<PAGE>
As filed with the Securities and Exchange
Commission on January 12, 2000
333-_____
811- 08377
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __X__
Pre-Effective Amendment No. ____
Post-Effective Amendment No. ____
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10
PFL ENDEAVOR TARGET ACCOUNT
(Exact Name of Registrant)
PFL LIFE INSURANCE COMPANY
(Name of Insurance Company)
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499-0001
Name and Address of Agent for Service: Copy to:
Frank A. Camp, Esquire Frederick R. Bellamy, Esquire
PFL Life Insurance Company Sutherland Asbill and Brennan LLP
4333 Edgewood Road N.E. 1275 Pennsylvania Avenue, N.W.
Cedar Rapids, Iowa 52499-0001 Washington, D.C. 20004-2404
TITLE OF SECURITIES BEING REGISTERED:
Flexible Premium Variable Annuity Policies
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after effectiveness of the Registration Statement, as the
Commission, acting pursuant to said Section 8(a), shall determine.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the 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
and
PFL ENDEAVOR TARGET ACCOUNT
by
PFL LIFE INSURANCE COMPANY
Prospectus
[DATE]
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
__________. 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 mutual fund account and
the target 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 annuity policy has many investment choices. There
are two separate accounts: (1) a mutual fund account; and (2) a target account.
The mutual fund subaccounts and the target series subaccounts are listed below.
You bear the entire investment risk for all amounts you put in either separate
account. There is also a fixed account, which offers interest at rates that are
guaranteed by PFL Life Insurance Company (PFL). You can choose any combination
of these investment choices.
ENDEAVOR SERIES TRUST
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price International Stock Portfolio
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Endeavor Enhanced Index Portfolio
Dreyfus U.S. Government Securities Portfolio
Dreyfus Small Cap Value Portfolio
Endeavor Select 50 Portfolio
Endeavor High Yield Portfolio
Endeavor Janus Growth Portfolio
TRANSAMERICA VARIABLE
INSURANCE FUND, INC.
Transamerica VIF Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND
(VIP) - SERVICE CLASS 2
VIP Equity-Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II
(VIP II) - SERVICE CLASS 2
VIP II Contrafund Portfolio
VARIABLE INSURANCE PRODUCTS FUND III
(VIP III) - SERVICE CLASS 2
VIP III Growth Opportunities Portfolio
VIP III Mid Cap Portfolio
WRL SERIES FUND, INC.
WRL Janus Global
WRL Alger Aggressive Growth
WRL NWQ Value Equity
WRL Goldman Sachs Growth
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
WRL Salomon All Cap
WRL Pilgrim Baxter Mid Cap Growth
THE TARGET ACCOUNT
The Dow/SM/ Target 10 (July Series)
The Dow/SM/ Target 5 (July Series)
The Dow/SM/ Target 10 (January Series)
The Dow/SM/ Target 5 (January Series)
<PAGE>
TABLE OF CONTENTS Page
GLOSSARY OF TERMS....................................
SUMMARY..............................................
ANNUITY POLICY FEE TABLE.............................
EXAMPLES.............................................
1. THE ANNUITY POLICY..............................
2. ANNUITY PAYMENTS
(THE INCOME PHASE)..............................
Annuity Payment Options.........................
3. PURCHASE........................................
Policy Issue Requirements.......................
Premium Payments................................
Initial Premium Requirements....................
Additional Premium Payments.....................
Maximum Total Premium Payments..................
Allocation of Premium Payments..................
Policy Value....................................
4. INVESTMENT CHOICES..............................
The Separate Accounts...........................
The Mutual Fund Account.........................
The Target Account..............................
The Fixed Account...............................
Transfers.......................................
Family Income Protector.........................
Dollar Cost Averaging Program...................
Asset Rebalancing...............................
Telephone Transactions..........................
5. EXPENSES........................................
Excess Interest Adjustment......................
Mortality and Expense Risk Fee..................
Administrative Charges..........................
Premium Taxes...................................
Federal, State and Local Taxes..................
Transfer Fee....................................
Family Income Protector.........................
Portfolio Management Fees.......................
Target Account Fees.............................
6. TAXES...........................................
Annuity Policies in General.....................
Qualified and Nonqualified Policies.............
Withdrawals - Nonqualified Policies.............
Withdrawals - Qualified Policies................
Withdrawals - 403(b) Policies...................
Tax Status of the Policy........................
Taxation of Death Benefit Proceeds..............
Annuity Payments................................
Transfers, Assignments or Exchanges
of Policies.....................................
Possible Tax Law Changes........................
7. ACCESS TO YOUR MONEY............................
Surrenders......................................
Delay of Payment and Transfers..................
Excess Interest Adjustment......................
Systematic Payout Option........................
Nursing Care and Terminal Condition
Withdrawal Option...........................
Unemployment Waiver.............................
8. PERFORMANCE.....................................
The Mutual Fund Account.........................
The Target Account..............................
9. DEATH BENEFIT...................................
When We Pay A Death Benefit.....................
When We Do Not Pay A Death Benefit..............
Amount of Death Benefit.........................
Guaranteed Minimum Death Benefit................
Adjusted Partial Withdrawal.....................
10. OTHER INFORMATION...............................
Ownership.......................................
Assignment......................................
PFL Life Insurance Company......................
The Mutual Fund Account.........................
The Target Account..............................
Mixed and Shared Funding........................
Reinstatements..................................
Voting Rights...................................
Distributor of the Policy.......................
Non-Participating ..............................
Variations in Certain Provisions................
IMSA............................................
Legal Proceedings...............................
Financial Statements............................
TABLE OF CONTENTS OF THE STATEMENT
OF ADDITIONAL INFORMATION............................
APPENDIX A
Historical Performance Data
The Mutual Fund Account.........................
Historical Performance Data
The Target Strategies and the
Dow Jones Industrial Average(SM)................
2
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit--An accounting unit of measure used in calculating the policy
value in the mutual fund account and the target account before the annuity
commencement date.
Adjusted Policy Value--An amount equal to the policy value increased or
decreased by any excess interest adjustments.
Annual Stock Selection Date--The last business day of a specified 12-month
period.
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.
DJIA--The Dow Jones Industrial Average/SM/. Thirty stocks chosen by the editors
of The Wall Street Journal as representative of the broad market and of American
Industry.
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
the general assets of PFL and are not in the mutual fund account or the target
account.
Guaranteed Period Options--The various guaranteed interest rate periods of the
fixed account which may be offered by PFL and into which premium payments may be
paid or amounts transferred.
Initial Stock Selection Date--The date is June 30, 1998 for the July Series. The
date is December 31, 1998 for the January Series.
Mutual Fund 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, to which premium payments under the policies
may be allocated.
Mutual Fund Subaccount--A subdivision within the mutual fund account, the assets
of which are invested in specified portfolios of the underlying funds.
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 mutual fund account and the target 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.
Target Account--A separate account established and registered as a management
investment company under the 1940 Act to which premium payments under the
policies may be allocated.
Target Series Subaccount--A subdivision within the target account, the assets of
which are invested in common stocks selected according to a specified investment
strategy, with a specific stock selection date.
(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. Words printed in italics in this prospectus
are defined in the Glossary.
1. THE VARIABLE 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 mutual
fund account, four subaccounts of the target 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 thirty subaccounts in both the mutual fund account and the
target account that are listed in Section 4. Each mutual fund subaccount invests
exclusively in shares of one of the portfolios of the underlying funds. Each
target series subaccount invests directly in individual stocks according to its
specific investment strategy. 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 is guaranteed by PFL. 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. 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.
3. 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.
4. INVESTMENT CHOICES
You can allocate your premium payments to one or more of the investment choices
listed below.
The following twenty-six mutual fund portfolios are described in the underlying
fund prospectuses:
Endeavor Asset Allocation Portfolio
Endeavor Money Market Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price International Stock Portfolio
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Endeavor Enhanced Index Portfolio
Dreyfus U.S. Government Securities Portfolio
Dreyfus Small Cap Value Portfolio
Endeavor Select 50 Portfolio
Endeavor High Yield Portfolio
Endeavor Janus Growth Portfolio
Transamerica VIF Growth Portfolio
VIP Equity-Income Portfolio
VIP II Contrafund Portfolio
VIP III Growth Opportunities Portfolio
VIP III Mid Cap Portfolio
WRL Janus Global
WRL Alger Aggressive Growth
WRL NWQ Value Equity
WRL Goldman Sachs Growth
WRL T. Rowe Price Dividend Growth
4
<PAGE>
WRL T. Rowe Price Small Cap
WRL Salomon All Cap
WRL Pilgrim Baxter Mid Cap Growth
The following four target series subaccounts are described later in this
prospectus:
The Dow(SM) Target 10 (July Series)
The Dow(SM) Target 5 (July Series)
The Dow(SM) Target 10 (January Series)
The Dow(SM) Target 5 (January Series)
Depending upon their investment performance, you can make or lose money in any
of the mutual fund subaccounts or target series subaccounts.
You can also allocate your premium payments to the fixed account.
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 mutual
fund subaccount and target series 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 mutual fund subaccounts will reflect the
investment advisory fee and other expenses incurred by the underlying
portfolios. The value of the net assets of the target series subaccounts will
reflect the investment advisory fee and other expenses incurred by the manager
in operating each target series subaccount.
6. 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.
7. ACCESS TO YOUR MONEY
You can take out $500 or more anytime during the accumulation phase. If you have
policy value in the fixed account, then after one year you may take up to 10% of
your cumulative premium payments out of the fixed account free of excess
interest adjustments each policy year. Amounts withdrawn in the first year, or
in excess of 10% of your cumulative premium payments thereafter, may be subject
to an excess interest adjustment. You may also have to pay income tax and a tax
penalty on any money you take out.
8. PERFORMANCE
The value of the policy will vary up or down depending upon the investment
performance of the mutual fund subaccounts or target series subaccounts you
choose. We provide performance information in Appendix A and in the SAI. This
data is not intended to indicate future performance.
5
<PAGE>
9. 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 dedcuted 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.
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.
10. 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 10 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 than 10 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 and individual retirement
accounts. The tax-deferred feature is most attractive to people in high federal
and state tax 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 unique to variable annuities,
such as the opportunity for lifetime income payments, a guaranteed death benefit
and the guaranteed level of certain charges, are appropriate for your needs.
Financial Statements. Financial Statements for PFL and the target account are in
the SAI.
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 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 mutual fund subaccounts or target
series subaccounts. This feature is called "dollar cost averaging."
. You can elect an optional rider that guarantees you a minimum annuitization
value. This feature is called the "family income protector."
. We will, upon your request, automatically transfer amounts among the mutual
fund subaccounts or target series subaccounts on a regular basis to
maintain a
6
<PAGE>
desired allocation of the policy value among the various mutual fund
subaccounts or target series subaccounts. This feature is called "asset
rebalancing."
. 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.
These features are not available in all states and may not be suitable for your
particular situation.
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
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
==============================================================================================================================
ANNUITY POLICY FEE TABLE
==============================================================================================================================
Separate Account Annual Expenses
Policy Owner Transaction Expenses (as a percentage of average account value)
- ----------------------------------------------------------------- ------------------------------------------------------------
Sales Load On Purchase Payments........................ 0 Mortality and Expense Risk Fee (3)..... 1.45%
Surrender Fees......................................... 0 Administrative Charge 0.40%
-----
Annual Service Charge/(1)/................... $30 Per Policy
Transfer Fee/(1)/........................... Currently No Fee TOTAL SEPARATE ACCOUNT
Family Income Protector (optional)/(2)/ ANNUAL EXPENSES........................ 1.85%
Rider Fee................................... 0.30%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Annual Expenses(4)
(as a percentage of average net assets and after expense reimbursements)
==============================================================================================================================
<CAPTION>
Total
Total Account
Rule Portfolio and
Management Other 12b-1 Annual Portfolio
Fees Expenses Fees(5) Expenses Expenses
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Endeavor Asset Allocation /(6)/.................................
Endeavor Money Market /(6)/.....................................
T. Rowe Price Equity Income /(6)/...............................
T. Rowe Price Growth Stock /(6)/................................
T. Rowe Price International Stock /(6)(7)/......................
Endeavor Value Equity /(6)/.....................................
Endeavor Opportunity Value /(6)/................................
Endeavor Enhanced Index /(6)/...................................
Dreyfus U.S. Government Securities /(6)(8)/.....................
Dreyfus Small Cap Value /(6)/...................................
Endeavor Select 50 /(6)(9)/.....................................
Endeavor High Yield /(6)(10)/...................................
Endeavor Janus Growth /(6)(11)/.................................
Transamerica VIF Growth /(12)/..................................
VIP Equity-Income...............................................
VIP II Contrafund...............................................
VIP III Growth Opportunities....................................
VIP III Mid Cap.................................................
WRL Janus Global /(13)/.........................................
WRL Alger Aggressive Growth.....................................
WRL NWQ Value Equity............................................
WRL Goldman Sachs Growth /(13)(14)/.............................
WRL T. Rowe Price Dividend Growth /(13)(14)/....................
WRL T. Rowe Price Small Cap /(14)/..............................
WRL Salomon All Cap /(13)(14)/..................................
WRL Pilgrim Baxter Mid Cap Growth /(13)(14)/....................
The Dow(SM) Target 10 (July) /(15)/ ............................
The Dow(SM) Target 5 (July) /(15)/ .............................
The Dow(SM) Target 10 (January) /(15)/ .........................
The Dow(SM) Target 10 (January) /(15)/ .........................
==============================================================================================================================
</TABLE>
8
<PAGE>
(1) The service charge applies to the fixed account, the mutual fund account
and the target 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, if surrender occurs during a policy year. 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 annual rider fee for the optional family income protector rider (only
deducted during the accumulation phase) is currently equal to 0.30% of
the minimum annuitization value on the previous policy anniversary. PFL
may, at its discretion, change the rate in the future, but the rate will
never be greater than 0.50% per year. The guaranteed payment fee is only
charged if you annuitize under the family income protector rider, and
then only after annuitization. This fee is reflected in the amount of the
variable payments. The guaranteed payment fee is currently equal to an
effective annual rate of 1.25% of the daily net asset value in the
variable investment options. PFL may at its discretion change the rate in
the future, but the rate will never be greater than 2.25% per year. Once
the family income protector rider is added to your policy, neither the
rider fee nor the guaranteed payment fee that is in effect at that time
will change during the life of that family income protector rider. They
could change if you upgrade.
(3) 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.
(4) The fee table information relating to the underlying funds was provided
to PFL by the underlying funds, their investment advisors 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.
(5) The Board of Trustees of Endeavor Series Trust (the "Trust") and the
Board of Managers of the target account have authorized an arrangement
whereby, subject to best price and execution, executing brokers will
share commissions with the Trust's or the target account's affiliated
broker. Under supervision of the Trustees and the Managers, the
affiliated broker will use the "recaptured commission" to promote
marketing of the Trust's shares and investments in the target account.
The staff of the Securities and Exchange Commission believes that,
through the use of these recaptured commissions, the Trust and the target
account are 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, to the target account or any owner.
Endeavor Series Trust and the target account, based on advice of counsel,
do 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. For more
information on the target account's Brokerage Enhancement Plan, see the
target account's section of this prospectus.
(6) Endeavor Management Co. has agreed, until further notice, to assume
expenses of the Portfolios that exceed the following rates: Endeavor
Asset Allocation--1.25%; Endeavor Money Market--0.99%; T. Rowe Price
Equity Income--1.30%; T. Rowe Price Growth Stock--1.30%; T. Rowe Price
International Stock--1.53%; Endeavor Value Equity--1.30%; Endeavor
Opportunity Value--1.30%; Endeavor Enhanced Index--1.30%; Dreyfus U.S.
Government Securities--1.00%; Dreyfus Small Cap Value--1.30%; Endeavor
Select 50--1.50%; Endeavor High Yield--1.30%. Endeavor Management Co. has
agreed to assume the expenses of the Endeavor Janus Growth Portfolio that
exceed 0.87% until April 30, 2000. Expenses shown for the Endeavor Janus
Growth Portfolio are estimated for 1999.
(7) For the T. Rowe Price International Stock Portfolio, the management fees
before waivers/reimbursements were 0.90% and other expenses after credits
allowed by the custodian were ___%. Therefore, Total Portfolio Annual
Expenses before waivers/reimbursements and after credits allowed by
9
<PAGE>
the custodian for the period ended December 31, 1999 were ______%.
(8) For the Dreyfus U.S. Government Securities Portfolio, the management fees
before waivers/reimbursements were 0.65% and other expenses after credits
allowed by the custodian were _____%. Therefore, Total Portfolio Annual
Expenses before waivers/reimbursements and after credits allowed by the
custodian for the period ended December 31, 1999 were _____%.
(9) For the Endeavor Select 50 Portfolio, the management fees before
waivers/reimbursements were 1.10% and other expenses after credits
allowed by the custodian were _____%. Therefore, Total Portfolio Annual
Expenses before waivers/reimbursement and after credits allowed by the
custodian for the period ended December 31, 1990 were _____% annualized.
(10) For the Endeavor High Yield Portfolio, the management fees before
waivers/reimbursements were 0.775% and other expenses after credits
allowed by the custodian were _____%. Therefore, Total Portfolio Annual
Expenses before waivers/reimbursements and after credits allowed by the
custodian for the period ended December 31, 1999 were _____% annualized.
(11) For the Endeavor Janus Growth Portfolio, the management fees before
waivers/reimbursements were _____% and other expenses after credits
allowed by the custodian were _____%. Therefore, Total Portfolio Annual
Expenses before waivers/reimbursements and after credits allowed by the
custodian for the period ended December 31, 1999 were _____% annualized.
(12) From time to time, the Transamerica VIF Growth Portfolios' investment
adviser, in its own discretion, may voluntarily waive all or part of its
fees and/or voluntarily assume certain portfolio expenses. The expenses
shown in the fee table are the expenses paid for 1999. The expenses shown
in that table reflect the portfolio's adviser's waivers of fees or
reimbursement of expenses, if applicable. It is anticipated that such
waivers or reimbursements will continue for calendar year 2000. Without
such waivers or reimbursements, the annual expenses for the portfolio
would have been as follows: Management Fee -_____%; Other Expenses -
_____%; and Total Portfolio Annual Expenses - _____%.
(13) As compensation for its services to the portfolios, the investment
adviser receives monthly compensation at an annual rate of a percentage
of the average daily net assets of each portfolio. The management fees
for each portfolio are: WRL Janus Global -0.80% up to $2 billion and
0.775% over $2 billion; WRL Salomon All Cap - 0.90% up to $100 million
and 0.80% over $100 million; WRL T. Rowe Price Dividend Growth -0.90% up
to $100 million and 0.80% over $100 million; WRL Pilgrim Baxter Mid Cap
Growth - 0.90% up to $100 million and 0.80% over $100 million; and WRL
Goldman Sachs Growth - 0.90% up to $100 million and 0.80% over $100
million.
(14) 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 estimates.
(15) In addition to the management fees, the target account pays all
expenses not assumed by the manager. The manager has agreed to limit
each target series subaccount's management fee and operating expenses
during its first year of operations to an annual rate of 1.30% of the
target series subaccount's average net assets. (This limit does not
include other fees and deductions such as the mortality and expense
risk fee and administrative charge.) (See the SAI for more details.)
Without this limitation, the management fees and operating expenses
for the July Series are annualized to be 1.56%. Without this
limitation, the management fees and operating expenses for the January
Series are estimated to be 1.60%.
10
<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 mutual fund subaccount or target series subaccount and assuming
the family income protector rider has 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>
- -------------------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
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 not
time period. surrendered or annuitized.
------------------------------------- -------------------------------------
Subaccounts 1 Year 3 Years 1 Year 3 Years
- -------------------------------------------------- ------------------- ----------------- ------------------ ------------------
Endeavor Asset Allocation A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
Endeavor Money Market A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
T. Rowe Price Equity Income A
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
T. Rowe Price Growth Stock A
---- ------------------- ----------------- ------------------ ------------------
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
T. Rowe Price International Stock A
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- ---------------------------------------------
Endeavor Value Equity A
---- ------------------- ----------------- ------------------ ------------------
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
Endeavor Opportunity Value A
---- ------------------- ----------------- ------------------ ------------------
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
Endeavor Enhanced Index A
---- ------------------- ----------------- ------------------ ------------------
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
Dreyfus U.S. Government Securities A
---- ------------------- ----------------- ------------------ ------------------
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
Dreyfus Small Cap Value A
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- ---------------------------------------------
Endeavor Select 50 A
---- ------------------- ----------------- ------------------ ------------------
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
Endeavor High Yield A
---- ------------------- ----------------- ------------------ ------------------
B
---- ------------------- ----------------- ------------------ ------------------
- ---------------------------------------------
Endeavor Janus Growth A
---- ------------------- ----------------- ------------------ ------------------
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
Transamerica VIF Growth A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
VIP Equity-Income A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
VIP II Contrafund A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
VIP III Growth Opportunities A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
</TABLE>
11
<PAGE>
EXAMPLES CONTINUED......
<TABLE>
<CAPTION>
<S> <C> <C>
==============================================================================================================================
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 not
time period. surrendered or annuitized.
------------------------------------- -------------------------------------
Subaccounts 1 Year 3 Years 1 Year 3 Years
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
VIP III Mid Cap A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL Janus Global A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL Alger Aggressive Growth A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL NWQ Value Equity A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL Goldman Sachs Growth A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL T. Rowe Price Dividend Growth A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL T. Rowe Price Small Cap A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL Salomon All Cap A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
WRL Pilgrim Baxter Mid Cap Growth A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
The Dow(SM)Target 10 (July Series) A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
The Dow(SM) Target 5 (July Series) A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
The Dow(SM) Target 10 (January Series) A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
The Dow(SM) Target 5 (January Series) A
---- ------------------- ----------------- ------------------ ------------------
B
- --------------------------------------------- ---- ------------------- ----------------- ------------------ ------------------
</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 estimates 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
0.0750% based on an anticipated average policy value of $40,000.
These examples also reflect the annual fee of 0.30% for the family income
protector rider. Expenses would be lower if you do not elect that rider.
Financial Information. The mutual fund subaccounts and the target series
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.
12
<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 mutual fund account or the target 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 mutual fund account or target 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. 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 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 chose 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.)
13
<PAGE>
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 mutual
fund subaccount(s) and/or target series 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
- -----------------------------------
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
- -----------------------------------------------
only for the fixed period you choose. No funds will remain at the end.
Payment Option 3--Life Income. You may choose between:
- -----------------------------
Fixed Payments
. No Period Certain--We will make level payments only during the annuitant's
lifetime.
. 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 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. You may choose between:
- --------------------------------------------
Fixed Payments
. 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.
Variable Payments
. Payments are made as long as either the payee or the joint payee 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 annuity payment;
THEN:
. we may make only one annuity payment.
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;
14
<PAGE>
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 to
keep PFL informed of their current address.
3. 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
. You (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 return your initial premium payment
at that time unless you let us keep it and credit it as soon as possible.
The date on which we credit your initial premium payment to your policy is the p
olicy 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
assure 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 mutual fund subaccount(s) and/or target
series 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 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
15
<PAGE>
New York Stock Exchange generally closes at 4:00 p.m. eastern time. Holidays
are generally not business days.
4. INVESTMENT CHOICES
The Separate Accounts
There are currently thirty variable subaccounts available under the policies.
There are twenty-six subaccounts of the mutual fund account (which is a portion
of PFL Life Variable Annuity Account D) and four subaccounts of the target
account (the PFL Endeavor Target Account).
The Mutual Fund Account
The mutual fund 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 Morgan Stanley Asset Management
Endeavor Asset Allocation Portfolio
Endeavor Money Market 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
Subadvised by OpCap Advisors
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Subadvised by J.P. Morgan Investment Management Inc.
Endeavor Enhanced Index Portfolio
Subadvised by The Dreyfus Corporation
Dreyfus U.S. Government Securities Portfolio
Dreyfus Small Cap Value Portfolio
Subadvised by Montgomery Asset
Management, LLC
Endeavor Select 50 Portfolio
Subadvised by Massachusetts Financial
Services Company
Endeavor High Yield Portfolio
Subadvised by Janus Capital Corporation
Endeavor Janus Growth Portfolio
TRANSAMERICA VARIABLE
INSURANCE FUND, INC.
Subadvised by Transamerica Investment Services, Inc.
Transamerica VIF Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND -
SERVICE CLASS 2
Managed by Fidelity
Management & Research Company
VIP Equity-Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II -
SERVICE CLASS 2
Managed by Fidelity
Management & Research Company
VIP II Contrafund Portfolio
VARIABLE INSURANCE PRODUCTS FUND III -
SERVICE CLASS 2
Managed by Fidelity
Management & Research Company
VIP III Growth Opportunities Portfolio
VIP III Mid Cap Portfolio
WRL SERIES FUND, INC.
Subadvised by Janus Capital Corporation
WRL Janus Global
Subadvised by Fred Alger Management, Inc.
WRL Alger Aggressive Growth
Subadvised by NWQ Investment Management
Company, Inc.
WRL NWQ Value Equity
Subadvised by Goldman Sachs Asset Management
WRL Goldman Sachs Growth
Subadvised by T. Rowe Price Associates, Inc.
WRL T. Rowe Price Dividend Growth
WRL T. Rowe Price Small Cap
Subadvised by Salomon Brothers Asset Management Inc
WRL Salomon All Cap
Subadvised by Pilgrim Baxter & Associates, Ltd.
WRL Pilgrim Baxter Mid Cap Growth
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
16
<PAGE>
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 based on the amount of assets that PFL or the mutual fund account invests
in the underlying portfolios.
We do not guarantee that any of the mutual fund 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 Target Account
This section gives information on the target account, including the management
and investment strategies, and policies. The following target account investment
choices are currently offered through this policy:
THE TARGET ACCOUNT
- ------------------
Subadvised by First Trust Advisors, L.P.
The Dow(SM) Target 10 (July Series)
The Dow(SM) Target 5 (July Series)
The Dow(SM) Target 10 (January Series)
The Dow(SM) Target 5 (January Series)
General. The target account is a managed separate account and is currently
- -------
divided into four target series subaccounts. Each Series is a separate
subaccount, so there are currently two Target 10 subaccounts (January and July
Series) and two Target 5 subaccounts (January and July Series). Additional
target series subaccounts may be established in the future at the discretion of
PFL. Each target series subaccount invests according to specific investment
strategies.
Under Iowa law, the assets of the target account are owned by PFL, but they are
held separately from the other assets of PFL. To the extent that these assets
are attributable to the policy value of the policies, these assets are not
chargeable with liabilities incurred in any other business operation of PFL.
Income, gains, and losses incurred on the assets in a target series subaccount,
whether or not realized, are credited to or charged against that target series
subaccount without regard to other income, gains or losses of any other account
or subaccount of PFL. Each target series subaccount operates as a separate
investment fund. Therefore, the investment performance of any target series
subaccount should be entirely independent of the investment performance of PFL's
general account assets or any other account or subaccount maintained by PFL.
Management of the Target Account. The investments and administration of each
- --------------------------------
target series subaccount are under the direction of a Board of Managers. The
Board of Managers for each target series subaccount annually selects an
independent public accountant, reviews the terms of the management and
investment advisory agreements, recommends any changes in the fundamental
investment policies, and takes any other actions necessary in connection with
the operation and management of the target series subaccounts.
Endeavor Management Co., an investment adviser registered with the SEC under the
Investment Advisers Act of 1940 and an affiliate of PFL, is the target account's
manager. The manager performs administerial and managerial functions for the
target account. First Trust Advisors L.P., an Illinois limited partnership
formed in 1991 and an investment adviser registered with the SEC under the
Investment Advisers Act of 1940, is the target account's investment adviser. The
adviser is responsible for selecting the investments of each target series
subaccount consistent with the investment objectives and policies of that target
series subaccount, and will conduct securities trading for the target series
subaccount. The manager has the ultimate responsibility to oversee the advisers
and recommend their hiring, termination and replacement.
In response to an exemptive application filed by the manager, the SEC has issued
an exemptive order that will permit the manager, subject to certain conditions,
and without the approval of owners who have an interest in a target series
subaccount to: (a) employ a new unaffiliated investment adviser for a target
series subaccount pursuant to the terms of a new investment advisory agreement,
in each case either as a replacement for an existing investment adviser or as an
additional investment adviser; (b) change the terms of any investment advisory
agreement; and (c) continue the employment of an existing investment adviser on
the same advisory contract terms where a contract has been assigned because of a
change in control of the investment adviser. In such circumstances, owners who
17
<PAGE>
have an interest in a target series subaccount would receive notice of such
action, including the information concerning the investment adviser that
normally is provided in a proxy statement. The exemptive order also permits
disclosure of fees paid to multiple unaffiliated investment advisers on an
aggregate basis only.
Portfolio Manager. There is no one individual primarily responsible for
- -----------------
portfolio management decisions for the target account. Investments are made
according to the prescribed strategy under the direction of a committee.
Investment Strategy. Each of the Dow(SM) Target 10 Subaccounts will invest in
- -------------------
the common stock of the ten companies in the DJIA that have the highest dividend
yield as of a specified business day and hold those stocks for the following 12-
month period.
Each of the Dow(SM) Target 5 Subaccounts will invest in the common stock of the
five companies with the lowest per share stock price of the ten companies in the
DJIA that have the highest dividend yield as of a specified business day and
hold those stocks for the following 12-month period. The objective of each
target series subaccount is to provide an above-average total return through a
combination of dividend income and capital appreciation. Each target series
subaccount will function in a similar manner. Each target series subaccount will
initially invest in substantially equal amounts in the common stock of the
companies described above for each target series subaccount (as held in a target
series subaccount, such common stock is referred to as the common shares)
determined as of the initial stock selection date.
Each target series subaccount may have different investment series running
simultaneously for different 12-month periods. For example, within The Dow(SM)
Target 10 Subaccount there may be more than one series, each with a different
initial stock selection date. At the initial stock selection date, a percentage
relationship among the number of common shares in a series will be established.
When additional funds are deposited into the series, additional common shares
will be purchased in such numbers reflecting as nearly as practicable the
percentage relationship of the number of common shares established at the
initial purchase. Sales of common shares by the series will likewise attempt to
replicate the percentage relationship of common shares. The percentage
relationship among the number of common shares in the series should therefore
remain stable. However, given the fact that the market price of such common
shares will vary throughout the year, the value of the common shares of each of
the companies as compared to the total assets of the series will fluctuate
during the year, above and below the proportion established on a stock selection
date.
As of each annual stock selection date, a new percentage relationship will be
established among the number of common shares described below for each series on
such date. Common shares may be sold or new shares bought each year so that the
series is equally invested in the common stock of each company meeting the
series' investment criteria. Thus the series may or may not hold common shares
of the same companies as the previous year. Any purchase or sale of additional
common shares during the year will duplicate, as nearly as practicable, the
percentage relationship among the number of common shares as of the annual stock
selection date since the relationship among the value of the common shares on
the date of any subsequent transactions may be different than the original
relationship among their value. The adviser may depart from the specified
strategy to meet tax diversification requirements. (See Section 6, "TAXES -
Diversification and Distribution Requirements").
There are currently four target series subaccounts. There are two "The Dow(SM)
Target 10 Subaccounts," which contain a July Series (a June 30, 1998 initial
stock selection date) and a January Series (a December 31, 1998 initial stock
selection date). Similarly, there are two "The Dow(SM) Target 5 Subaccounts,"
which contain a July Series (June 30, 1998 initial stock selection date) and a
January Series (December 31, 1998 initial stock selection date).
The target account may determine to offer additional target series subaccounts
in the future, which may have different selection criteria or stock selection
dates (or both).
The Dow(SM) Target 10 Subaccounts and The Dow(SM) Target 5 Subaccounts have not
been designed so that their prices will parallel or correlate with movements in
the DJIA. It is expected that their prices will not do so.
An investment in a target series subaccount is an investment in a portfolio of
equity securities with high dividend yields in one convenient purchase.
Investing in the stocks of the DJIA with the highest dividend yields amounts to
a
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contrarian strategy because these shares are often out of favor. Such strategy
may be effective in achieving a target series subaccount's investment objectives
because regular dividends are common for established companies and dividends
have accounted for a substantial portion of the total return on stocks of the
DJIA as a group. However, there is no guarantee that either a target series
subaccount's objective will be achieved or that a target series subaccount will
provide for capital appreciation in excess of such target series subaccount's
expenses.
Each target series subaccount may also invest in futures and options, hold
warrants, and lend its common shares.
The Dow Jones Industrial Average(SM). The DJIA consists of 30 stocks. The stocks
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are chosen by the editors of The Wall Street Journal as representative of the
broad market and of American industry. The companies are major factors in their
industries and their stocks are widely held by individuals and institutional
investors. Changes in the components of the DJIA are made entirely by the
editors of The Wall Street Journal without consultation with the companies, the
New York Stock Exchange or any official agency. For the sake of continuity,
changes are made rarely. Most substitutions have been the result of mergers, but
from time to time, changes may be made. The components of the DJIA may be
changed at any time, for any reason. Any changes in the components of the DJIA
made after the initial stock selection date of any series will not cause a
change in the identity of the common shares included in that series, including
any equity securities deposited in that series, except on an annual stock
selection date. The following is a list of the companies that currently comprise
the DJIA as of ________________.
AT&T Corporation
Allied Signal
Aluminum Company of America
American Express Company
Boeing Company
Caterpillar Inc.
Chevron Corporation
Coca Cola Company
Walt Disney Company
International Business Machines Corporation
International Paper Company
Johnson & Johnson
McDonald's Corporation
Merck & Company, Inc.
Minnesota Mining & Manufacturing Company
E.I. du Pont de Nemours & Company
Eastman Kodak Company
Exxon Corporation
General Electric Company
General Motors Corporation
Goodyear Tire & Rubber Company
Hewlett Packard Company
J.P. Morgan & Company, Inc.
Philip Morris Companies, Inc.
Procter & Gamble Company
Sears, Roebuck & Company
Travelers Group
Union Carbide Corporation
United Technologies Corporation
Wal Mart Stores Inc.
The target account is not sponsored, endorsed, sold or promoted by Dow Jones.
Dow Jones makes no representation or warranty, express or implied, to the owners
of the target account or any member of the public regarding the advisability of
purchasing the target account. Dow Jones' only relationship to First Trust
Advisors, Endeavor Management Co. (Endeavor) and PFL is the licensing of certain
copyrights, trademarks, service marks and service names of Dow Jones. Dow Jones
has no obligation to take the needs of First Trust Advisors, Endeavor, PFL or
the owners of the target account into consideration in determining, composing or
calculating the Dow Jones Industrial Average(SM). Dow Jones is not responsible
for and has not participated in the determination of the terms and conditions of
the target account to be issued, including the pricing or the amount payable
under the policy. Dow Jones has no obligation or liability in connection with
the administration or marketing of the target account.
Dow Jones does not guarantee the accuracy and/or the completeness of the Dow
Jones Industrial Average(SM) or any data included therein and Dow Jones shall
have no liability for any errors, omission, or interruptions therein. Dow Jones
makes no warranty, express or implied, as to results to be obtained by First
Trust Advisors, Endeavor, PFL, owners of the target account or any other person
or entity from the use of the Dow Jones Industrial Average(SM) or any data
included therein. Dow Jones makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the Dow Jones Industrial Average(SM)
or any data included therein. Without limiting any of the foregoing, in no
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event shall Dow Jones have any liability for any lost profits or indirect,
punitive, special or consequential damages (including lost profits), even if
notified of the possibility of such damages.
Investment Risks. There is no assurance that any target series subaccount will
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achieve its stated objective. More detailed information, including a description
of each target series subaccount's investment objective and policies and a
description of risks involved in investing in each of the target series
subaccounts and of each target series subaccount's fees and expenses is
contained in the SAI. You should read the SAI carefully before investing in a
target series subaccount.
Each subaccount consists of different issues of equity securities, all of which
are listed on a securities exchange. In addition, each of the companies whose
equity securities are included in a subaccount are actively traded,
well-established corporations.
Common shares may be sold under certain circumstances. Common shares, however,
will not be sold by a target series subaccount to take advantage of market
fluctuations or changes in anticipated rates of appreciation or depreciation, or
if the common shares no longer meet the criteria by which they were selected.
However, common shares will be sold on or about each annual stock selection date
in accordance with the adviser's stock selection strategy.
Even though the common shares are listed on a securities exchange, the principal
trading market for the common shares may be in the over-the-counter market. As a
result, the existence of a liquid trading market for the common shares may
depend on whether dealers will make a market in the common shares. There can be
no guarantee that a market will be made for any of the common shares, that any
market for the common shares will be maintained or that there will be sufficient
liquidity of the common shares in any markets made. The price at which the
common shares may be sold to meet transfers, partial withdrawals or surrenders
and the value of a target series subaccount will be adversely affected if
trading markets for the common shares are limited or absent.
Investors should consider the following before making a decision to invest in a
target series subaccount:
. The value of the common shares will fluctuate over the life of a target
series subaccount and may be more or less than the price at which they were
purchased by such target series subaccount.
. The common shares may appreciate or depreciate in value (or pay dividends)
depending on the full range of economic and market influences affecting
these securities, including the impact of the target series subaccounts'
purchase and sale of the common shares and other factors.
. Transfers between the target account investment portfolios during the 12-
month period from stock selection date to stock selection date run counter
to the investment strategy of the target account investment portfolios,
namely holding the applicable stocks for a 12-month period, and may
adversely impact your investment performance. Similarly, using dollar cost
averaging and asset rebalancing for the target account investment
portfolios also runs counter to their investment strategies.
. The investment policies of each target series subaccount are narrow and
innovative, and the Internal Revenue Service has not addressed them. If you
are deemed to have investment control of the assets in a target series
subaccount, then you could be treated as the owner of those assets. If so,
income and gains from the subaccount's assets would be includable (pro
rata) in your taxable income each year.
You should understand the risks of investing in common stocks before making an
investment in a target series subaccount. In general, the value of your
investment will fall if the financial condition of the issuers of the common
stocks becomes impaired or if the general condition of the relevant stock market
worsens. Common stocks are especially susceptible to general stock market
movements and to volatile increases and decreases of value, as market confidence
in and perceptions of the issuers change. These perceptions are based on
unpredictable factors including:
. expectations regarding government;
. economic, monetary and fiscal policies;
. inflation and interest rates;
. economic expansion or contraction; and
. global or regional political, economic or banking crises.
At times, due to the objective nature of the investment selection criteria,
target series subaccounts may be considered concentrated in various industries.
PFL cannot predict the direction or scope of any of these factors. Generally,
common stocks do not receive payments until all obligations of the issuer have
been paid. Unlike debt
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securities, common stocks do not offer any assurance of income or provide
guaranteed protection of capital.
An investment in The Dow/SM/ Target 5 Subaccount may subject you to greater
market risk than other target series subaccounts that contain a more diversified
portfolio of securities since it contains only five stocks.
The target series subaccounts are not actively managed and common shares will
not be sold to take advantage of market fluctuations or changes in anticipated
rates of appreciation.
Please note that each strategy has previously under-performed the DJIA.
PFL and the manager shall not be liable in any way for any default, failure or
defect in any common share.
The target account is also available as an investment option in other types of
variable annuity policies sold by PFL. Those other policies may have different
features and different charges than the Access Variable Annuity described in
this prospectus, and therefor are accounted for through a different class of
accumulation or annuity units. PFL does not believe there are any disadvantages
to this arrangement; rather, it leads to larger pools of assets which can result
in economies of scale.
Portfolio Turnover. It is anticipated that each target series subaccount's
- ------------------
annual rate of portfolio turnover normally will not exceed 100%. Portfolio
turnover for each target series subaccount will vary from year to year, and
depending on market conditions, the portfolio turnover rate could be greater in
periods of unusual market movement. A higher turnover rate would result in
heavier brokerage commissions or other transactional expenses which must be
borne, directly or indirectly by each target series subaccount, and ultimately
by you.
Brokerage Enhancement Plan. The target account has adopted, but is not currently
- --------------------------
participating in, a Brokerage Enhancement Plan (the "Plan") for each of its
subaccounts in accordance with the substantive provisions of Rule 12b-1 under
the Investment Company Act of 1940. The Plan uses available brokerage
commissions to promote the sale and distribution of interests in the
subaccount's shares. Under the Plan, the target account is using recaptured
commissions to pay for distribution expenses. Except for recaptured commissions,
unlike asset based charges imposed by many mutual funds for sales expenses, the
subaccounts do not incur any asset based or additional fees or charges under the
Plan.
Under the Plan, the manager is authorized to direct investment advisers to use
certain broker/dealers for securities transactions. (The duty of best price and
execution still applies to these transactions.) These broker/dealers have agreed
to give a percentage of their commission from the sale and purchase of
securities to Transamerica Capital, Inc.
Transamerica Capital, Inc. will not make any profit from participating in the
Plan. It is obligated to use any money given to it under the Plan for
distribution expenses (other than a minimal amount to defray its legal and
administrative costs). The rest will be spent on activities that are meant to
result in the sale of the policies, including:
. holding or participating in seminars and sales meetings promoting the
subaccounts;
. paying marketing fees requested by broker/dealers who sell policies;
. training sales personnel;
. compensating broker/dealers and/or registered representatives in connection
with the allocation of cash values and premiums to the target account;
. printing and mailing prospectuses, statements of additional information and
reports to prospective owners; and
. creating and mailing advertising and sales literature.
The Fixed Account
Premium payments allocated and amounts transferred to the fixed account become
part of the general account of PFL. 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 Investment Company
Act of 1940 (the "1940 Act"). Accordingly, neither the general account nor any
interests therein are generally subject to the provisions of the 1933 or 1940
Acts. PFL has been advised that the staff of the SEC has not reviewed the
disclosures in this prospectus which relate to the fixed 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
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<PAGE>
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 the other
general assets of PFL. 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 out of any mutual fund
subaccount or target series subaccount as often as you wish within certain
limitations.
Transfers out of a guaranteed period option of the fixed account are limited to
the following:
. At the end of a guaranteed period. However, you must notify us within 30
days prior to the end of the guaranteed period that you wish to transfer
the amount in that guaranteed period option to another investment choice.
. 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 mutual fund subaccount or target series 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 assure same day pricing of the transaction.
During the income phase of your policy, you may transfer values out of any
mutual fund subaccount or target series 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 mutual
fund subaccount or target series subaccount from which the transfer is being
made.
Transfers may be made by telephone, subject to the limitations described below
under "Telephone Transactions."
Currently, there is no charge for transfers. 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.
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<PAGE>
Family Income Protector
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;
. 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 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 2 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 to calculate the family income protector
payment and does not establish or guarantee a policy value or guarantee
performance of any investment option.
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. Please note that the
benefits and fees under the new rider may differ from your benefits and fees
prior to upgrading.
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.
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Note Carefully--If you annuitize at any time other than indicated above, you
cannot use the family income protector.
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, 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.
PFL may change the rider fee percentage in the future, but it will never be
greater than 0.50%. The rider fee is deducted from each variable investment
option in proportion to the amount of policy value in each mutual fund
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 mutual fund
account and/or the target account, is reflected in the amount of the variable
payments you receive if you annuitize under the family income protector rider.
PFL may change the guaranteed payment fee in the future, but it will never be
greater than 2.25%. 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).
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.
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 mutual fund subaccounts and/or the target series subaccounts. You may
specify the dollar amount to be transferred either monthly or quarterly; however
each transfer must be at least $500. A minimum of 6 monthly or 4 quarterly
transfers are required and a maximum of 24 monthly or 8 quarterly transfers are
allowed. Transfers must begin within 30 days. We will make the transfers on the
28th day of the applicable month.
If you choose to allocate additional premium payments to the dollar cost
averaging program, you must complete a separate request for each additional
premium payment. There is no charge for this program.
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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%.
Asset Rebalancing
During the accumulation phase you can instruct us to automatically rebalance the
amounts in your mutual fund subaccounts or target series 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.
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 make this request in writing.
You will be required to provide certain information for identification purposes
when requesting a transaction by telephone. 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
assure same-day pricing of the transaction. We may discontinue this option at
any time.
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 the interest
credited in the fixed account to the guaranteed minimum of 3% per year. See
"Excess Interest Adjustment" in Section 7 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 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 mutual fund subaccount and
target series 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. This daily charge is equal to an annual rate of 0.40% of the daily net
asset value of the mutual fund account and the target 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.
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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 mutual fund 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.
Target Account Fees
For its services to the target account, the manager is paid a fee of 0.75% of
the average daily net assets of each target series subaccount. For the adviser's
services to the target account, the manager pays the adviser a fee equal to
0.35% of the average daily net assets of each target series subaccount.
In addition to the management fees, the target account pays all expenses not
assumed by the manager, including, without limitation, the following:
. legal expenses;
. accounting and auditing services;
. interest;
. taxes;
. costs of printing and distributing reports to shareholders;
. proxy materials and prospectuses;
. custodian, transfer agent, and dividend disbursing agent charges;
. registration fees;
. fees and expenses of the Board of Managers who are not affiliated persons
of the manager or an adviser;
. insurance;
. brokerage costs
. litigation; and
. other extraordinary or nonrecurring expenses.
All general target account expenses are allocated among and charged to the
assets of the target series subaccounts on a basis that the Board of Managers
deems fair and equitable. This may be on the basis of relative net assets of
each target series subaccount or the nature of the services performed and
relative applicability to each target series subaccount.
The manager has agreed to limit each target series subaccount's management fee
and operating expenses during its first year of operations to an annual rate of
1.30% of the subaccount's average net assets. (This limit does not include other
fees and deductions, such as the mortality and expense risk fee and
administrative charge.)
6. TAXES
NOTE: PFL has prepared the following information on federal income taxes as a
general discussion of the subject. It is not intended as tax advice to any
individual. You should consult your own tax adviser about your own
circumstances.
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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.
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--Nonqualified Policies
If you make a withdrawal from your policy before the annuity commencement date,
the Internal Revenue Code treats that withdrawal as first coming from earnings
and then from your premium payments. When you make a withdrawal you are taxed on
the amount of the withdrawal that is earnings. (The excess interest adjustment
resulting from the withdrawal may affect the amount on which you are taxed.)
Different rules apply for annuity payments. See "Annuity Payments" below.
The Internal Revenue Code also provides that withdrawn earnings may be subject
to a penalty. The amount of the penalty is equal to 10% of the amount that is
includable in income. Some withdrawals will be exempt from the penalty. They
include any amounts:
. paid on or after the taxpayer reaches age 59 1/2;
. paid after the taxpayer dies;
. paid if the taxpayer becomes totally disabled (as that term is defined in
the Internal Revenue Code);
. paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity;
. paid under an immediate annuity; or
. which come from premium payments made prior to August 14, 1982.
All deferred non-qualified 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.
Withdrawals--Qualified Policies
The above information describing the taxation of nonqualified policies does not
apply to qualified policies.
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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 the withdrawal of premium payments 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.
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.
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. ss.1.817-5) apply
a diversification requirement to each of the mutual fund subaccounts and the
target series subaccounts. The mutual fund account, through its underlying funds
and their portfolios, and the target account, through its subaccounts, 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. PFL has entered into
an agreement with First Trust Advisers, L.P., the adviser of the target account,
which requires the target series subaccounts to be operated in compliance with
the Treasury regulations. The adviser reserves the right to depart from either
target series subaccount's investment strategy in order to meet these
diversification requirements. See the SAI for more information concerning
diversification requirements.
Owner Control. In certain circumstances, owners of variable annuity contracts
- -------------
may be considered the owners, for federal income tax purposes, of the assets of
the mutual fund account used to support their contracts. In those circumstances,
income and gains from the mutual fund 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 mutual fund 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 mutual fund 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. Moreover, the investment strategies for the target series
subaccounts are narrow and innovative and have not been addressed by the IRS.
These differences could result in you being treated as the owner of the assets
of the mutual fund account or the target account. In addition, PFL does not know
what standards will be set forth, if any, in the
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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 mutual fund account or the target account.
Distribution Requirements. The policy must meet certain distribution
- -------------------------
requirements at the death of an owner in order to be treated as an annuity
policy. These distribution requirements are discussed in the SAI. PFL may modify
the policy to attempt to maintain favorable tax treatment.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the policy because of the death of an owner or
the annuitant. Generally, such amounts are includable in the income of the
recipient:
. if distributed in a lump sum, these amounts are taxed in the same manner as
a full surrender; or
. if distributed under an annuity payment option, these amounts are taxed in
the same manner as annuity payments.
For these purposes, the "investment in the contract" is not affected by the
owner's or annuitant's death. That is, the "investment in the contract" remains
generally the total premium payments, less amounts received, which were not
includable in gross income. (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.
If you select more than one annuity payment option, special rules govern the
allocation of the policy's entire "investment in the contract" to each such
option, for purposes of determining the excludable amount of each payment
received under that option. We advise you to consult a competent tax adviser as
to the potential tax effects of allocating amounts to any particular annuity
payment option.
If, after the annuity commencement date, annuity payments stop because an
annuitant died, the excess (if any) of the "investment in the contract" as of
the annuity commencement date over the aggregate amount of annuity payments
received that was excluded from gross income is generally allowable as a
deduction for your last taxable year.
Transfers, Assignments or Exchanges of Policies
A transfer of ownership or assignment of a policy, the designation of an
annuitant or other beneficiary who is not also the owner, the selection of
certain annuity commencement dates, or a change of annuitant, may result in
certain income or gift tax consequences to the owner that are beyond the scope
of this discussion. An owner contemplating any such transfer, assignment,
selection, or change should contact a competent tax adviser 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.
7. ACCESS TO YOUR MONEY
Surrenders
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);
. by taking systematic payouts; or
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. by taking annuity payments.
If you want to make a complete withdrawal, you will receive:
. the value of your policy; plus or minus
. any excess interest adjustment; minus
. 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 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 9, 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.
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 mutual fund account or target 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 all required
information is received by PFL. PFL may be permitted to defer such payments from
the mutual fund account and target 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 mutual fund subaccounts and target
series 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.
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.
Certain conditions must be satisfied. See the SAI for more details.
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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, and 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.
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 select 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.
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 can select 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.
8. PERFORMANCE
The Mutual Fund Account
PFL periodically advertises performance of the various mutual fund 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 mutual fund
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 mutual fund 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
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the type of performance information shown. Future performance will vary and
future results will not be the same as the results shown.
The Target Account
Performance information regarding the target series subaccounts is in Appendix A
and in the SAI.
9. 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
- ------------------------------------
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.
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 must surrender the policy for the policy value increased or
decreased by an excess interest adjustment within five years of your death.
Note carefully. If the owner does not name a contingent owner, the owner's
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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.
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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 an 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 benefit will be the
greater of the policy value or cash value as of the date of death.
5% Annually Compounding through age 80 Death Benefit
- ----------------------------------------------------
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 81/st/
birthday.
We deduct higher charges for this guaranteed minimum death benefit than for the
Return of Premium Death Benefit.
Annual Step-Up through age 80 Death Benefit
- -------------------------------------------
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 81/st/ 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.
Return of Premium Death Benefit
- -------------------------------
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.
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.
10. 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
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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 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 Mutual Fund Account
PFL established a mutual fund account, called PFL Life Variable Annuity Account
D, under the laws of the State of Iowa on February 20, 1997. The mutual fund
account receives and currently invests the premium payments that are allocated
to it for investment in shares of the underlying mutual fund portfolios.
The mutual fund account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940. However, the SEC does not supervise
the management, the investment practices, or the policies of the separate
account or PFL. Income, gains and losses, whether or not realized, from assets
allocated to the mutual fund account are, in accordance with the policies,
credited to or charged against the mutual fund account without regard to PFL's
other income, gains or losses.
The assets of the mutual fund account are held in PFL's name on behalf of the
mutual fund account and belong to PFL. However, those assets that underlie the
policy are not chargeable with liabilities arising out of any other business PFL
may conduct. The mutual fund account includes other subaccounts that are not
available under the policy.
The Target Account
PFL established the PFL Endeavor Target Account (the target account) under the
laws of the state of Iowa on September 15, 1997. The target account is
registered with the SEC under the Investment Company Act of 1940, as amended, as
an open-end management investment company and meets the definition of a separate
account under federal securities laws. However, the SEC does not supervise the
management or the investment practices or policies of the target account or PFL.
The two Dow/SM/ Target 10 Subaccounts (January and July Series) and the two
Dow/SM/ Target 5 Subaccounts (January and July Series) are non-diversified
target series subaccounts of the target account.
Legislation. Legislation may be enacted at any time that could negatively affect
- -----------
the common shares in the target series subaccounts or the issuers of the common
shares. Changing approaches to regulation, particularly with respect to the
environment or with respect to the petroleum industry, may have a negative
impact on certain companies represented in the target series subaccounts. There
can be no assurance that future legislation, regulation or deregulation will not
have a material adverse effect on the target series subaccounts or will not
impair the ability of the issuers of the common shares to achieve their business
goals.
Mixed and Shared Funding
Before making a decision concerning the allocation of premium payments to a
particular mutual fund subaccount, please read the prospectuses for the
underlying funds. The underlying funds are not limited to selling their shares
to this mutual fund account and can accept investments from any mutual fund
account or qualified retirement plan. Since the portfolios of the underlying
funds are available to registered mutual fund accounts offering variable annuity
products of PFL, as well as variable annuity and 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 mutual fund account
and one or more of the separate accounts of another participating insurance
company. In the event of a material conflict, the affected insurance companies,
including PFL, agree to take any necessary steps to resolve the matter. This
includes removing their mutual fund accounts from the underlying
34
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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
Mutual Fund Account. 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.
Target Account. You (or the person receiving annuity payments) can vote on
- --------------
certain matters with respect to the target series subaccounts you have an
interest in. Such matters include:
. changes in the investment advisory agreement;
. changes in the fundamental investment policies;
. any other matter requiring a vote of persons holding voting interests; and
. matters pursuant to the requirements of Rules 12b-1 and 18f-2 of the
Investment Company Act of 1940.
On certain matters, each target series subaccount may vote separately. Each
person having a voting interest will receive proxy material, reports, and other
materials relating to the appropriate target series subaccount.
Distributor of the Policy
AFSG Securities Corporation is the principal underwriter of the policy. Like
PFL, it is an indirect wholly owned subsidiary of AEGON USA, Inc. It is located
at 4333 Edgewood Road N.E., Cedar Rapids, IA 52499-0001. AFSG Securities
Corporation is registered as a broker/dealer under the Securities Exchange Act
of 1934. It is a member of the National Association of Securities Dealers, Inc.
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.
Non-Participating
The policy does not participate or share in the profits or surplus earnings of
PFL. No dividends are payable on 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 charter member of the Insurance Marketplace Standards Association
(IMSA). IMSA is an independent, voluntary organization of life insurance
companies. It promotes high ethical standards in the sales, advertising and
servicing of individual life insurance and annuity products. Companies must
undergo a rigorous self and independent assessment of their practices to become
a member of IMSA. The IMSA logo in our sales literature shows our ongoing
commitment to these standards.
35
<PAGE>
Legal Proceedings
There are no legal proceedings to which the mutual fund account or target
account is a party or to which the assets of the account are subject. PFL, like
other life insurance companies, is involved in lawsuits. In some class action
and other lawsuits involving other insurers, substantial damages have been
sought and/or material settlement payments have been made. Although the outcome
of any litigation cannot be predicted with certainty, PFL believes that at the
present time there are no pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the mutual fund account, target
account or PFL.
Financial Statements
The financial statements of PFL and the target account are included in the SAI.
As of the date of this prospecuts, the mutual fund 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
Glossary of Terms
The Policy--General Provisions
Certain Federal Income Tax
Consequences
Investment Experience
Family Income Protector - Hypothetical Illustration
Historical Performance Data
The Target Account
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
36
<PAGE>
APPENDIX A
HISTORICAL PERFORMANCE DATA
Standardized Performance Data
PFL may advertise historical yields and total returns for the subaccounts of the
mutual fund 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 mutual fund 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 mutual fund
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.
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
37
<PAGE>
the mortality and expense risk fee and administrative charge. Table 1 does not
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>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TABLE 1
Adjusted Historical Average Annual Total Returns (1)
- ----------------------------------------------------------------------------------------------------------------------------
5% Annually Compounding through age 80 and Annual Step-Up through age 80
(Total Separate Account Annual Expenses: 1.85%)
- ----------------------------------------------------------------------------------------------------------------------------
10 Year Corresponding
or Portfolio
Portfolio 1 Year 5 Year Inception Inception Date
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Endeavor Asset Allocation........................... April 8, 1991
T. Rowe Price Equity Income......................... January 3, 1995
T. Rowe Price Growth Stock.......................... January 3, 1995
T. Rowe Price International Stock (2)............... April 8, 1991
Endeavor Value Equity............................... May 27, 1993
Endeavor Opportunity Value.......................... November 18, 1996
Endeavor Enhanced Index............................. May 1, 1997
Dreyfus U.S. Government Securities.................. May 4, 1994
Dreyfus Small Cap Value (3)......................... May 4, 1993
Endeavor Select 50.................................. February 2, 1998
Endeavor High Yield................................. June 2, 1998
Endeavor Janus Growth (4)........................... October 2, 1986
Transamerica VIF Growth............................. February 26, 1969
VIP Equity-Income................................... October 9, 1986
VIP II Contrafund................................... January 3, 1995
VIP III Growth Opportunities........................ January 3, 1995
VIP III Mid Cap..................................... December 28, 1998
WRL Janus Global.................................... December 3, 1992
WRL Alger Aggressive Growth......................... March 1, 1994
WRL NWQ Value Equity................................ May 1, 1996
WRL Goldman Sachs Growth............................ May 3, 1999
WRL T. Rowe Price Dividend Growth................... May 3, 1999
WRL T. Rowe Price Small Cap......................... May 3, 1999
WRL Salomon All Cap................................. May 3, 1999
WRL Pilgrim Baxter Mid Cap Growth................... May 3, 1999
- ----------------------------------------------------------------------------------------------------------------------------
+Ten Year Date
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
TABLE 1 continued
Adjusted Historical Average Annual Total Returns(1)
- ---------------------------------------------------------------------------------------------------------------------------
Return of Premium
(Total Separate Account Annual Expenses: 1.70%)
- ---------------------------------------------------------------------------------------------------------------------------
Corresponding
10 Year or Portfolio
Portfolio 1 Year 5 Year Inception Inception Date
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Endeavor Asset Allocation........................... April 8, 1991
T. Rowe Price Equity Income......................... January 3, 1995
T. Rowe Price Growth Stock.......................... January 3, 1995
T. Rowe Price International Stock (2)............... April 8, 1991
Endeavor Value Equity............................... May 27, 1993
Endeavor Opportunity Value.......................... November 18, 1996
Endeavor Enhanced Index............................. May 1, 1997
Dreyfus U.S. Government Securities.................. May 4, 1994
Dreyfus Small Cap Value (3)......................... May 4, 1993
Endeavor Select 50.................................. February 2, 1998
Endeavor High Yield................................. June 2, 1998
Endeavor Janus Growth (4)........................... October 2, 1986
Transamerica VIF Growth............................. February 26, 1969
VIP Equity-Income................................... October 9, 1986
VIP II Contrafund................................... January 3, 1995
VIP III Growth Opportunities........................ January 3, 1995
VIP III Mid Cap..................................... December 28, 1998
WRL Janus Global.................................... December 3, 1992
WRL Alger Aggressive Growth......................... March 1, 1994
WRL NWQ Value Equity................................ May 1, 1996
WRL Goldman Sachs Growth............................ May 3, 1999
WRL T. Rowe Price Dividend Growth................... May 3, 1999
WRL T. Rowe Price Small Cap......................... May 3, 1999
WRL Salomon All Cap................................. May 3, 1999
WRL Pilgrim Baxter Mid Cap Growth................... May 3, 1999
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
+Ten Year Date
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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) This portfolio began operations on April 8, 1991, as the Global Growth
Portfolio. However, 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).
(3) 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.
(4) Effective April 30, 1999, shares of the WRL Janus Growth Portfolio were
removed and replaced with shares of the Endeavor Janus Growth Portfolio.
The Endeavor Janus Growth Portfolio has the same investment objectives,
the same investment advisor (Janus Capital Corporation), and the same
advisory fees as the WRL Janus Growth Portfolio. Performance prior to May
1, 1999 reflects performance of the annuity subaccount while it was
invested in the WRL Growth Portfolio.
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 from the five year and from inception periods would
have been lower.
39
<PAGE>
HISTORICAL PERFORMANCE DATA
THE TARGET STRATEGIES AND THE DOW JONES INDUSTRIAL AVERAGE(SM)
The total return for each target series subaccount will also reflect the
manager's fee and other operating expenses.
Target Strategies--Performance Data
Certain aspects of the investment strategies can be demonstrated using
historical data.
The following table contains three columns that show the performance of:
Column One: the Ten Highest Dividend Yielding Stocks Strategy
for the DJIA;
Column Two: Five Lowest Priced Stocks of the Ten Highest
Dividend Yielding Stocks Strategies in the DJIA; and
Column Three: the performance of the DJIA.
The returns shown in the following table and graphs are not guarantees of future
performance and should not be used as predictors of returns to be expected in
connection with a target series subaccount. Both stock prices (which may
appreciate or depreciate) and dividends (which may be increased, reduced or
eliminated) will affect the returns. Each strategy under performed its
respective index in certain years. Accordingly, there can be no assurance that a
target series subaccount will outperform its respective index over the life of a
target series subaccount or over consecutive rollover periods, if available.
An investor in a target series subaccount would not necessarily realize as high
a total return on an investment in the stocks upon which the hypothetical
returns are based for the following reasons: the total return figures shown do
not reflect brokerage commissions, target series subaccount expenses or taxes;
the target series subaccounts are established at different times of the year;
and the target series subaccounts may not be fully invested at all times or
equally weighted in all stocks comprising a strategy. If the above-mentioned
charges were reflected in the hypothetical returns, the returns would be lower
than those presented here.
40
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURN(2)
Index
Strategy Total Returns Total Returns
---------------------- -------------
5 Lowest Priced of
the 10 Highest
10 Highest Dividend Dividend
Year Yielding Stocks(1) Yielding Stocks(1) DJIA
- ---- ------------------ ------------------ ----
<S> <C> <C> <C>
1975.................................... 56.10% 64.77% 44.46%
1976.................................... 35.18% 40.96% 22.80%
1977.................................... <1.95>% 5.49% <12.91>%
1978.................................... 0.03% 1.23% 2.66%
1979.................................... 13.01% 9.84% 10.60%
1980.................................... 27.90% 41.69% 21.90%
1981.................................... 7.46% 3.19% <3.61>%
1982.................................... 27.12% 43.37% 26.85%
1983.................................... 39.07% 36.38% 25.82%
1984.................................... 6.22% 11.12% 1.29%
1985.................................... 29.54% 38.34% 33.28%
1986.................................... 35.63% 30.89% 27.00%
1987.................................... 5.59% 10.69% 5.66%
1988.................................... 24.57% 21.47% 16.03%
1989.................................... 26.97% 10.55% 32.09%
1990.................................... <7.82>% <15.74>% <0.73>%
1991.................................... 34.20% 62.03% 24.19%
1992.................................... 7.69% 22.90% 7.39%
1993.................................... 27.08% 34.01% 16.87%
1994.................................... 4.21% 8.27% 5.03%
1995.................................... 36.85% 30.50% 36.67%
1996.................................... 28.35% 26.20% 28.71%
1997.................................... 21.68% 19.97% 24.82%
1998.................................... 10.59% 12.36% 18.03%
1999....................................
</TABLE>
- -----------------------------------
(1) The Ten Highest Dividend Yielding Stocks and the Five Lowest Priced Stocks
of the Ten Highest Dividend Yielding Stocks in the DJIA for any given
period were selected by ranking the dividend yields for each of the stocks
in the index, as of the beginning of the period, and dividing by the
stock's market value on the first trading day on the exchange where that
stock principally trades in the given period.
(2) Total Return represents the sum of the percentage change in market value of
each group of stocks between the first trading day of a period and the
total dividends paid on each group of stocks during the period divided by
the opening market value of each group of stocks as of the first trading
day of a period. Total Return does not take into consideration any sales
charges, commissions, expenses or taxes. Total Return dividends are
reinvested semi-annually and all returns are stated in terms of the United
States dollar. Based on the year-by-year returns contained in the table,
over the twenty-five years listed above, the Ten Highest Dividend Yielding
Stocks in the DJIA achieved an average annual total return of _____%, while
the Five Lowest Priced Stocks of the Ten Highest Dividend Yielding Stocks
in the DJIA achieved an average annual total return of _____%. In addition,
over this period, the individual strategies achieved a greater average
annual total return than that of the DJIA, which was _____%. Although each
target series subaccount seeks to achieve a better performance than the
index as a whole, there can be no assurance that a target series subaccount
will achieve a better performance.
The performance shown for the strategies does not guarantee future success, nor
should it be used as a predictor of returns. The Dow/SM/ Target 5 strategy and
The Dow/SM/ Target 10 strategy under-performed the DJIA in 8 and 9,
respectively, of the 25 years shown. There can be no assurance that the
strategies will outperform a given index over any time period, or that they will
have positive results. They have the potential for loss.
The results of the strategies do not represent actual investment advice of First
Trust Advisors L.P. or any actual trading using client assets. They were
achieved by the retroactive application of a model designed with the benefit of
hindsight and should not
41
<PAGE>
be considered indicative of the competence or skill of First Trust Advisors L.P.
In addition, the strategy results do not reflect the impact material, economic,
and market factors might have had on First Trust Advisors L.P.'s decision
making, if First Trust Advisors L.P. had actually managed client money during
the period indicated.
First Trust Advisors L.P. advisory services, though currently offered for the
strategies, were not offered during the entire 25 year period since First Trust
Advisors L.P. was found in 1991, and began supervising unit investment trusts
invested in the strategies in 1994. First Trust Advisors L.P.'s investment
advisory clients have received results different from that set forth above.
Past Performance of the DJIA
[INSERT "prodjia" CHART HERE]
(The numbers will need to be inserted on the EDGAR version ONLY for filing
purposes.)
The chart above represents past performance of the DJIA, the Ten Highest
Dividend Yielding DJIA Stocks and the Five Lowest Priced Stocks of the Ten
Highest Yielding DJIA Stocks (but not The Dow/SM/ Target 10 Subaccount or The
Dow/SM/ Target 5 Subaccount) from January 1, 1974 through December 31, 1999 and
should not be considered indicative of future results. Further, these results
are hypothetical. The chart assumes that all dividends during a year are
reinvested semi-annually and does not reflect sales charges, commissions,
expenses or taxes. There can be no assurance that either The Dow/SM/ Target 10
Subaccount or The Dow/SM/ Target 5 Subaccount will outperform the DJIA.
Investors should not rely on the preceding financial information as an
indication of the past or future performance of the target series subaccounts.
Standardized Performance Data
PFL may advertise historical total returns for the target series subaccounts.
These figures will be calculated according to standardized methods prescribed by
the SEC. They will be based on historical earnings and are not intended to
indicate future performance.
The total return calculations for a target series subaccount do not reflect the
effect of any premium taxes that may be applicable to a particular policy. To
the extent that any or all of a premium tax is applicable to a particular
policy, the total return of that policy will be reduced. For additional
information regarding total returns calculated using the standard formats
briefly summarized above, please refer to the SAI.
Non-Standardized Performance Data
PFL may also advertise or disclose average annual total return or other
performance data in non-standard formats for a target series subaccount. The
non-standardized data may assume that the policy remains in force. The
non-standard performance data may make other assumptions such as the amount
invested in a target series subaccount, differences in time periods to be shown,
or the effect of partial withdrawals or annuity payments and may also make other
assumptions.
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.
42
<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 , 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, the target
account, the mutual fund account, and the underlying fund portfolios.
Dated: , 2000
<PAGE>
TABLE OF CONTENTS
Page
----
GLOSSARY OF TERMS ..........................................................
THE POLICY--GENERAL PROVISIONS .............................................
Owner ..................................................................
Entire Contract ........................................................
Misstatement of Age or Sex .............................................
Addition, Deletion or Substitution of Investments ......................
Excess Interest Adjustment .............................................
Reallocation of Policy Values After the Annuity Commencement Date ......
Annuity Payment Options ................................................
Death Benefit ..........................................................
Death of Owner .........................................................
Assignment .............................................................
Evidence of Survival ...................................................
Non-Participating ......................................................
Amendments .............................................................
Employee and Agent Purchases ...........................................
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ....................................
Tax Status of the Policy ...............................................
Taxation of PFL ........................................................
INVESTMENT EXPERIENCE ......................................................
Accumulation Units .....................................................
Annuity Unit Value and Annuity Payment Rates ...........................
FAMILY INCOME PROTECTOR--ADDITIONAL INFORMATION ............................
HISTORICAL PERFORMANCE DATA ................................................
Money Market Yields ....................................................
Other Subaccount Yields ................................................
Total Returns ..........................................................
Other Performance Data .................................................
Adjusted Historical Performance Data--The Mutual Fund Account ..........
THE TARGET ACCOUNT .........................................................
What is the Investment Strategy? .......................................
Determination of Unit Value; Valuation of Securities ...................
The Board of Managers ..................................................
The Investment Advisory Services .......................................
The Manager ............................................................
Operating Expenses .....................................................
Transfer Agent and Custodian ...........................................
Brokerage Allocation ...................................................
Investment Restrictions ................................................
Fundamental Policies ...................................................
Operating Policies .....................................................
Options and Futures Strategies .........................................
Securities Lending .....................................................
Tax Limitation .........................................................
PUBLISHED RATINGS ..........................................................
STATE REGULATION OF PFL ....................................................
ADMINISTRATION .............................................................
RECORDS AND REPORTS ........................................................
DISTRIBUTION OF THE POLICIES ...............................................
VOTING RIGHTS ..............................................................
The Mutual Fund Account ................................................
The Target Account .....................................................
OTHER PRODUCTS .............................................................
CUSTODY OF ASSETS ..........................................................
LEGAL MATTERS ..............................................................
-2-
<PAGE>
INDEPENDENT AUDITORS .......................................................
OTHER INFORMATION ..........................................................
FINANCIAL STATEMENTS .......................................................
-3-
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit--An accounting unit of measure used in calculating the policy
value in the mutual fund account and the target 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.
Annual Stock Selection Date--The last business day of a specified 12-month
period.
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.
DJIA--The Dow Jones Industrial Average(SM). Thirty stocks chosen by the editors
of "The Wall Street Journal" as representative of the broad market and of
American industry.
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
the general assets of PFL and which are not in the separate accounts.
Guaranteed Period Options--The various guaranteed interest rate periods of the
fixed account, which may be offered by PFL, into which premiums may be paid or
amounts may be transferred.
Initial Stock Selection Date--The date is June 30, 1998 for the July Series.
The date is December 31, 1998 for the January Series.
Mutual Fund 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, to which premium payments under the policies
may be allocated.
-4-
<PAGE>
Mutual Fund Subaccount--A subdivision within the mutual fund account, the assets
of which are invested in specified portfolios of the underlying funds.
Nonqualified Policy--A policy other than a qualified policy.
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 mutual fund account and the target
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.
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.
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.
Target Account--A separate account established and registered as a management
investment company under the 1940 Act to which premium payments under the
policies may be allocated.
Target Series Subaccount--A subdivision within the target account, the assets of
which are invested in common stocks selected according to a specified investment
strategy, with a specific stock selection 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 mutual fund
account or the target 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.
-5-
<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. Words printed in italics in this SAI are defined in the
Glossary of Terms, beginning on page 4.
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.
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.
-6-
<PAGE>
Addition, Deletion, or Substitution of Investments
PFL cannot and does not guarantee that any of the mutual fund subaccounts or
target series subaccounts will always be available for premium payments,
allocations, or transfers. PFL retains the right, subject to any applicable law,
to make certain changes in the mutual fund account and its investments. PFL
reserves the right to eliminate the shares of any portfolio held by a mutual
fund subaccount and to substitute shares of another portfolio of the underlying
funds, or of another registered open-end management investment company for the
shares of any portfolio, if the shares of the portfolio are no longer available
for investment or if, in PFL's judgment, investment in any portfolio would be
inappropriate in view of the purposes of the mutual fund account. To the extent
required by the Investment Company Act of 1940, (the "1940 Act"), as amended,
substitutions of shares attributable to your interest in a mutual fund
subaccount will not be made without prior notice to you and the prior approval
of the Securities and Exchange Commission ("SEC"). PFL retains the right,
subject to any applicable law, to make certain changes in the target account and
its investments. PFL reserves the right to eliminate a target series subaccount
if, in PFL's judgment, investment in any target series subaccount would be
inappropriate in view of the purposes of the policy or for any other reason.
Nothing contained herein shall prevent the mutual fund 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, other
investment vehicle, or, in the case of the target account, in shares of common
stock. 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 mutual fund
account may be (i) operated as a management company under the 1940 Act or any
other form permitted by law, (ii) deregistered under the 1940 Act in the event
such registration is no longer required or (iii) combined with one or more other
mutual fund accounts, and the target account may be (i) operated in any 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
managed accounts. To the extent permitted by applicable law, PFL also may
transfer the assets of the mutual fund account or the target account associated
with the policies to another account or accounts.
Excess Interest Adjustment
Money that you withdraw from, transfer out of, or applied 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.
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 EIA 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.
-7-
<PAGE>
* 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 Free Amount at middle of Policy Year 3 = 50,000* .10 = 5,000.00
- ------------------------------------------------------------------------------------------------------------------------
Amount Subject to excess interest adjustment = 57,161.18-5,000.00 = 52,161.18
- ------------------------------------------------------------------------------------------------------------------------
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>
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 Year 3 = 50,000* .10 = 5,000
- ------------------------------------------------------------------------------------------------------------------------
Amount Subject to Excess Interest Adjustment = 57,161.18-5,000 = 52,161.18
- ------------------------------------------------------------------------------------------------------------------------
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 Year 3 = 50,000* .10 = 5,000
- ------------------------------------------------------------------------------------------------------------------------
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 Year 3 = 50,000* .10 = 5,000
- ------------------------------------------------------------------------------------------------------------------------
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)
= 37,536.18
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Reallocation of Policy Values After the Annuity Commencement Date
After the annuity commencement date, you may reallocate the value of a
designated number of annuity units of a mutual fund subaccount or of a target
series subaccount then credited to a policy into an equal value of annuity units
of one or more other mutual fund subaccounts, target series 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 income or (2) the entire monthly income of the
annuity units in the account or subaccount from which the transfer is being
made. If the monthly income of the annuity units remaining in an account or
subaccount after a reallocation is less than $10, PFL reserves the right to
include the value of those annuity units as part of the transfer. The request
must be in writing to PFL's administrative and service office. There is no
charge assessed in connection with such reallocation. PFL reserves the right to
limit the number of times a reallocation of annuity units may be made in any
given policy year.
After the annuity commencement date, no transfers may be made from the fixed
account to the mutual fund account.
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
-9-
<PAGE>
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 mutual fund account or the target 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 improved to the year 2000
with projection Scale G. ("The 1983 Table a" mortality rates are adjusted based
on improvements in mortality since 1983 to more appropriately reflect increased
longevity. This is accomplished using a set of improvement factors referred to
as projection scale G.) The dollar amount of additional variable annuity
payments will vary based on the investment performance of the subaccount(s) of
the mutual fund account and the target 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:
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
This adjustment assumes an increase in life expectancy, and therefore it results
in lower payments than without such an adjustment.
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-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.
-10-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Example 1
(Assumed Facts for Example)
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
$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
- ----------------------------------------------------------------------------------------------------------------
(Results)
- ----------------------------------------------------------------------------------------------------------------
$ 100 excess interest adjustment (assumes interest rates have decreased 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) = 50,000-14,900
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Summary:
- --------
Reduction in guaranteed minimum death benefit = $22,350
Reduction in policy value = $14,900
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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Example 2
(Assumed Facts for Example)
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
$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
- ----------------------------------------------------------------------------------------------------------------
(Results)
- ----------------------------------------------------------------------------------------------------------------
$ - 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>
Summary:
- --------
Reduction in guaranteed minimum death benefit = $15,100
Reduction in policy value = $15,100
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
-11-
<PAGE>
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
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.
-12-
<PAGE>
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.
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.
Withholding. The portion of any distribution under a policy that is includable
- ------------
in gross income will be subject to federal income tax withholding unless the
recipient of such distribution elects not to have federal income tax withheld.
Election forms will be provided at the time distributions are requested or made.
For certain qualified policies, certain distributions are subject to mandatory
withholding. The withholding rate varies according to the type of distribution
and the owner's tax status. For qualified policies, "eligible rollover
distributions" from section 401(a) plans and section 403(b) tax-sheltered
annuities are subject to a mandatory federal income tax withholding of 20%. An
eligible rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions such as distributions required by the
Code or distributions in a specified annuity form. The 20% withholding does not
apply, however, if the owner chooses a "direct rollover" from the plan to
another tax-qualified plan or IRA. 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
-13-
<PAGE>
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 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 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.
Section 408 of the Code also indicates that no part of the funds for a
traditional individual retirement account 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 under Section 408 of the Code. The
Internal Revenue Service has not reviewed the policy for qualification as an
IRA, and has not addressed in a ruling of general applicability whether an
enhanced death benefit provision, such as the provision in the policy, comports
with IRA qualification requirements.
Roth Individual Retirement Annuities (Roth IRA). The Roth IRA, under Section
- ------------------------------------------------
408A of the Code, contains many of the same provisions as a traditional IRA.
However, there are some differences. First, the contributions are not deductible
and must be made in cash or as a rollover or transfer from another Roth IRA or
other IRA. A rollover from or conversion of an IRA to a Roth IRA may be subject
to tax and other special rules may apply. You should consult a tax adviser
before combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years. The Roth IRA is
available to individuals with earned income and whose adjusted gross income is
under $110,000 for single filers, $160,000 for married filing jointly, and
$10,000 for married filing separately. The amount per individual that may be
contributed to all IRAs (Roth and traditional) is $2,000. Secondly, the
distributions are taxed differently. The Roth IRA offers tax-free distributions
when made from assets which have been held in the account for 5 tax years and
are made after attaining age 59 1/2, to pay for qualified first time homebuyer
expenses (lifetime maximum of $10,000) or due to death or disability. All other
distributions are subject to income tax when made from earnings and may be
subject to a premature withdrawal penalty tax unless an exception applies.
Unlike the traditional IRA, there are no minimum required distributions during
the owner's lifetime; however, required distributions at death are the same.
Section 403(b) Plans. Under Section 403(b) of the Code, payments made by public
- ---------------------
school systems and certain tax exempt organizations to purchase policies for
their employees are excludable from the gross income of the employee, subject to
certain limitations. However, such payments may be subject to FICA (Social
Security) taxes. The 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
-14-
<PAGE>
accordance with the requirements of the Code, Section 403(b) annuities generally
may not permit distribution of (i) elective contributions made in years
beginning after December 31, 1988, and (ii) earnings on those contributions and
(iii) earnings on amounts attributed to elective contributions held as of the
end of the last year beginning before January 1, 1989. Distributions of such
amounts will be allowed only upon the death of the employee, on or after
attainment of age 59 1/2, separation from service, disability, or financial
hardship, except that income attributable to elective contributions may not be
distributed in the case of hardship.
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans. Sections 401(a)
- -------------------------------------------------------------
and 403(a) of the Code permit corporate employers to establish various types of
retirement plans for employees and self-employed individuals to establish
qualified plans for themselves and their employees. Such retirement plans may
permit the purchase of the policies to accumulate retirement savings. Adverse
tax consequences to the plan, the participant or both may result if the policy
is assigned or transferred to any individual as a means to provide benefit
payments. 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 mutual fund account and the target account are 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 mutual fund account or the target
account retained as part of the reserves under the policy. Based on this
expectation, it is anticipated that no charges will be made against the mutual
fund account or the target account for federal income taxes. If, in future
years, any federal income taxes are incurred by PFL with respect to the mutual
fund account or the target account, PFL may make a charge to that account.
INVESTMENT EXPERIENCE
A "net investment factor" is used to determine the value of accumulation units
and annuity units, and to determine annuity payment rates.
Accumulation Units
Allocations of a premium payment directed to a mutual fund subaccount or target
series 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
-15-
<PAGE>
dividing the premium payment or amount transferred to the mutual fund subaccount
or target series subaccount by the accumulation unit value of the mutual fund
subaccount or target series subaccount as of the end of the valuation period
during which the allocation is made. For each mutual fund subaccount or target
series 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 mutual fund subaccount or target series
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 mutual fund subaccounts was
arbitrarily established at $1 and at $10 for the target series subaccounts 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 mutual fund account and the target 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 mutual fund subaccount or target series
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.
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>
<S> <C> <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
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C> <C>
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>
<S> <C> <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 both the mutual fund account and the target 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 mutual fund 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.
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.
For the target account, at the end of each valuation period, the annuity unit
value is established by multiplying the value of an annuity unit determined at
the end of the immediately preceding valuation period by a net investment factor
for the current valuation period, and then multiplying that product by an
investment result adjustment factor for the purpose of offsetting the effect of
an assumed investment return of 5.0% per annum which is assumed in the annuity
conversion rates for the contracts. The net investment factor for the target
series subaccounts is very similar to the net investment factor for the mutual
fund account, except that it is based upon the value of the assets in the
subaccount, instead of the net asset value for a mutual fund share. The net
investment factor includes a charge for mortality and expense risks, that is,
the mortality and expense risk fee, and administrative charge.
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.
-17-
<PAGE>
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>
<S> <C> <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>
<S> <C> <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
Formula and Illustration for Determining the Number of Annuity Units
Represented by Each Monthly Variable Annuity Payment
Number of annuity units = A
-
B
<TABLE>
<S> <C> <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
-18-
<PAGE>
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.
<TABLE>
<CAPTION>
Life Only = Life Annuity with No Period Certain Life 10 = Life Annuity with 10 Years Certain
- ---------------------------------------------------------------------------------------------
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 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 policy 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
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EXAMPLE 2
- --------------------------------------------------------------------------------------------------------------------------
Assumptions
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
. minimum annuitization value on last policy 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
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EXAMPLE 3
- --------------------------------------------------------------------------------------------------------------------------
Assumptions
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
. minimum annuitization value on last policy 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>
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 projection 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.
-20-
<PAGE>
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)
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 the date of this prospectus.
Other Subaccount Yields
PFL may from time to time advertise or disclose the current annualized yield of
one or more of the mutual fund subaccounts and the target series subaccounts
(except the Endeavor Money Market Subaccount) for 30-day periods. The annualized
yield of a
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<PAGE>
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)
Where:
NI = Net investment income of the subaccount for the 30-day period attributable
to the subaccount's unit.
ES = Expenses of the subaccount for the 30-day period.
U = The average number of units outstanding.
UV = The unit value at the close (highest) of the last day in the 30-day period.
Because of the charges and deductions imposed by the mutual fund account, the
yield for a mutual fund 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 mutual fund subaccounts and the target series
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 mutual fund subaccounts or the target series 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 mutual fund
account's underlying portfolio, the target series subaccounts common shares, and
the deductions for the mortality and expense risk fee and the administrative
charges. The total return for each target series subaccount will also reflect
the manager's fee and other operating expenses. 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.
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
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<PAGE>
Where:
CTR = The cumulative total return net of subaccount recurring charges for the
period.
ERV = The ending redeemable value of the hypothetical investment at the end of
the period.
P = A hypothetical initial payment of $1,000.
All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required period, is
also disclosed.
Adjusted Historical Performance Data--The Mutual Fund Account
From time to time, sales literature or advertisements may quote average annual
total returns for periods prior to the date a particular mutual fund subaccount
commenced operations. Such performance information for the mutual fund
subaccounts will be calculated based on the performance of the various
portfolios and the assumption that the mutual fund 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.
THE TARGET ACCOUNT
What is the Investment Strategy?
The objective of each of the target series subaccounts is to provide an above-
average total return through a combination of dividend income and capital
appreciation. While the objectives of the target series subaccounts are the
same, each target series subaccount follows a different investment strategy (set
forth below) in order to achieve its stated objective.
Each target series subaccount will initially invest in equal amounts in the
common stock described below for each target series subaccount (the common
shares) determined as of a specified business day (initial stock selection
date). The Dow(SM) Target 10 Subaccount will invest in the common stock of the
ten companies in the DJIA that have the highest dividend yield. The Dow(SM)
Target 5 Subaccount will invest in the common stock of the five companies with
the lowest per share stock price of the ten companies in The Dow (SM) Target 10
Subaccount. These stocks will be held for approximately one year.
At the initial stock selection date, a percentage relationship among the number
of common shares in a target series subaccount will be established. When
additional funds are deposited into the target series subaccount, additional
common shares will be purchased in such numbers reflecting as nearly as
practicable the percentage relationship of the number of common shares
established at the initial purchase. Sales of common shares by the target series
subaccount will likewise attempt to replicate the percentage relationship of
common shares. The percentage relationship among the number of common shares in
the target series subaccount should therefore remain stable. However, given the
fact that the market price of such common shares will vary throughout the year,
the value of the common shares of each of the companies as compared to the total
assets of the target series subaccount will fluctuate during the year, above and
below the proportion established on a stock selection date. On the last business
day of the 12-month period following the preceding stock selection date (annual
stock selection date), a new percentage relationship will be established among
the number of common shares described above for each target series subaccount on
such date. Common shares may be sold or new equity securities bought so that the
target series subaccount is equally invested in the common stock of each company
meeting the target series subaccount's investment criteria. Thus the target
series subaccount may or may not hold equity securities of the same companies as
the previous year. Any purchase or sale of additional common shares during the
year will duplicate, as nearly as practicable, the percentage relationship among
the number of common shares as of the annual stock selection date since the
relationship among the value of the common shares on the date of any subsequent
transactions may be different than the original relationship among their value.
The yield for each equity security listed on the DJIA is calculated by
annualizing the last quarterly or semi-annual ordinary dividend declared and
dividing the result by the market value of such equity security as of the close
of business on the stock selection date.
The publishers of the DJIA are not affiliated with PFL, Endeavor Management Co.,
or First Trust Advisers L.P. and have not participated in the creation of the
target series subaccounts or the selection of the equity securities included
therein. Any changes in the components of any of the respective indices made
after a stock selection date will not cause a change in the identity of the
common shares included in a target series subaccount, including any additional
common shares purchased thereafter, until the next annual stock selection date.
Investors should note that the above criteria were applied and will in the
future be applied to the common shares selected for inclusion in the target
series subaccounts as of the respective stock selection date. Additional common
shares, which were
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<PAGE>
originally selected through this process, may be purchased throughout the year,
as investors may continue to invest in the target series subaccounts, even
though the yields on these common shares may have changed subsequent to the
previous stock selection date. These common shares may no longer be included in
the index, or may not meet a target series subaccount's selection criteria at
that time, and therefore, such common shares would no longer be chosen for
inclusion in the target series subaccounts if the selection process were to be
performed again at that time. The equity securities selected as common shares
and the percentage relationship among the number of shares will not change for
purchase or sales by a target series subaccount until the next annual stock
selection date.
Determination of Unit Value; Valuation of Securities
PFL determines the unit value of each target series subaccount each business
day. This daily determination of unit value is made by dividing the total assets
of a target series subaccount, less all of its liabilities, by the total number
of units outstanding at the time the determination is made. This is made as of
the close of regular trading on the New York Stock Exchange, currently 4:00 p.m.
New York time, unless the Exchange closes earlier. Purchases and redemptions
will be effected at the time of determination of unit value next following the
receipt of any purchase or redemption order deemed to be in good order.
Equity securities are valued at the last sale price on the exchange on which
they are primarily traded or at the ask price on the NASDAQ system for unlisted
national market issues, or at the last quoted bid price for securities in which
there were no sales during the day or for unlisted securities not reported on
the NASDAQ system. Short-term obligations, which mature in 60 days or less, are
valued at amortized cost, which approximates fair value as determined by the
Board of Managers. Futures and option contracts that are traded on commodities
or securities exchanges are normally valued at the settlement price on the
exchange on which they are traded. Securities (other than short-term
obligations) for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Board of
Managers of the target series subaccounts.
The Board of Managers
The members of the Board of Managers of the target account, and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period. Unless otherwise indicated, the address of each
member is 2101 East Coast Highway, Suite 300, Corona del Mar, California 92625.
<TABLE>
<CAPTION>
Name, Age and Address Held With Registrant During Past 5 Years
- ------------------------------------ -------------------------- ------------------------------------------------------------
<S> <C> <C>
+* Vincent J. McGuinness, Jr. President and Chief From February 1997 to December 1997, Executive
(34) Financial Officer Vice-President, Chief of Operations, from March 1997 to
(Treasurer) October 1999, Director, from December 1997 to October 1999,
Chief Operating Officer and from June 1998 to October 1999,
Chief Financial Officer, from July 1999 to October 1999
Chief Executive Officer of Endeavor Group; from September
1996 to June 1997, and from June 1998 to October 1999,
Chief Financial Officer, since May 1996, Director, and from
June 1997 to October 1998, Executive Vice
President--Administration, from October 1998 to October
1999, President, and from July 1999 to October 1999 Chief
Executive Officer of Endeavor Management Co.; since August
1996, Chief Financial Officer of VJM Corporation; from May
1996 to January 1997, Executive VicePresident and Director
of Sales,Western Division of Endeavor Group;since May 1996,
Chief Financial Officer of McGuinness & Associates; from
July 1993 to August 1995 Rocky Mountain Regional Marketing
Director for Endeavor Group; President, Chief Financial
Officer, and Trustee of Endeavor Series Trust.
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Address Held With Registrant During Past 5 Years
- ------------------------------------ -------------------------- ------------------------------------------------------------
<S> <C> <C>
*Vincent J. McGuinness (64) Manager Director of Endeavor Group and Endeavor Management Co.;
President of VJM Corporation (oil and gas); since February
1996 President of McGuinness & Associates; until July 1999,
Chairman, Chief Executive Officer and Director of
McGuinness & Associtaes and VJM Corporation; until July,
1996 Chairman, Chief Executive Officer and Director of
McGuinness Group (insurance marketing); from September 1988
to July 1999, Chief Executive Officer of Endeavor
Management Co.; until October 1998, President of Endeavor
Management Co.; Trustee, Endeavor Series Trust.
Timothy A. Devine (64) Manager Vice President, Plant Control, Inc. (landscape contracting
1424 Dolphin Terrace and maintenance); Trustee, Endeavor Series Trust.
Corona del Mar, California 92625
Thomas J. Hawekotte (64) Manager President, Thomas Hawekotte, P.C. (law practice); Trustee,
6007 North Sheridan Road Endeavor Series Trust.
Chicago, Illinois 60660
Steven L. Klosterman (47) Manager Since July 1995, President of Klosterman Capital Corporation
5973 Avenida Encinas, #300 (investment adviser); Investment Counselor, Robert J.
Carlsbad, California 92008 Metcalf & Associates, Inc. (investment adviser) from August
1990 to June 1995; Trustee, Endeavor Series Trust.
Halbert D. Lindquist (53) Manager President, Lindquist, Stephenson & White (investment
1650 E. Fort Lowell Road adviser) and since December 1987 Tucson Asset Management
Suite 203 Inc. (commodity trading advisor), and since November 1987,
Tucson, Arizona 85719-2324 Presidio Government Securities, Incorporated
(broker-dealer); since January 1998, Chief Investment
Officer, Blackstone Alternative Asset Management, Trustee,
Endeavor Series Trust.
Keith H. Wood (63) Manager Since 1972, Chairman and Chief Executive Officer of
Jamison, Eaton & Wood (investment adviser) and since 1978
to December 1997, President of Ivory & Sime International,
Inc. (investment adviser); Trustee, Endeavor Series Trust.
Peter F. Muratore (67) Manager From June 1989 to March 1998, President of OCC Distributors
Too Far (broker/dealer), a subsidiary of Oppenheimer Capital;
Posthouse Road Trustee, Endeavor Series Trust.
Morristown, NJ 07960
*Larry N. Norman (47) Manager Executive Vice-President, PFL Life Insurance Company;
4333 Edgewood Road N.E. Trustee, Endeavor Series Trust.
Cedar Rapids, Iowa
52499-0001
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name, Age and Address Held With Registrant During Past 5 Years
- ------------------------------------ -------------------------- ------------------------------------------------------------
<S> <C> <C>
Michael Pond (46) Executive Vice President-- Since November 1, 1998, Executive Vice
Administration and President--Administrator and Compliance of Endeavor Group;
Compliance from November 1, 1998 to October 1999, Executive Vice
President-- Administration and Compliance and Chief
Investment officer of Endeavor Management Co.; since
October 1999, President, Chief Executive Officer and Chief
Investment Officer of Endeavor Management Co.; from
November 1991 to November 1996, Chairman and President, the
Preferred Group of Mutual Funds; from October 1989 to
November 1996, President of Caterpillar Securities, Inc.
and Caterpillar Investment Manager, Ltd.
Gail A. Hanson (57) Secretary Since September 1994, Counsel for PFPC, Inc. (formerly
known as First Data Investor Services Group, Inc.) (mutual
fund administration)
</TABLE>
* An "interested person" of the target account as defined in the 1940 Act.
+ Vincent J. McGuinness, Jr. is the son of Vincent J. McGuinness.
The "rules and regulations" of the target account provide that the target
account will indemnify its Board of Managers and officers against liabilities
and expenses incurred in connection with litigation in which they may be
involved because of their offices with the target account, except if it is
determined in the manner specified in the rules and regulations that they have
not acted in good faith in the reasonable belief that their actions were in the
best interests of the target account or that such indemnification would relieve
any officer or member of the Board of Managers of any liability to the target
account or its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties. The target account, at its
expense, provides liability insurance for the benefit of its Board of Managers
and officers.
Compensation. For the period ended December 31, 1999, the following
- -------------
compensation was paid to members of the Board of Managers:
<TABLE>
<CAPTION>
Total
-----
Aggregate Compensation
--------- ------------
Compensation From From Account and Fund
----------------- ---------------------
Name of Person Account Complex Paid Managers
- -------------------------------------------------------------------------- ------- ---------------------
<S> <C> <C>
Vincent J. McGuinness ....................................................
Timothy A. Devine ........................................................
Thomas J. Hawekotte ......................................................
Steven L. Klosterman .....................................................
Halbert D. Lindquist .....................................................
Keith H. Wood ............................................................
Vincent J. McGuinness, Jr. ...............................................
William L. Busler (resigned as of ___________, 1999) .....................
Peter F. Muratore ........................................................
Larry N. Norman ..........................................................
</TABLE>
The Investment Advisory Services
First Trust Advisors L.P. (the "adviser") is the target account's investment
adviser. The adviser manages the assets of each target series subaccount,
consistent with the investment objective and policies described herein and in
the prospectus, pursuant to an investment advisory agreement (the "advisory
agreement") with Endeavor Management Co., the target account's manager.
The adviser's address is 1001 Warrenville Road, Lisle, Illinois 60532. First
Trust Advisers L.P. is a limited partnership with one limited partner, Grace
Partners of Dupage L.P., and one general partner, Nike Securities Corporation.
Grace Partners of Dupage L.P. is a limited partnership with one general partner,
Nike Securities Corporation, and a number of limited partners. Nike Securities
Corporation is an Illinois corporation controlled by the Robert Donald Van
Kampen family.
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<PAGE>
Under the advisory agreement, the investment adviser provides each target series
subaccount with discretionary investment services. Specifically, the adviser is
responsible for supervising and directing the investments of each target series
subaccount in accordance with each target series subaccount's investment
objective, program, and restrictions as provided in the prospectus and this SAI.
The investment adviser is also responsible for effecting all security
transactions on behalf of each target series subaccount.
As compensation for its services, the adviser receives a fee of 0.35% of the
average daily net assets of each target series subaccount, which is paid by the
manager. Each target series subaccount's advisory agreement also provides that
the adviser, its directors, officers, employees, and certain other persons
performing specific functions for the target series subaccounts will only be
liable to the target series subaccount for losses resulting from willful
misfeasance, bad faith, gross negligence, or reckless disregard of duty. The
amount that Endeavor Management Co. paid to the adviser during 1999 was
$__________.
The adviser is also the portfolio supervisor of certain unit investment trusts
sponsored by Nike Securities L.P. ("Nike Securities") which are substantially
similar to the target series subaccounts in that they have the same investment
objectives as the target series subaccounts but have a life of approximately one
year. Nike Securities specializes in the underwriting, trading and distribution
of unit investment trusts and other securities. Nike Securities, an Illinois
limited partnership formed in 1991, acts as sponsor for successive series of The
First Trust Combined Series, The First Trust Special Situations Trust, the First
Trust Insured Corporate Trust, The First Trust of Insured Municipal Bonds and
the First Trust GNMA. First Trust introduced the first insured unit investment
trust in 1974 and to date more than $11 billion in First Trust unit investment
trusts have been deposited.
The Manager
The target account is managed by Endeavor Management Co. ("the manager") which,
subject to the supervision and direction of the target account's Board of
Managers, has overall responsibility for the general management and
administration of the target account. All of the outstanding common stock of
Endeavor Management Co. is owned by AUSA Holding Company, an affiliate of PFL.
The manager is responsible for providing investment management to the target
account and in the exercise of such responsibility selects an investment adviser
for each of the target series subaccounts (the "adviser") and monitors the
adviser's investment program and results, reviews brokerage matters, oversees
compliance by the target account with various federal and state statutes, and
carries out the directives of the Board of Managers. The manager is responsible
for providing the target account with office space, office equipment, and
personnel necessary to operate and administer the target account's business, and
also supervises the provision of services by third parties such as the target
account's custodian, transfer agent and administrator. Pursuant to an
administration agreement, PFPC, Inc., Inc. assists the manager in the
performance of its administrative responsibilities to the target account. For
its administrative responsibilities, the target account pays PFPC, Inc. a fee of
$10,000 per annum per subaccount and reimburses out-of-pocket fees.
As compensation for its services, the manager receives a fee equal to 0.75% of
the average daily net assets of each target series subaccount. The amount that
the target account paid the manager during 1999 was $____________.
Operating Expenses
In addition to the management fees, the target account pays all expenses not
assumed by the manager, including, without limitation, expenses for legal,
accounting and auditing services, interest, taxes, costs of printing and
distributing reports to shareholders, proxy materials and prospectuses, charges
of its custodian, transfer agent and dividend disbursing agent, registration
fees, fees and expenses of the Board of Managers who are not affiliated persons
of the manager or an adviser, insurance, brokerage costs, litigation, and other
extraordinary or nonrecurring expenses. All general target account expenses are
allocated among and charged to the assets of the target series subaccounts on a
basis that the Board of Managers deems fair and equitable, which may be on the
basis of relative net assets of each target series subaccount or the nature of
the services performed and relative applicability to each target series
subaccount. The manager has agreed to limit each target series subaccount's
management fee and operating expenses during its first year of operations to an
annual rate of 1.30% of the target series subaccount's average net assets. (This
limit does not include other fees and deductions such as the mortality and
expense risk fee, administrative charge, and distribution financing charge.)
-27-
<PAGE>
Transfer Agent and Custodian
Boston Safe Deposit and Trust Company holds all cash and securities of each
target series subaccount as custodian. PFPC, Inc., located at 4400 Computer
Drive, Westborough, Massachusetts 01581, serves as transfer agent for the target
account.
Brokerage Allocation
The adviser invests all assets of the target series subaccounts in common stock
and incurs brokerage costs in connection therewith.
Allocations of transactions by the target series subaccounts, including their
frequency, to various dealers is determined by the adviser in its best judgment
and in a manner deemed to be in the best interest of the investors in the target
series subaccount rather than by any formula. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Purchases and sales of securities may be principal transactions; that is,
securities may be purchased directly from the issuer or from an underwriter or
market maker for the securities. Any transactions for which the target series
subaccounts pays a brokerage commission will be effected at the best price and
execution available. Purchases from underwriters of securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and the
asked price. Brokerage may be allocated based on the sale of policies by dealers
or activities in support of sales of the policies. The target account has
adopted a Brokerage Enhancement Plan, whereby all or a portion of certain
brokerage commissions paid by the target series subaccounts may be allocated or
credited to the distributor or other entities marketing the policies, to help
finance sales activities.
The target account paid $_______________ as compensation to any affiliated
broker of Endeavor Management Co. or First Trust Advisors L.P. during 1999.
Investment Restrictions
Fundamental policies of the target series subaccounts may not be changed without
the approval of the lesser of (1) 67% of the persons holding voting interests
(generally owners) present at a meeting if the holders of more than 50% are
present in person or by proxy or (2) more than 50% of the persons holding voting
interests. Other restrictions, in the form of operating policies, are subject to
change by the Board of Managers without the approval of persons holding a voting
interest. Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
of securities or assets of, or borrowings by, a target series subaccount.
Fundamental Policies
As a matter of fundamental policy, each target series subaccount may not:
. Borrowing. Borrow money, except each target series subaccount may borrow as
a temporary measure for extraordinary or emergency purposes, and then only
in amounts not exceeding 30% of its total assets valued at market. Each
target series subaccount will not borrow in order to increase income
(leveraging), but only to facilitate redemption requests which might
otherwise require untimely investment liquidations;
. Loans. Make loans, although the target series subaccounts may purchase
money market securities and enter into repurchase agreements; and they may
lend their common shares;
. Margin. Purchase securities on margin;
. Mortgaging. Mortgage, pledge, hypothecate or, in any manner, transfer any
security owned by the target series subaccounts as security for
indebtedness except as may be necessary in connection with permissible
borrowings, in which event such mortgaging, pledging, or hypothecating may
not exceed 30% of each target series subaccount's total assets, valued at
market;
. Real Estate. Purchase or sell real estate;
. Senior Securities. Issue senior securities (except permitted borrowings);
. Short Sales. Effect short sales of securities; or
. Underwriting. Underwrite securities issued by other persons, except to the
extent the target series subaccounts may be deemed to be underwriters
within the meaning of the Securities Act of 1933 in connection with the
purchase and sale of their portfolio securities in the ordinary course of
pursuing their investment programs.
In addition, as a matter of fundamental policy, each target series subaccount
may engage in futures and options transactions and hold warrants.
-28-
<PAGE>
The investment objective of each target series subaccount is also a fundamental
policy and may not be changed without the necessary approval described above.
Operating Policies
As a matter of operating policy, each target series subaccount may not:
. Control of Companies. Invest in companies for the purpose of exercising
management or control;
. Illiquid Securities. Purchase a security if, as a result of such purchase,
more than 15% of the value of each target series subaccount's net assets
would be invested in illiquid securities or other securities that are not
readily marketable;
. Oil and Gas Programs. Purchase participations or other direct interests or
enter into leases with respect to, oil, gas, other mineral exploration or
development program.
Options and Futures Strategies
A target series subaccount may at times seek to hedge against either a decline
in the value of its portfolio securities or an increase in the price of
securities which the adviser plans to purchase through the writing and purchase
of options and the purchase or sale of future contracts and related options.
Expenses and losses incurred as a result of such hedging strategies will reduce
a target series subaccount's current return.
The ability of a target series subaccount to engage in the options and futures
strategies described below will depend on the availability of liquid markets in
such instruments. It is impossible to predict the amount of trading interest
that may exist in various types of options or futures. Therefore no assurance
can be given that a target series subaccount will be able to utilize these
instruments effectively for the purposes stated below.
Writing Covered Options on Securities. A target series subaccount may write
- --------------------------------------
covered call options and covered put options on optionable securities of the
types in which it is permitted to invest from time to time as the adviser
determines is appropriate in seeking to attain the target series subaccount's
investment objective. Call options written by a target series subaccount give
the holder the right to buy the underlying security from the target series
subaccount at a stated exercise price; put options give the holder the right to
sell the underlying security to the target series subaccount at a stated price.
A target series subaccount may only write call options on a covered basis or for
cross-hedging purposes and will only write covered put options. A put option
would be considered "covered" if the target series subaccount owns an option to
sell the underlying security subject to the option having an exercise price
equal to or greater than the exercise price of the "covered" option at all times
while the put option is outstanding. A call option is covered if the target
series subaccount owns or has the right to acquire the underlying securities
subject to the call option (or comparable securities satisfying the cover
requirements of securities exchanges) at all times during the option period. A
call option is for cross-hedging purposes if it is not covered, but is designed
to provide a hedge against another security which the target series subaccount
owns or has the right to acquire. In the case of a call written for cross-
hedging purposes or a put option, the target series subaccount will maintain in
a segregated account at the target series subaccount's custodian bank cash or
short-term U.S. government securities with a value equal to or greater than the
target series subaccount's obligation under the option. A target series
subaccount may also write combinations of covered puts and covered calls on the
same underlying security.
A target series subaccount will receive a premium from writing an option, which
increases the target series subaccount's return in the event the option expires
unexercised or is terminated at a profit. The amount of the premium will
reflect, among other things, the relationship of the market price of the
underlying security to the exercise price of the option, the term of the option,
and the volatility of the market price of the underlying security. By writing a
call option, a target series subaccount will limit its opportunity to profit
from any increase in the market value of the underlying security above the
exercise price of the option. By writing a put option, a target series
subaccount will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.
A target series subaccount may terminate an option, which it has written prior
to its expiration, by entering into a closing purchase transaction in which it
purchases an option having the same terms as the option written. The target
series subaccount will realize a profit (or loss) from such transaction if the
cost of such transaction is less (or more) than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying security,
any loss resulting from the repurchase of a call option may be offset in whole
or in part by unrealized appreciation of the underlying security owned by the
target series subaccount.
-29-
<PAGE>
Purchasing Put and Call Options on Securities. A target series subaccount may
- ----------------------------------------------
purchase put options to protect its portfolio holdings in an underlying security
against a decline in market value. This protection is provided during the life
of the put option since the target series subaccount, as holder of the put, is
able to sell the underlying security at the exercise price regardless of any
decline in the underlying security's market price. For the purchase of a put
option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, any profit which the
target series subaccount might otherwise have realized on the underlying
security will be reduced by the premium paid for the put option and by
transaction costs.
A target series subaccount may also purchase a call option to hedge against an
increase in price of a security that it intends to purchase. This protection is
provided during the life of the call option since the target series subaccount,
as holder of the call, is able to buy the underlying security at the exercise
price regardless of any increase in the underlying security's market price. For
the purchase of a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. By using call options in this manner, any profit
which the target series subaccount might have realized had it bought the
underlying security at the time it purchased the call option will be reduced by
the premium paid for the call option and by transaction costs.
No target series subaccount intends to purchase put or call options if, as a
result of any such transaction, the aggregate cost of options held by the target
series subaccount at the time of such transaction would exceed 5% of its total
assets.
Limitations. A target series subaccount will not purchase or sell futures
- ------------
contracts or options on futures contracts for non-hedging purposes if, as a
result, the sum of the initial margin deposits on its existing futures contracts
and related options positions and premiums paid for options on futures contracts
would exceed 5% of the net assets of the target series subaccount unless the
transaction meets certain "bona fide hedging" criteria.
Risks of Options and Futures Strategies. The effective use of options and
- ----------------------------------------
futures strategies depends, among other things, on a target series subaccount's
ability to terminate options and futures positions at times when the adviser
deems it desirable to do so. Although a target series subaccount will not enter
into an option or futures position unless the adviser believes that a liquid
market exists for such option or future, there can be no assurance that a target
series subaccount will be able to effect closing transactions at any particular
time or at an acceptable price. The adviser generally expects that options and
futures transactions for the target series subaccounts will be conducted on
recognized exchanges. In certain instances, however, a target series subaccount
may purchase and sell options in the over-the-counter market. The staff of the
SEC considers over-the-counter options to be illiquid. A target series
subaccount's ability to terminate option positions established in the over-the-
counter market may be more limited than in the case of exchange traded options
and may also involve the risk that securities dealers participating in such
transactions would fail to meet their obligations to the target series
subaccount.
The use of options and futures involves the risk of imperfect correlation
between movements in options and futures prices and movements in the price of
the securities that are the subject of the hedge. The successful use of these
strategies also depends on the ability of the target series subaccount's adviser
to forecast correctly interest rate movements and general stock market price
movements. The risk increases as the composition of the securities held by the
target series subaccount diverges from the composition of the relevant option or
futures contract.
Securities Lending
Each target series subaccount may also lend common shares to broker-dealers and
financial institutions to realize additional income. As an operating policy, the
target series subaccounts will not lend common shares or other assets, if as a
result, more than 33% of each subaccount's total assets would be lent to other
parties. Under applicable regulatory requirements (which are subject to change),
the following conditions apply to securities loans: (a) the loan must be
continuously secured by liquid assets maintained on a current basis in an amount
at least equal to the market value of the securities loaned; (b) each target
series subaccount must receive any dividends or interest paid by the issuer on
such securities; (c) each target series subaccount must have the right to call
the loan and obtain the securities loaned at any time upon notice of not more
than five business days, including the right to call the loan to permit voting
of the securities; and (d) each target series subaccount must receive either
interest from the investment of collateral or a fixed fee from the borrower.
Securities loaned by a target series subaccount remain subject to fluctuations
in market value. A target series subaccount may pay reasonable finders,
custodian and administrative fees in connection with a loan. Securities lending,
as with other extensions of credit, involves the risk that the borrower may
default. Although securities loans will be fully collateralized at all times, a
target series subaccount may experience delays in, or be prevented from,
recovering the collateral. During the period that the target series subaccount
seeks to enforce its rights against the borrower, the collateral and the
securities loaned remain subject to
-30-
<PAGE>
fluctuations in market value. The target series subaccounts do not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if it were considered important with respect to the investment. A
target series subaccount may also incur expenses in enforcing its rights. If a
target series subaccount has sold a loaned security, it may not be able to
settle the sale of the security and may incur potential liability to the buyer
of the security on loan for its costs to cover the purchase.
Tax Limitation
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 target series subaccounts. To qualify as "adequately diversified,"
each subaccount may have:
. No more than 55% of the value of its total assets represented by any
one investment;
. No more than 70% of the value of its total assets represented by any
two investments;
. No more than 80% of the value of its total assets represented by any
three investments; and
. No more than 90% of the value of its total assets represented by any
four investments.
The target account, through the target series subaccounts, intends to comply
with the section 817(h) diversification requirements. PFL has entered into an
agreement with the manager, who in turn, has entered into a contract with the
adviser, that requires the target series subaccounts be operated in compliance
with Treasury regulations. Therefore, each target series subaccount may deviate
from its stated strategy to the extent necessary to comply with these
requirements.
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 mutual
fund account or the target account or of the safety or riskiness of an
investment in the mutual fund account or the target 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.
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 mutual fund account and the target
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.
-31-
<PAGE>
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 had not begun as of
the date of this SAI.
The target account has adopted a distribution plan in accordance with Rule 12b-1
under the 1940 Act for the distribution financing charge (the "distribution
plan"). The distribution plan has been approved by a majority of the
disinterested members of the Board of Managers of the target account. The
distribution plan is designed to partially compensate PFL for the cost of
distributing the policies. Charges under the distribution plan will be used to
support marketing efforts, training of representatives and reimbursement of
expenses incurred by broker/dealers who sell the policies, and will be based on
a percentage of the daily net assets of the target account. The distribution
plan may be terminated at any time by a vote of a majority of the disinterested
members of the target account's Board of Managers, or by a vote of the majority
of its outstanding shares.
VOTING RIGHTS
The Mutual Fund Account
To the extent required by law, PFL will vote the underlying funds' shares held
by the mutual fund account at regular and special shareholder meetings of the
underlying funds in accordance with instructions received from persons having
voting interests in the portfolios, although the underlying funds do not hold
regular annual 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 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.
The Target Account
The target account is the legal owner of the common stock held in the
subaccounts and as such has the right to vote upon any matter that may be voted
by shareholders. However, you or persons receiving income payments may vote on
certain aspects of the governance of the subaccounts. Matters on which persons
holding voting interests may vote include the following: (1) approval of any
change in the investment advisory agreement corresponding to a subaccount; (2)
any change in the fundamental investment policies of a subaccount; or (3) any
other matter requiring a vote of persons holding voting interests in the
subaccount. With respect to approval of the investment advisory agreements or
any change in a fundamental investment policy, owners participating in that
subaccount will vote separately on the matter pursuant to the requirements of
Rule 18f-2 under the 1940 Act.
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<PAGE>
Before the annuity commencement date, you hold the voting interest in the
selected subaccounts. The number of votes that you have will be calculated
separately for each subaccount. The number of votes that you have for a
subaccount will be determined by dividing your policy value in the subaccount
into the total assets of the subaccount and multiplying this by the total number
of votes.
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 into the total assets of the subaccount and multiplying
this by the total number of votes.
PFL does not intend to hold annual or other periodic meetings of owners. PFL
will solicit proxies by sending you (or other persons entitled to vote) written
requests for proxies prior to the vote. Where timely proxies are not received,
the voting interests will be voted in proportion to the proxies that are
received with respect to all policies participating in the same subaccount.
PFL may, if required by state insurance officials, disregard proxies which would
require voting to cause a change in the subclassification or investment
objectives or policies of one or more of the subaccounts, or to approve or
disapprove an investment adviser or principal underwriter for one or more of the
subaccounts. In addition, PFL may disregard proxies that would require changes
in the investment objectives or policies of any subaccount or in an investment
adviser or principal underwriter, if PFL reasonably disapproves those changes in
accordance with applicable federal regulations. If PFL disregards proxies, it
will advise those persons who may give proxies of that action and its reasons
for the action in the next semiannual report.
OTHER PRODUCTS
PFL makes other variable annuities available that may also be funded through the
mutual fund account and/or the target account. These variable annuities may have
different features, such as different investment options or charges.
CUSTODY OF ASSETS
The assets of each of the mutual fund subaccounts and the target series
subaccounts are held by PFL. 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, and of all purchases and sales of common stock held by each of the
target series subaccounts. Additional protection for the assets of the mutual
fund account and the target 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 mutual fund account because it had not commenced
operations as of December 31, 1999.
The financial statements of the PFL Endeavor Target Account as of December 31,
1999, and for each of the two years in the period then ended, included in this
Statement of Additional Information have been audited by Ernst & Young LLP.
OTHER INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
policies discussed in this 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 Securities and
Exchange Commission.
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<PAGE>
FINANCIAL STATEMENTS
The values of your interest in the mutual fund account or the target 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 mutual fund account or the
target account.
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<PAGE>
PART C
OTHER INFORMATION
Item 28. Financial Statements and Exhibits
(a) Financial Statements:
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits:
(1) Resolution of the Board of Directors of PFL Life Insurance
Company authorizing the establishment of the PFL Endeavor Target
Account. (Note 1)
(2) Rules and Regulations of the PFL Endeavor Target Account.
(Note 2)
(3)(a) Custodian Agreement between the PFL Endeavor Target Account and
Boston Safe Deposit and Trust Company (Note 2)
(3)(b) Not Applicable.
(4)(a) Management Agreement between the PFL Endeavor Target Account and
Endeavor Investment Advisers. (Note 2)
(4)(b)(1) Investment Advisory Agreement between Endeavor Investment
Advisers and First Trust Advisers L.P. (The Dow(SM) Target 5)
(Note 2)
(4)(b)(2) Investment Advisory Agreement between Endeavor Investment
Advisers and First Trust Advisers L.P. (The Dow(SM) Target 10)
(Note 2)
(5)(a) Principal Underwriting Agreement by and between PFL Life
Insurance Company on its own behalf and on behalf of the PFL
Endeavor Target Account, and AFSG Securities Corporation (Note 1)
(5)(b) Form of Broker-Dealer Supervision and Sales Agreement by and
between AFSG Securities Corporation and the Broker-Dealer.
(Note 1)
(6)(a) Form of Group Master Policy and Optional Riders for the Access
Variable Annuity. (Note 5)
(6)(b) Form of Group Certificate for the Access Variable Annuity (PFL
Endeavor Target Account) (Note 5)
(6)(c) Form of Individual Policy for the Access Variable Annuity
(Note 4)
(7)(a) Form of Group Master Application for the Access Variable Annuity.
(Note 5)
(7)(b) Form of Group Certificate Enrollment Application for the Access
Variable Annuity (Note 5)
(7)(c) Form of Individual Application for the Access Variable Annuity
(Note 4)
(8)(a) Articles of Incorporation of PFL Life Insurance Company (Note 1)
(8)(b) Bylaws of PFL Life Insurance Company (Note 1)
(9) Not Applicable.
<PAGE>
(10) Not Applicable.
(11)(a) Distribution Plan (Note 2).
(11)(b) Administrative Services Agreement with First Data Investors
Services Group (Note 2)
(11)(b)(1) Amendment to Schedule A and Schedule B of the Administrative
Services Agreement with First Data Investors Services Group
(Note 4)
(11)(c) Brokerage Enhancement Plan (Note 2)
(11)(d) Sublicense Agreement between Dow Jones, First Trust Advisers
L.P. and the PFL Endeavor Target Account (Note 3)
(11)(e) Distribution Agreement. (Note 2)
(12) Opinion and Consent of Counsel. (Note 5)
(13)(a) Opinion and Consent of Actuary. (Note 5)
(13)(b) Consent of Independent Auditors. (Note 5)
(14) Not Applicable.
(15) Not Applicable
(16) Performance Data Calculations. (Note 5)
(18) Powers of Attorney (Note 4)
_______________________
Note 1. Incorporated by reference to the Initial Filing of Form N-3 Registration
Statement (File No. 333-47027) on February 27, 1998
Note 2. Incorporated by reference to Post-Effective Amendment No. 1 to Form N-3
Registration Statement (File No. 333-47027) on September 28, 1998)
Note 3. Incorporated by reference to Post-Effective Amendment No. 2 to Form N-3
Registration Statement (File No. 333-47027) on April 28, 1999.
Note 4. Filed herewith.
Note 5. To be filed by amendment.
<PAGE>
Item 29. Directors and Officers of the 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 30. Persons Controlled by or Under Common Control with the Insurance
Company or Registrant
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
<S> <C> <C> <C>
AEGON N.V. Netherlands 53.63% of Vereniging Holding company
Corporation AEGON Netherlands
Membership Association
Groninger Financieringen B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation
AEGON Netherland N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation
AEGON Nevak Holding B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation
AEGON International N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Voting Trust Delaware Voting Trust
Trustees:
K.J. Storm
Donald J. Shepard
H.B. Van Wijk
Dennis Hersch
AEGON U.S. Holding Delaware 100% of Voting Trust Holding company
Corporation
Short Hills Management New Jersey 100% of AEGON U.S. Holding company
Company Holding Corporation
CORPA Reinsurance New York 100% of AEGON U.S. Holding company
Company Holding Corporation
AEGON Management Indiana 100% of AEGON U.S. Holding company
Company Holding Corporation
RCC North America Inc. Delaware 100% of AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Maryland 100% AUSA Holding Co. Holding company
Insurance Group, Inc.
Trip Mate Insurance Kansas 100% Monumental General Sale/admin. of travel
Agency, Inc. Insurance Group, Inc. insurance
Monumental General Maryland 100% Monumental General Provides management
Administrators, Inc. Insurance Group, Inc. srvcs. to unaffiliated
third party administrator
Executive Management and Maryland 100% Monumental General Provides actuarial
Consultant Services, Inc. Administrators, Inc. consulting services
Monumental General Mass Maryland 100% Monumental General Marketing arm for
Marketing, Inc. Insurance Group, Inc. sale of mass marketed
insurance coverages
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment
Advisors, Inc. advisor
Diversified Investors Delaware 100% Diversified Investment Broker-Dealer
Securities Corp. Advisors, Inc.
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer
Supplemental Ins. Tennessee 100% AUSA Holding Co. Insurance
Division, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Insurance agency
Canadian Dealer Network Inc.
Inc.
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment
services
Quantra Corporation Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and
sales
Quantra Software Delaware 100% Quantra Corporation Manufacture and sell
Corporation mortgage loan and
security management
software
Landauer Realty Advisors, Iowa 100% AEGON USA Realty Real estate counseling
Inc. Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Realty Information Iowa 100% AEGON USA Realty Information Systems for
Systems, Inc. Advisors, Inc. real estate investment
management
AEGON USA Realty Iowa 100% AEGON USA Real estate management
Management, Inc Realty Advisors, Inc.
USP Real Estate Investment Iowa 21.89% First AUSA Life Real estate investment
Trust Ins. Co, 13.11% PFL Life trust
Ins. Co. 4.86% Bankers
United Life Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Limited Partnership
Partnership Advisors Inc. is General
Partner and 5% owner.
AUSA Financial Markets, Iowa 100% AUSA Holding Co. Marketing
Inc.
Endeavor Management Co. California 49.9% AUSA Financial General Partnership
Markets, Inc.
Universal Benefits Iowa 100% AUSA Holding Co. Third party administrator
Corporation
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Iowa 100% AUSA Holding Co. Trust company
Trust Co.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial
counseling for employees
and agents of affiliated
companies
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment
Services, Inc. advisor
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
Associated Mariner Financial Michigan 100% Intersecurities, Inc. Holding co./management
Group, Inc. services
Mariner Financial Michigan 100% Associated Mariner Broker/Dealer
Services, Inc. Financial Group, Inc.
Mariner Planning Michigan 100% Mariner Financial Financial planning
Corporation Services, Inc.
Associated Mariner Agency, Michigan 100% Associated Mariner Insurance agency
Inc. Financial Group, Inc.
Associated Mariner Agency Hawaii 100% Associated Mariner Insurance agency
of Hawaii, Inc. Agency, Inc.
Associated Mariner Ins. Massachusetts 100% Associated Mariner Insurance agency
Agency of Massachusetts, Agency, Inc.
Inc.
Associated Mariner Agency Ohio 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.
Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.
Associated Mariner Agency New Mexico 100% Associated Mariner Insurance agency
New Mexico, Inc. Agency, Inc.
Mariner Mortgage Corp. Michigan 100% Associated Mariner Mortgage origination
Financial Group, Inc.
Idex Investor Services, Florida 100% AUSA Holding Co. Shareholder services
Inc.
Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital Corp.
IDEX Series Fund Massachusetts Various Mutual fund
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding Company
company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
AUSA Life Insurance New York 100% First AUSA Life Insurance
Company, Inc. Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Insurance
Company of America Ins. Co.
Life Investors Alliance, Delaware 100% LIICA Purchases, own, and hold
LLC the equity interest of
other entities
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
Life Investors Agency Iowa 100% Life Investors Ins. Marketing
Group, Inc. Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Insurance
Ins. Co.
AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.
AEGON Assignment Kentucky 100% AEGON Financial Administrator of structured
Corporation Services Group, Inc. settlements
of Kentucky
AEGON Assignment Illinois 100% AEGON Financial Administrator of structured
Corporation Services Group settlements
Southwest Equity Life Ins. Arizona 100% of Common Voting Insurance
Co. Stock
First AUSA Life Ins. Co.
Iowa Fidelity Life Arizona 100% of Common Voting Insurance
Insurance Co. Stock
First AUSA Life Ins. Co.
Western Reserve Life Ohio 100% First AUSA Life Insurance
Assurance Co. of Ohio Ins. Co.
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Florida 100% Western Reserve Life Provides administration
Inc. Assurance Co. of Ohio for affiliated mutual fund
WRL Investment Florida 100% Western Reserve Life Registered investment
Management, Inc. Assurance Co. of Ohio advisor
AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance agency
Assurance Co. of Ohio
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
Assurance Co. of Ohio
ISI Insurance Agency Ohio 100% ISI Insurance Insurance agency
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
of Ohio, Inc. Agency Inc.
ISI Insurance Agency Texas 100% ISI Insurance Insurance agency
of Texas, Inc. Agency Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Insurance Agency
of Massachusetts, Inc. Agency Inc.
Monumental Life Insurance Maryland 100% First AUSA Life Insurance
Co. Ins. Co.
AEGON Special Markets Maryland 100% Monumental Life Marketing
Group, Inc. Ins. Co.
Monumental General Casualty Maryland 100% First AUSA Life Insurance
Co. Ins. Co.
United Financial Services, Maryland 100% First AUSA Life General agency
Inc. Ins. Co.
Bankers Financial Life Arizona 100% First AUSA Life Insurance
Ins. Co. Ins. Co.
The Whitestone Corporation Maryland 100% First AUSA Life Insurance agency
Ins. Co.
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Ins. Co.
Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")
PB Series Trust Massachusetts N/A Mutual fund
Monumental Agency Group, Kentucky 100% CGC Provider of srvcs. to
Inc. ins. cos.
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security
Life Insurance Company
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Commonwealth General. Kentucky 100% CGC Administrator of
Assignment Corporation structured settlements
AFSG Securities Pennsylvania 100% CGC Broker-Dealer
Corporation
PB Investment Advisors, Delaware 100% CGC Registered investment
Inc. advisor
Diversified Financial Delaware 100% CGC Provider of investment,
Products Inc. marketing and admin.
services to ins. cos.
AEGON USA Real Estate Delaware 100% Diversified Financial Real estate and mortgage
Services, Inc. Products Inc. holding company
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Capital Real Estate Delaware 100% CGC Furniture and equipment
Development Corporation lessor
Capital General Development Delaware 100% CGC Holding company
Corporation
Ammest Realty Corporation Texas 100% Peoples Security Life Special purpose subsidiary
Insurance Company
JMH Operating Company, Inc. Mississippi 100% Peoples Security Life Real estate holdings
Insurance Company
Independence Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company
Independence Automobile Georgia 100% Capital Security Automobile Club
Club, Inc. Life Insurance Company
Capital 200 Block
Corporation Delaware 100% CGC Real estate holdings
Capital Broadway Kentucky 100% CGC Real estate holdings
Corporation
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Ampac Insurance Agency, Pennsylvania 100% CGC Provider of management
Inc. (EIN 23-1720755) support services
National Home Life Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
Valley Forge Associates, Pennsylvania 100% Ampac Insurance Furniture & equipment
Inc. Agency, Inc. lessor
Veterans Benefits Plans, Pennsylvania 100% Ampac Insurance Administrator of group
Inc. Agency, Inc. insurance programs
Veterans Insurance Delaware 100% Ampac Insurance Special-purpose subsidiary
Services, Inc. Agency, Inc.
Academy Insurance Group, Delaware 100% CGC Holding company
Inc.
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Kansas 100% Academy Insurance Special-purpose subsidiary
Inc. Group, Inc.
Ammest Insurance Agency, California 100% Academy Insurance General agent
Inc. Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
Ampac Insurance Agency, Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Inc. (EIN 23-2364438) Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy Insurance Provider of mgmt. services
Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary
Inc.
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin.
Services, Inc. Group, Inc. services
Unicom Administrative Germany 100% Unicom Administrative Provider of admin.
Services, GmbH Services, Inc. services
Capital Liberty, L.P. Delaware 79.2% Commonwealth Life Holding Company
Insurance Company
19.8% Peoples Security Life
Insurance Company
1% CGC
Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20% Capital Liberty, L.P.
76.3% Monumental Life
Insurance Co.
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
Inc.
</TABLE>
Item 31. Number of Contract Owners
As of December 31, 1999, there were 0 owners of the policies.
Item 32. Indemnification
The Iowa Code (Sections 490.850 et. seq.) provides for permissive
indemnification in certain situations, mandatory indemnification in other
situations, and prohibits indemnification in certain situations. The Code also
specifies producers for determining when indemnification payments can be made.
Insofar as indemnification for liabilities arising under the Securities Act of
933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person in connection with the
securities being registered), the Depositor will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 33. Business and Other Connections of Investment Adviser
Manager - Endeavor Management Co.
The Manager is a registered investment adviser providing investment management
and administrative services to the Registrant.
The list required by this Item 33 of partners, officers and directors of the
Manager together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedule B and D of
Form ADV filed by the Manager pursuant to the Investment Advisers Act of 1940
(SEC No. 801-41827).
Advisers - First Trust Advisers L.P.
The list required by Item 33 of partners, officers and directors of the Adviser
together with information as to any other business, professioon, vocation or
employment of a substantial nature engaged in by such oficers and director
during the past two years is incorporated by reference to Schedule B and D of
Form ADV filed by the Adviser pursuant to the Investment Advisers Act of 1940
(SEC No. 801-39950).
<PAGE>
Item 34. Principal Underwriters
AFSG Securities Corporation
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499-0001
The directors and officers of AFSG Securities Corporation are as follows:
Larry N. Norman Sarah J. Strange
Director and President Director and Vice President
Frank A. Camp Bob Warner
Director and Secretary Assistant Compliance Officer
Lisa Wachendorf Linda Gilmer
Vice President and Treasurer/Controller
Chief Compliance Officer
Priscilla Hechler
Debra C. Cubero Assistant Vice President and Assistant Secretary
Vice President
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.
AFSG Securities Corporation serves as the principal underwriter for the PFL
Endeavor Variable Annuity Account, PFL Endeavor Platinum Variable Annuity
Account, the PFL Retirement Builder Variable Annuity Account, the PFL Life
Variable Annuity Account A, PFL Life Variable Annuity Account C, 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.
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.
Item 35. 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 36. Management Services
All management Contracts are discussed in Part A or Part B.
<PAGE>
Item 37. Undertakings
(a) Registrant undertakes to file a post-effective amendment, using
financial statements of the Registrant which need not be certified, within four
to six months from the effective date of the Registrant's 1933 Act registration
statement.
(b) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as Premiums under the Policy may be accepted.
(c) Registrant undertakes that it will include either (i) a postcard or
similar written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information or (ii) a
space in the Policy application that an applicant can check to request a
Statement of Additional Information.
(d) 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.
(e) PFL Life Insurance Company hereby represents that the fees and charges
deducted under the policies, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by PFL Life Insurance Company.
Section 403 (b) Representations
- -------------------------------
PFL represents that it is relying on a no-action letter dated November 28, 1988,
to the American Council of Life Insurance (Ref. No. IP-6-88), regarding Sections
22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, in connection
with redeemability restrictions on Section 403(b) Policies, and that paragraphs
numbered (1) through (4) of that letter will be complied with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the PFL Endeavor Target Account has caused this Registration Statement to
be signed on its behalf in the City of Corona Del Mar and State of California on
this 11th day of January, 2000.
PFL ENDEAVOR TARGET ACCOUNT
By: /s/ Vincent J. McGuinness, Jr.
---------------------------------
Vincent J. McGuinness, Jr.
President
PFL LIFE INSURANCE COMPANY
By: /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.
Signature Title Date
- --------- ----- ----
/s/ Vincent J. McGuinness Manager January 11, 2000
- ---------------------------------
Vincent J. McGuinness
/s/ Timothy A. Devine Manager January 11, 2000
- ---------------------------------
Timothy A. Devine
/s/ Thomas J. Hawekotte Manager January 11, 2000
- ---------------------------------
Thomas J. Hawekotte
/s/ Steven L. Klosterman Manager January 11, 2000
- ---------------------------------
Steven L. Klosterman
/s/ Halbert D. Lindquist Manager January 11, 2000
- ---------------------------------
Halbert D. Lindquist
/s/ Peter F. Muratore Manager January 11, 2000
- ---------------------------------
Peter F. Muratore
/s/ Vincent J. McGuinness, Jr. Treasurer and January 11, 2000
- --------------------------------- Chief Investment Officer
Vincent J. McGuinness, Jr.
<PAGE>
/s/ Keith H. Wood Manager January 11, 2000
- ---------------------------------
Keith H. Wood
/s/ Larry Norman Manager January 11, 2000
- ---------------------------------
Larry Norman
/s/ Robert Hickey Power of Attorney January 11, 2000
- ---------------------------------
Robert Hickey
<PAGE>
Registration No.
333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
EXHIBITS
TO
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
PFL ENDEAVOR TARGET ACCOUNT
_______________
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit Page No.*
- ----------- ---------------------- ---------
(6)(c) Form of Individual Policy for the Access Variable
Annuity.
(7)(c) Form of Individual Application for the Access Variable
Annuity.
(11)(b)(1) Amended Schedule A and Schedule B to the Administrative
Services Agreement
(18) Powers of Attorney
- -----------------------------------------------------------
* Page numbers included only in manually executed original.
<PAGE>
EXHIBIT (6)(c)
--------------
INDIVIDUAL POLICY
<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
ANNUITANT: JOHN DOE
OWNER(S): JOHN DOE
POLICY NUMBER: 07 - 0001234
POLICY DATE: December 1, 1999
WE AGREE
. To provide annuity payments as set forth in Section 10 of this policy,
. Or to pay withdrawal benefits in accordance with Section 5 of this policy,
. Or to pay death proceeds in accordance with Section 9 of this policy.
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 policy.
These agreements are subject to the provisions of this policy. This policy is
issued in consideration of the application, or information provided in lieu
thereof, and payment of the initial premium.
This policy 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 policy by delivering or mailing a written notice or sending
a telegram to us. You must return the policy before midnight of the twentieth
day after the day you receive it. Notice given by mail and return of the policy
by mail are effective on being postmarked, properly addressed and postage
prepaid.
We will pay you an amount equal to the sum of:
. the premiums paid; and
. the accumulated gains or losses, if any, in the Separate Account on the date
of cancellation;
unless otherwise required by law.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
This policy is a legal contract between the policyowner and the company.
READ YOUR POLICY CAREFULLY
Flexible Premium Variable Annuity
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
AV474 101 122 1099
<PAGE>
SECTION 1
DEFINITIONS
ADJUSTED POLICY VALUE - The Policy Value increased or decreased by any Excess
Interest Adjustment.
ANNUITANT - The person to whom annuity payments will be made, unless another
payee is named.
ANNUITY COMMENCEMENT DATE - Date the Annuitant will begin receiving payments
from this policy, which may not be later than the last day of the policy 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
is surrendered.
CUSTODIAL CARE - Care designed essentially to help a person with the activities
of daily living which does not require the continuous attention of trained
medical or paramedical personnel.
DISTRIBUTION - A withdrawal or disbursement of funds from the Policy Value or
Cash Value.
HOSPITAL - An institution which 1) is operated pursuant to the laws of the
jurisdiction in which it is located, 2) operates primarily for the care and
treatment of sick and injured persons on an inpatient basis, 3) provides 24-
hour a day nursing service by or under the supervision of registered graduate
professional nurses, 4) is supervised by a staff of one or more licensed
physicians, and 5) has medical, surgical and diagnostic facilities or access to
such facilities.
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.
NURSING FACILITY - A facility which 1) is operated pursuant to the laws of the
jurisdiction in which it is located, 2) provides Nursing Care or Custodial Care,
3) primarily provides nursing care under the direction of a licensed physician,
registered graduate professional nurse, or licensed vocational nurse, except
when receiving custodial care, and 4), is not other than incidentally a
hospital, a home for the aged, a retirement home, a rest home, a community
living center or a place mainly for the treatment of alcoholism, mental illness
or drug abuse.
NURSING CARE - Nursing care prescribed by a physician and performed or
supervised by a registered graduate nurse. Such care includes nursing and
rehabilitation services available 24 hours a day.
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.
PHYSICIAN - Doctor of Medicine or Doctor of Osteopathy who is licensed as such
and operating within the scope of the license.
POLICY ANNIVERSARY - The anniversary of the Policy Date for each year the policy
remains in force.
POLICY DATE - The date shown on page 3 of this policy and the date on which this
policy becomes effective.
POLICY YEAR - The 12 month periods following the Policy Date shown on the Policy
Data page. The first Policy Year starts on the Policy Date. Each subsequent year
starts on the anniversary of the Policy Date.
SEPARATE ACCOUNT - The separate investment account established by us, as
described in Section 6.
SUBACCOUNT - A division of the Separate Account, as described in Section 6.
SURRENDER - A partial or full withdrawal of funds from the Policy Value or
Cash Value.
TERMINAL CONDITION - A condition resulting from an accident or illness which, as
determined by a physician, has reduced life expectancy to not more than 12
months, despite appropriate medical care.
WITHDRAWAL - A distribution of funds from the Policy Value or Cash Value.
YOU, YOUR - The owner of this policy. Unless otherwise specified on the Policy
Data page, the Annuitant and the owner shall be one and the same person.
AVB474 PAGE 2
<PAGE>
SECTION 2 - POLICY DATA
POLICY NUMBER: 07 - 001234 ANNUITANT: JOHN DOE
INITIAL PREMIUM
PAYMENT: $25,000.00 ISSUE AGE/SEX: 35 / MALE
POLICY DATE December 1, 1999 OWNER(S): JOHN DOE
ANNUITY
COMMENCEMENT GUARANTEED
DATE: March 10, 2049 MIMINUM
DEATH BENEFIT
BENEFICIARY: JANE DOE OPTION*: C
Fixed Account Guaranteed Minimum Effective Annual Interest Rate: 3%
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 - 5% 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 Owner(s) or Annuitant is age 85 or older on the Policy 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%
AV474 101 122 1099 SP Page 3
<PAGE>
SECTION 3 - PREMIUM PAYMENTS
PAYMENT OF PREMIUMS
Premium payments may be made any time while this policy 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 initial premium payment is $25,000. If this
policy is being used as a tax-qualified annuity, the minimum initial premium is
$25,000, except that no minimum initial premium payment will be required for
403(b) annuities. The minimum subsequent premium payment we will accept is $50.
The maximum total premium payments 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 policy. The initial premium payment less any applicable premium taxes will
be credited to the policy within two business days of receipt of the premium
payment and the information needed. Subsequent additional premium payments will
be credited to the policy 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 various Investment Options which we make
available. You must indicate what percent of each premium payment to allocate to
various Investment Options. Each percent may be either zero or any whole number,
however, the allocation among all accounts must total 100%.
CHANGE OF ALLOCATION
You may change the allocation of premium payments to various Investment Options.
You must tell us in a notice you sign which gives us the facts that we need.
Premium payments received after the date on which we receive your notice will be
applied on the basis of the new allocation.
PREMIUM TAXES
Your state may impose a premium tax. It may be imposed either 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 (see Section 6); minus
(e) accumulated losses in the Separate Account (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. You may use the Adjusted Policy Value 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 Policy Anniversary and at the time of surrender during any Policy Year
before the Annuity Commencement Date, we reserve the right to charge up to $30
for policy administration expenses. The Service Charge will be deducted from
each Investment Option in proportion to the portion of Policy Value (prior to
such charge) in each Investment Option. In no event will the Service Charge
exceed 2% of the Policy Value on the Policy Anniversary or at the time of
surrender.
The Service Charge will not be deducted on a Policy Anniversary or at the time
of surrender if, at either of these times, (1) the sum of all premium payments
less the sum of all withdrawals taken is at least $50,000; or (2) the Policy
Value equals or exceeds $50,000.
M1074 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 applicable Surrender Charges. Since there are no
Surrender Charges, the Cash Value is the Adjusted Policy Value. Information on
the current amount of Your policy'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 policy. 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 or transfer 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 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 may affect the death proceeds defined in
Section 9;
4) 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 You;
5) 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.
6) 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 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 policy 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.
PARTIAL WITHDRAWALS
We will pay You a portion of the Cash Value as a Partial Withdrawal provided we
receive Your written request while the policy 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.
U1074 PAGE 5
<PAGE>
SECTION 5 - CASH VALUES AND PARTIAL WITHDRAWALS - CONT
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 Excess Interest Adjustments apply at the time You request
the Partial Withdrawal.
The formula for determining the Gross Partial Withdrawal is as follows:
Gross Partial Withdrawal = R - E
where: R is the requested Partial Withdrawal; and
E is the Excess Interest Adjustment
If any Partial Withdrawal reduces the Cash Value below $500, we reserve the
right to pay the full Cash Value and terminate the policy.
We may delay payment of the Cash Value from the Fixed Account for up to 6 months
after we receive the request. If the Owner dies after we receive the request,
but before the request is processed, the request will be processed before the
death proceeds are determined.
Partial Withdrawals may be made free from Excess Interest Adjustments as
follows:
LUMP SUM
Beginning in the second Policy Year, amounts up to 10% of the cumulative
premium payments immediately prior to the Partial Withdrawal are available as
Lump Sum distributions in one or more withdrawals during a Policy Year with no
Excess Interest Adjustment. The minimum Withdrawal is $500.
SYSTEMATIC PAYOUT OPTION
Beginning in the first Policy Year, a Systematic Payout Option (SPO) is
available on a monthly, quarterly, semi-annual or annual basis. SPO payouts
must be at least $50 and may not exceed 10% of the cumulative premium payments
at the time a SPO payout is made divided by the number of payouts made per
year (e.g. 12 for monthly). No Excess Interest Adjustment will apply to the
SPO payout. Monthly and quarterly payouts must be sent through electronic
funds transfer directly to Your checking or savings account. You may start or
stop SPO payouts at any time; however, 30 days written notice is required to
stop SPO payouts. Once stopped, You must wait until the first day of the next
Policy Year to begin a new SPO.
Once You have elected a SPO, You 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.
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 Excess Interest Adjustments. The amount available
from this policy with respect to the minimum distribution requirement is based
solely on this policy.
The 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 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 Excess Interest Adjustments applied, unless the excess
distribution qualifies as Excess Interest Adjustment-free under any additional
options provided.
P1051 PAGE 6
<PAGE>
SECTION 5 - CASH VALUE AND PARTIAL WITHDRAWALS - CONT
NURSING CARE AND TERMINAL CONDITION WITHDRAWAL OPTION
Beginning in the first Policy Year, if the Owner or Owner's spouse
(Annuitant or Annuitant's spouse if the 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 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, Owner's, or 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 Policy Year, You may withdraw all or a portion of
the Policy Value free of any Excess Interest Adjustment if the Owner or
Owner's spouse (Annuitant or Annuitant's spouse, if the Owner is not a
natural person) becomes unemployed. In order to qualify, 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 Policy Date, 3)
must have been unemployed for at least 60 consecutive days at the time of
withdrawal and 4) must have a minimum Cash Value at the time of withdrawal
of $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.
GUARANTEED RETURN OF FIXED ACCOUNT PREMIUM PAYMENTS
Upon full surrender of the policy, 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 policy are not less than those required by
any statute of the state in which the policy is delivered.
PB1051 PAGE 7
<PAGE>
SECTION 6 - SEPARATE ACCOUNT
SEPARATE ACCOUNT
We have established and will maintain a Separate Account, 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 this policy, as well as for other variable annuity policies. 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 policies to which this policy
belongs, to another separate account. If this type of transfer is made, the
term "Separate Account", as used in the policy, 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 Policy 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.
V1092 PAGE 8
<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 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 lowa 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 policy 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 policy.
The Service Charge is deducted prior to the Annuity Commencement Date only.
If the Mortality and Expense Risk Fee is more than sufficient, the Company will
retain the balance as profit or reduce this fee 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 amount allocated to or 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. 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 that Subaccount.
Since the net investment factor may be greater or less than one, the
accumulation unit value may increase or decrease.
VB1092 PAGE 9
<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 roiled 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 Policy 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.
L921 PAGE 10
<PAGE>
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 Policy
Year. Any transfers in excess of 12 per Policy 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 Money Market Subaccount, the Dollar Cost
Averaging (DCA) Fixed Account Option, or the U.S. Government Securities
Subaccount to any other 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 Policy 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.
LB921 PAGE 11
<PAGE>
SECTION 9 - DEATH PROCEEDS
A. DEATH PROCEEDS PRIOR TO ANNUITY COMMENCEMENT DATE
The amount of 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), if any, 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 you have not selected a payment option by the date of death, the beneficiary
may make such election within one year of the date we receive due proof of the
Owner's or Annuitant's death as described in C. below. 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. GUARANTEED MINIMUM DEATH BENEFIT
For Owner(s) and Annuitant issue ages 84 and younger, the amount of the
Guaranteed Minimum Death Benefit (GMDB) is based on the death benefit shown on
page 3. You may not change the GMDB option after the policy is issued.
Option C: 5% Annually Compounding through age 80 Death Benefit
The GMDB is equal to the total premiums paid for the policy, less any
Adjusted Partial Withdrawals (as described below), accumulated at 5%
interest per annum from the payment or withdrawal date to the earlier of
the date of death or the owner's 81st birthday.
Option S: Annual Step-Up through age 80 Death Benefit
This GMDB is equal to:
a) 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
b) any Premium Payments subsequent to the date of the Policy
Anniversary with the largest Policy Value; minus
c) any Adjusted Partial Withdrawals (as described below), subsequent
to the date of the Policy Anniversary with the largest Policy
Value.
Option R: Return of Premium Death Benefit
This GMDB is equal to the total premiums paid for this policy, less any
Adjusted Partial Withdrawals (as described below), as of the date of death.
If the Owner is a nonnatural person, or if the Owner has elected to have the
death proceeds paid upon the death of the Annuitant, the GMDB will be based upon
the Annuitant's age.
A Partial Withdrawal taken as provided in Section 5 will reduce the Guaranteed
Minimum Death Benefit by an amount referred to as the "Adjusted Partial
Withdrawal". The Adjusted Partial Withdrawal may be a different amount than the
Gross Partial Withdrawal described in Section 5. 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.
C. DEATH PRIOR TO ANNUITY COMMENCEMENT DATE
Death proceeds are payable contingent upon the relationships between the owner,
Annuitant, successor owner and beneficiary as outlined below. The policy must be
surrendered upon settlement or on proof of death.
I. Annuitant and owner are the same.
When we have due proof that the owner died before the Annuity Commencement Date,
we will provide the death proceeds to the beneficiary.
a) Beneficiary is the deceased owner's surviving spouse. The beneficiary may
elect to continue this policy as owner and annuitant rather than receiving
the death proceeds. If the policy is continued, an amount equal to the
excess, if any, of the 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.
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 owner's death, or
(2) payments must begin no later than one year after the deceased 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 owner's surviving spouse. The death
proceeds must be distributed as provided in l.a)(1) or l.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
owner's death.
D333 PAGE 12
<PAGE>
SECTION 9 - DEATH PROCEEDS - CONT
II. Annuitant and owner are different and the Annuitant dies.
When we have due proof that the Annuitant died prior to the Annuity
Commencement Date, the owner will become the new Annuitant and no death
proceeds are payable. If the owner is also the deceased Annuitant's
surviving spouse, an amount equal to the excess, if any, of the Guaranteed
Minimum Death Benefit over the Policy Value will then be added to the
Policy Value. This amount will be added only once.
However, in lieu of becoming the new Annuitant, the 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 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 owner are different and the owner dies.
If the owner dies prior to the Annuity Commencement Date and before the
entire interest in the policy is distributed, the successor owner will
become the new owner. The remaining portion of any interest in the policy
must be distributed to the extent provided below in III.a), III.b), III.c),
or III.d).
a) Successor owner is the deceased owner's surviving spouse. The
successor owner may elect to continue this policy rather than receive
the Adjusted Policy Value. If the successor owner elects to receive
the Adjusted Policy Value, the Adjusted Policy Value must be
distributed:
(1) by the end of 5 years after the date of the deceased owner's
death, or
(2) payments must begin no later than one year after the deceased
owner's death and must be made for a period certain or for the
successor owner's lifetime, so long as any period certain does not
exceed the successor owner's life expectancy.
b) Successor owner is not the deceased owner's surviving spouse. The
Adjusted Policy Value must be distributed as provided in III.a)(1) or
III.a)(2) above.
c) Successor owner is not a natural person. The Adjusted Policy Value
must be distributed as provided in III.a)(1) above.
d) No successor owner survives the deceased owner. The deceased owner's
estate will become the new owner (or the estate may name a new 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 owner's death.
IV. More than one Owner.
If there is more than one owner, then the death of any owner will be
treated the same as the death of the 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 owner dies on or after the Annuity Commencement
Date, but before the entire interest in the policy is distributed, the remaining
portion of such interest in the policy will be distributed to the beneficiary at
least as rapidly as under the method of distribution being used as of the date
of that owner's death
E. AN OWNER IS NOT AN INDIVIDUAL
In the case of a non tax-qualified annuity, if any owner or beneficial owner, is
not an individual, then for purposes of the federal income tax mandatory
distribution provisions in subsection C or D above, (1) the primary Annuitant
will be treated as the owner of the policy, and (2) if there is any change in
the primary Annuitant, such a change will be treated as the death of the owner.
DB333 PAGE 13
<PAGE>
SECTION 10 - ANNUITY PAYMENTS
A. GENERAL PAYMENT PROVISIONS
Payment
If this policy 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 option(s) elected must
provide for lifetime income or income for a period of at least 60 months. You
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 $50.00.
Before the Annuity Commencement Date, if the death proceeds become payable or if
You surrender this policy, 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 Age Adjusted
- ----------------------- ------------------
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 You can elect or change a payment option.
You may elect, in a notice You sign which gives us the facts that we need,
annuity payments that may be either variable, fixed, or a combination of both.
If you elect a combination, You must also tell us what part of the policy
proceeds on the Annuity Commencement Date are to be applied to provide each type
of payment. (You 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.
Payee
Unless You specify otherwise, the payee shall be the Annuitant, or the
beneficiary as defined 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 so, we will deduct the premium tax before applying the proceeds.
Supplementary Contract
Once proceeds become payable and a payment option has been selected, this policy
will terminate and we will issue a supplementary contract to ref elect the terms
of the selected option. The contract will name the payees and will describe the
payment schedule.
B. FIXED ACCOUNT PAYMENTS
Guaranteed Payment Options
The fixed account payment is determined by multiplying each $1,000 of policy
proceeds allocated to a fixed payment option by the amounts shown on page 16 for
the option You select. 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 You agree to. We and You 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.
S987 PAGE 14
<PAGE>
SECTION 10 - ANNUITY PAYMENTS - CONT
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 16 are the guaranteed amounts. Current
amounts offered to individuals of the same class may be obtained from us.
C. VARIABLE ACCOUNT PAYMENT OPTIONS
Variable Annuity Units
The policy proceeds You tell us to apply to a variable payment option will be
used to purchase variable annuity units in Your chosen Subaccounts. The dollar
value of variable annuity units in Your chosen Subaccounts will increase or
decrease reflecting the investment experience of Your 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. 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 policy proceeds allocated to a variable payment option by the amounts
shown on page 17 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 3-V - Life Income
An election may be made between:
1. "No Period Certain" - Payments will be made during the lifetime of the
Annuitant
2. "10 Years Certain" - Payments will be made for the longer of the
Annuitant's lifetime or ten years. 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 5-V - Joint and Survivor Annuity
Payments are made as long as either the Annuitant or the joint Annuitant 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.
SB987 PAGE 15
<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
- ----------------------------------------------------------------------------------------------------------------------------------
<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
- ----------------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------------
</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.
T831 PAGE 16
<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.
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<TABLE>
<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
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <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
- ----------------------------------------------------------------------------------------------------------------------------------
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 $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 17
TB831
<PAGE>
SECTION 11 - GENERAL PROVISIONS
THE CONTRACT
The entire contract consists of this policy, endorsements, if any, and the
application, or information provided in lieu thereof, signed by You.
MODIFICATION OF POLICY
No change in this policy 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 Your policy.
TAX QUALIFICATION
This policy is intended to qualify as an annuity contract for federal income tax
purposes. The provisions of this policy are to be interpreted to maintain such
qualification, notwithstanding any other provisions to the contrary. To maintain
such tax qualification, we reserve the right to amend this policy to reflect any
clarifications that may be needed or are appropriate to maintain such tax
qualification or to conform this policy to any applicable changes in the tax
qualification requirements. We will send You a copy in the event of any such
amendment. If You refuse such an amendment it must be by giving us written
notice, and Your refusal may result in adverse tax consequences.
NON-PARTICIPATING
This policy 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
annuity payments 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 policy shall be incontestable from the Policy 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 policy is payable at our Home Office.
RIGHTS OF OWNER
The owner may, while the Annuitant is living:
1. Assign this policy.
2. Surrender the policy to us.
3. Amend or modify the policy 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
policy.
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
policy, we will rely on our good faith belief that no such interest exists and
will assume no responsibility for inquiry.
SUCCESSOR OWNER
A successor owner can be named in the application, or information provided in
lieu thereof, or in a notice You sign which gives us the facts that we need. The
successor owner will become the new owner when You die, if You die before the
Annuitant. If no successor owner survives You and You die before the Annuitant,
Your estate will become the new owner.
CHANGE OF OWNERSHIP
In the case of a non-tax qualified annuity, You can change the owner of this
policy, from yourself to a new 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 policy will pass to the new owner.
A change of owner or successor 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 policy. Changing the owner or naming a new successor
owner cancels any prior choice of successor owner, but does not change the
beneficiary or the Annuitant
A change of ownership may result in adverse tax consequences.
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 policy 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 policy 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.
H769 PAGE 18
<PAGE>
SECTION 11 - GENERAL PROVISIONS - CONT
ASSIGNMENT
(a) In the case of a non tax-qualified annuity, this policy 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 policy may be applied for and issued to qualify as a tax-qualified
annuity under certain sections of the Internal Revenue Code. Ownership of
this policy then is restricted so that it will comply with provisions of
the Internal Revenue Code.
Assignment of this policy 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 application, 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 You sign it, 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. Your 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 policy 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 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 ail 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 owner (who is not the Annuitant)
elected to receive the death benefit in accordance with Section 9, if the
Annuitant's estate has been named as beneficiary, then payment will be made to
the owner.
PROTECTION OF PROCEEDS
Unless You so direct by filing written notice with us, no beneficiary may assign
any payments under this policy before the same are due. To the extent permitted
by law, no payments under this policy will be subject to the claims of creditors
of any beneficiary.
DEFERMENT
We will pay any Partial Withdrawals or Surrender proceeds from the Separate
Account 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 Your
request. If the 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 3% per year unless otherwise required by law.
REPORTS TO OWNER
We will give You an annual report at least once each Policy 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.
J769 PAGE 19
<PAGE>
PFL Life Insurance Company
Home Office located at: 4333 Edgewood Road NE., Cedar Rapids, Iowa 52499
[PFL LIFE LOGO]
Flexible Premium Variable Annuity
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 9
Age or Sex Corrections 18
Annuity Commencement Date 18
Annuity Payments 14, 15
Adjusted Policy Value 4
Assignment 19
Beneficiary 19
Cash Value 5
Contract 18
Death Proceeds 12, 13
Definitions 2
Dollar Cost Averaging Option 11
Evidence of Survival 18
Excess Interest Adjustment 5
Fixed Account 10
Guaranteed Minimum Death Benefit 12
Guaranteed Return of Fixed Account
Premium Payments 7
Page
Guaranteed Periods 10
Incontestability 18
Modification of Policy 18
Nonparticipation 18
Owner 18
Partial Withdrawals 5, 6, 7
Payee 14
Payment of Premiums 4
Payment Option Tables 16,17
Policy Data Page 3
Policy Value 4
Proof of Age 14
Protection of Proceeds 19
Right to Cancel 1
Separate Account 8, 9
Service Charge 4
Settlement 18
Transfers 10, 11
Y613
<PAGE>
EXHIBIT (7)(c)
FORM OF INDIVIDUAL APPLICATION
<PAGE>
<TABLE>
<CAPTION>
Issued by: PFL Life Insurance Company ("PFL Life")
A Transamerica Company
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499-0001
VARIABLE ANNUITY APPLICATION Mail the application and a check:
PFL Life Insurance Company
Attn: Variable Annuity Dept.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. owner If no annuitant is specified in #2, the Owner will joint owner(s)
be the annuitant.
In the event the owner is a trust, please provide verification
of trustees. Trustee certificate in forms booklet.
Last Name Last Name
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------------------------- -------------------------------------------------------------
First Name First Name
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------------------------- -------------------------------------------------------------
Address Address
- -------------------------------------------------------------- -----------------------------------------------------------------
Street Street
- -------------------------------------------------------------- -----------------------------------------------------------------
City State Zip City State Zip
Phone________________ SS#/TIN / / / /-/ / /-/ / / / / Phone_________________________ SS#/TIN / / / /-/ / /-/ / /
[ ]Male [ ]Female Birthdate / / /-/ / /-/ / / / / [ ]Male [ ]Female Birthdate / / /-/ / /-/ / / / /
- ------------------------------------------------------------------------------------------------------------------------------------
2. annuitant Complete only if different from Owner. Address
Last Name
/ / / / / / / / / / / / / / / / / / / / / -----------------------------------------------------------------
- ------------------------------------------------------------- Street
First Name
/ / / / / / / / / / / / / / / / / / / / / ------------------------------------------------------------------
- ------------------------------------------------------------- City State Zip
Relationship to Owner________________________________________ Phone____________________ SS#/TIN / / / /-/ / /-/ / / / /
[ ]Male [ ]Female Birthdate / / /-/ / /-/ / / / /
- ------------------------------------------------------------------------------------------------------------------------------------
3. beneficiary(ies)
Primary__________________________________________ Relationship to Annuitant: _________________________________ _______%
Primary__________________________________________ Relationship to Annuitant: _________________________________ _______%
Contingent:______________________________________ Relationship to Annuitant: _________________________________ _______%
Contingent:______________________________________ Relationship to Annuitant: _________________________________ _______%
- ------------------------------------------------------------------------------------------------------------------------------------
4. type of annuity
[ ] Non-Qualified Qualified Types: [ ] IRA [ ] Roth IRA [ ] SEP/IRA [ ] 403(b) [ ] Keogh [ ] Roth Conversion
[ ] Other ______________________________________________________
IRA/SEP/ROTH IRA
$_______________________ Contribution for tax year __________. ROTH IRA Rollover
$_______________________ Trustee to Trustee Transfer / / /-/ / /-/ / / / / Date first established or date of
----------------------------- conversion Portion previously
$_______________________ Rollover from [ ] IRA [ ] 403(b) [ ] Pension $_____________ taxed
[ ] Other ________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
5. family income protector Please complete
Family Income Protector Option: [ ] Yes (Available at an additional cost, see prospectus) [ ] No
- ------------------------------------------------------------------------------------------------------------------------------------
6. minimum death benefit Select one if owner(s) & 7. replacement information
annuitant are age 84 or under.*
If no selection then Return of
Premium will apply.
Your selection cannot be changed after the policy has been Will this annuity replace or change any existing annuity or
issued. life insurance?
[ ] No [ ] Yes (If Yes, complete the following)
[ ] 5% Annually Compounding Death Benefit to age 81 (only if Company _______________________________________________________
owner(s) and annuitant are under age 81 at time of Policy No. ____________________________________________________
purchase.) Annual M&E risk fee and administrative charge
is 1.85%
[ ] Annual Step-Up Death Benefit (only if owner(s) and annuitant
are under age 81 at time of purchase.) Annuitant M&E risk
fee and administrative charge is 1.85%
[ ] Return of Premium Death Benefit
Annual M&E risk fee and administrative charge is 1.70%
*(If owner(s) or annuitant is age 85 or older on the policy
date, there is no guaranteed minimum death benefit option to
be elected.)
- --------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
VA-APP R1099
<PAGE>
<TABLE>
<S> <C> <C> <C>
8. allocation of premium payments Please fill in selected funds and fixed accounts. The initial premium will be allocated as
selected here. If Dollar Cost Averaging also complete section 9.
- ------------------------------------------------------------------------------------------------------------------------------------
Initial Premium $________________________. Make check payable to PFL Life Insurance Company. Following is authorized to make
telephone transfer requests (check one only):
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] Owner(s) only, or [ ] Owner(s) and Owner's Registered Representative
- ------------------------------------------------------------------------------------------------------------------------------------
VARIABLE OPTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
SUBADVISER PORTFOLIO INITIAL DCA
- -----------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Corporation DREYFUS SMALL CAP VALUE PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Corporation DREYFUS U.S. GOVERNMENT SECURITIES PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Asset Management, Inc. ENDEAVOR ASSET ALLOCATION PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan Investment Mgmt. Inc. ENDEAVOR ENHANCED INDEX PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts Financial Services Co. ENDEAVOR HIGH YIELD PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Capital Corporation ENDEAVOR JANUS GROWTH PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Asset Management, Inc. ENDEAVOR MONEY MARKET PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
OpCap Advisors ENDEAVOR OPPORTUNITY VALUE PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Montgomery Asset Mgmt. LLC ENDEAVOR SELECT 50 PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
OpCap Advisors ENDEAVOR VALUE EQUITY PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Transamerica Investment Services, Inc. TRANSAMERICA VIF GROWTH PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Associates, Inc. T. ROWE PRICE EQUITY INCOME PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Associates, Inc. T. ROWE PRICE GROWTH STOCK PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Rowe-Price Fleming International, Inc. T.ROWE PRICE INTERNATIONAL STOCK PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Fred Alger Management, Inc. WRL ALGER AGGRESSIVE GROWTH PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Asset Management WRL GOLDMAN SACHS GROWTH PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Capital Corporation WRL JANUS GLOBAL PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
NWQ Investment Management Company, Inc. WRL NWQ VALUE EQUITY PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Pilgrim Baxter & Associates, Ltd. WRL PILGRIM BAXTER MID CAP GROWTH PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Asset Management, Inc. WRL SALOMAN ALL CAP PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Associates, Inc. WRL T. ROWE PRICE DIVIDEND GROWTH PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Associates, Inc. WRL T. ROWE PRICE SMALL CAP PORTFOLIO .0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
.0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
.0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
.0% .0%
- -----------------------------------------------------------------------------------------------------------------------------------
FIXED OPTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
. Policy values when allocated to any of Dollar Cost Averaging Account .0%
the Variable Options are not guaranteed ----------------------------------------------------------------------------------
as to fixed dollar amount. (Must complete DCA allocation above and section 9.) .0%
----------------------------------------------------------------------------------
. When funds are allocated to Fixed Account 1 Year Guaranteed Period .0%
Guaranteed Periods, policy values under ----------------------------------------------------------------------------------
policy may increase or decrease in 3 Year Guaranteed Period .0%
accordance with Excess Interest Adjustment ----------------------------------------------------------------------------------
prior to the end of Guaranteed Period. 5 Year Guaranteed Period .0%
==================================================================================
TOTAL VARIABLE AND FIXED 100% 100%
==================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
9. dollar cost averaging program Must complete DCA Allocation in Section 8. Authorized by Owner Signature in Section 10.
TRANSFER FROM: [ ] DCA Fixed FREQUENCY OPTIONS: ______ Monthly Transfers (6 min., 24 max.)
[ ] Money Market [ ] U.S. Gov't Securities ______ Quarterly (4 min., 8 max.)
- -----------------------------------------------------------------------------------------------------------------------------------
10. signature(s) of authorization acceptance
. Unless I have notified the Company of a community or marital property interest in this policy, the Company will rely on good
faith belief that no such interest exits and will assume no responsibility for inquiry.
. To the best of my knowledge and belief, my answers to the questions on this application are correct and true, and I agree that
this application becomes a part of the annuity policy when issued by me.
. I (we) am in receipt of a current prospectus for this variable annuity.
. This application is subject to acceptance by PFL Life. If this application is rejected for any reason, PFL Life will be liable
only for return of premium 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) ______________________________________________________ Joint Owner(s) ____________________________________________________
Annuitant (if not Owner) __________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
11. 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 Rep/Licensed Agent Name (please print): ________________________________________ Signature _____________________________
Phone ________________________________________________ SS#/TIN ___________________________________________________________________
Firm Name _________________________________________________________________________________________________________________________
Firm Address ______________________________________________________________________________________________________________________
For Registered Representative Use Only - Contact your home office for program information. [ ] Option A [ ] Option B [ ] Option C
(Once selected program cannot be changed)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
VA-APP R1099B
<PAGE>
EXHIBIT (11)(b)(1)
AMENDED SCHEDULE A AND SCHEDULE B
TO THE ADMINISTRATIVE SERVICES AGREEMENT
<PAGE>
ADMINISTRATION AGREEMENT
AMENDED SCHEDULE A
(as of December 31, 1998)
The Dow Target 5 Subaccount
July Series
January Series
The Dow Target 10 Subaccount
July Series
January Series
Accepted by:
/s/ William L. Busler /s/ James Fox
- ---------------------- ----------------------------------
PFL Life Insurance Company, on behalf of First Data Investor Services
PFL Endeavor Target Account Group, Inc.
<PAGE>
ADMINISTRATION AGREEMENT
AMENDED SCHEDULE B
FEE SCHEDULE
(as of December 31, 1998)
The Account shall pay Investor Services Group the following fees:
. a flat fee of $10,000 per annum per Series of each Subaccount
. Investor Services Group shall be entitled to collect all out-
of-pocket fees described in Schedule C
Accepted by:
/s/ William L. Busler /s/ James Fox
- --------------------------------- -----------------------------------
PFL Life Insurance Company, on behalf of First Data Investor Services
PFL Endeavor Target Account Group, Inc.
<PAGE>
EXHIBIT (18)
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Vincent J. McGuinness, Jr.
-------------------------------
Vincent J. McGuinness, Jr.
President
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Vincent J. McGuinness
--------------------------
Vincent J. McGuinness
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Timothy A. Devine
----------------------
Timothy A. Devine
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Thomas J. Hawekotte
------------------------
Thomas J. Hawekotte
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Steven L. Klosterman
-------------------------
Steven L. Klosterman
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Halbert D. Lindquist
-------------------------
Halbert D. Lindquist
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Peter F. Muratore
----------------------
Peter F. Muratore
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Keith H. Wood
------------------
Keith H. Wood
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
PFL ENDEAVOR TARGET ACCOUNT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-3 has been signed below by the following persons in the
capacities and on the dates indicated. By so signing, each of the undersigned
in his capacity as a manager or officer, or both, as the case may be of the
Registrant, does hereby appoint Robert Hickey and David Leahy, and each of them,
severally, or if more than one acts, a majority of them, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and agents
shall have the power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
each of the undersigned might or could do in person, hereby ratifying and
approving the act of said attorneys and agents and each of them.
/s/ Larry N. Norman
--------------------
Larry N. Norman
Manager
PFL Endeavor Target Account
December 27, 1999
- -----------------
Date
