PRINCIPAL MUTUAL LIFE INSURANCE CO VARIABLE LIFE SEP ACCOUNT, S-6EL24/A, 1996-06-05

PRINCIPAL MUTUAL LIFE INSURANCE CO VARIABLE LIFE SEP ACCOUNT
S-6EL24/A, 1996-06-05

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Registration No. 333-00101
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- --------------------------------------------------------------------------------
Pre-effective Amendment No. 1 to
FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2

PRINCIPAL MUTUAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Depositor)

711 High Street
Des Moines, Iowa 50309
(Address of Depositor's Principal Executive Offices)

David J. Brown
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50309
(Name and address of agent for service)

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Telephone Number, Including Area Code: (515) 247-5111
-------------------------------------------------------

Please send copies of all communications to

W. Randolph Thompson
Jorden, Burt, Berenson & Johnson LLP
Suite 400 East
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007-0805

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

Title and Amount of Securities: PrinFlex Life Insurance Policy. (Pursuant to
Rule 24f-2 under the Investment Company Act of 1940, the Registrant has elected
to register an indefinite amount of securities being registered.)

Approximate date of proposed public offering: As soon as practicable after the
effective date of the Registration Statement.

--------------------------
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT

Registration Statement on Form S-6
Cross Reference Sheet

Items of
Form N-8B-2 Captions in Prospectus

1.............. Cover Page

2.............. Cover Page

3.............. Not Applicable

4.............. Distribution of the Policy

5.............. Principal Mutual Life Insurance Company Variable Life
Separate Account

6(a)........... Not Applicable

6(b)........... Not Applicable

7.............. Not Required

8.............. Not Required

9.............. Legal Proceedings

10(a).......... Ownership, Beneficiaries, Assignment

10(b).......... Policy Values; Participating Policy

10(c), 10(d)... Summary (Transfers; Policy Loans; Total and Partial
Surrenders, Charges and Deductions; Maturity Proceeds;
Death Benefits and Proceeds, Termination and
Reinstatement; Policy "Free Look"); Policy "Free Look,"
Values Transfers; Policy Loans; Total and Partial
Surrenders); Death Benefits and Rights; Charges and
Deductions (Transaction Charge, Surrender Charge)
Policy Termination and Reinstatement

10(e).......... Summary (Termination and Reinstatement); Policy
Termination and Reinstatement; Registration Statement

10(f).......... Other Matters (Voting Rights)

10(g)(1),
10(g)(2),
10(h)(1),
10(h)(2)....... Principal Mutual Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion or Substitution of Investments; The
Contract)

10(g)(3),
10(g)(4),
10(h)(3),
10(h)(4)....... Not Applicable

10(i).......... Principal Mutual Life Insurance Company Variable Life
Separate Account, Values and Policy Features While the
Policy is in Force; Death Benefits and Rights;
General Provisions (Addition, Deletion or Substitution
of Investments; Optional Insurance Benefits; Policy
Proceeds); Federal Tax Matters

11............. Principal Mutual Life Insurance Company Variable Life
Separate Account (Separate Account Divisions); General
Provisions (Addition, Deletion or Substitution of
Investments)

12(a).......... Cover page

12(b).......... Not Applicable

12(c).......... Principal Mutual Life Insurance Company Variable Life
Separate Account (Separate Account Divisions)

12(d).......... Distribution of the Policy

12(e).......... Not Applicable

13(a).......... Summary (Charges and Deductions); Principal Mutual Life
Insurance Company Variable Life Separate Account;
Charges and Deductions; Distribution of the Policy

13(b), 13(c),
13(d), 13(e),
13(f), 13(g)... Not Applicable

14............. Distribution of the Policy

15............. Summary (Premiums); Purchasing a Policy

16............. Summary (The Policy); Principal Mutual Life Insurance
Company Variable Life Separate Account; Purchasing a
Policy (Allocation of Premiums);
Values and Policy Features While the Policy is in
Force; General Provisions (Addition, Deletion or
Substitution of Investments)

17(a), 17(b),
17(c).......... Captions referenced under Items 10(c), 10(d), 10(e),
and 10(i) above

18(a).......... Summary (Policy Value); Values and Policy Features
While the Policy is in Force

18(b).......... Not Applicable

18(c).......... Values and Policy Features While the Policy is in Force

18(d).......... Not Applicable

19............. Other Matters (Voting Rights; Statement of Values)

20(a), 20(b)... Principal Mutual Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion or Substitution of Investments); Other Matters
(Voting Rights)

20(c), 20(d),
20(e), 20(f)... Not Applicable

21(a), 21(b)... Summary (Policy Loans); Values and Policy Features
While the Policy is in Force (Policy Loans)

21(c).......... Not Applicable

22............. General Provisions (The Contract; Incontestability)

23............. Not Applicable

24............. Charges and Deductions (Special Provisions for Group or
Sponsored Arrangements)

25............. Description of Principal Mutual Life Insurance Company

26............. Not Applicable

27............. Description of Principal Mutual Life Insurance Company

28............. Officers and Directors of Principal Mutual Life
Insurance Company

29............. Description of Principal Mutual Life Insurance Company

30............. Not Applicable

31............. Not Applicable

32............. Not Applicable

33............. Not Applicable

34............. Not Applicable

35............. Description of Principal Mutual Life Insurance Company

36............. Not Applicable

37............. Not Applicable

38(a), 38(b),
38(c).......... Distribution of the Policy

39(a), 39(b)... Distribution of the Policy

40............. Not Applicable

41(a).......... Distribution of the Policy

41(b), 41(c)... Not Applicable

42............. Not Applicable

43............. Not Applicable

44(a), 44(b),
44(c).......... Summary (Policy Value; Transfers; Policy Loans; Total
and Partial Surrenders, Termination and Reinstatement;
Policy "Free-Look"); Principal Mutual Life Insurance
Company Variable Life Separate Account; Values
and Policy Features while the Policy is in Force
(Policy Values; Transfers; Policy Loans; Total and
Partial Surrender) Charges and Deductions

45............. Not Applicable

46(a).......... Captions referenced under items 44(a) above

46(b).......... Not Applicable

47............. Not Applicable

48............. Not Applicable

49............. Not Applicable

50............. Not Applicable

51(a) - (j).... Description of Principal Mutual Life Insurance Company;
Principal Mutual Life Insurance Company Variable Life
Separate Account; Purchasing a Policy; Policy
Termination and Reinstatement; General Provisions;
Distribution of the Policy

52(a).......... Principal Mutual Life Insurance Company Variable Life
Separate Account; General Provisions (Addition,
Deletion or Substitution of Investments)

52(b).......... Not Applicable

52(c).......... Captions referenced in 10(g) and 10(h) above

52(d).......... Not Applicable

53(a).......... Summary (Tax Consequences of the Policy); Federal Tax
Matters

53(b).......... Not Applicable
54............. Not Applicable

55............. Not Applicable

56............. Not Applicable

57............. Not Applicable

58............. Not Applicable

59............. Not Applicable

<PAGE>

Prospectus Dated ________________, 1996

PRINCIPAL MUTUAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
PrinFlex(R) LIFE -- FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY

"PrinFlex(R) Life," the flexible premium variable universal life insurance
policy (the "Policy" or the "Policies") offered by Principal Mutual Life
Insurance Company ("Company") and described in this Prospectus is designed to
provide lifetime insurance protection and maximum flexibility in connection with
premium payments and death benefits. A policyowner may, within limits, vary the
frequency and amount of premium payments and increase or decrease the face
amount of the life insurance benefit under the Policy. This flexibility allows a
policyowner to provide for changing life insurance needs within a single
insurance policy.

The Policy provides : (1) a death benefit upon the insured's death; (2)
policy loans; and (3) a net surrender value accessible by a partial or total
surrender of the Policy.

Policy values may be accumulated on a fixed basis or vary with the
investment performance of the division of the Principal Mutual Life Insurance
Company Variable Life Separate Account to which the policyowner allocates policy
values. Each division invests in a corresponding open-end, management investment
company, or a separate investment portfolio thereof ("Mutual Fund"). The
accompanying prospectuses describe the investment objectives and the attendant
risks of the Mutual Funds currently offered as investment choices under the
Policy: Principal Aggressive Growth Fund, Inc., Principal Asset Allocation Fund,
Inc., Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal
Capital Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
Government Securities Fund, Inc., Principal Growth Fund, Inc., Principal Money
Market Fund, Inc., and Principal World Fund, Inc. ("Principal Mutual Funds"),
Fidelity Variable Insurance Products Fund II: Contrafund Portfolio ("Fidelity
VIP II Contrafund Portfolio"), Fidelity Variable Insurance Products Fund:
Equity-Income Portfolio ("Fidelity VIP Equity-Income Portfolio") and Fidelity
Variable Insurance Products Fund: High Income Portfolio ("Fidelity VIP High
Income Portfolio").

Prospective purchasers of this Policy are advised that replacement of
existing insurance coverage may not be financially advantageous. It may also be
disadvantageous to purchase a Policy as a means to obtain additional insurance
protection if the purchaser already owns a flexible premium universal variable
life insurance policy.

Please read this prospectus carefully and retain it for future reference.
This Prospectus is valid only if accompanied or preceded by the current
prospectuses for the Fidelity Variable Insurance Products Fund, Fidelity
Variable Insurance Products Fund II and Principal Mutual Funds.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>

TABLE OF CONTENTS

GLOSSARY OF SPECIAL TERMS ................................. 4

SUMMARY ................................................... 5

The Policy............................................ 5

Premiums.............................................. 6

Policy Value.......................................... 6

Transfers............................................. 6

Policy Loans.......................................... 6

Total and Partial Surrenders...........................7

Charges and Deductions ............................... 7

Maturity Proceeds..................................... 8

Death Benefit and Proceeds............................ 8

Adjustment Options.................................... 8

Termination and Reinstatement......................... 8

Policy "Free Look".................................... 10

Distribution of the Policy............................10

Tax Consequences of the Policy........................10

DESCRIPTION OF PRINCIPAL MUTUAL
LIFE INSURANCE COMPANY ....................................10

PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY VARIABLE LIFE SEPARATE
ACCOUNT....................................................10

Separate Account Divisions............................11

PURCHASING A POLICY........................................13

Purchase Procedures...................................13

Payment of Premiums...................................13

Premium Limitations...................................14

Allocation of Premiums................................14

Policy "Free Look"....................................14

VALUES AND POLICY FEATURES WHILE
THE POLICY IS IN FORCE................................15

Policy Values.........................................15

Transfers.............................................15

Policy Loans..........................................16

Total and Partial Surrenders.........................17

DEATH BENEFITS AND RIGHTS..................................17

Death Proceeds........................................17

Death Benefit.........................................18

Applicable Percentage.................................18

Change in Death Benefit Option........................19

Adjustment Options....................................19

CHARGES AND DEDUCTIONS.....................................20

Premium Expense Charge................................20

Monthly Policy Charge.................................20

Transaction Charge....................................22

Surrender Charge......................................22

Other Charges.........................................23

Special Provisions for Group or Sponsored
Arrangements........................................23

THE FIXED ACCOUNT..........................................24

POLICY TERMINATION AND REINSTATEMENT.......................24

Policy Termination....................................24

Reinstatement.........................................25

OTHER MATTERS..............................................26

Voting Rights.........................................26

Statement of Value....................................26

Service Available by Telephone........................27

GENERAL PROVISIONS.........................................27

Addition, Deletion, or Substitution of
Investments...........................................27

Optional Insurance Benefits...........................27

The Contract..........................................28

Incontestability......................................28

Misstatements.........................................28

Suicide...............................................28

Ownership.............................................28

Beneficiaries.........................................28

Benefit Instructions..................................29

Postponement of Payments..............................29

Assignment............................................29

Policy Proceeds.......................................29

Participating Policy..................................30

Right to Exchange Policy..............................30

DISTRIBUTION OF THE POLICY.................................30

OFFICERS AND DIRECTORS OF
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY....................................................31

STATE REGULATION OF PRINCIPAL
MUTUAL LIFE INSURANCE COMPANY..............................32

FEDERAL TAX MATTERS........................................32

Tax Status of the Company and the Separate
Account.............................................33

Charges for Taxes.....................................33

Diversification Standards.............................33

Life Insurance Status of Policy.......................33

Modified Endowment Contract Status....................33

Policy Surrenders and Partial Surrenders..............34

Policy Loans and Interest Deductions..................34

Corporate Alternative Minimum Tax.....................35

Exchange or Assignments of Policies...................35

Withholding...........................................35

Taxation of Accelerated Death Benefits................35

Other Tax Issues......................................35

EMPLOYEE BENEFIT PLANS.....................................35

LEGAL PROCEEDINGS..........................................35

LEGAL OPINION..............................................36

INDEPENDENT AUDITORS.......................................36

REGISTRATION STATEMENT.....................................36

FINANCIAL STATEMENTS.......................................36

Report of Independent Auditors........................37

Variable Life Separate Account
Financial Statements..................................38

Report of Independent Auditors........................50

Principal Mutual Life Insurance
Company Financial Statements..........................51

APPENDIX A - SAMPLE ILLUSTRATIONS OF
POLICY VALUES, SURRENDER VALUES AND
DEATH BENEFITS.............................................72

APPENDIX B - TARGET PREMIUMS...............................77

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
DOES NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING
DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, THE
PROSPECTUSES FOR THE UNDERLYING MUTUAL FUNDS OR THE STATEMENTS OF ADDITIONAL
INFORMATION OF THESE FUNDS.
<PAGE>

GLOSSARY OF SPECIAL TERMS

Attained Age - The insured's age on the birthday preceding the last Policy
Anniversary.

Business Day - Any day that the New York Stock Exchange is open for
trading, and trading is not restricted.

Division - A part of the Separate Account to which Net Premiums may be
allocated which invests in shares of a single Mutual Fund. The value of an
investment in a Division is variable and is not guaranteed.

Effective Date - The date on which all requirements for issuance of a
Policy have been satisfied.

Face Amount - The minimum death benefit of a Policy so long as the Policy
remains in force.

Fixed Account - That part of Policy Value that reflects the value in the
general account of the Company.

General Account - The assets of the Company other than those allocated to
any of the Separate Accounts of the Company.

Guideline Annual Premium - The level annual payment necessary to provide
the death benefit under a Policy, through maturity, based on the 1980
Commissioners Standard Ordinary Mortality Table, a 5% assumed interest rate, and
the fees and charges specified for a Policy.

Internal Revenue Code - The Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder. Reference to the Internal Revenue Code means
such Internal Revenue Code or the corresponding provisions of any subsequent
revenue code and any regulations thereunder.

Investment Account - That part of the Policy Value that reflects the value
in one of the Divisions of the Separate Account.

Loan Account - That part of the Policy Value that reflects the value
transferred from the Fixed Account or Separate Account as collateral for a
policy loan.

Maturity Date - The Policy Anniversary following the insured's 95th
birthday.

Monthly Date - The day of the month which is the same as the day of the
Policy Date. For example, if the Policy Date is June 10, 1997, the first Monthly
Date is July 10, 1997.

Monthly Policy Charge - The amount subtracted from the Policy Value on each
Monthly Date equal to the sum of the cost of insurance and additional benefits
provided by any rider plus the monthly administration charge and mortality and
expense risks charge in effect on the Monthly Date.

Mutual Fund - A registered, open-end, management investment company, or a
separate investment portfolio thereof, in which a Division of the Separate
Account invests.

Net Premium - The gross premium less the deductions for the Premium Expense
Charge. It is the amount of premium allocated to the Fixed Account or Investment
Accounts.

Net Surrender Value - The Surrender Value of the Policy reduced by any
unpaid loans and loan interest.

Notice - Any form of communication received in the Company's home office
providing the information needed by the Company, either in writing or another
manner approved in advance by the Company.

Policy Date - The Policy Date is the date from which Monthly Dates and
Policy Years and Anniversaries are determined.

Policy Value - The sum of the values in the Loan Account, Fixed Account and
Investment Accounts.

Policy Years and Anniversaries - The Policy Years and Anniversaries
computed from the Policy Date. Example: If the Policy Date is May 5, 1997, the
first Policy Year ends on May 4, 1998 and the first Policy Anniversary falls on
May 5, 1998.

Premium Expense Charge - The charge deducted from premium payments to cover
a sales charge, state and local premium taxes and federal taxes.

Prorated Basis - The proportion that the value of a particular Investment
Account or Fixed Account for a Policy bears to the total value of all Investment
Accounts and the Fixed Account for that Policy.

Separate Account - Principal Mutual Life Insurance Company Variable Life
Separate Account, a registered unit investment trust with Divisions and
segregated assets, to which Net Premiums may be allocated.

Surrender Charge - A charge assessed upon total surrender of a Policy or
termination of a Policy when a Grace Period expires without sufficient premium
payment.

Surrender Value - The Policy Value reduced by the Surrender Charge.

Target Premium - A premium amount used to determine the maximum sales
charge that is included as part of the Premium Expense Charge and any applicable
contingent deferred sales charge under a Policy. Target Premiums are set forth
in Appendix B. The policyowner will be advised of the Target Premium for any
increase in face amount.

Unit - The accounting measure used to calculate Division values.

Valuation Period - The period between the time as of which the net asset
value of a Mutual Fund is determined on one business day and the time as of
which that value is determined on the next following business day.

Written Request - Actual delivery to the Company at its home office in Des
Moines, Iowa, of a written notice or request, signed and dated, on a form
supplied or approved by the Company.

SUMMARY

THE FOLLOWING SUMMARY IS INTENDED TO PROVIDE A GENERAL DESCRIPTION OF THE
MOST IMPORTANT POLICY FEATURES. IT IS NOT COMPREHENSIVE AND SHOULD BE READ IN
CONJUNCTION WITH THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS.

The Policy

The Policy is designed to provide a policyowner with lifetime insurance
protection and flexibility in connection with the amount and frequency of
premium payments and the amount of life insurance proceeds payable under the
Policy. A policyowner may, subject to certain limitations, vary the frequency
and amount of premium payments. The Policy is a life insurance contract with a
death benefit, Policy Value, and other features traditionally associated with
life insurance.

The policyowner allocates Net Premium Payments to one or more of the Fixed
Account and the Divisions of the Principal Mutual Life Insurance Company
Variable Life Separate Account. Allocations to the Divisions of the Separate
Account are invested in shares of a particular Mutual Fund. Allocation
instructions may be changed at any time and transfers may be made subject to
certain conditions.

The Mutual Funds in which the Divisions currently invest are as follows:

Mutual Fund in
Division which the Division Invests
---------------------------------------------------------
Aggressive Growth Division Principal Aggressive Growth Fund
Asset Allocation Division Principal Asset Allocation Fund
Balanced Division Principal Balanced Fund
Bond Division Principal Bond Fund
Capital Accumulation Division Principal Capital Accumulation Fund
Emerging Growth Division Principal Emerging Growth Fund
Government Securities Division Principal Government Securities Fund
Growth Division Principal Growth Fund
Money Market Division Principal Money Market Fund
World Division Principal World Fund
Fidelity Contrafund Division Fidelity VIP II Contrafund Portfolio
Fidelity Equity-Income Division Fidelity VIP Equity-Income Portfolio
Fidelity High Income Division Fidelity VIP High Income Portfolio

Premiums

The required initial premium payment is equal to the minimum monthly
premium shown on the Policy's current data pages. Payment of a minimum premium
is required during the first twenty-four policy months (the "Minimum Required
Premium"). Payment of the Minimum Required Premium ensures that the Policy will
not enter a Grace Period during the first twenty-four Policy months, unless a
policy loan is taken. See "Policy Termination and Reinstatement" and "Policy
Loans". The Company allows payments in accordance with the planned periodic
premium schedule established by the policyowner in the application (annual,
semiannual, quarterly, or pre-authorized withdrawal payments of premium on a
monthly basis). However, if the minimum monthly premium is less than $30, only a
planned periodic premium schedule that would result in a payment of $30 or more
will be made available to the policyowner. The Company also allows unscheduled
premium payments of $30 or more. The planned periodic premium schedule indicates
the preference of the policyowner only, and other than payment of the Minimum
Required Premium, payment of premiums is not required. (However, the death
benefit guarantee premium must be paid to maintain the death benefit guarantee
rider. See "Optional Insurance Benefits.") Changes in frequency, as well as
increases or decreases in the amount of planned periodic premiums, may be made.
However, the total of all premiums, planned and otherwise, cannot exceed the
current maximum premium limitations set forth in the Internal Revenue Code to
qualify a Policy as a life insurance contract. At any time there is an
outstanding policy loan, if a payment cannot be identified as a premium payment,
it will be considered a loan repayment.

All Net Premium payments received during the first 20 days from the
Effective Date are allocated to the Money Market Division of the Separate
Account. On the 21st day from the Effective Date, the Policy Value held in the
Money Market Division is transferred to the Divisions and the Fixed Account in
accordance with the policyowner's direction for allocation of premium payments.
(If the 21st day from the Effective Date is not a Business Day, the transfer
will occur on the first Business Day thereafter). Net Premium payments received
after the Policy Value in the Money Market Division is transferred to the
Divisions and the Fixed Account are allocated among the Divisions and the Fixed
Account in accordance with the directions in the application for the Policy.

Policy Value

The Policy Value reflects the following: premium payments made; investment
performance of the Divisions to which amounts have been allocated; interest
credited by the Company to amounts allocated to the Fixed Account; partial
withdrawals; loans taken; repayment of loans; and deduction of charges described
above under "Charges And Deductions." The Policy Value is the sum of the values
in the Investment Accounts, the Fixed Account and the Loan Account.

Investment Account. An Investment Account is established under the Policy
for each Division of the Separate Account to which Net Premiums or transfer
amounts have been allocated. An Investment Account measures the interest of the
Policy in the corresponding Division. The value of each Investment Account under
the Policy varies each Business Day and reflects the investment performance of
the Mutual Fund shares held in the corresponding Division. See "Policy Value".

Fixed Account. The Fixed Account consists of that portion of the Policy
Value based on Net Premiums allocated to, and amounts transferred to, the
general account of the Company. The Company credits interest on amounts in the
Fixed Account at an effective annual rate guaranteed to be at least 3%. See
"Fixed Account."

Loan Account. When a policy loan is taken, the Company will establish a
Loan Account under the Policy and will transfer an amount equal to the amount of
the loan from the Investment Accounts and/or the Fixed Account to the Loan
Account. The Company will credit interest to amounts in the Loan Account at an
effective annual rate of at least 6% through Policy Year ten at which point
interest is credited at 7.75%. See "Policy Loans."

Transfers

Scheduled and unscheduled transfers of Policy Value among Divisions and the
Fixed Account may be made by a policyowner, subject to certain conditions and
charges. The Company has reserved the right to revoke or modify transfer
privileges and charges, except where prohibited by state law. See "Transfers."

Policy Loans

A policyowner may borrow against the Policy Value at any time the Policy
has Net Surrender Value. The minimum amount for a loan is $500. Interest is
charged on policy loans at an annual rate of eight percent during any period the
loan is outstanding. Loan interest is payable at the end of each Policy Year.
All policy loans and loan interest will be deducted from proceeds payable at the
insured's death, upon maturity, or upon total surrender. See "Policy Loans."

Total and Partial Surrenders

A policyowner may elect to make a total surrender of the Policy and receive
its Net Surrender Value determined as of the date the Company receives the
policyowner's Written Request. A Surrender Charge is imposed upon total
surrender of a Policy at any time within the first ten years after the Policy
Date. In addition, any increase in face amount is subject to a Surrender Charge
upon total surrender of the Policy at any time within ten years after the
effective date of the adjustment. After the second Policy Year, the policyowner
may request a partial surrender of the Policy Value, but no more than two times
per Policy Year. The minimum amount for a partial surrender is $500 and
aggregate partial surrenders during a Policy Year cannot exceed 75% of the
Policy's Net Surrender Value at the time the first partial surrender is
requested. A transaction charge of the lesser of $25 or two percent of the
amount of the partial surrender is imposed on each partial surrender. The Policy
Value is reduced by the amount of any partial surrender plus the transaction
charge. The amount surrendered will be withdrawn from the Policy on a last-in
first-out basis. If the Option 1 death benefit is in effect at the time of a
partial surrender, then the Policy's face amount is also reduced by the amount
of the partial surrender plus the transaction charge.

Charges and Deductions

Charges under the Policy are assessed as:
(1) deductions from premiums
o sales load of 2.75% of premiums less than or equal to Target
Premium and .75% of premiums in excess of Target Premium, made
during each of the first ten Policy Years and, with respect to
premiums attributable to any face amount increase, made during
each of the first ten years following the increase
o 2.20% state and local taxes
o 1.25% federal taxes
(2) Surrender Charges upon termination or total surrender made during
the first ten Policy Years (and ten years after an increase in
the Policy face amount) equal to a percentage (described in the
table below) of the sum of the following:
o deferred administrative charge of $3 for each $1,000 of face
amount (but no greater than $1,500 per Policy), and
o deferred sales charge of 47.25% of premiums paid up to a
maximum of two Target Premiums (or less for persons age 66 and
older. See "Contingent Deferred Sales Charge")

Surrender Surrender Charge
Year Percentage
1-5 100.0%
6 95.24%
7 85.71%
8 71.43%
9 52.38%
10 28.57%
11+ 0.0%

(3) Monthly Policy Charges
o administration charge:
During the first Policy Year: $.40 for each $1,000 of face
amount, but no less than $6.00/month and no greater than
$16.67/month;
During each Policy Year thereafter: $6.00/month
o cost of insurance charge
o mortality and expense risks charge of .90% per annum against
the value of the policyowner's Investment Accounts (After the
ninth Policy Year the mortality and expense risks charge
will not exceed .35% per annum)
o supplemental benefit(s) charge(s)
(4) Other Charges
o investment management fees and other operating expenses for
the underlying Mutual Funds
o transfer fee of $25 may be imposed on each unscheduled
transfer of Policy Value among the Investment Accounts in
excess of twelve during a Policy Year
o transaction charge of the lesser of $25 or 2% of the amount
surrendered on each partial surrender of Policy Value

For complete discussion of charges and deductions see "Charges and
Deductions".

Maturity Proceeds

If the insured under a Policy is living on the Policy's Maturity Date,
which is the Policy Anniversary following the birthday on which the insured
reaches age 95, the Company will pay the Policy's maturity proceeds to the
policyowner. A Policy's maturity proceeds are the Policy Value less any Policy
loans and unpaid loan interest on the Maturity Date. If maturity proceeds are
paid under a Policy, the Policy terminates with no further benefits payable.

Death Benefit and Proceeds

The death proceeds under a Policy are payable to the beneficiary when the
insured dies, subject to all provisions and conditions of the Policy. The death
proceeds, determined as of the date of the insured's death, are: the death
benefit described below, plus proceeds from any benefit riders on the insured's
life, less any Policy loans and loan interest, and less any overdue Monthly
Policy Charges if the insured dies during a Grace Period. All or part of the
death proceeds may be paid in cash or applied under one or more of the benefit
options available under the Policy, subject to certain restrictions. The Company
pays interest on the death proceeds from the date of death until the date of
payment or until applied under a benefit option. Interest is at a rate the
Company determines, but not less than required by state law.

There are two options available for the death benefit under a Policy. If a
policyowner selects Option 1, the death benefit will be equal to the greater of
the face amount of the Policy or the Policy Value on the date of death
multiplied by an applicable percentage specified in the Internal Revenue Code.
If a policyowner selects Option 2, the death benefit will be the greater of the
face amount of the Policy plus the Policy Value on the date of death or the
Policy Value on the date of death multiplied by the applicable percentage.

A policyowner may make a Written Request to change the death benefit option
on or after the second Policy Anniversary. Any change must be approved by the
Company before it takes effect. Changes in death benefit option are limited to
two per Policy Year. If the request is to change from Option 1 to Option 2, the
face amount will be reduced by the amount of the Policy Value on the effective
date of the change. The Company reserves the right to disapprove a request to
change from Option 1 to Option 2 if the face amount in effect after the change
would be less than $50,000. Evidence of insurability satisfactory to the Company
under its underwriting guidelines then in effect may be required on a change
from Option 1 to Option 2. If the request is to change from Option 2 to Option
1, the face amount will be increased by the amount of the Policy Value on the
effective date of the change. No evidence of insurability is required for a
change from Option 2 to Option 1. The effective date of any change will be the
Monthly Date that coincides with or next follows the day the request for change
is approved by the Company.

Adjustment Options

Subject to certain conditions, the face amount of a Policy may be adjusted
by providing Notice to the Company. If a payment in an amount greater than or
equal to the adjustment conditional receipt premium deposit is submitted with
the adjustment application, then a conditional receipt is given to the
policyowner reflecting receipt of the payment and outlining any interim
insurance coverage provided by the conditional receipt. The adjustment
conditional receipt premium deposit is that amount calculated by the Company and
provided to the policyowner in connection with the policyowner's request for a
face amount increase. No request to adjust the face amount of a Policy will be
approved if a Policy is in a Grace Period or if Monthly Policy Charges are being
waived under a rider. In addition, a decrease in face amount may be requested
only after the second Policy Anniversary and may not reduce the face amount of a
Policy below $50,000. A requested face amount increase must be at least $50,000
and is subject to evidence of insurability satisfactory to the Company under its
underwriting guidelines then in effect. Any adjustment in face amount of a
Policy will be effective on the Monthly Date that coincides with or next follows
the date the Company receives the Notice. No processing charges are assessed in
connection with adjustments of a Policy, although an increase in face amount
will result in Premium Expense Charges and Surrender Charges applicable to the
increase. Increases in face amount made pursuant to a Cost of Living Rider,
Salary Increase Rider or Extra Protection Increase Rider are not subject to the
minimum increase amount or to evidence of insurability. More information
regarding these supplementary benefits may be obtained from an authorized agent
of the Company.

Termination and Reinstatement

Failure to make a planned periodic premium or additional premium payments
may cause termination of a Policy. A notice of impending termination of a Policy
will be sent if:

1. Twenty-four months or later following the Policy Date, or at any time
after a policy loan is taken, the Net Surrender Value of a Policy on
any Monthly Date is less than the Monthly Policy Charge and, if the
Policy has a death benefit guarantee rider, the death benefit guarantee
premium requirement has not been satisfied; or

2. During the 24 months following the Policy Date, the sum of the premiums
paid is less than the Minimum Required Premium on a Monthly Date (this
provision does not apply where prohibited by state laws; a notice of
impending termination will be sent as permitted therein).

The Minimum Required Premium on a Monthly Date is equal to (1) times (2)
where:

1. Is the minimum monthly premium shown on the current data pages; and

2. Is the number of completed months since the Policy Date.

The notice of impending termination will show the 61-day Grace Period
during which the Company will accept a payment required to keep the Policy in
force.

If a Grace Period begins 24 months or more after the Policy Date because
the Net Surrender Value is less than the current Monthly Policy Charge, the
minimum payment is equal to (1) plus (2) divided by (3) where:

1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of
the Grace Period;

2. Is three Monthly Policy Charges; and

3. Is 1 minus the maximum Premium Expense Charge.

If the Grace Period ends before we receive the minimum payment, the Company
will keep any remaining value in the Policy.

If a Grace Period begins because the sum of the premiums paid is less than
the Minimum Required Premium, the minimum payment is (1) minus (2) where:

1. Is the Minimum Required Premium due on the second Monthly Date
following the beginning of the Grace Period; and;

2. Is the sum of the premiums paid since the Policy Date.

If the Grace Period ends before the Company receives the past due Minimum
Required Premium, the Company will pay to the policyowner any remaining value in
the Policy, which would be the difference of (1) minus (2) where:

1. Is the Net Surrender Value on the Monthly Date on or
immediately preceding the start of the Grace Period; and

2. Is the two Monthly Policy Charges applicable during the Grace Period.

In the event the 61-day Grace Period expires without a payment by the
policyowner at least equal to the minimum payment, the Policy will terminate,
and the Company will retain the remaining value in the policy.

Once a Policy has terminated as a result of failure to pay the Minimum
Required Premium on a Monthly Date during the 24 months following the Policy
Date, or as a result of insufficient value, the policyowner may make a Written
Request to reinstate the Policy at any time within three years after the date of
termination, so long as the insured is alive and it is prior to the Policy's
Maturity Date. Satisfactory proof of insurability and payment of a reinstatement
premium is required. The reinstatement premium must be at least the greater of
((1) plus (2) divided by (3)) or ((4) minus (5)) where:

1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of the
Grace Period;

2. Is three Monthly Policy Charges;

3. Is one minus the maximum Premium Expense Charge;

4. Is the Minimum Required Premium due on the second Monthly Date
following the beginning of the Grace Period; and

5. Is the sum of the premiums paid since the Policy Date.

Repayment or reinstatement of policy loans and loan interest which remained
unpaid on the date the Policy terminated is also required.

Policy "Free Look"

A policyowner has the limited right to return a Policy for cancellation and
receive a refund of all premiums paid (Accumulated Value for policies applied
for in the state of California by Policyowners over the age of 60). The Written
Request for cancellation, along with return of the Policy, must be made within
10 days (30 days if the Policy is applied for in the state of California by a
policyowner age 60 or over) after the Policy is received by the policyowner,
within 10 days (30 days if the Policy is applied for in the state of California
by a policyowner age 60 or over) after written notice of this right is provided
to the policyowner, or within 45 days after the policyowner completes the Policy
application, whichever is later. For Policies applied for in the state of
California by persons age 60 or over, the amount refunded is equal to (1) plus
(2) plus (3) where:

1. Is the Policy Value as of the date the Company receives the
policyowner's Written Request for cancellation; and

2. Is the Premium Expense Charge(s) deducted from gross premiums; and

3. Is the Monthly Policy Charge(s) deducted from the Policy Value.

Distribution of the Policy

The Company may offer the Policy in states and jurisdictions where it is
licensed to sell this type of insurance product. The Policy will be sold by
agents and brokers who represent the Company and are registered representatives
of Princor Financial Services Corporation, the principal underwriter of the
Policies, or registered representatives of other broker-dealers which Princor
Financial Services Corporation selects and the Company approves.

Tax Consequences of the Policy

The Policies will be treated as life insurance contracts under provisions
of the Internal Revenue Code so long as certain definitional tests of Section
7702 of the Internal Revenue Code are met and so long as the investments of the
Separate Account meet the diversification requirements of Section 817(h) of the
Internal Revenue Code. The Company has designed the Policy to meet these
criteria. Thus, the death benefit under a Policy should be fully excludable from
the gross income of the beneficiary. In addition, the policyowner should not be
taxed on any part of the Policy Value, unless in the first 15 years of a Policy
a cash distribution is made as a result of a change in the benefits under (or in
other terms of) the Policy, such as a partial or total surrender of Policy Value
which causes a reduction in the face amount. Such a distribution will be taxable
to the extent of income in the Policy, as limited by the applicable recapture
ceiling as set out in Section 7702(f)(7)(C) or (D) of the Internal Revenue Code.
Also, partial surrenders may result in taxable income to the policyowner to the
extent distributions (or deemed distributions) exceed total investments
(generally premiums paid) in the Policy to the date of surrender. If, however,
the Policy is considered a modified endowment contract under the terms of the
Technical and Miscellaneous Revenue Act of 1988, all distributions under the
Policy would be taxed on an "income first" basis. Most distributions received by
a policyowner directly or indirectly (including policy loans, total or partial
surrenders or the assignment or pledge of any portion of the Policy Value) would
be includable in gross income to the extent that the Policy Value of the Policy
exceeds the policyowner's investment in the contract. (See "Federal Tax
Matters.") Policyowners are advised to consult with their own tax advisors
regarding tax treatment of the Policies.

DESCRIPTION OF PRINCIPAL MUTUAL LIFE INSURANCE COMPANY (The "Company")

Principal Mutual Life Insurance Company is a mutual life insurance company
with its home office at The Principal Financial Group, Des Moines, Iowa 50392,
telephone number (515) 247-5111. It was originally incorporated under the laws
of the State of Iowa in 1879 as Bankers Life Association, changed its name to
Bankers Life Company in 1911 and changed its name to Principal Mutual Life
Insurance Company in 1986. It is a member of The Principal Financial Group, a
diversified family of insurance and financial services companies.

Principal Mutual Life Insurance Company is authorized to do business in the
50 states of the United States, the District of Columbia, the Commonwealth of
Puerto Rico, and the Canadian Provinces of Alberta, British Columbia, Manitoba,
Ontario and Quebec. The Company offers a full range of products and services for
businesses, groups and individuals including individual insurance, pension plans
and group/employee benefits. During the year ended December 31, 1995, the
Company ranked in the upper one percent of life insurers in assets and premium
income. The Company has consistently received excellent ratings from the major
rating firms based upon the Company's claims paying ability. As of December 31,
1995, the Company had $51.3 billion in assets under management and served more
than 9.3 million individuals and their families.

PRINCIPAL MUTUAL LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT

The Separate Account was established on November 2, 1987, pursuant to a
resolution of the Executive Committee of the Board of Directors of the Company.
Under Iowa insurance law the income, gains or losses of the Separate Account are
credited to or charged against the assets of the Separate Account without regard
to the other income, gains or losses of the Company. The assets of the Separate
Account, equal to the reserves and other liabilities arising under the Policies,
are not chargeable with liabilities arising out of any other business conducted
by the Company. In addition, all income, gains or losses, whether or not
realized, and expenses with respect to a Division shall be credited to or
charged against that Division without regard to income, gains or losses, or
expenses of any other Division. The assets of the Separate Account are held with
relation to the Policies described in this Prospectus and other policies issued
by the Company. All obligations arising under Policies, including the promise to
make benefit payments, are general corporate obligations of the Company. The
Separate Account is organized as a unit investment trust under the Investment
Company Act of 1940.

The Company is taxed as an insurance company under the Tax Reform Act of
1984, as amended. The operations of the Separate Account are part of the total
operations of the Company, but are treated separately for accounting and
financial statement purposes and are considered separately in computing the
Company's tax liability.

The Separate Account is not affected by federal income taxes paid by the
Company. The Company reserves the right to charge the Separate Account with, and
create a reserve for, any tax liability which the Company determines may result
from maintenance of the Separate Account. To the best of the Company's knowledge
there is no current prospect of such liability.

Separate Account Divisions

A policyowner may direct the Company to allocate Net Premium Payments among
the Divisions which invest exclusively in shares of a corresponding Mutual Fund.
Some of these Mutual Funds also offer their shares to variable annuity separate
accounts of the Company ("Mixed Funding") and to variable annuity and variable
life separate accounts of unaffiliated insurance companies ("Shared Funding").
The potential risks associated with "Mixed and Shared Funding" are disclosed in
the Mutual Fund prospectuses. The Mutual Funds in which the Divisions invest,
and the investment adviser of each Mutual Fund, are provided in the following
table.

<TABLE>
<CAPTION>
<C> <C> <C>
MUTUAL FUND IN
WHICH DIVISION INVESTS MUTUAL FUND
DIVISION AND INVESTMENT ADVISER INVESTMENT OBJECTIVE

Aggressive Growth Division Principal Aggressive Growth Fund; Seeks long-term capital appreciation by
Morgan Stanley Asset Management, Inc. investing primarily in growth-oriented common
through a sub-advisory agreement. stocks of medium and large capitalization
U.S. corporations and, to a limited extent,
foreign corporations.

Asset Allocation Division Principal Asset Allocation Fund; Seeks a total investment return consistent with
Morgan Stanley Asset Management, Inc. the preservation of capital.
through a sub-advisory agreement.

Balanced Division Principal Balanced Fund; Seeks a total return consisting of current income
Invista Capital Management, Inc. and capital appreciation while assuming reasonable
through a sub-advisory agreement. risks in furtherance of the investment objective.

Bond Division Principal Bond Fund; Seeks to provide as high a level of income as is
Princor Management Corporation. consistent with preservation of capital and prudent
investment risk.

Capital Accumulation Division Principal Capital Accumulation Fund; Seeks to achieve primarily long-term capital
Princor Management Corporation. appreciation and secondarily growth of investment
income through the purchase primarily of common
sotcks, but the Fund may invest in other securities.

Emerging Growth Division Principal Emerging Growth Fund; Seeks growth of capital through the purchase
Princor Management Corporation. primarily of common stocks, but the Fund may
invest in other securities.

Government Securities Division Principal Government Securities Fund; Seeks a high level of income, liquidity and safety
Princor Management Corporation. of principal through the purchase of obligations
issued or guaranteed by the United States Government
or its agencies, with emphasis on Government
National Mortgage Association Certificates ("GNMA
Certificates"). Fund shares are not guaranteed by
the United States Government.

Growth Division Principal Growth Fund; Seeks growth of capital through the purchase
Invista Capital Management, Inc. primarily of common stocks, but the Fund may invest
through a sub-advisory agreement. in other securities.

Money Market Division Principal Money Market Fund; Seeks as high a level of income available from
Princor Management Corporation. short-term securities as is considered consistent
with preservation of principal and maintenance of
liquidity by investing all of its assets in a
portfolio of money market instruments.

World Division Principal World Fund; Seeks long-term growth of capital by investing in a
Invista Capital Management, Inc. portfolio of equity securities of companies
through a sub-advisory agreement. domiciled in any of the nations of the world.

Fidelity Contrafund Division Fidelity VIP II Contrafund Portfolio; Seeks long-term capital appreciation.
Fidelity Management and
Research Company.

Fidelity Equity-Income Division Fidelity VIP Equity-Income Portfolio; Seeks reasonable income by investing primarily in
Fidelity Management and income-producing equity securities,
Research Company.

Fidelity High Income Division Fidelity VIP High Income Portfolio; Seeks a high level of current income by investing
Fidelity Management and primarily in high yielding, lower quality, fixed
Research Company. income securities, while also considering
growth of capital.
</TABLE>

Policyowners make their own decisions on the allocations to and between the
Divisions based upon their unique circumstances and perceptions of economic
conditions. Additional information concerning these Mutual Funds, including
their investment policies and restrictions, investment management fees and
expenses, is given in the prospectuses which accompany, and should be read in
conjunction with, this Prospectus.

Underlying Mutual Fund shares are purchased at net asset value, which
reflects the deduction of investment management fees and certain other expenses.
The management fees are charged by each underlying Mutual Fund's investment
adviser for managing the underlying Mutual Fund and selecting its portfolio of
securities. Other underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the underlying Mutual Fund. The
management fees and other expenses for each underlying Mutual Fund for its most
recently completed fiscal year, expressed as a percentage of the underlying
Mutual Fund's average assets, are as follows:

Management Other Total
Mutual Fund Fees Expenses Expenses

Principal Aggressive Growth Fund 0.80 0.10 0.90
Principal Asset Allocation Fund 0.80 0.09 0.89
Principal Balanced Fund 0.60 0.06 0.66
Principal Bond Fund 0.50 0.06 0.56
Principal Capital Accumulation Fund 0.49 0.02 0.51
Principal Emerging Growth Fund 0.65 0.05 0.70
Principal Government Securities Fund 0.50 0.05 0.55
Principal Growth Fund 0.50 0.08 0.58
Principal Money Market Fund 0.50 0.08 0.58
Principal World Fund 0.75 0.20 0.95
Fidelity VIP II Contrafund Portfolio 0.61 0.12 0.73
Fidelity VIP Equity-Income Portfolio 0.51 0.10 0.61
Fidelity VIP High-Income Portfolio 0.60 0.11 0.71

PURCHASING A POLICY

Purchase Procedures

To apply for a Policy, a completed application, including any required
supplements, must be submitted to the Company through the agent or broker
selling the Policy. If interim coverage is desired, a payment of at least the
required minimum initial premium amount must be submitted with the completed
application. The required minimum initial premium amount for any Policy
(including a Policy issued on an application submitted without an accompanying
payment) is equal to the minimum monthly premium shown on the Policy's current
data pages. The Company generally will not issue policies to insure persons over
age 85 for regularly underwritten Policies and age 70 for guaranteed issue,
expanded non-medical and batch underwriting Policies. Applicants for insurance
must furnish satisfactory evidence of insurability. Acceptance is subject to the
Company's insurance underwriting guidelines and suitability rules. The Company
reserves the right to reject any application or related premium if in the view
of the Company, the Company's insurance underwriting guidelines and suitability
rules and procedures are not satisfied. The minimum face amount for a Policy at
issue is $50,000 ($25,000 for guaranteed issue, batch underwriting and expanded
non-medical Policies). The Company reserves the right to revise its rules from
time to time to specify either a higher or a lower minimum face amount.

If a payment in at least the required minimum initial premium amount is
submitted with the completed application, then a conditional receipt is given to
the applicant, reflecting receipt of the initial payment and outlining any
interim conditional insurance coverage provided by the conditional receipt.

If the Company determines to issue a Policy then a Policy Date will be
established. Policy Years and Anniversaries will be determined from the Policy
Date regardless of when the Policy is delivered. The Company does not date
Policies on the 29th, 30th, or 31st day of any month. Policies which otherwise
would be dated on these days except for this rule will be dated on the 28th of
the month. The Policy Date is shown on the Policy's current data pages.

Upon specific Written Request of the applicant in the application and
subject to the Company's approval, a Policy may be issued with a backdated
Policy Date. The Policy Date may not be more than three months prior to the date
of the application or such shorter maximum backdating period as required by
state law. Payment of the Minimum Required Premium is required for the period
the Policy is backdated.

Each Policy also has an Effective Date. The Policy Date and the Effective
Date will be the same unless (i) a backdated Policy Date is requested, (ii) the
application was not accompanied by a payment in an amount equal to or greater
than the minimum monthly premium, or (iii) additional premiums or application
amendments are required. In such cases, the Effective Date will be the date on
which the required premiums have been received at the Company's home office and
any application amendments have been received, reviewed, and accepted in the
Company's home office.

No insurance under a Policy will take effect until actual physical delivery
to and acceptance of a Policy by the applicant. If the proposed insured dies
before actual physical delivery to and acceptance of a Policy by the applicant,
there will be no coverage under the Policy and coverage will be determined
solely under the terms of the conditional receipt, if any, given to the
applicant.

Payment Of Premiums

Premiums must be paid to the Company at its home office. There is no fixed
schedule of premium payments on a Policy, either as to the amount or timing of
the payments, although a minimum premium is required during the first
twenty-four Policy months (the "Minimum Required Premium"). A policyowner may
determine, within specified limits, the planned periodic premium schedule for
the Policy. These limits will be set forth by the Company and will include a
minimum initial premium payment. Planned periodic premium schedules may provide
for annual, semiannual, quarterly or monthly payments. A "pre-authorized
withdrawal" allows the Company to deduct premiums, on a monthly basis, from the
policyowner's checking or other financial institution account. The policyowner
is not required to pay planned periodic premiums. Failure to make any premium
payment will not result in termination of a Policy during the first twenty-four
Policy months provided that any Minimum Required Premium is paid and no policy
loan is taken. Likewise, payment of premiums in accordance with the planned
periodic premium schedule does not guarantee that the Policy will stay in force
twenty-four months or later following the Policy Date or any time after a policy
loan is taken, if the Policy's Net Surrender Value is not at least equal to the
Monthly Policy Charge on the current Monthly Date, unless the death benefit
guarantee rider is in effect.

The Company will send premium reminder notices in accordance with planned
periodic premium schedules to policyowners who are on annual, semi-annual or
quarterly premium payment schedules. Premium payments may also be made by
unscheduled premium payment made to the Company at its home office or by payroll
deduction where allowed by law and approved by the Company.

Premium Limitations

In no event can the total of all premiums paid exceed the current maximum
premium limitations required by the Internal Revenue Code in order to qualify a
Policy as a life insurance contract. The premium limitations are imposed in
order to assure favorable federal income tax treatment of the Policy and its
death benefit. If at any time a premium is paid which would result in total
premiums exceeding the current maximum premium limitation, the Company will only
accept that portion of the premium which will make total premiums equal the
maximum. Any part of the premium in excess of that amount will be returned and
no further premiums will be accepted until allowed by the maximum premium
limitations specified in the Internal Revenue Code. No premium payment may be
less than $30. Premium payments less than the minimum amount will be returned to
the policyowner.

It is possible a premium payment could increase a Policy's death benefit by
more than it increases the Policy Value because of the manner in which the
Policy's death benefit is calculated. In order to qualify a Policy as a life
insurance contract under provisions of the Internal Revenue Code, the death
benefit must be at least equal to an applicable percentage of the Policy Value.
This percentage is 250% for insureds age 40 and under and grades down to 100%
for insureds age 95. For example, a hypothetical Policy insuring the life of a
35-year old with a Policy Value of $20,000 must have a death benefit in at least
the amount of $50,000 ($20,000 x 250%, the applicable percentage). Suppose a
premium is paid that, after deduction of the Premium Expense Charge, increases
this hypothetical Policy Value by $1,000. The Internal Revenue Code test
requires that the death benefit for the hypothetical Policy be at least $52,500
($21,000 x 250%). Hence, if the death benefit before the premium were $50,000,
the $1,000 increase in Policy Value would produce a $2,500 increase in the death
benefit of this hypothetical Policy. In such a situation where a premium payment
increases a Policy's death benefit by more than it increases the Policy Value,
the Company reserves the right to refund the premium payment. Evidence of
insurability under the Company's current underwriting guidelines then in effect
may be required before acceptance of any such premium.

Allocation Of Premiums

The initial Net Premium Payment and any additional premiums received at the
home office of the Company during the first 20 days from the Effective Date are
allocated to the Money Market Division of the Separate Account at the end of the
Valuation Period during which such premiums are received. On the 21st day from
the Effective Date, Policy Value held in the Money Market Division is
automatically transferred to the Divisions of the Separate Account or to the
Fixed Account, or both, in accordance with the policyowner's direction for
allocation of premium payments. If the 21st day from the Effective Date is not a
Business Day, then the transfer will occur on the first Business Day after the
21st day from the Effective Date.

Premium payments received after expiration of the initial 20-day period
described above are allocated among the Divisions, the Fixed Account, or both in
accordance with the directions in the application for the Policy. For each
Division and the Fixed Account, the allocation percentage must be zero or a
whole number not less than ten. The sum of the percentages for all the Divisions
and the Fixed Account must equal 100. The policyowner may change the allocation
of future premium payments among the Divisions and the Fixed Account without
payment of any fee or penalty, at any time, by Written Request to the Company or
by telephone as described below. Allocation percentages must be approved by the
Company. Changes in allocation percentages will be effective at the end of the
Valuation Period in which the Company receives the policyowner's request.

Policy "Free Look"

The policyowner has a limited right to return the Policy for cancellation
and receive a refund in an amount equal to the premiums paid (For policies
applied for in the state of California by policyowners age 60 or over, the
amount refunded is determined as set forth below). The request to cancel a
Policy must be in writing. The Written Request and the Policy must be personally
delivered or mailed (as determined by its postmark) to the home office of the
Company or to the agent or broker who sold the Policy before the later of:

o 10 days (30 days for Policies applied for in the state of California
by policyowners age 60 or over) after the Policy is received by the
policyowner;

o 10 days (30 days for Policies applied for in the state of California
by policyowners age 60 or over) after a written notice is delivered
or mailed (as determined by its postmark) to the policyowner which
tells about the cancellation right; or

o 45 days after the policyowner completes the application.

For Policies applied for in the state of California by persons age 60 or
over, the amount refunded is equal to (1) plus (2) plus (3) where:

1. Is the Policy Value as of the date the Company receives the
policyowner's Written Request for cancellation; and

2. Is the Premium Expense Charge(s) deducted from gross premiums; and

3. Is the Monthly Policy Charge(s) deducted from the Policy Value.

The refunded amount will ordinarily be disbursed by the Company to the
policyowner within five Business Days after the Written Request for cancellation
and the Policy are received in the Company's home office. (See "Postponement of
Payments." )

VALUES AND POLICY FEATURES WHILE THE POLICY IS IN FORCE

Policy Values

A Policy has a Policy Value, a portion of which is available to the
policyowner by taking a policy loan or upon total or partial surrender of the
Policy. See "Policy Loans" and "Total and Partial Surrenders" below. The Policy
Value may also affect the amount of the death benefit. See DEATH BENEFITS AND
RIGHTS - "Death Benefit." This Policy Value at any time is equal to the sum of
the Values in the Investment Accounts, the Fixed Account and the Loan Account.
The following discussion relates only to the Investment Accounts. Policy loans
are discussed under "Policy Loans" and the Fixed Account is discussed under "The
Fixed Account." The portion of the Policy Value based on the Investment Accounts
is not guaranteed and will vary each Business Day with the investment
performance of the underlying Mutual Funds.

An Investment Account is established under each Policy for each Division of
the Separate Account to which Net Premiums or transfer amounts have been
allocated. Each Investment Account under a Policy measures the interest of the
Policy in the corresponding Division. The value of the Investment Account
established for a particular Division is equal to the number of Units of that
Division credited to the Policy times the value of those Units.

Units of a particular Division are credited to a Policy when Net Premiums
are allocated to that Division or amounts are transferred to that Division.
Units of a Division are cancelled when amounts are deducted, transferred or
withdrawn from the Division. The number of Units credited or cancelled for a
specific transaction is based on the dollar amount of the transaction divided by
the value of the Unit at the end of the Business Day on which the transaction
occurs. The number of Units credited with respect to a premium payment will be
based on the applicable Unit values at the end of the Business Day on which the
premium is received at the Company's home office.

Units are valued at the end of each Business Day. A Business Day is deemed
to end at the time of the determination of the net asset value of the Mutual
Fund shares. When an order involving the crediting or cancelling of Units is
received at the Company's home office after the end of a Business Day or on a
day which is not a Business Day, the order will be processed on the basis of
Unit values determined at the end of the next Business Day. Similarly, any
determination of Policy Value, Investment Account value or death benefit to be
made on a day which is not a Business Day will be made at the end of the next
Business Day.

The value of a Unit of each Division was initially fixed at $10. For each
subsequent Business Day the Unit value is determined by multiplying the Unit
value for the preceding Business Day by the "net investment factor" for the
particular Division for such subsequent Business Day. The net investment factor
for a Division for any Business Day is equal to (a) divided by (b), where:

(a) is the net asset value of the underlying Mutual Fund shares held by
that Division at the end of such Business Day before any policy
transactions are made that day; and

(b) is the net asset value of the underlying Mutual Fund shares held by
that Division at the end of the immediately preceding Business Day
after all policy transactions have been made for that day.

The Company reserves the right to adjust the above formula for any taxes
determined by it to be attributable to the operations of the Division.

Transfers

The policyowner may transfer amounts among the Investment Accounts and the
Fixed Account on either an unscheduled or a scheduled basis.

Transfers From an Investment Account

Unscheduled Transfers. Transfers of amounts from one Investment Account
to another or to the Fixed Account can be made by the policyowner. A
transfer from an Investment Account to the Fixed Account may not be
made if a transfer from the Fixed Account to an Investment Account has
been made within the six-month period prior to the date of the
requested transfer or if immediately after the transfer to the Fixed
Account the policyowner's Fixed Account Value exceeds $1 million. The
amount to be transferred may be stated as a dollar amount or as a
percentage of the value of the Investment Account from which the
transfer is to be made. The amount transferred from each Investment
Account must equal or exceed the lesser of $100 or 100% of the
policyowner's interest in the Investment Account. Transfers may be
completed by sending a Written Request to the Company at its home
office, or by telephone as described below. (See "Service Available by
Telephone.")

All or part of the values in one or more Investment Accounts may be
transferred at one time. Transfers from an Investment Account will be
executed and values will be determined in connection with the transfers
at the next computed Unit value after the Company receives the transfer
request. There is currently no charge for the transfer but the Company
reserves the right to impose charges (not to exceed $25 per transfer)
on unscheduled transfers after the twelfth such transfer during a
Policy Year. For this purpose, all transfers between and among the
Investment Accounts and the Fixed Account will be treated as one
transfer, if all the transfer requests are made at the same time as
part of one request. The Company also reserves the right to reject
transfer instructions provided by a person providing them for multiple
contracts.

Scheduled Transfers. The policyowner may elect to have automatic
transfers completed on a periodic basis from any Investment Account.
Scheduled transfers may be initiated from an Investment Account only if
the value of the Investment Account equals or exceeds $2,500 when
scheduled transfers begin. A policyowner may establish scheduled
transfers by sending a Written Request to the Company at its home
office or by telephone. (See "Service Available by Telephone.")
Scheduled transfers will be completed on a monthly, quarterly,
semiannual or annual basis beginning on the Monthly Date following the
date the Company receives the Written Request. Scheduled transfers of
the dollar amount specified by the policyowner (minimum of $100) will
continue until the Policy Value in the Investment Account from which
such transfers are made is exhausted or until the policyowner notifies
the Company to discontinue such transfers. The Company reserves the
right to limit the number of Investment Accounts from which transfers
will be made simultaneously, but in no event will such limitation be
less than two Investment Accounts.

Transfer From The Fixed Account

Transfers from the Fixed Account have special limitations which are
described below. A policyowner may not make both an unscheduled transfer and
scheduled transfers from the Fixed Account during the same Policy Year.

Unscheduled Transfer. An unscheduled transfer in an amount not to
exceed 25% of the policyowner's Fixed Account value as of the later of
the Policy Date or the last Anniversary, may be made each Policy Year
during the 30-day period following the Policy Date or Anniversary. A
transfer request must be made by the policyowner within such 30-day
period. The minimum transfer amount is $100 (or, if less, the entire
amount of the Fixed Account value).

Scheduled Transfers. The policyowner may elect to have automatic
transfers completed on a monthly basis from the Fixed Account to one or
more Investment Accounts. Scheduled transfers are available from the
Fixed Account only if the policyowner's Fixed Account value equals or
exceeds $2,500 at the time scheduled transfers begin. (The Company
reserves the right to change that amount but it will never exceed
$10,000.) A policyowner may establish scheduled transfers by sending a
Written Request to the Company at its home office or by telephone.
Scheduled transfers will be completed on a monthly basis on the Monthly
Date following the date the Company receives the Written Request.
Scheduled monthly transfers of an amount equal to 2% of the
policyowner's Fixed Account value as of the later of the Policy Date or
the last Anniversary will continue until the Fixed Account value is
exhausted or until the policyowner notifies the Company to discontinue
the scheduled transfers. If the policyowner discontinues the scheduled
transfers, transfers may not begin again until six months after the
date of the last scheduled transfer.

Policy Loans

So long as a Policy remains in effect and the Policy has Net Surrender
Value, a policyowner may borrow money from the Company using the Policy as the
only security for the loan. The maximum amount that may be borrowed is 90% of
the Net Surrender Value of the Policy as of the date a loan request is processed
at the Company's home office.

The minimum amount of any policy loan is $500. Proceeds of policy loans
ordinarily will be disbursed within five Business Days from the date of receipt
of a Written Request at the Company's home office. (See "Postponement of
Payments." )

When a policy loan is taken, a portion of the Policy Value equal to the
amount of the loan is transferred from the Fixed Account and/or the Investment
Accounts to the Loan Account in the proportion requested by the policyowner. If
no request for allocation of the loaned amount is made by the policyowner, the
loan amount will be withdrawn in the same proportion as the allocation used for
the most recent Monthly Policy Charge. Any loan interest that is due and unpaid
will be transferred in the same manner. The Loan Account will be credited
interest from the date of transfer. During the first ten Policy Years, the Loan
Account will earn interest at an annual rate of six percent. After the tenth
Policy Anniversary, the Loan Account will earn interest at an annual rate of
7.75%. Loan repayments will be allocated among the Fixed Account and the
Investment Accounts in the proportion currently designated by a policyowner for
the allocation of premium payments. A Policy's Loan Account is part of the
Company's General Account.

The Company charges interest on policy loans. Interest accrues daily and is
due and payable at the end of the Policy Year. Any interest not paid when due is
added to the loan principal and bears interest at the same rate. Adding unpaid
interest to the loan principal will cause additional amounts to be withdrawn
from the Fixed Account and/or Investment Accounts in the same manner as
described above for loans. Amounts withdrawn for unpaid loan interest will be
transferred to the Loan Account.

Unpaid policy loans and loan interest reduce the Policy's Net Surrender
Value and may cause it to be less than the Monthly Policy Charges on a Monthly
Date. If on any Monthly Date occurring after a policy loan is taken the Net
Surrender Value is not sufficient to pay the Monthly Policy Charges, the 61-day
Grace Period provision will apply. (See "Policy Termination.")

So long as a Policy remains in force, policy loans and loan interest may be
repaid in whole or in part at any time during the insured's life. The minimum
loan repayment amount is $30. If the policyowner does not designate a payment as
a premium payment or if the Company cannot identify it as a premium payment, the
Company will apply the payment received as a loan repayment if a loan is
outstanding. Loan Account values equal to the loan repayment will be transferred
to the Fixed Account and/or Investment Accounts in the proportion currently
designated by a policyowner for the allocation of premium payments. Any policy
loan, whether repaid or not, is likely to have a permanent effect on the Policy
Value. If the policy loan had not been made, the Policy Value would have
reflected the investment experience of the Investment Accounts and/or the
interest credited to the Fixed Account. Any policy loans and loan interest are
subtracted from life insurance proceeds payable at the insured's death, from
surrender value upon total surrender or termination of a Policy when a Grace
Period expires without sufficient premium payment, and from the Policy Value
payable at maturity.

Total and Partial Surrenders

A Policy has a Surrender Value and a Net Surrender Value. The Surrender
Value of a Policy is the Policy Value less the Surrender Charge. The Net
Surrender Value of a Policy is its Surrender Value less any loans and loan
interest. While the Policy is in effect, a policyowner may elect to surrender
the Policy and receive its Net Surrender Value as of the date the Company
receives the policyowner's Written Request at its home office. A Surrender
Charge is imposed upon total surrender of a Policy which occurs at any time
within the first ten years after the Policy Date. In addition, if total
surrender of a Policy occurs at any time within the first ten years after the
adjustment date of a face amount increase, a Surrender Charge attributable to
the face amount increase will be imposed. (See "Surrender Charge.")

After the second Policy Anniversary and so long as a Policy is in effect,
a policyowner may request a partial surrender from the Net Surrender Value, but
no more than two times per Policy Year. The minimum amount of a partial
surrender is $500 and the maximum amount that may be surrendered in a Policy
Year is 75% of the Net Surrender Value as of the date of the first partial
surrender. A transaction charge of the lesser of $25 or two percent of the
amount surrendered is imposed on each partial surrender, which is intended to
cover the administrative costs of processing the partial surrender. No Surrender
Charge is assessed upon a partial surrender. The Policy Value is reduced by the
amount of the partial surrender plus the amount of the transaction charge. If
the Option 1 death benefit is in effect at the time of a partial surrender, then
the Policy face amount also is reduced by the amount of the partial surrender
and the transaction charge.

A policyowner may designate the amount of the partial surrender and
transaction charge to be withdrawn from the Fixed Account and/or each Investment
Account. If no designation is made, the amount of the partial surrender and the
transaction charge will be withdrawn in the same proportion as the allocation
instruction in effect for the Monthly Policy Charge. The amount surrendered will
be withdrawn from the Policy on a last in, first out basis.

Proceeds from partial or total surrender of a Policy will ordinarily be
disbursed within five Business Days from the date of receipt of a Written
Request at the Company's home office. (See "Postponement of Payments.")

DEATH BENEFITS AND RIGHTS

Death Proceeds

As long as a Policy remains in force, the Company will, upon proof of the
insured's death, pay the death proceeds under the Policy to the named
beneficiary in accordance with the designated death benefit option. The death
proceeds, determined as of the date of the insured's death, are: the death
benefit described below, plus the proceeds from any benefit rider on the
insured's life, less any unpaid loans and loan interest on the Policy, and less
any overdue Monthly Policy Charges if the insured died during a Grace Period.
All or part of the death proceeds may be paid in cash or applied under one or
more of the benefit options available under the Policy. The Company pays
interest on the death proceeds from the date of death until date of payment or
until applied under a benefit option. Interest on death proceeds is credited at
a rate the Company determines, but not less than required by state law.

Death Benefit

The Policy provides two death benefit options: Option 1 and Option 2. The
policyowner designates the death benefit option in the application. Both Option
1 and Option 2 provide insurance protection combined with the opportunity for
increasing Policy Value. Under Option 1, the amount of death benefit remains
level (until the Policy Value exceeds certain limits). Under Option 2, the total
death benefit increases as the Policy Value increases. Thus, Option 1 emphasizes
the growth of Policy Value while Option 2 emphasizes the total available death
benefit.

Option 1

The death benefit is the greater of the Policy's current face amount or
the Policy Value on the date of death multiplied by the applicable
percentage.

Option 2

The death benefit is the greater of the Policy's current face amount
plus its Policy Value on the date of death or the Policy Value on that
date multiplied by the applicable percentage.

Applicable Percentage

The Policy provides that the death benefit is at least equal to the amount
of insurance proceeds required by the Internal Revenue Code to qualify the
Policy as a life insurance contract. That death benefit amount is calculated by
multiplying the Policy Value by an applicable percentage set forth in the
Internal Revenue Code based on the insured's age. The applicable percentages
are:

TABLE OF APPLICABLE PERCENTAGES*

(For ages not shown, the applicable percentages
decrease by a pro rata portion for each full year.)
Insured's Attained Age %
--------------------------------------------------
40 and under 250
45 215
50 185
55 150
60 130
65 120
70 115
75 through 90 105
95 100

*The Company has reserved the right, where allowed by law, to change or delete
the applicable percentages as required by amendments to the Internal Revenue
Code.

Illustration of Option 1. Assume that the insured's attained age at the
time of death is between 20 and 40, that there are no unpaid policy loans or
loan interest at the time of death, and that the face amount of the Policy is
$50,000.

Under Option 1, because the death benefit will be equal to or greater than
250% of the Policy Value under this illustrative Policy, any time the Policy
Value of the Policy exceeds $20,000, the death benefit will exceed the Policy's
$50,000 face amount. Each additional dollar added to Policy Value above $20,000
will increase the death benefit by $2.50. Similarly, any time Policy Value
exceeds $20,000, each dollar taken out of Policy Value will reduce the death
benefit by $2.50. If, for example, the Policy Value is reduced from $24,000 to
$20,000 because of charges or negative investment performance, the death benefit
will be reduced from $60,000 to $50,000. If, however, at any time in this
illustration 250% of the Policy Value is less than $50,000 and no partial
surrenders have been made, the death benefit will equal $50,000. A partial
surrender causes the face amount to decrease by the amount of the partial
surrender and the transaction charge.

Illustration of Option 2. Assume that the insured's attained age at the
time of death is between 20 and 40, that there are no policy loans or loan
interest unpaid at the time of death, and that the face amount of the Policy is
$50,000.

Under Option 2, a Policy with an Policy Value of $10,000 will have a death
benefit of $60,000 ($50,000 + $10,000); a Policy Value of $30,000 will yield a
death benefit of $80,000 ($50,000 + $30,000). The death benefit under this
illustrative Policy, however, must be at least equal to 250% of Policy Value
(Policy Value plus 150% of Policy Value). As a result, if the Policy Value of
the Policy exceeds $33,334, the death benefit will be greater than the face
amount plus Policy Value. Each additional dollar of Policy Value above $33,334
will increase the death benefit by $2.50. A contract on a 40-year old insured
that has an Policy Value of $40,000 will provide a death benefit of $100,000
(250% x $40,000). Similarly, any time Policy Value exceeds $33,334, each dollar
taken out of Policy Value reduces the death benefit by $2.50. If, for example,
the Policy Value is reduced from $40,000 to $34,000 because of partial
surrenders, charges, or negative investment performance, the death benefit will
be reduced from $100,000 to $85,000. If, however, at any time in this
illustration 250% of the Policy Value were less than $50,000 plus Policy Value,
the death benefit would be $50,000 plus the Policy Value of the Policy.

The Company guarantees that, so long as the Policy remains in force, the
death benefit under either death benefit option will never be less than the
current face amount of the Policy. However, the death proceeds payable may be
less than the death benefit in the event of policy loans, unpaid loan interest
or overdue Monthly Policy Charges.

Change in Death Benefit Option

A policyowner may make a Written Request to change the death benefit option
on or after the second Policy Anniversary. Only two changes in death benefit
option are allowed per Policy Year. There are no charges or fees for changing
the death benefit option. Any Written Request for change in death benefit option
must be approved by the Company. The effective date of any change will be the
Monthly Date that coincides with or next follows the day the request for change
is approved by the Company. A change in death benefit option will affect future
cost of insurance charges.

If the death benefit option is changed from Option 1 to Option 2, the new
face amount will be the old face amount decreased by the Policy Value as
determined on the effective date of the change. This change will not be allowed
if it will result in a face amount less than the minimum face amount of $50,000.
Changing from Option 1 to Option 2 may require evidence of insurability
satisfactory to the Company that the insured is insurable for the new death
benefit under its underwriting guidelines then in effect.

If the death benefit option is changed from Option 2 to Option 1, the new
face amount will be the old face amount increased by the Policy Value as
determined on the effective date of the change. Changing from Option 2 to Option
1 does not require evidence of insurability.

Adjustment Options

A policyowner may make a Written Request to increase the face amount of a
Policy at any time, so long as the Policy is not in a Grace Period and the
policyowner is not receiving benefits under a waiver rider. A policyowner may
make a Written Request to decrease the face amount at any time on or after the
second Policy Anniversary so long as the Policy is not in a Grace Period and
Monthly Policy Charges are not being waived under a rider. Any Written Request
for adjustment of face amount must be approved by the Company and is subject to
these additional conditions:

1. Any request for an increase in face amount must be applied for by a
supplemental application and an adjustment application, signed by the
policyowner and the insured, and shall be subject to evidence of
insurability satisfactory to the Company under its underwriting
guidelines then in effect. The minimum increase in face amount is
$50,000. The age of the insured must be 85 or less at the time of the
request.

2. A request for a decrease in face amount must be applied for by a
supplemental application and an adjustment application, signed by the
Policyowner and the insured, and may not reduce the face amount of the
Policy below $50,000.

3. Any increase in face amount will be in a risk classification the
Company determines.

4. Any adjustment approved by the Company will become effective on the
Monthly Date that coincides with or next follows the Company's
approval of the request.

If a payment in an amount greater than or equal to the adjustment
conditional receipt premium deposit is submitted with the adjustment
application, then a conditional receipt is given to the policyowner reflecting
receipt of the payment and outlining any interim insurance coverage provided by
the conditional receipt. The adjustment conditional receipt premium deposit is
that amount calculated by the Company and provided to the policyowner in
connection with the policyowner's request for a face amount increase. The
adjustment conditional receipt premium deposit will be considered a premium
payment for the Policy and will be allocated to the Divisions of the Separate
Account or to the Fixed Account, or both, in accordance with the policyowner's
existing directions for allocation of premium payments.

Any increase in face amount will carry its own free look period and
exchange right, which apply only to the increase in face amount, not the entire
Policy. The policyowner has a limited right to cancel the face amount increase.
The request to cancel a face amount increase must be in writing. The Written
Request and the Policy data pages reflecting the increase must be personally
delivered or mailed to the Company's home office or to the agent or broker who
sold the face amount increase before the later of:

* 10 days after Policy data pages reflecting the increase are received
by the policyowner;

* 10 days after a written notice is delivered to the policyowner which
tells about the cancellation of face amount increase right; or

* 45 days after the policyowner completes the application for the face
amount increase.

If a face amount increase is cancelled pursuant to this right or if the
Company does not approve a requested face amount increase, the Company will
restore to the Policy Value an amount equal to all Monthly Policy Charges
attributable to the increase in face amount (including rider costs arising from
the increase). The amount restored will be allocated among the Divisions of the
Separate Account or the Fixed Account, or both, as if it were a Net Premium.
This restoration will be made within five Business Days after the Company
receives the request for cancellation on the appropriate form. In addition, the
Surrender Charge will be adjusted, if necessary, so that it will be as though no
increase in face amount had occurred.

Net Premiums paid after an increase in face amount will be allocated to the
Divisions of the Separate Account or the Fixed Account, or both, and will not be
refunded following cancellation of the increase. Policyowners who request an
increase in face amount should consider this in deciding whether to make any
premium payments during the free look period for the increase.

During the first 24 policy months following issuance of Policy data pages
reflecting an increased face amount, but not while the Policy is in a Grace
Period, the policyowner may exchange the increased face amount for any other
form of fixed benefit individual life insurance policy (other than term
insurance) currently made available by the Company for this purpose on the
insured's life. On the date of exchange, a portion of the Policy Value
attributable to the increase will be transferred to the fixed benefit policy.
The portion of the Policy Value attributable to the increase in face amount is
determined by use of the ratio of the face amount of the increase over the face
amount of the Policy, determined at the adjustment date for the face amount
increase.

Premium payments made under the Policy after exercise of this exchange
right will be credited only to the Policy. A new Policy will be issued upon
exercise of the exchange right which will require payment of its own premiums. A
portion of any unpaid policy loan and loan interest may be required to be repaid
prior to the exchange or transferred to the new Policy. In all other respects,
this exchange right for face amount increases is the same as that available for
the purchase of the Policy (See "Right to Exchange Policy." )

CHARGES AND DEDUCTIONS

The Company will make certain charges and deductions to support the
operation of the Policy and the Separate Account. Some charges will be deducted
from premium payments as received, some charges will be deducted from the Policy
Value on a monthly basis, and other charges will be deducted from the Policy
Value upon total surrender or termination of a Policy. In addition, there are
fees for the administrative costs involved in processing certain transfers and
all partial surrenders of Policy Value.

Premium Expense Charge

Upon receipt of each premium payment, the Company deducts a Premium Expense
Charge. The Premium Expense Charge includes a charge of 2.20% for state and
local taxes and a charge of 1.25% for federal taxes. The charges for state,
local and federal taxes are not expected to exceed these taxes. The charge also
includes a premium sales load of 2.75% for premium payments less than or equal
to the Target Premium and .75% for premium payments in excess of Target Premium
made during each of the first ten Policy Years and, with respect to premiums
attributable to any face amount increase, made during each of the first ten
years following the increase. Sales loads, including the sales load portion of
the Surrender Charge more fully described below, are intended to compensate the
Company for distribution expenses including registered representatives'
commissions, the printing of prospectuses and sales literature, and advertising.
The sales loads imposed in any Policy Year are not necessarily related to actual
distribution expenses incurred in that year. Instead, the Company expects to
incur the majority of distribution expenses in the early years of a Policy and
to recover any deficiency over the life of a Policy. To the extent distribution
expenses exceed sales loads (including the sales load portion of Surrender
Charges, if any) in any year, the Company will pay them from its other assets or
surplus in its general account, which includes amounts derived from mortality
and expense risks charges and from mortality gains.

Monthly Policy Charge

On each Monthly Date, the Company will deduct from the Policy Value an
amount to cover certain charges and expenses incurred in connection with the
Policy. The Monthly Policy Charge deduction is made only from the Policy Value
held in the Fixed Account and/or Investment Accounts. No deduction is made from
a Loan Account . The Monthly Policy Charge will be allocated among the
Investment Accounts and the Fixed Account in accordance with policyowner
instruction on the application for the Policy. The policyowner's choice of
allocation percentages may be: (1) the same as the allocation percentages for
premiums, (2) on a Prorated Basis or (3) any other method of allocation agreed
upon by the policyowner and the Company. For the Fixed Account or each
Investment Account, the allocation percentage must be zero or a whole number not
less than ten nor greater than 100. The allocation percentages chosen by the
policyowner must total 100. Requests for changes in allocation percentages are
effective on the next Monthly Date following approval by the Company. If
following the policyowner's instruction would not be possible on any Monthly
Date due to insufficient value in the Fixed Account and/or Investment Accounts,
Monthly Policy Charges will be deducted on a Prorated Basis. The deduction for
the Monthly Policy Charge consists of a charge for the cost of insurance and a
charge for any optional benefits added by rider, a monthly administration
charge, and a mortality and expense risks charge.

Cost of Insurance Charge

The monthly cost of insurance charge is calculated as (1) multiplied by the
result of (2) minus (3) where:

(1) is the cost of insurance rate as described below divided by 1,000;

(2) is the death benefit at the beginning of the policy month; and

(3) is the Policy Value at the beginning of the policy month calculated as
if the Monthly Policy Charges were zero.

The cost of insurance rate is based on the gender, issue age, duration
since issue, smoking status and risk classification of the insured under the
Policy. (For Policies issued in states which require unisex pricing or in
connection with employment related insurance and benefit plans, the cost of
insurance is not based on the gender of the insured.) The rate will be
determined by the Company based upon its expectations as to future mortality
experience, but the rate will never exceed the rate shown in the Table of
Monthly Guaranteed Cost of Insurance Rates set forth in the Policy. These
guaranteed maximum rates are based on the 1980 Smoker and Nonsmoker
Commissioners Standard Ordinary Mortality Tables. The table used will be male or
female according to the gender of the insured (where allowed by law). Any change
in current cost of insurance rates will apply to all individuals of the same
age, gender and risk classification of the insured. However, different maximum
cost of insurance rates may apply to any face amount increases under a Policy.
The cost of insurance rate for a face amount increase is based on the insured's
gender (where allowed by law), age at time of increase, duration since increase,
smoking status and risk classification of the insured at the time of the
increase.

Administration Charge

The current monthly administration charge for a Policy during the first
Policy Year is an amount equal to $.40 for each $1,000 of Policy face amount,
but not less than $6.00 per month and not greater than $16.67 per month. After
the first Policy Year, the monthly administration charge for a Policy is
currently set at $6.00 per month. The monthly administration charge is
guaranteed not to exceed an amount equal to the greater of $.60 for each $1,000
of Policy face amount or $10.00 per month, but no more than $25.00 per month
during the first Policy Year and no more than $10.00 per month after the first
Policy Year. The Policy also provides for a contingent deferred administration
charge which is a part of the Surrender Charge imposed upon total surrender or
termination of a Policy when a Grace Period expires without sufficient premium
payment. (See "Surrender Charge.") The monthly administration charge and the
deferred administration charge reimburse the Company for the recurring
administrative expenses related to the Policy and the Separate Account. These
expenses are expenses other than sales expenses and include, for example, the
cost of processing applications, conducting medical examinations, determining
insurability, establishing policy records, premium reminders and collection,
recordkeeping, processing death benefit claims and policy changes, reporting,
and overhead costs. The Company does not expect to recover from the
administration charges any amount above its accumulated expenses associated with
the Policies and the Separate Account.

Mortality and Expense Risks Charge

The Company deducts a monthly charge from the Policy Value for the
mortality and expense risks it assumes under the Policies. This charge is made
on each Monthly Date at an annual rate of .90% of the value of the policyowner's
Investment Accounts. The charge is currently reduced to an annual rate of .35%
after the ninth Policy Year. The Company reserves the right to increase the .35%
charge, subject to the guaranteed maximum annual rate of .90%. If the Company
increases the charge such increase will be applicable only to Policies issued on
or after the date of the increase. The mortality risk assumed is that lives
insured may live for a shorter period of time than the Company estimated. The
expense risk assumed is that expenses incurred in issuing and administering the
Policies will be greater than the Company estimated. The Company will realize a
gain from this charge to the extent it is not needed to provide benefits and pay
expenses under the Policies.

Transaction Charge

A transaction charge of the lesser of $25 or 2% of the amount being
surrendered is imposed on each partial surrender of Policy Value. A transaction
charge of $25 may be imposed on each unscheduled transfer of Policy Value among
the Investment Accounts exceeding twelve per Policy Year. All transfers with the
same effective date count as one transfer.

Surrender Charge

During the first ten Policy Years, the Company will assess a Surrender
Charge upon total surrender of a Policy or termination of a Policy when a Grace
Period expires without sufficient premium payment. In addition, the Company will
assess a Surrender Charge upon surrender or termination of a Policy for
insufficient premium payment which occurs during the first ten Policy Years
after the adjustment date for a face amount increase. Thus, surrender of a
Policy or termination of a Policy for insufficient value within the first ten
Policy Years and within ten Policy Years after the adjustment date of a face
amount increase will result in assessment of a composite Surrender Charge
representing the charge imposed on the initial face amount and the charge
imposed on the face amount increase. Surrender Charges do not decrease when the
face amount of a Policy is decreased. No additional Surrender Charges apply when
the death benefit under a Policy is changed from Option 2 to Option 1. All or a
portion of the Surrender Charge will be partially or completely waived on
Policies issued with an accounting benefit rider upon total surrender in early
Policy Years.

The Surrender Charge is comprised of two parts: A contingent deferred sales
charge and a contingent deferred administration charge.

Contingent Deferred Sales Charge

The contingent deferred sales charge is equal to 47.25% of premiums paid up
to a maximum of two Target Premiums for insureds under age 66. This charge is
reduced for insureds age 66 and over in accordance with the following table:

Insured's Age Applicable
on Issue or Contingent Deferred
Adjustment Date Sales Charge

66-70 47.25% on premiums paid up to 1.5 x Target Premium
71-75 47.25% on premiums paid up to 1.1 x Target Premium
76-80 47.25% on premiums paid up to 0.8 x Target Premium
81-85 47.25% on premiums paid up to 0.5 x Target Premium

The contingent deferred sales charge portion of the Surrender Charge is
assessed to recover sales expenses and is in addition to the 2.75% and .75%
premium sales load which is deducted when premium payments are made.

Contingent Deferred Administration Charge

The contingent deferred administration charge is equal to $3 per $1,000 of
Policy face amount, but no greater than $1,500 per Policy. The contingent
deferred administration charge portion of the Surrender Charge is intended to
reimburse the Company for administrative expenses associated with the Policy and
the Separate Account and is in addition to the monthly administration charge for
a Policy.

Surrender Charge Percentage

The Surrender Charge during any Policy Year is equal to the sum of the
contingent deferred sales charge and the contingent deferred administration
charge multiplied by the applicable surrender percentage as shown below.

Policy Year of Surrender Surrender Charge Percentage
- ------------------------ ---------------------------
1-5 100.00%
6 95.24%
7 85.71%
8 71.43%
9 52.38%
10 28.57%
11+ 0.00%

If the face amount of a Policy is increased, Surrender Charges apply to the
net increase in face amount as though a new Policy had been issued for an amount
equal to the net increase. The net increase in face amount is equal to the
increase in face amount less earlier decreases in face amount not offset against
an earlier increase in face amount. The Surrender Charge applicable to face
amount increase will be determined by multiplying the increase in the face
amount, in thousands, by the contingent deferred administration charge on the
increase in face amount (subject to the $1,500 limit per Policy) and adding the
premium attributable to the face amount increase (up to a maximum of two Target
Premiums) multiplied by the contingent deferred sales charge (47.25%). The
premium attributable to the increase in face amount is determined by use of the
ratio of the face amount of the increase over the face amount of the Policy
determined at the adjustment date for the face amount increase.The contingent
deferred sales charge is reduced for insureds age 66 or older at the Issue or
Adjustment Date as discussed above under the heading "Contingent Deferred Sales
Charge." The sum of these amounts is then multiplied by the Surrender Charge
percentage in the above table to determine the Surrender Charge.

Surrender Charges following a Policy's reinstatement commence at the rate
in effect at the time of the Policy's termination.

Sales Charge Limitations

If a Policy is surrendered at any time during the first two years after
issuance or after an increase in face amount, the Company will forego taking
that part of the deferred sales charge with respect to "premiums" paid for the
initial face amount or such increase, whichever is applicable, which would cause
the total sales load (premium sales load portion of the Premium Expense Charge
deducted from premium payments plus contingent deferred sales charge) to exceed
the sum of (i) 30% of the premiums paid up to the lesser of one guideline annual
premium or the maximum amount of premiums subject to the deferred sales charge
plus (ii) 10% of the premiums paid in excess of one guideline annual premium, up
to the lesser of two guideline annual premiums or the maximum amount of premiums
subject to the deferred sales charge.

Other Charges

Shares of the Mutual Funds are purchased by the corresponding Divisions at
the shares' net asset values. The net asset value of Mutual Fund shares reflects
the investment management fees and corporate operating expenses already deducted
from the assets of the Mutual Funds. The current investment management fee and
total operating expenses for each of the Mutual Funds is provided under the
heading "Separate Account". These fees and expenses are fully described in the
prospectus for each of the Mutual Funds.

Special Provisions for Group or Sponsored Arrangements

Where permitted by state insurance laws, Policies may be purchased under
group or sponsored arrangements, as well as on an individual basis. A "group
arrangement" includes a program under which a trustee, employer or similar
entity purchases Policies covering a group of individuals on a group basis. A
"sponsored arrangement" includes a program under which an employer permits group
solicitation of its employees or an association permits group solicitation of
its members for the purchase of Policies on an individual basis.

The charges and deductions described above may be reduced for Policies
issued in connection with group or sponsored arrangements. Such arrangements may
include sales without premium sales loads and/or Surrender Charges to employees,
officers, directors, agents, immediate family members of the foregoing, and
employees of agents of the Company and its subsidiaries. The Company will reduce
the above charges and deductions in accordance with its rules in effect as of
the date an application for a Policy is approved. To qualify for such a
reduction, a group or sponsored arrangement must satisfy certain criteria as to,
for example, size of the group, expected number of participants and anticipated
premium payments from the group. Generally, the sales contacts and effort,
administrative costs and mortality cost per Policy vary based on such factors as
the size of the group or sponsored arrangements, the purposes for which Policies
are purchased and certain characteristics of its members. The amount of
reduction and the criteria for qualification will reflect the reduced sales
effort and administrative costs resulting from, and the different mortality
experience expected as a result of, sales to qualifying groups and sponsored
arrangements.

The Company may modify from time to time, on a uniform basis, both the
amounts of reductions and the criteria for qualification. Reductions in these
charges will not be unfairly discriminatory against any person, including the
affected policyowners and all other policyowners with policies funded by the
Separate Account.

In addition, groups and persons purchasing under a sponsored arrangement
may apply for flexible underwriting. If flexible underwriting is granted, the
cost of insurance charge may increase as a result of higher anticipated
mortality experience. Flexible underwriting programs currently available include
batch underwriting, expanded non-medical underwriting and guaranteed issue
underwriting.

THE FIXED ACCOUNT

Policyowners may allocate Net Premiums and transfer amounts from the Separate
Account to the Fixed Account, in which case such amounts are held in the General
Account of the Company. Because of exemptive and exclusionary provisions,
interests in the Fixed Account have not been registered under the Securities Act
of 1933 and the General Account has not been registered as an investment company
under the Investment Company Act of 1940. Accordingly, neither the Fixed Account
nor any interests therein are subject to the provisions of these Acts and, as a
result, the staff of the Securities and Exchange Commission has not reviewed the
disclosures in this prospectus relating to the Fixed Account. Disclosures
regarding the Fixed Account may, however, be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses. This prospectus is
generally intended to serve as a disclosure document only for the aspects of the
Policy involving the Separate Account and contains only selected information
regarding the Fixed Account. More information regarding the Fixed Account may be
obtained from the Company's home office or from a sales representative.

The Company's obligations with respect to the Fixed Account are supported by the
Company's General Account. Subject to applicable law, the Company has sole
discretion over the investment of the assets in the General Account.

The Company guarantees that Net Premiums allocated to the Fixed Account will
accrue interest daily at an effective annual interest rate of not less than 3%
compounded annually. In its sole discretion, the Company may credit a higher
rate of interest.

Charges under the Policy are the same as when the Separate Account is being
used, except that the mortality and expense risks charge is not imposed on
amounts of Policy Value in the Fixed Account. The value of the Fixed Account on
any Business Day is the sum of the Net Premiums allocated to the Fixed Account,
plus any transfers from the Separate Account, plus interest credited to the
Fixed Account, less surrenders, Surrender Charges, Monthly Policy Charges or
transaction fees allocated to the Fixed Account or transfers to the Separate
Account.

POLICY TERMINATION AND REINSTATEMENT

Policy Termination

An initial minimum premium payment is required to commence coverage under a
Policy. A minimum premium is required during the first twenty-four policy months
(the "Minimum Required Premium"). A notice of impending termination of a Policy
will be sent if during the 24 months following the Policy Date, the sum of the
premiums paid is less than the Minimum Required Premium on a Monthly Date.

The Minimum Required Premium on a Monthly Date is equal to (1) times (2)
where:

1. Is the minimum monthly premium shown on the current data pages ; and

2. Is the number of completed months since the Policy Date.

Further, a notice of impending termination of a Policy will be sent if, 24
months after the Policy Date or later, or any time after a policy loan is taken,
the Net Surrender Value of the Policy is not at least equal to the Monthly
Policy Charge on the current Monthly Date and, if the Policy has a death benefit
guarantee rider, the death benefit guarantee premium requirement has not been
satisfied. Payment of a planned periodic premium does not ensure that the Policy
will not enter a Grace Period 24 months or later following the Policy Date.

The Grace Period begins when a notice of impending termination is mailed to
a policyowner. The notice will be sent to the last post office address of the
policyowner known to the Company. It will show the minimum payment required to
keep the Policy in force. The notice will also show the 61-day period during
which the Company will accept the required payment.

If the Grace Period begins because the sum of the premiums paid is less
than the Minimum Required Premium, the minimum payment is (1) minus (2) where:

1. Is the Minimum Required Premium due on the second Monthly Date
following the beginning of the Grace Period; and

2. The sum of the premiums paid since the Policy Date.

If the Grace Period ends before receipt by the Company of the minimum
payment described above, the Company will pay to the policyowner any remaining
value in the Policy which would be (1) minus (2) where:

1. Is the Net Surrender Value on the Monthly Date on or immediately
preceding the start of the Grace Period; and

2. Is the two Monthly Policy Charges applicable during the Grace Period.

If the Grace Period begins because the Net Surrender Value is less than the
current Monthly Policy Charge, the minimum payment is equal to (1) plus (2)
divided by (3) where:

1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of the
Grace Period;

2. Is three Monthly Policy Charges; and

3. Is 1 minus the maximum Premium Expense Charge.

If the Grace Period ends before we receive the minimum payment, the Company
will keep any remaining value in the Policy.

This payment is intended to reimburse the Company for the Monthly Policy Charges
during the 61-day Grace Period and provide sufficient Policy Value to pay the
Monthly Policy Charge for the first Monthly Date following the Grace Period.
There is no guarantee the amount requested at the beginning of the Grace Period
will be sufficient to actually meet the Monthly Policy Charges as they are
processed. Should the Policy's Net Surrender Value not at least equal the
Monthly Policy Charges on any Monthly Date, a new 61-day Grace Period will
commence.

The Policy will continue in force through a Grace Period; but, if the
required payment is not received by the Company during the 61-day period, the
Policy will terminate as of the Monthly Date on or immediately preceding the
start of the Grace Period. If the insured dies during a Grace Period, the policy
proceeds will be reduced by the amount of all Monthly Policy Charges due and
unpaid at the insured's death, as well as by loans and unpaid loan interest.

A Policy will also terminate if the policyowner makes a total surrender of
the Policy, the death proceeds under the Policy are paid or the maturity
proceeds under the Policy are paid. When a Policy terminates for any reason, all
policy privileges and rights of the policyowner under the Policy end.

Reinstatement

A policyowner may, however, reinstate a Policy which terminated as a result
of failure to pay the Minimum Required Premium on a Monthly Date during the 24
months following the Policy Date, or as a result of insufficient value, subject
to certain conditions. A Policy may be reinstated only prior to the Maturity
Date and while the insured is alive. The application for reinstatement must be
personally delivered or mailed to the Company at its home office within three
years of a Policy's termination. (In some states, the Company is required by law
to provide a longer period of time within which a Policy may be reinstated.)
Satisfactory proof of insurability based upon the Company's underwriting
guidelines then in effect and payment of a reinstatement premium. The
reinstatement must be at least the greater of ((1) plus (2) divided by (3)) or
((4) minus (5)) where:

1. Is the amount by which the Surrender Charge exceeds the Accumulated
Value on the Monthly Date on or immediately preceding the start of the
Grace Period;

2. Is three Monthly Policy Charges;

3. Is one minus the maximum Premium Expense Charge;

4. Is the Minimum Required Premium due on the second Monthly Date
following the beginning of the Grace Period; and

5. Is the sum of the premiums paid since the Policy Date.

Payment of Monthly Policy Charges for the period of termination is not required.
If a policy loan or loan interest was unpaid at the time of termination, the
Company will require repayment or reinstatement of the loan and any loan
interest before permitting reinstatement of the Policy. Loan interest will not
be charged for the period the Policy was terminated. Reinstatement will be
effective on the next Monthly Date following the Company's approval of the
reinstatement application. The Policy Date will remain the original Policy Date
and will not be changed at reinstatement, although Surrender Charges for total
surrender following reinstatement will resume at the rate charged at the time of
the Policy's termination, as adjusted for the payment of past due premiums, if
any.
Upon reinstatement of a Policy, all the rights and privileges of the owner are
restored.

OTHER MATTERS

Voting Rights

The Company shall vote Mutual Fund shares held in the Separate Account at
regular and special meetings of shareholders of each Mutual Fund, but will
follow voting instructions received from persons having the voting interest in
such Mutual Fund shares.

The policyowner has the voting interest under a Policy. The policyowner
shall have one vote for each $100 of Policy Value in the Divisions, with
fractional votes allocated for amounts less than $100. The number of votes on
which the policyowner has the right to instruct will be determined as of the
date coincident with the date established by the Mutual Fund for determining
shareholders eligible to vote at the meeting of the Mutual Fund. Voting
instructions will be solicited by written communications prior to such meetings
in accordance with procedures established by the Mutual Fund. The Company will
vote other Mutual Fund shares held in the Separate Account, including those for
which no instructions are received in the same proportion as it votes shares for
which it has received instructions. All Mutual Fund shares held in the general
account of the Company will be voted in proportion to instructions that are
received with respect to participating contracts.

If the Company determines pursuant to applicable law that Mutual Fund
shares held in the Separate Account need not be voted pursuant to instructions
received from persons otherwise having the voting interest as provided above,
then the Company may vote Mutual Fund shares held in the Separate Account in its
own right.

The Company may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that shares be voted
so as to cause a change in subclassification or investment objective of the
Mutual Fund, or disapprove an investment advisory contract of the Mutual Fund.
In addition, the Company may disregard voting instructions in favor of changes
initiated by a policyowner in the investment policy or the investment adviser of
the Mutual Fund if the Company reasonably disapproves of such changes. A change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities or the Company determines that the
change would be inconsistent with the investment objectives of the Mutual Fund
or would result in the purchase of securities for the Mutual Fund which vary
from the general quality and nature of investments and investment techniques
utilized by other separate accounts created by the Company or any affiliates of
the Company which have similar investment objectives. In the event that the
Company does disregard voting instructions, a summary of that action and the
reason for such actions will be included in the next semiannual report to
policyowners.

Statement of Values

The Company will mail an annual statement to the policyowner after the end
of each Policy Year until the Policy terminates. The statement will show:

1. the current death benefit;
2. the current Policy Value and Surrender Value;
3. all premiums paid since the last statement;
4. all charges since the last statement;
5. any Policy loans and loan interest;
6. any partial surrenders since the last statement;
7. the number of Units and Unit value;
8. the total value of each of the policyowner's Investment Accounts; and
9. any investment gain or loss since the last statement.
10. the designated beneficiary or beneficiaries;
11. all riders included with the Policy; and
12. a detailed summary of activity which occurred during the Policy Year.

Any policyowner may request at any time a current statement of account
values, transactions and activities by telephoning 1-800-852-4450.

The Company will also send to the policyowner the reports required by the
Investment Company Act of 1940.

Service Available by Telephone

Unless telephone transaction services are declined on the supplemental
application for a Policy, or at any subsequent time the policyowner notifies the
Company in writing to remove telephone transaction services, certain
transactions, including transfers permitted by the Policy, Policy loans (Policy
loan proceeds will be mailed only to the policyowner's address of record),
changes in the allocation of future premium payments and changes in allocation
of the Monthly Policy Charge, may be made pursuant to telephone instructions.
The telephone transactions may be exercised by telephoning 1-800-852-4450.
Telephone transfer requests must be received by the close of the New York Stock
Exchange on a day when the Company is open for business to be effective that
day. Requests made after that time or on a day when the Company is not open for
business will be effective the next Business Day. Although neither the Separate
Account nor the Company is responsible for the authenticity of telephone
transaction requests, the right is reserved to refuse to accept telephone
requests when in the opinion of the Company it seems prudent to do so. The
policyowner bears the risk of loss caused by fraudulent telephone instructions
the Company reasonably believes to be genuine. The Company will employ
reasonable procedures to assure telephone instructions are genuine and if such
procedures are not followed, the Company may be liable for losses due to
unauthorized or fraudulent transactions. Such procedures include recording all
telephone instructions, requesting personal identification information such as
the caller's name, daytime telephone number, social security number and/or
birthdate and sending a written confirmation of the transaction to the
policyowner's address of record. Policyowners may obtain additional information
and assistance by telephoning the toll free number. The Company may modify or
terminate telephone transfer procedures at any time.

GENERAL PROVISIONS

Addition, Deletion or Substitution of Investments

The Company reserves the right, subject to compliance with applicable law,
to make additions to, deletions from, or substitutions for the shares held by
any Division or which any Division may purchase. If shares of any Mutual Fund
should no longer be available for investment or if, in the judgment of the
Company's management, further investment in shares of any mutual fund should
become inappropriate in view of the purposes of the Policy, the Company may
substitute shares of any other investment company for shares already purchased,
or to be purchased in the near future under the Policies. No substitution of
securities will take place without notice to policyowners and without prior
approval of the Securities and Exchange Commission, to the extent required by
the Investment Company Act of 1940.

The investment policy of the Separate Account will not be materially
changed unless a statement of the change is filed with and not disapproved by
the Insurance Commissioner of the State of Iowa and the Superintendent of
Insurance of the State of New York, if required. Whether a change in investment
policy is material will be determined in conjunction with the appropriate state
insurance commissioner(s). The policyowner will be notified of any material
investment policy change. If the Company eliminates or combines existing
Divisions or transfers assets in one Division to another, the policyowner may
then change allocation percentages and transfer any value in an affected
Division to another Division without charge. In the alternative, the policyowner
may exchange the Policy for a fixed-benefit, flexible premium life insurance
policy offered by the Company for this purpose. The policyowner may exercise
this exchange privilege until the later of 60 days after (i) the effective date
of such change, or (ii) the receipt of a notice of the options available. The
face amount of the new policy will be the death benefit of the Policy on the
date of exchange.

Each Mutual Fund is subject to certain investment restrictions which may
not be changed without the approval of the majority of the outstanding voting
securities. See the accompanying prospectuses for the Mutual Funds.

Optional Insurance Benefits

Subject to certain requirements and approval by state insurance
departments, one or more supplementary benefits may be added to a Policy,
including those providing term insurance options, providing accidental death
coverage, waiving Monthly Policy Charges or waiving of premium payments upon
disability, accelerating benefits in the event of terminal illness, providing
cost of living increases in benefits, providing a death benefit guarantee,
providing extended coverage beyond the Maturity Date, and, in the case of
business-owned Policies, permitting a change of the life insured, providing face
amount increases that reflect salary increases, providing extra protection
increases and providing enhanced policy values in the early years of a Policy.
More detailed information concerning supplementary benefits may be obtained from
an authorized agent of the Company. The cost, if any, of any optional insurance
benefits will be deducted as part of the Monthly Policy Charge.

The death benefit guarantee rider provides that if the death benefit
guarantee premium requirement is satisfied the Policy will not enter its grace
period even if the Net Surrender Value is insufficient to cover the monthly
deduction on a Monthly Date. This rider is automatically made a part of all
Policies at no premium. The death benefit guarantee premium requirement is
satisfied if the sum of all premiums paid less any partial surrenders and any
Policy loans and unpaid loan interest equals or exceeds the sum of the monthly
death benefit guarantee premiums applicable to date plus the next monthly death
benefit guarantee premium. The death benefit guarantee premium is based on the
issue age, gender (where permitted by law), death benefit option, and risk class
of the insured. The monthly death benefit guarantee premium will be considered
to be zero for any month that deductions are being paid by the waiver of monthly
deductions rider. The death benefit guarantee premium may change if the Policy
face amount is changed, the death benefit option is changed, or a rider is added
or deleted. As a result of a change, an additional premium may be required on
the date of the change in order to satisfy the new death benefit guarantee
premium requirement. If on any Monthly Date the death benefit guarantee premium
requirement is not met, the policyowner will be sent a notice of the premium
required to maintain the guarantee. If the premium is not received at a
Company's home office prior to the expiration of 61 days after the date the
notice is mailed, the death benefit guarantee will no longer be in effect and
the rider will terminate. If the rider terminates, it may not be reinstated. If
this rider is in force, the death benefit guarantee premium requirement is
satisfied and the insured is alive on the Policy Maturity Date, the Company will
pay the policyowner the excess, if any, of the face amount over the maturity
proceeds.

The Contract

The Policy, the application attached to it, any supplemental application,
any adjustment applications, any amendments to the application and the current
data pages make up the entire contract between the Company and the policyowner.
Any statements made in the application or an adjustment application will be
considered representations and not warranties. No statement, unless made in an
application, will be used to void a Policy (or void an adjustment in case of an
adjustment application) or to defend against a claim. A Policy may be modified
by mutual agreement between the policyowner and the Company. Any alteration of
the Policy must be in writing and signed by one of the Company's corporate
officers. No one else, including the agent, may change the contract or waive any
provisions.

Incontestability

The Company will not contest the insurance coverage provided under a
Policy, except for any subsequent increase in face amount, after the Policy has
been in force during the lifetime of the insured for a period of two years from
the Policy Date. This provision does not apply to claims for total disability or
to accidental death benefits which may be provided by a rider to a Policy. Any
face amount increase made under the Adjustment Options has its own two-year
contestable period which begins on the effective date of the adjustment.

Misstatements

If the age or gender of the insured has been misstated in an application,
including a reinstatement application, the death benefit under the Policy will
be the Policy Value plus the amount which would be purchased by the most recent
mortality charge at the correct age and gender.

Suicide

A Policy does not cover the risk of suicide within two years from the
Policy Date or two years from the date of any increase in face amount with
respect to such increase, whether the insured is sane or insane. In the event of
suicide within two years of the Policy Date, the only liability of the Company
will be a refund of premiums paid, without interest, less any policy loans and
loan interest and any partial surrenders. In the event of suicide within two
years of an increase in face amount, the only liability of the Company in
respect to that increase in face amount will be a refund of the cost of
insurance for that increase.

Ownership

The owner of the Policy is as named in the application. The owner may
exercise every right and enjoy every privilege provided by the Policy, subject
to the rights of any irrevocable beneficiary. All privileges and rights of the
owner under a Policy end when the owner surrenders the Policy for cash, the
death proceeds of the Policy are paid, or the maturity proceeds of the Policy
are paid. Also, if the Grace Period ends without receipt by the Company at its
home office of the payment required to keep the Policy in force, the privileges
and rights of the owner terminate as of the Monthly Date on or immediately
preceding the start of the Grace Period. If the owner is not the insured and
dies before the insured, the insured becomes the owner unless the owner has
provided for a successor owner. The owner may be changed by filing a Written
Request with the Company. The Company's approval is needed and no change is
effective until the Company approves the Written Request for change of owner.
Once approved, the change is effective as of the date the owner signed the
Written Request. The Company reserves the right to require that the Policy be
sent to the Company so that the change may be recorded.

Beneficiaries

The original beneficiaries and contingent beneficiaries are designated by
the policyowner on the application. A primary and/or contingent beneficiary or
beneficiaries may be changed by Written Request to the Company. The Company's
approval is needed and no change is effective until the Company approves the
Written Request for change of beneficiary. Once approved, the change is
effective as of the date the owner signed the Written Request. If changed, the
primary beneficiary or contingent beneficiary is as shown in the latest written
change filed with the Company. One or more primary or contingent beneficiaries
may be named in the application or a later change request.

Benefit Instructions

While the insured is alive, the owner may file instructions for the payment
of death proceeds under one of the benefit options under the Policy. Such
instructions, or a change of instructions, must be made by Written Request to
the Company. If the owner changes the beneficiary, that change will revoke any
prior benefit instructions.

Postponement of Payments

Payment of any amount upon total or partial surrender, policy loan, or
proceeds payable at death or maturity and the right to transfer to or from an
Investment Account may be postponed or suspended whenever: (1) the New York
Stock Exchange is closed other than customary weekend and holiday closings, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission; (2) the Securities and Exchange Commission
by order permits postponement for the protection of policyowners; or (3) the
Securities and Exchange Commission requires that trading be restricted or
declares an emergency, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to determine the net
asset value of the Mutual Funds.

Assignment

The Policy can be assigned as collateral for a loan. The Company must be
notified in writing if the Policy has been assigned. Each assignment will be
subject to any payments made or action taken by the Company prior to its
notification of such assignment. The Company is not responsible for the validity
of an assignment. An assignment as collateral does not change the owner but the
rights of beneficiaries, whenever named, become subordinate to those of the
assignee.

Policy Proceeds

Death proceeds under a Policy will ordinarily be paid within five Business
Days after the Company receives due proof of death. Payments may be postponed in
certain circumstances. (See "Postponement of Payments.") During the insured's
lifetime, the policyowner may arrange for the death proceeds to be paid in a
lump sum or under one or more of the settlement options described below. These
choices are also available if the Policy is surrendered or matures.

When death proceeds are payable in a lump sum, the beneficiary may select
one or more of the settlement options.

The following options are available:

Option A

Special Benefit Arrangement - A specially designed benefit option may be
arranged with the Company's approval.

Option B

Proceeds Left at Interest - The Company will hold the amount applied on
deposit. Interest payments will be made annually, semiannually, quarterly or
monthly, as elected.

Option C

Fixed Income - The Company will pay an income of a fixed amount or an
income for a fixed period not exceeding 30 years.

Option D

Life Income - The Company will pay an income during a person's lifetime. A
minimum guaranteed period may be used.

Option E

Joint and Survivor Life Income - The Company will pay an income during the
lifetime of two persons, and continuing until the death of the survivor. This
option includes a minimum guaranteed period of 10 years.

Option F

Joint and Two-Thirds Survivor Life Income - The Company will pay an income
during the time two persons both remain alive, and two-thirds of the original
amount during the remaining lifetime of the survivor.

Interest at a rate set by the Company, but never less than required by
state law, will be applied to determine the payment under Option B, and any such
interest in excess of the guaranteed minimum will be added to payments under
Option C.

Participating Policy

The Policies share in any divisible surplus of the Company. The Company
will determine each Policy's share of the surplus and will credit it as a
dividend at the end of each Policy Year. The Company does not expect to pay any
dividends under the Policy.
Dividends, if any, will be paid in cash.

Right To Exchange Policy

During the first 24 policy months following issuance of a Policy, except
during a Grace Period, the policyowner may exchange the Policy for any other
form of fixed benefit individual life insurance policy (other than term
insurance) currently made available by the Company for this purpose on the
insured's life. At present, the Company makes several insurance policies
available for exercise of this exchange right. Such request must be postmarked
or delivered to the home office of the Company before the expiration of 24
months after the Effective Date. At the option of the policyowner, the new
policy will provide either the same death benefit or the same amount at risk as
the Policy did at the time of the exchange request. Premiums for the new policy
will be based on the same issue age, gender and risk classification of the
insured under the Policy. An equitable adjustment in the new policy's payments
and cash or Policy Values will be made to reflect variances, if any, in the
payments and Policy Values under the Policy and the new policy. Minimum benefits
of the new policy will be fixed and guaranteed and the new policy will not
participate in the experience of the Separate Account. Policy values will be
determined as of the date the Written Request for exchange is received at the
Company's home office. Evidence of insurability will not be required for the
exchange. No charge will be imposed on the exercise of this exchange privilege.
Any policy loan and loan interest must be repaid prior to the exchange or
transferred to the new policy. Any benefit riders included as a part of a Policy
may be exchanged, without evidence of insurability, for similar benefit riders
on the new policy if both these conditions are met:

1. The policyowner, in the Written Request for exchange, indicates that
the rider or riders should be a part of the new policy; and

2. The similar benefit rider or riders were available for the new policy
on the effective date of the benefit rider for the Policy based on the
same issue age, gender and risk classification of the insured under
the Policy.

The exchange will be effective upon proper receipt by the Company of the
Written Request, any amount required as an adjustment and surrender of the
Policy.

The policyowner may also exchange the Policy for a fixed-benefit, flexible
premium policy in the event of a material change in investment policy of a
Division (see "Addition, Deletion or Substitution of Investments.")

In addition, the policyowner has the right to exchange a face amount
increase for a fixed-benefit, flexible premium policy at any time during the
first 24 months following issuance of Policy data pages reflecting a face amount
increase, but not while the Policy is in a Grace Period (see "Adjustment
Options.")

DISTRIBUTION OF THE POLICY

The Policy will be sold by individuals who, in addition to being licensed
and appointed as life insurance agents or brokers for the Company, are also
registered representatives of the principal underwriter of the Policies, Princor
Financial Services Corporation, or of other broker-dealers which Princor
Financial Services Corporation selects and the Company approves. Princor
Financial Services Corporation is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. For Policies
distributed by the principal underwriter commissions will range between 0% and
50% of premium received in the first year of a Policy (and between 0% and 50% of
premium received in the first year following an adjustment date), up to a Target
Premium determined by a rate per $1,000 of face amount which varies by the age
and gender of the insured. In addition, commissions will include 0% to 3% of
premium received in the first year of the Policy, above the Target Premium. For
years two and later of a Policy, commissions will range from 0% to 2% of
premiums received. A service fee of 0% to 2% is paid on all premiums received
after the first Policy Year. In addition, a persistency renewal commission may
be paid which ranges from 1.25% to 5.25% of premiums received in the first three
Policy Years, depending upon the agent's or broker's total life insurance sales
for the Company. Expense allowances may also be payable to agents and brokers
based upon premiums received. Commission amounts for Policies distributed by
broker-dealers other than the principal underwriter will vary.

The Company has entered into a distribution agreement with Princor
Financial Services Corporation. Princor Financial Services Corporation is also
the principal underwriter for various registered investment companies organized
by the Company. Princor Financial Services Corporation is a wholly-owned
subsidiary of Principal Holding Company. Principal Holding Company is a holding
company and a wholly-owned subsidiary of the Company.

OFFICERS AND DIRECTORS OF PRINCIPAL MUTUAL LIFE INSURANCE COMPANY

Principal Mutual Life Insurance Company is managed by a Board of Directors
which is elected by its policyowners. The directors and executive officers of
the Company, their positions with the Company, including Board Committee
memberships, and their principal occupation during the last five years, are as
follows:

DIRECTORS:
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS):

J. E. ASCHENBRENNER Senior Vice President
R. S. CRABTREE Executive Vice President
T. J. GAARD Senior Vice President
M. H. GERSIE Senior Vice President
T. J. GRAF Senior Vice President
J. B. GRISWELL Executive Vice President
R. E. KELLER Executive Vice President
G. R. NARBER Senior Vice President and General Counsel
C. E. ROHM Executive Vice President
<TABLE>
<CAPTION>

<C> <C>
Principal Occupation
Name, Positions and Offices During Last 5 Years
- --------------------------- -------------------
M. VERMEER ANDRINGA President and Chief Operating Officer, Vermeer Manufacturing Company.
Director
Member, Nominating Committee

R. M. DAVIS President and Chief Executive Officer, The Pymatuning Group, Inc.
Director
Member, Nominating Committee

D. J. DRURY Chairman and Chief Executive Officer, Principal Mutual Life Insurance Company since
Director January 1995. President and Chief Executive Officer from 1994 - 1995; President from
Chairman of the Board 1993-1994; Executive Vice President from 1992-1993; Executive Vice President and Chair,
Executive Committee Chief Actuary 1992; prior thereto, Senior Vice President and Chief Actuary.

C. D. GELATT, JR. President, NMT Corporation.
Director
Member, Executive and
Human Resources Committees

G. D. HURD Retired. Chairman and Chief Executive Officer, Principal Mutual Life Insurance Company
Director 1989 - 1994.
Member, Executive and
Human Resources Committee

T. M. HUTCHISON Vice Chairman, Principal Mutual Life Insurance Company since August 1994. Prior thereto,
Director Executive Vice President.

C. S. JOHNSON President and Chief Executive Officer, Pioneer Hi-Bred International, Inc. since
Director September, 1995. President and Chief Operating Officer March 1995-September 1995.
Executive Vice President 1993-March 1995. Prior thereto Senior Vice President.

W. T. KERR President & Chief Operating Officer, Meredith Corporation since 1994.
Director Executive Vice President 1991-1994. Prior thereto President, New York Times.
Member, Nominating Committee

L. LIU President, Chairman and Chief Executive Officer, IES Industries, Inc.
Director
Member, Executive and Human
Resources Committees

V. H. LOEWENSTEIN Managing Partner, Egon Zehnder International
Director
Member, Audit Committee

J. R. PRICE Managing Director, Chemical Banking Corporation.
Director
Chair, Audit Committee

B. A. RICE Principal, Rice & Associates since 1994. Prior thereto, Vice President-Human Resources,
Director Scott Paper Company.
Member, Human Resources Committee

J-P. C. ROSSO President and Chief Executive Officer, Case Corporation since April 1994. President,
Director Honeywell, Inc., 1991-1994; Prior thereto President, Honeywell Europe.
Member, Audit Committee

D. M. STEWART President, The College Board.
Director
Chair, Nominating Committee

E. E. TALLETT President and Chief Executive Officer, Transcell Technologies, Inc. since 1992. Prior
Director thereto, President - Pharmaceutical Division, Centocor, Inc., 1989-1992.
Member, Audit Committee

D. D. THORNTON Retired since 1993. Prior thereto President, Boeing Commercial Airplane Group.
Director
Chair, Human Resources Committee

F. W. WEITZ President, Chairman of the Board and Chief Executive Officer, Essex Meadows, Inc. since
Director 1995. Prior thereto, President, Chairman of the Board, and Chief Executive Officer, The
Member, Executive and Nominating Weitz Corporation and its subsidiaries.
Committees
</TABLE>

STATE REGULATION OF PRINCIPAL MUTUAL LIFE INSURANCE COMPANY

The Company is organized under the laws of the State of Iowa and is subject
to regulation by the Commissioner of Insurance of Iowa. An annual statement is
filed with the Iowa Division of Insurance on or before March 1 of each year
covering the operations and reporting on the financial condition of the Company
as of December 31 of the preceding year. Periodically, the Commissioner examines
the assets
and liabilities of the Company and the Separate Account and verifies their
adequacy. A full examination of the Company's operations is conducted by the
National Association of Insurance Commissioners at least every five years.

FEDERAL TAX MATTERS

The discussion contained herein is general in nature, is not an exhaustive
discussion of all tax questions that might arise under the policies, and is not
intended as tax advice. No attempt is made to consider any applicable state or
other tax laws and no representation is made as to the likelihood of
continuation of current federal income tax laws and treasury regulations or of
current interpretations of the Internal Revenue Service.

While the Company reserves the right to make changes in the Policy to assure
that it continues to qualify as life insurance for tax purposes, the Company
cannot make any guarantee regarding the future tax treatment of any Policy. For
complete information on the impact of changes with respect to the Policy and
federal and state considerations, a qualified tax advisor should be consulted.

The ultimate effect of federal income taxes on values under the Policy and on
the economic benefit to the policyowner or beneficiary depends upon the
Company's tax status, upon the terms of the Policy and upon the tax status of
the individual concerned.

Tax Status of the Company and the Separate Account

The Company is taxed as an insurance Company under Subchapter L of the Internal
Revenue Code of 1986 (the "Code"). The Separate Account is not a separate
taxable entity and its operations are taken into account by the Company in
determining its income tax liability. All investment income and realized net
capital gains on the assets of the separate account are reinvested and taken
into account in determining Policy Values and are automatically applied to
increase the book reserves associated with the Policies. Under existing federal
income tax law, neither the investment income nor any net capital gains of the
Separate Account, are taxed to the Company to the extent those items are applied
to increase reserves associated with the Policies.

Charges for Taxes

The Company imposes a federal tax charge equal to 1.25% of premiums received
under the Policy to compensate for the federal income tax liability it incurs
under Section 848 of the Code by reason of its receipt of premiums under the
Policy. The Company believes that this charge is reasonable in relation to the
increased tax burden it incurs as a result of Section 848. No other charge is
currently made to the Separate Account for federal income taxes of the Company
that may be attributable to the Separate Account. Periodically, the Company
reviews the appropriateness of charges to the Separate Account for the Company's
federal income taxes, and in the future, a charge may be made for federal income
taxes incurred by the Company that are attributable to the Separate Account. In
addition, depending on the method of calculating interest on Policy Values
allocated to the Fixed Account, a charge may also be imposed for the Policy's
share of the Company's federal income taxes attributable to the Fixed Account.

Under current laws, the Company may incur state or local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, the Company
reserves the right to charge the Separate Account for the portion of such taxes,
if any, attributable to the Separate Account.

Diversification Standards

In addition to other requirements imposed by the Code, a Policy will qualify as
life insurance under the Code only if the diversification requirements of Code
Section 817(h) are satisfied by each Separate Account in which any of the Policy
Values are held. To assure that each Policy continues to qualify as life
insurance for federal income tax purposes, the Company intends to comply with
Code Section 817(h) and the regulations thereunder.

Life Insurance Status of Policy

The Company believes that the Policy meets the statutory definition of life
insurance under Code Section 7702 and that the policyowner and beneficiary of
any Policy will receive the same federal income tax treatment as that accorded
to owners and beneficiaries of fixed benefit life insurance policies.
Specifically, the death benefit under the Policy will be excludable from the
gross income of the beneficiary subject to the terms and conditions of Section
101(a)(1) of the Code. (Death benefits under a "modified endowment contract" as
discussed below are treated in the same manner as death benefits under life
insurance contracts that are not so classified.)

In addition, unless the Policy is a "modified endowment contract," in which case
the receipt of any loan under the Policy may result in recognition of income to
the policyowner, the policyowner will not be deemed to be in constructive
receipt of the Policy Values, including increments thereon, under the Policy
until proceeds of the Policy are received upon a total or partial surrender of
the Policy.

Modified Endowment Contract Status

A Policy will be a modified endowment contract if it satisfies the definition of
life insurance set out in the Internal Revenue Code, but it either fails the
additional "7-pay test" set forth in Code Section 7702A or was received in
exchange for a modified endowment contract. A Policy will fail the 7-pay test if
the accumulated amount paid under the contract at any time during the first
seven contract years exceeds the total premiums that would have been payable
under a Policy providing for guaranteed benefits upon the payment of seven level
annual premiums. A Policy received in exchange for a modified endowment contract
will be taxed as a modified endowment contract even if it would otherwise
satisfy the 7-pay test.

While the 7-pay test is generally applied as of the time the Policy is issued,
certain changes in the contractual terms of a Policy will require a Policy to be
retested to determine whether the change has caused the Policy to become a
modified endowment contract. For example, a reduction in death benefits during
the first seven contract years will cause the Policy to be retested as if it had
originally been issued with the reduced death benefit.

In addition, if a "material change" occurs at any time while the Policy is in
force, a new 7-pay test period will start and the Policy will need to be
retested to determine whether it continues to meet the 7-pay test. The term
"material change" generally includes increases in death benefits, but does not
include an increase in death benefits which is attributable to the payment of
premiums necessary to fund the lowest level of death benefits payable during the
first seven contract years, or which is attributable to the crediting of
interest with respect to such premiums.

Because the Policy provides for flexible premium payments, the Company has
instituted procedures to monitor whether increases in death benefits or
additional premium payments cause either the start of a new seven-year test
period or the taxation of distributions and loans. All additional premium
payments will be considered in these determinations.

If a Policy fails the 7-pay test, all distributions (including loans) occurring
in the year of failure and thereafter will be subject to the rules for modified
endowment contracts. A recapture provision also applies to loans and
distributions that are received in anticipation of failing the 7-pay test. Under
the Code, any distribution or loan made within two years prior to the date that
a Policy fails the 7-pay test is considered to have been made in anticipation of
the failure.

Policy Surrenders and Partial Surrenders

Upon a total surrender of a Policy, the policyowner will recognize ordinary
income for federal tax purposes to the extent that the Net Surrender Value
exceeds the investment in the Policy (the total of all premiums paid but not
previously recovered plus any other consideration paid for the Policy). The tax
consequences of a partial surrender from a Policy will depend upon whether the
partial surrender results in a reduction of future benefits under the Policy and
whether the Policy is a modified endowment contract.

If the Policy is not a modified endowment contract, the general rule is that a
partial surrender from a Policy is taxable only to the extent that it exceeds
the total investment in the contract. An exception to this general rule applies,
however, if a reduction of future benefits occurs during the first 15 years
after a Policy is issued and there is a cash distribution associated with that
reduction. In such a case, the Code prescribes a formula under which the
policyowner may be taxed on all or a part of the amount distributed. After 15
years, cash distributions from a Policy that is not a modified endowment
contract will not be subject to federal income tax, except to the extent they
exceed the total investment in the contract. The Company suggests that a
policyowner consult with a tax advisor in advance of a proposed decrease in face
amount or a partial surrender. In addition, any amounts distributed under a
"modified endowment contract" (including proceeds of any loan) are taxable to
the extent of any accumulated income in the Policy. In general, the amount which
may be subject to tax is the excess of the Policy Value (both loaned and
unloaned) over the previously unrecovered premiums paid.

Under certain circumstances, a distribution under a modified endowment contract
(including a loan) may be taxable even though it exceeds the amount of
accumulated income in the Policy. This can occur because for purposes of
determining the amount of income received upon a distribution (or loan) from a
modified endowment contract, the Code requires the aggregation of all modified
endowment contracts issued to the same policyowner by an insurer and its
affiliates within the same calendar year. Therefore, loans and distributions
from any one such Policy are taxable to the extent of the income accumulated in
all the modified endowment contracts required to be so aggregated.

If any amount is taxable as a distribution of income under a modified endowment
contract (as a result of a total surrender, a partial surrender or a loan), it
may also be subject to a 10% penalty tax under Code Section 72(v). Limited
exceptions from the additional penalty tax are available for certain
distributions to individual policyowners. The penalty tax will not apply to
distributions: (i) that are made on or after the date the taxpayer attains age
59 1/2; or (ii) that are attributable to the taxpayer's becoming disabled; or
(iii) that are part of a series of substantial equal periodic payments (made not
less frequently than annually) made for the life or life expectancy of the
taxpayer.

Policy Loans and Interest Deductions

The Company also believes that under current law any loan received under the
Policy will be treated as a Policy debt of a policyowner and that, unless the
Policy is a modified endowment contract, no part of any loan under a Policy will
constitute income to the policyowner. If the Policy is a modified endowment
contract (see discussion above) loans will be fully taxable to the extent of the
income in the Policy (and in any other contracts with which it must be
aggregated) and could be subject to the additional 10 percent tax.

Code Section 264 imposes stringent limitations on the deduction of interest paid
or accrued on loans in connection with a Policy. In addition, under the
"personal" interest limitation provisions of Code Section 163, no deduction is
allowed for interest on any policy loan if the proceeds are used for personal
purposes, even if the Policy and loan otherwise meet the requirements of Code
Section 264. The limitations on deductibility of personal interest may not apply
to disallow all or part of the interest expense as a deduction if the loan
proceeds are used for "trade or business" or "investment" purposes. The Company
suggests consultation with a tax advisor for further guidance.

Corporate Alternative Minimum Tax

Ownership of a Policy by a corporation may affect the policyowner's exposure to
the corporate alternative maximum tax. In determining whether it is subject to
alternative minimum tax a corporate policyowner must make two computations.
First, the corporation must take into account a portion of the current year's
increase in the built-in gain in its corporate-owned policies. Second, the
corporation must take into account a portion of the amount by which the death
benefits received under any Policy exceed the sum of (i) the premiums paid on
that Policy in the year of death, and (ii) the corporation's basis in the Policy
(as measured for alternative minimum tax purposes) as of the end of the
corporation's tax year immediately preceding the year of death.

Exchange or Assignments of Policies

A change of the policyowner or the insured or an exchange or assignment of a
Policy may have significant tax consequences depending on the circumstances. For
example, an assignment or exchange of a Policy may result in taxable income to
the transferring policyowner. Further, Code Section 101(a) provides, subject to
certain exceptions, that where a Policy has been transferred for value, only the
portion of the death benefit which is equal to the total consideration paid for
the Policy may be excluded from gross income. For complete information with
respect to Policy assignments and exchanges, a qualified tax advisor should be
consulted.

Withholding

Under Section 3405 of the Code, withholding is generally required with respect
to certain taxable distributions under insurance contracts. In the case of
periodic payments (payments made as an annuity or on a similar basis), the
withholding is at graduated rates (as though the payments were employee wages).
With respect to non-periodic distributions, the withholding is at a flat rate of
10%. A policyowner can elect to have either non-periodic or periodic payments
made without withholding except where the policyowner's tax identification
number has not been furnished to the Company or the Internal Revenue Service has
notified the Company that the tax identification number furnished by the
policyowner is incorrect.

Taxation of Accelerated Death Benefits

The Company provides accelerated death benefits based upon a lien method. It is
unclear whether benefits paid under this rider are taxable. For information
regarding taxation of accelerated death benefits, a qualified tax advisor should
be consulted.

Other Tax Issues

Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each policyowner or beneficiary.

EMPLOYEE BENEFIT PLANS

Employers and employee organizations should consider, in consultation with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on the purchase
of a Policy in connection with an employment-related insurance or benefit plan.
The United States Supreme Court held, in the 1983 decision of Arizona Governing
Committee v. Norris, that, under Title VII, optional annuity benefits under a
deferred compensation plan could not vary on the basis of gender. Policies are
available for use in connection with such employment-related insurance and
benefit plans which do not vary in any respect between male and female insureds
of a particular age and underwriting classification.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Separate Account is a party or
to which the assets of any of the Divisions thereof are subject. The Company is
not involved in any litigation that is of material importance in relation to its
total assets or that relate to the Separate Account.

LEGAL OPINION

Legal matters applicable to the issue and sale of the Policies, including
the right of the Company to issue Policies under Iowa insurance law, have been
passed upon by Gregg R. Narber, Senior Vice President and General Counsel of the
Company.

INDEPENDENT AUDITORS

The financial statements of Principal Mutual Life Insurance Company
Variable Life Separate Account and Principal Mutual Life Insurance Company which
are included in this registration statement have been audited by Ernst & Young
LLP, independent auditors, for the periods indicated in their reports thereon
which appear elsewhere in the registration statement.

REGISTRATION STATEMENT

A registration statement has been filed with the Commission under the
Securities Act of 1933, as amended, with respect to the Policies offered hereby.
This Prospectus does not contain all the information set forth in the
registration statement and the amendments and exhibits to the registration
statement to all of which reference is made for further information concerning
the Separate Account, the Company and the Policy offered hereby. Statements
contained in this Prospectus as to the contents of the Policy and other legal
instruments are summaries. For a complete statement of the terms thereof,
reference is made to such instruments as filed.

FINANCIAL STATEMENTS

The financial statements of the Company which are included in this
Prospectus should be considered only as bearing on the ability of the Company to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.

Principal Mutual Life Insurance Company
Variable Life Separate Account

<PAGE>
Report of Independent Auditors

Board of Directors and Participants
Principal Mutual Life Insurance Company

We have audited the accompanying statement of net assets of Principal Mutual
Life Insurance Company Variable Life Separate Account (comprising, respectively,
the Balanced, Bond, Capital Accumulation, Emerging Growth, High Yield, and Money
Market Divisions) as of December 31, 1995, and the related statements of
operations and changes in net assets for each of the three years in the period
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the transfer agent. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Principal Mutual Life Insurance
Company Variable Life Separate Account at December 31, 1995, and the results of
its operations and the changes in its net assets for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Des Moines, Iowa
February 7, 1996
<PAGE>
Principal Mutual Life Insurance Company
Variable Life Separate Account

Statement of Net Assets

December 31, 1995

Assets
Investments (Note 1):
Balanced Division:
Principal Balanced Fund, Inc. - 200,063 shares at net
asset value of $13.97 per share (cost - $2,557,217) $ 2,794,881
Bond Division:
Principal Bond Fund, Inc. - 78,645 shares at net asset
value of $11.73 per share (cost - $878,731) 922,511
Capital Accumulation Division:
Principal Capital Accumulation Fund, Inc. - 142,987 shares
at net asset value of $27.80 per share (cost - $3,656,186) 3,975,025
Emerging Growth Division:
Principal Emerging Growth Fund, Inc. - 305,125 shares at
net asset value of $25.33 per share (cost - $6,575,712) 7,728,821
High Yield Division:
Principal High Yield Fund, Inc. - 101,791 shares at net asset
value of $8.39 per share (cost - $882,335) 854,028
Money Market Division:
Principal Money Market Fund, Inc. - 402,869 shares at net
asset value of $1.00 per share (cost - $402,869) 402,869
-----------
Net assets $16,678,135
===========

Unit
Units Value
-----------------------
Net assets are represented by:
Balanced Division 137,574 $20.31 $ 2,794,881
Bond Division 45,999 20.05 922,511
Capital Accumulation Division 184,750 21.51 3,975,025
Emerging Growth Division 283,791 27.23 7,728,821
High Yield Division 48,615 17.57 854,028
Money Market Division 27,948 14.42 402,869
-----------
Net assets $16,678,135
===========

See accompanying notes.
<PAGE>
Principal Mutual Life Insurance Company
Variable Life Separate Account

Statements of Operations
<TABLE>
<CAPTION>
Combined
----------------------------------------------
Year ended December 31
1995 1994 1993
----------------------------------------------
Investment income
Income:
<S> <C> <C> <C>
Dividends (Note 1) $ 376,014 $205,850 $148,055
Capital gains distributions 429,058 211,019 318,056
----------------------------------------------
805,072 416,869 466,111
Expenses (Note 2):
Mortality and expense risks 95,590 55,513 35,413
----------------------------------------------
Net investment income 709,482 361,356 430,698

Realized and unrealized gains (losses) on investments (Note 4)

Net realized gains (losses) on investments 254,585 31,582 153,033
Change in net unrealized appreciation/depreciation of
investments 1,956,773 (442,230) (62,738)
----------------------------------------------
Net increase (decrease) in net assets resulting from operations $2,920,840 $(49,292) $520,993
==============================================

</TABLE>
<TABLE>
<CAPTION>
Balanced Division
Year ended December 31
-----------------------------------------
1995 1994 1993
------------------------------------------
Investment income
Income:
<S> <C> <C> <C>
Dividends (Note 1) $ 85,937 $ 53,356 $ 45,460
Capital gains distributions 72,211 25,558 76,753
------------------------------------------
158,148 78,914 122,213
Expenses (Note 2):
Mortality and expense risks 17,258 12,058 9,014
------------------------------------------
Net investment income 140,890 66,856 113,199

Realized and unrealized gains (losses) on investments (Note 4)

Net realized gains (losses) on investments 28,104 6,900 21,878
Change in net unrealized appreciation/depreciation of
investments 316,677 (120,904) (16,979)
------------------------------------------
Net increase (decrease) in net assets resulting from operations $485,671 $ 47,148) $118,098
==========================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bond Division
Year ended December 31
--------------------------------------
1995 1994 1993
Investment income --------------------------------------
Income:
<S> <C> <C> <C>
Dividends (Note 1) $ 47,997 $ 33,025 $28,730
Capital gains distributions - - -
--------------------------------------
47,997 33,025 28,730
Expenses (Note 2):
Mortality and expense risks 5,384 3,207 3,166
--------------------------------------
Net investment income 42,613 29,818 25,564

Realized and unrealized gains (losses) on investments (Note 4)

Net realized gains (losses) on investments 4,064 (2,792) 13,739
Change in net unrealized appreciation/depreciation of
investments 85,230 (40,136) 304
--------------------------------------
Net increase (decrease) in net assets resulting from operations $131,907 $(13,110) $39,607
======================================

</TABLE>
<TABLE>
<CAPTION>
Capital Accumulation Division
Year ended December 31
------------------------------------------
1995 1994 1993
------------------------------------------
Investment income
Income:
<S> <C> <C> <C>
Dividends (Note 1) $ 79,394 $ 56,729 $ 37,967
Capital gains distributions 293,683 54,291 110,884
------------------------------------------
373,077 111,020 148,851
Expenses (Note 2):
Mortality and expense risks 22,976 14,428 10,069
------------------------------------------
Net investment income 350,101 96,592 138,782

Realized and unrealized gains (losses) on investments (Note 4)

Net realized gains (losses) on investments 49,320 (13,565) 15,162
Change in net unrealized appreciation/depreciation of
investments 433,439 (87,735) (62,178)
------------------------------------------
Net increase (decrease) in net assets resulting from operations $832,860 $ (4,708) $ 91,766
==========================================

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Emerging Growth Division
Year ended December 31
---------------------------------------------
1995 1994 1993
---------------------------------------------
Investment income
Income:
<S> <C> <C> <C>
Dividends (Note 1) $ 65,593 $ 26,319 $ 14,369
Capital gains distributions 63,164 131,170 130,419
---------------------------------------------
128,757 157,489 144,788
Expenses (Note 2):
Mortality and expense risks 43,103 21,185 10,184
---------------------------------------------
Net investment income 85,654 136,304 134,604

Realized and unrealized gains (losses) on investments (Note 4)
Net realized gains (losses) on investments 172,414 42,332 98,424
Change in net unrealized appreciation/depreciation of
investments 1,127,081 (174,867) 18,087
---------------------------------------------
Net increase in net assets resulting from operations $1,385,149 $ 3,769 $251,115
=============================================
</TABLE>
<TABLE>
<CAPTION>
High Yield Division
Year ended December 31
-----------------------------------------------------
1995 1994 1993
-----------------------------------------------------
Investment income
Income:
<S> <C> <C> <C>
Dividends (Note 1) $72,460 $21,527 $15,343
Capital gains distributions - - -
-----------------------------------------------------
72,460` 21,527 15,343
Expenses (Note 2):
Mortality and expense risks 3,702 1,585 1,251
-----------------------------------------------------
Net investment income 68,758 19,942 14,092

Realized and unrealized gains (losses) on investments (Note 4)
Net realized gains (losses) on investments 683 (1,293) 3,830
Change in net unrealized appreciation/depreciation of
investments (5,654) (18,588) (1,972)
-----------------------------------------------------
Net increase in net assets resulting from operations $63,787 $ 61 $15,950
=====================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Money Market Division
Year ended December 31

1995 1994 1993
-----------------------------------------------------
Investment income
Income:
<S> <C> <C> <C>
Dividends (Note 1) $24,633 $14,894 $6,186
Capital gains distributions - - -
-----------------------------------------------------
24,633 14,894 6,186
Expenses (Note 2):
Mortality and expense risks 3,167 3,050 1,729
-----------------------------------------------------
Net investment income 21,466 11,844 4,457

Realized and unrealized gains (losses) on investments (Note 4)
Net realized gains (losses) on investments - - -
Change in net unrealized appreciation/depreciation of
investments - - -
----------------------------------------------------
Net increase in net assets resulting from operations $21,466 $11,844 $4,457
====================================================
</TABLE>

See accompanying notes.

<PAGE>
Principal Mutual Life Insurance Company
Variable Life Separate Account

Statements of Changes in Net Assets

Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Balanced
Combined Division
----------------- ------------------
<S> <C> <C> <C>

Net assets at January 1, 1993 $3,571,056 $ 912,717

Increase (decrease) in net assets Operations:
Net investment income 430,698 113,199
Net realized gains on investments 153,033 21,878
Change in net unrealized appreciation/depreciation of investments (62,738) (16,979)
----------------- ------------------
Net increase in net assets resulting from operations 520,993 118,098

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 4,243,839 722,419
Contract terminations and surrenders (302,559) (41,473)
Death benefit payments (1,961) (627)
Policy loan transfers (162,427) (29,608)
Transfers to other contracts (1,444,635) (70,023)
Cost of insurance and administration charges (591,394) (126,288)
Surrender charges (30,418) (4,170)
----------------- ------------------
Increase (decrease) in net assets from policy related transactions 1,710,445 450,230
----------------- ------------------
Total increase (decrease) 2,231,438 568,328
----------------- ------------------
Net assets at December 31, 1993 5,802,494 1,481,045

<PAGE>
Net assets at January 1, 1994

Increase (decrease) in net assets Operations:
Net investment income 361,356 66,856
Net realized gains (losses) on investments 31,582 6,900
Change in net unrealized appreciation/depreciation of investments (442,230) (120,904)
----------------- ------------------
Net increase (decrease) in net assets resulting from operations (49,292) (47,148)

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 7,030,808 805,108
Contract terminations and surrenders (200,983) (61,360)
Death benefit payments (4,614) -
Policy loan transfers (131,130) (25,740)
Transfers to other contracts (2,149,666) (155,607)
Cost of insurance and administration charges (1,002,937) (178,431)
Surrender charges (41,439) (12,651)
----------------- ------------------

Increase in net assets from policy related transactions 3,500,039 371,319
----------------- ------------------
Total increase 3,450,747 324,171
----------------- ------------------
Net assets at December 31, 1994 9,253,241 1,805,216

Net assets at January 1, 1995 9,253,241 $1,805,216

Increase (decrease) in net assets Operations:
Net investment income 709,482 140,890
Net realized gains on investments 254,585 28,104
Change in net unrealized appreciation/depreciation of investments 1,956,773 316,677
----------------- ------------------
Net increase in net assets resulting from operations 2,920,840 485,671

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 9,511,939 1,036,158
Contract terminations and surrenders (514,344) (89,520)
Death benefit payments (9,358) -
Policy loan transfers (275,660) (52,264)
Transfers to other contracts (2,602,796) (145,034)
Cost of insurance and administration charges (1,539,242) (233,775)
Surrender charges (66,485) (11,571)
----------------- ------------------
Increase (decrease) in net assets from policy related transactions 4,504,054 503,994
----------------- ------------------
Total increase (decrease) 7,424,894 989,665
----------------- ------------------
Net assets at December 31, 1995 $16,678,135 $2,794,881
================= ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Bond Stock
Division Division
------------------ ------------------
<S> <C> <C>
Net assets at January 1, 1993 $256,631 $1,005,168

Increase (decrease) in net assets Operations:
Net investment income 25,564 138,782
Net realized gains on investments 13,739 15,162
Change in net unrealized appreciation/depreciation of investments 304 (62,178)
------------------ ------------------
Net increase in net assets resulting from operations 39,607 91,766

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 344,656 939,904
Contract terminations and surrenders (107,373) (53,383)
Death benefit payments - (642)
Policy loan transfers (5,743) (40,134)
Transfers to other contracts (77,910) (123,748)
Cost of insurance and administration charges (43,267) (149,902)
Surrender charges (10,795) (5,367)
------------------ ------------------
Increase (decrease) in net assets from policy related transactions 99,568 566,728
------------------ ------------------
Total increase (decrease) 139,175 658,494
------------------ ------------------
Net assets at December 31, 1993 395,806 1,663,662

Net assets at January 1, 1994

Increase (decrease) in net assets Operations:
Net investment income 29,818 96,592
Net realized gains (losses) on investments (2,792) (13,565)
Change in net unrealized appreciation/depreciation of investments (40,136) (87,735)
------------------ ------------------
Net increase (decrease) in net assets resulting from operations (13,110) (4,708)

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 288,736 1,149,226
Contract terminations and surrenders (4,871) (39,008)
Death benefit payments - (3,319)
Policy loan transfers (3,819) (42,994)
Transfers to other contracts (92,188) (226,938)
Cost of insurance and administration charges (59,452) (218,560)
Surrender charges (1,004) (8,043)
------------------ ------------------

Increase in net assets from policy related transactions 127,402 610,364
------------------ ------------------
Total increase 114,292 605,656
------------------ ------------------
Net assets at December 31, 1994 510,098 2,269,318
<PAGE>
Net assets at January 1, 1995 510,098 2,269,318

Increase (decrease) in net assets Operations:
Net investment income 42,613 350,101
Net realized gains on investments 4,064 49,320
Change in net unrealized appreciation/depreciation of investment 85,230 433,439
------------------- -----------------
Net increase in net assets resulting from operations 131,907 832,860

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 444,236 1,633,021
Contract terminations and surrenders (24,317) (149,990)
Death benefit payments - (2,336)
Policy loan transfers (4,770) (56,174)
Transfers to other contracts (52,638) (218,351)
Cost of insurance and administration charges (78,861) (313,935)
Surrender charges (3,144) (19,388)
------------------- -----------------
Increase (decrease) in net assets from policy related transactions 280,506 872,847
------------------- -----------------
Total increase (decrease) 412,413 1,705,707
------------------- -----------------
Net assets at December 31, 1995 $922,511 $3,975,025
=================== =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Emerging High
Growth Yield
Division Division
----------------- -----------------

<S> <C> <C>
Net assets at January 1, 1993 $1,033,749 $ 71,862

Increase (decrease) in net assets Operations:
Net investment income 134,604 14,092
Net realized gains on investments 98,424 3,830
Change in net unrealized appreciation/depreciation of investments 18,087 (1,972)
----------------- -----------------
Net increase in net assets resulting from operations 251,115 15,950

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 1,179,248 196,359
Contract terminations and surrenders (94,725) (2,641)
Death benefit payments (692) -
Policy loan transfers (60,229) (5,136)
Transfers to other contracts (236,343) (74,398)
Cost of insurance and administration charges (188,113) (22,433)
Surrender charges (9,523) (265)
------------------ ----------------
Increase (decrease) in net assets from policy related transactions 589,623 91,486
------------------ ----------------
Total increase (decrease) 840,738 107,436
------------------ ----------------
Net assets at December 31, 1993 1,874,487 179,298

Net assets at January 1, 1994

Increase (decrease) in net assets Operations:
Net investment income 136,304 19,942
Net realized gains (losses) on investments 42,332 (1,293)
Change in net unrealized appreciation/depreciation of investments (174,867) (18,588)
------------------ ----------------
Net increase (decrease) in net assets resulting from operations 3,769 61

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes
Contract terminations and surrenders 2,765,121 120,265
Death benefit payments (83,480) (9,690)
Policy loan transfers (1,295) -
Transfers to other contracts (59,784) (3,260)
Cost of insurance and administration charges (284,168) (7,501)
Surrender charges (396,646) (32,323)
(17,212) (1,998)
------------------ ----------------
Increase in net assets from policy related transactions 1,922,536 65,493
------------------ ----------------
Total increase 1,926,305 65,554
------------------ ----------------
Net assets at December 31, 1994 3,800,792 244,852
<PAGE>
Net assets at January 1, 1995 3,800,792 244,852

Increase (decrease) in net assets Operations:
Net investment income 85,654 68,758
Net realized gains on investments 172,414 683
Change in net unrealized appreciation/depreciation of investmen 1,127,081 (5,654)
------------------ ----------------
Net increase in net assets resulting from operations 1,385,149 63,787

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 4,022,336 673,413
Contract terminations and surrenders (238,336) (10,016)
Death benefit payments (4,755) -
Policy loan transfers (159,532) (3,158)
Transfers to other contracts (338,865) (52,617)
Cost of insurance and administration charges (707,162) (60,938)
Surrender charges (30,806) (1,295)
------------------ ----------------
Increase (decrease) in net assets from policy related transactions 2,542,880 545,389
------------------ ----------------
Total increase (decrease) 3,928,029 609,176
------------------ ----------------
Net assets at December 31, 1995 $7,728,821 $854,028
================== ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Money
Market
Division
------------------
<S> <C>
Net assets at January 1, 1993 $ 290,929

Increase (decrease) in net assets Operations:
Net investment income 4,457
Net realized gains on investments -
Change in net unrealized appreciation/depreciation of investments -
------------------
Net increase in net assets resulting from operations 4,457

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 861,253
Contract terminations and surrenders (2,964)
Death benefit payments -
Policy loan transfers (21,577)
Transfers to other contracts (862,213)
Cost of insurance and administration charges (61,391)
Surrender charges (298)
------------------
Increase (decrease) in net assets from policy related transactions (87,190)
------------------
Total increase (decrease) (82,733)
------------------
Net assets at December 31, 1993 208,196

Net assets at January 1, 1994

Increase (decrease) in net assets Operations:
Net investment income 11,844
Net realized gains (losses) on investments -
Change in net unrealized appreciation/depreciation of investments -
------------------
Net increase (decrease) in net assets resulting from operations 11,844

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 1,902,352
Contract terminations and surrenders (2,574)
Death benefit payments -
Policy loan transfers 4,467
Transfers to other contracts (1,383,264)
Cost of insurance and administration charges (117,525)
Surrender charges (531)
------------------

Increase in net assets from policy related transactions 402,925
------------------
Total increase 414,769
------------------
Net assets at December 31, 1994 622,965
<PAGE>
Net assets at January 1, 1995 622,965

Increase (decrease) in net assets Operations:
Net investment income 21,466
Net realized gains on investments -
Change in net unrealized appreciation/depreciation of investmen -
------------------
Net increase in net assets resulting from operations 21,466

Policy related transactions (Note 2):
Net premium payments, less sales charges and applicable premium
taxes 1,702,775
Contract terminations and surrenders (2,165)
Death benefit payments (2,267)
Policy loan transfers 238
Transfers to other contracts (1,795,291)
Cost of insurance and administration charges (144,571)
Surrender charges (281)
------------------
Increase (decrease) in net assets from policy related transactions (241,562)
------------------
Total increase (decrease) (220,096)
------------------
Net assets at December 31, 1995 $ 402,869
==================

See accompanying notes.
</TABLE>
<PAGE>
Principal Mutual Life Insurance Company
Variable Life Separate Account

Notes to Financial Statements

December 31, 1995

1. Investment and Accounting Policies

Principal Mutual Life Insurance Company Variable Life Separate Account is a
segregated investment account of Principal Mutual Life Insurance Company
(Principal Mutual) and is registered under the Investment Company Act of 1940 as
a unit investment trust, with no stated limitations on the number of authorized
units. As directed by eligible policyowners, the Separate Account invests solely
in shares of Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal
Capital Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
High Yield Fund, Inc., and Principal Money Market Fund, Inc., diversified
open-end management investment companies organized by Principal Mutual.
Investments are stated at the closing net asset values per share on December 31,
1995.

The average cost method is used to determine realized gains and losses on
investments. Dividends are taken into income on an accrual basis as of the
ex-dividend date.

2. Expenses and Policy Charges

Principal Mutual is compensated for the following expenses and charges:

Mortality and expense risks assumed by Principal Mutual are compensated for by a
charge equivalent to an annual rate of .75% of the asset value of each policy.
An annual administration charge of $57 for each policy and a cost of insurance
charge, which is based on the Company's expected future mortality experience, is
deducted as compensation for administrative and insurance expenses,
respectively. The mortality and expense risk, annual administration, and
insurance charges amounted to $95,590, $166,464, and $1,372,778, respectively,
in 1995; $55,513, $119,268, and $883,669, respectively, in 1994; and $35,413,
$72,362, and $519,032, respectively, in 1993. A sales charge of 5.0% is deducted
from each payment made on behalf of each participant. The sales charge is
deducted from the payments by Principal Mutual prior to their transfer to the
Variable Life Separate Account. In addition, a surrender charge up to a maximum
of 25% of the minimum first year premium may be imposed upon total surrender or
termination of a policy for insufficient value.

3. Federal Income Taxes

Operations of the Separate Account are a part of the operations of Principal
Mutual. Under current practice, no federal income taxes are allocated by
Principal Mutual to the operations of Principal Mutual Life Insurance Company
Variable Life Separate Account.

<PAGE>
4. Purchases and Sales of Investment Securities

The aggregate units and cost of purchases and proceeds from sales of investments
were as follows:
<TABLE>
<CAPTION>
Capital Accumulation
Balanced Division Bond Division Division
-----------------------------------------------------------------------
Units Amount Units Amount Units Amount
-----------------------------------------------------------------------
Year ended December 31, 1995
Units purchased and reinvested
<S> <C> <C> <C> <C> <C> <C>
dividends and capital gains 56,758 $1,194,305 24,137 $492,234 87,030 $2,006,098
Units redeemed 29,073 549,421 8,980 169,115 40,420 783,150
-----------------------------------------------------------------------
Net increase 27,685 $ 644,884 15,157 $323,119 46,610 $1,222,948
=======================================================================

Year ended December 31, 1994
Units purchased and reinvested
dividends and capital gains 48,225 $884,022 17,428 $321,761 69,938 $1,260,246
Units redeemed (25,949) (445,847) (9,652) (164,541) (32,805) (553,290)
-----------------------------------------------------------------------
Net increase 22,276 $438,175 7,776 $157,220 37,133 $ 706,956
=======================================================================
Year ended December 31, 1993
Units purchased and reinvested
dividends and capital gains 45,069 $844,632 21,131 $373,386 59,306 $1,088,755
Units redeemed (16,973) (281,203) (14,639) (248,254) (23,597) (383,245)
-----------------------------------------------------------------------
Net increase 28,096 $563,429 6,492 $125,132 35,709 $ 705,510
=======================================================================
</TABLE>

Emerging Growth Money Market Division
Division High Yield Division
-------------------------------------------------------------------------
Units Amount Units Amount Units Amount
-------------------------------------------------------------------------
Year ended December 31, 1995
Units purchased and reinvested
<S> <C> <C> <C> <C> <C> <C>
dividends and capital gains 165,606 $4,151,094 40,295 $745,873 120,838 $1,727,408
Units redeemed 60,516 1,522,560 7,739 131,726 138,209 1,947,504
-------------------------------------------------------------------------
Net increase (decrease) 105,090 $2,628,534 32,556 $614,147 (17,371) $ (220,096)
=========================================================================

Year ended December 31, 1994
Units purchased and reinvested
dividends and capital gains 129,908 $2,922,610 7,938 $141,792 140,805 $1,917,246
Units redeemed (39,368) (863,770) (3,624) (56,357) (111,080) (1,502,477)
-------------------------------------------------------------------------
Net increase 90,540 $2,058,840 4,314 $ 85,435 29,725 $ 414,769
=========================================================================

Year ended December 31, 1993
Units purchased and reinvested
dividends and capital gains 61,758 $1,324,037 13,653 $211,702 65,053 $ 867,441
Units redeemed (31,157) (599,810) (7,155) (106,124) (71,680) (950,174)
-------------------------------------------------------------------------
Net increase (decrease) 30,601 $ 724,227 6,498 $105,578 (6,627) $ (82,733)
=========================================================================
</TABLE>

<PAGE>

5. Net Assets

Net assets at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>

Net Unrealized
Accumulated Net Appreciation
Unit Transactions Investment Income (Depreciation) of
Combined Investments
------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
Balanced Division $ 2,794,881 $ 2,273,642 $ 283,575 $ 237,664
Bond Division 922,511 805,743 72,988 43,780
Capital Accumulation Division 3,975,025 3,166,851 489,335 318,839
Emerging Growth Division 7,728,821 6,330,029 245,683 1,153,109
High Yield Division 854,028 797,025 85,310 (28,307)
Money Market Division 402,869 398,502 4,367 -
------------------------------------------------------------------------------
$16,678,135 $13,771,792 $1,181,258 $1,725,085
==============================================================================
</TABLE>
<PAGE>
Principal Mutual Life Insurance Company

Report of Independent Auditors

The Board of Directors
Principal Mutual Life Insurance Company

We have audited the accompanying statements of financial position of Principal
Mutual Life Insurance Company (the Company) as of December 31, 1995 and 1994,
and the related statements of operations and surplus and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Principal Mutual Life Insurance
Company at December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles and with reporting
practices prescribed or permitted by the Insurance Division of the Department of
Commerce of the State of Iowa.

ERNST & YOUNG LLP

Des Moines, Iowa
January 31, 1996
<PAGE>
Principal Mutual Life Insurance Company

Statements of Financial Position

December 31
1995 1994
---------------------------
(In Millions)
Assets
Bonds $21,798 $20,626
Preferred stocks 93 69
Common stocks 1,330 914
Investment in subsidiaries 546 501
Commercial mortgage loans 9,794 8,901
Residential mortgage loans 234 287
Investment real estate 1,313 1,155
Properties held for Company use 204 159
Policy loans 711 683
Cash and short-term investments 913 485
Accrued investment income 467 468
Separate account assets 12,957 9,197
Other assets 908 672
---------------------------
Total assets $51,268 $44,117
===========================

Liabilities
Insurance reserves $ 6,297 $ 6,007
Annuity reserves 25,770 24,311
Reserves for policy dividends 578 583
Other policy liabilities 748 618
Investment valuation reserves 1,041 792
Tax liabilities 241 189
Separate account liabilities 12,891 9,099
Other liabilities 1,494 591
---------------------------
Total liabilities 49,060 42,190

Surplus
Surplus notes 298 298
Unassigned and other surplus funds 1,910 1,629
---------------------------
Total surplus 2,208 1,927
---------------------------
Total liabilities and surplus $51,268 $44,117
===========================

See accompanying notes.

<PAGE>

Principal Mutual Life Insurance Company

Statements of Operations and Surplus
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
------------------------------------------
(In Millions)
Income
<S> <C> <C> <C>
Premiums and annuity and other considerations $11,940 $10,718 $ 9,983
Net income from investments 2,651 2,520 2,369
Other income 25 505 18
------------------------------------------
Total income 14,616 13,743 12,370

Benefits and expenses
Benefit payments other than dividends 9,268 8,211 6,729
Dividends to policyowners 309 317 410
Additions to policyowner reserves 3,439 3,756 3,890
Insurance expenses and taxes 1,199 1,145 1,029
------------------------------------------
Total benefits and expenses 14,215 13,429 12,058
------------------------------------------

Income before federal income taxes and realized
capital gains (losses) 401 314 312

Federal income taxes 140 130 48
------------------------------------------

Net gain from operations before realized capital gains (losses)
261 184 264

Realized capital gains (losses) 2 (32) (52)
------------------------------------------
Net income $ 263 $ 152 $ 212
==========================================

Surplus
Surplus at beginning of year $ 1,927 $ 1,641 $ 1,440
Net income 263 152 212
Issuance of surplus notes - 298 -
Increase in investment valuation reserves (249) (131) (43)
Increase in non-admitted assets and related items (45) (51) (59)
Net unrealized capital gains 326 47 57
Adjustment for prior years' federal income taxes - (63) -
Net policyowner reserve adjustments 1 31 18
Other adjustments - net (15) 3 16
------------------------------------------
Surplus at end of year $ 2,208 $ 1,927 $ 1,641
==========================================
</TABLE>

See accompanying notes.

<PAGE>

Principal Mutual Life Insurance Company

Statements of Cash Flows

Year ended December 31
1995 1994 1993
------------------------------------------
(In Millions)
CASH PROVIDED
Proceeds from operating activities
Premiums and annuity and other considerations
<S> <C> <C> <C>
received $11,923 $10,711 $ 9,967
Net investment income received 2,723 2,509 2,421
Benefit payments other than dividends (9,277) (8,186) (6,700)
Dividends paid to policyowners (317) (293) (396)
Insurance expenses and taxes paid (1,198) (1,159) (1,007)
Federal income taxes paid (125) (67) (119)
Transfers for separate account operations (1,549) (1,396) (1,120)
Other (3) 7 (5)
------------------------------------------
Net cash provided from operations 2,177 2,126 3,041

Proceeds from investments sold, matured or repaid
Bonds and stocks 12,028 10,951 20,072
Mortgage loans 1,276 2,043 6,852
Real estate and other invested assets 70 168 37
Tax on capital gains (22) (25) (29)
------------------------------------------
Total cash provided from investments 13,352 13,137 26,932

Issuance of surplus notes - 298 -
Other cash provided 793 - 85
------------------------------------------
Total cash provided 16,322 15,561 30,058

CASH APPLIED
Cost of investments acquired
Bonds and stocks acquired (13,234) (13,709) (22,434)
Mortgage loans acquired or originated (2,265) (1,611) (7,253)
Real estate and other invested assets acquired (195) (91) (132)
------------------------------------------
Total cash applied to investments (15,694) (15,411) (29,819)

Other cash applied (200) (135) (72)
------------------------------------------
Total cash applied (15,894) (15,546) (29,891)

SHORT-TERM BORROWINGS
Proceeds of short-term borrowings 990 3,152 1,743
Repayment of short-term borrowings (990) (3,152) (1,743)
------------------------------------------
Net cash provided by short-term borrowings - - -
------------------------------------------
Net increase in cash and short-term investments 428 15 167

Cash and short-term investments at beginning of year 485 470 303
------------------------------------------
Cash and short-term investments at end of year $ 913 $ 485 $ 470
==========================================
</TABLE>
See accompanying notes.
<PAGE>

Principal Mutual Life Insurance Company

Notes to Financial Statements

December 31, 1995

1. Nature of Operations and Significant Accounting Policies

Description of Business

Principal Mutual Life Insurance Company (the Company) is primarily engaged in
the marketing and management of life insurance, annuity, health and pension
products. In addition, the Company provides various other financial services
through its subsidiaries.

Use of Estimates in the Preparation of Financial Statements

The preparation of the Company's financial statements and accompanying notes
requires management to make estimates and assumptions that affect the amounts
reported and disclosed. These estimates and assumptions could change in the
future as more information becomes known, which could impact the amounts
reported and disclosed in the financial statements and accompanying notes.

Basis of Presentation

The Company's financial statements have been prepared on the basis of accounting
practices prescribed or permitted by the Insurance Division of the Department of
Commerce of the State of Iowa (statutory accounting practices), which practices
are currently regarded as generally accepted accounting principles (GAAP) for
mutual life insurance companies.

Beginning in 1996, however, under the requirements of Financial Accounting
Standards Board (FASB) Interpretation No. 40, "Applicability of Generally
Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises,"
as amended, financial statements prepared on the basis of statutory accounting
practices will no longer be described as prepared "in conformity with GAAP." The
Accounting Standards Executive Committee of the American Institute of Certified
Public Accountants and the FASB issued authoritative accounting and reporting
pronouncements in January 1995, effective for calendar year 1996, addressing how
mutual life insurance companies should account for certain insurance activities.
Applying the provisions of these authoritative accounting and reporting
pronouncements may result in surplus and net income that differ from the amounts
reported under existing statutory accounting practices. The Company has not yet
determined the impact of these pronouncements on its financial statements. The
Company plans to issue general-purpose financial statements for calendar year
1996 that follow these authoritative pronouncements and will be described as
prepared in conformity with GAAP. These statutory-basis financial statements,
however, will continue to be required by insurance regulatory authorities.

The National Association of Insurance Commissioners (NAIC) currently is in the
process of recodifying statutory accounting practices, the result of which is
expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is not expected to be completed
before 1997, will likely change, to some extent, prescribed statutory accounting
practices and may result in changes to the accounting practices that the Company
uses to prepare its statutory-basis financial statements.

Subsidiaries

Investment in subsidiaries is reported at equity in net assets determined on a
statutory basis for insurance subsidiaries and on the basis of prescribed
valuation alternatives for non-insurance subsidiaries, resulting in carrying
values periodically approved by the Securities Valuation Office of the NAIC.
Total assets of these unconsolidated subsidiaries amounted to $2.6 billion at
December 31, 1995 and $2.1 billion at December 31, 1994, and total revenues were
$1,190 million in 1995, $911 million in 1994 and $669 million in 1993. During
1995, 1994 and 1993, the Company included $(48) million, $(2) million and $(37)
million, respectively, in net income from investments representing the current
year net losses of its subsidiaries.

Investments

Investments in bonds, short-term investments, and commercial and residential
mortgage loans are reported principally at cost (unpaid principal balance),
adjusted for amortization of premiums and accrual of discounts, both computed
using the interest method; policy loans and investments in preferred stocks
primarily at cost; common stocks at market value based on the latest quoted
market prices; and investments in real estate and properties held for Company
use generally at cost less encumbrances and accumulated depreciation. For the
loan-backed and structured securities included in the bond portfolio, the
Company recognizes income using the prospective method which results in a new
constant effective yield based on currently anticipated prepayments as
determined by broker-dealer surveys or internal estimates. Properties acquired
through loan foreclosures with cumulative carrying values of $946 million at
December 31, 1995, and $830 million at December 31, 1994, are recorded at the
lower of cost (principal balance of the former mortgage loan) or fair market
value at the time of foreclosure or receipt of deed in lieu of foreclosure. This
becomes the new cost basis of the real estate and is subject to further
potential carrying value reductions as a result of depreciation and quarterly
valuation determinations. Depreciation expense is computed primarily on the
basis of accelerated and straight-line methods over the estimated useful lives
of the assets. Other admitted assets are valued as prescribed by the Iowa
Insurance laws. Net realized capital gains and losses on investments are
determined using the specific identification basis.

The Asset Valuation Reserve (AVR) provides a reserve for losses from investments
in bonds, preferred and common stocks, mortgage loans, real estate, and other
invested assets, with related increases or decreases being recorded directly to
surplus. At December 31, 1995 and 1994, the AVR was $1,041 million and $792
million, respectively. At both December 31, 1995 and 1994, other liabilities
include additional investment reserves of $36 million and $51 million,
respectively, of which $9 million is required by statutory accounting practices
as a provision for potential losses on specific mortgages in default. Unrealized
capital gains and losses on investments, including changes in mortgage and
security reserves, are recorded directly in surplus. Comparable adjustments are
also made to the AVR.

The Interest Maintenance Reserve (IMR) primarily defers certain interest-related
gains and losses (net of tax) on fixed income securities which are amortized
into net income from investments over the estimated remaining lives of the
investments sold. At December 31, 1995 and 1994, the IMR, which is included in
other liabilities, was $109 million and $52 million, respectively.

In connection with preparation of its statement of cash flows, the Company
considers all highly liquid investments with a maturity of one year or less when
purchased to be short-term investments.

Fair Values of Financial Instruments

The Company has accumulated information to disclose the fair values of certain
financial instruments, whether or not recognized in the statement of financial
position, as required by the FASB. The FASB excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
The aggregate fair value asset amounts for investments (including cash and
short-term investments, policy loans and accrued investment income and excluding
investment in subsidiaries and investment real estate) are presented in Note 2
(carrying value: 1995 - $35.3 billion, 1994 - $32.4 billion; fair value: 1995 -
$37.5 billion, 1994 - $31.9 billion). Fair value information for derivatives
held or issued for purposes other than trading is presented in Note 3.
Information for certain of the Company's reserves and liabilities that are
investment-type contracts (insurance, annuity and other policy contracts that do
not involve significant mortality or morbidity risk) is presented in Note 4
(carrying value: 1995 - $21.4 billion, 1994 - $20.0 billion; fair value: 1995 -
$22.0 billion, 1994 - $19.5 billion). Those referenced notes also describe the
methods and assumptions utilized by the Company in estimating its fair value
disclosures for financial instruments. Those techniques utilized in estimating
the fair values of financial instruments are affected by the assumptions used,
including discount rates and estimates of the amount and timing of future cash
flows. Care should be exercised in deriving conclusions about the Company's
business, its value or financial position based on the fair value information of
certain financial instruments presented in the referenced notes.

Futures and Forward Contracts and Interest Rate and Equity Swaps

The Company uses financial futures contracts, forward purchase commitments and
interest rate swaps to hedge risks associated with interest rate fluctuations
and uses equity swaps to hedge risks associated with market fluctuations of
certain unaffiliated common stocks. Realized capital gains and losses on those
contracts which hedge risks associated with interest rate fluctuations are
amortized over the remaining lives of the underlying assets, primarily by
including them in the IMR. Realized capital gains and losses on equity swaps are
recognized in the period incurred.

Reserves for Insurance, Annuity and Accident and Health Policies

The reserves for life, health and annuity policies, all developed by actuarial
methods, are established and maintained on the basis of mortality and morbidity
tables using assumed interest rates and valuation methods that will provide, in
the aggregate, reserves that are greater than the minimum valuation required by
law or guaranteed policy cash values. The cumulative effects of changes in
valuation bases at the beginning of the year for previously established
policyowner reserves are included as adjustments to surplus. Significant
decreases in valuation bases are approved by the Insurance Division of the
Department of Commerce of the State of Iowa.

The liability for unpaid accident and health claims is determined using
statistical analyses and case basis evaluations. This liability is an estimate
of the ultimate net cost of all reported and unreported losses that are unpaid.
This liability is determined using estimates of future trends in claim severity,
frequency, and other factors that could vary as claims are ultimately settled.
Although considerable variability is inherent in such estimates, the Company
believes that the liability for unpaid claims is adequate. These estimates are
continually reviewed and, as adjustments to this liability become necessary,
such adjustments are reflected in current operations.

Recognition of Premium Revenues and Costs

For life and annuity contracts, premiums are recognized as revenues over the
premium-paying period, whereas commissions and other costs applicable to the
acquisition of new business are charged to operations as incurred.

Reinsurance

The Company reinsures certain of its risks. Reinsurance premiums, expenses, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums ceded to other companies (1995 - $27
million, 1994 - $21 million and 1993 - $19 million) are reported as a reduction
of premium income, and insurance reserves applicable to reinsurance ceded have
also been reported as reductions of these items (1995 - $33 million and 1994 -
$24 million). The Company is contingently liable with respect to reinsurance
ceded to other companies in the event the reinsurer is unable to meet the
obligations that it has assumed.

Separate Accounts

The separate accounts presented in the financial statements represent the fair
market value of funds that are separately administered by the Company for
contracts with equity, real estate and fixed-income investments. The separate
account contract owner, rather than the Company, bears the investment risk of
these funds. The Company receives a fee for administrative and investment
advisory services.

Separate account assets and liabilities are disclosed in the aggregate in the
statements of financial position. The statements of operations include the
premiums, increases in reserves, benefits, and other items arising from the
operations of the separate accounts of the Company. The statements of surplus
reflect the gain from operations and surplus of the separate accounts. Such gain
from operations and surplus arises from the transfer by the Company of funds to
the separate accounts to facilitate their operations.

Reclassifications

Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.

2. Investments

Investments in debt securities, preferred stocks, and other fixed maturity
instruments are generally held for investment purposes to maturity, and,
therefore, are carried in the financial statements at amortized cost. The
Company's liabilities, to which such fixed maturity investments are closely
matched, are long-term in nature so the Company does not expect to be required
to sell such securities prior to maturity.

The carrying values and estimated market values of investments in bonds and
preferred stocks as of December 31, 1995 and 1994, are as follows (in millions):
<TABLE>
<CAPTION>

Gross Gross Estimated
Carrying Value Unrealized Unrealized Market
Gains Losses Value
---------------------------------------------------------------
December 31, 1995 Bonds:
<S> <C> <C> <C> <C>
United States Government and agencies $ 232 $ 4 $ - $ 236
States and political subdivisions 230 21 - 251
Corporate - public 4,374 328 16 4,686
Corporate - private 13,877 1,332 15 15,194
Mortgage-backed securities 3,085 134 4 3,215
---------------------------------------------------------------
21,798 1,819 35 23,582
Preferred stocks 93 12 - 105
---------------------------------------------------------------
$21,891 $1,831 $35 $23,687
===============================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 Bonds:
<S> <C> <C> <C> <C>
United States Government and agencies $ 111 $ 1 $ 4 $ 108
States and political subdivisions 198 2 12 188
Corporate - public 3,986 74 142 3,918
Corporate - private 13,678 365 391 13,652
Mortgage-backed securities 2,653 2 166 2,489
---------------------------------------------------------------
20,626 444 715 20,355
Preferred stocks 69 4 2 71
---------------------------------------------------------------
$20,695 $448 $717 $20,426
===============================================================
</TABLE>

Market values of public bonds and preferred stocks have been determined by the
Company from public quotations, when available, or bonds have been assigned a
market rate by the Securities Valuation Office of the NAIC. Private placement
securities are valued by discounting the expected total cash flows. Market rates
used are applicable to the yield, credit quality and average maturity of each
security.

The carrying values and estimated market values of bonds at December 31, 1995,
by expected maturity, are as follows (in millions):

<TABLE>
<CAPTION>
Carrying Value Estimated Market
Value
------------------------------------

<S> <C> <C>
Due in one year or less $ 747 $ 768
Due after one year through five years 6,878 7,271
Due after five years through ten years 6,189 6,695
Due after ten years 3,176 3,657
------------------------------------
16,990 18,391
Mortgage-backed and other securities without
a single maturity date 4,808 5,191
------------------------------------
Total $21,798 $23,582
====================================
</TABLE>

The carrying value and estimated market value of mortgage loans at December 31,
1995 and 1994, are as follows (in millions):
<TABLE>
<CAPTION>

1995 1994
----------------------------- ----------------------------------
Estimated Estimated Market
Carrying Value Market Carrying Value Value
Value
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial mortgage loans $9,794 $10,129 $8,901 $8,580
Residential mortgage loans 234 262 287 299
</TABLE>

Market values of commercial mortgage loans are valued by discounting the
expected total cash flows using market rates that are applicable to the yield,
credit quality, and maturity of each loan. Market values of residential mortgage
loans are valued by a pricing and servicing model using market rates that are
applicable to the yield, rate structure, credit quality, size, and maturity of
each loan. The carrying value for policy loans approximates the fair value.

Major categories of income from investments are summarized as follows (in
millions):

Year ended December 31
1995 1994 1993
------------------------------------------

Bonds $1,761 $1,622 $1,549
Preferred stocks 6 3 2
Common stocks 35 22 26
Investment in subsidiaries (48) (2) (37)
Mortgage loans 808 766 811
Investment real estate 211 179 129
Policy loans 48 44 44
Cash and short-term investments 29 20 6
Other 18 48 1
------------------------------------------
2,868 2,702 2,531

Less investment expenses 217 182 162
------------------------------------------
Net income from investments $2,651 $2,520 $2,369
==========================================

The major components of realized capital gains (losses) on investments reflected
in operations, and unrealized capital gains (losses) on investments reflected
directly in surplus, are summarized as follows (in millions):
<TABLE>
<CAPTION>

Realized Unrealized
--------------------------------- -----------------------------
1995 1994 1993 1995 1994 1993
--------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Bonds $101 $(133) $150 $ (17) $32 $(32)
Preferred stocks (1) - (11) 1 (7) 11
Common stocks 32 6 29 398 7 23
Mortgage loans (24) (34) (81) 9 3 41
Investment real estate 7 3 1 5 6 (1)
Investment in subsidiaries 1 32 - (6) 6 (5)
Other 4 45 (44) (1) - 20
------------------------------ -----------------------------
Net capital gains (losses) 120 (81) 44 389 47 57

Related federal income taxes (41) 6 (26) (63) - -
Transferred (to) from interest
maintenance reserve (77) 43 (70) - - -
------------------------------ -----------------------------
Total capital gains (losses) $ 2 $ (32) $(52) $326 $47 $57
============================== =============================
</TABLE>
Proceeds from sales of investments (excluding maturity proceeds) in debt
securities were $6.5 billion in both 1995 and 1994, and $11.9 billion in 1993.
Gross gains of $93 million, $53 million and $173 million and gross losses of $54
million, $213 million and $65 million in 1995, 1994 and 1993, respectively, were
realized on those sales. Of the 1995, 1994 and 1993 proceeds, $6.1 billion, $5.7
billion and $11.5 billion, respectively, relates to sales of mortgage-backed
securities. The Company actively manages its mortgage-backed securities
portfolio to control prepayment risk. Gross gains of $66 million, $19 million
and $152 million and gross losses of $17 million, $139 million and $29 million
in 1995, 1994 and 1993, respectively, were realized on sales of mortgage-backed
securities. At December 31, 1995, the Company had security purchases payable
totaling $426 million relating to the purchases of mortgage-backed securities at
forward dates.

The Company has a revolving credit agreement with Principal Residential
Mortgage, Inc., a wholly-owned subsidiary which conducts the Company's mortgage
banking operations, of up to $800 million, which had a balance of $458 million
outstanding at December 31, 1995.

Commercial mortgage loans and corporate private placement bonds originated or
acquired by the Company represent its primary areas of credit risk exposure. At
December 31, 1995 and 1994, the commercial mortgage portfolio is diversified by
geographic region and specific collateral property type as follows:

Geographic Distribution Property Type Distribution
- ------------------------------------------ ----------------------------------
December 31 December 31

1995 1994 1995 1994
----------------------- ---------------------------------

South Atlantic 22% 21% Industrial 43% 47%
Pacific 34 38 Office 26 24
Mid Atlantic 17 17 Retail 26 24
North Central 14 13 Other 5 5
South Central 7 6
New England 4 3
Mountain 2 2

The corporate private placement bond portfolio is diversified by issuer and
industry. Restrictive bond covenants are monitored by the Company to regulate
the activities of issuers and control their leveraging capabilities. Under the
NAIC bond classification system, 99.8% and 99.7% of the Company's bond portfolio
were carried at amortized cost at December 31, 1995 and 1994, respectively, with
the remainder carried at the lower of amortized cost or market value.

Effective December 29, 1995, the Company entered into short-term equity swap
agreements to mitigate its exposure to declines in the value of about one-half
of its marketable common stock portfolio. Under the agreements, the return on
that portion of the Company's marketable common stock portfolio was swapped for
a fixed short-term interest rate. At December 31, 1995, there was no realized or
unrealized gains or losses recorded on the equity swap agreements and,
accordingly, there was no credit exposure. The unrealized appreciation and
depreciation of marketable common stocks recognized in the Company's statement
of financial position were $814 million and $85 million, respectively, at
December 31, 1995.

Investment real estate includes properties directly owned by the Company and
investments in subsidiaries include properties owned jointly with venture
partners and operated by the partners. Joint ventures in which the Company has
an interest have mortgage loans with the Company of $2.2 billion at both
December 31, 1995 and December 31, 1994. The Company is committed to provide
additional mortgage financing for such joint ventures aggregating $304 million
at December 31, 1995.

3. Derivatives Held or Issued for Purposes Other Than Trading

The Company uses exchange-traded interest rate futures and forward contracts to
hedge against interest rate risks. The Company attempts to match the timing of
when interest rates are committed on insurance products and on new investments.
However, timing differences do occur and can expose the Company to fluctuating
interest rates. Interest rate futures and forward contracts are used to minimize
these risks. In these contracts, the Company is subject to the risk that the
counterparties will fail to perform and to the risks associated with changes in
the value of the underlying securities; however, such changes in value generally
are offset by opposite changes in the value of the hedged items. Futures
contracts are marked to market and settled daily, which minimizes the
counterparty risk. The notional amounts of futures and forward contracts ($303
million at December 31, 1995, and $80 million at December 31, 1994) represent
the extent of the Company's involvement but not the risk of loss.

The Company enters into interest rate swaps to minimize its exposure to
fluctuations in interest rates and to correct duration mismatches. The most
common use is to modify the duration of an asset or portfolio, a less common use
is to convert a floating rate asset into a fixed rate asset. The notional
principal amounts of the swaps outstanding at December 31, 1995 and 1994, were
$599 million and $586 million, respectively, and the credit exposure at December
31, 1995 and December 31, 1994 was $8 million. The Company's current credit
exposure on swaps is limited to the value of interest rate swaps that have
become favorable to the Company. The average unexpired terms of the swaps were
approximately three years at both December 31, 1995 and 1994, respectively. The
net amount payable or receivable from interest rate swaps is accrued as an
adjustment to interest income. The Company's interest rate swap agreements
include cross-default provisions when two or more swaps are transacted with a
given counterparty. Principal Mutual Life Insurance Company

3. Derivatives Held or Issued for Purposes Other Than Trading (continued)

The Company enters into currency exchange swap agreements to convert certain
foreign denominated fixed rate assets into dollar denominated fixed rate assets
and eliminate the exposure to future currency volatility on those securities. At
December 31, 1995, the Company had various foreign currency exchange agreements
with maturities ranging from 1995 to 2002, with an aggregate notional amount
involved of approximately $312 million and the credit exposure was $4 million.
The average unexpired term of the swaps was approximately five years at December
31, 1995.

4. Insurance, Annuity and Accident and Health Reserves

The carrying values and fair values of the Company's reserves and liabilities
for investment-type insurance contracts (which are only a portion of the
insurance reserves, annuity reserves, and other policy liabilities appearing in
the statement of financial position) at December 31, 1995 and 1994, are
summarized as follows (in millions):
<TABLE>
<CAPTION>

1995 1994
----------------------------------------------------------------------
Carrying Value Fair Carrying Value Fair
Value Value
----------------------------------------------------------------------

<S> <C> <C> <C> <C>
Insurance reserves $ 30 $ 33 $ 30 $ 30
Annuity reserves 20,989 21,524 19,714 19,168
Other policy liabilities 398 403 270 270
----------------------------------------------------------------------
Total $21,417 $21,960 $20,014 $19,468
======================================================================
</TABLE>

The fair values for the Company's reserves and liabilities under investment-type
contracts (insurance, annuity and other policy contracts that do not involve
significant mortality or morbidity risk) are estimated using discounted cash
flow analyses (based on current interest rates being offered for similar
contracts with maturities consistent with those remaining for the
investment-type contracts being valued) or surrender values.

The fair values for the Company's insurance contracts (insurance, annuity and
other policy contracts that do involve significant mortality or morbidity risk),
other than investment-type contracts, are not required to be disclosed. The
Company does consider, however, the various insurance and investment risks in
choosing investments for both insurance and investment-type contracts.

4. Insurance, Annuity and Accident and Health Reserves (continued)

Activity in the liability for unpaid accident and health claims, which is
included with insurance reserves in the statement of financial position, is
summarized as follows (in millions):

Year ended December 31
1995 1994 1993
------------------------------------------
Balance at beginning of year $ 844 $ 723 $ 657

Incurred:
Current year 2,665 2,735 2,307
Prior years (24) (105) (37)
------------------------------------------
Total incurred 2,641 2,630 2,270

Payments:
Current year 2,196 2,065 1,814
Prior years 481 444 390
------------------------------------------
Total payments 2,677 2,509 2,204
------------------------------------------

Balance at end of year:
Current year 469 670 493
Prior years 339 174 230
------------------------------------------
Total balance at end of year $ 808 $ 844 $ 723
==========================================

5. Federal Income Taxes

The Company files a consolidated income tax return that includes all of its
qualifying subsidiaries, and has a policy of allocating income tax expenses and
benefits to companies in the group based upon pro rata contribution of taxable
income or operating losses. The Company is taxed at corporate rates on taxable
income based on existing tax laws. Due to the inherent differences between
income for financial reporting purposes and income for tax purposes, the
Company's provision for federal income taxes may not have the customary
relationship of taxes to income.

Deferred income taxes are generally not recognized for the tax effects of
temporary differences between income for financial reporting purposes and income
for tax purposes. In 1993, 1994 and 1995, however, the Company recognized a
deferred tax asset and operating benefit for the tax effect of unamortized
deferred acquisition costs required for tax purposes. This deferred tax asset
was non-admitted in accordance with statutory accounting practices. In 1995, the
Company also recognized a deferred tax liability and surplus charge for the tax
effect of unrealized gains for common stocks identified for sale in 1996.

5. Federal Income Taxes (continued)

In December 1994, a U.S. Court of Appeals with jurisdiction over the Company
ruled that federal law did not permit mutual life insurance companies to use a
negative recomputed differential earnings rate to compute their equity tax
liability for the preceding year. Accordingly, the Company increased its
liability for federal income taxes attributable to its equity for years prior to
1994 and made a corresponding adjustment to surplus in the amount of $63
million.

6. Short-Term Borrowings

The Company issues commercial paper to meet its short-term financing needs.
There were no outstanding borrowings at December 31, 1995 or 1994. The Company
also maintains credit facilities with various banks for short-term borrowing
purposes.

7. Employee and Agent Benefits

The Company has defined benefit pension plans covering substantially all of its
employees and certain agents. The employees and agents are generally first
eligible for the pension plans when they reach age 21. The pension benefits are
based on the years of service and generally the employee's or agent's average
annual compensation during the last five years of employment. Partial benefit
accrual of pension benefits is recognized from first eligibility until
retirement based on attained service divided by potential service to age 65 with
a minimum of 35 years of potential service.

During 1995, the Company adopted Statement of Financial Standards (SFAS) No. 87,
"Employers' Accounting for Pensions," and accordingly changed its method of
accounting for the costs of defined benefit pension plans to an accrual method.
Prior to this change, the cost of pension benefits was recognized as
contributions were made to the pension trusts. The Company's policy is to fund
the cost of providing pension benefits in the years that the employees and
agents are providing service to the Company. The Company's funding policy is to
deposit the actuarial normal cost and any change in unfunded accrued liability
over a 30-year period as a percentage of compensation.

The pension plans' combined funded status, reconciled to amounts recognized in
the statements of financial position and statements of operations and surplus as
of and for the years ended December 31, 1995 and 1994, is as follows (in
millions):

<TABLE>
<CAPTION>
December 31
1995 1994
------------------------------
Actuarial present value of benefit obligations:
<S> <C> <C>
Vested benefit obligation $437 $324
==============================
Accumulated benefit obligation $457 $338
==============================

Plan assets at fair value, primarily affiliated mutual funds
and investment contracts of the Company $719 $581
Projected benefit obligation 661 462
------------------------------
Plan assets in excess of projected benefit obligation 58 119

Unrecognized net (gains) losses and funding different from that assumed
and from changes in assumptions 42 (23)
Unrecognized net transition asset as of January 1, 1994 (72) (83)
------------------------------
Prepaid pension asset (non-admitted) $ 28 $ 13
==============================
</TABLE>

Net periodic pension income included the following components (in millions):
<TABLE>
<CAPTION>

Year ended December 31
1995 1994
------------------------------
<S> <C> <C>
Service cost $22 $26
Interest cost on projected benefit obligation 39 37
Actual return on plan assets (144) 6
Net amortization and deferral 79 (72)
------------------------------
Total net periodic pension income $ (4) $ (3)
==============================
</TABLE>

During 1994 and 1993, $10 million and $8 million, respectively, was charged to
expense and contributed to the trusts previously established to provide for
future costs of pension benefits. During 1995, $12 million was contributed to
these pension trusts. In addition, to adjust the pension accounting to the new
method required by SFAS No. 87 and to make the change effective as of January 1,
1994, surplus as of January 1, 1995 has been increased by $13 million. According
to the requirements of statutory accounting practices, pension expense for 1994
has not been restated and the 1994 pension amounts shown above are for
comparative purposes only. The pension asset at January 1, 1995 ($13 million)
and December 31, 1995 ($28 million) was non-admitted as prescribed by statutory
accounting practices.

The weighted-average assumed discount rate used in determining the projected
benefit obligation was 7% and 8.5% at December 31, 1995 and 1994, respectively.
Some of the trusts holding the plan assets are subject to federal income taxes
at a 35% tax rate while others are not subject to federal income taxes. For both
1995 and 1994, the expected long-term rates of return on plan assets were
approximately 6% (after estimated income taxes) for those trusts subject to
federal income taxes and approximately 10% for those trusts not subject to
federal income taxes. The assumed rate of increase in future compensation levels
varies by age for both the qualified and non-qualified pension plans.

In addition, the Company has defined contribution plans that are generally
available to all employees and agents who are age 21 or older and have completed
one year of service. Eligible participants may contribute up to 15% of their
compensation or $9,240 annually to the plans. The Company matches the
participant's contribution with a 50% contribution up to a maximum contribution
of 2% of the participant's compensation. During both 1995 and 1994, the Company
contributed $7 million to the defined contribution plans. During 1993, such
contributions totaled $6 million.

The Company also provides certain health care, life insurance, and long-term
care benefits for retired employees. Substantially all employees are first
eligible for these postretirement benefits when they reach age 57 and have
completed ten years of service with the Company. Partial benefit accrual of
these health, life, and long-term care benefits is recognized from first
eligibility until retirement based on attained service divided by potential
service to age 65 with a minimum of 35 years of potential service. The Company's
policy is to fund the cost of providing retiree benefits in the years that the
employees are providing service to the Company. The Company's funding policy is
to deposit the actuarial normal cost and an accrued liability over a 30-year
period as a percentage of compensation.

The postretirement plans' combined funded status, reconciled to amounts
recognized in the statement of financial position and statement of operations
and surplus as of and for the years ended December 31, 1995 and 1994, is as
follows (in millions):
<TABLE>
<CAPTION>

December 31
1995 1994
-------------------------------
Plan assets at fair value, primarily affiliated mutual funds and
<S> <C> <C>
investment contracts of the Company $208 $155
Accumulated postretirement benefit obligation:
Retirees (83) (71)
Eligible employees (40) (31)
-------------------------------
Total accumulated postretirement benefit obligation (123) (102)
-------------------------------
Plan assets in excess of accumulated postretirement benefit
obligation 85 53

Unrecognized net losses and funding different from that assumed and
from changes in assumptions 3 29
-------------------------------
Postretirement benefit asset (non-admitted) $ 88 $ 82
===============================
</TABLE>

The net periodic postretirement benefit cost included the following components
(in millions):
<TABLE>
<CAPTION>

Year ended
December 31
1995 1994 1993
--------------------------------

<S> <C> <C> <C>
Service cost $ 5 $ 4 $ 3
Interest cost on accumulated postretirement benefit cost 9 7 6
Expected return on plan assets (10) (10) (6)
Net amortization of gains and losses 1 - -
================================
Total net periodic postretirement benefit cost $ 5 $ 1 $ 3
================================
</TABLE>

The weighted-average assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7% and 8.5% at December 31, 1995 and 1994,
respectively. Some of the trusts holding the plan assets are subject to federal
income taxes at a 35% tax rate while others are not subject to federal income
taxes. For both 1995 and 1994, the expected long-term rates of return on plan
assets were approximately 6% (after estimated income taxes) for those trusts
subject to federal income taxes and approximately 9% for those trusts not
subject to federal income taxes. These rates of return on plan assets vary by
benefit type and employee group.

The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligations starts at 11.5% in 1995, declines to 9.5% in
2001, and then declines to an ultimate rate of 6.5% in 2036. If the health care
cost trend rate assumptions were increased by 1% in each year, the accumulated
postretirement benefits obligation for health plans as of December 31, 1995
would increase by 11.8% ($10 million). The effect of this 1% increase would also
increase the aggregate of the service cost and interest cost components of the
net periodic postretirement benefit cost of health plans for the year ended
December 31, 1995 by 13.5% ($1 million).

These statutory accounting provisions are similar to Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," issued by the FASB except that SFAS No. 106
includes ineligible employees in the accumulated postretirement benefit
obligation calculations. The accumulated postretirement benefit obligation for
ineligible employees was $77 million and $48 million at December 31, 1995 and
1994, respectively.

8. Surplus Notes

On March 10, 1994, the Company issued $300 million of surplus notes, including
$200 million due March 1, 2024 at a 7.875% annual interest rate and the
remaining $100 million due March 1, 2044 at an 8% annual interest rate. No
affiliates of the Company hold any portion of the surplus notes. The discount
and direct costs associated with issuing these surplus notes is being amortized
to expense over their respective terms using the interest method. For statutory
accounting purposes, these notes are considered a part of total surplus of the
Company. Each payment of interest and principal on the surplus notes may be made
only with the prior approval of the Commissioner of Insurance of the State of
Iowa (the Commissioner) and only to the extent that the Company has sufficient
surplus earnings to make such payments. For the years ended December 31, 1995
and 1994, interest of $24 million and $11 million, respectively, was approved by
the Commissioner, paid and charged to expense. Had the accrual of interest on
surplus notes not been subject to approval of the Commissioner, accrued interest
payable on surplus notes at both December 31, 1995 and 1994 would have been $8
million.

Subject to Commissioner approval, the surplus notes due March 1, 2024 may be
redeemed at the Company's election on or after March 1, 2004 in whole or in part
at a redemption price of approximately 103.6% of par. The approximate 3.6%
premium is scheduled to gradually diminish over the following ten years. These
surplus notes may then be redeemed on or after March 1, 2014, at a redemption
price of 100% of the principal amount plus interest accrued to the date of
redemption. Non-insurance companies individually held over 10% of these surplus
notes (approximately $50 million and $73 million at December 31, 1995 and 1994,
respectively).

In addition, subject to Commissioner approval, the surplus notes due March 1,
2044 may be redeemed at the Company's election on or after March 1, 2014, in
whole or in part at a redemption price of approximately 102.3% of par. The
approximate 2.3% premium is scheduled to gradually diminish over the following
ten years. These surplus notes may be redeemed on or after March 1, 2024, at a
redemption price of 100% of the principal amount plus interest accrued to the
date of redemption. Non-insurance companies individually held over 10% of these
surplus notes (approximately $43 million and $62 million at December 31, 1995
and 1994, respectively).

9. Other Commitments and Contingencies

The Company leases office space and furniture and equipment under various
operating leases. Rental expense for all operating leases totaled $48 million in
1995, $43 million in 1994 and $44 million in 1993. At December 31, 1995, future
minimum rental commitments under noncancelable operating leases for office space
and electronic data processing equipment totaled approximately $97 million.

The Company is a defendant in various legal actions arising in the normal course
of its investment and insurance operations. In the opinion of management, any
losses resulting from such actions would not have a material effect on the
financial statements.

The Company is also subject to insurance guarantee laws in the states in which
it writes business. These laws provide for assessments against insurance
companies for the benefit of policyholders and claimants in the event of
insolvency of other insurance companies. At December 31, 1995 and 1994,
approximately $18 million and $15 million, respectively, of surplus is
appropriated for possible guarantee fund assessments for which notices have not
been received.

In 1995, the Company sold its wholly-owned subsidiary, Principal National Life
Insurance Company (Principal National), at a gain of approximately $1 million.
At December 31, 1994, substantially all the assets ($513 million), liabilities
($470 million), and equity ($43 million) of Principal National were transferred
to and assumed by the Company. This resulted in increases in both other income
and additions to policyowner reserves of $470 million in 1994.
<PAGE>

APPENDIX - A

SAMPLE ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES AND DEATH BENEFITS

The following illustrations have been prepared to help show how Policy
Values and Surrender Values under the Policies change with investment
performance and differing death benefit options. The illustrations show how
death benefits and values would vary over time if the return on assets held by
the Mutual Funds were uniform, gross, after tax, annual rates of 0%, 6% and 12%.
The death benefits and values would be different from those shown if the return
averaged 0%, 6% and 12%, but fluctuated above and below those averages during
individual years. Both Death Benefit Option 1 and Death Benefit Option 2 are
illustrated.

The four illustrations set out show hypothetical Policies issued to
45-year-old male nonsmokers. Illustrations for females or for younger males
would be more favorable; illustrations for older males or for smokers would be
less favorable than those presented. The Policies are illustrated on the basis
of $4,000 Target Premium and a face amount at issue of $250,000. The first and
third illustrations show the selection of Death Benefit Option 1; the second and
fourth, Death Benefit Option 2.

The illustrations reflect all Policy charges (including deductions from
premiums for sales loads and state and federal taxes; monthly deductions from
Policy Value of administration charges, cost of insurance charges and mortality
and expense risk charges; and the contingent deferred administration charge and
contingent deferred sales load that may be deducted upon full surrenders or
lapse of a Policy) and the average fees and expenses of the Mutual Funds. The
first two illustrations reflect current administrative and cost of insurance
charges. The third and fourth illustrations reflect the guaranteed maximum
administration and cost of insurance charges. The average fees and expenses of
the Mutual Funds may decrease or increase in the future making operating
expenses actually incurred by the Mutual Funds differ from the .69% average rate
shown in the illustrations.

The four illustrations are based on the assumption that payments are made
in accordance with a $4,000 annual Target Premium schedule, that no values are
allocated to the Fixed Account, no changes in death benefit option or face
amount are made, no policy loans or partial surrenders occur, and that no riders
are in effect. Upon request, the Company will prepare a comparable illustration
reflecting the proposed insured's actual age, gender, risk classification and
desired policy features.

From time to time, in advertisements or sales literature for the Policies
that quote performance data for one or more of the Mutual Funds, the Company may
include Policy Values, Surrender Values and death benefit figures computed using
the same methodology as that used in the following illustrations, but with the
average annual total return of the Fund for which performance data is shown in
the advertisement replacing the hypothetical rates of return shown in the
following tables. This information may be shown in the form of graphs, charts,
tables and examples and may include data for periods prior to the offering of
the Policies for which a Mutual Funds has had performance (with Policy charges
assumed to be equal to current charges for any periods prior to offering the
Policies).

<PAGE>
<TABLE>
<CAPTION>
Principal Mutual Life Insurance Company
PrinFlex Life
Male Age 45 Non-Smoker
Assuming Current Charges

Planned Premium 4000 Initial Face Amount 250,000
Death Benefit Option 1

Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Assuming Hypothetical Surrender Value (2)
Accumu- Gross Annual Gross Annual Assuming Hypothetical Gross
End of lated Investment Return Investment Return of Annual Investment Return of
Year Premiums 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4200 250000 250000 250000 2924 3122 3320 1076 1273 1471
2 8610 250000 250000 250000 5779 6356 6956 3411 3987 4588
3 13241 250000 250000 250000 8536 9676 10912 4406 5546 6781
4 18103 250000 250000 250000 11224 13116 15250 7093 8985 11119
5 23208 250000 250000 250000 13838 16677 20007 9707 12546 15876
6 28568 250000 250000 250000 16376 20360 25225 12442 16426 21291
7 34196 250000 250000 250000 18836 24169 30951 15296 20629 27410
8 40106 250000 250000 250000 21203 28095 37223 18253 25144 34272
9 46312 250000 250000 250000 23461 32126 44088 21297 29963 41924
10 52827 250000 250000 250000 25752 36471 51896 24572 35291 50716
11 59669 250000 250000 250000 28040 41068 60622 28040 41068 60622
12 66852 250000 250000 250000 30269 45871 70305 30269 45871 70305
13 74395 250000 250000 250000 32443 50897 81063 32443 50897 81063
14 82314 250000 250000 250000 34589 56183 93042 34589 56183 93042
15 90630 250000 250000 250000 36631 61674 106328 36631 61674 106328
16 99361 250000 250000 250000 38545 67364 121069 38545 67364 121069
17 108530 250000 250000 250000 40319 73257 137442 40319 73257 137442
18 118156 250000 250000 250000 41941 79361 155651 41941 79361 155651
19 128264 250000 250000 250000 43397 85682 175935 43397 85682 175935
20 138877 250000 250000 250000 44695 92249 198574 44695 92249 198574

<FN>
The death benefit, accumulated value and surrender value will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed a
representation of past or future investment results. Actual investment results
may be more or less than those shown. The death benefit, accumulated value and
surrender value for a policy would be different from those shown if actual rates
of investment return applicable to the policy averaged 0%, 6%, or 12% over a
period of years, but also fluctuated above or below that average for individual
policy years. The death benefit, accumulated value and surrender value for a
policy would also be different from those shown, depending on the investment
allocations made to the investment divisions of the separate account and the
different rates of return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 6% or 12% but varied
above or below that average for individual divisions. No representations can be
made that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Mutual Life Insurance Company
PrinFlex Life
Male Age 45 Non-Smoker
Assuming Guaranteed Charges

Planned Premium 4000 Initial Face Amount 250,000
Death Benefit Option 1

Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Assuming Hypothetical Surrender Value (2)
Accumu- Gross Annual Gross Annual Assuming Hypothetical Gross
End of lated Investment Return Investment Return of Annual Investment Return of
Year Premiums 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4200 250000 250000 250000 2709 2900 3091 861 1052 1243
2 8610 250000 250000 250000 5348 5897 6470 2980 3529 4102
3 13241 250000 250000 250000 7882 8962 10134 3751 4831 6003
4 18103 250000 250000 250000 10309 12092 14106 6178 7961 9975
5 23208 250000 250000 250000 12623 15286 18416 8492 11155 14286
6 28568 250000 250000 250000 14816 18536 23092 10882 14602 19158
7 34196 250000 250000 250000 16878 21836 28162 13337 18295 24622
8 40106 250000 250000 250000 18795 25173 33659 15844 22222 30709
9 46312 250000 250000 250000 20553 28536 39618 18389 26372 37454
10 52827 250000 250000 250000 22267 32095 46341 21087 30915 45161
11 59669 250000 250000 250000 23905 35795 53800 23905 35795 53800
12 66852 250000 250000 250000 25353 39527 61967 25353 39527 61967
13 74395 250000 250000 250000 26602 43288 70930 26602 43288 70930
14 82314 250000 250000 250000 27632 47066 80783 27632 47066 80783
15 90630 250000 250000 250000 28417 50844 91632 28417 50844 91632
16 99361 250000 250000 250000 28932 54606 103605 28932 54606 103605
17 108530 250000 250000 250000 29147 58333 116852 29147 58333 116852
18 118156 250000 250000 250000 29013 61990 131540 29013 61990 131540
19 128264 250000 250000 250000 28483 65547 147879 28483 65547 147879
20 138877 250000 250000 250000 27508 68972 166124 27508 68972 166124

Planned Premium 4000 Initial Face Amount 250,000
Death Benefit Option 2

Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Assuming Hypothetical Surrender Value (2)
Accumu- Gross Annual Gross Annual Assuming Hypothetical Gross
End of lated Investment Return Investment Return of Annual Investment Return of
Year Premiums 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4200 252915 253112 253309 2915 3112 3309 1067 1263 1461
2 8610 255751 256325 256922 5751 6325 6922 2805 3378 3975
3 13241 258479 259611 260837 8479 9611 10837 4349 5480 6706
4 18103 261128 263001 265114 11128 13001 15114 6997 8871 10983
5 23208 263692 266495 269783 13692 16495 19783 9561 12364 15653
6 28568 266169 270092 274881 16169 20092 24881 12235 16158 20947
7 34196 268555 273791 280446 18555 23791 30446 15015 20251 26906
8 40106 270833 277578 286506 20833 27578 36506 17883 24627 33555
9 46312 272985 281435 293089 22985 31435 43089 20822 29271 40926
10 52827 275149 285559 300526 25149 35559 50526 23969 34379 49345
11 59669 277287 289885 308771 27287 39885 58771 27287 39885 58771
12 66852 279348 294366 317851 29348 44366 67851 29348 44366 67851
13 74395 281338 299016 327864 31338 49016 77864 31338 49016 77864
14 82314 283285 303871 338939 33285 53871 88939 33285 53871 88939
15 90630 285100 308849 351096 35100 58849 101096 35100 58849 101096
16 99361 286756 313926 364422 36756 63926 114422 36756 63926 114422
17 108530 288235 319088 379024 38235 69088 129024 38235 69088 129024
18 118156 289521 324319 395020 39521 74319 145020 39521 74319 145020
19 128264 290597 329604 412543 40597 79604 162543 40597 79604 162543
20 138877 291471 334952 431764 41471 84952 181764 41471 84952 181764

Planned Premium 4000 Initial Face Amount 250,000
Death Benefit Option 2
Death Benefit (2) Accumulated Value (2)
Assuming Hypothetical Assuming Hypothetical Surrender Value (2)
Accumu- Gross Annual Gross Annual Assuming Hypothetical Gross
End of lated Investment Return Investment Return of Annual Investment Return of
Year Premiums 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4200 252698 252888 253078 2698 2888 3078 850 1040 1230
2 8610 255315 255861 256430 5315 5861 6430 2368 2914 3483
3 13241 257816 258885 260046 7816 8885 10046 3685 4755 5916
4 18103 260196 261957 263946 10196 11957 13946 6065 7826 9815
5 23208 262449 265069 268149 12449 15069 18149 8318 10939 14019
6 28568 264566 268212 272676 14566 18212 22676 10632 14278 18742
7 34196 266533 271371 277542 16533 21371 27542 12992 17831 24002
8 40106 268335 274529 282764 18335 24529 32764 15384 21579 29814
9 46312 269956 277666 288358 19956 27666 38358 17792 25502 36195
10 52827 271503 280937 294593 21503 30937 44593 20323 29757 43413
11 59669 272944 284278 301414 22944 34278 51414 22944 34278 51414
12 66852 274162 287568 308752 24162 37568 58752 24162 37568 58752
13 74395 275147 290791 316652 25147 40791 66652 25147 40791 66652
14 82314 275875 293919 325147 25875 43919 75147 25875 43919 75147
15 90630 276319 296914 334269 26319 46914 84269 26319 46914 84269
16 99361 276450 299739 344053 26450 49739 94053 26450 49739 94053
17 108530 276237 302348 354534 26237 52348 104534 26237 52348 104534
18 118156 275629 304676 365730 25629 54676 115730 25629 54676 115730
19 128264 274581 306658 377666 24581 56658 127666 24581 56658 127666
20 138877 273045 308222 390367 23045 58222 140367 23045 58222 140367

<FN>
The death benefit, accumulated value and surrender value will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment results are illustrative only and should not be deemed a
representation of past or future investment results. Actual investment results
may be more or less than those shown. The death benefit, accumulated value and
surrender value for a policy would be different from those shown if actual rates
of investment return applicable to the policy averaged 0%, 6%, or 12% over a
period of years, but also fluctuated above or below that average for individual
policy years. The death benefit, accumulated value and surrender value for a
policy would also be different from those shown, depending on the investment
allocations made to the investment divisions of the separate account and the
different rates of return of the Fund portfolios, if the actual rates of
investment return applicable to the policy averaged 0%, 6% or 12% but varied
above or below that average for individual divisions. No representations can be
made that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
</FN>
</TABLE>
<PAGE>
Appendix B
Target Premiums
Annual per $1,000 Face Amount
Nonsmoker and Smoker

Age* Male Female Unisex Age* Male Female Unisex

0 3.50 2.83 3.41 43 12.91 10.82 12.64
1 3.50 2.83 3.41 44 13.59 11.36 13.30
2 3.50 2.83 3.41 45 14.31 11.93 14.00
3 3.50 2.83 3.41 46 15.09 12.53 14.76
4 3.50 2.83 3.41 47 15.90 13.16 15.54
5 3.50 2.83 3.41 48 16.77 13.83 16.39
6 3.50 2.83 3.41 49 17.70 14.54 17.29
7 3.50 2.83 3.41 50 18.68 15.30 18.24
8 3.50 2.83 3.41 51 19.74 16.10 19.27
9 3.50 2.83 3.41 52 20.86 16.94 20.35
10 3.50 2.83 3.41 53 22.05 17.85 21.50
11 3.65 2.91 3.55 54 23.32 18.80 22.73
12 3.80 3.00 3.70 55 24.67 19.82 24.04
13 3.95 3.08 3.84 56 26.11 20.90 25.43
14 4.10 3.17 3.98 57 27.65 22.05 26.92
15 4.25 3.25 4.12 58 29.30 23.29 28.52
16 4.62 3.63 4.49 59 31.05 24.62 30.21
17 4.99 4.00 4.86 60 32.93 26.06 32.04
18 5.36 4.38 5.23 61 34.94 27.60 33.99
19 5.73 4.75 5.60 62 37.10 29.26 36.08
20 6.10 5.13 5.97 63 39.40 31.06 38.32
21 6.11 5.16 5.99 64 41.86 32.97 40.70
22 6.12 5.20 6.00 65 44.48 35.02 43.25
23 6.13 5.23 6.01 66 47.29 37.21 45.98
24 6.14 5.27 6.03 67 50.30 39.58 48.91
25 6.15 5.30 6.04 68 53.52 42.14 52.04
26 6.29 5.42 6.18 69 56.98 44.93 55.41
27 6.43 5.54 6.31 70 60.71 47.98 59.06
28 6.57 5.65 6.45 71 64.73 51.30 62.98
29 6.71 5.77 6.59 72 69.02 54.93 67.19
30 6.85 5.89 6.73 73 73.62 58.86 71.70
31 7.17 6.16 7.04 74 78.48 63.12 76.48
32 7.51 6.44 7.37 75 83.65 67.71 81.58
33 7.87 6.74 7.72 76 87.41 71.10 85.29
34 8.26 7.06 8.10 77 91.34 74.66 89.17
35 8.66 7.40 8.50 78 95.45 78.39 93.23
36 9.10 7.76 8.93 79 99.75 82.31 97.48
37 9.55 8.13 9.37 80 104.24 86.43 101.92
38 10.03 8.53 9.84 81 112.06 94.21 109.74
39 10.54 8.94 10.33 82 120.46 102.69 118.15
40 11.09 9.38 10.87 83 129.49 111.93 127.21
41 11.66 9.83 11.42 84 139.20 122.00 136.96
42 12.26 10.32 12.01 85 149.64 132.98 147.47

* Last Birthday

<PAGE>
PART II. OTHER INFORMATION

UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter adopted under the authority conferred in that
section.

UNDERTAKING PURSUANT TO RULE 484
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant 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 Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter had been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

<PAGE>

REPRESENTATIONS PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940. Registrant elects to be governed by Rule
6e-3(T)(b)(13)(i)(A) under the Investment Company Act of 1940, with respect to
the Policies described in the prospectus. Registrant makes the following
representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.

(2) The level of the mortality and expense risks charge is within
the range of industry practice for comparable contracts.

(3) The Registrant has concluded that there is a reasonable
likelihood that the distribution financing arrangement for the
Variable Life Separate Account will benefit the separate account
and policyowners, and it will keep and make available to the
Commission on request a memorandum setting forth the basis for
this representation.

(4) The Variable Life Separate Account will invest only in
management investment companies which have undertaken to have a
board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.

The methodology used to support the representation made in paragraph (2) above
is based upon an analysis of the mortality and expense risks charges contained
in other variable life insurance policies, including scheduled and flexible
premium products. Registrant undertakes to keep and make available to the
Commission on request the documents used to support the representation in
paragraph (2) above.

<PAGE>
CONTENTS OF REGISTRATION STATEMENT

This registration statement comprises the following papers and documents:

The facing sheet;

The prospectus, consisting of 36 pages;

The undertaking to file reports;

The undertaking pursuant to Rule 484;

Representations pursuant to Rule 6e-3(T);

The signatures;

Written consents of the following persons:

G.R. Narber, Esq.(Filed January 8, 1996)

The following exhibits:

1. Copies of all exhibits required by paragraph A of the
instructions as to exhibits in Form N-8B-2 are set forth below
under designations based on such instructions:

1.A(1) Resolution of Executive Committee of Board of Directors of
Principal Mutual Life Insurance Company establishing the Variable
Life Separate Account.(Filed January 8, 1996)

1.A(3)(a) Distribution Agreement between Princor Financial Services
Corporation and Principal Mutual Life Insurance Company.
(Filed January 8, 1996)

1.A(3)(a)(i) Form of Selling Agreement.(Filed January 8, 1996)

1.A(3)(b) Registered Representative Agreement.(Filed January 8, 1996)

1.A(3)(c) Schedule of sales commissions.(Filed January 8, 1996)

1.A(5)(a) Form of PrinFlex Life Insurance Policy.

1.A(5)(a)(i) Cost of Living Increase Rider.

1.A(5)(a)(ii) Waiver of Monthly Policy Charge Rider.

1.A(5)(a)(iii) Waiver of Specified Premium Rider.

1.A(5)(a)(iv) Accidental Death Benefit Rider.(Filed January 8, 1996)

1.A(5)(a)(v) Children Term Insurance Rider.

1.A(5)(a)(vi) Spouse Term Insurance Rider.

1.A(5)(a)(vii) Change of Insured Rider.

1.A(5)(a)(viii)Death Benefit Guarantee Rider.

1.A(5)(a)(ix) Salary Increase Rider.

1.A(5)(a)(x) Extra Protection Increase Rider.

1.A(5)(a)(xi) Accounting Benefits Rider.(Filed January 8, 1996)

1.A(5)(a)(xii) Extended Coverage Rider.

1.A(5)(a)(xiii)Accelerated Benefits Rider.(Filed January 8, 1996)

1.A(5)(b) Form of PrinFlex Life Insurance Policy - Unisex Version.

1.A(5)(b)(i) Accidental Death Benefit Rider.(Filed January 8, 1996)

1.A(5)(b)(ii) Children Term Insurance Rider.

1.A(5)(b)(iii) Spouse Term Insurance Rider.

1.A(5)(b)(iv) Change of Insured Rider.

1.A(5)(b)(v) Death Benefit Guarantee Rider.

1.A(6)(a) Articles of Incorporation, as Amended of Principal Mutual Life
Insurance Company.(Filed January 8, 1996)

1.A(6)(b) By-laws of Principal Mutual Life Insurance Company.
(Filed January 8, 1996)

1.A(10) Form of Application for PrinFlex Life Insurance Policy.
(Filed January 8, 1996)

1.A(10(a) Form of Supplemental Application for PrinFlex Life Insurance
Policy.

2. Opinion and consent of G.R. Narber, Senior Vice President and
General Counsel of Principal Mutual Life Insurance Company.
(Filed January 8, 1996)

3. No financial statements will be omitted from the prospectus
pursuant to Instruction 1(b) or (c) or Part I.

4. Not applicable.

5. Not applicable.

6. Consent of Ernst & Young.

7. Description of Issuance, Transfer and Redemption Procedures
Pursuant to Rule 6e-3(T)(b)(12)(iii).**

8. Powers of Attorney of Directors of Principal Mutual Life
Insurance Company.(Filed January 8, 1996)

9. Opinion and consent of Lisa Huebert, Assistant Actuary.

- ---------------------------
** To be filed by Amendment.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, and its seal to be hereunto
affixed and attested, all in the city of Des Moines, and the state of Iowa, on
the 5th day of June, 1996.

PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT

(Registrant)

By: PRINCIPAL MUTUAL LIFE INSURANCE COMPANY

(Depositor)

DAVID J. DRURY
By ______________________________________________
David J. Drury Chairman and Chief Executive
Officer

Attest:

JOYCE N. HOFFMAN
- -----------------------------------
Joyce N. Hoffman
Vice President and
Corporate Secretary

<PAGE>

As required by the Securities Act of 1933, Pre-effective Amendment No. 1 to the
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

Signature Title Date

D. J. DRURY Director, Chairman and
D. J. Drury Chief Executive Officer June 5, 1996

D. C. CUNNINGHAM Second Vice President and
D. C. Cunningham Controller (Principal
Accounting Officer) June 5, 1996

C. E. ROHM Executive Vice
C. E. Rohm President (Principal
Financial Officer) June 5, 1996

(M. V. Andringa)* Director June 5, 1996
M. V. Andringa

(R. M. Davis)* Director June 5, 1996
R. M. Davis

(C. D. Gelatt, Jr.)* Director June 5, 1996
C. D. Gelatt, Jr.

(G. D. Hurd)* Director June 5, 1996
G. D. Hurd

(T. M. Hutchison)* Director June 5, 1996
T. M. Hutchison

(C.S. Johnson)* Director June 5, 1996
C.S. Johnson

(W. T. Kerr)* Director June 5, 1996
W. T. Kerr

(L. Liu)* Director June 5, 1996
L. Liu

(V. H. Loewenstein)* Director June 5, 1996
V. H. Loewenstein

(J. R. Price, Jr.)* Director June 5, 1996
J. R. Price, Jr.

(B. A. Rice)* Director June 5, 1996
B. A. Rice

(J-P. C. Rosso)* Director June 5, 1996
J-P. C. Rosso

(D. M. Stewart)* Director June 5, 1996
D. M. Stewart

(E. E. Tallett)* Director June 5, 1996
E. E. Tallett

(D. D. Thornton)* Director June 5, 1996
D. D. Thornton

(F. W. Weitz)* Director June 5, 1996
F. W. Weitz

*By DAVID J. DRURY
David J. Drury
Chairman and Chief Executive Officer

Pursuant to Powers of Attorney
Previously Filed or Included Herein
<PAGE>
EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT INDEX

Page Number in
Sequential Numbering
Exhibit No. Description Where Exhibit Can Be Found

<S> <C> <C>
1.A(1) Resolution of Executive Committee *
of Board of Directors of Depositor
establishing Variable Life Separate
Account.

1.A(3)(a) Distribution Agreement Between *
Depositor and Principal Underwriter.

1.A(3)(a)(i) Form of Selling Agreement. *

1.A(3)(b) Registered Representative Agreement. *

1.A(3)(c) Schedule of Sales Commissions. *

1.A(5)(a) PrinFlex Life Policy. 17

1.A(5)(a)(i) Cost of Living Increase Rider. 40

1.A(5)(a)(ii) Waiver of Monthly Policy Charge Rider. 42

1.A(5)(a)(iii) Waiver of Specified Premium Rider. 44

1.A(5)(a)(iv) Accidental Death Benefit Rider. *

1.A(5)(a)(v) Children Term Insurance Rider. 46

1.A(5)(a)(vi) Spouse Term Insurance Rider. 48

1.A(5)(a)(vii) Change of Insured Rider. 50

1.A(5)(a)(viii) Death Benefit Guarantee Rider. 51

1.A(5)(a)(ix) Salary Increase Rider. 52

1.A(5)(a)(x) Extra Protection Increase Rider. 55

1.A(5)(a)(xi) Accounting Benefits Rider. *

1.A(5)(a)(xii) Extended Coverage Rider. 57

1.A(5)(a)(xiii) Accelerated Benefits Rider. *

1.A(5)(b) PrinFlex Life Policy - Unisex Version. 58

1.A(5)(b)(i) Accidental Death Benefit Rider. *

1.A(5)(b)(ii) Children Term Insurance Rider. 80

1.A(5)(b)(iii) Spouse Term Insurance Rider. 82

1.A(5)(b)(iv) Change of Insured Rider. 84

1.A(5)(b)(v) Death Benefit Guarantee Rider. 85

1.A(6)(a) Articles of Incorporation, as Amended, *
of Depositor.

1.A(6)(b) By-laws of Depositor. *

1.A(10) Form of Application for the PrinFlex *
Life Policy.

1.A(10)(a) Form or Supplemental Application 86
For the PrinFlex Life Policy.

2 Opinion and consent of G.R. Narber, *
Senior Vice President and General
Counsel.

6 Consent of Ernst & Young LLP 89

8 Powers of Attorney of Directors of *
Principal Mutual Life Insurance
Company.

9 Opinion and consent of Lisa Huebert, 90
Senior Actuary.

27 Financial Data Schedules 91

*Previously filed.

</TABLE>

FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY. Adjustable death
benefit. Benefits payable at death or earlier Maturity Date. Flexible premiums
payable until Maturity Date or prior death. PARTICIPATING.

This policy is a legal contract between you, as owner, and us, Principal Mutual
Life Insurance Company. Your policy is issued based on the information in the
application and payment of premiums as shown on the current Data Pages. We will
pay the benefits of this policy in accordance with its provisions.

YOUR NET PREMIUMS ARE ADDED TO YOUR POLICY VALUE. YOU MAY ALLOCATE THEM TO ONE
OR MORE OF THE SEPARATE ACCOUNT DIVISIONS AND TO THE FIXED ACCOUNT.

THE PORTION OF YOUR POLICY VALUE THAT IS IN THE SEPARATE ACCOUNT WILL VARY FROM
DAY TO DAY. THE AMOUNT IS NOT GUARANTEED. IT MAY INCREASE OR DECREASE DEPENDING
ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING DIVISIONS THAT YOU HAVE CHOSEN.
THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR POLICY VALUE.

THE PORTION OF YOUR POLICY VALUE THAT IS IN THE FIXED ACCOUNT WILL ACCUMULATE,
AFTER DEDUCTIONS, AT RATES OF INTEREST WE DETERMINE. SUCH RATES WILL NOT BE LESS
THAN 3% A YEAR.

THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED AS
DESCRIBED IN THIS POLICY.

10 DAY EXAMINATION OFFER. IT IS IMPORTANT TO US THAT YOU ARE SATISFIED WITH THIS
POLICY. IF YOU ARE NOT SATISFIED, YOU MAY RETURN YOUR POLICY TO EITHER YOUR
AGENT OR OUR HOME OFFICE BEFORE THE LATTER OF:

(1) 10 DAYS OF ITS RECEIPT; (2) 45 DAYS AFTER THE APPLICATION WAS SIGNED; OR (3)
10 DAYS FROM THE DELIVERY OF THE NOTICE OF THE RIGHT TO CANCEL. WE WILL REFUND
ANY PREMIUM PAID AND YOUR POLICY WILL BE CONSIDERED VOID FROM ITS INCEPTION.
PLEASE READ YOUR POLICY CAREFULLY SO YOU MAY BETTER USE ITS MANY BENEFITS.

The terms of this policy start on the Policy Date and will stay in force until
the Insured's Age 95 Policy Anniversary so long as you satisfy the requirements
as outlined in your policy.

- --------------------------------------------------------------------------
Vice President, President
and Corporate Secretary

[GRAPHIC OMITTED] Principal Mutual Life
Insurance Company

711 High Street
Des Moines, Iowa 50392-0001
- --------------------------------------------------------------------------------

INSURED John Doe POLICY DATE November 21, 2001

OWNER Jane Doe POLICY Flexible Premium Variable
Universal Life

POLICY NUMBER Sample FACE AMOUNT $1,000,000
<PAGE>

INDEX

PAGE PAGE
Adjusting the Face Amount.........17 Loan Interest Charge...........13
Age and Sex.......................24 Loan Repayment.................13
Alterations...................... 24 Owner/Beneficiary Changes......23
Assignment........................24 Planned Periodic Premiums.......6
Benefit Payment Options...........18 Policy Expenses................14
Contract..........................24 Policy Value................... 9
Cost of insurance Rates...........15 Premium Payment Limits..........6
Data Page..........................3 Reinstatement...................7
Death Benefit Option..............16 Right to Exchange Policy.......23
Death Benefit Option Changes .....17 Statement of Value.............25
Death Proceeds....................16 Suicide........................25
Definitions........................4 Surrender Value................14
Fixed Account......................8 Termination.....................7
Grace Period.......................6 Transfers......................10
Incontestability..................24 Variable Life Separate Account..8
Investment Accounts................8

A copy of the application and any additional benefits provided
by rider follow the last page of this policy.

<PAGE>

DATA PAGE PAGE 3

INSURED John Doe ISSUE AGE-SEX 35-Male

POLICY NUMBER Sample POLICY DATE November 21, 2001

SCHEDULE OF PROTECTION

FORM PROTECTION*1
NO. POLICY AND RIDERS FACE AMOUNT PERIOD DEATH BENEFIT

SF378 Flexible Premium $1,000,000 To Age 95*2 Option 1
Variable Universal
Life

SF380 Cost of Living To Age 55*2

PREMIUM INFORMATION

Your planned periodic premium of $8,660.00 is payable annually.

*1 If sufficient premiums are paid, this policy provides life insurance
protection on the Insured until the Maturity Date, which is the Policy
Anniversary following the birthday on which the Insured attains age 95, or
termination of the Extended Coverage Rider, if applicable, whichever is
later. YOU MAY HAVE TO PAY OTHER THAN THE PLANNED PERIODIC PREMIUM SHOWN
ABOVE TO KEEP THIS POLICY AND COVERAGE IN FORCE TO THAT DATE, and to keep any
additional benefit riders in force.

*2 Any reference to age means the Policy Anniversary following the birthday on
which the Insured attains the age stated.

The smallest payment we will accept is $30.00

Target premium: $8,660.00

Applicable during the first two Policy Years only:

Minimum monthly premium: $652.67

This policy is adjustable. If it is adjusted, we will send you new Data Pages.
The Data Pages are to be attached to and made a part of this policy. The minimum
face amount is $50,000. The minimum face amount increase is $50,000.

3.0% Fixed Account Guaranteed Interest Crediting Rate

8% Loan Interest Rate

Interest on borrowed funds is credited at 6% through Policy Year ten. Thereafter
it is credited at 7.75%.

SF 378 (Continued on Page 3-1)
<PAGE>
DATA PAGE PAGE 3-1

INSURED John Doe ISSUE AGE-SEX 35-Male

POLICY NUMBER Sample POLICY DATE November 21, 2001

SEPARATE ACCOUNT: PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT

PREMIUM DEDUCTION
ALLOCATIONS ALLOCATIONS

FIXED ACCOUNT 0% 0%

SEPARATE ACCOUNT DIVISIONS

Aggressive Growth 0% 0%

Asset Allocation 0% 0%

Balanced 20% 20%

Bond 20% 20%

Capital Accumulation 0% 0%

Emerging Growth 0% 0%

Fidelity VIPII Contrafund Portfolio 20% 20%

Fidelity VIP Equity-Income Portfolio 0% 0%

Fidelity VIP High Income Portfolio 0% 0%

Government Securities 0% 0%

Growth 20% 20%

Money Market 20% 20%

World 0% 0%

SF 378 (Continued on Page 3-2)

<PAGE>

DATA PAGE PAGE 3-2

INSURED John Doe ISSUE AGE-SEX 35-Male

POLICY NUMBER Sample POLICY DATE November 21, 2001

SCHEDULE OF CHARGES

Maximum Monthly Administration Charge: $16.67

Maximum Monthly Mortality and Expense Risks Charge: .000747 (.90% annual) of the
portion of the Accumulated Value in the Separate Account.

Premium Expense Charge: 2.75% of each premium received for premium payments less
than or equal to the Target Premium, reducing to .75% for premiums over Target
Premium made during the first ten Policy Years and for any premiums attributable
to any face increases; plus a charge for state and local taxes of 2.2% of each
premium received; and a federal tax charge of 1.25% of each premium received.

Transaction Charges: The first 12 division transfers per year are free.
Thereafter, we reserve the right to charge a $25.00 transaction charge for each
transfer. Each partial surrender will also have a transaction charge. The
transaction charge is the lesser of $25.00 or 2% of the amount surrendered.

Minimum Transfer Amount: $100 or the balance of the investment account being
transferred from, if less.

Minimum Transfer Value: $2,500

Minimum Partial Surrender or Loan Amount: $500

Minimum Policy Loan Repayment: $30.00

SF 378 (Continued on Page 3-3)
<PAGE>

DATA PAGE PAGE 3-3

INSURED John Doe ISSUE AGE-SEX 35-Male

POLICY NUMBER Sample POLICY DATE November 21, 2001

TABLE OF MAXIMUM SURRENDER CHARGES

POLICY YEAR AMOUNT

1 $5,591.85
2 9,683.70
3 9,683.70
4 9,683.70
5 9,683.70
6 9,222.76
7 8,299.90
8 6,917.07
9 5,072.32
10 2,766.63
11 and later 0.00

A surrender charge will be deducted from your Accumulated Value if this policy
is surrendered for its net surrender value or if this policy terminates within
the first ten years. The maximum charge in the first policy month of each Policy
Year is shown in the above Table (subject to any applicable limitations in Rule
6e-3(T) adopted under the Investment Company Act of 1940).

This Table assumes no face amount increases.

SF 378 (Continued on Page 3-4)
<PAGE>
DATA PAGE PAGE 3-4

INSURED John Doe ISSUE AGE-SEX 35-Male

POLICY NUMBER Sample POLICY DATE November 21, 2001

DETAILED SCHEDULE OF PROTECTION AND RISK CLASSES

POLICY AND EFFECTIVE
RIDERS DATE AMOUNT RISK CLASS

Flexible Premium
Variable Universal Novemember 21, 2001 $1,000,000 Standard Nonsmoker
Life
TOTAL $1,000,000

Cost of Living The Effective Date is November 21, 2001. The
current cost of living base is $1,000,000.
The maximum cost of living increase is the
lesser of $100,000 or 30% of the cost of
living base. The minimum cost of living
increase is $1,000.

Basis of Values: Guaranteed maximum cost of insurance rates are based on 1980
CSO Mortality Table NA, age last birthday, with distinction for sex and smoking
status. The rates will reflect the Insured's risk class(es).

SF 378 (Continued on Page 3-5)

<PAGE>

DATA PAGE PAGE 3-5

INSURED John Doe ISSUE AGE-SEX 35-Male

POLICY NUMBER Sample POLICY DATE November 21, 2001

TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES

MONTHLY RATES PER $1,000.00

INSURED'S MONTHLY INSURED'S MONTHLY
ATTAINED AGE RATE ATTAINED AGE RATE

35 0.14417 67 2.26833
36 0.15167 68 2.49917
37 0.16167 69 2.75583
38 0.17250 70 3.04583
39 0.18417 71 3.37667
40 0.19833 72 3.75917
41 0.21333 73 4.19333
42 0.22917 74 4.67000
43 0.24667 75 5.18000
44 0.26583 76 5.71917

45 0.28750 77 6.28333
46 0.31083 78 6.87583
47 0.33583 79 7.51583
48 0.36333 80 8.22333
49 0.39333 81 9.01750
50 0.42750 82 9.91500
51 0.46667 83 10.91250
52 0.51167 84 11.99000
53 0.56333 85 13.12417
54 0.62083 86 14.29917

55 0.68500 87 15.49917
56 0.75500 88 16.71833
57 0.82917 89 17.97417
58 0.91167 90 19.28500
59 1.00500 91 20.68167
60 1.10833 92 22.21750
61 1.22333 93 24.04333
62 1.35667 94 26.50333
63 1.50667
64 1.67417
65 1.85750
66 2.05583

SF 378
<PAGE>
DEFINITIONS IN THIS POLICY

ACCUMULATED VALUE---(also known as Policy Value) is the sum of the values in the
Loan Account, Fixed Account, and Investment Accounts.

ADJUSTMENT DATE--means the Monthly Date on or next following our approval of a
requested adjustment.

EXAMPLE:If the Policy Date is June 5, 1997, and if your requested adjustment
is approved on April 20, 1998, the Adjustment Date will be May 5, 1998.

ATTAINED AGE--means the Insured's age on the birthday on or preceding the last
Policy Anniversary.

BUSINESS DAY--is any day that the New York Stock Exchange is open for trading,
and trading is not restricted. We will deem each Business Day to end at the time
we determine the net asset value of the underlying Mutual Fund shares held by
the Division of the Separate Account. When we need to determine a Policy Value
or an amount after the end of a Business Day, or on a day that is not a Business
Day, we will do so at the end of the next Business Day.

DIVISION--is the part of the Separate Account to which Net Premiums may be
allocated which invests in shares of a Mutual Fund. The value of an investment
in a Division is variable and is not guaranteed.

EFFECTIVE DATE--is the date on which all requirements for issuance of a policy
have been satisfied.

FIXED ACCOUNT--is that part of the Policy Value that reflects the value you have
in our general account.

INSURED--means the person named as the Insured on the current Data Pages of this
policy. The Insured may or may not be the owner.

INVESTMENT ACCOUNT--is that part of the Policy Value that reflects the value you
have in one of the Divisions of the Separate Account.

LOAN ACCOUNT--is that part of the Policy Value that reflects the value you have
transferred from the Fixed Account and/or Separate Account as collateral for a
policy loan.

MATURITY DATE--means the Policy Anniversary following the Insured's 95th
birthday.

MONTHLY DATE--means the day of the month which is the same as the day of the
Policy Date.

EXAMPLE: If the Policy Date is June 5, 1997, the first Monthly Date is
July 5, 1997.

MONTHLY POLICY CHARGE--is the amount subtracted from your Policy Value on each
Monthly Date equal to the sum of the cost of insurance and additional benefits
provided by any rider plus the monthly administration charge and mortality and
expense risks charge in effect on the Monthly Date.

MUTUAL FUND--means a registered open-end investment company in which the
Divisions of the Separate Account may invest under this policy. Mutual Funds
currently available are shown on the current Data Pages.

NET PREMIUM--is the gross premium less the deductions for the Premium Expense
Charge as shown on the current Data Pages. It is the amount of premium allocated
to the Fixed Account and/or Investment Accounts.

NOTICE--means any form of communication we receive in our home office providing
the information we need, either in writing or another manner that we approve in
advance.

POLICY DATE--is the date shown on the current Data Pages.

POLICY VALUE--(also known as the Accumulated Value) is the sum of the values
in the Loan Account, Fixed Account, and Investment Accounts.

POLICY YEARS AND ANNIVERSARIES--means the Policy Years and Anniversaries
computed from the Policy Date.

EXAMPLE: If the Policy Date is June 5, 1997, the first Policy Year ends
on June 4, 1998. The first Policy Anniversary falls on June 5, 1998.

PREMIUM EXPENSE CHARGE---is the charge deducted from premium payments to cover a
sales charge, state and local premium taxes and the federal tax charge as shown
on the current Data Pages.

PRORATED BASIS--means in the proportion that the value of a particular
Investment Account or Fixed Account bears to the total value of all Investment
Accounts and Fixed Account.

SEPARATE ACCOUNT--means Principal Mutual Life Insurance Company Variable Life
Separate Account, a registered Unit investment trust with Divisions and
segregated assets, to which Net Premiums may be allocated under this policy and
others we issue.

TARGET PREMIUM--is a premium amount used to determine the maximum sales charge
that is included as part of the Premium Expense Charge and any applicable
contingent deferred sales charge under a policy. Your Target Premium is set
forth on your Current Data Pages.

UNIT--is the accounting measure used to calculate the Separate Account value.

VALUATION PERIOD--means the period between the time as of which the net asset
value of a Mutual Fund is determined on one Business Day and the time as of
which such value is determined on the next following Business Day.

WE, OUR, US--means Principal Mutual Life Insurance Company.

WRITTEN REQUEST--means a form satisfactory to us, signed and dated by you, and
filed at our home office.

YOU, YOUR--means the owner of this policy.

PURCHASING AND KEEPING THE CONTRACT IN FORCE

PREMIUM PAYMENTS

Your first premium is due on the Policy Date. After that, premiums may be paid
at any time while this policy is in force. The amount of your premiums is
subject to the Premium Payment Limits provision. We will give a receipt to the
premium payor on request.

Your initial Net Premium will be allocated to the Money Market Division of the
Separate Account. The Premium Expense Charge is shown on the current Data Pages.
Net Premiums will continue to be allocated to the Money Market Division until 20
days after the Effective Date. After the 20-day period has expired, your
policy's Accumulated Value will be transferred to the Divisions indicated by
your initial premium allocation percentage(s) request.

The premium allocation percentages are shown on the current Data Pages. Unless
you change them, these percentages apply to future allocations of premiums. For
each Division, the allocation percentages must be zero or a whole number not
less than ten nor greater than 100. The sum of the percentages for all Divisions
must equal 100.

PLANNED PERIODIC PREMIUMS You may preauthorize automatic monthly planned
periodic premium payments. If you do not elect to pay automatically, we will
send you reminder notices of the amount and frequency of your planned periodic
premiums as selected in your application. These notices serve only as a reminder
of your preference. Premiums are to be sent to the address we provide in the
reminder notices. You may change the amount and frequency of your planned
periodic premiums by providing Notice to us.

If you do not make a planned periodic premium payment or additional premium
payments, the Grace Period provision may apply.

PREMIUM PAYMENT LIMITS To keep this policy in force you must satisfy the
requirements described in the Grace Period provision.

The smallest premium payment we will accept is shown on the current Data Pages.

You may choose to make premium payments that are greater than the planned
periodic premium. However, we will refund any premiums that would disqualify
this policy as "life insurance" as defined in the Internal Revenue Code, as
amended.

If any payment increases the policy's death benefit by more than it increases
the Policy Value, we reserve the right to refund the premium payment. Evidence
of insurability which satisfies us may be required.

GRACE PERIOD The grace period begins when we mail a notice of impending policy
termination to you. This notice will be sent to your last post office address
known to us. It will show the minimum payment required to keep your policy in
force. It will also show the 61 day grace period during which we will accept
that payment.

A notice of impending policy termination will be sent if:

1. During the 24 months following the Policy Date, the sum of the premiums paid
is less than the minimum required premium on a Monthly Date;

2. During the 24 months following the Policy Date, you have taken out a policy
loan and during this period, the net surrender value on any Monthly Date is less
than the Monthly Policy Charge; or

3. After this 24 month period, the net surrender value on any Monthly Date is
less than the Monthly Policy Charge.

The minimum required premium on a Monthly Date is equal to A times B where:

A Is the minimum monthly premium shown on the current Data Pages; and

B Is the number of completed months since the Policy Date.

If the grace period begins because the net surrender value is less than the
Monthly Policy Charge, the minimum payment is equal to A plus B divided by C
where:

A Is the amount by which the surrender charge exceeds the Accumulated Value on
the Monthly Date on or preceding the grace period;

B Is three Monthly Policy Charges; and

C Is 1 minus the maximum Premium Expense Charge.

If the grace period ends before we receive the minimum payment, we will keep any
remaining value in the policy.

If the grace period begins because the sum of the premiums paid is less than the
minimum required premium, the minimum payment is:

1. The minimum required premium due on the second Monthly Date following the
beginning of the grace period;

LESS

2. The sum of the premiums paid since the Policy Date.

If the grace period ends before we receive the minimum payment described above,
we will pay you any remaining value in the policy which would be the result of A
minus B where:

A Is the net surrender value on the Monthly Date immediately preceding the start
of the grace period, and

B Is the two Monthly Policy Charges applicable during the grace period.

If the Insured dies during a grace period, we will pay the death proceeds to the
beneficiary.

TERMINATION All policy privileges and rights of the owner under this policy end:

1. When you surrender your policy for cash;

2. When the death proceeds are paid;

3. When the policy maturity proceeds are paid; or

4. When the grace period ends as described above. In this case, the privileges
and rights of the owner terminate as of the Monthly Date on which the grace
period begins.

REINSTATEMENT If this policy ends as described in the Grace Period provision,
you may reinstate it provided:

1. Such reinstatement is prior to the Maturity Date;

2. The Insured is alive;

3. Not more than three years have elapsed since the policy terminated;

4. You supply evidence which satisfies us that the Insured is insurable under
our underwriting guidelines then in effect;

5. You either repay or reinstate any policy loans and unpaid loan interest on
this policy existing at termination; and

6. You make a payment of at least the greater of (A plus B divided by C) or (D
minus E) where:

A Is the amount by which the surrender charge exceeds the Accumulated Value on
the Monthly Date on or preceding the grace period;

B Is three Monthly Policy Charges;

C Is 1 minus the maximum Premium Expense Charge;

D Is the minimum required premium due on the second Monthly Date following the
beginning of the grace period; and

E Is the sum of the premiums paid since the Policy Date.

The reinstatement will be effective on the Monthly Date on or next following the
date we approve it. Your surrender charges made upon reinstatement will be
calculated as if the policy had never ended. You will receive new Data Pages
upon reinstatement.

PREMIUM INVESTMENT OPTIONS

ALLOCATIONS--You may allocate Net Premiums to the Fixed Account and/or any of
the Separate Account Divisions. Allocation percentages must be zero or a whole
number not less than ten nor greater than 100. The sum of the allocation
percentages must equal 100. You may change the allocation percentages by
providing us Notice. Unless you change the initial premium allocation specified
in your application for this policy, it will continue to apply to subsequent
premium payments.

FIXED ACCOUNT Net Premiums allocated to the Fixed Account will earn interest at
a specified rate. In no event will the guaranteed interest rate be less than 3%
compounded annually.

INVESTMENT ACCOUNTS The Separate Account is comprised of Divisions shown on the
current Data Pages. Each Division invests in a Mutual Fund with a different
investment objective. You may allocate amounts to one or more of the Divisions.
An Investment Account will be established for you corresponding to each Division
of the Separate Account to which amounts are allocated or transferred under this
policy. We will maintain each of these Investment Accounts for you to keep track
of your values in each Division. Income, gains and losses, whether or not
realized, from each Division's assets are credited to or charged against that
Division without regard to income, gains or losses of other Divisions or our
other income, gains or losses.

VARIABLE LIFE SEPARATE ACCOUNT The Separate Account is registered with the
Securities and Exchange Commission as a Unit investment trust under the
Investment Company Act of 1940, as amended. Assets are put into the Separate
Account to support this policy and to support other variable life insurance
policies we may offer. We own the assets of the Separate Account. These assets
are not part of our general account. Income, gains and losses of the Separate
Account, whether or not realized, are credited to or charged against the
Separate Account assets, without regard to our other income, gains or losses.
The assets of the Separate Account will be available to cover the liabilities of
our general account only to the extent that the assets of the Separate Account
exceed the liabilities of the Separate Account arising under the variable life
insurance policies supported by the Separate Account.

We reserve the right to add other Divisions, eliminate or combine existing
Divisions, or transfer assets in one Division to another. If shares of a Mutual
Fund are no longer available for investment, or in our judgment investment in a
Mutual Fund becomes inappropriate considering the purpose of the Separate
Account, we may eliminate the shares of a Mutual Fund and substitute shares of
another. Substitution may be made with respect to both existing investments and
the investment of future Net Premium payments. However, no such changes will be
made without notifying you and getting any required approval from the
appropriate state and/or federal regulatory authorities. We will notify you of
any such change.

If we eliminate or combine existing Divisions, or transfer assets in one
Division to another, you may then change your allocation percentages and
transfer any value in that Division to another Division without charge. Or, you
may exchange the policy for a fixed-benefit flexible premium policy made
available by us. You may exercise this right until the later of 60 days after
the effective date of such change or the date you receive notice of this right.
The face amount of the new policy will be the death benefit of this policy on
the date of exchange.

BENEFITS WHILE POLICY IS IN FORCE

YOUR POLICY VALUES

Your Policy Value at any time is equal to the sum of the values you have in the
Loan Account, the Fixed Account and the Investment Accounts.

LOAN ACCOUNT VALUE You can get a loan on this policy under certain conditions.
When you take out a loan, we transfer the amount of the loan from the Fixed
Account and/or one or more of the Investment Accounts, into the Loan Account.
For details of the Loan Account see the Policy Loans section.

FIXED ACCOUNT VALUE The amount you have in the Fixed Account at any time equals:

1) Net Premiums allocated to it, PLUS

2) Amounts transferred to it, PLUS

3) Interest credited to it, LESS

4) Amounts deducted from it, LESS

5) Amounts transferred from it, LESS

6) Amounts withdrawn from it.

INVESTMENT ACCOUNT VALUE Your Investment Account value for each Division is
equal to the number of Units in that Investment Account multiplied by that
Division's Unit value. The number of Units in an Investment Account at any time
equals A minus B, where:

A is the number of Units credited to the Investment Account because of

1. Net Premiums allocated to it, and

2. Amounts transferred to it; and

B is the number of Units canceled from the Investment Account because of

1. Amounts deducted from it,

2. Amounts transferred from it, and

3. Amounts withdrawn from it.

The number of Units credited or canceled for a given transaction is equal to the
dollar amount of the transaction, divided by the Unit value on the Business Day
of the transaction.

UNIT VALUES We will determine the Unit values for each Division of the Separate
Account at the end of each Business Day.

The Unit value for each Division was established at $10 for the first Business
Day that an amount was allocated, or transferred to the particular Division. For
any subsequent Business Day, the Unit value for that Division is obtained by
multiplying the Unit value for the immediately preceding Business Day by the net
investment factor for the particular Division on that subsequent Business Day.

NET INVESTMENT FACTOR The net investment factor for a Division on any Business
Day is equal to A divided by B where:

A Is the net asset value of the underlying Mutual Fund shares held by that
Division at the end of such Business Day before any policy transactions are made
on that day; and

B Is the net asset value of the underlying Mutual Fund shares held by that
Division at the end of the immediately preceding Business Day after all policy
transactions were made for that day.

We reserve the right to adjust the above formula for any taxes determined by us
to be attributable to the operations of the Division.

TRANSFERS

TRANSFERS ALLOWED You may transfer amounts between the Fixed Account and the
Investment Accounts as provided below. To request a transfer, you must provide
us Notice. All transfers with the same effective dates count as one transfer. We
reserve the right to not accept transfer requests from someone requesting them
for multiple contracts. We also reserve the right to modify or revoke transfer
privileges and charges.

TRANSFERS FROM FIXED ACCOUNT You may transfer amounts from the Fixed Account to
an Investment Account by making either a scheduled or unscheduled Fixed Account
transfer, subject to the following conditions:

Either unscheduled transfers or scheduled transfers (not both) may occur during
the same Policy Year.

UNSCHEDULED FIXED ACCOUNT TRANSFERS--You may make one unscheduled transfer from
the Fixed Account each Policy Year, as follows:

1. You must provide us Notice within 30 days following either the Policy Date or
any Policy Anniversary.

2. The transfer will be effective on the Business Day we receive your Notice.

3. You must specify the dollar amount or percentage to be transferred, and the
resulting amount must not exceed 25% of your Fixed Account value as of the later
of the Policy Date or the last Policy Anniversary. However, you may transfer up
to 100% of your Fixed Account value within 30 days after the first and following
Policy Anniversaries if your Fixed Account value is less than $1,000

SCHEDULED FIXED ACCOUNT TRANSFERS-(Dollar Cost Averaging)-You may make scheduled
transfers on a monthly basis from the Fixed Account as follows:

1. Transfers will begin on the Monthly Date following the date we receive your
Notice.

2. Your Fixed Account value must equal or exceed the minimum transfer value
shown on the current Data Pages. We reserve the right to change this amount but
it will never exceed $10,000;

3. The monthly amount transferred must equal 2% of your Fixed Account value as
of the later of the Policy Date or the last Policy Anniversary;

4. The transfers will continue until your Fixed Account value is exhausted or we
receive Notice to stop them; and

5. If you stop the scheduled transfers, you may not start them again until six
months after the date of the last scheduled transfer.

TRANSFERS FROM INVESTMENT ACCOUNTS You may transfer amounts from an Investment
Account to either the Fixed Account or another Investment Account by making
either a scheduled or unscheduled Investment Account transfer, subject to the
following conditions:

Transfers to the Fixed Account are allowed only if:

1. You have not transferred any amount from the Fixed Account for at least six
months; and

2. Your Fixed Account value immediately after the transfer does not exceed
$1,000,000, except with our prior approval.

UNSCHEDULED INVESTMENT ACCOUNT TRANSFERS--You may make unscheduled transfers
from an Investment Account, as follows:

1. The transfer will be effective on the Business Day we receive your Notice.

2. You must specify the dollar amount or percentage to transfer from each
Investment Account, and the resulting amount must equal or exceed the lesser of
the value of your Investment Account or the minimum transfer amount shown on the
current Data Pages.

3. We reserve the right to charge a transaction charge as shown on the current
Data Pages for each unscheduled transfer after the twelfth transfer in a Policy
Year.

SCHEDULED INVESTMENT ACCOUNT TRANSFERS-(Dollar Cost Averaging)-You may make
scheduled transfers from an Investment Account, as follows:

1. Scheduled transfers will begin on the Monthly Date following the date we
receive your Notice.

2. You must specify how often the transfers will occur (annually, semi-annually,
quarterly or monthly).

3. You must specify the dollar amount to transfer from each Investment Account,
and that amount must equal or exceed the lesser of the value of your Investment
Account or the minimum transfer amount shown on the current Data Pages.

4. The value of each Investment Account from which transfers are made must equal
or exceed the minimum transfer value shown on the current Data Pages.

5. The transfers will continue until your interest in the Investment Account is
exhausted or we receive Notice to stop them.

6. We reserve the right to limit the number of Investment Accounts from which
transfers will be made at the same time. In no event will the limit ever be less
than two.

POLICY LOANS

You may obtain a policy loan from us with this policy as sole security. You may
borrow up to A minus B where:

A. Is 90% of the net surrender value; and

B. Is any outstanding policy loan and unpaid loan interest at the time the loan
request is processed at the home office.

The minimum loan amount is shown on the current Data Pages.

YOUR LOAN ACCOUNT If you take a policy loan, a portion of your Policy Value
equal to the loan will be transferred from the Fixed Account and/or the
Investment Accounts to your Loan Account until the loan is repaid. The effective
date of the transfer is the date of the loan.

The policy will enter a grace period if you take a policy loan during the 24
month period following the Policy Date, and the net surrender value on any
Monthly Date is less than the Monthly Policy Charge.

During the 24 months following the Policy Date, if you pay the minimum required
premium and do not take a policy loan, then you will not enter a grace period
even if your net surrender value is less than the Monthly Policy Charge on any
Monthly Date during this period.

The loan will result in a reduction in the value of the Fixed Account to the
extent amounts are transferred from the Fixed Account to the Loan Account, or in
the cancellation of Units in the Investment Account or Accounts from which the
loan was withdrawn. For each Investment Account, the number of Units canceled
will be equal to the portion of the loan withdrawn divided by the Unit value for
the Valuation Period in which the loan is taken.

You may tell us the amount of the policy loan to be withdrawn from the Fixed
Account and/or each Investment Account. If you do not tell us, the loan amount
will be withdrawn in the same proportion as the allocation used for your Monthly
Policy Charge. Amounts held in your Loan Account will be part of our general
account and will be credited with interest from the date of transfer. The
difference between the policy loan rate and the rate credited on the Loan
Account will not exceed 2%.

On each Policy Anniversary, if there has been a loan repayment, this credited
interest is transferred from the Loan Account to the Fixed Account and the
Investment Accounts. It is allocated among the Fixed Account and the Investment
Accounts in the same manner used to allocate premium payments.

All interest rates stated are effective annual rates. We apply these rates to
properly reflect the actual date we receive any repayments and any changes you
make in loan amounts during a policy month.

LOAN INTEREST CHARGE Interest charges accrue daily at the annual loan interest
rate shown on the current Data Pages. Interest is due and payable at the end of
each Policy Year. Any interest not paid when due is added to the loan principal
and bears interest at the same rate. The adding of unpaid interest charges to
the loan principal will cause additional amounts to be withdrawn from the
Divisions in the same manner as described above for loans.

REPAYMENT You may repay all or part of a policy loan as long as the policy is in
force and the minimum payment amount (as shown on the current Data Pages) is
met. Any policy loans and unpaid loan interest charges not repaid at the
Insured's death or at maturity are deducted from the death or maturity proceeds.

YOU SHOULD IDENTIFY THE PURPOSE OF EACH PAYMENT. IF WE CANNOT IDENTIFY ITS
PURPOSE, WE WILL CONSIDER IT TO BE A LOAN REPAYMENT IF A LOAN IS OUTSTANDING.

As the loan is repaid, the amount repaid is transferred from your Loan Account
to the Fixed Account and/or the Investment Accounts in the same manner used to
allocate premium payments. If you do not repay a policy loan or pay loan
interest and the net surrender value is less than the Monthly Policy Charge due
on a Monthly Date, the Grace Period provision will apply.

SURRENDER OF THE POLICY

SURRENDER VALUE AND NET SURRENDER VALUE The surrender value of your policy
equals the Policy Value less the surrender charges (described below.)

The net surrender value of your policy is the surrender value less any policy
loans and unpaid loan interest. As long as your policy is in force, you may
surrender it for its net surrender value by sending us a Written Request.

SURRENDER CHARGES The Table of Maximum Surrender Charges is shown on the current
Data Pages. Surrender charges vary based on the face amount of the policy and
the premiums paid and will apply only during the first 10 Policy Years unless
changed due to a face amount increase. A face amount increase has its own
surrender charge period which begins on the Adjustment Date. If a face amount
increase is made, the surrender charges will be a composite of all charges which
apply for each year.

PARTIAL SURRENDERS Each Policy Year after the second Policy Year, you may make
up to two partial surrenders from the net surrender value, subject to the
following:

1. Each partial surrender must be in an amount not less than the minimum amount
shown on the current Data Pages; and

2. In the aggregate the total amount surrendered in a Policy Year will not
exceed an amount equal to 75% of the net surrender value as of the date of the
first surrender.

The transaction charge is shown on the current Data Pages. You may tell us in
what proportion to allocate the amount of the partial surrender and transaction
charge to be withdrawn from the Fixed Account and/or each Separate Account
Division. If you do not tell us, the partial surrender and the transaction
charge will be withdrawn from the Fixed Account and the Separate Account
Divisions in the same proportion as the allocations used for your current
Monthly Policy Charge. Partial surrenders from the Fixed Account will be taken
from the most recent premium payments first (last in, first out).

The amount of the partial surrender plus the transaction charge will result in
the cancellation of Units in the Separate Account Divisions from which the
partial surrender occurs. The number of Units canceled will be equal to the
amount of the partial surrender plus the transaction charge divided by the Unit
value of the Division or Divisions for the Valuation Period in which the partial
surrender is effective.

Your Policy Value is reduced by the amount of the partial surrender plus the
amount of the transaction charge.

If the Option 1 death benefit is in effect, the face amount is reduced by the
amount of the partial surrender and the transaction charge.

POLICY EXPENSES

MONTHLY POLICY CHARGES On the Policy Date, and each Monthly Date thereafter, we
will deduct a Monthly Policy Charge.

The deduction for the Monthly Policy Charge is the sum of the following amounts:

1. The cost of insurance (described below) and the cost of additional benefits
provided by any rider in force for the policy month;

2. The current monthly administration charge but not greater than the maximum
shown on the current Data Pages; and

3. The current mortality and expense risks charge imposed on the Investment
Account value, which will not exceed the maximum as shown on the current Data
Pages.

The Monthly Policy Charge will be withdrawn from the Investment Accounts and/or
Fixed Account according to the allocation percentages you have chosen. These
percentages are shown on the current Data Pages.

Your choice for the Monthly Policy Charge allocation may be:

1. The same as the allocation percentages you have chosen for your premiums; or

2. Determined on a Prorated Basis; or

3. Any other allocation which we mutually agree upon.

If the amount in an Investment Account and/or Fixed Account is insufficient to
allow the allocation you have chosen, your Monthly Policy Charge will be
allocated on a Prorated Basis.

For each Investment Account and/or Fixed Account, the allocation percentages
must be zero or a whole number not less than ten nor greater than 100. The sum
of the percentages for all the Investment Accounts and the Fixed Account must
equal 100. Changes in allocation percentages may be made by providing Notice to
us. Once approved by us, they are effective as of the next Monthly Date.

COST OF INSURANCE The cost of insurance on each Monthly Date is A multiplied by
the result of B minus C, where:

A Is the cost of insurance rate as described in the Cost of Insurance Rates
section divided by 1,000;

B Is the death benefit as described in the Your Death Proceeds section of this
policy at the beginning of the Policy Month, divided by 1.0024663 (the sum of 1
plus the monthly guaranteed fixed account interest rate); and

C Is the Policy Value at the beginning of the policy month calculated as if the
Monthly Policy Charge was zero.

COST OF INSURANCE RATES The monthly cost of insurance rates are based on the
sex, issue age, duration since issue, risk classification, and smoking status of
the Insured. We determine these rates based on our expectations as to our future
mortality experience. Any change in these rates applies to all individuals of
the same class as the Insured. The cost of insurance rates will never be greater
than shown in the Table of Guaranteed Maximum Cost of Insurance Rates on the
current Data Pages. However, different cost of insurance rates may apply to any
face amount increase. Cost of insurance rates for a face amount increase are
based on the sex, age at time of adjustment, duration since adjustment, risk
classification, and smoking status of the Insured.

PREMIUM EXPENSE CHARGE We will deduct a Premium Expense Charge as shown on the
current Data Pages from each premium payment. The result will be the Net Premium
payment.

OTHER CHARGES We will charge a surrender charge as described in the Surrender Of
The Policy section if any of the following occurs during the surrender charge
period:

1. You request the net surrender value of your policy; or

2. You do not pay an amount due at the end of a grace period, and the policy
terminates.

If you take a partial surrender of the net surrender value of your policy, we
will charge a transaction charge as shown on your current Data Pages.

YOUR DEATH PROCEEDS

We will pay the death proceeds to the beneficiary subject to the provisions of
the policy, when we receive proof that the Insured died before the Maturity
Date. These death proceeds, determined as of the date of the Insured's death,
are A minus B where:

A Is the death benefit described below plus any proceeds from any benefit rider
on the Insured's life; and

B Is any policy loans and unpaid loan interest and, if the Insured died during a
grace period, any overdue Monthly Policy Charges.

We will pay interest on death proceeds from the date of death until date of
payment or until applied under a benefit option. It will be at a rate we
determine, but not less than required by state law.

DEATH BENEFIT This policy provides two death benefit options. The option in
effect is shown on the current Data Pages.

Option 1.

Under Option 1, the death benefit equals the greater of:

1. The policy's face amount; or

2. The amount found by multiplying the Policy Value by the applicable percentage
shown below.

Option 2.

Under Option 2, the death benefit equals the greater of:

1. The policy's face amount plus its Policy Value; or

2. The amount found by multiplying the Policy Value by the applicable percentage
shown below.

TABLE OF APPLICABLE PERCENTAGES*

(For ages not shown, the applicable percentages shall decrease by a pro rata
portion for each full year.)

INSURED'S ATTAINED AGE %

40 and under 250
45 215
50 185
55 150
60 130
65 120
70 115
75 through 90 105
95 100

*These percentages will be updated as required by revisions to the Internal
Revenue Code.

CHANGES IN DEATH BENEFIT OPTION You may change the death benefit option on or
after the second Policy Anniversary. To request a change in the death benefit
option, you must send us a Written Request. A change approved on a Monthly Date
will be effective on that Monthly Date. A change approved on other than a
Monthly Date will be effective on the next following Monthly Date. Changes in
options are limited to two per Policy Year and are subject to the following
conditions:

1. If the change is from Option 1 to Option 2, we will reduce the face amount.
The reduction will be equal to the Accumulated Value on the effective date of
the change. The face amount after any reduction must be at least the minimum
face amount required by our then current underwriting guidelines. We may require
proof of insurability which satisfies us.

2. If the change is from Option 2 to Option 1, we will increase the face amount.
The increase will be equal to the Accumulated Value on the effective date of
change. No proof of insurability is required.

YOUR MATURITY PROCEEDS If the Insured is living on the policy's Maturity Date,
we will pay you the policy's Accumulated Value less any policy loans and unpaid
loan interest.

ADJUSTING THE FACE AMOUNT While your policy is in force (but not in a grace
period) you may request an increase or decrease in the face amount. Decreases
may not be made during the first two Policy Years. Any adjustment is subject to
our approval.

APPROVAL OF AN ADJUSTMENT Any increase in face amount will be in a risk
classification we determine, and will be approved if:

1. The Attained Age of the Insured is 85 or less and the amount of the increase
is at least the minimum increase shown on the current Data Pages; and

2. You supply evidence which satisfies us that the Insured is insurable under
our underwriting guidelines then in effect.

No adjustment will be approved if:

1. The face amount after adjustment would be less than the minimum amount shown
on the current Data Pages; or

2. Your Monthly Policy Charges are being waived under any rider.

REQUESTING AN ADJUSTMENT You must send us a Written Request for an adjustment. A
request for a face amount increase must be signed by the Insured and owner. It
must show the face amount desired after adjustment. An adjustment is effective
on the Adjustment Date.

To the extent required by law, a face amount increase, (including one made under
an increase rider) is subject to the 10-Day Examination Offer and Right to
Exchange Policy provisions.

BENEFIT PAYMENT OPTIONS

You may elect to use one of these benefit options in your benefit instructions.
If no benefit instructions are in effect at the Insured's death, the beneficiary
may apply unpaid death proceeds under a benefit option. You may also apply the
net surrender value of your policy at surrender or at maturity under a benefit
option.

If a benefit option is elected, this policy must be exchanged for a
supplementary contract effective when the policy proceeds first become payable.
Payments under the following options are not affected by the investment
experience of any Division of our Separate Account after the policy proceeds are
applied under an option.

Option A. SPECIAL BENEFIT ARRANGEMENT--A specially designed benefit option may
be arranged with our approval.

Option B. PROCEEDS LEFT AT INTEREST--We will hold the amount applied on deposit.
Interest payments will be made annually, semi-annually, quarterly or monthly, as
elected.

Option C. FIXED INCOME--We will pay an income of a fixed amount or an income for
a fixed period not exceeding 30 years. Refer to Option C Tables to determine the
number of fixed amount payments or the amount of each fixed period payment. On
request, we will furnish benefit information not shown in the Tables.

Option D. LIFE INCOME--We will pay an income during a person's lifetime. A
minimum guaranteed period may be used, as shown in the Option D Table. Payments
will be in an amount we determine, but not less than shown in the Table.

Option E. JOINT AND SURVIVOR LIFE INCOME--We will pay an income during the
lifetime of two persons, and continuing until the death of the survivor. This
option includes a minimum guaranteed period of 10 years. Payments will be in an
amount we determine, but not less than shown in the Option E Table. On request,
we will furnish minimum income information for age combinations not shown in the
Table.

Option F. JOINT AND TWO-THIRDS SURVIVOR LIFE INCOME--We will pay an income
during the lifetime of two persons, and two-thirds of the original amount
continuing until the death of the survivor. Payments during the time both people
are alive will be in an amount we determine (the "original amount"), but not
less than shown in the Option F Table. On request, we will furnish minimum
income information for age combinations not shown in the Table.

OPTION C TABLES
================================================================================

Minimum Number of Months for Which Monthly Income will be Paid. First Payment on
Effective Date of Supplementary Contract.
Amount No. of No. of No. of
Applied Income Pymts* Income Pymts* Income Pymts*
$ 10,000 $ 50 274 $ 100 114 $ 175 61
25,000 150 214 250 114 400 67
50,000 250 274 500 114 750 72
100,000 450 321 1,000 114 1,500 72

*Minimum number of months for which full monthly income will be paid. There may
be part of a payment made one month after the last one. This partial payment
will be the balance, if any, of the amount applied less the payments, all
accumulated at interest.

Minimum Monthly Income To Be Paid for Number Of Years. First Payment on
Effective Date of Supplementary Contract.

Number of Years
Amount ------------------------------------------------------------
Applied 5 10 15 20 25 30
$ 10,000 179.10 96.10 68.70 55.10 47.10 41.80
25,000 447.75 240.25 171.75 137.75 117.75 104.50
50,000 895.50 480.50 343.50 275.50 235.50 209.00
100,000 1,791.00 961.00 687.00 551.00 471.00 418.00
<PAGE>
OPTION D TABLE
================================================================================

Minimum Monthly Life Income for Each $1,000 Applied. First Payment on Effective
Date of Supplementary Contract.

Minimum Guaranteed Period
Age ------------------------------------
Last Birthday 5 10 15 20 Inst*
Male Payee None Yrs. Yrs. Yrs. Yrs. Rfd.
----------------- --------- -------- ------- -------- -------- -------
55 4.45 4.44 4.40 4.33 4.23 4.24
56 4.54 4.53 4.48 4.41 4.29 4.31
57 4.64 4.62 4.57 4.48 4.35 4.38
58 4.74 4.72 4.66 4.56 4.42 4.46
59 4.84 4.82 4.76 4.65 4.48 4.54
60 4.96 4.94 4.87 4.74 4.55 4.63
61 5.08 5.06 4.97 4.83 4.61 4.72
62 5.21 5.18 5.09 4.92 4.68 4.82
63 5.35 5.32 5.21 5.01 4.75 4.92
64 5.50 5.46 5.33 5.11 4.81 5.02
65 5.66 5.62 5.47 5.21 4.87 5.13
66 5.83 5.78 5.60 5.31 4.94 5.25
67 6.01 5.95 5.75 5.41 4.99 5.37
68 6.21 6.13 5.89 5.52 5.05 5.50
69 6.42 6.33 6.05 5.62 5.11 5.64
70 6.64 6.53 6.21 5.72 5.16 5.78
71 6.87 6.74 6.37 5.82 5.20 5.93
72 7.12 6.97 6.54 5.91 5.25 6.09
73 7.39 7.21 6.71 6.01 5.29 6.25
74 7.67 7.46 6.88 6.10 5.32 6.42
75 7.98 7.73 7.05 6.18 5.35 6.60

*Income payments continue until the total received equals the amount applied
under the option.
<PAGE>
OPTION D TABLE, CONTINUED
================================================================================

Minimum Monthly Life Income for Each $1,000 Applied. First Payment on Effective
Date of Supplementary Contract.

Minimum Guaranteed Period
Age --------------------------------------------------
Last Birthday None 5 10 15 20 Inst*
Female Payee Yrs. Yrs. Yrs. Yrs. Rfd.
- ------------------- -------- -------- -------- ------- -------- --------
55 4.05 4.05 4.03 4.00 3.95 3.94
56 4.12 4.12 4.10 4.06 4.01 4.00
57 4.20 4.19 4.17 4.13 4.07 4.06
58 4.28 4.27 4.25 4.20 4.13 4.13
59 4.36 4.35 4.33 4.28 4.20 4.20
60 4.45 4.44 4.41 4.35 4.26 4.27
61 4.55 4.54 4.50 4.43 4.33 4.35
62 4.65 4.64 4.60 4.52 4.40 4.43
63 4.76 4.74 4.70 4.61 4.47 4.52
64 4.87 4.86 4.80 4.70 4.54 4.61
65 5.00 4.98 4.91 4.80 4.61 4.70
66 5.13 5.11 5.03 4.89 4.69 4.81
67 5.27 5.24 5.16 5.00 4.76 4.91
68 5.42 5.39 5.29 5.10 4.83 5.02
69 5.58 5.55 5.43 5.21 4.90 5.14
70 5.76 5.71 5.57 5.32 4.97 5.27
71 5.94 5.89 5.73 5.43 5.03 5.40
72 6.15 6.09 5.89 5.55 5.09 5.54
73 6.37 6.30 6.06 5.66 5.15 5.69
74 6.60 6.52 6.24 5.77 5.20 5.85
75 6.86 6.75 6.42 5.88 5.25 6.02

*Income payments continue until the total received equals the amount applied
under the option.
<PAGE>
OPTION E TABLE
================================================================================

Minimum Monthly Joint and Survivor Life Income For Each $1,000 Applied. First
Payment on Effective Date of Supplementary Contract.

Age Last Birthday Age Last Birthday of Female Payee
of Male Payee 55 60 62 65 70
----------------------- ------- ------ ------ ----- -----
60 3.82 4.04 4.12 4.25 4.45
62 3.85 4.09 4.19 4.33 4.57
65 3.90 4.16 4.28 4.45 4.74
70 3.95 4.26 4.40 4.62 5.01
75 3.99 4.33 4.48 4.75 5.24

OPTION F TABLE
================================================================================

Minimum Monthly Joint and Two-Thirds Survivor Life Income for Each $1,000
Applied. First Payment on Effective Date of Supplementary Contract.

Age Last Birthday of Female Payee
Age Last Birthday ----------------------------------------------------
of Male Payee 55 60 62 65 70
---------------------- ---------- --------- ---------- ---------- --------
60 4.22 4.45 4.55 4.71 5.00
62 4.30 4.54 4.65 4.82 5.14
65 4.41 4.68 4.80 4.99 5.35
70 4.61 4.92 5.06 5.29 5.74
75 4.82 5.17 5.33 5.60 6.14

BENEFIT OPTION INTEREST Interest at a rate we set, but never less than 3% a
year, will be applied to determine the payments under Option B. Any such
interest in excess of 3% will be added to payments under Option C.

CONDITIONS When a benefit option is elected:

1. Any amount payable to an assignee will be paid in one lump sum.

2. The amount applied must be at least $3,500 and result in periodic payments of
at least $20.

3. Benefit options are restricted if the recipient of benefits is not a natural
person.

4. Under Options D, E and F, one of the persons on whose life payments are based
must be the owner, Insured or beneficiary. The size of payments depends on the
age and sex of the person or persons on whose life payments are based. This will
be determined as of the effective date of the supplementary contract. We reserve
the right to require evidence of age, sex and continuing survival.

RIGHT TO EXCHANGE POLICY

You may exchange this policy for a new life policy we make available for this
purpose on the life of the Insured based on our current underwriting guidelines.
The new policy may not be a term insurance policy or a variable policy. Evidence
of insurability will not be required.

The exchange must be made during the first 24 months from the Effective Date
while your policy is in force, but not while it is in a grace period. The
exchange will be effective on receipt of a Written Request on a form we specify.
This policy will then terminate. The new policy will have the same Policy Date
as this policy.

You may choose whether the new policy will have either the same death benefit or
the same amount at risk as this policy. The amount at risk is the difference
between the Accumulated Value and the death benefit of the policy. Premiums for
the new policy will be based on the same issue age, sex, and risk classification
as this policy.

An equitable adjustment in the new policy's premiums and values will be made to
reflect any variations between the premiums and values under this policy and the
new policy. No additional charge will be made for this exchange privilege. Any
policy loans and unpaid loan interest must be repaid or transferred to the new
policy.

Any benefit riders included on this policy may be exchanged, without evidence of
insurability, for similar benefit riders on the new policy if:

1. You request the similar benefit rider to be included on the new policy; and

2. The similar benefit rider was available for the new policy on the effective
date of the benefit rider for this policy based on the same issue age, sex, and
risk classification as the Insured.

OWNER, BENEFICIARY, ASSIGNMENT

OWNERSHIP The owner is as named in the application unless you change ownership
as provided below. As owner, you may exercise every right and enjoy every
privilege provided by your policy, subject to the rights of any irrevocable
beneficiary. These rights and privileges continue while your policy is in force,
and end at the Insured's death. If you are not the Insured and you die before
the Insured, the Insured becomes the owner unless you have provided for a
successor owner.

BENEFICIARY The beneficiary(ies) named in the application will receive the death
proceeds unless you change the beneficiary designation as provided below. Any
death proceeds payable to a beneficiary who dies before the Insured will be paid
equally to surviving beneficiaries named in the application, unless we have
approved another Written Request. If no beneficiary survives the Insured, the
death proceeds will be paid to the owner or to the owner' s estate.

CHANGE OF OWNER OR BENEFICIARY You may change the owner or beneficiary of this
policy by Written Request. Our approval is needed and no change is effective
until we approve it. Once approved, the change is effective as of the date you
signed the request. We have the right to require that you send us this policy so
we can record the change.

BENEFIT INSTRUCTIONS While the Insured is alive, you may file instructions for
the payment of the death proceeds under one of the benefit options previously
described. Such instructions, or change of instructions, must be by Written
Request approved by us. If you change the beneficiary, it will revoke any prior
benefit instructions.

ASSIGNMENT You may assign your policy as collateral for a loan. The assignment
must be in writing and filed in our home office. We assume no responsibility for
any assignment's validity. An assignment as collateral does not change the
owner. The rights of beneficiaries, whenever named, except irrevocable
beneficiaries, become subordinate to those of the assignee.

GENERAL INFORMATION

THE CONTRACT This policy, the attached application, any amendments to the
application, and the current Data Pages make up the entire contract. Any
statements made in the application or an adjustment application will be
considered representations and not warranties. No statement, unless made in an
application, will be used to void your policy (or void an adjustment in case of
an adjustment application) or to defend against a claim.

ALTERATIONS This policy may be altered by mutual agreement, but any alterations
must be in writing and signed by one of our corporate officers. No one else,
including the agent, may change the contract or waive any provisions.

INCONTESTABILITY With respect to statements made in the initial application for
this policy, we will not contest this policy after the Insured has been alive
for two years after the Policy Date. With respect to statements made in any
subsequent application for additional coverage, we will not contest the
additional coverage resulting from such application after the Insured has been
alive for two years after the application date. The time limits in this
Incontestability provision do not apply to fraudulent misrepresentations.

AGE AND SEX If the age or sex of the Insured has been misstated, the death
benefit will be that which would be purchased by the most recent mortality
charge at the correct age or sex.

DEFERMENT We will usually pay surrenders, partial surrenders, or policy loans
within 5 Business Days after we receive a Written Request. We will usually pay
any death benefit within 5 Business Days after we receive proof at our home
office of the Insured ' s death.

However, we may not be able to determine the value of the assets of our Separate
Account if:

1. The New York Stock Exchange is closed on other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission;

2. The Securities and Exchange Commission by order permits postponement for the
protection of policyowners; or

3. The Securities and Exchange Commission requires that trading be restricted or
declares an emergency, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to determine the net
asset value of the Mutual Funds.

If any of the above events occur, we reserve the right to defer:

1. Determination and payment of any surrender, partial surrenders, or death
proceeds;

2. Payment of any policy loans;

3. Determination of the Unit values of the Divisions;

4. Any requested transfer between the Divisions; and

5. Application of your death proceeds or surrender proceeds under Your Benefit
Options.

PARTICIPATING Your policy is eligible to share in our divisible surplus. We will
determine its share and credit it as a dividend at the end of each Policy Year.
We do not expect any dividends will be paid under this policy. Dividends, if
any, will be paid in cash.

SUICIDE This policy' s death proceeds will not be paid if the Insured dies by
suicide, while sane or insane, within 2 years of the Policy Date. Instead, we
will return all premiums paid, less any partial surrenders and any policy loans
and unpaid loan interest. This amount will be paid to the beneficiary.

Any face amount increase made under the adjustment options will not be paid if
the Insured dies by suicide, while sane or insane, within 2 years of the
Adjustment Date. Instead, we will return the sum of the cost of insurance
charges for the increased amount of protection. This amount will be paid to the
beneficiary.

BASIS OF VALUES Guaranteed maximum cost of insurance rates are based on the
mortality table referred to on the current Data Pages.

A detailed statement of the method of calculating values and benefits has been
filed with the insurance department of the state in which this policy is
delivered. The guaranteed values are greater than or equal to those required by
any state law.

STATEMENT OF VALUE We will mail a statement to you once each Policy Year until
the policy terminates. The statement will show:

1. The current death benefit;

2. The current accumulated and surrender values;

3. All premiums paid since the last statement;

4. Any investment gain or loss since the last statement;

5. All charges since the last statement;

6. Any policy loans and unpaid loan interest;

7. Any partial surrenders since the last statement; and

8. The total value of each of your Investment Accounts.

SF 378

COST OF LIVING INCREASE RIDER

We will periodically give you the opportunity to increase the face amount of
your policy based on increases in the Consumer Price Index for All Urban
Consumers, subject to the provisions of this rider. No evidence that the Insured
is insurable is required.

LIMITATIONS AND CONDITIONS These limitations and conditions apply:

1. Increases are available only on every 3rd Policy Anniversary, as
measured from the Policy Date, and only when the amount of the increase is
at least the minimum cost of living increase shown on the current Data
Pages.

2. The amount of increase will be:

a. The lesser of the calculated increase ( as determined below) or the
maximum cost of living increase shown on the current Data Pages;

LESS

b. The total of any face amount increases made during the prior year
at a standard or preferred risk class.

3. Increases are subject to your acceptance, the provisions of this rider
and any other applicable policy provisions, including any exclusions or
limitations.

THE CALCULATED INCREASE The calculated cost of living increase is based on the
all-item Consumer Price Index for All Urban Consumers (CPI) as published by the
United States Department of Labor. The increase amount is determined by
multiplying your policy's current cost of living base (shown on the current Data
Pages) by an increase factor. The increase factor will be:

1. CPI 6 months prior to the cost of living increase date

DIVIDED BY

2. CPI 42 months prior to the cost of living increase date

LESS

3. 1.00

If use of the Index would result in a face amount decrease, no change in the
face amount will be made.

We will substitute what we believe is an appropriate index for the Consumer
Price Index for All Urban Consumers if:

1. The Index is discontinued, delayed, or otherwise not available for this
use; or

2. The composition or base of, or method of calculating the Index changes
so that we consider it not appropriate for calculating the future cost of
living increases.

MONTHLY POLICY CHARGE There is no cost associated with this rider. However, when
it is exercised, the Monthly Policy Charge will be increased to cover the costs
and charges for any increase in protection made under this rider. This increase
will be based on the risk class or classes shown on the current Data Pages.
Please refer to your policy for more information on Monthly Policy Charges.

DISABILITY BENEFITS If your policy has a rider that provides any benefits due to
disability, we will increase such benefits when a cost of living increase
occurs. For more information, see the rider providing these benefits.

PLANNED PERIODIC PREMIUM Your planned periodic premium will be increased
accordingly for any increase in protection made under this rider. Increases are
subject to your acceptance. We will notify you of this increase. You will be
sent new Data Pages reflecting the increase.

LIMIT ON COST OF LIVING BASE Your cost of living base may not be greater than
the face amounts on your policy that have a standard or preferred risk class.

TERMINATION This rider terminates, with no further cost of living increases
available, on the first of:

1. The Policy Anniversary following the Insured's 55th birthday;

2. Any decrease in your policy's face amount (except as a result of a
partial surrender or a change in your death benefit option);

3. Your failure to accept a cost of living increase; or

4. The termination of your policy.

REINSTATEMENT If this rider terminates under 2, 3, or 4 above it will be
reinstated:

1. Whenever an underwritten increase is made in your policy's face amount,
provided that increase is issued at a standard or preferred risk class;

2. If your policy is reinstated at a standard or preferred risk class; or

3. Automatically on the Policy Anniversary following the Insured's 21st
birthday, if terminated prior to that time.

SF 380

WAIVER OF MONTHLY POLICY CHARGE RIDER

This rider is part of your policy. It is issued in consideration of the
application and deduction from Accumulated Value of the monthly cost of waiver
rates for the benefits provided by this rider. All definitions, provisions and
exceptions of the policy apply to this rider unless changed by this rider. The
effective date is the Policy Date unless another date is shown on the current
Data Pages.

DEFINITIONS An Age Policy Anniversary means the Policy Anniversary on or next
following the birthday designated.

EXAMPLE: If the Policy Date is June 5, 2000, and the Insured is 65
years old on June 4, 2001, the Age 65 Policy Anniversary is June 5,
2001.

TOTAL DISABILITY For purposes of this rider, Total Disability is disability
which results from injury or sickness and prevents the Insured from working for
pay or profit:

1. In the Insured's regular occupation during the first 2 years of the
disability; and

2. Thereafter, in any occupation for which the Insured is reasonably fitted
by education, training, or experience.

Until the Insured's 25th birthday, "working for pay or profit" includes
attending school full time outside the home.

Total Disability also means (without regard to "working for pay or profit") the
total and irrecoverable loss of (a) sight of both eyes; (b) use of both hands or
both feet; or (c) use of one hand and one foot.

WAIVER PERIOD A waiver period becomes effective only after the Insured has
remained Totally Disabled for 6 continuous months. Once effective, the waiver
period begins:

1. On the Insured's Age 5 Policy Anniversary if the rider was issued and
Total Disability began before and continues to that date; or

2. For all others, on the Monthly Date which follows the date Total
Disability began.

In no event will a waiver period begin earlier than one year prior to our
receipt of written notice of the Insured's Total Disability.

The waiver period will continue as long as Total Disability continues
uninterrupted, except that the waiver period will:

1. End on the policy's Maturity Date (or death of the Insured, whichever is
earlier) if Total Disability:

a. Begins prior to the Insured's Age 60 Policy Anniversary; and

b. Continues to the Insured's Age 65 Policy Anniversary.

2. End on the Insured's Age 65 Policy Anniversary, if Total Disability:

a. Begins on or after the Insured's Age 60 Policy Anniversary; and

b. Begins before the Insured's Age 63 Policy Anniversary.

3. End after 2 years if Total Disability:

a. Begins on or after the Insured's Age 63 Policy Anniversary; and

b. Begins before the Insured's Age 65 Policy Anniversary.

DISABILITY BENEFITS If the Insured becomes Totally Disabled while this rider is
in force, on each Monthly Date during a waiver period we will waive (or credit
to the Accumulated Value if already deducted) the Monthly Policy Charge for the
policy benefits.

If Death Benefit Option 1 is in effect when we begin to waive your Monthly
Policy Charges, we will then change it to Option 2. You may not change the death
benefit option or increase the face amount during a waiver period.

We will pay the Accumulated Value to you on the Maturity Date if the policy
matures while Monthly Policy Charges are being waived by this rider.

If Monthly Policy Charges for policy benefits are being waived under this rider,
your policy will remain in force whether or not your net surrender value is
sufficient to continue the Monthly Policy Charge.

You may continue to pay premiums as described in your policy.

COST OF WAIVER RIDER The cost for the Waiver of Monthly Policy Charge Rider is
deducted on each Monthly Date. The cost is 1 multiplied by the result of 2 minus
3 where:

1. Is the Cost of Waiver Rate as shown on the current Data Pages,

2. Is the death benefit at the beginning of the Policy Month divided by 1
plus the monthly guaranteed rate (1.0024663); and

3. Is the Accumulated Value at the beginning of the month.

EXCEPTIONS In no case will the Monthly Policy Charge be waived or credited under
this rider if the Total Disability results from an intentional self-injury or
service in the military forces of any country at war, declared or undeclared.

At no time will the Monthly Policy Charges be waived for any face amount that
exceeds the maximum face amount as shown on the current Data Pages.

PROOF OF DISABILITY We will require proof which satisfies us of the Insured's
Total Disability before any Monthly Policy Charge can be waived or credited.
Such proof may include examination at our expense by doctors we select.

We may require similar proof of the Insured's continued Total Disability from
time to time during the first 2 years of Total Disability and once a year
thereafter.

If such proof is not provided as we require, the waiver period will end and
Monthly Policy Charges will again be deducted from your Accumulated Value.

CLAIMS The benefits under this rider will not be granted unless we receive
Written Notice of the claim while the Insured is living and remains Totally
Disabled. Failure to comply however, will not invalidate a claim if it was not
reasonably possible to give written notice within such time and notice was given
as soon as reasonably possible.

Even if your policy terminates because of the expiration of a grace period,
benefits under this rider may be granted if:

1. The Total Disability for which claim is made began before the end of the
grace period;

2. We receive written notice of the claim within one year after the due
date of the first unpaid Monthly Policy Charge; and

3. All other conditions for this rider are met.

If Total Disability begins within the grace period, any unpaid Monthly Policy
Charge due prior to the start of the waiver period must be paid before the
benefits of this rider are available.

POLICY INCREASES Refer to your current policy Data Pages to see if your policy
contains a Cost of Living Increase Rider, Salary Increase Rider, or an Extra
Protection Increase Rider.

If so, any increase arising from that rider will also be covered by this Waiver
of Monthly Policy Charge Rider. The Monthly Policy Charge for this rider will be
increased based on the risk class or classes shown on the Data Pages. We will
not require evidence of insurability.

If an increase under the Cost of Living Increase Rider becomes effective during
a waiver period, the Monthly Policy Charge for the increase will be waived as
long as the waiver period continues.

TERMINATION This rider ends on the first of:

1. The termination of your Policy;

2. The Insured's Age 65 Policy Anniversary, or at the end of a waiver
period which is in effect on the Insured's Age 65 Policy Anniversary; or

3. Our receipt of your Written Request to cancel it. The change will be
effective on the Monthly Date on or next following the date we receive the
request. We may require that you send your policy to our home office so
that we can record the cancellation.

SF 386

WAIVER OF SPECIFIED PREMIUM RIDER

This rider is part of your policy. It is issued in consideration of the
application and deduction from Accumulated Value of the monthly cost of waiver
of specified premium rates for the benefits provided by this rider. All
definitions, provisions and exceptions of the policy apply to this rider unless
changed by this rider. The effective date is the Policy Date unless another date
is shown on the current Data Pages.