such approval is filed with the insurance
official of the state or district in which this contract is delivered.
CHARGES AND DEDUCTIONS
The Mortality and Expense Risk Fee and the Administrative Charge are each
deducted both before and after the Annuity Commencement Date to compensate for
changes in mortality and expenses not anticipated by the mortality and
administration charges guaranteed in the certificate.
Any applicable Service Charge is deducted prior to the Annuity Commencement Date
only.
Any applicable Distribution Financing Charge is deducted prior to the Annuity
Commencement Date only, to compensate for costs of distributing the policy.
If the Mortality and Expense Risk Feels) and/or Distribution Financing Charges
are more than sufficient, the Company will retain the balance as profit or
reduce these fees and charges in the future.
ACCUMULATION UNITS
The Policy Value in the Separate Account before the Annuity Commencement Date is
represented by accumulation units. The dollar value of accumulation units for
each Subaccount will change from day to day reflecting the investment experience
of the Subaccount.
Premium payments allocated to and any amounts transferred to the Subaccounts
will be applied to provide accumulation units in those Subaccounts. The number
of accumulation units purchased in a Subaccount will be determined by dividing
the premium payment allocated to or any amount transferred to that Subaccount,
by the value of an accumulation unit for that Subaccount on the premium payment
or transfer date.
The number of accumulation units withdrawn or transferred from the Subaccounts
will be determined by dividing the amount withdrawn or transferred by the value
of an accumulation unit for that Subaccount on the withdrawal or transfer date.
The value of an accumulation unit on any business day is determined by
multiplying the value of that unit at the end of the immediately preceding
valuation period by the net investment factor for the valuation period.
The net investment factor used to calculate the value of an accumulation 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 result of:
(1) the net asset value of a fund share held in that Subaccount determined
as of the end of the current valuation period; plus
(2) the per share amount of any dividend or capital gain distributions
made by the fund for shares held in that Subaccount if the ex-dividend
date occurs during the valuation period; plus or minus
(3) a per share credit or charge for any taxes reserved for, which we
determine to have resulted from the investment operations of that
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.
(c) is a factor representing the Mortality and Expense Risk Fee and
Administrative Charge before the Annuity Commencement Date, plus any
applicable Distribution Financing Charge. This factor is less than or equal
to, on an annual basis, the sum of the applicable percentages shown on page
3 of the daily net asset value of a fund share held in that Subaccount.
Since the net investment factor may be greater or less than one, the
accumulation unit value may increase or decrease.
PAGE 7
<PAGE>
SECTION 7 - FIXED ACCOUNT
FIXED ACCOUNT
Premium payments applied to and any amounts transferred to the Fixed Account
will reflect a fixed interest rate. The interest rates we set will be credited
for increments of at least one year measured from each premium payment or
transfer date. These rates will never be less than an effective annual interest
rate of 3%.
GUARANTEED PERIODS
We may offer optional Guaranteed Period Options, into which premium payments may
be paid or amounts transferred. The current interest rate we set for funds
entering each Guaranteed Period Option (GPO) is guaranteed until the end of that
option's Guaranteed Period. At that time, the premium payment made or amount
transferred into the GPO, less any withdrawals or transfers from that GPO, plus
accrued interest, will be rolled into a new GPO or may be transferred to any
Subaccount(s) within the Separate Account(s).
You may choose the Investment Option(s) you want the funds rolled into by giving
us a written notice within 30 days before the end of the expiring option's
Guaranteed Period. However, any Guaranteed Period elected may not extend beyond
the maximum Annuity Commencement Date defined in Section 11. In the absence of
such election, the funds will be rolled into a new GPO which is the same as the
expiring GPO unless that GPO is no longer offered, in which case, the next
shorter GPO offered will be used. You will be mailed a notice of completion of
the rollover with the new interest rate applicable. The new GPO will be deemed
as accepted if we do not receive a written rejection within 30 days from the
postmark date of the completion notice.
We reserve the right for new premium payments, transfers, or rollovers to offer
or not to offer any GPO, except that we will always offer at least a one year
GPO.
For purposes of crediting interest when funds are withdrawn from or transferred
into a GPO, the amount of the oldest premium payment or rollover into that GPO
is considered to be withdrawn first If the amount withdrawn exceeds this amount,
the next oldest premium payment or rollover is considered to be withdrawn next,
and so on until the most recent premium payment or rollover is considered to be
withdrawn (this is a "First-In, First-Out" or FIFO procedure). Premium
payment(s) or rollover(s) are deemed to be withdrawn first, then credited
interest.
Partial withdrawals, Surrenders, transfers, and amounts applied to a Payment
Option from the Guarantee Period Option(s) are subject to an Excess Interest
Adjustment as described in Section 5.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
We may offer a Dollar Cost Averaging (DCA) Fixed Account Option separate from
the Guaranteed Period Options. This option will have a one year interest rate
guarantee. The current interest rate we set for the DCA Fixed Account may differ
from the rates credited on the one year GPO in the Fixed Account. In addition,
the current interest rate we credit may vary on different portions of the DCA
Fixed Account. The credited interest rate will never be less than the minimum
effective annual interest rate of 3%. The DCA Fixed Account Option will only be
available under a Dollar Cost Averaging program as described in Section 8.
SECTION 8 - TRANSFERS
A. TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the Annuity Commencement Date, you may transfer the value of the
accumulation units from one Investment Option to another. You must sign a notice
to transfer which gives us the facts that we need.
Transfers of Policy Value from the Guaranteed Period Options (GPO) of the Fixed
Account prior to the end of that GPO are subject to an Excess Interest
Adjustment. If the Excess Interest Adjustment at the time of such Policy Value
transfer is a negative adjustment, then the maximum Policy Value transfer is 25%
of that GPO's Policy Value, less Policy Values previously transferred out of
that GPO during the current certificate year. If the Excess Interest Adjustment
at the time of such Policy Value transfer is a positive adjustment, no maximum
will apply to such Policy Values transferred from the GPO. No Excess Interest
Adjustment will apply to Policy Value transfers at the end of a Guaranteed
Period.
Transfers of interest credited in the GPOs to other Investment Options are
allowed on a "First-In, First-Out" basis. Such transfers may be made monthly,
quarterly, semi-annually, or annually. Each such transfer must be at least $50
and will not be subject to an Excess Interest Adjustment.
Transfers of Policy Value from the Separate Account are subject to a minimum of
$500 or the entire Subaccount Policy Value, if less. However, if the remaining
Subaccount Policy Value is less than $500, we reserve the right to include that
amount as part of the transfer.
You may choose which GPO to transfer to or from, however, any GPO elected may
not extend beyond the maximum Annuity Commencement Date defined in Section 11.
PAGE 8
<PAGE>
SECTION 8 - CONT
No transfers will be allowed out of the Dollar Cost Averaging Fixed Account
Option except through the Dollar Cost Averaging Option.
We reserve the right to limit transfers to no more than 12 in any one
Certificate Year. Any transfers in excess of 12 per Certificate Year may be
charged a $10 per transfer fee. Transfers among multiple Investment Options will
be treated as one transfer in determining the number of transfers that have
occurred. We also reserve the right to prohibit transfers to the Fixed Account
if we are crediting an effective annual interest rate of 3%.
DOLLAR COST AVERAGING OPTION
Prior to the Annuity Commencement Date, you may instruct us to automatically
transfer a specified amount from the Dollar Cost Averaging (DCA) Fixed Account
Option or from the Dollar Cost Averaging Subaccount(s), if any, shown on page 3
to any Subaccount(s) of the Separate Account. The automatic transfers can occur
monthly or quarterly. If the Dollar Cost Averaging request is received prior to
the 28th day of any month, the first transfer will occur on the 28th day of that
month. If the Dollar Cost Averaging request is received on or after the 28th day
of any month, the first transfer will occur on the 28th day of the following
month.
Prior to the Annuity Commencement Date, no transfers, (except through Dollar
Cost Averaging) will be allowed from a DCA Fixed Account. Transfers will
continue until the elected Subaccount or DCA Fixed Account value is depleted.
The amount transferred each time must be at least $500. All transfers from the
DCA account will be the same amount as the initial transfer. Changes to the
amount transferred will only be allowed when additional premium is allocated or
a new amount is transferred into the DCA Account. Changes to the Subaccounts to
which these transfers are allocated are not restricted. Transfers must be
scheduled for at least 6 but not more than 24 months or for at least 4 but not
more than 8 quarters each time the Dollar Cost Averaging program is started or
restarted following termination of the program for any reason.
Dollar Cost Averaging results in the purchase of more accumulation units when
the value of the accumulation unit is low, and fewer accumulation units when the
value of the accumulation unit is high. However, there is no guarantee that the
Dollar Cost Averaging program will result in higher Policy Values or will
otherwise be successful.
The Dollar Cost Averaging may be discontinued after satisfying the minimum
number of required transfers by sending written notice to us. While Dollar Cost
Averaging is in effect, Asset Rebalancing is not available.
ASSET REBALANCING
Prior to the Annuity Commencement Date, you may instruct us to automatically
transfer amounts among the Subaccounts of the Separate Account on a regular
basis to maintain a desired allocation of the Policy Value among the various
Subaccounts offered. Rebalancing will occur on a monthly, quarterly, semi-annual
or annual basis, beginning on a date selected. You must select the percentage of
the Policy Value desired in each of the various Subaccounts offered (totaling
100%). Any amounts in the Fixed Account are ignored for the purposes of asset
rebalancing. Rebalancing can be started, stopped or changed at any time. Asset
Rebalancing is not available while Dollar Cost Averaging is in effect.
Rebalancing will cease as soon as we receive a request for any other transfer.
B. TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
After the Annuity Commencement Date, you may transfer the value of the variable
annuity units from one Subaccount to another within the Separate Account or to
the Fixed Account. If you want to transfer the value of the variable annuity
units, you must tell us in a signed notice which gives us the facts that we
need. We reserve the right to limit transfers between the Subaccounts or to the
Fixed Accounts to once per Certificate Year.
The minimum amount which may be transferred is the lesser of $10 monthly income
or the entire monthly income of the variable annuity units in the Subaccount
from which the transfer is being made. If the monthly income of the remaining
units in a Subaccount is less than $10, we have the right to include the value
of those variable annuity units as part of the transfer.
After the Annuity Commencement Date, no transfers may be made from the Fixed
Account to any other Investment Options.
PAGE 9
<PAGE>
SECTION 9 - DEATH PROCEEDS
A. DEATH PROCEEDS PRIOR TO ANNUITY COMMENCEMENT DATE
The amount of death proceeds will be the greater of the Cash Value, the Policy
Value, or any guaranteed minimum death benefit
If no payment option is selected by the date of death, the beneficiary may make
such election within one year of the date we receive due proof of death. The
beneficiary may elect to receive the death proceeds as a lump sum payment or may
use the death proceeds to provide any of the annuity payment options described
in Section 10. Interest on death proceeds will be paid as required by law.
B. DEATH PRIOR TO ANNUITY COMMENCEMENT DATE
Death proceeds are payable contingent upon the relationships between the
Certificate Owner, Annuitant, successor Certificate Owner and beneficiary as
outlined below. The Certificate must be surrendered upon settlement and will be
terminated upon receiving proof of death.
I. Certificate Owner is also the Annuitant.
When we have due proof that the Certificate Owner died before the Annuity
Commencement Date, we will provide the death proceeds to the beneficiary.
a) Beneficiary is the deceased Certificate Owner's surviving spouse. The
beneficiary may elect to continue the Certificate rather than
receiving the death proceeds. If the Certificate is continued, an
amount equal to the excess, if any, of any guaranteed minimum death
benefit over the Policy Value will then be added to the Policy Value.
This amount will be added only once, at the time of such election.
Furthermore, all future Surrender Charges will be waived.
If this beneficiary elects to have the death proceeds paid, the death
proceeds must be distributed:
(1) by the end of 5 years after the date of the deceased Certificate
Owner's death, or
(2)payments must begin no later than one year after the deceased
Certificate Owner's death and must be made for a period certain or
for. this beneficiary's lifetime, so long as any period certain does
not exceed this beneficiary's life expectancy.
b) Beneficiary is not the deceased Certificate Owner's surviving spouse.
The death proceeds must be distributed as provided in I.a)(1) or
I.a)(2) above.
c) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
deceased Certificate Owner's death.
II. Annuitant and Certificate Owner are different and the Annuitant dies.
When we have due proof that the Annuitant died prior to the Annuity
Commencement Date, the Certificate Owner will become the new Annuitant
and no death proceeds are payable. If the Certificate Owner is also
the deceased Annuitant's surviving spouse, an amount equal to the
excess, if any, of any guaranteed minimum death benefit over the
Policy Value will then be added to the Policy Value. This amount will
be added only once at the time of such election. Furthermore, all
future Surrender Charges will be waived.
However, in lieu of becoming the new Annuitant, the Certificate Owner
may elect to have the death proceeds distributed to the beneficiary on
the death of the Annuitant. This election must be in writing and must
be received by us prior to the Annuitant's death. In such case, when
we have due proof that the Annuitant died prior to the Annuity
Commencement Date, we will provide the death proceeds to the
beneficiary.
a) If the Certificate Owner has elected to have the death proceeds paid
as a lump sum, the beneficiary must, within 60 days of our receipt of
due proof of the Annuitant's death, either:
1) receive the lump sum proceeds; or
2) elect to receive annuity payments. Such payments must begin within
one year of our receipt of due proof of the Annuitant's death and must
be made for a period certain or for this beneficiary's lifetime, so
long as any period certain does not exceed this beneficiary's life
expectancy.
b) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
Annuitant's death.
III. Annuitant and Certificate Owner are different and the Certificate Owner
dies.
If the Certificate Owner dies prior to the Annuity Commencement Date and
before the entire interest in the Certificate is distributed, the successor
Certificate Owner will become the new Certificate Owner. The remaining
portion of any interest in the policy must be distributed to the extent
provided below in Ill.a), Ill.b), Ill.c), or Ill.d).
a) Successor Certificate Owner is the deceased Certificate Owner's
surviving spouse.The successor Certificate Owner may elect to continue this
Certificate rather than receive the Adjusted Policy Value. If the
Certificate is continued, all future Surrender Charges will be waived. If
the successor Certificate Owner elects to receive the Adjusted Policy
Value, the Adjusted Policy Value must be distributed:
PAGE 10
<PAGE>
SECTION 9 - CONT
(1) by the end of 5 years after the date of the deceased Certificate
Owner's death, or
(2) payments must begin no later than one year after the deceased
Certificate Owner's death and must be made for a period certain or for the
successor Certificate Owner's lifetime, so long as any period certain does
not exceed the successor Certificate Owner's life expectancy.
b) Successor Certificate Owner is not the deceased Certificate Owner's
surviving spouse. The Adjusted Policy Value must be distributed as provided
in Ill.a)(1) or Ill.a)(2) above.
c) Successor Certificate Owner is not a natural person. The Adjusted Policy
Value must be distributed as provided in Ill.a)(1) above.
d) No successor Certificate Owner survives the deceased Certificate Owner. The
deceased Certificate Owner's estate will become the new Certificate Owner
(or the estate may name a new Certificate Owner). The executor or
Administrator must be named in a form acceptable to us. The Adjusted Policy
Value must be distributed by the end of 5 years after the date of the
deceased Certificate Owner's death.
IV. More than one Certificate Owner.
If there is more than one Certificate Owner, then the death of any
Certificate Owner will be treated the same as the death of the Certificate
Owner.
D. DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
The death proceeds on or after the Annuity Commencement Date depend on the
payment option selected. If any Certificate Owner dies on or after the Annuity
Commencement Date, but before the entire interest in the Certificate is
distributed, the remaining portion of such interest in the Certificate will be
distributed at least as rapidly as under the method of distribution being used
as of the date of that Certificate Owner's death.
E. AN OWNER IS NOT AN INDIVIDUAL
In the case of anon tax-qualified annuity, if any Certificate Owner or
beneficial Certificate Owner is not an individual, then for purposes of the
federal income tax mandatory distribution provisions in subsection C or D above,
(1) the Annuitant will be treated as the Certificate Owner of the Certificate,
and (2) if there is any change in the Annuitant, such a change will be treated
as the death of the Certificate Owner.
SECTION 10 - ANNUITY PAYMENTS
A. GENERAL PAYMENT PROVISIONS
Payment
If the Certificate is in force on the Annuity Commencement Date, we will use the
Fixed Account portion and/or the Separate Account portion of the Adjusted Policy
Value to make annuity payments to the Payee under Option 3 and/or 3-V,
respectively, with 10 years certain, or if elected, under one or more of the
other options described in this section. However, the options) elected must
provide for lifetime income or income for a period of at least 60 months. The
Certificate Owner will become the Annuitant at the Annuity Commencement Date.
Payments will be made at 1, 3, 6 or 12 month intervals. We reserve the right to
change the frequency of payments to avoid making payments of less than $50.
Before the Annuity Commencement Date, if the death proceeds become payable or if
the Certificate is surrendered, we will pay any proceeds in one sum, or if
elected, all or part of these proceeds may be placed under one or more of the
options described in this section. If we agree, the proceeds may be placed under
some other method of payment instead.
Adjusted Age
Payments under Options 3 and 5, and the first payment under Options 3-V and 5-V
are determined based on the adjusted age of the Annuitant The adjusted age is
the Annuitant's actual age on the Annuitant's nearest birthday, at the Annuity
Commencement Date, adjusted as follows:
Annuity
Commencement Date Adjusted Age
----------------- ------------
Before 2001 Actual Age
2001 - 2010 Actual Age minus 1
2011 - 2020 Actual Age minus 2
2021 - 2030 Actual Age minus 3
2031 - 2040 Actual Age minus 4
After 2040 Actual Age minus 5
Election of Optional Method of Payment
Before the Annuity Commencement Date the Certificate Owner can elect or change a
payment option. The Certificate Owner may elect, in a signed notice which gives
us the facts that we need, annuity payments that may be either variable, fixed,
or a combination of both. If a combination is elected, they must also tell us
what part of the proceeds on the Annuity Commencement Date are to be applied to
provide each type of payment (It must also specify which Subaccounts.) The
amount of a combined payment will be the sum of the variable and fixed payments.
Payments under a variable payment option will reflect the investment performance
of the selected Subaccount of the Separate Account
PAGE 11
<PAGE>
SECTION 10 - ANNUITY PAYMENTS - CONT
Payee
Unless specified otherwise, the Payee shall be the Annuitant, or the beneficiary
as specified in the Beneficiary provision.
Proof of Age
We may require proof of the age of any person who has an annuity purchased under
Options 3, 3-V, 5 and 5-V of this section before we make the first payment
Minimum Proceeds
If the proceeds are less than $2,000, we reserve the right to pay them out as a
lump sum instead of applying them to a payment option.
Premium Tax
We may be required by law to pay premium tax on the amount applied to a payment
option. If the requirement is applicable to the issue state, we will deduct the
premium tax before applying the proceeds.
B. FIXED ACCOUNT PAYMENTS
Guaranteed Payment Options
The fixed account payment is determined by multiplying each $1,000 of proceeds
allocated to a fixed Payment Option by the amounts shown on page 12 for the
option selected. Options 1, 2 and 4 are based on a guaranteed interest rate of
3%.
Options 3 and 5 are based on a guaranteed interest rate of 3% and the "1983
Table a" (male, female, and unisex if required by law) mortality table improved
to the year 2000 with projection scale G. (The "1983 Table a" mortality rates
are adjusted based on improvements in mortality since 1983 to more appropriately
reflect increased longevity. This is accomplished using a set of improvement
factors referred to as projection scale G.)
Option 1 - Interest Payments
We will pay the interest on the amount we use to provide annuity payments in
equal payments or this amount may be left to accumulate for a period of time we
and the Certificate Owner agree to. We and the Certificate Owner will agree on
withdrawal rights when you elect this option. The interest rate we declare for
this option may be different than the interest rate(s) credited prior to the
Annuity Commencement Date.
Option 2 - Income for a Specified Period
We will make level payments only for the fixed period you choose. In the event
of the death of the person receiving payments prior to the end of the fixed
period elected, payments will be continued to that person's beneficiary or their
present value may be paid in a single sum. No funds will remain at the end.
Option 3 - Life Income - You may choose between:
1. No Period Certain - We will make level payments only during the Annuitant's
lifetime.
2. 10 Years Certain.- We will make level payments for the longer of the
Annuitant's lifetime or ten years.
3. Guaranteed Return of Policy Proceeds - We will make level payments for the
longer of the Annuitant's lifetime or until the total dollar amount of
payments we made to you equals the amount applied to this option.
Option 4 - Income of a Specified Amount
Payments are made for any specified. amount until the amount applied to this
option, with interest, are exhausted. This will be a series of level payments
followed by a smaller final payment In the event of the death of the person
receiving payments prior to the time proceeds with interest are exhausted,
payments will be continued to that person's beneficiary or their present value
may be paid in a single sum.
Option 5 - Joint and Survivor Annuity
Payments are made during the joint lifetime of the Payee and a joint Payee of
your selection. Payments will be made as long as either person is living.
Current Payment Options
The amounts shown in the tables on page 12 are the guaranteed amounts. Current
amounts offered to individuals of the same class may be obtained from us.
PAGE 11(A)
<PAGE>
SECTION 10 - CONT
C. VARIABLE ACCOUNT PAYMENT OPTIONS
Variable Annuity Units
The proceeds chosen by the Certificate Owner to apply to a variable payment
option will be used to purchase variable annuity units in Subaccounts chosen by
the Certificate Owner. The dollar value of variable annuity units in the chosen
Subaccounts will increase or decrease reflecting the investment experience of
the chosen Subaccounts. The value of a variable annuity unit in a particular
Subaccount on any 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 Assumed Investment Return adjustment factor for the Valuation
Period.
The Assumed Investment Return adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5.0% effective
annual Assumed Investment Return.
The net investment factor 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
as of the end of the current valuation period; plus
(2) the per share amount of any dividend or capital gain distributions
made by the fund for shares held in that Subaccount if the ex-dividend
date occurs during the Valuation Period; plus or minus
(3) a per share credit or charge 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.
(c) is a factor representing the Mortality and Expense Risk Fee and
Administrative Charge applicable after the Annuity Commencement Date. This
factor is less than or equal to, on an annual basis, the percentage shown
on page 3 of the daily net asset value of a fund share held in the Separate
Account for that Subaccount.
Determination of the First Variable Payment
The amount of the first variable payment is determined by multiplying each $
1,000 of proceeds allocated to a variable payment option by the amounts shown on
page 13 for the variable option you select The tables are based on a 5%
effective annual Assumed Investment Return and the " 1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year 2000
with projection scale G. (The " 1983 Table a" mortality rates are adjusted based
on improvements in mortality since 1983 to more appropriately reflect increased
longevity. This is accomplished using a set of improvement factors referred to
as projection scale G.)
Option 3V - Life Income
You may choose between:
1. "No Period Certain" - Payments will be made only during the lifetime of the
Annuitant
2. "10 Years Certain" - Payments will be made for the longer of the
Annuitant's lifetime or ten years. In the event of the death of the person
receiving payments prior to the end of the period for which the election
was made, payments will be continued to that person's beneficiary or their
present value may be paid in a single sum.
Option 5V - Joint and Survivor Annuity
Payments are made as long as either the Payee or the joint Payee is living.
Determination of Subsequent Variable Payments
The amount of each variable annuity payment after the first will increase or
decrease according to the value of the variable annuity units which reflect the
investment experience of the selected Subaccounts. Each variable annuity payment
after the first will be equal to the number of variable annuity units in the
selected Subaccounts multiplied by the variable annuity unit value on the date
the payment is made. The number of variable annuity units in each selected
Subaccount is determined by dividing the first variable annuity payment
allocated to the Subaccount by the variable annuity unit value of that
Subaccount on the Annuity Commencement Date.
PAGE 11(B)
<PAGE>
GUARANTEED FIXED ACCOUNT PAYMENT OPTIONS
The amounts shown in these tables are the guaranteed amounts for each $1,000 of
the proceeds. Higher current amounts may be available at the time of settlement.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Option 2, Table I Option 3, Table II Option 3, Table III Option 3, Table IV
- --------------------------------------------------------------------------------------------------------------------
Monthly Installment
Number Amount of Monthly Installment Monthly Installment for Life
Of Years Monthly for Life for Life Guaranteed Return
Payable Installment No Period Certain 10 Years Certain of Proceeds
- --------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex Male Female Unisex
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.87 $3.55 $3.71 $3.84 $3.54 $3.70 $3.73 $3.49 $3.61
51 3.93 3.60 3.77 3.90 3.59 3.75 3.79 3.53 3.66
52 4.00 3.65 3.83 3.97 3.64 3.81 3.84 3.58 3.71
53 4.07 3.71 3.90 4.04 3.70 3.87 3.90 3.63 3.76
5 $17.91 54 4.15 3.77 3.97 4.11 3.75 3.94 3.96 3.68 3.82
6 15.14 55 4.23 3.83 4.04 4.19 3.82 4.01 4.03 3.73 3.88
7 13.16 56 4.32 3.90 4.11 4.27 3.88 4.08 4.10 3.79 3.94
8 11.68 57 4.41 3.97 4.19 4.35 3.95 4.15 4.17 3.85 4.00
9 10.53 58 4.50 4.05 4.28 4.44 4.02 4.24 4.24 3.91 4.07
10 9.61 59 4.61 4.13 4.37 4.53 4.10 4.32 4.32 3.97 4.14
11 8.86 60 4.72 4.21 4.47 4.63 4.18 4.41 4.40 4.04 4.22
12 8.24 61 4.84 4.30 4.57 4.74 4.26 4.51 4.49 4.12 4.30
13 7.71 62 4.96 4.40 4.68 4.85 4.35 4.61 4.58 4.19 4.38
14 7.26 63 5.10 4.50 4.80 4.97 4.45 4.71 4.68 4.28 4.47
15 6.87 64 5.24 4.61 4.93 5.09 4.55 4.83 4.78 4.36 4.56
16 6.53 65 5.40 4.73 5.06 5.22 4.66 4.95 4.88 4.45 4.66
17 6.23 66 5.56 4.85 5.21 5.36 4.77 5.07 4.99 4.55 4.76
18 5.96 67 5.74 4.99 5.36 5.50 4.89 5.20 5.11 4.65 4.87
19 5.73 68 5.93 5.13 5.53 5.65 5.02 5.34 5.24 4.76 4.98
20 5.51 69 6.13 5.29 5.71 5.80 5.15 5.49 5.37 4.87 5.10
70 6.34 5.45 5.90 5.96 5.30 5.64 5.51 4.99 5.23
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Option 5, Table V
- --------------------------------------------------------------------------------------------------------------------
Monthly Installment For Joint and Full Survivor
- --------------------------------------------------------------------------------------------------------------------
Age of Age of Female Annuitant*
Male ------------------------------------------------------------------------------------------------
Annuitant* 15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $2.99 $3.05 $3.11 $3.18 $3.25 $3.32 $3.39
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.31 4.53 4.77 5.02
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Monthly Installment For Unisex Joint and Full Survivor
- --------------------------------------------------------------------------------------------------------------------
Age of Age of Joint Annuitant*
First ------------------------------------------------------------------------------------------------
Annuitant* 15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
First First First First First First First
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $3.04 $3.09 $3.15 $3.21 $3.27 $3.33 $3.39
55 3.17 3.24 3.32 3.40 3.48 3.56 3.63
60 3.34 3.44 3.54 3.64 3.75 3.85 3.95
65 3.57 3.70 3.83 3.97 4.11 4.26 4.39
70 3.87 4.04 4.22 4.42 4.62 4.82 5.01
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*Adjusted Age as defined in Section 10.A.
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly installments under Option 2 shall be the
monthly installment shown multiplied by 11.84, 5.96 or 2.99 respectively, and
for Options 3 and 5 the monthly installment shown multiplied by 11.80, 5.95 or
2.99 respectively.
- --------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be
calculated on the same basis as those shown and may be obtained from the
Company.
PAGE 12
<PAGE>
VARIABLE PAYMENT OPTIONS
BASED ON ASSUMED INVESTMENT RETURN
The amounts shown in these tables are the initial payment amounts based on a
5.0% Assumed Investment Return for each $1,000 of the proceeds.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Option 3 - V, Table II Option 3 - V, Table III
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Installment for Life Monthly Installment for Life
No Period Certain 10 Years Certain
- -----------------------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $5.11 $4.81 $4.96 $5.07 $4.79 $4.94
51 5.17 4.85 5.02 5.13 4.83 4.99
52 5.24 4.90 5.07 5.19 4.88 5.04
53 5.31 4.95 5.13 5.25 4.93 5.10
54 5.38 5.01 5.20 5.32 4.98 5.16
55 5.46 5.06 5.26 5.39 5.04 5.22
56 5.54 5.12 5.34 5.47 5.09 5.28
57 5.63 5.19 5.41 5.54 5.16 5.36
58 5.72 5.26 5.49 5.63 5.22 5.43
59 5.82 5.34 5.58 5.72 5.29 5.51
60 5.93 5.42 5.68 5.81 5.37 5.60
61 6.04 5.50 5.78 5.91 5.44 5.69
62 6.17 5.60 5.89 6.02 5.53 5.78
63 6.30 5.69 6.00 6.13 5.62 5.88
64 6.44 5.80 6.13 6.25 5.71 5.99
65 6.60 5.91 6.26 6.37 5.82 6.10
66 6.76 6.04 6.40 6.50 5.92 6.22
67 6.94 6.17 6.56 6.63 6.04 6.35
68 7.13 6.31 6.72 6.77 6.16 6.48
69 7.33 6.46 6.90 6.92 6.29 6.62
70 7.55 6.63 7.09 7.07 6.43 6.76
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Option 5V, Table V
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Installment For Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of Age of Female Annuitant*
Male ------------------------------------------------------------------------------------------------------------------
Annuitant* 15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
50 $4.32 $4.36 $4.41 $4.46 $4.51 $4.57 $4.62
55 4.42 4.47 4.53 4.60 4.67 4.75 4.83
60 4.54 4.62 4.70 4.80 4.90 5.01 5.12
65 4.71 4.82 4.94 5.07 5.22 5.37 5.53
70 4.95 5.10 5.27 5.46 5.67 5.89 6.13
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Installment For Unisex Joint and Full Survivor
- -----------------------------------------------------------------------------------------------------------------------------------
Age of Age of Joint Annuitant*
First ------------------------------------------------------------------------------------------------------------------
Annuitant* 15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
First First First First First First First
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.40 $4.45 $4.50 $4.55 $4.61 $4.67 $4.72
55 4.52 4.59 4.66 4.73 4.81 4.89 4.96
60 4.69 4.78 4.87 4.97 5.08 5.19 5.29
65 4.91 5.04 5.17 5.31 5.46 5.62 5.77
70 5.22 5.40 5.59 5.79 6.02 6.24 6.47
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
*Adjusted Age as defined in Section 10.A.
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly installments shall be the monthly
installment shown for Options 3-V and 5-V multiplied by 11.70, 5.93 or 2.99
respectively.
- --------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be
calculated on the same basis as those shown and may be obtained from the
Company.
- --------------------------------------------------------------------------------
PAGE 13
<PAGE>
SECTION 11 - GENERAL PROVISIONS
PARTICIPANT CERTIFICATES
We will issue a Certificate to each Participant.
MODIFICATION OF CONTRACT
No change in this Certificate or the Group Contract is valid unless made in
writing by us and approved by one of our officers. No registered representative
has authority to change or waive any provision of the Group Contract or this
Certificate.
TAX QUALIFICATION
This Certificate is intended to qualify as an annuity contract for federal
income tax purposes. The provisions of this Certificate are to be interpreted to
maintain such qualification. To maintain such tax qualification, we reserve the
right to amend this Certificate to reflect any clarifications that may be needed
or are appropriate to maintain such tax qualification or to conform this
Certificate to any applicable changes in the tax qualification requirements. We
will send the Certificate Owner a copy in the event of any such amendment. If
such an amendment is refused, it must be by giving us written notice, and
refusal may result in adverse tax consequences.
NON-PARTICIPATING
The Group Contract and Group Certificates will not share in our surplus
earnings.
AGE OR SEX CORRECTIONS
If the age or sex of the Annuitant has been misstated, the benefits will be
those which the premiums paid would have purchased for the correct age and sex.
If required by law to ignore differences in the sex of the Annuitant, the
payment options will be determined using the unisex factors in Section 10.
Any underpayment made by us will be paid with the next payment. Any overpayment
made by us will be deducted from future payments. Any underpayment or
overpayment, will include interest at 5% per year, from the date of the wrong
payment to the date of the adjustment.
INCONTESTABILITY
This Certificate shall be incontestable from the Certificate Date.
EVIDENCE OF SURVIVAL
We have the right to require satisfactory evidence that a person was alive if a
payment is based on that person being alive. No payment will be made until we
receive the evidence.
SETTLEMENT
Any payment by us under this Certificate is payable at our Home Office.
RIGHTS OF CERTIFICATE OWNER
You may, while the Annuitant is living:
1. Assign this Certificate.
2. Surrender this Certificate to us.
3. Amend or modify this, Certificate with our consent.
4. Receive annuity payments or name a Payee to receive the payments.
5. Exercise, receive and enjoy every other right and benefit contained in this
Certificate.
The use of these rights may be subject to the consent of any assignee or
irrevocable beneficiary; and of the spouse in a community or marital property
state.
Unless we have been notified of a community or marital property interest in this
Certificate, we will rely on our good faith belief that no such interest exists
and will assume no responsibility for inquiry.
SUCCESSOR CERTIFICATE OWNER
A successor Certificate Owner can be named in any enrollment form, or in a
notice you sign which gives us the facts that we need. The successor Certificate
Owner will become the new Certificate Owner when you die, if you die before the
Annuitant. If no successor Certificate Owner survives you and you die before the
Annuitant, your estate will become the new Certificate Owner.
CHANGE OF OWNERSHIP
In the case of a non-tax qualified annuity, you can change the Certificate Owner
of this Certificate from yourself to a new Certificate Owner, in a notice you
sign which gives us the facts that we need. When this change takes effect, all
rights of ownership in this Certificate will pass to the new Certificate Owner.
A change of Certificate Owner or successor Certificate Owner will not be
effective until it is recorded in our records. After it has been so recorded,
the change will take effect as of the date you signed the notice. However, if
the Annuitant dies before the notice has been so recorded, it will not be
effective as to those proceeds we have paid before the change was recorded in
our records. We may require that the change be endorsed in the Certificate.
Changing the Certificate Owner or naming a new successor Certificate Owner
cancels any prior choice of successor Certificate Owner, but does not change the
beneficiary or the Annuitant.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date annuity payments begin. This date may
not be later than the last day of the Certificate month starting after the
Annuitant attains age 85, except as expressly allowed by us, but in no event
later than the last day of the Certificate month following the month in which
the Annuitant attains age 95. You may change the Annuity Commencement Date at
any time before the Annuity Commencement Date by giving us 30 days' written
notice.
PAGE 14
<PAGE>
SECTION 11 - CONT
ASSIGNMENT
(a) In the case of a non-tax qualified annuity, this Certificate may be
assigned. The assignment must be in writing and filed with us.
(b) We assume no responsibility for the validity of any assignment. Any claim
made under an assignment shall be subject to proof of interest and the
extent of the assignment.
(c) This Certificate may be applied for and issued to qualify as a
tax-qualified annuity under certain sections of the Internal Revenue Code.
This will be specified in the enrollment form, or information provided in
lieu thereof. Ownership of this Certificate then is restricted so that it
will comply with provisions of the Internal Revenue Code.
Assignment of this Certificate may result in adverse tax consequences.
BENEFICIARY
Death proceeds, when payable in accordance with Section 9, are payable to the
designated beneficiary or beneficiaries. Such beneficiary(ies) must be named in
the enrollment form, or information provided in lieu thereof, and may be changed
without consent (unless irrevocably designated or required by law) by notifying
us in writing on a form acceptable to us. The change will take effect upon the
date signed, whether or not you are living when we receive it. The notice must
have been postmarked (or show other evidence of delivery that is acceptable to
us) on or before the date of death. The most recent change of beneficiary notice
will replace any prior beneficiary designations. No change will apply to any
payment we made before the written notice was received. If an irrevocable
beneficiary dies, you may designate a new beneficiary.
You may direct that the beneficiary shall not have the right to withdraw, assign
or commute any sum payable under an option. In the absence of such election or
direction, the beneficiary may change the manner of payment or make an election
of any option.
If any primary or contingent beneficiary dies before the Annuitant, that
beneficiary's interest in this Certificate 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 Proceeds. In the event no
contingent beneficiaries have been named and all primary beneficiaries have died
before the death proceeds become payable, the Certificate Owner(s) will become
the beneficiary(ies) unless elected otherwise in accordance with Section 9. 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
proceeds become payable. If any primary beneficiary is alive at the time the
death proceeds become payable, but dies before receiving their payment, their
share will be paid to their estate.
In cases where the annuitant dies and the Certificate Owner (who is not the
annuitant) elected to receive the death proceeds in accordance with Section 9,
if the annuitant's estate has been named as beneficiary, then payment will be
made to the Certificate Owner.
PROTECTION OF PROCEEDS
Unless you so direct by filing written notice with us, no beneficiary may assign
any payments under this Certificate before the same are due. To the extent
permitted by law, no payments under this Certificate will be subject to the
claims of creditors of the Certificate Owner or any beneficiary.
DEFERMENT
We will pay any Partial Withdrawals or surrender proceeds from the Separate
Accounts) within 7 days after we receive all requirements that we need. However,
it may happen that the New York Stock Exchange is closed for trading (other than
the usual weekend or holiday closings), or the Securities and Exchange
Commission restricts trading or determines that an emergency exists. If so, it
may not be practical for us to determine the investment experience of the
Separate Account. In that case, we may defer transfers among the Subaccounts and
to the Fixed Account, and determination or payment of Partial Withdrawals or
surrender proceeds.
When permitted by law, we may defer paying any Partial Withdrawals or surrender
proceeds from the Fixed Account for up to 6 months from the date we receive the
request. If the Certificate Owner dies after the request is received, but before
the request is processed, the request will be processed before the death
proceeds are determined. Interest will be paid on any amount deferred for 30
days or more. This rate will be computed at the rate of interest currently paid
on proceeds left under the Interest Payments Settlement Option.
REPORTS TO OWNER
We will give you an annual report at least once each Certificate Year. This
report will show the number and value of the accumulation units held in each of
the Subaccounts as well as the value of the Fixed Account. It will also give you
the Death Benefit, Cash Value, and any other facts required by law or
regulation.
PAGE 15
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
SERVICE CHARGE WAIVER
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate Data page.
The Service Charge provision in Section 4, Policy Value, is amended to include
the following language:
The Service Charge will not be deducted on a Certificate Anniversary or at
the time of surrender if, at such time, either (1) the sum of all premium
payments made less the sum of all withdrawals taken equals or exceeds
$50,000 or (2) the Policy Value equals or exceeds $50,000.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. [ILLEGIBLE] /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
GUARANTEED MINIMUM DEATH BENEFIT
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate page.
The Death Proceeds Prior to Annuity Commencement Date Provision in Section 9,
Death Proceeds, is replaced with the following language:
The amount of the death proceeds will be the greatest of (a), (b), or (c),
where:
(a) is the Policy Value on the date we receive due proof of death and an
election of a method of settlement;
(b) is the Cash Value on the date we receive due proof of death and an
election of a method of settlement, and;
(b) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional
premium payments received, less any Gross Partial Withdrawals from the date
of death to the date of payment of death proceeds.
If no payment option is selected by the date of death, the beneficiary may
make such election within 60 days of the date we receive due proof of
death. The beneficiary may elect to receive the death proceeds as a lump
sum payment or may use the death proceeds to provide any of the annuity
payment options described in Section 10. Interest on death proceeds will be
paid as required by law.
The Guaranteed Minimum Death Benefit is the Return of Premium Death
Benefit. The GMDB is equal to the total premiums paid for the Certificate,
less any Partial Withdrawals, as of the date of death.
The Adjusted Partial Withdrawal is the total amount deducted from the GMDB
as a result of a Partial Withdrawal as used in the GMDB provision. It is
equal to the Gross Partial Withdrawal described in Section 5, multiplied by
an Adjustment Factor. The Adjustment Factor is equal to the amount of the
death proceeds prior to the Partial Withdrawal divided by the Policy Value
prior to the Partial Withdrawal.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. [ILLEGIBLE] /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
GUARANTEED MINIMUM DEATH BENEFIT
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate page.
The Death Proceeds Prior to Annuity Commencement Date Provision in Section 9,
Death Proceeds, is replaced with the following language
The amount of the death proceeds will be the greatest of (a), (b), or (c),
where
(a) is the Policy Value on the date we receive due proof of death and an
election of a method of settlement;
(b) is the Cash Value on the date we receive due proof of death and an
election of a method of settlement, and;
(c) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional
premium payments received, less any Gross Partial Withdrawals from the date
of death to the date of payment of death proceeds.
If no payment option is selected by the date of death, the beneficiary may
make such election within 60 days of the date we receive due proof of
death. The beneficiary may elect to receive the death proceeds as a lump
sum payment or may use the death proceeds to provide any of the annuity
payment options described in Section 10. Interest on death proceeds will be
paid as required by law.
The Guaranteed Minimum Death Benefit is the Step-Up Death Benefit. The GMDB
is equal to the largest Policy Value on the Certificate Date or on any
Certificate Anniversary prior to the earlier of the date of death or the
Certificate Owner's 81st birthday, plus any Premium Payments made since
then, minus any Adjusted Partial withdrawals made since then.
If the Certificate Owner is a nonnatural person, or if the Certificate
Owner has elected to have the death proceeds paid upon the death of the
annuitant, the Guaranteed Minimum Death Benefit will be based upon the
annuitant's age.
The Adjusted Partial Withdrawal is the total amount deducted from the GMDB
as a result of a Partial Withdrawal as used in the GMDB provision. It is
equal to the Gross Partial Withdrawal described in Section 5, multiplied by
an Adjustment Factor. The Adjustment Factor is equal to the amount of the
death proceeds prior to the Partial Withdrawal divided by the Policy Value
prior to the Partial Withdrawal.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. [ILLEGIBLE] /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
GUARANTEED MINIMUM DEATH BENEFIT
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate page.
The Death Proceeds Prior to Annuity Commencement Date Provision in Section 9,
Death Proceeds, is replaced with the following language
The amount of the death proceeds will be the greatest of (a), (b), or (c),
where
(a) is the Policy Value on the date we receive due proof of death and an
election of a method of settlement;
(b) is the Cash Value on the date we receive due proof of death and an
election of a method of settlement, and;
(d) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional
premium payments received, less any Gross Partial Withdrawals from the date
of death to the date of payment of death proceeds.
If no payment option is selected by the date of death, the beneficiary may
make such election within 60 days of the date we receive due proof of
death. The beneficiary may elect to receive the death proceeds as a lump
sum payment or may use the death proceeds to provide any of the annuity
payment options described in Section 10. Interest on death proceeds will be
paid as required by law.
The Guaranteed Minimum Death Benefit is the 5% Annually Compounding Death
Benefit. The GMDB is equal to the total premiums paid for the Certificate,
less any Adjusted Partial Withdrawals, accumulated at 5% interest per annum
from the payment or withdrawal date to the earlier of the date of death or
the Certificate Owner's 81st birthday.
If the Certificate Owner is a nonnatural person, or if the Certificate
Owner has elected to have the death proceeds paid upon the death of the
annuitant, the Guaranteed Minimum Death Benefit will be based upon the
annuitant's age.
The Adjusted Partial Withdrawal is the total amount deducted from the GMDB
as a result of a Partial Withdrawal as used in the GMDB provision. It is
equal to the Gross Partial Withdrawal described in Section 5, multiplied by
an Adjustment Factor. The Adjustment Factor is equal to the amount of the
death proceeds prior to the Partial Withdrawal divided by the Policy Value
prior to the Partial Withdrawal.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. [ILLEGIBLE] /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
LUMP SUM PARTIAL WITHDRAWAL OPTION
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate Data page.
The Partial Withdrawals provision in Section 5, Cash Value and Partial
Withdrawals, is amended to include the following language
Beginning in the 2nd Certificate Year amounts ($500 minimum) up to 10% of
the Cumulative Premium Payments immediately prior to the Partial Withdrawal
are available as a Lump Sum distribution once per Certificate Year with no
Surrender Charges and no Excess Interest Adjustment.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. [ILLEGIBLE] /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LETTERHEAD OF PFL LIFE INSURANCE COMPANY]
SYSTEMATIC PAYOUT OPTION
This Rider is a part of the Contract/Certificate if it is shown in the Schedule
of Additional Benefits section on the Contract/Certificate Data page.
The Partial Withdrawals provision in Section 5, Cash Value and Partial
Withdrawals, is amended to include the following language:
Beginning in the 1st Certificate Year, a Systematic Payout Option (SPO) is
available on a monthly, quarterly, semi-annual or annual basis. At the time
a SPO payout is made, such payout must be at least $50 and may not exceed
10% of the cumulative premium payments immediately prior to the Partial
Withdrawal, divided by the number of payouts made per year (e.g. 12 for
monthly). No Surrender Charges or Excess Interest Adjustment will apply to
the SPO payout. Monthly and quarterly payouts must be sent through
electronic funds transfer directly to a checking or savings account The
Certificate Owner may start or stop SPO payouts at any time; however, 30
days written notice is required to stop SPO payouts. Once stopped, the
Certificate Owner must wait until the first day of the next Certificate
Year to begin a new SPO.
Once the Certificate Owner has elected a SPO, the Certificate Owner must
wait a minimum time before the first SPO payment: one month for a monthly
SPO, three months for quarterly, six months for semi-annual, or twelve
months for annual.
This Rider takes effect and expires concurrently with the Contract/Certificate
to which it is attached and is subject to all the terms and conditions of the
Contract/Certificate not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
<PAGE>
[LOGO OF PFL LIFE]
PFL Life Insurance Company
A Stock Company
Home Office located at 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
(Hereafter called the Company, we, our or us) (3191 398-8511
GUARANTEED MINIMUM INCOME BENEFIT RIDER
This rider provides your variable annuity with a Minimum Annuitization Value
which can only be used with the Annuity Factors shown in Schedule I of this
rider. This Minimum Annuitization value is guaranteed by us, regardless of the
performance of the variable annuity's investments.
This rider is attached to and made part of your Certificate as of the Rider
Date. This rider may only be terminated as provided herein. This rider is
subject to all of the provisions in the Certificate that do not conflict with
the provisions of this rider. The Rider Payment Options provide for variable
annuity payments. Subsequent payments may fluctuate with the investment
performance of Your annuity Subaccounts, but will never be less than the initial
payment.
Certificate Number. 300054EVA
Rider Date: 02/22/2000 Last Date To Upgrade: 02/22/2019
Annual Growth Rate: 6.00% Guaranteed -Minimum
Rider Fee Percentage: 0.30% Income Benefit
Rider Fee Waiver First Date to Elect Benefit 02/22/2010
Threshold: 200% Last Date to Elect Benefit: 02/22/2029
Mortality and Expense Risk Fee and Administrative Charge
after the Election Date: 2.50%
Rider Date Age Minimum Guaranteed
Annuitization Minimum
Values* Monthly Payment**
- -------------- ---- --------------- ------------------
02/ 22/ 2000 65 $ 26,250.00 N/A
Election
Date
02/ 22/ 2010 75 $ 47,009.75 $ 288.17
02/ 22/ 2011 76 $ 49,830.34 $ 314.93
02/ 22/ 2012 77 $ 52,820.16 $ 344.39
02/ 22/ 2013 78 $ 55,989.37 $ 376.25
02/ 22/ 2014 79 $ 59,348.73 $ 410.69
02/ 22/ 2015 80 $ 62,909.65 $ 448.55
02/ 22/ 2016 81 $ 66,684.23 $ 489.46
02/ 22/ 2017 82 $ 70,685.29 $ 532.97
02/ 22/ 2018 83 $ 74,926.40 $ 579.93
02/ 22/ 2019 84 $ 79,421.99 $ 629.82
*Assumes no further payments, no premium tax, and no withdrawals. This amount
may only be used for annuitization with the Rider Payment Options provided in
this rider.
** Assumes the Minimum Annuitization Value shown is applied to a life with 10
year certain Rider Payment Option with monthly payments.
1
<PAGE>
DEFINITIONS
The following definitions used in this Rider are for reference only.
Annuitant
The Annuitant is designated on the Certificate Data Page. The variable annuity
payments are paid to the Annuitant (or surviving Joint Annuitant).
Annuity Factor
A factor for the applicable Annuitant age, sex and Rider Payment Option is shown
in Schedule I or Schedule II of this rider. For the Rider Payment Option chosen,
the Annuity Factor from Schedule I and the Minimum Annuitization Value will be
used to determine the applicable annuity payments. For Annuitants age 85 or
older at the time of annuitization, the age 85 Annuity Factor will be used for
Schedule I. Factors not shown are available from us upon request. Schedule I and
Schedule II are based on the " 1983 Table a" mortality table, improved to the
year 2000 with projection scale G.
Election Date
A date that You elect to begin Guaranteed Minimum Income Benefit payments. The
Election Date must be within 30 days following a Certificate Anniversary. The
first and last dates to elect a Rider Payment Option are shown on page one of
this rider.
Minimum Annuitization Value
The amount we will use to determine the Guaranteed Minimum Income Benefit
payments.
Rider Date
The date that this rider is added to the Certificate. This date may only be the
issue date of the Certificate or a Certificate Anniversary date. this is also
the Certificate Anniversary that You most recently elected to upgrade the
Minimum Annuitization Value, if applicable.
Supportable Payment
The Supportable Payment is equal to the number of variable annuity units in the
selected Subaccounts multiplied by the variable annuity unit values in those
Subaccounts on the date the payment is made.
GUARANTEED MINIMUM INCOME BENEFIT
On the Election Date, You may use the Minimum Annuitization Value and the
applicable Annuity Factor to provide variable payments to the Annuitant. The
first variable payment is determined by multiplying each $1,000 of Minimum
Annuitization Value by the Annuity Factor on Schedule I. Each subsequent payment
will be calculated as described in the Certificate, using a 5% Assumed
Investment Return.
For subsequent payments, an annual Mortality and Expense Risk Fee and
Administrative Charge (which includes an investment risk fee) will be charged.
This fee may be different than the Mortality and Expense Risk Fee and
Administrative Charge in effect prior to the Election Date. It may also be
different than the Mortality and Expense Risk Fee and Administrative Charge for
the settlement options shown in the Certificate.
The subsequent payments may fluctuate in accordance with the investment
performance of Your annuity Subaccounts. However, such payments will never be
less than the initial payment.
MINIMUM ANNUITIZATION VALUE
The Minimum Annuitization Value is used to determine Your Guaranteed Minimum
Income Benefit payments. On the Rider Date, the Minimum Annuitization Value is
the value of Your Certificate. thereafter, based upon the effective Annual
Growth Rate (shown on page one of this rider), it will be the value of Your
Certificate on the Rider Date, plus any additional payments made after the Rider
Date, minus policy withdrawals (adjusted as described below), minus any premium
taxes.
Withdrawals
In any Certificate Year, the Minimum Annuitization Value will only be reduced by
the actual amount of a withdrawal as long as the withdrawal does not exceed a
maximum annual free amount. Withdrawals-in excess of the maximum annual free
amount will reduce the Minimum Annuitization Value by an amount equal to (A)
divided by (B) multiplied by (C) where:
(A) is the amount of the excess withdrawal;
(B) is the value of Your Certificate after the current Certificate Year
maximum annual free amount has been withdrawn, but prior to the withdrawal
of the excess portion; and
(C) is the Minimum Annuitization Value after the current Certificate Year
maximum annual free amount has been withdrawn, but prior to withdrawal of
the excess portion.
For each Certificate Year, the maximum annual free amount is equal to the
Minimum Annuitization Value, as of the beginning of the Certificate Year,
multiplied by the effective Annual Growth Rate as shown on page one of this
rider. Withdrawals during a Certificate Year will reduce the available maximum
annual free amount by the amount of the withdrawal.
RIDER FEE
We will deduct a fee from the value of the Certificate on each Certificate
Anniversary and on the termination date of this rider. The Rider Fee is the
Minimum Annuitization Value at the time the fee is .deducted, multiplied by the
Rider Fee Percentage shown on the first page of this rider. The fee will be
deducted from each Subaccount in proportion to the amount of value of the
Certificate in each Subaccount. This fee will not be deducted after the Election
Date or if the Certificate terminates due to the death of the Certificate Owner.
2
<PAGE>
WAIVER OF RIDER FEE
If the value of the Certificate, on a particular Certificate Anniversary,
exceeds an amount equal to the Rider Fee Waiver Threshold (shown on page one of
this rider) multiplied by the Minimum Annuitization Value, the Rider Fee will be
waived for that Certificate Anniversary.
MINIMUM ANNUITIZATION VALUE UPGRADE
The Certificate Owner may elect, in writing, to upgrade the Minimum
Annuitization Value to the value of the Certificate on a Certificate
Anniversary. This may be done within 30 days immediately following any
Certificate Anniversary, and prior to the Last Date to Upgrade shown on page one
of this rider.
If an upgrade is elected, this rider will terminate and a new rider will be
issued with a new Rider Date, Election Date and its own guaranteed benefits. The
new annual Rider Fee Percentage may be different than this rider's, but it will
never be greater than 0.50%.
RIDER PAYMENT OPTIONS
The Minimum Annuitization Value and applicable Annuity Factors from Schedule I
may be applied to the following payment options:
Life Income - An election may be made for "No Period Certain" or "10 Years
Certain". In the event of the death of the person receiving payments prior
to the end of the chosen period certain, the remaining period certain
payments will be continued to the beneficiary.
Joint and Full Survivor - An election may be made for "No Period Certain"
or "10 Years Certain". Payments will be made as long as either the
Annuitant or Joint Annuitant is living. In the event of the death of both
the Annuitant and the Joint Annuitant prior to the end of the chosen period
certain, the remaining period certain payments will be continued to the
beneficiary.
GUARANTEED MINIMUM PAYMENT
On the Election Date, the owner will receive guaranteed minimum payments. The
annual Mortality and Expense Risk Fee and Administration Charge for these
payments is shown on page one of this rider. The percentage shown on page one
also includes a fee to cover investment risk associated with guaranteeing a
minimum payment.
The first payment is based on the Annuity Factors in Schedule I. We guarantee
that each subsequent payment will be equal to or greater than your initial
payment.
During the first Certificate Year following annuitization, each payment will be
stabilized to equal the initial payment. On each Certificate Anniversary
following annuitization, the stabilized payment will be increased or decreased
(but never below the initial payment) and held level for that Certificate Year.
On each Certificate Anniversary following annuitization, the stabilized payment
will equal the greater of the initial payment or the Supportable Payment at that
time.
If the Supportable Payment (at any payment date) is greater than the stabilized
payment for that year, the excess will be used to purchase additional annuity
units as described below. If the Supportable Payment (at any payment date) is
less than the stabilized payment for that year, annuity units will be redeemed
as described below to fund the deficiency.
Purchase/Redemption of Annuity Units:
The number of annuity units purchased or redeemed is equal to the annuity
income purchased or redeemed, respectively, divided by the annuity unit
value for each respective Subaccount. Purchases and redemptions of annuity
income will be allocated to each Subaccount on a proportionate basis. The
amount of annuity income purchased or redeemed is the difference between
the Supportable Payment and the stabilized payment, times the attained age
nearest birthday Annuity Factors shown in Schedule II, divided by $1,000.
These factors will reflect the remaining certain period, if any, but will
be calculated on the same basis as the Schedule II factors.
The Company bears the risk that it will need to make payments if all annuity
units have been redeemed in an attempt to maintain the stabilized payment at the
initial payment level. In such an event, the Company will make all future
payments equal to the initial payment.
ASSIGNMENT
Payments made under this rider may not be pledged or assigned. Payments will
only be made to the Annuitant or Joint Annuitant named in the Certificate.
TERMINATION
This rider will be terminated upon the earliest of:
a. the Election Date;
b. 30 days after the Last Date to Elect Benefit shown on the first page of
this rider.
c. the date the Certificate terminates;
d. the date you elect to apply the value of the Certificate to annuitize the
Certificate; and
e. the date you elect to upgrade your Minimum Annuitization Value.
This rider cannot be terminated prior to the earliest of the above dates.
Signed for us at our home office.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
SECRETARY PRESIDENT
3
<PAGE>
SCHEDULE I - ANNUITY FACTORS
The amounts shown in these tables are the Annuity Factors for each $1,000 of the
Minimum Annuitization Value and assume a 3% Assumed Investment Return.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly Annuity Factor for Monthly Annuity Factor For
Life With No Period Certain Life With 10 Years
Certain
- ------------------------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $3.87 $3.55 $3.71 $3.84 $3.54 $3.70
51 3.93 3.60 3.77 3.90 3.59 3.75
52 4.00 3.65 3.83 3.97 3.64 3.81
53 4.07 3.71 3.90 4.04 3.70 3.87
54 4.15 3.77 3.97 4.11 3.75 3.94
55 4.23 3.83 4.04 4.19 3.82 4.01
56 4.32 3.90 4.11 4.27 3.88 4.08
57 4.41 3.97 4.19 4.35 3.95 4.15
58 4.50 4.05 4.28 4.44 4.02 4.24
59 4.61 4.13 4.37 4.53 4.10 4.32
60 4.72 4.21 4.47 4.63 4.18 4.41
61 4.84 4.30 4.57 4.74 4.26 4.51
62 4.96 4.40 4.68 4.85 4.35 4.61
63 5.10 4.50 4.80 4.97 4.45 4.71
64 5.24 4.61 4.93 5.09 4.55 4.83
65 5.40 4.73 5.06 5.22 4.66 4.95
66 5.56 4.85 5.21 5.36 4.77 5.07
67 5.74 4.99 5.36 5.50 4.89 5.20
68 5.93 5.13 5.53 5.65 5.02 5.34
69 6.13 5.29 5.71 5.80 5.15 5.49
70 6.34 5.45 5.90 5.96 5.30 5.64
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly Annuity Factor For Joint and Full Survivor
- ------------------------------------------------------------------------------------------------------------------------------------
Age of Age of Female Annuitant*
Male
Annuitant*
- ------------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $2.99 $3.05 $3.11 $3.18 $3.25 $3.32 $3.39
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.31 4.53 4.77 5.02
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Monthly Annuity Factor For Joint and Full Survivor with 10 Year Period Certain
- ------------------------------------------------------------------------------------------------------------------------------------
Age of Age of Female Annuitant*
Male
Annuitant*
- ------------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $2.99 $3.05 $3.11 $3.18 $3.24 $3.31 $3.38
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
70 3.74 3.91 4.10 4.30 4.52 4.76 4.99
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
*Age nearest birthday
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly Annuity Factor shall be the monthly Annuity
Factor shown multiplied by 11.80, 5.95 or 2.99 respectively.
- --------------------------------------------------------------------------------
Annuity Factors not shown in the above tables will be calculated on the same
basis as those shown and may be obtained from the Company.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE II - ANNUITY FACTORS
The amounts shown in these tables are the Annuity Factors for each $1,000 of the
Minimum Annuitization Value and assume a 5% Assumed Investment Return.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly Annuity Factor for Monthly Annuity Factor For
Life With No Period Certain Life With 10 Years
Certain
- ------------------------------------------------------------------------------------------------------------------------------------
Age* Male Female Unisex Male Female Unisex
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $5.14 $4.83 $4.99 $5.09 $4.80 $4.95
51 5.20 4.87 5.04 5.15 4.85 5.00
52 5.27 4.92 5.10 5.21 4.89 5.05
53 5.34 4.98 5.16 5.27 4.94 5.11
54 5.41 5.03 5.22 5.34 4.99 5.17
55 5.49 5.09 5.29 5.41 5.05 5.23
56 5.57 5.15 5.36 5.48 5.11 5.30
57 5.66 5.22 5.44 5.56 5.17 5.37
58 5.75 5.29 5.52 5.65 5.24 5.45
59 5.85 5.37 5.61 5.74 5.31 5.53
60 5.96 5.45 5.71 5.83 5.38 5.61
61 6.08 5.53 5.81 5.93 5.46 5.70
62 6.20 5.63 5.92 6.04 5.55 5.80
63 6.34 5.73 6.04 6.15 5.64 5.90
64 6.48 5.83 6.16 6.27 5.73 6.01
65 6.64 5.95 6.30 6.39 5.84 6.12
66 6.81 6.07 6.44 6.52 5.94 6.24
67 6.99 6.21 6.60 6.66 6.06 6.37
68 7.18 6.35 6.77 6.80 6.18 6.50
69 7.39 6.51 6.95 6.94 6.31 6.64
70 7.61 6.68 7.14 7.09 6.45 6.78
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly Annuity Factor For Joint and Full Survivor
- ------------------------------------------------------------------------------------------------------------------------------------
Age of
Male
Annuitant* Age of Female Annuitant*
- ------------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.34 $4.38 $4.43 $4.48 $4.53 $4.59 $4.65
55 4.43 4.49 4.55 4.62 4.77 4.85 4.85
60 4.56 4.64 4.73 4.82 4.92 5.03 5.15
65 4.74 4.84 4.96 5.10 5.24 5.40 5.56
70 4.98 5.13 5.30 5.49 5.70 5.93 6.17
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Monthly Annuity Factor For Joint and Full Survivor with 10 Year Period Certain
- ------------------------------------------------------------------------------------------------------------------------------------
Age of
Male
Annuitant* Age of Female Annuitant*
- ------------------------------------------------------------------------------------------------------------------------------------
15 Years 12 Years 9 Years 6 Years 3 Years 3 Years
Less than Less Than Less Than Less Than Less Than Same As More Than
Male Male Male Male Male Male Male
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.34 $4.38 $4.43 $4.48 $4.53 $4.59 $4.65
55 4.43 4.49 4.55 4.62 4.70 4.77 4.85
60 4.56 4.64 4.72 4.82 4.92 5.03 5.14
65 4.73 4.84 4.96 5.09 5.24 5.39 5.55
70 4.97 5.12 5.29 5.48 5.69 5.91 6.14
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
*Age nearest birthday
- --------------------------------------------------------------------------------
The annual, semi-annual or quarterly Annuity Factor shall be the monthly Annuity
Factor shown multiplied by 11.70, 5.93 or 2.99 respectively.
- --------------------------------------------------------------------------------
Annuity Factors not shown in the above tables will be calculated on the same
basis as those shown and may be obtained from the Company.
- --------------------------------------------------------------------------------
<PAGE>
PFL Life Insurance Company
Home Office located at: 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
[LOGO OF PF LIFE]
Group Flexible Premium Variable Annuity Certificate
Income Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount
(See Sections 6 and 10C.)
Non-Participating
INDEX
Page Page
Accumulation Units......... 7 Guaranteed Period.... 8
Adjusted Age (Settlement
Options).................. 11 Incontestability..... 14
Age or Sex Corrections..... 14 Modification of
Contract............. 14
Annuity Commencement Date.. 14 Nonparticipation..... 14
Annuity Payments........... 11,11(A),11(B) Nursing Care and
Terminal' Condition
Assignment................. 15 Withdrawal Option.... 5(B)
Beneficiary................ 15 Partial Withdrawals.. 5(A)
Cash Value................. 5 Payee................ 11(A)
Certificate Data Page...... 3 Payment of Premiums.. 4
Death Proceeds............. 10, 11 Payment Option
Definitions................ 2 Tables.............. 12, 13
Dollar Cost Averaging...... 9 Policy Value......... 5
Excess Interest Proof of Age......... 11(A)
Adjustment............... 5 Protection of
Evidence of Survival....... 14 Proceeds............. 15
Fixed Account.............. 8 Right to Cancel...... 1
Guaranteed Return of Fixed Separate Account..... 6, 7
Account................... Service Charge....... 5
Premium Payments.......... 6 Settlement........... 14
Surrender Charges.... 6
Transfers............ 8
Unemployment Waiver.. 5(B)
<PAGE>
Exhibit (5)(a)
Form of Group Master Application
for the Access Variable Annuity
<PAGE>
Application for Group Insurance to
PFL LIFE INSURANCE COMPANY
Home Office: 4333 Edgewood Rd NE, Cedar Rapids IA 52499-0001
Securities Customers DRL Insurance Trust II
- --------------------------------------------------------------------------------
hereby applies for Group Policy No. PV0005 to which this application is attached
-----
Said Group Policy is hereby approved and the terms thereof are hereby accepted.
This application is executed in duplicate, with one part being attached to said
Policy and the other returned to PFL LIFE INSURANCE COMPANY.
It is understood and agreed that no agent of PFL Life Insurance Company has
power on behalf of said Company to make or modify this or any other application
for insurance.
This application supersedes any previous application for the said Group Policy.
Dated at Cedar Rapids, Iowa this 1 day of March , 2000
------------------ ------- ----------- ------
---------------------------------
Firstar Bank N.A.
By
------------------------------
- ------------------------- ---------------------------------
Agent Signature Agent Number
- --------------------------
Agent Name (please print)
2
<PAGE>
Exhibit (5)(b)
Form of Group Certificate
Enrollment Application for the
Access Variable Annuity
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
Variable Annuity Enrollment Form
Issued by: PFL Life Insurance Company ("PFL Life") 4333 Edgewood Road N.E., Cedar Rapids, IA 52499-0001
Mail the enrollment form and a check: PFL Life Insurance Company Attn: Variable Annuity Dept.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. OWNER In the event the owner is a trust, please provide verification of trustees.
- --------------------
If no annuitant is Name: Phone No.:
specified in #2, the -------------------------------------------------------------------------------------------------------------
Owner will be the Address: City: State: Zip:
Annuitant -------------------------------------------------------------------------------------------------------------
[_] Male [_] Female SS#/TIN [_][_][_]-[_][_]-[_][_][_][_] Birthdate [_][_]/[_][_]/[_][_][_][_]
- ----------------------------------------------------------------------------------------------------------------------------------
JOINT OWNER(S) Name: Phone No.:
- -------------------- -------------------------------------------------------------------------------------------------------------
Address: City: State: Zip:
-------------------------------------------------------------------------------------------------------------
[_] Male [_] Female SS#/TIN [_][_][_]-[_][_]-[_][_][_][_] Birthdate [_][_]/[_][_]/[_][_][_][_]
- ----------------------------------------------------------------------------------------------------------------------------------
2. ANNUITANT Name: Phone No.:
- -------------------- -------------------------------------------------------------------------------------------------------------
Complete only if Address: City: State: Zip:
different from -------------------------------------------------------------------------------------------------------------
Owner. [_] Male [_] Female SS#/TIN [_][_][_]-[_][_]-[_][_][_][_] Birthdate[_][_]/[_][_]/[_][_][_][_]
- ----------------------------------------------------------------------------------------------------------------------------------
3. BENEFICIARY(IES) Primary: Relationship to Annuitant: 0.00%
- -------------------- --------------------------------------------------------------------------------------- --------------------
Primary: Relationship to Annuitant: 0.00%
--------------------------------------------------------------------------------------- --------------------
Contingent: Relationship to Annuitant: 0.00%
--------------------------------------------------------------------------------------- --------------------
Contingent: Relationship to Annuitant: 0.00%
--------------------------------------------------------------------------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------------
4. TELEPHONE Following is authorized to make telephone transfer requests (check one only):
TRANSFERS [_] Owner(s) only, or
- -------------------- [_] Owner(s) and Owner's Registered Representative (Print Rep Name) _________________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
5. ALLOCATION Please check selected funds and fixed accounts. The initial premium will be allocated as selected here.
OF PREMIUM If Dollar Cost Averaging, see section 7 on reverse side.
PAYMENTS
- -------------------- VARIABLE OPTIONS: FIXED OPTIONS:
Initial Premium Morgan Stanley Asset Management Inc. Montgomery Asset Management LLC [_] Dollar Cost Averaging 0%
$ [_] Endeavor Asset Allocation [_] Endeavor Select 50 (Must complete section 7.) ----
- -------------------- Portfolio 0% Portfolio 0%
Make check payable [_] Endeavor Money Market ---- ---- [_] 1 Year Guarantee Period 0%
to PFL Life Portfolio 0% MFS Investment Management ----
Insurance Company. ---- [_] Endeavor High Yield [_] 3 Year Guarantee Period 0%
T. Rowe Price Associates, Inc. Portfolio 0% ----
Type of Annuity: [_] T. Rowe Price Equity Income ---- [_] 5 Year Guarantee Period 0%
Portfolio 0% Janus Capital Corporation ----
[_] Non-qualified ---- [_] Endeavor Janus Growth [_] 7 Year Guarantee Period 0%
[_] T. Rowe Price Growth Stock Portfolio ----
Qualified Types: Portfolio 0% Total Variable and Fixed 100%
Also complete ---- WRL Series Fund, Inc. ----
Section 6. [_] T. Rowe Price International [_] WRL Janus Global *Policy values, when allocated
[_] IRA Stock Portfolio 0% [_] WRL Alger Aggressive to any of the Variable Options
[_] Roth IRA ---- Growth 0% are not guaranteed as to fixed
[_] SEP/IRA OpCap Advisors ---- dollar amount.
[_] 403(b) [_] Endeavor Value Equity [_] WRL NWQ Value Equity 0%
[_] Keogh Portfolio 0% ---- *When funds are allocated to
[_] Roth ---- [_] WRL Goldman Sachs Fixed Account Guarantee
Conversion [_] Endeavor Opportunity Value Growth 0% Periods, policy values under
[_] Other __________ Portfolio 0% ---- certificate may increase or
____________________ ---- [_] WRL T. Rowe Price decrease in accordance with
____________________ J.P. Morgan Investment Management Dividend Growth 0% Excess Interest Adjustment
Inc. ---- prior to the end of Guarantee
[_] Endeavor Enhanced Index [_] WRL T. Rowe Price Period.
Portfolio 0% Small Cap 0%
---- ----
Dreyfus Corporation [_] WRL Salomon All Cap 0%
[_] Dreyfus U.S. Government ----
Securities Portfolio 0% [_] WRL Pilgrim Baxter
---- Mid Cap Growth 0%
[_] Dreyfus Small Cap Value ----
Portfolio 0% Transamerica Variable Insurance
---- Fund, Inc.
[_] Transamerican VIF Growth
Portfolio 0%
----
0%
----------------------------- ----
0%
----------------------------- ----
0%
----------------------------- ----
0%
----------------------------- ----
- ----------------------------------------------------------------------------------------------------------------------------------
6. QUALIFIED PLAN IRA/SEP/ROTH IRA ROTH IRA Rollover Date first
INFORMATION $___________________ Contribution for tax year ________ [_][_]/[_][_]/[_][_][_][_] established
- -------------------- $___________________ Trustee to Trustee Transfer or date of
$___________________ Rollover from [_] IRA [_] 403(b) [_] Pension conversion
[_] Other ____________________________________ $_______________ Portion previously taxed
</TABLE>
VA-ENROLL 5/99
<PAGE>
- --------------------------------------------------------------------------------
7. DOLLAR COST AVERAGING PROGRAM
- --------------------------------------------------------------------------------
Authorized by Owner signature in Section 11.
Transfer Frequency:
DCA program Options
[_] 6 month program
[_] 12 month program
Number of transfers ___________
Other Frequency Options
[_] Monthly (6 min, 24 max)
[_] Quarterly (4 min, 8 max)
Transfer to (indicate investment option and percentage);
________________ _____.0% ________________ _____.0%
________________ _____.0% ________________ _____.0%
________________ _____.0% ________________ _____.0%
________________ _____.0% ________________ _____.0%
________________ _____.0% ________________ _____.0%
________________ _____.0% ________________ _____.0%
Total: 100%
- --------------------------------------------------------------------------------
8. Other
- --------------------------------------------------------------------------------
Please complete.
Family Income Protector Option:
[_] No [_] Yes (Available at an additional cost, see prospectus)
- --------------------------------------------------------------------------------
9. MINIMUM DEATH BENEFIT
- --------------------------------------------------------------------------------
Annual Step-Up Death Benefit
Annual Mortality and Expense (M&E) risk fee and administrative charge is 1.75%
- --------------------------------------------------------------------------------
10. REPLACEMENT INFORMATION
- --------------------------------------------------------------------------------
Will this annuity replace or change any existing annuity or life insurance?
[_] No [_]_______(If Yes, complete the following)
Company: Policy No.:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11. SIGNATURE(S) OF AUTHORIZATION ACCEPTANCE
- --------------------------------------------------------------------------------
. Unless I have notified the Company of a community or marital property
interest in this certificate, the Company will rely on a good faith belief
that no such interest exists and will assume no responsibility for inquiry.
. To the best of my knowledge and belief, my answers to the questions on this
application are correct and true, and I agree that this enrollment form
becomes a part of the annuity certificate when issued to me.
. I (we) am in receipt of a current prospectus for this variable annuity.
. This enrollment form is subject to acceptance by PFL Life. If this enrollment
form is rejected for any reason, PFL Life will be liable only for return of
premiums paid.
[_] Check here if you want to be sent a copy of Statement of Additional
Information
I HAVE REVIEWED MY EXISTING ANNUITY COVERAGE AND FIND THIS COVERAGE SUITABLE FOR
MY NEEDS.
Signed at City: State: Date:
- --------------------------------------------------------------------------------
Owner(s): Annuitant (if not Owner):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. AGENT INFORMATION
- --------------------------------------------------------------------------------
Do you have any reason to believe the annuity applied for will replace or change
any existing annuity or life insurance? [_] No [_] Yes
I HAVE REVIEWED THE APPLICANT'S EXISTING ANNUITY COVERAGE AND FIND THIS COVERAGE
IS SUITABLE FOR HIS/HER NEEDS.
Registered Representative/
Licensed Agent Name (please print): Signature:
- --------------------------------------------------------------------------------
Phone No.: SS#/TIN [_][_][_]-[_][_]-[_][_][_][_] [_] A [_] B [_] C
- ----------------------
PFL Life Agent #:
- --------------------------------------------------------------------------------
Firm Name:
- --------------------------------------------------------------------------------
Firm Address:
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT (8)(c)
PARTICIPATION AGREEMENT AMONG
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
AND PFL LIFE INSURANCE COMPANY
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
and
PFL LIFE INSURANCE COMPANY
THIS AGREEMENT, effective of this 1st day of November 1999 by and among PFL
LIFE INSURANCE COMPANY (hereinafter "Insurance Company"), an Iowa life insurance
company, on its own behalf and on behalf of its SEPARATE ACCOUNT(S) (the
"Account"); TRANSAMERICA VARIABLE INSURANCE FUND, INC., a corporation organized
under the laws of Maryland (hereinafter the "Fund"); and TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY, (hereinafter the "Adviser"), a California corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and/or variable annuity
contracts (collectively, the "Variable Insurance Products") to be offered by
insurance companies which have entered into participation agreements similar to
this Agreement (hereinafter "Participating Insurance Companies"), as well as
qualified pension and retirement plans; and
WHEREAS, the beneficial interests in the Fund are divided into several
series of shares, each designated a "Portfolio" and representing interests in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940 as amended, and
WHEREAS, Insurance Company has registered the Account as a unit investment
trust under the 1940 Act, and certain variable annuity contracts supported
wholly or partially by the Account (the "Contracts") under the 1933 Act, and
said Account(s) are listed on Schedule A hereto, as it may be amended from time
to time by mutual written agreement; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of Insurance
Company to set aside and invest assets attributable to the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Insurance Company intends to purchase shares in the Portfolios
listed in Schedule B hereto, as it may be amended from time to time by mutual
written agreement (the "Designated Portfolios"), on behalf of the Account to
fund the aforesaid Contracts, and the Fund intends to sell such shares to the
Account at net asset value;
<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, Insurance
Company, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Fund agrees to sell to Insurance Company those shares of the
Designated Portfolios which Insurance Company orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund, or
its designee, of the order for the shares of the Designated Portfolios. For
purposes of this Section 1.1, Insurance Company shall be the agent of the Fund
for receipt of such orders and receipt by Insurance Company shall constitute
receipt by the Fund; provided that the Fund receives notice of such order by
9:30 a.m. New York time on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value.
1.2. The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by Insurance Company on
those days on which the Fund calculates its net asset value, and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Directors of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or if , in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3 The Fund agrees that shares of the Designated Portfolios will be sold
only to Participating Insurance Companies and their separate accounts and to
qualified pension and retirement plans. No shares of any Designated Portfolio
will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on Insurance Companies request,
any full or fractional shares of the Fund held by Insurance Companies, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act. For purposes of this Section 1.5, Insurance Companies shall be the
agent of the Fund for receipt of requests for redemption and receipt by
Insurance Company shall constitute receipt by the Fund; provided that the Fund
receives notice of such request for redemption by 9:30 a.m. New York time on the
next following Business Day.
1.5. The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies and to qualified pension and retirement plans and the cash
value of the Contracts may be invested in other investment companies.
1.6. Insurance Company shall pay for Fund shares by 12:00 noon New York
Time the next Business Day after an order to purchase Fund shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire and/or by a credit for any shares redeemed the
same day as the purchase. Upon receipt by the Fund of the
-2-
<PAGE>
federal funds so wired, such funds shall cease to be the responsibility of
Insurance Company and shall become the responsibility of the Fund.
1.7. The Fund shall pay and transmit the proceeds of redemptions of Fund
shares by 3:00 p.m. New York time the next Business Day after a redemption order
is received, subject to Section 1.5 hereof. Payment shall be in federal funds
transmitted by wire and/or a credit for any shares purchased the same day as the
redemption.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to Insurance Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Account or the appropriate sub-account of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to Insurance Company of any income, dividends,
or capital gain distributions payable on the Designated Portfolios' shares.
Insurance Company hereby elects to receive all such income dividends and capital
gain distributions in additional shares of that Portfolio. Insurance Company
reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash. The Fund shall notify
Insurance Company by the end of the next following Business Day of the number of
shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Designated
Portfolio available to Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:30 p.m. New
York time. If the Fund provides incorrect per share net asset value information,
Insurance Company shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct net asset value per share. Any
material error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported immediately upon
discovery to Insurance Company. Any error of a lesser amount shall be corrected
in the next Business Day's net asset value per share.
In the event adjustments are required to correct any error in the
computation of a Designated Portfolio's net asset value per share, or dividend
or capital gain distribution, the Fund shall notify Insurance Company as soon as
possible after discovering the need for such adjustments. Notification can be
made orally, but must be confirmed in writing. If an adjustment is necessary to
correct an error which caused Contract owners to receive less than the amount to
which they are entitled, the Fund shall make all necessary adjustments to the
number of shares owned by the Account and distribute to the Account the amount
of the underpayment. In no event shall Insurance Company be liable to the Fund
for any such adjustments or overpayment amounts.
ARTICLE II. Representations and Warranties
------------------------------
2.1. Insurance Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws. Insurance Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established the Account as a segregated asset
-3-
<PAGE>
account under insurance law and has registered the Account as a unit investment
trust in accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2. The Fund and Adviser represent and warrants that Designated
Portfolio shares sold pursuant to this Agreement shall be registered under the
1933 Act, duly authorized for issuance and sold in compliance with all
applicable federal and state securities laws including without limitation the
1933 Act, the 1934 Act, and the 1940 Act and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend the Registration Statement
for its shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states if and to the extent required by applicable law.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule 12b-1
under the 1940 Act or impose an asset-based or other charge to finance
distribution expenses as permitted by applicable law and regulation. To the
extent that the Fund decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have a Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant to Rule
12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund and Adviser represent and warrant that the Fund is
lawfully organized and validly existing under the laws of the State of Maryland
and that it does and shall comply in all material respects with the 1940 Act.
2.5. The Adviser represents and warrants that it is and shall remain
duly registered under all applicable federal and state securities laws and that
it shall perform its obligations for the fund in compliance with all applicable
state and federal securities laws.
2.6. The Fund and Adviser each represent and warrant that all of its
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are, and shall
continue to be at all times, covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
coverage required by Section 17g-(1) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond shall include coverage
for larceny and embezzlement and shall be issued by a reputable bonding company.
2.7. The Fund will provide Insurance Company with as much advance notice
as is reasonably practicable of any material change affecting the Designated
Portfolios (including, but not limited to, any material change in its
registration statement or prospectus affecting the Designated Portfolios and any
proxy solicitation affecting the Designated Portfolios) and consult with
Insurance Company in order to implement any such change in an orderly manner,
recognizing the expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the prospectuses
for the Contracts.
2.8. Insurance Company represents and warrants, that, if the Fund
complies with Sections 2.9 and 2.10 of this Agreement, the Contracts are
currently treated as annuity contracts under applicable provisions of the
Internal Revenue Code of 1986, as amended, and that it shall make every effort
necessary to maintain such treatment and that it will notify the Underwriter
immediately upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the future.
-4-
<PAGE>
2.9. The Fund and the Adviser represent and warrant that: (a) each
Designated Portfolio currently has elected to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code ("Code"); (b) the Fund
and Adviser shall make every effort necessary that each Portfolio shall maintain
such qualification (under Subchapter M or any successor or similar provision);
(c) the fund or the Adviser will notify Insurance Company immediately upon
having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future; and (d) the Fund and the
Adviser will seek to minimize any damages and to rectify any Portfolio's failure
to so qualify promptly. The Fund and the Adviser acknowledge that any failure by
a Portfolio to qualify as a regulated investment company will eliminate the
ability of the Account to avail itself of the "look through" provisions of
Section 817(h) of the Code and that, as a result, the Contracts will almost
certainly fail to qualify as life insurance contracts under Section 817(h) of
the Code.
2.10. The Fund and the Adviser further represent and warrant that the
assets of each Designated Portfolio will at all times be invested in such a
manner to assure that the Contracts will be treated as life insurance contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund and the Adviser represent that the each Designated
Portfolio will at all times comply with Section 817(h) of the Code and Treasury
Regulation 1.817.5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulation. In the event of a breach of this Section 2.10, the Fund and the
Adviser warrant that they will take all reasonable steps: (a) to immediately
notify the Insurance Company of such breach; and (b) to adequately diversify the
Fund's assets so as to achieve compliance within the grace period afforded by
Regulation 1.817-5.
2.11. The Fund and Underwriter acknowledge that full compliance with the
requirements referred to in Sections 2.9 and 2.10 hereof is absolutely essential
because any failure to meet those requirements would result in the Contracts not
being treated as annuity contracts for federal income tax purposes, which would
have adverse tax consequences for Contract owners and could also adversely
affect the Insurance Company corporate tax liability.
ARTICLE III. Prospectuses, Reports, Proxy Statements and Voting
--------------------------------------------------
3.1. The Fund or Adviser, at their expense, shall provide Insurance
Company or its designee with current a prospectus, Statement of Additional
Information, and supplements thereto, and annual and semi-annual reports for the
Designated Portfolios in final "camera ready" copy form or on a diskette or such
other form as is required by a financial printer. The Fund and Adviser agrees
that the prospectuses, and supplements thereto, and the annual and semi-annual
reports for the Designated Portfolios will describe only the Designated
Portfolios and will not describe other Portfolios of the Fund. The Statement of
Additional Information may include information on other Portfolios of the Fund.
It is anticipated that the prospectuses and annual
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<PAGE>
and semi-annual reports for the Contracts (if applicable), for the Designated
Portfolio(s) and for other portfolios available under the Contracts will be
printed together in one booklet. The Fund or Adviser shall pay a portion of the
printing expenses for prospectus and fund reports booklets distributed to
current Contract Owners. Such portion shall be the percentage, which is the
number of pages of the Fund prospectus or report as compared to the total number
of pages of the booklet. The Fund shall not pay any expenses for printing or
distribution of prospectuses or fund reports to prospective Contract Owners.
3.2. It is understood and agreed that, except with respect to
information regarding Insurance Company provided in writing by Insurance
Company, Insurance Company shall not be responsible for the content of the
prospectus, SAI or annual and semi-annual reports for the Designated Portfolios.
It is also understood and agreed that, except with respect to information
regarding the Fund and provided in writing by the Fund, the Fund shall not be
responsible for the content of the prospectus or SAI for the Contracts.
3.3. The Fund or Adviser at their expense shall provide Insurance
Company with as many copies of its Fund proxy material as Insurance Company
shall reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law, Insurance Company shall, at
its expense:
(i) solicit voting instructions from Contract owners;
(ii) vote the Designated Portfolio shares in accordance with
instructions received from Contract owners: and
(iii) vote Designated Portfolio shares for which no instructions
have been received in the same proportion as Designated
Portfolio shares for which instructions have been received
from Contract owners in the same Account.
So long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass-through voting privileges for variable contract
owners. Insurance Company reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent permitted by law.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. Insurance Company shall furnish, or shall cause to be furnished, to
the Fund, or its designee, each prospectus, Statement of Additional Information
and each piece of sales literature and other promotional material that Insurance
Company develops or uses and in which the Fund (or a Portfolio thereof), its
investment adviser or one of its sub-advisers is named in connection with the
Contracts, at least 10 (ten) Business Days prior to its use. No such material
shall be used if the Fund, or its designee, objects to such use within 10 (ten)
Business Days after receipt of such material.
4.2. Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts inconsistent with the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the
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<PAGE>
permission of the Fund.
4.3. The Fund shall furnish, or shall cause to be furnished, to
Insurance Company, each piece of sales literature and other promotional material
developed by the Fund or its designee in which Insurance Company and/or the
Account is named at least 10 (ten) Business Days prior to its use. No such
material shall be used if Insurance Company objects to such use within 10 (ten)
Business Days after receipt of such material. Notwithstanding the fact that
Insurance Company or its designee may not initially object to a piece of sales
literature or other promotional material, Insurance Company reserves the right
to object at a later date to the continued use of any such sales literature or
promotional material in which Insurance Company is named, and no such material
shall be used thereafter if Insurance Company or its designee so objects.
4.4. The Fund and Adviser shall not give any information or make any
representations on behalf of Insurance Company or concerning Insurance Company,
the Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports for the Account, or in sales literature or other
promotional material approved by Insurance Company or its designee, except with
the permission of Insurance Company.
4.5. For purposes of this Article IV, the phrase "sales literature and
other promotional material" includes, but is not limited to, advertisements
(material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, telephone directories (other than routine
listings), electronic or other public media), sales literature (i.e., any
written or electronic communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, performance reports or summaries, form letters, telemarketing
scripts, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, Statements of Additional
Information, supplements thereto, shareholder reports, and proxy materials.
4.6. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representative of the appropriate regulatory agencies, all records, data and
access to operating procedures that may be reasonably requested in connection
with compliance and regulatory requirements related to this Agreement or any
party's obligations under this Agreement.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund shall pay no fee or other compensation to Insurance
Company under this Agreement, except that if the Fund or any Designated
Portfolio adopts and implements a plan pursuant to Rule 12b-1 of the 1940 Act to
finance distribution and shareholder servicing expenses, then the Fund's
underwriter may make payments to Insurance Company or to the
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<PAGE>
distributor of the Contracts if and in amounts agreed to by the Fund's
underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Fund's underwriter, past profits of the underwriter or
other resources available to the underwriter. No such payments shall be made
directly by the Fund. Nothing herein shall prevent the parties hereto from
otherwise agreeing to perform, and arrange for appropriate compensation for,
other services relating to the Fund and/or the Account. Insurance Company shall
pay no fee or other compensation to the Fund under this Agreement, although the
parties hereto will bear certain expenses.
5.2. All expenses incident to performance by the Fund or the Adviser
under this Agreement shall be paid by the Fund or Adviser. The Fund shall see to
it that all shares of the Designated Portfolios are registered and authorized
for issuance in accordance with applicable federal law and, if and to the extent
required, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, supplements thereto and its proxy materials and reports. The Fund or
Adviser will bear the expenses of fulfilling their obligations under (S). 3.1.
5.3. Insurance Company shall bear the expenses of routine annual
distribution of the Fund's prospectus to owners of Contracts issued by Insurance
Company and of distributing the Fund's proxy materials and reports to such
Contract owners; Insurance Company shall bear all expenses associated with the
registration, qualification, and filing of the Contracts under applicable
federal securities and state insurance laws; the cost of preparing, printing,
and distributing the Contract prospectus and SAI; and the cost of preparing,
printing and distributing annual individual account statement to Contract owners
as required by state insurance laws.
5.4. The Fund acknowledges that a principal feature of the Contracts is
the Contract owner's ability to choose from a number of unaffiliated mutual
funds (and portfolios or series thereof), including the Designated Portfolios
("Unaffiliated Funds"), and to transfer the Contract's cash value between funds
and portfolios. The Fund and Underwriter agree to cooperate with Insurance
Company in facilitating the operation of the Account and the Contracts as
intended, including but not limited to cooperation in facilitating transfers
between Unaffiliated Funds.
ARTICLE VI. Potential Conflicts and Compliance With
Shared Funding Exemptive Order
---------------------------------------
6.1 In the event that Fund determines that it is appropriate for the
Fund to seek an order from the SEC granting insurance companies and their
separate accounts exemptions which purchase Fund shares from the provisions of
Sections 9(a), 13(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to
be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
certain qualified pension and retirement plans (the "Shared Funding Exemptive"),
this article shall apply.
6.2. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an
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<PAGE>
action by any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by a participating insurance
company to disregard the voting instructions of contract owners. The Board shall
promptly inform Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
6.3. Insurance Company will report any potential or existing conflicts
of which it is aware to the Board. Insurance Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by Insurance Company to inform the Board whenever contract owner voting
instructions are disregarded. Such responsibilities shall be carried out by
Insurance Company with a view only to the interests of its Contract Owners.
6.4. If it is determined by a majority of the Board, or a majority of
its directors who are not interested persons of the Fund, its adviser or any
sub-adviser to any of the Portfolios (the "Independent Directors"), that a
material irreconcilable conflict exists, Insurance Company and other
participating insurance companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the Independent
Directors), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more participating insurance
companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. Insurance
Company shall not be required by this Section 6.4 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict.
6.5. If a material irreconcilable conflict arises because of a decision
by Insurance Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote,
Insurance Company may be required, at the Fund's election, to withdraw the
Account's investment in the Fund and terminate this Agreement; provided, however
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the Independent Directors. Any such withdrawal and termination must take place
within six (6) months after the Fund gives written notice that this provision is
being implemented, and until the end of that six month period the Fund shall
continue to accept and implement orders by Insurance Company for the purchase
(and redemption) of shares of the Fund.
6.6. If a material irreconcilable conflict arises because a particular
state insurance
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<PAGE>
regulator's decision applicable to Insurance Company conflicts with the majority
of other state regulators, then Insurance Company will withdraw the Account's
investment in the Fund and terminate this Agreement within six months after the
Board informs Insurance Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and the Fund shall continue to accept and implement
orders by Insurance Company for the purchase (and redemption) of shares of the
Fund.
6.7. For purposes of Sections 6.4 through 6.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
6.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable:
and (b) Sections 6.2, 6.3, 6.4, 6.5 and 6.6 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VII. Indemnification
---------------
7.1. Indemnification By Insurance Company
------------------------------------
8.1(a). Insurance Company agrees to indemnify and hold harmless the
Fund and the Adviser and their officers, directors, employees, and agents and
each person who controls the Fund within meaning of (S). 15 of the 1933 Act.
(collectively, the "Indemnified Parties" for purposes of this Section 7.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Insurance Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus or SAI for the Contracts or
contained in the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
not misleading, provided that this Agreement to indemnify shall not
apply
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<PAGE>
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to Insurance
Company by or on behalf of the Underwriter or Fund for use in the
registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied
by Insurance Company or persons under its control) or wrongful
conduct of Insurance Company or persons under its control, with
respect to the sale or distribution of the Contracts or Fund
Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in writing
to the Fund by or on behalf of Insurance Company; or
(iv) arise as a result of any failure by Insurance Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Insurance Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by Insurance Company, as limited by and in
accordance with the provisions of Sections 7.1(b) and 7.1(c)
hereof.
7.1(b). Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject if caused by such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
7.1(c). Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Insurance Company
of any such claim shall not relieve Insurance Company from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, Insurance Company shall be
entitled to participate, at its own expense, in the defense of such action.
Insurance Company also shall be entitled to assume the defense thereof, with
counsel
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<PAGE>
satisfactory to the party named in the action. After notice from Insurance
Company to such party of Insurance Company's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and Insurance Company will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.1(d). The Indemnified Parties will promptly notify Insurance
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
7.2. Indemnification by the Adviser
------------------------------
7.2(a). The Adviser agrees to indemnify and hold harmless Insurance
Company and each of its directors, officers, employees, agents and each person,
if any, who controls Insurance Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
7.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to the
Adviser or Fund by or on behalf of Insurance Company for use in
the registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by the Adviser or persons under its
control) or wrongful conduct of the Fund or Adviser or persons
under their control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus
or sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein
not misleading, if such statement or omission was made in
reliance upon information furnished in
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<PAGE>
writing to Insurance Company by or on behalf of the Adviser or
Fund; or
(iv) arise as a result of any failure by the Fund or Adviser to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification and
other qualification requirements specified (S). 2.9 and 2.10 in
of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or Adviser in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Fund or Adviser; as limited by
and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
7.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
7.2(d). Insurance Company agrees promptly to notify the Adviser of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
ARTICLE VIII. Applicable Law
--------------
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of California,
without regard to that state's principles of conflicts of law, except that any
terms shall be defined and interpreted in accordance with, and the Agreement
subject to, the federal securities laws.
8.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts,
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<PAGE>
and the rules and regulations and rulings thereunder, including such exemptions
from those statutes, rules and regulations as the Securities and Exchange
Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE IX. Termination
-----------
9.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with respect
to some or all Portfolios, upon one (1) year advance written notice
delivered to the other parties; provided, however, that such notice
shall not be given earlier than one year following the date of this
Agreement; or
(b) at the option of Insurance Company by written notice to the
other parties with respect to any Portfolio based upon Insurance
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts; or
(c) at the option of Insurance Company by written notice to the
other parties with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/ or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by Insurance Company; or
(d) at the option of the Fund in the event that formal
administrative proceedings are instituted against Insurance Company
by the National Association of Securities Dealers, Inc. ("NASD"),
the Securities and Exchange Commission, the Insurance Commissioner
or like official of any state or any other regulatory body regarding
Insurance Company's duties under this Agreement or related to the
sale of the Contracts, the operation of any Account, or the purchase
of the Fund shares, provided, however, that the Fund determines in
its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon
the ability of Insurance Company to perform its obligations under
this Agreement; or
(e) at the option of Insurance Company in the event that formal
administrative proceedings are instituted against the Fund or
Adviser by the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other regulatory
body, provided, however, that Insurance Company determines in its
sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Fund or Adviser to perform its obligations under this Agreement;
or
(f) at the option of Insurance Company by written notice to the Fund
and the Adviser with respect to any Portfolio if Insurance Company
reasonably believes that the Portfolio may fail to meet the Section
817(h) diversification requirements or Subchapter M qualifications
specified in Section 2.9 and 2.10 of this Agreement; or
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<PAGE>
(g) at the option of either the Fund or the Adviser, if (i) the Fund
or Adviser, respectively, shall determine, in their sole judgement
reasonably exercised in good faith, that Insurance Company has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and that
material adverse change or publicity will have a material adverse
impact on Insurance Company's ability to perform its obligations under
this Agreement, (ii) the Fund or Adviser notifies Insurance Company of
that determination and its intent to terminate this Agreement, and
---
(iii) after considering the actions taken by Insurance Company and any
other changes in circumstances since the giving of such a notice, the
determination of the Fund or Adviser shall continue on the sixtieth
(60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(h) at the option of Insurance Company, if (i) Insurance Company shall
determine, in its sole judgement reasonably exercised in good faith,
that either the Fund or the Adviser have suffered a material adverse
change in their business or financial condition or is the subject of
material adverse publicity and that material adverse change or
publicity will have a material adverse impact on the Fund's or
Adviser's ability to perform its obligations under this Agreement,
(ii) Insurance Company notifies the Fund or Adviser, as appropriate,
of that determination and its intent to terminate this Agreement, and
---
(iii) after considering the actions taken by the Fund or Adviser and
any other changes in circumstances since the giving of such a notice,
the determination of Insurance Company shall continue on the sixtieth
(60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(i) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement; or
(j) upon assignment of this Agreement, unless made with the written
consent of the parties hereto, except that the Adviser may assign this
Agreement, or any of its rights or obligations hereunder, to any
affiliate of, or company under common control with, the Adviser (but
in such event the Adviser shall continue to be liable for any
indemnification due to Insurance Company and the assignee shall also
be liable), if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement; or
(k) at the option of Insurance Company or the Fund by written notice
to the other party upon a determination by the Fund's Board that a
material irreconcilable conflict exists among the interests of (i) all
contract owners of all separate accounts investing in the Fund or (ii)
the interests of the Participating Insurance Companies; or
(l) at the option of Insurance Company by written notice to the Fund
or the Adviser upon the sale, acquisition or change of control of the
Adviser.
9.2. Notice Requirement. No termination of this Agreement shall be
------------------
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to terminate, which notice
shall set forth the basis for the termination.
9.3. Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the
-15-
<PAGE>
Fund and the Adviser shall, at the option of Insurance Company, continue to make
available additional shares of the Fund for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts") pursuant to the terms and conditions of this Agreement.
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 9.3 shall not apply
to any terminations under Article VI and the effect of such Article VI
terminations shall be governed by Article VI of this Agreement.
9.4. Surviving Provisions. Notwithstanding any termination of this
--------------------
Agreement, each party's obligations under Article VIII to indemnify other
parties shall survive and not be affected by any termination of this Agreement.
In addition, with respect to Existing Contracts, all provisions of this
Agreement shall also survive and not be affected by any termination of this
Agreement.
ARTICLE X. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail or by overnight mail sent through a nationally-recognized delivery service
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to Insurance Company:
PFL Life Insurance Company
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52406
Attention: General Counsel, Financial Markets Division
If to the Fund:
Transamerica Variable Insurance Fund, Inc.
1150 South Olive Street
Los Angeles, CA 90015
Attention: Secretary
If to the Adviser:
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Attention: General Counsel
-16-
<PAGE>
ARTICLE XI. Miscellaneous
-------------
10.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party reasonably considers to be proprietary.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
10.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
10.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
10.7. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
10.8. The Schedules attached hereto, as modified from time to time, are
incorporated herein by reference and are part of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
PFL LIFE INSURANCE COMPANY:
By its authorized officer
By: /s/ William L. Busler
----------------------------
Title: President
----------------------------
-17-
<PAGE>
TRANSAMERICA VARIABLE INSURANCE FUND, INC.:
By its authorized officer,
By: /s/ Regina M. Fink
----------------------------
Title: Secretary
----------------------------
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY:
By its authorized officer,
By: /s/ David Goldstein
----------------------------
Title: Vice President &
----------------------------
Deputy General Counsel
-18-
<PAGE>
Effective May 1, 2000
AMENDED SCHEDULE A
------------------
Extra Variable Annuity
Endeavor Variable Annuity
Endeavor ML Variable Annuity
Endeavor Platinum Variable Annuity
AUSA Endeavor Variable Annuity
Access Variable Annuity
Retirement Income Builder II Variable Annuity
Legacy Builder Plus
-19-
<PAGE>
SCHEDULE B
----------
Designated Portfolios
- ---------------------
Growth Portfolio of Transamerica Variable Insurance Fund, Inc.
-20-
<PAGE>
NOTICE
------
With regard to
November 1, 1999
Participation Agreement between
Transamerica Variable Insurance Fund
Transamerica Occidental Life Insurance Company
and
PFL Life Insurance Company
Effective January 1, 2000, and pursuant to (S). 8.1 and (S). 9.1(j) of this
Agreement, Transamerica Investment Management, LLC, replaced Transamerica
Occidental Life Insurance Company as Adviser.
/s/ Regina M. Fink
- -----------------------------------------------------------
Regina M. Fink
Assistant General Counsel, Transamerica Occidental Life Insurance Company
Counsel to Transamerica Investment Management, LLC
Secretary, Transamerica Variable Insurance Fund, Inc.
<PAGE>
EXHIBIT (8)(d)(1)
-----------------
AMENDED SCHEDULE A TO PARTICIPATION AGREEMENT BY AND BETWEEN VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, FIDELITY DISTRIBUTORS
CORPORATION, AND PFL LIFE INSURANCE COMPANY
<PAGE>
Participation Agreement Addendum
SCHEDULE A
----------
Accounts
--------
This Schedule shall be effective as of the date of the last signature below, and
replaces and supersedes Schedule A to the Participation Agreement dated April 1,
1991 (as amended) among Variable Insurance Products Fund, Variable Insurance
Products Fund II, Fidelity Distributors Corporation and PFL Life Insurance
Company.
<TABLE>
<CAPTION>
Date of Resolutions of Company's
Board which established the
Name of Contracts Name of Accounts Accounts
-------------------------- --------------- ----------------------------
<S> <C> <C>
Fidelity Income Plus Individual Fidelity Variable August 24, 1979 (by an affiliate
Variable Annuity Contracts Annuity Account subsequently acquired by the Company)
PFL Endeavor Individual and Group PFL Endeavor VA
Variable Annuity Contracts Separate Account January 19, 1990
PFL Endeavor Platinum Individual and PFL Endeavor VA
Group Variable Annuity Contracts Separate Account January 19, 1990
PFL Retirement Builder Individual PFL Retirement Builder Variable
Variable Annuity Contracts Annuity Account March 29, 1996
PFL Retirement Builder Immediate PFL Retirement Builder Variable
Variable Annuity Contracts Annuity Account March 29, 1996
Portfolio Select Individual Variable PFL Retirement Builder Variable
Annuity Contracts Annuity Account March 29, 1996
PFL Retirement Income Builder II PFL Retirement Builder Variable
Individual Variable Annuity Contracts Annuity Account March 29, 1996
Extra Individual and Group Variable PFL Life Variable February 20, 1997
Annuity Contracts Annuity Account C
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Access Individual and Group Variable PFL Life Variable February 20, 1997
Annuity Contracts Annuity Account D
Select Advantage Individual Variable PFL Life Variable February 20, 1997
Annuity Contracts Annuity Account E
Advantage V PFL Corporate Account One August 10, 1998
PFL Variable PFL Variable Life Account A July 1, 1999
Universal Life Policy
</TABLE>
In witness whereof, we have hereunto set our hand as of the dates indicated:
PFL Life Insurance Company Variable Insurance Products Fund
By: /s/ William L. Busler By: /s/ Robert C. Pozen
----------------------------- --------------------------
Title: President Title: Senior Vice President
----------------------------- --------------------------
Date: February 28, 2000 Date: February 19, 2000
----------------------------- --------------------------
Fidelity Distributors Corporation Variable Insurance Products Fund II
By: /s/ Kevin Kelly By: /s/ Robert C. Pozen
----------------------------- --------------------------
Title: Vice President Title: Senior Vice President
----------------------------- --------------------------
Date: February 19, 2000 Date: February 19, 2000
----------------------------- --------------------------
<PAGE>
EXHIBIT (8)(e)(1)
-----------------
AMENDED SCHEDULE A TO PARTICIPATION AGREEMENT BY AND BETWEEN VARIABLE INSURANCE
PRODUCTS FUND III, FIDELITY DISTRIBUTORS CORPORATION, AND PFL LIFE INSURANCE
COMPANY
<PAGE>
Participation Agreement Addendum
SCHEDULE A
----------
Accounts
--------
This Schedule shall be effective as of the date of the last signature below, and
replaces and supersedes Schedule A to the Participation Agreement dated March
21, 1997 among Variable Insurance Products Fund III, Fidelity Distributors
Corporation and PFL Life Insurance Company.
<TABLE>
<CAPTION>
Date of Resolutions of Company's
Board which established the
Name of Contracts Name of Accounts Accounts
-------------------------- ---------------- ----------------------------
<S> <C> <C>
Fidelity Income Plus Individual Fidelity Variable August 24, 1979 (by an affiliate
Variable Annuity Contracts Annuity Account subsequently acquired by the
Company)
PFL Endeavor Individual and Group PFL Endeavor VA
Variable Annuity Contracts Separate Account January 19, 1990
PFL Endeavor Platinum Individual and PFL Endeavor VA
Group Variable Annuity Contracts Separate Account January 19, 1990
PFL Retirement Builder Individual PFL Retirement Builder Variable
Variable Annuity Contracts Annuity Account March 29, 1996
PFL Retirement Builder Immediate PFL Retirement Builder Variable
Variable Annuity Contracts Annuity Account March 29, 1996
Portfolio Select Individual Variable PFL Retirement Builder Variable
Annuity Contracts Annuity Account March 29, 1996
PFL Retirement Income Builder II PFL Retirement Builder Variable
Individual Variable Annuity Contracts Annuity Account March 29, 1996
Extra Individual and Group Variable PFL Life Variable February 20, 1997
Annuity Contracts Annuity Account C
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Access Individual and Group Variable PFL Life Variable February 20, 1997
Annuity Contracts Annuity Account D
Select Advantage Individual Variable PFL Life Variable February 20, 1997
Annuity Contracts Annuity Account E
Advantage V PFL Corporate Account One August 10, 1998
PFL Variable PFL Variable Life Account A July 1, 1999
Universal Life Policy
</TABLE>
In witness whereof, we have hereunto set our hand as of the dates indicated:
PFL Life Insurance Company Variable Insurance Products Fund III
By: /s/ William L. Busler By: /s/ Robert C. Pozen
----------------------------- --------------------------
Title: President Title: Senior Vice President
----------------------------- --------------------------
Date: February 28, 2000 Date: February 19, 2000
----------------------------- --------------------------
Fidelity Distributors Corporation
By: /s/ Kevin Kelly
-----------------------------
Title: Vice President
-----------------------------
Date: February 19, 2000
-----------------------------
<PAGE>
EXHIBIT (9)
-----------
OPINION AND CONSENT OF COUNSEL
<PAGE>
[PFL Life Insurance Company Letterhead]
April 10, 2000
PFL Life Insurance Company
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499-0001
Dear Sir/Madam:
With reference to the Registration Statement on Form N-4 by PFL Life Insurance
Company and PFL Life Variable Annuity Account D with the Securities and Exchange
Commission covering group and individual variable annuity contracts, I have
examined such documents and such law as I considered necessary and appropriate,
and on the basis of such examination, it is my opinion that:
1. PFL Life Insurance Company is duly organized and validly existing under the
laws of the State of Iowa and has been duly authorized to issue group and
individual variable annuity contracts by the Department of Insurance of the
State of Iowa.
2. PFL Life Variable Annuity Account D is a duly authorized and existing
separate account established pursuant to the provisions of Section 508A.1
of the Iowa Insurance Code.
3. The Access Variable Annuity Contracts, when issued as contemplated by said
Form N-4 Registration Statement, will constitute legal, validly issued and
binding obligations of PFL Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to said N-4
Registration Statement.
Very truly yours,
PFL LIFE INSURANCE COMPANY
/s/ Frank A. Camp
Frank A. Camp
Division General Counsel
Financial Markets Division
<PAGE>
EXHIBIT (10)(a)
CONSENT OF AUDITORS
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our report dated
February 18, 2000 with respect to the statutory-basis financial statements and
schedules of PFL Life Insurance Company, included in Pre-Effective Amendment No.
1 to the Registration Statement (Form N-4 No. 333-94489) and related Prospectus
of the Access Variable Annuity.
/s/ Ernst & Young, LLP
Des Moines, Iowa
April 24, 2000
<PAGE>
EXHIBIT (10)(b)
---------------
OPINION AND CONSENT OF ACTUARY
<PAGE>
[PFL Life Insurance Company Letterhead]
April 10, 2000
PFL Life Insurance Company
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-0001
Re: Access Variable Annuity Account
Registration on Form N-4 SEC File No. 33-94489
Dear Sir/Madam:
With regard to the above registration statement, I have examined such documents
and made such inquiries as I have deemed necessary and appropriate, and on the
basis of such examination, have the following opinions:
Fees and charges deducted under the Access Variable Annuity policies are those
deemed necessary to appropriately reflect:
(1) the expenses incurred in the acquisition and distribution of the Policies,
(2) the expenses associated with the development and servicing of the policies,
(3) the assumption of certain risks arising from the operation and management
of the Policies and/or riders to the Policy and that provides for a
reasonable margin of profit.
Fees and charges assessed against the policy values in the Variable Account
include:
(i) Service Charge and Administrative Charge
(ii) Mortality and Expense Risk Fee (M&E)
(iii) Taxes (including Premium and other Taxes if applicable)
The magnitude of each of the individual charges listed above in (i) through
(iii) is established in the pricing of the Access Variable Annuity, to achieve a
reasonable Return on Investment (ROI), which is within the range of industry
practice with respect to comparable variable annuity products.
<PAGE>
PFL Life Insurance Company
April 10, 2000
Page 2
Except by coincidence, it is not expected that actual charges assessed in a
given year would exactly offset actual expenses incurred. Acquisition expenses
(as well as major product and/or systems development expenses) are incurred "up
front" and recovered, with a reasonable profit margin, through future years'
charges. In addition, the company cannot increase certain charges under the
Policies in the pricing process.
Therefore, in my opinion, the fees and charges deducted under the Policies, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the company.
I hereby consent to the use of this opinion, which is included as an Exhibit to
the Registration Statement.
/s/ Calvin R. Birkey
- -------------------------------
Calvin R. Birkey, FSA, MAAA
Managing Actuary
PFL Life Insurance Company
