<PAGE>
As filed with the Securities and Exchange Commission on February 28, 1997
Registration No. 33- 33085
811-06032
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.___
Post-Effective Amendment No. 12 X
---- -
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 19 X
---- -
PFL ENDEAVOR VA SEPARATE ACCOUNT
-------------------------------------
(Exact Name of Registrant)
PFL ENDEAVOR VARIABLE ANNUITY ACCOUNT
-----------------------------------------
(Former Name of Registrant)
PFL LIFE INSURANCE COMPANY
--------------------------
(Name of Depositor)
4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499
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(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code
(319) 297-8121
Frank A. Camp, Esquire
PFL Life Insurance Company
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
(Name and Address of Agent for Service)
Copy to:
Frederick R. Bellamy, Esquire
Sutherland, Asbill & Brennan L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
1
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DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that a notice pursuant to Rule 24f-2 for the year ended
December 31, 1996 was filed on February 18, 1997.
--------------
It is proposed that this filing will become effective:
------- immediately upon filing pursuant to paragraph (b) of
Rule 485
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
-------
60 days after filing pursuant to paragraph (a) (i) of
------- Rule 485
------- on __________ pursuant to paragraph (a)(i) of Rule 485
------- 75 days after filing pursuant to paragraph (a)(ii)
------- on __________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
2
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CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus) and
Part B (Statement of Additional Information)
of Registration Statement of Information Required by Form N-4
-------------------------------------------------------------
<TABLE>
<CAPTION>
PART A
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Item of Form N-4 Prospectus Caption
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<S> <C>
1. Cover Page.................... Cover Page
2. Definitions................... Definitions
3. Synopsis...................... Summary; Historical Performance
Data
4. Condensed Financial Information Financial Statements
5. General
(a) Depositor................. PFL Life Insurance Company
(b) Registrant................ The Mutual Fund Account
(c) Portfolio Company......... Underlying Funds
(d) Fund Prospectus........... Underlying Funds
(e) Voting Rights............. Voting Rights
6. Deductions and Expenses
(a) General................... Charges and Deductions
(b) Sales Load %.............. Surrender Charge
(c) Special Purchase Plan..... N/A
(d) Commissions............... Distributor of the Policies
(e) Expenses - Registrant..... N/A
(f) Fund Expenses............. Expenses Including Investment
Advisory Fees
(g) Organizational Expenses... N/A
7. Policies
(a) Persons with Rights....... The Policy; Election of Annuity
Option; Determination of Annuity
Payments; Annuity Commencement
Date; Ownership of the Policy
Voting Rights
(b) (i) Allocation of Premium
Payments............ Allocation of Premiums
(ii) Transfers........... Transfers
(iii) Exchanges........... N/A
(c) Changes................... Addition, Deletion or
Substitution of Investments;
Election of Annuity Option;
Annuity Commencement Date;
Beneficiary; Ownership of the
Policy
</TABLE>
3
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<TABLE>
<S> <C>
(d) Inquiries................. Summary
8. Annuity Period................ Annuity Options
9. Death Benefit................. Death of Annuitant Prior to
Annuity Commencement Date
10. Purchase and Policy Values
(a) Purchases................. Policy Application and Issuance
of Policies; Premiums
(b) Valuation................. Policy Value; The Mutual Fund
Account Value
(c) Daily Calculation......... The Mutual Fund Account Value
(d) Underwriter............... Distributor of the Policies
11. Redemptions
(a) By Owners................. Surrenders
By Annuitant.............. N/A
(b) Texas ORP................. Restrictions Under the Texas
Optional Retirement Program
(c) Check Delay............... Payment not Honored by Bank
(d) Lapse..................... N/A
(e) Free Look................. Summary
12. Taxes.......................... Certain Federal Income Tax
Consequences
13. Legal Proceedings.............. Legal Proceedings
14. Table of Contents for the
Statement of Statement of Additional
Additional Information Information
<CAPTION>
PART B
------
Item of Form N-4 Statement of Additional
- - ---------------- Information Caption
-------------------
<S> <C>
15. Cover Page..................... Cover Page
16 Table of Contents.............. Table of Contents
17. General Information
and History.................... (Prospectus) PFL Life Insurance
Company
18. Services.......................
(a) Fees and Expenses
of Registrant............. N/A
(b) Management Policies....... N/A
(c) Custodian................. Custody of Assets
Independent
Auditors.................. Independent Auditors
(d) Assets of Registrant...... Custody of Assets
</TABLE>
4
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<TABLE>
<S> <C>
(e) Affiliated Person......... N/A
(f) Principal Underwriter..... Distribution of the Policies
19. Purchase of Securities
Being Offered.................. Distribution of the Policies
Offering Sales Load............ N/A
20. Underwriters................... Distribution of the Policies;
(Prospectus) Distributor of the
Policies
21. Calculation of Performance
Data........................... Calculation of Yields and Total
Returns; Other Performance Data
22. Annuity Payments............... (Prospectus) Election of Annuity Option;
(Prospectus) Determination of Annuity
Payments
23. Financial Statements........... Financial Statements
<CAPTION>
PART C -- OTHER INFORMATION
---------------------------
Item of Form N-4 Part C Caption
- - ---------------- --------------
<S> <C>
24. Financial Statements
and Exhibits.................. Financial Statements and Exhibits
(a) Financial Statements..... Financial Statements
(b) Exhibits................. Exhibits
25. Directors and Officers of Directors and Officers of the
the Depositor Depositor
26. Persons Controlled By or Under Persons Controlled By or Under
Common Control with the Common Control with the
Depositor or Registrant....... Depositor or Registrant
27. Number of Policyowners........ Number of Policyowners
28. Indemnification............... Indemnification
29. Principal Underwriters........ Principal Underwriters
30. Location of Accounts..........
and Records................... Location of Accounts and Records
31. Management Services........... Management Services
32. Undertakings.................. Undertakings
Signature Page................ Signatures
</TABLE>
______________________________
5
<PAGE>
Prospectus May 1, 1997
THE ENDEAVOR VARIABLE ANNUITY
Issued Through
PFL ENDEAVOR VARIABLE ANNUITY ACCOUNT
by
PFL LIFE INSURANCE COMPANY
The Endeavor Variable Annuity Policy is a Flexible Premium Variable
Annuity that is offered by PFL Life Insurance Company ("PFL"). You can use the
Policy to accumulate funds for retirement or other long-term financial planning
purposes. You are generally not taxed on any earnings on amounts you invest
until you withdraw them or begin to receive annuity payments. The Policy is a
"variable" annuity because the value of your investments can go up or down based
on the performance of mutual fund portfolios that you select. It is a flexible
premium policy because after you purchase it you can generally make additional
investments of any amount of $50 or more, until the Annuity Commencement Date
when PFL begins making annuity payments to you.
You have twelve investment options to choose from. They include these
eleven mutual fund portfolios:
WRL Growth Portfolio, managed by Janus Capital Corporation
TCW Managed Asset Allocation Portfolio Dreyfus Small Cap Portfolio
TCW Money Market Portfolio Dreyfus U.S. Government
Securities Portfolio
T. Rowe Price International Stock Portfolio Value Equity Portfolio
T. Rowe Price Equity Income Portfolio Opportunity Value Portfolio
T. Rowe Price Growth Stock Portfolio Enhanced Index Portfolio
<PAGE>
You as the Owner of the Policy, bear the entire investment risk for all
amounts that you allocate to any of the mutual funds. This means that you could
lose the amount that you invest. But if the mutual fund shares increase in
value, then the value of your Policy will also increase.
The twelfth investment option is the Fixed Account. If you invest in the Fixed
Account, then PFL guarantees to return your investment with interest at rates
that PFL will declare from time to time.
Of course, you can choose any combination of these investment options. You can
also transfer amounts among these options (subject to some restrictions) until
the Annuity Commencement Date.
Like all securities, these securities have not been approved or disapproved by
the Securities and Exchange Commission, nor has the Securities and Exchange
Commission passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
2
<PAGE>
You should only purchase a Policy as a long-term investment. However, you
do have access to all or some of the current cash value of your investments at
any time before the Annuity Commencement Date. But, if you do withdraw cash from
your Policy, there may be a surrender charge. You may also have to pay income
taxes on some or all of the amount you withdraw, and if you are under the age 59
1/2 there may also be a tax penalty. Finally, there may be an interest
penalty if you make a premature withdrawal from the Fixed Account (this is
called an "Excess Interest Adjustment," and it could also result in your earning
extra interest). PFL has the right to postpone withdrawals from the Fixed
Account.
3
<PAGE>
Prospectuses for the mutual fund portfolios are attached to the back of
this prospectus. This prospectus and the mutual fund prospectuses give you vital
information about the Policies and the mutual funds. Please read them carefully
before you invest. Keep them for future reference.
Please note that the Policies and the mutual funds:
. are not bank deposits
. are not federally insured
. are not endorsed by any bank or government agency
. are not guaranteed to achieve their goal.
This Prospectus sets forth the information that a prospective
purchaser should consider before purchasing a Policy. A Statement of Additional
Information about the Policy and the Mutual Fund Account which has the same date
as this Prospectus has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available at no cost to any person requesting a copy by writing PFL at the
Administrative and Service Office or by calling 1-800-525-6205. The table of
contents of the Statement of Additional Information is included at the end of
this Prospectus.
This Prospectus and the Statement of Additional Information generally
describe only the Policies and the Mutual Fund Account, except when the Fixed
Account is specifically mentioned.
Administrative and Service Office:
Financial Markets Division--Variable Annuity Department
PFL Life Insurance Company
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
4
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
DEFINITIONS................................................................... 5
SUMMARY....................................................................... 8
CONDENSED FINANCIAL INFORMATION............................................... 16
FINANCIAL STATEMENTS.......................................................... 18
HISTORICAL PERFORMANCE DATA................................................... 18
Standardized Performance Data........................................... 18
TCW Money Market Subaccount 18
Other Subaccounts....................................................... 19
Opportunity Value Subaccount--Hypothetical Data ........................ 20
Enhanced Index Subaccount--Hypothetical Data ........................... 20
Non-Standardized Performance Data....................................... 21
PUBLISHED RATINGS............................................................. 22
PFL LIFE INSURANCE COMPANY.................................................... 22
THE ENDEAVOR ACCOUNTS......................................................... 23
The Mutual Fund Account................................................. 23
The Fixed Account....................................................... 26
Guaranteed Periods................................................ 26
Dollar Cost Averaging Fixed Account Option........................ 27
Transfers............................................................... 27
Reinstatements.......................................................... 28
Telephone Transactions.................................................. 28
Dollar Cost Averaging................................................... 29
Asset Rebalancing....................................................... 29
THE POLICY.................................................................... 30
Policy Application and Issuance of Policies--
Premium Payments................................................... 30
Initial Premium Payment........................................... 30
Subsequent Additional Premium Payments............................ 30
Maximum Total Premium Payments.................................... 30
Allocation of Premium Payments.................................... 30
Payment Not Honored by Bank....................................... 31
Policy Value............................................................ 31
The Mutual Fund Account Value..................................... 31
Amendments.............................................................. 31
Non-participating Policy................................................ 32
DISTRIBUTIONS UNDER THE POLICY................................................ 32
Surrenders.............................................................. 32
Nursing Care and Terminal Condition Withdrawal Option .................. 33
Excess Interest Adjustments (EIA)....................................... 33
Systematic Payout Option................................................ 33
Annuity Payments........................................................ 34
Annuity Commencement Date......................................... 34
Election of Payment Option........................................ 34
Premium Tax....................................................... 35
Supplementary Policy.............................................. 35
Annuity Payment Options................................................. 35
Death Benefit........................................................... 38
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Death of Annuitant Prior to Annuity Commencement
Date............................................................ 38
Death On or After Annuity Commencement Date....................... 39
Beneficiary....................................................... 39
Death of Owner.......................................................... 40
Restrictions Under the Texas Optional Retirement Program................ 40
Restrictions Under Section 403(b) Plans................................. 40
Restrictions Under Qualified Policies .................................. 40
CHARGES AND DEDUCTIONS........................................................ 40
Surrender Charge........................................................ 40
Mortality and Expense Risk Fee.......................................... 41
Administrative Charges.................................................. 42
Distribution Financing Charge........................................... 42
Premium Taxes........................................................... 42
Federal, State and Local Taxes.......................................... 43
Transfer Charge......................................................... 43
Other Expenses Including Investment Advisory Fees....................... 43
Employee and Agent Purchases............................................ 43
CERTAIN FEDERAL INCOME TAX CONSEQUENCES....................................... 43
Tax Status of the Policy................................................ 44
Taxation of Annuities................................................... 44
DISTRIBUTOR OF THE POLICIES................................................... 48
VOTING RIGHTS................................................................. 48
LEGAL PROCEEDINGS............................................................. 49
STATEMENT OF ADDITIONAL INFORMATION........................................... 49
Appendix A.............................................................. A-1
Appendix B.............................................................. B-1
</TABLE>
6
<PAGE>
DEFINITIONS
Accumulation Unit--An accounting unit of measure used in calculating the
Policy Value in the Mutual Fund Account before the Annuity Commencement
Date.
Adjusted Policy Value-- An amount equal to the Policy Value increased
or decreased by any Excess Interest Adjustment.
Administrative and Service Office--Financial Markets Division--Variable
Annuity Department, PFL Life Insurance Company, 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499-0001.
Annuitant--The person entitled to receive Annuity Payments after the
Annuity Commencement Date and during whose life any Annuity Payments involving
life contingencies will continue.
Annuity Commencement Date--The date upon which Annuity Payments are to
commence. This date may not be later than the last day of the policy month
starting after the Annuitant attains age 85, except as expressly allowed by PFL,
but in no event later than the last day of the month following the month in
which the Annuitant attains age 95.
Annuity Payment Option or Payment Option--A method of receiving a stream
of Annuity Payments selected by the Owner.
Annuity Unit--An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Annuity Payment after the
Annuity Commencement Date.
Beneficiary--The person who has the right to the death benefit set forth
in the Policy.
Business Day--Any day when the New York Stock Exchange is open for
business.
Cash Value--The Policy Value increased or decreased by any Excess Interest
Adjustment, less the Surrender Charge, if any.
Code--The Internal Revenue Code of 1986, as amended.
Current Interest Rate--The interest rate or rates currently guaranteed to
be credited on amounts under a Policy allocated to the Fixed Account. This
interest rate will always equal or exceed a minimum of 3%. See
7
<PAGE>
Appendix B for variations in the minimum guaranteed effective annual interest
rate applicable to the Fixed Account.
Due Proof of Death--A certified copy of a death certificate, a certified
copy of a decree of a court of competent jurisdiction as to the finding of
death, a written statement by the attending physician, or any other proof
satisfactory to PFL will constitute Due Proof of Death.
Distribution Financing Charge--a daily charge for the first seven Policy
Years equal to an effective annual rate of 0.15% of the Mutual Fund Account's
net assets.
Excess Interest Adjustment--A positive or negative adjustment to amounts
withdrawn upon partial withdrawal or surrenders, to amounts transferred by the
Owner from the Fixed Account Guaranteed Period Options, or to amounts applied to
Annuity Payment Options. The adjustment reflects changes in the interest rates
declared by PFL since the date any payment was received by or an amount was
transferred to the Guaranteed Period Option. The Excess Interest Adjustment
(EIA) can either decrease or increase the amount to be received by the Owner
upon surrender or commencement of Annuity Payments, depending upon whether there
has been an increase or decrease in interest rates, respectively.
Fixed Account-- A group of Investment Options under the Policy, other than
the Mutual Fund Account, that are part of the general assets of PFL that are not
in separate accounts.
Fixed Annuity Payments--Payments made pursuant to an Annuity Payment
Option which do not fluctuate in amount.
Guaranteed Period Options--The various guaranteed interest rate periods
which may be offered by PFL under the Fixed Account into which premiums may be
paid or amounts transferred.
Investment Options--Any of the Guaranteed Period Options of the Fixed
Account, the Dollar Cost Averaging Fixed Account Option, and any of the
Subaccounts of the Mutual Fund Account.
Mutual Fund Account--The PFL Endeavor Variable Annuity Account, which
comprises a portion of the PFL Endeavor VA Separate Account, a separate account
established and registered as a unit investment trust under the Investment
Company Act of 1940 to which Premium Payments under the Policies may be
allocated and which invests in the Growth Portfolio of the WRL Series Fund, Inc.
and the portfolios of the Endeavor Series Trust.
Nonqualified Policy--A Policy other than a Qualified Policy.
PFL--PFL Life Insurance Company, the issuer of the Policies.
Policy--One of the variable annuity policies offered by this Prospectus.
Policy Anniversary--Each anniversary of the Policy Date.
Policy Date--The date shown on the Policy data page attached to the
Policy and the date on which the Policy becomes effective.
8
<PAGE>
Policy Owner or Owner--The person who may exercise all rights and
privileges under the Policy. The Policy Owner during the lifetime of the
Annuitant and prior to the Annuity Commencement Date is the person designated as
the Policy Owner or a Successor Owner in the application.
Policy Value--On or before the Annuity Commencement Date, this is an
amount equal to (a) the Premium Payments; minus (b) partial withdrawals taken
(including any applicable Excess Interest Adjustments and Surrender Charges on
such partial withdrawals); plus (c) interest credited in the Fixed Account; plus
or minus (d) accumulated gains or losses in the Mutual Fund Account (including
applicable fees and charges); minus (e) any applicable service charges, premium
or other taxes, and transfer fees, if any.
Policy Year--Each 12-month period beginning on the Policy Date shown on
the Policy Data page and each Policy Anniversary thereafter.
Premium Payment--An amount paid to PFL by the Policy Owner or on the
Policy Owner's behalf as consideration for the benefits provided by the Policy.
Qualified Policy--A Policy issued in connection with retirement plans
that qualify for special Federal income tax treatment under the Code.
Service Charge--An annual charge on each Policy Anniversary (and a charge
at the time of surrender during any Policy Year) for Policy maintenance and
related administrative expenses. This annual charge is the lesser of 2% of the
Policy Value or $35.
Subaccount--A subdivision within the Mutual Fund Account, the assets of
which are invested in a specified Portfolio of the Underlying Funds.
Successor Policy Owner--A person appointed by the Policy Owner to succeed
to ownership of the Policy in the event of the death of the Policy Owner (if the
Policy Owner is not the Annuitant) before the Annuity Commencement Date.
Surrender Charge--A percentage of each Premium Payment in an amount from
7% to 0% depending upon the length of time from the date of each Premium
Payment. The Surrender Charge is assessed on surrenders of, or partial
withdrawals from, the Policy. A Surrender Charge may also be referred to as a
"Contingent Deferred Sales Charge."
Underlying Funds--The Growth Portfolio of the WRL Series Fund, Inc., and
the portfolios of the Endeavor Series Trust.
Valuation Period--The period of time from one determination of
Accumulation Unit and Annuity Unit values to the next subsequent determination
of values. Such determination is made on each Business Day.
Variable Annuity Payments--Payments made pursuant to an Annuity Payment
Option which fluctuate as to dollar amount or payment term in relation to the
investment performance of the specified Subaccounts within the Mutual Fund
Account.
Written Notice or Written Request--Written notice, signed by the Policy
Owner, that gives PFL the information it requires and is received at the
Administrative and Service Office. For some transactions, PFL may accept an
electronic notice such as telephone instructions. Such electronic notice must
meet the requirements PFL establishes for such notices.
9
<PAGE>
THE ENDEAVOR VARIABLE ANNUITY
SUMMARY
The following summary is intended to provide a brief overview of the
Policy. More detailed information can be found in the sections of this
Prospectus that follow, all of which should be read in their entirety.
The Policy
The Endeavor Variable Annuity is a Flexible Premium Variable Annuity which
can be purchased as a Nonqualified Policy or as a Qualified Policy. The Owner
allocates the Premium Payments among the two Endeavor Accounts of PFL: the PFL
Endeavor Variable Annuity Account, (the "Mutual Fund Account") and the Fixed
Account.
Certain features described in this Prospectus may only be available to
Policies purchased after the effective date of the Policy form used. (See
"Variations in Policy Provisions," p.15 and Appendix B to this Prospectus.)
The Accounts
The Mutual Fund Account. The Mutual Fund Account is a separate account of
PFL, which invests exclusively in shares of the ten portfolios of the Endeavor
Series Trust and the Growth Portfolio of the WRL Series Fund, Inc.
(collectively, the "Underlying Funds"). The Endeavor Series Trust is a mutual
fund managed by Endeavor Investment Advisers, a general partnership between
Endeavor Management Co. and AUSA Financial Markets, Inc. (an affiliate of PFL),
which contracts with several subadvisers (as described in separate prospectuses
that accompany this Prospectus) for investment advisory services. The WRL Growth
Portfolio is a portfolio within the WRL Series Fund, Inc. The WRL Series Fund,
Inc. is a mutual fund whose investment adviser is WRL Investment Management,
Inc., a subsidiary of Western Reserve Life Assurance Co. of Ohio ("Western
Reserve"), (an affiliate of PFL). WRL Investment Management, Inc. contracts with
Janus Capital Corporation as a sub-adviser to the WRL Growth Portfolio for
investment advisory services.
The Underlying Funds currently have eleven Portfolios: the WRL Growth
Portfolio, managed by Janus Capital Corporation; the TCW Managed Asset
Allocation Portfolio; the TCW Money Market Portfolio; the T. Rowe Price
International Stock Portfolio; the Value Equity Portfolio; the Dreyfus Small Cap
Value Portfolio; the Dreyfus U.S. Government Securities Portfolio; the T.
10
<PAGE>
Rowe Price Equity Income Portfolio; the T. Rowe Price Growth Stock Portfolio;
the Opportunity Value Portfolio; and the Enhanced Index Portfolio. Each of the
eleven Subaccounts of the Mutual Fund Account invests solely in a corresponding
Portfolio of the Underlying Funds. Because the Policy Value may depend on the
investment experience of the selected Subaccounts, the Owner bears the entire
investment risk with respect to Premium Payments allocated to, and amounts
transferred to, the Mutual Fund Account. (See "THE ENDEAVOR ACCOUNTS--The Mutual
Fund Account," p. 23.)
The Fixed Account. The Fixed Account generally guarantees return of
principal and a minimum effective annual interest rate of 3% on Premium Payments
allocated to, and amounts transferred to, the Fixed Account (see Appendix "B"
for variations in the minimum guaranteed effective annual interest rate for
prior versions of Policies and for Policies offered in certain states). PFL may,
in its sole discretion, declare a higher Current Interest Rate. A Current
Interest Rate is guaranteed for at least one year. (See "THE ENDEAVOR
ACCOUNTS--The Fixed Account," p. 26.)
Premium Payments
A Nonqualified Policy may be purchased with an initial Premium Payment of
at least $5,000, and a Qualified Policy generally may be purchased with an
initial Premium Payment of at least $1,000. A Policy purchased and used in
connection with a Tax Deferred 403(b) Annuity may be purchased with an initial
premium payment in any amount chosen by the purchaser, however, PFL must receive
the initial Premium Payment within 90 days following the Policy Date, otherwise
the Policy will be canceled. An Owner may make subsequent additional Premium
Payments of at least $50 each at any time before the Annuity Commencement Date.
The maximum total Premium Payments allowed without prior approval of PFL is
$1,000,000. At the time of each Premium Payment no charges or fees are deducted,
so the entire Premium Payment is invested immediately, subject to the
restrictions below regarding the "Right to Cancel" period. (See "CHARGES AND
DEDUCTIONS--Surrender Charge," p. 40 and CHARGES AND DEDUCTIONS--Premium Taxes,"
p. 42.)
The Owner must allocate the initial Premium Payment among the Investment
Options (that is, among the options available under the Fixed Account or the
Subaccounts of the Mutual Fund Account or a combination of those options)
according to allocation percentages in the Policy application or transmittal
form. Any allocation must be in whole percents, and the total allocation must
equal 100%. Allocations specified by the Owner for the Initial Premium Payment
will be used for Subsequent Additional Premium Payments unless the Owner
requests a change in allocation. Allocations of additional Premium Payments may
be changed by sending Written Notice to PFL's Administrative and Service Office.
(See "THE POLICY--Policy Application and Issuance of Policies--Premium
Payments," p. 30.)
Right to Cancel Period
The Owner may, until the end of the period of time specified in the Policy
(the Right to Cancel period), examine the Policy and return it for a refund. The
applicable period will depend on the state in which the Policy is issued. In
some states the period is ten (10) days after the Policy is delivered to the
Owner. Many states allow for
11
<PAGE>
a longer period to return the Policy. The amount of the refund will also depend
on the state in which the Policy is issued. Ordinarily the amount of the refund
will be the Policy Value. However, some states may require a return of the
Premium Payments, or the greater of the Premium Payments or the Policy Value.
PFL will pay the refund within seven (7) days after it receives written notice
of cancellation and the returned Policy. The Policy will then be deemed
void.
If the Policy is issued in California (a) to an Owner who is age 60 or
more and (b) with a Premium Payment of $10,000 or more, then the amount returned
will be the Policy Value. If the Policy is issued in California (a) to an Owner
who is age 59 or less or (b) with a Premium Payment of less than $10,000, then
the amount returned will be the Premium Payment and any charges deducted.
Transfers Before the Annuity Commencement Date
An Owner may transfer Policy Values from one Subaccount to another within
the Mutual Fund Account or to the Fixed Account, or from the Guaranteed Period
Options of the Fixed Account to the Mutual Fund Account. The minimum amount
which may be transferred is $500, or the entire Subaccount (or Guaranteed Period
Option) value, whichever is less. However, following a transfer out of a
particular Subaccount or Guaranteed Period Option, at least $500 must remain in
that Subaccount or Guaranteed Period Option, otherwise PFL reserves the right to
either deny the transfer request or include remaining amounts in the transfer.
Transfers currently may be made either by telephone (subject to the provisions
described below under "Telephone Transactions," p. 28) or by sending Written
Notice to the Administrative and Service Office.
An Owner may choose the Guaranteed Period Option to or from which
transfers may be made. Transfers from a Guaranteed Period Option prior to the
end of a Guaranteed Period are subject to an Excess Interest Adjustment which
may increase or decrease the amount available to transfer. (see "DISTRIBUTIONS
UNDER THE POLICY--Excess Interest Adjustment," p. 34 and "THE ENDEAVOR
ACCOUNTS--Transfers," p. 27.)
Transfers from the Dollar Cost Averaging Fixed Account Option, except
through automatic Dollar Cost Averaging transfers, are not allowed. (see "THE
ENDEAVOR ACCOUNTS--Dollar Cost Averaging Fixed Account Option," p. 27.)
Prior versions of the Policy and Policies issued in certain states may
have additional restrictions on transfers. See Appendix B and the Policy or
endorsement for details.
A $10 charge may be imposed for each transfer in excess of 12 transfers
per Policy Year. Currently PFL does not charge for any transfers. (See "THE
ENDEAVOR ACCOUNTS---Transfers," p. 27.)
Surrenders and Partial Withdrawals
12
<PAGE>
The Owner may elect to surrender the Policy or make a partial withdrawal
from the Policy ($500 minimum) in exchange for a cash payment from PFL at any
time prior to the earlier of the Annuitant's death or the Annuity Commencement
Date. A surrender or partial withdrawal may be subject to deductions for
Surrender Charges, Excess Interest Adjustments, and Service Charges. (See
"CHARGES AND DEDUCTIONS," p.40.) A surrender or partial withdrawal request must
be made by Written Request, and a request for a partial withdrawal must specify
the Subaccount(s) or Guaranteed Period Options from which the withdrawal is
requested. There is currently no limit on the frequency or timing of partial
withdrawals. (See "DISTRIBUTIONS UNDER THE POLICY---Surrenders," p. 32),
although for Qualified Policies the retirement plan or applicable law may
restrict and/or penalize partial withdrawals. In addition to the applicable
charges and deductions under the Policy, surrenders and partial withdrawals may
be subject to premium taxes, income taxes and a 10% penalty tax.
Nursing Care and Terminal Condition Withdrawal Option
If the Owner or Owner's spouse (or Annuitant or Annuitant's spouse if the
Owner is not a natural person): (1) has been confined in a hospital or nursing
facility for 30 consecutive days or (2) has been diagnosed as having a terminal
condition, as defined in the Policy or endorsement, then partial withdrawals or
surrenders may be taken with no Surrender Charge and no Excess Interest
Adjustment. (This benefit may not be available in all states or for all policy
forms. See Appendix B and the Policy or endorsement for details.) (See
DISTRIBUTIONS UNDER THE POLICY--Nursing Care and Terminal Condition Withdrawal
Option," p. 33.)
Charges and Deductions
Surrender Charge. In order to permit investment of the entire Premium
Payment, PFL does not deduct sales or other charges at the time the Policy is
purchased. However, a Surrender Charge of up to 7% of the amount withdrawn is
imposed on certain surrenders or partial withdrawals of Premium Payments in
order to cover expenses relating to the sale of the Policies. The applicable
Surrender Charge is based on the period of time elapsed since payment of the
Premium Payment(s) being withdrawn. There is no Surrender Charge imposed seven
or more years after a Premium Payment was paid. For purposes of determining the
applicable Surrender Charge, Premium Payments are considered to be withdrawn on
a "first in--first out" basis. (See "CHARGES AND DEDUCTIONS---Surrender Charge,"
p. 40.) Note that for income tax purposes, however, gains are deemed to be
withdrawn first. (See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," p.43.) After
the first Policy Year, up to 10% of the Policy Value may be withdrawn once per
Policy Year without an Excess Interest Adjustment and without a Surrender Charge
if it is the first withdrawal in that Policy Year.
13
<PAGE>
Excess Interest Adjustment. Surrenders, partial withdrawals and transfers
out of Fixed Account Guaranteed Period Options, which occur prior to the end of
the Guarantee Period, are subject to an Excess Interest Adjustment, which could
eliminate all credited interest in excess of the minimum guaranteed effective
annual interest rate of 3%. The Excess Interest Adjustment, if a positive
adjustment, could also result in the crediting of additional interest. (See
"DISTRIBUTIONS UNDER THE POLICY--Excess Interest Adjustment," p. 33.)
Account Charges. PFL deducts a daily charge equal to a percentage of the
net assets in the Mutual Fund Account for the mortality and expense risks
assumed by PFL. For Guaranteed Minimum Death Benefit Options "A" (5% Annually
Compounding Death Benefit) and "B" (Annual Step-Up Death Benefit), the effective
annual rate of this charge is 1.25% of the value of the Mutual Fund Account's
net assets. For Guaranteed Minimum Death Benefit Option "C" (Return of Premium
Death Benefit), the effective annual rate of this charge is 1.10% of the value
of the Mutual Fund Account's net assets. (See "CHARGES AND DEDUCTIONS--Mortality
and Expense Risk Fee," p. 41, and "DISTRIBUTIONS UNDER THE POLICY--Death
Benefit," p. 38.)
PFL also deducts a daily Administrative Charge from the net assets of the
Mutual Fund Account to partially cover expenses incurred by PFL in connection
with the administration of the Mutual Fund Account and the Policies. The
effective annual rate of this charge is .15% of the value of the Mutual Fund
Account's net assets. (See "CHARGES AND DEDUCTIONS--Administrative Charges," p.
42.)
PFL guarantees that the account charges for mortality and expense risks and
administrative expenses will not exceed a total of 1.40% for the 5% Annually
Compounding Death Benefit and the Annual Step Up Death Benefit, and 1.25% for
the Return of Premium Death Benefit.
Service Charge. Prior to the Annuity Commencement Date, there is an annual
Service Charge on each Policy Anniversary (and a charge at the time of surrender
during any Policy Year) for Policy maintenance and related administrative
expenses. This annual charge is the lesser of 2% of the Policy Value or $35. The
Service Charge is deducted from each Investment Option in proportion to each
Investment Option's percentage of the Policy Value just prior to such charge.
This charge is waived if either the Policy Value or the sum of all Premium
Payments less the sum of all partial withdrawals equals or exceeds $50,000 on a
Policy Anniversary (or date of surrender). PFL guarantees that this charge will
not be increased in the future. (See "CHARGES AND DEDUCTIONS--Administrative
Charges," p. 42.)
Distribution Financing Charges. During the first seven Policy Years, PFL
imposes a daily Distribution Financing Charge equal to an effective annual rate
of .15% of the Mutual Fund Account's net assets. This charge is used by PFL to
defray a portion of the cost of distribution of the Policies. The sum of the
cumulative
14
<PAGE>
Distribution Financing Charges and the Surrender Charges will never exceed 8.5%
of the cumulative Premium Payments. (See "CHARGES AND DEDUCTIONS--Distribution
Financing Charge," p. 42.)
Taxes. PFL may incur premium taxes relating to the Policies. When
permitted by state law, PFL will not deduct any premium taxes related to a
particular Policy from the Policy Value until withdrawal of the full Policy
Value, payment of the death benefit, or the Annuity Commencement Date. Premium
taxes currently range from 0% to 3.50% of Premium Payments. (See "CHARGES AND
DEDUCTIONS---Premium Taxes," p. 42.)
No charges are currently made against the Fixed Account or the Mutual Fund
Account for federal, state, or local income taxes. Should PFL determine that any
such taxes may be imposed, PFL may deduct such taxes from amounts held in the
relevant Account. (See "CHARGES AND DEDUCTIONS---Federal, State and Local
Taxes," p. 43.)
Charges Against the Underlying Funds. The value of the net assets of the
Subaccounts of the Mutual Fund Account will reflect the investment advisory fee
and other expenses incurred by the Underlying Funds. Those fees and expenses are
detailed in the prospectuses for the Underlying Funds that accompany this
Prospectus.
Expense Data. The charges and deductions are summarized in the following
tables. This tabular information regarding expenses assumes that the entire
Policy Value is in the Mutual Fund Account.
<TABLE>
<CAPTION>
Dreyfus
TCW T. Rowe Dreyfus U.S. T. Rowe T. Rowe
TCW Managed Price Small Government Price Price Enhanced WRL
Money Asset International Value Cap Securities Equity Growth Opportunity Index Growth
Market Allocation Stock Equity Value Portfolio Income Stock Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Policy Owner Transaction
Expenses
Sales Load/(1)/ On
Purchase Payments 0 0 0 0 0 0 0 0 0 0 0
Maximum Surrender
Charge (as a % of
Premium Payment 7 7 7 7 7 7 7 7 7 7 7
Surrendered)/(2)/
Surrender Fees 0 0 0 0 0 0 0 0 0 0 0
Annual Service Charge $35 Per Policy
Transfer Fee First 12 Transfers Per Year: NO FEE
More than 12 in One Year: Currently no fee
Mutual Fund Account Annual
Expenses
(as a percentage of account
value)
Mortality and
Expense Risk
Fees/(3)/ 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25
Administrative
Charge 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15
Distribution
Financing Charge 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Mutual Fund
Account Annual
Expenses 1.55 1.55 1.55 1.55 1.55 1.55 1.55 1.55 1.55 1.55 1.55
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Underlying Funds Annual
Expenses/(4)/
(as a percentage of
average net assets)
Management Fees 0.50 0.75 0.90 0.80 0.80 0.65 0.80 0.80 0.80 0.75 0.80
Other Expenses 0.10 0.10 0.28 0.11 0.12 0.19 0.16 0.21 0.58 .55 0.06
---- ---- ---- ---- ---- ---- ---- ---- --- ----
Total Underlying
Funds Annual
Expense/(5)/ 0.60 0.85 1.18 0.91 0.92 0.82 0.96 1.01 1.30 1.30 0.86
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
15
<PAGE>
1
The Surrender Charge and Transfer Fee, if any is imposed, apply to each
Policy, regardless of how the Policy Value is allocated among the Mutual Fund
Account and the Fixed Account. The Service Charge applies to both the Fixed
Account and the Mutual Fund Account, and is assessed on a prorata basis
relative to each Account's Policy Value as a percentage of the Policy's total
Policy Value. (See "CHARGES AND DEDUCTIONS--Other Expenses Including
Investment Advisory Fees," p. 43.)
2
The Surrender Charge is decreased based on the number of years since the
premium payment date in which the withdrawal is made, from 7% in the first
year in which the Premium Payment was made to 0% in the eighth year after the
Premium Payment was made.
3
The Mortality and Expense Risk Fees shown are for the 5% Annually Compounding
Death Benefit and the Annual Step Up Death Benefit. The corresponding Fee for
the Return of Premium Death Benefit is 1.10% for each Subaccount. (See
"DISTRIBUTIONS UNDER THE POLICY---Death Benefit," p. 38.)
4
The Manager has agreed, until terminated by the Manager, to assume expenses
of the Portfolios that exceed the following rates: TCW Money Market--0.99%;
TCW Managed Asset Allocation--1.25%; T. Rowe Price International
Stock--1.53%; Value Equity--1.30%; Dreyfus Small Cap Value--1.30%; Dreyfus
U.S. Government Securities--1.00%; T. Rowe Price Equity Income--1.30%; T.
Rowe Price Growth Stock--1.30%; Opportunity Value--1.30%; Enhanced Index -
1.30%. The fee table information relating to the Underlying Fund was provided
to PFL by the Underlying Fund, and PFL has not independently verified such
information.
5
Effective January 1, 1997, the WRL Series Fund, Inc. has adopted a Plan of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "1940 Act") ("Distribution Plan") and pursuant to the Distribution Plan,
has entered into a Distribution Agreement with InterSecurities, Inc. ("ISI"),
principal underwriter for the WRL Series Fund, Inc. Under the Distribution
Plan, the WRL Series Fund, Inc., on behalf of the WRL Growth Portfolio, is
authorized to pay to various service providers, as direct payment for
expenses incurred in connection with the distribution of the Portfolio's
shares, amounts equal to actual expenses associated with distributing the
Portfolio's shares, up to a maximum rate of 0.15% (fifteen one-hundredths of
one percent) on an annualized basis of the average daily net assets. This fee
is measured and accrued daily and paid monthly. ISI has determined that it
will not seek payment by the WRL Series Fund, Inc. of distribution expenses
with respect to any portfolio (including the WRL Growth Portfolio) during the
fiscal year ending December 31, 1997. Owners will be notified in advance
prior to ISI's seeking such reimbursement.
Examples
An Owner would pay the following expenses on a $1,000 investment, assuming
a 5% annual return on assets and assuming the entire Policy Value is in the
applicable Subaccount:
16
<PAGE>
1. If the Policy is surrendered at the end of the applicable time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
TCW Money Market Portfolio........................... $85 $114 $145 $248
TCW Managed Asset Allocation Portfolio............... $88 121 $157 $273
T. Rowe Price International Stock
Portfolio......................................... $91 $130 $172 $303
Value Equity Portfolio............................... $88 $121 $158 $275
Dreyfus Small Cap Value Portfolio.................... $88 $122 $158 $276
Dreyfus U.S. Government Securities
Portfolio......................................... $88 $121 $157 $273
T. Rowe Price Equity Income Portfolio................ $91 $130 $172 $303
T. Rowe Price Growth Stock Portfolio................. $92 $133 $178 $314
Opportunity Value Portfolio.......................... $92 $135 $180 $318
Enhanced Index Portfolio............................. $92 $135 $180 $318
WRL Growth Portfolio................................. $88 $121 $158 $275
</TABLE>
2. If the Policy is annuitized at the end of the applicable time
period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
TCW Money Market Portfolio........................... $22 $69 $118 $248
TCW Managed Asset Allocation Portfolio............... $25 $76 $130 $273
T. Rowe Price International Stock
Portfolio......................................... $28 $85 $146 $303
Value Equity Portfolio............................... $25 $77 $131 $275
Dreyfus Small Cap Value Portfolio.................... $25 $77 $132 $276
Dreyfus U.S. Government Securities
Portfolio......................................... $25 $76 $130 $273
T. Rowe Price Equity Income Portfolio................ $28 $85 $146 $303
T. Rowe Price Growth Stock Portfolio................. $29 $89 $151 $314
Opportunity Value Portfolio.......................... $29 $90 $153 $318
Enhanced Index Portfolio............................. $29 $90 $153 $318
WRL Growth Portfolio................................. $25 $77 $131 $275
</TABLE>
3. If the Policy is not surrendered or annuitized:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
TCW Money Market Portfolio........................... $22 $69 $118 $248
TCW Managed Asset Allocation Portfolio............... $25 $76 $130 $273
T. Rowe Price International Stock
Portfolio......................................... $28 $85 $146 $303
Value Equity Portfolio............................... $25 $77 $131 $275
Dreyfus Small Cap Value Portfolio.................... $25 $77 $132 $276
Dreyfus U.S. Government Securities
Portfolio......................................... $25 $76 $130 $273
T. Rowe Price Equity Income Portfolio................ $28 $85 $146 $303
T. Rowe Price Growth Stock Portfolio................. $29 $89 $151 $314
Opportunity Value Portfolio.......................... $29 $90 $153 $318
Enhanced Index Portfolio............................. $29 $90 $153 $318
WRL Growth Portfolio................................. $25 $77 $131 $275
</TABLE>
17
<PAGE>
The above tables are intended to assist the Owner in understanding the
costs and expenses that will be borne, directly or indirectly. These include the
expenses of the Underlying Funds. (See "CHARGES AND DEDUCTIONS," p. 40, and the
Underlying Funds' prospectuses.) In addition to the expenses listed above,
premium taxes may be applicable.
The Examples should not be considered a representation of past or future
expenses, and actual expenses may be greater or lesser than those shown. The
assumed 5% Annual return is hypothetical and should not be considered a
representation of past or future annual returns, which could be greater or less
than the assumed rate. The figures and data for Underlying Fund annual expenses
have been provided by WRL Investment Management, Inc. and Endeavor Investment
Advisers, and while PFL does not dispute these figures, PFL has not
independently verified their accuracy.
In these examples, the $35 Annual Service Charge is reflected as a charge
of .0661% based on average Policy Value of $52,980. Normally, the $35 Service
Charge would be waived if the Premium Payment(s), less partial withdrawals, or
Policy Value is at least $50,000. However, it was included in these examples for
illustrative purposes.
Death Benefit
Upon receipt of proof that the Annuitant, who is the Owner, has died
before the Annuity Commencement Date, the Death Benefit is calculated and is
payable to the Beneficiary when PFL receives due proof of death, an election of
the method of settlement and return of the Policy. The Death Benefit is only
paid if the Owner and Annuitant are the same person, and that person dies prior
to the Annuity Commencement Date. In the event that the Annuitant who is not the
Owner dies prior to the Annuity Commencement Date, the Owner will generally
become the Annuitant unless the Owner specifically requests on the application
or in writing prior to Annuitant's death that the death benefit be paid upon the
Annuitant's death and PFL agrees to such an election.
The amount of the Death Benefit will depend on the state where the
Policy is purchased and will depend on the Death Benefit option elected by the
Owner. However, the Death Benefit will always be at least equal to the greater
of the Policy Value or the Cash Value on the date PFL receives the documentation
it needs to process the Death Benefit.
The Death Benefit is not paid on the death of an Owner if the Owner is
not the Annuitant. If an Owner who is not the Annuitant dies before the Annuity
Commencement Date, the amount payable under the Policy upon surrender will be
the Adjusted Policy Value. (See "DISTRIBUTIONS UNDER THE POLICY--Death Benefit,"
p. 38, Appendix B or the Policy or endorsement for details.)
The Owner has the "one-time" option of choosing a Guaranteed Minimum
Death Benefit at the time of purchase of the Policy. The Owner may choose among
the "5% Annually Compounding Death Benefit," the "Annual Step-Up Death Benefit,"
or the "Return of Premium Death Benefit." Certain age restrictions may apply,
and prior versions of the Policy or Policies offered in certain states may not
offer all Guaranteed Minimum Death Benefit Options. Appendix B contains
information regarding the Death Benefit in prior versions of the Policy and for
Policies issued in certain states. See the Policy or endorsement for details. If
no Guaranteed Minimum Death Benefit Option election is made by the Owner, the
contract will be issued with the Return of Premium Death Benefit. The Death
Benefit may be paid as either a lump sum cash benefit or as an annuity as
permitted by federal or state law.
18
<PAGE>
Variations in Policy Provisions
Certain provisions in prior versions of the Policies, and those offered
in certain states may vary from the descriptions in this Prospectus in order to
comply with different state laws. Any such state variations will be included in
the Policy itself or in riders or endorsements attached to the Policy. A summary
of those differences is contained in Appendix B to this Prospectus. See the
Policy or endorsement for details.
19
<PAGE>
Federal Income Tax Consequences of Investment in the Policy
With respect to Owners who are natural persons, there should be no federal
income tax on increases in the Policy Value until a distribution under the
Policy occurs (for example, a surrender, partial withdrawal, or Annuity Payment)
or is deemed to occur (for example, a pledge or assignment of a Policy).
Generally, a portion of any distribution or deemed distribution will be taxable
as ordinary income. The taxable portion of certain distributions will be subject
to withholding unless the recipient elects otherwise. In addition, a penalty tax
may apply to certain distributions or deemed distributions under the Policy.
(See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," p. 43.)
* * *
Note: The foregoing summary is qualified in its entirety by the more detailed
information in the remainder of this Prospectus, in the Statement of Additional
Information, in the prospectuses for the Underlying Funds, and in the Policy
itself. Prospective purchasers should refer to those sources before purchasing a
Policy. This Prospectus generally describes only the Policy and the Mutual Fund
Account. Separate prospectuses describe the Underlying Funds. (There is no
prospectus for the Fixed Account since interests in the Fixed Account are not
securities. See "The Fixed Account," p. 26.)
Inquiries, Written Notices and Written Requests
Any questions about procedures or the Policy, or any Written Notice or
Written Request required to be sent to PFL, should be sent to the Administrative
and Service Office, Financial Markets Division--Variable Annuity Department,
4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001. Telephone requests and
inquiries may be made by calling 800-525-6205. All inquiries, Notices and
Requests should include the Policy number, the Owner's name and the Annuitant's
name.
20
<PAGE>
CONDENSED FINANCIAL INFORMATION
The Accumulation Unit Values and the number of Accumulation Units
outstanding for each Subaccount from the date of inception:
<TABLE>
<CAPTION>
TCW Money Market Subaccount*
-----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- -------------------
<S> <C> <C> <C>
1996......... $1.1157 $1.154219 26,461,099.19
1995......... $1.07242 $1.11571 21,103,926.23
1994......... $1.05150 $1.07242 17,836,839.87
1993......... $1.04313 $1.05150 12,190,857.62
1992......... $1.02803 $1.04313 4,334,947.76
1991/(1)/.... $1.00000 $1.02803 1,855,372.17
<CAPTION>
TCW Managed Asset Allocation Subaccount**
----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $1.57787 $1.833135 124,998,927.67
1995......... $1.301669 $1.577873 122,974,873.030
1994......... $1.393488 $1.301669 130,909,987.116
1993......... $1.209859 $1.393488 69,252,242.665
1992......... $1.125386 $1.209859 11,637,563.615
1991/(1)/.... $1.000000 $1.125386 3,775,618.731
<CAPTION>
T. Rowe Price International Stock Subaccount
----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $1.17103 $1.330640 91,462,303.69
1995......... $1.073958 $1.171039 75,065,177.549
1994......... $1.156482 $1.073958 76,518,044.179
1993......... $0.989782 $1.156482 45,569,234.403
1992......... $1.041235 $0.989782 6,368,485.858
1991/(1)/.... $1.000000 $1.041235 3,068,279.081
<CAPTION>
Value Equity Subaccount***
----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $1.38790 $1.694854 65,227,195.34
1995......... $1.045610 $1.387903 46,194,663.692
1994......... $1.018576 $1.045610 30,512,231.489
1993/(3)/.... $1.000000 $1.018576 10,958,836.984
<CAPTION>
Dreyfus Small Cap Value Subaccount****
----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $1.20684 $1.496065 51,124,831.63
1995......... $1.072941 $1.206843 40,635,696.978
1994......... $1.107747 $1.072941 32,607,348.474
1993/(4)/.... $1.000000 $1.107747 11,449,956.948
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Dreyfus U.S. Government Securities Subaccount*****
-----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $1.124292 $1.128769 17,561,825.53
1995......... $0.985803 $1.124292 8,456,764.729
1994/(5)/.... $0.998670 $0.985803 3,102,671.789
<CAPTION>
T. Rowe Price Equity Income Subaccount
-----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $1.287240 $1.521680 42,673,040.68
1995/(6)/.... $1.000000 $1.287240 14,943,358.393
<CAPTION>
T. Rowe Price Growth Stock Subaccount
-----------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $1.353339 $1.611613 $30,237,847.75
1995/(6)/.... $1.000000 $1.353339 14,196,707.745
<CAPTION>
Opportunity Value Subaccount
------------------------------------------------------
Accumulation Unit Accumulation Number of
Value at Beginning Unit Value at Accumulation Units
of Year End of Year at End of Year
------------------ ------------- ------------------
<S> <C> <C> <C>
1996/(7)/.... ------ $1.004355 314,119.41
<CAPTION>
Enhanced Index Subaccount
------------------------------------------------------
Accumulation Unit Accumulation Number of
Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996/(8)/....
<CAPTION>
WRL Growth Subaccount
------------------------------------------------------
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Year End of Year at End of Year
----------------- ------------- ------------------
<S> <C> <C> <C>
1996......... $14.58384 $16.964068 15,174,482.39
1995......... $10.051117 $14.583843 13,337,196.679
1994......... $11.114865 $10.051117 12,758,957.591
1993......... $10.839753 $11.114865 9,252,403.800
1992/(2)/.... $10.000000 $10.839753 1,119,066,376
</TABLE>
(1) Period from April 8, 1991 through December 31, 1991.
(2) Period from July 1, 1992 through December 31, 1992.
(3) Period from May 27, 1993 through December 31, 1993.
(4) Period from May 4, 1993 through December 31, 1993.
(5) Period from May 9, 1994 through December 31, 1994.
(6) Period from January 3, 1995 through December 31, 1995.
(7) Period from November 18, 1996, through December 31, 1996.
(8) The offering of the Enhanced Index Subaccount is expected to commence on
or about the date of this Prospectus. Accordingly, no comparable data is
available for that Subaccount.
* Prior to May 1, 1996, known as the Money Market Subaccount.
** Prior to May 1, 1996, known as the Managed Asset Allocation Subaccount.
*** Prior to May 1, 1996, known as the Quest for Value Equity Subaccount.
22
<PAGE>
**** Prior to October 29, 1996, known as the Value Small Cap Subaccount,
and prior to May 1, 1996, known as the Quest for Value Small Cap
Subaccount.
***** Prior to May 1, 1996, known as the U.S. Government Securities
Subaccount.
FINANCIAL STATEMENTS
The financial statements of the Mutual Fund Account and PFL and the
independent auditors' reports thereon are in the Statement of Additional
Information which is available free upon request to the Administrative and
Service Office.
HISTORICAL PERFORMANCE DATA
Standardized Performance Data
From time to time, PFL may advertise historical yields and total returns
for the Subaccounts of the Mutual Fund Account. In addition, PFL may advertise
the effective yield of the Subaccount investing in the TCW Money Market
Portfolio (the "TCW Money Market Subaccount"). These figures will be calculated
according to standardized methods prescribed by the Securities and Exchange
Commission ("SEC"). They will be based on historical earnings and are not
intended to indicate future performance.
TCW Money Market Subaccount
The yield of the TCW Money Market Subaccount for a Policy refers to the
annualized income generated by an investment under a Policy in the Subaccount
over a specified seven-day period. The yield is calculated by assuming that the
income generated for that seven-day period is generated each seven-day period
over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment under a Policy in the Subaccount is assumed to be reinvested.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a Subaccount of the Mutual Fund Account (other than the TCW
Money Market Subaccount) for a Policy refers to the annualized income generated
by an investment under a Policy in the Subaccount over a specified thirty-day
period. The yield is calculated by assuming that the income generated by the
investment during that thirty-day period is generated each thirty-day period
over a 12-month period and is shown as a percentage of the investment.
The total return of a Subaccount of the Mutual Fund Account refers to
return quotations assuming an investment under a Policy has been held in the
Subaccount for various periods of time including, but not limited to, a period
measured from the date the Subaccount commenced operations. When a Subaccount
has been in operation for one, five, and ten years, respectively, the total
return for these periods will be provided. The total return quotations for a
Subaccount will represent the average annual compounded rates of return that
equate an initial investment of $1,000 in the Subaccount to the redemption value
of that investment as of the first day of each of the periods for which total
return quotations are provided.
The yield and total return calculations for a Subaccount do not reflect
the effect of any premium taxes that may be applicable to a particular Policy.
The yield calculations also do not reflect the effect of any Surrender Charge
that may be applicable to a particular Policy. To the extent that any or all of
a premium tax and/or Surrender Charge is applicable to a particular Policy,
23
<PAGE>
the yield and/or total return of that Policy will be reduced. For additional
information regarding yields and total returns calculated using the standard
formats briefly summarized above, please refer to the Statement of Additional
Information, a copy of which may be obtained from the Administrative and Service
Office upon request.
Other Subaccounts
Based on the method of calculation described in the Statement of
Additional Information, the average annual total returns for periods from
inception of the Subaccounts to December 31, 1996, and for the year ended
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
One Year Five Years Inception of the
Period Ended Ended Subaccount to Inception
Subaccount 12/31/96 12/31/96 12/31/96 Date
- - ---------- ---------- -------- -------- ----
<S> <C> <C> <C> <C>
TCW Managed Asset Allocation...................... 10.80% 9.95% 10.91% April 18, 1991
T. Rowe Price International Stock(1).............. 8.24% N/A 9.24% January 1, 1995
Value Equity...................................... 16.77% N/A 15.08% May 3, 1993
Dreyfus Small Cap Value........................... 18.63% N/A 10.86% May 3, 1993
Dreyfus U.S. Government Securities................ -5.07% N/A 3.09% May 9, 1994
T. Rowe Price Equity Income....................... 12.84% N/A 21.26% January 3, 1995
T. Rowe Price Growth Stock........................ 13.72% N/A 24.94% January 3, 1995
Opportunity Value................................. N/A N/A -6.56% November 18, 1996
Enhanced Index(2)................................. N/A N/A N/A ---
WRL Growth........................................ 10.94% N/A 12.01% July 1, 1992
</TABLE>
(1) Effective January 1, 1995, Rowe Price-Fleming International, Inc. became
the new adviser to the Global Growth Portfolio. The Portfolio's name
changed to the T. Rowe Price International Stock Portfolio and the
Portfolio's shareholders approved a change in investment objective from
investments in small capitalization companies on a global basis to
investments in a broad range of companies on an international basis (that
is, non-U.S. companies).
(2) The Enhanced Index Subaccount is expected to begin operations on or about
the date of this Prospectus, therefore comparable information is not
available.
Prior to July 1, 1992, the WRL Growth Subaccount had not yet commenced
operations. However, the following is standardized average annual total return
information based on the hypothetical assumption that the WRL Growth Subaccount
had been available to the PFL Endeavor Variable Annuity Account since inception
of the WRL Growth Portfolio:
<TABLE>
<CAPTION>
One Year Five Years Inception of the
Period Ended Ended Subaccount to Inception
12/31/96 12/31/96 12/31/96 Date
------------ ---------- ---------------- ---------
<S> <C> <C> <C> <C>
Subaccount
WRL Growth........................ 10.94% 9.10% 15.89% October 2, 1986
</TABLE>
* The performance data for periods prior to the date the WRL Growth Subaccount
commenced operations (July 1, 1992) is based on the performance of the WRL
Growth Portfolio and
24
<PAGE>
the assumption that the WRL Growth Subaccount was in existence for the same
period as the WRL Growth Portfolio, with a level of charges equal to those
currently assessed against the Subaccount or against Owners' contract values
under the Policies. The WRL Growth Portfolio, commenced operations on October 2,
1986. For purposes of the calculation of the performance data prior to July 1,
1992, the deductions for the Mortality and Expense Risk Fee, and Administrative
Charge are made on a monthly basis, rather than a daily basis. The monthly
deduction is made at the beginning of each month and generally approximates the
performance which would have resulted if the Subaccount had actually been in
existence since the inception of the WRL Growth Portfolio. Performance data for
periods of less than seven years reflect deduction of the Surrender Charge.
Opportunity Value Subaccount -- Hypothetical Data
OpCap Advisors ("OpCap") is the investment adviser of the Managed
Portfolio of the Accumulation Trust (formerly known as the Quest for Value
Accumulation Trust)(the "Accumulation Trust") a registered open-end investment
company whose shares are sold to certain variable accounts of life insurance
companies. The Managed Portfolio of the Accumulation Trust is substantially
similar to the Opportunity Value Portfolio in that it has the same investment
objectives as the Opportunity Value Portfolio and is managed using the same
investment strategies and techniques as contemplated for the Opportunity Value
Portfolio.
Prior to November 18, 1996, the Opportunity Value Subaccount had not yet
commenced operations. However, the following figures represent what the
investment performance of the Opportunity Value Subaccount would have been, IF
that Subaccount had been in existence since 1988, and invested in the
Accumulated Trust. The performance information regarding the Managed Portfolio
of the Accumulation Trust has been obtained from OpCap, and is set forth in the
current prospectus and statement of additional information of the Accumulation
Trust. These are not actual performance figures for the Opportunity Value
Subaccount. These are hypothetical average annual total return figures, which
represent the performance of the Managed Portfolio of the Accumulation Trust
(which are not available under the Policy), adjusted for the charges and
deductions applicable to the Policy. Investors should not rely on the following
financial information as an indication of the past or future performance of the
Opportunity Value Subaccount.
Hypothetical Average Annual Total Return of Comparable Subaccount*/(1)/
<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Five Years Ended from Inception to
December 31, 1996 December 31, 1996 December 31, 1996/(2)/
----------------- ----------------- ----------------------
<S> <C> <C> <C>
Subaccount
Opportunity Value 15.86% 17.35% 18.39%
</TABLE>
* On September 16, 1994, an investment company called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two
investment funds, the Old Trust and the Accumulation Trust, at which time
the Accumulation Trust commenced operations. The total net assets for the
Managed Portfolio immediately after the transaction was $682,601,380 with
respect to the Old Trust and $51,345,102 with respect to the
25
<PAGE>
Accumulation Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed Portfolio reflect the performance
of the corresponding Portfolio of the Old Trust.
(1) Reflects waiver of all or a portion of the advisory fees and reimbursements
of other expenses. Without such waivers and reimbursements, the average
annual total return during the periods would have been lower.
(2) The Managed Portfolio commenced operation on August 1, 1988.
These figures are not an indication of the present, past, or future performance
of the Opportunity Value Subaccount.
Enhanced Index Subaccount -- Hypothetical Data
J.P. Morgan Investment Management Inc. ("Morgan") is the investment
manager of certain Private Accounts. At December 31, 1996 and as of the date of
this Prospectus, the Enhanced Index Portfolio had not commenced operations.
However, these Private Accounts are substantially similar to the Enhanced Index
Portfolio in that they have the same investment objectives as the Enhanced Index
Portfolio and are managed using the same investment strategies and techniques as
contemplated for the Enhanced Index Portfolio.
Investors should not rely on the following financial information as an
indication of the future performance of the Enhanced Index Subaccount. The
performance of the Enhanced Index Subaccount may vary from the Private Account
composite information because the corresponding Portfolio will be actively
managed and its investments will vary from time to time and will not be
identical to the past portfolio investments of the Private Accounts. Moreover,
the Private Accounts are not registered under the 1940 Act and do not have to
meet certain Internal Revenue Code requirements applicable to the Enhanced Index
Portfolio, and therefore are not subject to certain investment restrictions that
are imposed by the 1940 Act and the Internal Revenue Code, which, if imposed,
could have adversely affected the Private Accounts' performances. In addition,
the Private Accounts are not subject to the provisions of the Internal Revenue
Code with respect to regulated investment companies, which provisions, if
imposed, could have already affected the Private Accounts' performances.
The chart below shows hypothetical performance information derived from
historical composite performance of the Private Accounts included in the
Structured Stock Selection Composite. The hypothetical performance figures
represent the actual performance results of the composite of comparable Private
Accounts, adjusted to reflect the deduction of the fees and expenses anticipated
to be paid by the Enhanced Index Portfolio. The actual Private Account composite
performance figures are time-weighted rates of return which include all income
and accrued income and realized and unrealized gains or losses, but do not
reflect the deduction of investment advisory fees actually charged to the
Private Accounts. The tables below reflect charges and deductions which are, or
may be, imposed under the Policies.
Hypothetical Average Annual Total Return Information
Derived from Private Account Composite
<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Five Years Ended From Inception
December 31, 1996 December 31, 1996 (November 1, 1989) to
----------------- -------------------- December 31, 1996
---------------------
<S> <C> <C> <C>
Structured Stock
Selection Composite 15.30% 13.67% 12.79%
</TABLE>
The calculations of total return assume the reinvestment of all dividends
and capital gains distributions on the reinvestment dates during the period and
the deduction of all recurring expenses that were charged to shareholder
accounts.
26
<PAGE>
Non-Standardized Performance Data
PFL may from time to time also advertise or disclose average annual total
return or other performance data in non-standard formats for a Subaccount of the
Mutual Fund Account. The non-standard performance data may assume that no
Surrender Charge is applicable, and may also make other assumptions such as the
amount invested in a Subaccount, differences in time periods to be shown, or the
effect of partial withdrawals or annuity payments.
The following non-standardized average annual total return figures are
based on the assumption that the Policy is not surrendered, and therefore the
Surrender Charge is not imposed.
Average Annual Total Returns
(Assuming No Surrender Charge)
<TABLE>
<CAPTION>
One Year Five Years Inception of
Period Ended Ended the Subaccount to Inception
Subaccount 12/31/96 12/31/96 12/31/96 Date
- - ---------- ---------- -------- ---------- ----
<S> <C> <C> <C> <C>
TCW Managed Asset Allocation................... 16.10% 10.18% 11.08% April 18, 1991
T. Rowe Price International Stock.............. 13.55% ---- 11.22% January 1, 1995
Value Equity................................... 22.04% ---- 15.72% May 3, 1993
Dreyfus Small Cap Value........................ 23.88% ---- 11.56% May 3, 1993
Dreyfus U.S. Government Securities............. 0.33% ---- 4.66% May 9, 1994
T. Rowe Price Equity Income.................... 18.14% ---- 23.35% January 3, 1995
T. Rowe Price Growth Stock..................... 19.01% ---- 26.95% January 3, 1995
Opportunity Value.............................. ---- ---- 0. 44% November 18, 1996
Enhanced Index................................. ---- ---- ---- ----
WRL Growth..................................... 16.24% ---- 12.38% July 1, 1992
</TABLE>
All non-standard performance data will be advertised only if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information, a copy of which may be obtained from the Administrative
and Service office upon request.
The Enhanced Index Subaccount is expected to commence operations on or
about the date of this Prospectus, therefore no comparable data exists for such
Subaccount.
The figures for the five year and from inception periods reflect waiver of
advisory fees and reimbursement of other expenses. In the absence of such
waivers, the average annual total return figures above from the five year and
from inception periods would have been lower.
PUBLISHED RATINGS
PFL may from time to time publish in advertisements, sales literature and
reports to Owners, the ratings and other information assigned to it by one or
more independent rating organizations such as A.M. Best Company, Standard &
Poor's, and Duff & Phelps Credit Rating Co.. The purpose of the ratings is to
reflect the financial strength and/or claims-paying ability of PFL and should
not be considered as bearing on the investment performance of assets held in the
Mutual Fund Account or of the safety or riskiness of an investment in the Mutual
Fund Account. Each year the A.M. Best Company reviews the financial status of
thousands of insurers,
27
<PAGE>
culminating in the assignment of Best's ratings. These ratings reflect their
current opinion of the relative financial strength and operating performance of
an insurance company in comparison to the norms of the life/health insurance
industry. In addition, the claims-paying ability of PFL as measured by Standard
& Poor's Insurance Ratings Services or Duff & Phelps Credit Rating Co. may be
referred to in advertisements or sales literature or in reports to Owners. These
ratings are opinions of an operating insurance company's financial capacity to
meet the obligations of its insurance policies in accordance with their terms.
Claims-paying ability ratings do not refer to an insurer's ability to meet non-
policy obligations (i.e., debt/commercial paper).
PFL LIFE INSURANCE COMPANY
PFL Life Insurance Company ("PFL"), 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499-0001, is a stock life insurance company. It was incorporated
under the name NN Investors Life Insurance Company, Inc. under the laws of the
State of Iowa on April 19, 1961. It is principally engaged in the sale of life
insurance and annuity policies, and is licensed in the District of Columbia,
Guam, and in all states except New York. As of December 31, 1996, PFL had assets
of approximately $7.9 billion. PFL is a wholly-owned indirect subsidiary of
AEGON USA, Inc., which conducts substantially all of its operations through
subsidiary companies engaged in the insurance business or in providing
non-insurance financial services. All of the stock of AEGON USA, Inc. is
indirectly owned by AEGON n.v. of the Netherlands. AEGON n.v., a holding
company, conducts its business through subsidiary companies engaged primarily in
the insurance business.
THE ENDEAVOR ACCOUNTS
Premium Payments made under a Policy may be allocated to the Mutual Fund
Account, to the Fixed Account, or to a combination of these Accounts.
The Mutual Fund Account
The PFL Endeavor Variable Annuity Account comprises a portion of the PFL
Endeavor VA Separate Account of PFL Life Insurance Company (the "Mutual Fund
Account"). The PFL Endeavor VA Separate Account was established as a separate
investment account under the laws of the State of Iowa on January 19, 1990. The
Mutual Fund Account receives and invests the Premium Payments under the Policies
that are allocated to it for investment in shares of the WRL Growth Portfolio
and the Endeavor Series Trust.
The Mutual Fund Account currently is divided into eleven Subaccounts.
Additional Subaccounts may be established in the future at the discretion of
PFL. Each Subaccount invests exclusively in shares of one of the Portfolios of
the Underlying Funds. Under Iowa law, the assets of the Mutual Fund Account are
owned by PFL, but they are held separately from the other assets of PFL. To the
extent that these assets are attributable to the Policy Value of the Policies,
these assets are not chargeable with liabilities incurred in any other business
operation of PFL. Income, gains, and losses incurred on the assets in the
Subaccounts of the Mutual Fund Account, whether or not realized, are credited to
or charged against that Subaccount without regard to other income, gains or
losses of any other Account or Subaccount of PFL. Therefore, the investment
performance of any Subaccount should be entirely independent of the investment
performance of PFL's general account assets or any other Account or Subaccount
maintained by PFL.
The Mutual Fund Account is registered with the SEC under the 1940 Act as a
unit investment trust and meets the definition of a separate account under
federal securities laws. However, the SEC does not supervise the management or
the investment practices or policies of the Mutual Fund Account or PFL.
28
<PAGE>
Underlying Funds. The Mutual Fund Account will invest exclusively in
shares of Endeavor Series Trust and the Growth Portfolio of the WRL Series Fund,
Inc. (collectively the "Underlying Funds"). The WRL Series Fund, Inc., and the
Endeavor Series Trust are each a series-type mutual fund registered with the SEC
under the 1940 Act as an open-end, diversified management investment company.
The registration of the Underlying Funds does not, however, involve supervision
of the management or investment practices or policies of the Underlying Funds by
the SEC.
The Underlying Funds currently issue shares of the following eleven
Portfolios: The WRL Growth Portfolio, managed by Janus Capital Corporation, the
TCW Managed Asset Allocation, the TCW Money Market Portfolio, the T. Rowe Price
International Stock Portfolio, the Value Equity Portfolio, the Dreyfus Small Cap
Value Portfolio, the Dreyfus U.S. Government Securities Portfolio, the T. Rowe
Price Equity Income Portfolio, the T. Rowe Price Growth Stock Portfolio, the
Opportunity Value Portfolio; and the Enhanced Index Portfolio. The assets of
each Portfolio are held separate from the assets of the other Portfolios, and
each Portfolio has its own distinct investment objectives and policies. Each
Portfolio operates as a separate investment fund, and the income or losses of
one Portfolio generally have no effect on the investment performance of any
other Portfolio.
Endeavor Investment Advisers (the "Manager"), an investment adviser
registered with the SEC under the Investment Advisers Act of 1940, is the
Endeavor Series Trust's manager. The Manager selects and contracts with advisers
for investment services for the Portfolios of Endeavor Series Trust, reviews the
advisers' activities, and otherwise performs administerial and managerial
functions for the Endeavor Series Trust. Six advisers each perform investment
advisory services for particular Portfolios of Endeavor Series Trust: TCW Funds
Management, Inc. (a wholly-owned subsidiary of The TCW Group, Inc.), T. Rowe
Price Associates, Inc., Rowe Price-Fleming International, Inc. (a joint venture
between T. Rowe Price Associates, Inc. and Robert Fleming Holdings Limited),
OpCap Advisors (formerly known as Quest for Value Advisors), J.P. Morgan
Investment Management Inc. (a wholly owned subsidiary of J.P. Morgan and Co.
Incorporated) and The Dreyfus Corporation (a wholly owned subsidiary of Mellon
Bank, N.A.), as successor to The Boston Company Asset Management, Inc., (the
"Advisers").
TCW Funds Management, Inc. is the Adviser for the TCW Managed Asset
Allocation Portfolio and the TCW Money Market Portfolio. T. Rowe Price
Associates, Inc. is the Adviser for the T. Rowe Price Equity Income Portfolio
and the T. Rowe Price Growth Stock Portfolio. Rowe Price-Fleming International,
Inc. is the Adviser for the T. Rowe Price International Stock Portfolio.
OpCap Advisors is the Adviser for the Value Equity Portfolio and the
Opportunity Value Portfolio. J.P. Morgan Investment Management Inc. ("Morgan")
is the Adviser for the Enhanced Index Portfolio. The Dreyfus Corporation is the
Adviser for the Dreyfus U.S. Government Securities Portfolio, and the Dreyfus
Small Cap Value Portfolio. WRL Investment Management, Inc. a subsidiary of
Western Reserve Life Assurance Co. of Ohio, (an affiliate of PFL), is the
Adviser for the WRL Series Fund, Inc. and contracts with Janus Capital
Corporation (also an "Adviser") as a sub-adviser to the WRL Growth Portfolio.
The Adviser of a Portfolio is responsible for selecting the investments of
the Portfolio consistent with the investment objectives and policies of the
Portfolio, and will conduct securities trading for the Portfolio. All Advisers
are investment advisers registered with the SEC under the Investment Advisers
Act of 1940.
The investment objectives of each Portfolio are summarized as follows:
29
<PAGE>
TCW Money Market Portfolio--seeks current income, preservation of capital
and maintenance of liquidity through investment in short-term money market
securities. The Portfolio seeks to maintain a constant net asset value of $1.00
per share although no assurances can be given that such constant net asset value
will be maintained.
TCW Managed Asset Allocation Portfolio--seeks high total return through a
managed asset allocation portfolio of equity, fixed income and money market
securities.
T. Rowe Price International Stock Portfolio--seeks long-term growth of
capital through investments primarily in common stocks of established non-U.S.
companies.
Value Equity Portfolio--seeks long-term capital appreciation through
investment in securities (primarily equity securities) of companies that are
believed by the Portfolio's Adviser to be undervalued in the marketplace in
relation to factors such as the companies' assets or earnings.
Dreyfus Small Cap Value Portfolio--seeks capital appreciation through
investments in a diversified portfolio consisting primarily of equity securities
of companies with a median capitalization of approximately $750 million,
provided that under normal market conditions at least 75% of the Portfolio's
investments will be in equity securities of companies with capitalizations at
the time of purchase between $150 million and $1.5 billion.
Dreyfus U.S. Government Securities Portfolio--seeks as high a level of
total return as is consistent with prudent investment strategies by investing
under normal circumstances at least 65% of its assets in debt obligations and
mortgage-backed securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
T. Rowe Price Equity Income Portfolio--seeks to provide substantial
dividend income and also capital appreciation by investing primarily in dividend
paying stocks of established companies.
T. Rowe Price Growth Stock Portfolio--seeks long-term growth of capital
and to increase dividend income through investment primarily in common stocks of
well established growth companies.
Opportunity Value Portfolio--seeks growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based upon the Portfolio
Adviser's assessment of relative values.
Enhanced Index Portfolio--seeks to earn a total return modestly in excess
of the total return performance of the S&P 500 Composite Stock Index (the "S&P
500 Index") while maintaining a volatility of return similar to the S&P 500
Index.
WRL Growth Portfolio--seeks growth of capital. At most times, this
Portfolio will be invested primarily in equity securities which are selected
solely for their capital growth potential; investment income is not a
consideration.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE. More
detailed information, including a description of each Portfolio's investment
objective and policies and a description of risks involved in investing in each
of the Portfolios and of each Portfolio's fees and expenses is contained in the
prospectuses for the Underlying Funds, current copies of which are attached to
this Prospectus. INFORMATION CONTAINED IN THE UNDERLYING FUNDS' PROSPECTUSES
SHOULD BE READ CAREFULLY BEFORE INVESTING IN A SUBACCOUNT OF THE MUTUAL FUND
ACCOUNT.
30
<PAGE>
An investment in the Mutual Fund Account, and in any Subaccount or
Portfolio, including the TCW Money Market Portfolio and the Dreyfus U.S.
Government Securities Portfolio, is not insured or guaranteed by the U.S.
government or any government agency.
Addition, Deletion, or Substitution of Investments. PFL cannot and does
not guarantee that any of the Portfolios will always be available for Premium
Payments, allocations, or transfers. PFL retains the right, subject to any
applicable law, to make certain changes in the Mutual Fund Account and its
investments. PFL reserves the right to eliminate the shares of any Portfolio
held by a Subaccount and to substitute shares of another Portfolio of the
Underlying Funds, or of another registered open-end management investment
company for the shares of any Portfolio, if the shares of the Portfolio are no
longer available for investment or if, in PFL's judgment, investment in any
Portfolio would be inappropriate in view of the purposes of the Mutual Fund
Account. To the extent required by the 1940 Act, substitutions of shares
attributable to an Owner's interest in a Subaccount will not be made without
prior notice to the Owner and the prior approval of the SEC. Nothing contained
herein shall prevent the Mutual Fund Account from purchasing other securities
for other series or classes of variable annuity policies, or from effecting an
exchange between series or classes of variable annuity policies on the basis of
requests made by Owners.
New Subaccounts may be established when, in the sole discretion of PFL,
marketing, tax, investment or other conditions warrant. Any new Subaccounts may
be made available to existing Owners on a basis to be determined by PFL. Each
additional Subaccount will purchase shares in a mutual fund portfolio or other
investment vehicle. PFL may also eliminate one or more Subaccounts if, in its
sole discretion, marketing, tax, investment or other conditions warrant such
change. In the event any Subaccount is eliminated, PFL will notify Owners and
request a reallocation of the amounts invested in the eliminated Subaccount. If
no such reallocation is provided by the Owner, PFL will reinvest the amounts
invested in the eliminated Subaccount in the Subaccount that invests in the TCW
Money Market Portfolio (or in a similar portfolio of money market instruments)
or in another Subaccount, if appropriate.
In the event of any such substitution or change, PFL may, by appropriate
endorsement, make such changes in the Policies as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to be
in the best interests of persons having voting rights under the Policies, the
Mutual Fund Account may be (i) operated as a management company under the 1940
Act or any other form permitted by law, (ii) deregistered under the 1940 Act in
the event such registration is no longer required or (iii) combined with one or
more other separate accounts. To the extent permitted by applicable law, PFL
also may transfer the assets of the Mutual Fund Account associated with the
Policies to another account or accounts.
The Fixed Account
This Prospectus is generally intended to serve as a disclosure document
only for the Policy and the Mutual Fund Account. For more complete details
regarding the Fixed Account, see the Policy itself.
Premium Payments allocated and amounts transferred to the Fixed Account
become part of the general account of PFL, which supports insurance and annuity
obligations. Interests in the general account have not been registered under the
Securities Act of 1933 (the "1933 Act"), nor is the general account registered
as an investment company under the 1940 Act. Accordingly, neither the general
account nor any interests therein are generally subject to the provisions of the
1933 or 1940 Acts and PFL has been advised that the staff of the SEC has not
reviewed the disclosures in this Prospectus which relate to the Fixed Account.
31
<PAGE>
The Fixed Account is part of the general assets of PFL, other than those
in the Mutual Fund Account or in any other segregated asset account. The Policy
Owner may allocate Premium Payments to the Fixed Account at the time of Premium
Payment or by subsequent transfers from the Mutual Fund Account. Instead of the
Policy Owner bearing the investment risk, as is the case for Policy Value in the
Mutual Fund Account, PFL bears the full investment risk for all Policy Value in
the Fixed Account. PFL has sole discretion to invest the assets of its general
account, including the Fixed Account, subject to applicable law. While PFL bears
the full investment risk for all Policy Value in the Fixed Account, the Owner
bears the risk that PFL would not be able to satisfy its contractual
obligations.
Premium payments applied to and any amounts transferred to the Fixed
Account will reflect a fixed interest rate. The interest rates PFL sets will be
credited for increments of at least one year measured from each premium payment
or transfer date. These rates will never be less than a minimum effective annual
interest rate of 3%. Prior versions of the Policy and Policies offered in
certain states will have the minimum effective annual interest rates specified
in Appendix B.
Guaranteed Periods. PFL may offer optional guaranteed interest rate
periods ("Guaranteed Period Options" or "GPOs") into which Premium Payments may
be paid or amounts transferred. For example, PFL may, from time to time, offer
Guaranteed Period Options for periods of 1, 3, 5, or 7 years. The current
interest rate PFL sets for funds placed in each Guaranteed Period Option will
apply to those funds until the end of the Guaranteed Period. At the end of the
Guaranteed Period, the Premium Payment or amount transferred into the Guaranteed
Period Option less any partial withdrawals or transfers from that Guaranteed
Period Option, including the effect of any Excess Interest Adjustment or
Surrender Charge due to partial withdrawals or transfers prior to the end of the
Guaranteed Period, plus accrued interest, will be rolled into a new Guaranteed
Period Option.
The Owner may choose the Guaranteed Period Option into which the funds are
to be placed by giving PFL notice within 30 days before the end of the expiring
Guaranteed Period. In the absence of such election, the new Guaranteed Period
will be the same as the expiring one. If that Guaranteed Period Option is no
longer offered by PFL, the next shorter Guaranteed Period Option then being
offered will be used. PFL reserves the right, for new Premium Payments,
transfers, or rollovers, whether or not to offer any Guaranteed Period Option.
PFL will, however, always offer at least a one-year Guaranteed Period Option.
Surrenders, partial withdrawals and transfers from a Guaranteed Period
Option prior to the end of the Guaranteed Period are subject to an Excess
Interest Adjustment. (See "DISTRIBUTIONS UNDER THE POLICY--Excess Interest
Adjustment," p. 33.)
PFL guarantees that, at any time prior to the Annuity Commencement Date,
the Policy Value of the Fixed Account allocable to a particular Policy will be
not less than the amount of the Premium Payments allocated or transferred to the
Fixed Account, less any applicable premium or other taxes allocable to the Fixed
Account, less any partial withdrawals or transfers to the Mutual Fund Account
(including any Surrender Charges), plus interest at the guaranteed effective
annual interest rate of 3%. Upon surrender of the Policy, the Owner is
guaranteed the greater of 1) Fixed Account Premium Payments less prior partial
withdrawals and transfers from the Fixed Account, or 2) the Premium Payments
applied to, less partial withdrawals and transfers from, the Fixed Account
accumulated at the guaranteed effective annual interest rate of 3%, less
Surrender Charges.
The Current Interest Rates offered from time to time will be determined by
PFL in its sole discretion.
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For purposes of crediting interest, the oldest Premium Payment or transfer
into a Guaranteed Period Option within the Fixed Account, plus interest
allocable to that Premium Payment or transfer, is considered to be withdrawn or
transferred out first; the next oldest Premium Payment plus interest is
considered to be transferred out next, and so on (this is a "first-in,
first-out" procedure).
Dollar Cost Averaging Fixed Account Option. PFL may offer a Dollar Cost
Averaging Fixed Account Option separate from the Guaranteed Period Option(s).
This option will have a one-year interest rate guarantee and will only be
available under a Dollar Cost Averaging (DCA) program. The current interest rate
PFL credits for the DCA Fixed Account may differ from the rates credited on
other Guaranteed Period Option(s) in the Fixed Account.
Prior to the Annuity Commencement Date, the Owner can instruct PFL to make
automatic transfers from the Dollar Cost Averaging Fixed Account to one or more
subaccounts of the Mutual Fund Account. Transfers must be scheduled for at least
six but not more than 24 months, or for at least four, but not more than eight
quarters. No changes to the automatic amount transferred will be allowed, but
changes can be made to the Subaccounts to which these transfers are allocated.
Dollar Cost Averaging transfers from the Dollar Cost Averaging Fixed Account
will not be subject to an Excess Interest Adjustment. (See "Dollar Cost
Averaging" p. 29.)
Transfers
An Owner can transfer Policy Values from one Investment Option to another
within certain limits.
Subject to the limitations and restrictions described below, transfers
from an Investment Option may be made, up to thirty days prior to the Annuity
Commencement Date, by sending Written Notice, signed by the Owner, to the
Administrative and Service Office. The minimum amount which may be transferred
is the lesser of $500 or the entire Subaccount or Guaranteed Period Option
Value. If the Subaccount or Guaranteed Period Option Value remaining after a
transfer is less than $500, PFL reserves the right, at its discretion, either to
deny the transfer request or to include that amount as part of the transfer.
If the Excess Interest Adjustment (at time of a transfer request) from any
Guaranteed Period Option is a negative adjustment, then the maximum amount that
can be transferred is 25% of the Guaranteed Period Option's Policy Value, less
amounts previously transferred out of that Guaranteed Period Option during the
current Policy Year. No maximum will apply to amounts transferred from any
Guaranteed Period Option if the Excess Interest Adjustment is a positive
adjustment at the time of transfer.
Transfers prior to the Annuity Commencement Date currently may be made
without charge as often as the Owner wishes, subject to the minimum amount
specified above. PFL reserves the right to limit these transfers to no more than
12 per Policy Year in the future or to charge up to $10 per transfer in excess
of 12 per Policy Year.
Transfers out of the Dollar Cost Averaging Fixed Account, except through
an automatic Dollar Cost Averaging program, are not allowed.
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After the Annuity Commencement Date, transfers out of the Fixed Account
are not permitted, and transfers between Subaccounts or from Subaccounts to the
Fixed Account may be limited to once per Policy Year. (See "DISTRIBUTIONS UNDER
THE POLICY--Annuity Payment Options," p. 35.)
Transfers may be made by telephone, subject to the provisions described
below under "Telephone Transactions."
Reinstatements
Requests are occasionally received by PFL to reinstate funds which had
been transferred to another insurance company pursuant to a Section 1035
exchange or trustee-to-trustee transfer under the Code. In this situation PFL
will require the Owner to replace the same total amount of money in the
applicable Subaccounts or Fixed Accounts as taken from them to effect the
exchange. The total dollar amount of funds reapplied to the Separate Account
will be used to purchase a number of Accumulation Units available for each
Subaccount based on the Accumulation Unit prices at the date of reinstatement
(within two days after the date the funds are received by PFL). The number of
Accumulation Units available on the reinstatement date may be more or less than
the number of Units surrendered for the exchange. Amounts reapplied to the Fixed
Account will receive the effective annual interest rate they would otherwise
have received, had they not been withdrawn. However, an adjustment will be made
to the amount reapplied to compensate PFL for the additional interest credited
during the period of time between the withdrawal and the reapplication of the
funds. Owners should consult a qualified tax adviser concerning the tax
consequences of any Section 1035 exchanges or reinstatements.
Telephone Transactions
An Owner (or the Owner's designated account executive) may make transfers
and/or change the allocation of subsequent Premium Payments by telephone if the
"Telephone Transfer/Reallocation Authorization" box in the Policy application
has been checked or telephone transfers have been subsequently authorized in
writing by the Owner. PFL will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine. However,
PFL will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If PFL fails to do so, it may be liable for any losses
due to unauthorized or fraudulent instructions. All telephone requests will be
recorded on voice recorder equipment for the protection of the Owner. The Owner,
when making telephone requests, will be required to provide a social security
number or other information for identification purposes.
Telephone requests must be received at the Administrative and Service
Office no later than 3:00 p.m. Central time in order to assure same day pricing
of the transaction.
At its discretion, PFL may discontinue the telephone transaction privilege
at any time as to some or all Owners, and PFL may require written confirmation
of any transaction request.
Dollar Cost Averaging (DCA)
Under the Dollar Cost Averaging program, prior to the Annuity Commencement
Date, the Owner can instruct PFL to automatically transfer a specified dollar
amount from the Dollar Cost Averaging Fixed Account Option, the TCW Money Market
Subaccount or the Dreyfus U.S. Government Securities
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Subaccount to any other Subaccount or Subaccounts of the Mutual Fund Account.
The automatic transfers can occur monthly or quarterly and will occur on the
28th day of the month. If the Dollar Cost Averaging request is received prior to
the 28th day of any month, the first transfer will occur on the 28th day of that
month. If the Dollar Cost Averaging request is received on or after the 28th day
of any month, the first transfer will occur on the 28th day of the following
month. The amount transferred each time must be at least $500. A minimum of six
monthly or four quarterly transfers are required and a maximum of 24 monthly or
eight quarterly transfers are allowed from the Dollar Cost Averaging Fixed
Account.
Dollar Cost Averaging results in the purchase of more units when the Unit
Value is low, and fewer units when the Unit Value is high. However, there is no
guarantee that the Dollar Cost Averaging program will result in higher Policy
Values or will otherwise be successful. Dollar Cost Averaging requires regular
investment regardless of fluctuating prices and does not guarantee profits nor
prevent losses in a declining market. Before electing this option, individuals
should consider their financial ability to continue purchases through periods of
both high and low price levels.
The Owner may request Dollar Cost Averaging when purchasing the Policy or
at a later date. The program will terminate when the amount in the Dollar Cost
Averaging Fixed Account, the TCW Money Market Subaccount or the Dreyfus U.S.
Government Securities Subaccount is insufficient for the next transfer, at which
time the entire remaining balance is transferred.
Except for automatic Dollar Cost Averaging transfers from the Dollar Cost
Averaging Fixed Account Option the Owner may increase or decrease the amount of
the transfers by sending PFL a new Dollar Cost Averaging form. The Owner may
discontinue the program at any time by sending a Written Notice to the
Administrative and Service Office. The minimum number of transfers (6 monthly or
4 quarterly) requirement must be satisfied each time the Dollar Cost Averaging
program is restarted following termination of the program for any reason. There
is no charge for participation in the Dollar Cost Averaging program.
Asset Rebalancing
Prior to the Annuity Commencement Date the Owner may instruct PFL to
automatically transfer amounts among the Subaccounts of the Mutual Fund Account
on a regular basis to maintain a desired allocation of the Policy Value among
the various Subaccounts offered. Rebalancing will occur on a monthly, quarterly,
semi-annual, or annual basis, beginning on a date selected by the Owner. The
Owner must select the percentage of the Policy Value desired in each of the
various Subaccounts offered (totaling 100%). Any amounts in the Fixed Account
are ignored for purposes of asset rebalancing. Rebalancing may be started,
stopped, or changed at any time, except that rebalancing will not be available
when:
(1) Automatic Dollar Cost Averaging transfers are being made; or
(2) any other transfer is requested.
There is no charge for participation in the asset rebalancing program.
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THE POLICY
The Endeavor Variable Annuity Policy is a Flexible Premium Variable
Annuity Policy. The rights and benefits under the Policy are summarized below;
however, the description of the Policy contained in this Prospectus is qualified
in its entirety by reference to the Policy itself, a copy of which is available
upon request from PFL. The Policy may be purchased on a non-tax qualified basis
("Nonqualified Policy"). The Policy may also be purchased and used in connection
with retirement plans or individual retirement accounts that qualify for
favorable federal income tax treatment ("Qualified Policy").
Policy Application and Issuance of Policies--Premium Payments
Before it will issue a Policy, PFL must receive a completed Policy
application or transmittal form and a minimum initial Premium Payment of $5,000
for a Nonqualified Policy, or $1,000 for a Qualified Policy. There is no minimum
initial Premium Payment required for tax deferred 403(b) annuity purchases, any
amount selected by the Owner in such case, up to the maximum total premium
payment allowed by PFL, may be used to start a Policy. The initial Premium
Payment for tax deferred 403(b) purchases must be received within 90 days
following the Policy Date, otherwise the Policy will be canceled. The initial
Premium Payment is the only Premium Payment required to be paid under a Policy.
A Policy ordinarily will be issued only in respect of Annuitants Age 0 through
80. Acceptance or declination of an application shall be based on PFL's
underwriting standards, and PFL reserves the right to reject any application or
Premium Payment based on those underwriting standards.
If the application or transmittal form can be accepted in the form
received, the initial Premium Payment will be credited to the Policy Value
within two Business Days after the later of receipt of the information needed to
issue the Policy or receipt of the initial Premium Payment. If the initial
Premium Payment cannot be credited because the application or other issuing
requirements are incomplete, the applicant will be contacted within five
Business Days and given an explanation for the delay and the initial Premium
Payment will be returned at that time unless the applicant consents to PFL's
retaining the initial Premium Payment and crediting it as soon as the necessary
requirements are fulfilled.
The date on which the initial Premium Payment is credited to the Policy
Value is the Policy Date. The Policy Date is the date used to determine Policy
Years and Policy Anniversaries.
All checks or drafts for Premium Payments should be made payable to PFL
Life Insurance Company and sent to the Administrative and Service Office. The
Death Benefit will not take effect until the Premium Payment is received and any
check or draft for the Premium Payment is honored.
Subsequent Additional Premium Payments. While the Annuitant is living and
prior to the Annuity Commencement Date, the Owner may make subsequent additional
Premium Payments at any time, and in any frequency. The minimum subsequent
additional Premium Payment under both a Nonqualified Policy and a Qualified
Policy is $50. Subsequent additional Premium Payments will be credited to the
Policy and added to the Policy Value as of the Business Day when the premium and
required information are received.
Maximum Total Premium Payments. The maximum total Premium Payments allowed
without prior approval of PFL is $1,000,000.
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Allocation of Premium Payments. An Owner must allocate Premium Payments to
one or more of the Investment Options. The Owner must specify the initial
allocation in the Policy application or transmittal form. This allocation will
be used for Subsequent Additional Premium Payments unless the Owner requests a
change of allocation. All allocations must be made in whole percentages and must
total 100%. If Premium Payments are allocated to the Dollar Cost Averaging Fixed
Account, directions regarding the Subaccount(s) to which transfers are to be
made must be specified on the Application or other proper Written Request. If
the Owner fails to specify how Premium Payments are to be allocated, the Premium
Payment(s) cannot be accepted.
The Owner may change the allocation instructions for future subsequent
additional Premium Payments by sending Written Notice, signed by the Owner, to
PFL's Administrative and Service Office, or by telephone (subject to the
provisions described under "Telephone Transactions," p. 28.) The allocation
change will apply to Premium Payments received after the date the Written Notice
or telephone request is received.
Payment Not Honored by Bank. Any payment due under the Policy which is
derived, all or in part, from any amount paid to PFL by check or draft may be
postponed until such time as PFL determines that such instrument has been
honored.
Policy Value
On the Policy Date, the Policy Value equals the initial Premium Payment.
Thereafter, the Policy Value equals the sum of the values in the Mutual Fund
Account and the Fixed Account. The Policy Value will increase by: (1) any
Subsequent Additional Premium Payments received by PFL; (2) any increases in the
Policy Value due to investment results of the selected Subaccount(s); (3) any
positive Excess Interest Adjustments on transfers, and (4) interest credited in
the Fixed Account. The Policy Value will decrease by (1) any surrenders,
including applicable Excess Interest Adjustments and/or Surrender Charges; (2)
any decreases in the Policy Value due to investment results of the selected
Subaccounts; (3) the charges and deductions imposed by PFL; and (4) any negative
Excess Interest Adjustments on transfers.
The Policy Value is expected to change from Valuation Period to Valuation
Period, reflecting the investment experience of the selected Subaccount(s), as
well as the deductions for charges. A Valuation Period is the period between
successive Business Days. It begins at the close of business on each Business
Day and ends at the close of business on the next succeeding Business Day. A
Business Day is each day that the New York Stock Exchange is open for business.
Holidays are generally not Business Days.
The Mutual Fund Account Value. When a Premium Payment is allocated or an
amount is transferred to a Subaccount of the Mutual Fund Account, it is credited
to the Policy Value in the form of Accumulation Units. Each Subaccount of the
Mutual Fund Account has a distinct Accumulation Unit value (the "Unit Value").
The number of Accumulation Units credited is determined by dividing the Premium
Payment or amount transferred by the Unit Value of the Subaccount as of the end
of the Valuation Period during which the allocation is made. When amounts are
transferred out of, or surrendered or withdrawn from a Subaccount, Accumulation
Units are canceled or redeemed in a similar manner.
For each Subaccount, the Unit Value for a given Business Day is based on
the net asset value of a share of the corresponding Portfolio of the Underlying
Funds. Therefore, the Unit Values will fluctuate from day to day based on the
investment experience of the corresponding Portfolio. The determination of
Subaccount Unit Values is described in detail in the Statement of Additional
Information.
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Amendments
No change in the Policy is valid unless made in writing by PFL and
approved by one of PFL's officers. No registered representative has authority to
change or waive any provision of the Policy.
PFL reserves the right to amend the Policies to meet the requirements of
the Code, regulations or published rulings. An Owner can refuse such a change by
giving Written Notice, but a refusal may result in adverse tax consequences.
Non-participating Policy
The Policy does not participate or share in the profits or surplus
earnings of PFL. No dividends are payable on the Policy.
DISTRIBUTIONS UNDER THE POLICY
Surrenders
Prior to the Annuity Commencement Date, the Owner may surrender all or a
portion of the Cash Value in exchange for a cash payment from PFL. The Cash
Value is the Policy Value less any applicable Surrender Charge and Excess
Interest Adjustments.(See "Annuity Payment Options," p. 35.) The Policy cannot
be surrendered after the Annuity Commencement Date. (See "Annuity Payments,"
p.34.)
When requesting a partial withdrawal ($500 minimum), the Owner must tell
PFL how the withdrawal is to be allocated from among various Guaranteed Period
Options of the Fixed Account and/or the Subaccount(s) of the Mutual Fund
Account. If the Owner's request for a partial withdrawal from a Guaranteed
Period Option of the Fixed Account is greater than the Cash Value of that
Guaranteed Period Option, PFL will pay the Owner the amount of the Cash Value of
that Guaranteed Period Option. If no allocation instructions are given, the
withdrawal will be deducted from each Investment Option in the same proportion
that the Policy Owner's interest in each Investment Option bears to the Policy's
total Policy Value. PFL reserves the right to defer payment of the Cash Value
from the Fixed Account for up to six months.
Beginning in the second Policy Year, an Owner may request a partial
withdrawal of up to 10% of the Policy Value without an Excess Interest
Adjustment and without a Surrender Charge if no withdrawal has been made in the
current Policy Year ( "10% Withdrawals"). Amounts withdrawn from the Policy in
excess of the 10% Withdrawal or withdrawn in the same Policy Year as a previous
10% Withdrawal (and all surrenders in the first Policy Year) are subject to the
Excess Interest Adjustment and to the Surrender Charge. Neither a Surrender
Charge nor an Excess Interest Adjustment will be assessed if the withdrawal is
necessary to meet the minimum distribution requirements for that Policy
specified by the Code for tax-qualified plans.
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10% Withdrawals will reduce the Policy Value by the amount withdrawn.
Amounts requested in excess of the 10% Withdrawal are Excess Partial
Withdrawals. Excess Partial Withdrawals will reduce the Policy Value by an
amount equal to (X - Y + Z) where:
X = Excess Partial Withdrawal
Y = Excess Interest Adjustment applicable to the Excess Partial Withdrawal
Z = Surrender Charge on X minus Y.
For a discussion of the Surrender Charge, see "CHARGES AND DEDUCTIONS--
Surrender Charge," p. 40. For a discussion of the Excess Interest Adjustment,
see "DISTRIBUTIONS UNDER THE POLICY--Excess Interest Adjustment," p. 33, and
Appendix A.
Since the Owner assumes the investment risk with respect to Premium
Payments allocated to the Mutual Fund Account, and because partial withdrawals
may be subject to an Excess Interest Adjustment and to a Surrender Charge, and
possibly income taxes or premium taxes, the total amount paid upon total
surrender of the Cash Value (taking any prior surrenders into account) may be
more or less than the total Premium Payments made. Following a surrender of the
total Cash Value, or at any time the Policy Value is zero, all rights of the
Owner and Annuitant will terminate.
In addition to the Excess Interest Adjustment and Surrender Charge and any
applicable premium taxes, surrenders may be subject to income taxes and, if
prior to age 59 1/2, a ten percent penalty tax. (See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," p. 43.)
Nursing Care and Terminal Condition Withdrawal Option
If the Owner or Owner's spouse (Annuitant or Annuitant's spouse if the
Owner is not a natural person): (1) has been confined in a hospital or nursing
facility for 30 consecutive days, or (2) has been diagnosed as having a terminal
condition as defined in the Policy or endorsement, then the Surrender Charge,
Excess Interest Adjustment, and partial withdrawals adjustment as described in
the Guaranteed Minimum Death Benefit calculation, (See "DISTRIBUTIONS UNDER THE
POLICY--Death Benefit," p. 38.) are not imposed on surrenders or partial
withdrawals. (This benefit may not be available in all states or in all Policy
forms---see the Policy or endorsement for details.)
Excess Interest Adjustment (EIA)
Surrenders, partial withdrawals, transfers, and amounts applied to a
Payment Option (prior to the end of a Guaranteed Period) from the Fixed Account
Guaranteed Period Options will be subject to an Excess Interest Adjustment
except as provided for under "Surrenders" or "Nursing Care and Terminal
Condition
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Withdrawal Option" above or "Systematic Payout Option," below. Prior
versions of the Policy or Policies offered in certain states may not be subject
to an Excess Interest Adjustment. (See Appendix B.)
The Excess Interest Adjustment partially compensates PFL for the foregoing
early removal of funds from the Guaranteed Period Options where market interest
rates have risen since the date of the guarantee. Conversely, the Excess
Interest Adjustment allows PFL to share the benefit of falling market interest
rates with the Owner upon such withdrawals.
Generally, if market interest rates have risen since the date of the
guarantee, the application of the Excess Interest Adjustment (a negative Excess
Interest Adjustment in this case) will result in a lower payment upon surrender.
Conversely, if market interest rates have fallen since the date of the
guarantee, the application of the Excess Interest Adjustment (a positive Excess
Interest Adjustment in this case) will result in a higher payment upon
surrender.
Excess Interest Adjustments will not reduce the Adjusted Policy Value for
that Guaranteed Period Option below the amount paid into, less any prior partial
withdrawals and transfers from that Guaranteed Period Option, plus interest at
the Policy's minimum guaranteed effective annual interest rate of 3%.
The formula for calculating the Excess Interest Adjustment and examples of
the application of the Excess Interest Adjustments are set forth in Appendix A
to this Prospectus.
Systematic Payout Option
Under the Systematic Payout Option, Policy Owners can instruct PFL to make
automatic payments to them monthly, quarterly, semi-annually or annually from a
specified Subaccount. Monthly and quarterly payments can only be sent by
electronic funds transfer directly to a checking or savings account. The minimum
payment is $50. The maximum payment is 10% of the Policy Value at the time the
Systematic Payout is made divided by the number of payouts made per year (for
example, 12 for monthly). If this requested amount is below the minimum
distribution requirements for that policy specified by the IRS for tax qualified
plans, the maximum payment will be increased to this minimum required
distribution amount. The
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"Request for Systematic Payout" form must specify a date for the first payment,
which must be at least 30 days but not more than one year after the form is
submitted (i.e., Systematic Payouts will start at the end of the payment mode
selected, but not earlier than 30 days from the date of request).
The Surrender Charge and Excess Interest Adjustment will be waived for
Policy Owners under age 59 1/2 of Qualified Policies if they take Systematic
Payouts using one of the payout methods described in IRS Notice 89-25, Q&A-12
(the Life Expectancy Recalculation Option, Amortization, or Annuity Factor)
which generally require payments for life or life expectancy. These payments
must be continued until the later of age 59 1/2 or five years from their
commencement. No additional partial withdrawal may be taken during this time.
For Qualified Policies, when the Policy Owner is age 59 1/2 or older, the
Surrender Charge and Excess Interest Adjustment will be waived if payments are
made using the Life Expectancy Recalculation Option.
In addition, for either Qualified or Nonqualified Policies, the Surrender
Charge and Excess Interest Adjustment will not be imposed on Systematic Payouts.
Qualified Policies are subject to complex rules with respect to
restrictions on and taxation of distributions, including the applicability of
penalty taxes. In addition, the tax treatment of systematic payouts from
Nonqualified Policies has had an unfavorable ruling regarding the ability to
avoid the 10% penalty tax. Therefore, the Policy Owner should consult a
qualified tax adviser before requesting a Systematic Payout. In certain
circumstances withdrawn amounts may be included in the Policy Owner's gross
income. (See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," p. 43.)
Annuity Payments
Annuity Commencement Date. Unless the Annuity Commencement Date is
changed, Annuity Payments under a Policy will begin on the Annuity Commencement
Date selected by the Owner at the time the Owner applies for the Policy. The
Annuity Commencement Date may be changed from time to time by the Owner by
Written Notice to PFL, provided that notice of each change is received by PFL at
its Administrative and Service Office at least thirty (30) days prior to the
then current Annuity Commencement Date. Except as otherwise permitted by PFL, a
new Annuity Commencement Date must be a date which is: (1) at least thirty (30)
days after the date notice of the change is received by PFL; and (2) not later
than the last day of the policy month starting after the Annuitant attains age
85. In no event will an Annuity Commencement Date be permitted to be later than
the last day of the month following the month in which the Annuitant attains age
95. The Annuity Commencement Date may also be changed by the Beneficiary's
election of the Annuity Option after the Annuitant's death.
Election of Payment Option. During the lifetime of the Annuitant and prior
to the Annuity Commencement Date, the Owner may choose an Annuity Payment Option
or change the election, but Written Notice of any election or change of election
must be received by PFL at its Administrative and Service Office at least thirty
(30) days prior to the Annuity Commencement Date. If no election is made prior
to the Annuity Commencement Date, Annuity Payments will be made under (i) Option
3, life income with level payments for 10 years certain, using the existing
Adjusted Policy Value of the Fixed Account, or (ii) under Option 3-V, life
income with variable payments for 10 years certain using the existing Adjusted
Policy Value of the Mutual Fund Account, or (iii) in a combination of (i) and
(ii) if the Adjusted Policy Value is allocated among both the Fixed Account and
the Mutual Fund Account. If the Adjusted Policy Value on the Annuity
Commencement Date is less than $2000, PFL reserves the right to pay it in one
lump sum in lieu of applying it under an Annuity Payment Option.
Prior to the Annuity Commencement Date, the Beneficiary may elect to
receive the Death Benefit in a lump sum or under one of the Payment Options, to
the extent allowed by law and subject to the terms of any settlement
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agreement. (See "Death Benefit," p. 41.) Subject to the restrictions of certain
state laws, Annuity Payments will be made on either a fixed basis or a variable
basis as selected by the Owner (or the Beneficiary, after the Annuitant's
death).
The person who elects a Payment Option can also name one or more successor
payees to receive any unpaid amount PFL has at the death of a payee. Naming
these payees cancels any prior choice of a successor payee.
A payee who did not elect the Payment Option does not have the right to
advance or assign payments, take the payments in one sum, or make any other
change. However, the payee may be given the right to do one or more of these
things if the person who elects the option tells PFL in writing and PFL agrees.
Unless the Policy Owner specifies otherwise, the payee shall be the
Annuitant, or, after the Annuitant's death, the Beneficiary. PFL may require
written proof of the age of any person who has an annuity purchased under Option
3, 3-V, 5 or 5-V.
Premium Tax. PFL may be required by state law to pay premium tax on the
amount applied to a Payment Option or upon withdrawal. If so, PFL will deduct
the premium tax before applying or paying the proceeds.
Supplementary Policy. Once proceeds become payable and a Payment Option
has been chosen, PFL will issue a Supplementary Policy in settlement of the
option elected under the Policy setting forth the terms of the option elected.
The Supplementary Policy will name the payees and will describe the payment
schedule.
Annuity Payment Options
The Policy provides five Payment Options which are described below. Three
of these are offered as either "Fixed Payment Options" or "Variable Payment
Options," and two are only available as Fixed Payment Options. The Policy Owner
may elect a Fixed Payment Option, a Variable Payment Option, or a combination of
both. If the Policy Owner elects a combination, he must specify what part of the
Policy proceeds are to be applied to the Fixed and Variable Options (and he must
also specify which Subaccounts for the Variable Options).
Note Carefully: Under Payment Options 3(1) and 5 (including 3-V(1) and
5-V), it would be possible for only one Annuity Payment to be made if the
Annuitant(s) were to die before the due date of the second annuity payment; only
two Annuity Payments if the Annuitant(s) were to die before the due date of the
third annuity payment; and so forth.
On the Annuity Commencement Date, the Policy's Adjusted Policy Value will
be applied to provide for Annuity Payments under the selected Annuity Option as
specified. The Adjusted Policy Value is the Policy Value (for the Valuation
Period which ends immediately preceding the Annuity Commencement Date),
increased or decreased by any applicable Excess Interest Adjustment.
The effect of choosing a Fixed Annuity Option is that the amount of each
payment will be set on the Annuity Commencement Date and will not change. If a
Fixed Annuity Option is selected, the Adjusted Policy Value will be transferred
to the general account of PFL, and the Annuity Payments will be fixed in amount
by the fixed annuity provisions selected and the age and sex (if consideration
of sex is allowed under applicable law) of the Annuitant. For further
information, contact PFL at its Administrative and Service Office.
Guaranteed Values. There are five Fixed Annuity Options. Options 1, 2 and
4 are based on a guaranteed interest rate of 3%. Options 3 and 5 are based on a
guaranteed effective annual interest rate of 3% using the "1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year 2000
with projection
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scale G. ("The 1983 Table a" mortality rates are adjusted based on improvements
in mortality since 1983 to more appropriately reflect increased longevity. This
is accomplished using a set of improvement factors referred to as projection
scale G.)
Option 1--Interest Payments. The policy proceeds may be left with PFL for
any term as agreed by PFL and the Owner. PFL will pay the interest in equal
payments or it may be left to accumulate. Withdrawal rights will be agreed upon
by the Owner and PFL when the option is elected.
Option 2--Income for a Specified Period. Level payments of the proceeds
with interest are made for the fixed period elected, at which time the funds are
exhausted.
Option 3--Life Income. An election may be made between:
1. "No Period Certain"--Level payments will be made during the
lifetime of the Annuitant.
2. "10 Years Certain"--Level Payments will be made for the longer of
the Annuitant's lifetime or ten years.
3. "Guaranteed Return of Policy Proceeds"--Level payments will be
made for the longer of the Annuitant's lifetime or the number of
payments which, when added together, equals the proceeds applied
to the income option.
Option 4--Income of a Specified Amount. Payments are made for any
specified amount until the proceeds with interest are exhausted.
Option 5--Joint and Survivor Annuity. Payments are made during the joint
lifetime of the payee and a joint payee of the Owner's selection. Payments will
be made as long as either person is living.
Other options may be arranged by agreement with PFL. Certain options may
not be available in some states.
Current immediate annuity rates for the same class of annuities will be
used if higher than the guaranteed amount (guaranteed amounts are based upon the
tables contained in the Policy). Current amounts may be obtained from PFL.
Variable Payment Options. The dollar amount of the first Variable Annuity
Payment will be determined in accordance with the annuity payment rates set
forth in the applicable table contained in the Policy. The tables are based on a
5% effective annual Assumed Investment Return and the "1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year 2000
with projection Scale G. ("The 1983 Table a" mortality rates are adjusted based
on improvements in mortality since 1983 to more appropriately reflect increased
longevity. This is accomplished using a set of improvement factors referred to
as projection scale G.) The dollar amount of subsequent Variable Annuity
Payments will vary based on the investment performance of the Subaccount of the
Mutual Fund Account selected by the Annuitant or Beneficiary. If the actual
investment performance exactly matched the Assumed Investment Return of 5% at
all times, the amount of each Variable Annuity Payment would remain equal. If
actual investment performance exceeds the Assumed Investment Return, the amount
of the payments would increase. Conversely, if actual investment performance is
worse than the Assumed Investment Return, the amount of the payments would
decrease.
Determination of the First Variable Payment. The amount of the first
variable payment depends upon the sex (if consideration of sex is allowed) and
adjusted age of the Annuitant. The adjusted age is the Annuitant's actual age
nearest birthday, at the Annuity Commencement Date, adjusted as follows:
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Annuity Commencement Date Adjusted Age
------------------------- ------------
Before 2001 Actual Age
2001-2010 Actual Age minus 1
2011-2020 Actual Age minus 2
2021-2030 Actual Age minus 3
2031-2040 Actual Age minus 4
After 2040 As determined by PFL
This adjustment assumes an increase in life expectancy, and therefore it results
in lower payments than without such an adjustment.
The following Variable Payment Options generally are available:
Option 3-V--Life Income. An election may be made between:
1. "No Period Certain"--Payments will be made during the lifetime of
the Annuitant.
2. "10 Years Certain"--Payments will be made for the longer of the
Annuitant's lifetime or ten years.
Option 5-V--Joint and Survivor Annuity. Payments are made as long as
either the Annuitant or the joint Annuitant is living.
Certain options may not be available in some states.
Determination of Subsequent Variable Payments. All Variable Annuity
Payments other than the first are calculated using "Annuity Units" which are
credited to the Policy. The number of Annuity Units to be credited in respect of
a particular Subaccount is determined by dividing that portion of the first
Variable Annuity Payment attributable to that Subaccount by the Annuity Unit
Value of that Subaccount for the Annuity Commencement Date. The number of
Annuity Units of each particular Subaccount credited to the Policy then remains
fixed. The dollar value of variable Annuity Units in the chosen Subaccount will
increase or decrease reflecting the investment experience of the chosen
Subaccount. The dollar amount of each Variable Annuity Payment after the first
may increase, decrease or remain constant, and is equal to the sum of the
amounts determined by multiplying the number of Annuity Units of each particular
Subaccount credited to the Policy by the Annuity Unit Value for the particular
Subaccount on the date the payment is made.
Transfers. A Policy Owner may transfer the value of the Annuity Units from
one Subaccount to another within the Mutual Fund Account or to the Fixed
Account. However, after the Annuity Commencement Date no transfers may be made
from the Fixed Account to the Mutual Fund Account. The minimum amount which may
be transferred is the lesser of $10 of monthly income or the entire monthly
income of the variable Annuity Units in the Subaccount from which the transfer
is being made. The remaining Annuity Units in the Subaccount must provide at
least $10 of monthly income. If, after a transfer, the monthly income of the
remaining Annuity Units in a Subaccount would be less than $10, PFL reserves the
right to include those Annuity Units as part of the transfer. PFL reserves the
right to limit transfers between Subaccounts or to the Fixed Account after the
Annuity Commencement Date to once per Policy Year.
* * *
Tax Withholding. A portion or the entire amount of the Annuity Payments
may be taxable as ordinary income. If, at the time the Annuity Payments begin,
the Policy Owner has not provided PFL with a written election not to have
federal income taxes withheld, PFL must by law withhold such taxes from the
taxable portion of such annuity payments and remit that amount to the federal
government. Withholding is mandatory for certain Qualified Policies. (See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES," p. 43.)
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<PAGE>
Adjustment of Annuity Payments. Payments will be made at 1, 3, 6, or 12
month intervals. If the individual payments provided for would be or become less
than $50, PFL may change, at its discretion, the frequency of payments to such
intervals as will result in payments of at least $50. If the Adjusted Policy
Value on the Annuity Commencement Date is less than $2,000, PFL may pay such
value in one sum in lieu of the payments otherwise provided for.
Death Benefit
Death of Annuitant Prior to Annuity Commencement Date. A Death Benefit
will be paid to the Beneficiary if the Owner, who is the Annuitant, dies prior
to the Annuity Commencement Date. The amount of the Death Benefit is the
greatest of the Policy Value, Cash Value or the Guaranteed Minimum Death Benefit
selected. Prior versions of the Policy or Policies offered in certain states may
provide for a different definition or calculation of the Death Benefit. See
Appendix B and the Policy or endorsement for details.
There are three Guaranteed Minimum Death Benefit Options available: (A)
The "5% Annually Compounding Death Benefit," (B) the "Annual Step-Up Death
Benefit," and (C) the "Return of Premium Death Benefit."
The "5% Annually Compounding Death Benefit" is the total Premium Payments
less any Adjusted Partial Withdrawals plus interest at an effective annual rate
of 5% from the payment or withdrawal date up to the earlier of date of death or
the Owner's 81st birthday.
The "Annual Step-Up Guaranteed Minimum Death Benefit" is the highest
Policy Value on any Policy Anniversary prior to the earlier of the date of death
or the Owner's 81st birthday, plus Premium Payments less any Adjusted Partial
Withdrawals since that anniversary. For this purpose, the Policy Date will be
treated as a Policy Anniversary. Any applicable Excess Interest Adjustments on
transfers from the Fixed Account will affect the value of this Guaranteed
Minimum Death Benefit.
The "Return of Premium Death Benefit" is the total Premium Payments less
any Adjusted Partial Withdrawals (defined below) as of the date of death.
Under all Guaranteed Minimum Death Benefit Options, if the surviving
spouse elects to continue the Policy in lieu of receiving the Death Benefit, an
amount equal to the excess, if any, of the Guaranteed Minimum Death Benefit over
the Policy Value, will then be added to the Policy Value. This amount will be
added only once, at the time of such election.
The 5% Annually Compound Death Benefit is not available if either the
Annuitant or the Owner is age 75 or higher on the Policy Date. The Annual
Step-Up Death Benefit is not available if either the Annuitant or the Owner is
age 81 or higher on the Policy Date. If no choice is made in the Policy
application then the Return of Premium Death Benefit will apply.
After the Policy Date, an election cannot be made and the Guaranteed
Minimum Death Benefit option cannot be changed.
The Death Benefit is based on values determined on the later of when PFL
receives due proof of death and an election of a settlement option.
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<PAGE>
Adjusted Partial Withdrawal. The Adjusted Partial Withdrawal is the total
amount deducted from the Guaranteed Minimum Death Benefit following a partial
withdrawal of the Policy Value. Each Adjusted Partial Withdrawal is the sum of
(1) and (2), where:
(1) The 10% Withdrawal and,
(2) The amount that an Excess Partial Withdrawal reduces the Policy Value. (See
"DISTRIBUTIONS UNDER THE POLICY--Surrenders," p. 32) times [(a) divided by (b)]
where:
(a) is the Death Benefit less any 10% Withdrawals; and
(b) is the Policy Value less any 10% Withdrawals.
If a partial withdrawal is taken when the Guaranteed Minimum Death Benefit
exceeds the Policy Value, then the amount deducted from the Guaranteed Minimum
Death Benefit as a result of the partial withdrawal (that is, the Adjusted
Partial Withdrawal) will exceed the partial withdrawal request. In that case,
the total proceeds of a partial withdrawal followed by a Death Benefit could be
less than total Premium Payments.
Due Proof of Death of the Annuitant is proof that the Annuitant who is the
Owner died prior to the commencement of Annuity Payments. Upon receipt of this
proof, an election of a method of settlement and return of the Policy, the Death
Benefit generally will be paid within seven days, or as soon thereafter as PFL
has sufficient information about the Beneficiary to make the payment. The
Beneficiary may receive the amount payable in a lump sum cash benefit, or,
subject to any limitation under any state or federal law, rule, or regulation,
under one of the Annuity Payment Options described above, unless a settlement
agreement is effective at the death of the Owner preventing such election.
If the Annuitant was the Policy Owner, and the Beneficiary was not the
Annuitant's spouse, the Death Benefit must (1) be distributed within five years
of the date of the deceased Owner's death, or (2) payments under a Payment
Option must begin within one year of the deceased Owner's death and must be made
for the Beneficiary's lifetime or for a period certain (so long as any certain
period does not exceed the Beneficiary's life expectancy). Death proceeds which
are not paid to or for the benefit of a natural person must be distributed
within five years of the date of the deceased Owner's death. If the sole
Beneficiary is the deceased Owner's surviving spouse, such spouse may elect to
continue the Policy as the new Annuitant and Policy Owner instead of receiving
the Death Benefit. (See "Federal Tax Matters" in the Statement of Additional
Information.)
If the Annuitant is not the Owner, and the Owner dies prior to the Annuity
Commencement Date, a Successor Owner may surrender the Policy at any time for
the Adjusted Policy Value. If the Successor Owner is not the deceased Owner's
surviving spouse, however, this amount must be distributed within five years
after the date of death of the Owner, or payments under a Payment Option must
begin within one year of the deceased Owner's death and must be made for the
Beneficiary's lifetime or for a period certain (so long as any certain period
does not exceed the Beneficiary's life expectancy).
Death On or After Annuity Commencement Date. The death benefit payable on
or after the Annuity Commencement Date depends on the Payment Option selected.
If any Owner dies on or after the Annuity
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<PAGE>
Commencement Date, but before the entire interest in the Policy is distributed,
the remaining portion of such interest in the Policy will be distributed at
least as rapidly as under the method of distribution being used as of the date
of that Owner's death.
Beneficiary. The Beneficiary designation in the application will remain in
effect until changed. The Policy Owner may change the designated Beneficiary by
sending Written Notice to PFL. The Beneficiary's consent to such change is not
required unless the Beneficiary was irrevocably designated or consent is
required by law. (If an irrevocable Beneficiary dies, the Policy Owner may then
designate a new Beneficiary.) The change will take effect as of the date the
Policy Owner signs the Written Notice, whether or not the Policy Owner is living
when the Notice is received by PFL. PFL will not be liable for any payment made
before the Written Notice is received. If more than one Beneficiary is
designated, and the Policy Owner fails to specify their interests, they will
share equally.
Death of Owner
Federal tax law requires that if any Policy Owner (including any joint
Owner or any Successor Policy Owner who has become a current Owner) dies before
the Annuity Commencement Date, then the entire value of the Policy must
generally be distributed within five years of the date of death of such Policy
Owner. Certain rules apply where 1) the spouse of the deceased Owner is the sole
beneficiary, 2) the Policy Owner is not a natural person and the primary
Annuitant dies or is changed, or 3) any Policy Owner dies after the Annuity
Commencement Date. See "Federal Tax Matters" in the Statement of Additional
Information for a detailed description of these rules. Other rules may apply to
Qualified Policies. (See also "DISTRIBUTIONS UNDER THE POLICY--Death Benefit" p.
38)
Restrictions Under the Texas Optional Retirement Program
Section 36.105 of the Texas Educational Code permits participants in the
Texas Optional Retirement Program (ORP) to withdraw their interest in a variable
annuity Policy issued under the ORP only upon: (1) termination of employment in
the Texas public institutions of higher education; (2) retirement; or (3) death.
Accordingly, a participant in the ORP (or the participant's estate if the
participant has died) will be required to obtain a certificate of termination
from the employer or a certificate of death before the account can be redeemed.
Restrictions Under Section 403(b) Plans
Section 403(b) of the Internal Revenue Code provides for tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any Policy
used for a 403(b) plan will prohibit distributions of elective contributions and
earnings on elective contributions except upon death of the employee, attainment
of age 59 1/2, separation from service, disability, or financial hardship. In
addition, income attributable to elective contributions may not be distributed
in the case of hardship.
Restrictions Under Qualified Policies
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Policies or under the terms
of the plans in respect of which Qualified Policies are issued.
CHARGES AND DEDUCTIONS
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<PAGE>
No deductions are made from Premium Payments, so that the full amount of
each Premium Payment is invested in one or more of the Accounts. PFL will make
certain charges and deductions in connection with the Policy in order to
compensate it for incurring expenses in distributing the Policy, bearing
mortality and expense risks under the Policy, and administering the Accounts and
the Policies. Charges may also be made for premium taxes, federal, state or
local taxes, or for certain transfers or other transactions. Charges and
expenses are also deducted from the Underlying Funds.
Surrender Charge
PFL will incur expenses relating to the sale of Policies, including
commissions to registered representatives and other promotional expenses. PFL
may deduct a Surrender Charge from any amount surrendered (i.e., withdrawn) in
connection with a partial withdrawal or a surrender in order to cover a portion
of such distribution expenses. A Surrender Charge will not be deducted from a
withdrawal, after the first Policy Year, of up to 10% of the Policy Value, if
there have been no partial withdrawals in the current Policy Year. (See
"DISTRIBUTIONS UNDER THE POLICY--Surrenders," p. 32.)
The Surrender Charge is not imposed upon exercise of the Nursing Care and
Terminal Condition Option. This feature may no be available in all states. (See
"DISTRIBUTIONS UNDER THE POLICY," p.32, and Appendix B.)
The amount of the Surrender Charge is determined by multiplying the amount
of the Premium Payments withdrawn by the applicable Surrender Charge Percentage.
The applicable Surrender Charge Percentage will depend upon the number of years
that have elapsed since the Premium Payment that is being withdrawn was made.
For this purpose, surrenders are allocated to Premium Payments on a "first
in-first out" basis, that is, first to the oldest Premium Payment, then to the
next oldest Premium Payment, and so on. Premium Payments are deemed to be
withdrawn before earnings, and after all Premium Payments have been withdrawn,
the remaining Adjusted Policy Value may be withdrawn without any Surrender
Charge. The following is the table of Surrender Charge Percentages:
<TABLE>
<CAPTION>
Applicable Surrender
Number of Sales Charge Percentage
Years Since (as percentage of
Premium Payment Date Premium Payment withdrawn)
-------------------- --------------------------
<S> <C>
Less than 1....................... 7%
At least 1 and less than 2........ 6%
At least 2 and less than 3........ 5%
At least 3 and less than 4........ 4%
At least 4 and less than 5........ 3%
At least 5 and less than 6........ 2%
At least 6 and less than 7........ 1%
</TABLE>
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<PAGE>
PFL anticipates that the Surrender Charge will not generate sufficient
funds to pay the cost of distributing the Policies. If this charge is
insufficient to cover the distribution expenses, the deficiency will be met from
PFL's general funds, which will include amounts derived from the fee for
mortality and expense risks and the Distribution Financing Charge.
Mortality and Expense Risk Fee
PFL imposes a daily charge as compensation for bearing certain
mortality and expense risks in connection with the Policies. For the 5% Annually
Compounding Death Benefit and the Annual Step-Up Death Benefit, this charge is
equal to an effective annual rate of 1.25% of the daily net asset value of the
Mutual Fund Account. For the Return of Premium Death Benefit, the corresponding
charge is equal to an effective annual rate of 1.10% of the daily net asset
value of the Mutual Fund Account. The Mortality and Expense Risk Fee is
reflected in the Accumulation or Annuity Unit Values for the Policy for each
Subaccount.
Policy Values and Annuity Payments are not affected by changes in actual
mortality experience nor by actual expenses incurred by PFL. The mortality risks
assumed by PFL arise from its contractual obligations to make Annuity Payments
(determined in accordance with the Annuity tables and other provisions contained
in the Policy) and to pay Death Benefits prior to the Annuity Commencement Date.
Thus, Owners are assured that neither an Annuitant's own longevity nor an
unanticipated improvement in general life expectancy will adversely affect the
monthly Annuity payments that the Annuitant will receive under the Policy.
PFL also bears substantial risk in connection with the Death Benefit
Guarantee since PFL will pay a Death Benefit equal to the Guaranteed Minimum
Death Benefit if that amount is higher than the Policy Value.
The expense risk assumed by PFL is the risk that PFL's actual expenses in
administering the Policy and the Accounts will exceed the amount recovered
through the Administrative Charges.
If the Mortality and Expense Risk Fee is insufficient to cover PFL's
actual costs, PFL will bear the loss; conversely, if the charge is more than
sufficient to cover costs, the excess will be profit to PFL. PFL expects a
profit from this charge. To the extent that the Surrender Charge is insufficient
to cover the actual cost of Policy distribution, the deficiency will be met from
PFL's general corporate assets, which may include amounts, if any, derived from
the Distribution Financing Charge and, if necessary, the Mortality and Expense
Risk Fee. A Mortality and Expense Risk Fee is assessed during the annuity phase
for all Variable Annuity Options including those that do not carry a life
contingency.
Administrative Charges
Service Charge. In order to cover the costs of administering the
Policies, PFL deducts a Service Charge from the Policy Value of each Policy. The
annual Service Charge is deducted from the Policy Value of each Policy on each
Policy Anniversary prior to the Annuity Commencement Date. PFL also reserves the
right to charge up to $35 at the time of surrender during any Policy Year. The
charge is not deducted after the Annuity Commencement Date. The annual Service
Charge is the lesser of 2% of the Policy Value or $35, and it will not be
increased in the future. This charge is waived if either the Policy Value or the
sum of all Premium Payments less the sum of all partial withdrawals equals or
exceeds $50,000 on a Policy Anniversary (or date of surrender). PFL does not
anticipate that it will realize any profit from this Service Charge. The Service
Charge will be deducted from the
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<PAGE>
Investment Option(s) in the same proportion that the Owner's interest in each
Investment Option bears to the Owner's total Policy Value.
Administrative Charge. PFL also deducts a daily Administrative Charge from
the net assets of the Mutual Fund Account to partially cover expenses incurred
by PFL in connection with the administration of the Account and the Policies.
The effective annual rate of this charge is .15% of the daily net assets value
of the Mutual Fund Account. (See "CHARGES AND DEDUCTIONS--Administrative
Charges," p. 42.)
Distribution Financing Charge
During the first seven Policy Years, PFL deducts a daily Distribution
Financing Charge equal to an effective annual rate of 0.15% of the daily net
asset value of the Mutual Fund Account. PFL guarantees that the cumulative
amount of the charge, plus the Surrender Charge, will never exceed 8.5% of the
cumulative Premium Payments for a Policy. The Distribution Financing Charge is
paid to PFL and is designed to partially compensate PFL for the cost of
distributing the Policies. The Distribution Financing Charge will be used to
support marketing efforts, training of representatives and reimbursement of
expenses incurred by broker/dealers who sell the Policies. The staff of the SEC
deems such charge to constitute a deferred sales charge.
Premium Taxes
PFL currently makes no deduction from the Premium Payments for any state
premium taxes PFL pays in connection with Premium Payments under the Policies.
However, PFL will, when permitted by state law, deduct the aggregate premium
taxes paid on behalf of a particular Policy on (i) the Annuity Commencement
Date, (ii) the total surrender of a Policy, or (iii) payment of the death
proceeds of a Policy. Premium taxes currently range from 0% to 3.50% of Premium
Payments.
Federal, State and Local Taxes
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<PAGE>
No charges are currently made for federal, state, or local taxes other
than premium taxes. However, PFL reserves the right to deduct charges in the
future for any taxes or other economic burden resulting from the application of
any tax laws that PFL determines to be attributable to the accounts or the
policies.
Transfer Charge
There is no charge for the first 12 transfers between Investment Options
in each Policy Year. PFL reserves the right to impose a $10 charge for the
thirteenth and each subsequent transfer request made by the Owner during a
single Policy Year. For the purpose of determining whether a transfer charge is
payable, Premium Payment allocations are not considered transfers. All transfer
requests made simultaneously will be treated as a single request. No transfer
charge will be imposed for any transfer which is not at the Owner's request.
Other Expenses Including Investment Advisory Fees
Each of the Portfolios of the Underlying Funds is responsible for all of
its expenses. In addition, charges will be made against each of the Portfolios
of the Underlying Funds for investment advisory services provided to the
Portfolio. The net assets of each Portfolio of the Underlying Funds will reflect
deductions in connection with the investment advisory fee and other expenses.
For more information concerning the investment advisory fee and other
charges against the Portfolios, see the prospectuses for the Underlying Funds,
current copies of which accompany this Prospectus.
Employee and Agent Purchases
The Policy may be acquired by an employee or registered representative of
any broker/dealer authorized to sell the Policy or their spouse or minor
children, or by an officer, director, trustee or bona-fide full-time employee of
PFL or its affiliated companies or their spouse or minor children. In such case,
a bonus of 5% of each premium deposit may be credited to the Policy due to lower
acquisition costs PFL experiences on these purchases. The bonus will be reported
to the Internal Revenue Service as taxable income to the employee or registered
representative. Compensation to the registered representative and broker/dealer
will be reduced by the amount of such bonus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary does not constitute tax advice. It is a general
discussion of certain of the expected federal income tax consequences of
investment in and distributions with respect to a Policy, based on the Internal
Revenue Code of 1986, as amended (the "Code"), proposed and final Treasury
Regulations thereunder, judicial authority, and current administrative rulings
and practice. This summary discusses only certain federal income tax
consequences to "United States Persons," and does not discuss state, local, or
foreign tax consequences. United States Persons means citizens or residents of
the United States, domestic corporations, domestic partnerships and trusts or
estates that are subject to United States federal income tax regardless of the
source of their income.
At the time the initial Premium Payment is paid, a prospective purchaser
must specify whether he or she is purchasing a Nonqualified Policy or a
Qualified Policy. If the initial Premium Payment is derived from an exchange or
surrender of another annuity policy, PFL may require that the prospective
purchaser provide information with regard to the federal income tax status of
the previous annuity policy. PFL will require that persons purchase separate
Policies if they desire to invest monies qualifying for different annuity tax
treatment under the Code. Each such separate Policy would require the minimum
initial Premium Payment stated above.
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<PAGE>
Subsequent Additional Premium Payments under a Policy must qualify for the same
federal income tax treatment as the initial Premium Payment under the Policy;
PFL will not accept a Subsequent Additional Premium Payment under a Policy if
the federal income tax treatment of such Premium Payment would be different from
that of the initial Premium Payment.
The Qualified Policies were designed for use by retirement plans and
individual retirement accounts that qualify for special federal income tax
treatment under Sections 401(a), 403(b), or 408(a), or 457 of the Code and
individuals purchasing individual retirement annuities that qualify for special
federal income tax treatment under Section 408(b) of the Code. Certain
requirements must be satisfied in purchasing a Qualified Policy in order for the
plan, account or annuity to retain its special tax treatment. This summary is
not intended to cover such requirements, and assumes that Qualified Policies are
purchased pursuant to retirement plans or individual retirement accounts, or are
individual retirement annuities, that qualify for such special tax treatment.
This summary was prepared by PFL after consultation with tax counsel, but no
opinion of tax counsel has been obtained.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. EACH
POTENTIAL PURCHASER IS URGED TO CONSULT HIS/HER OWN TAX ADVISER AS TO THE
CONSEQUENCES OF INVESTMENT IN A POLICY UNDER FEDERAL AND APPLICABLE STATE, LOCAL
AND FOREIGN TAX LAWS.
Tax Status of the Policy
The following discussion is based on the assumption that the Policy
qualifies as an annuity contract for federal income tax purposes. The Statement
of Additional Information discusses the tax requirements for qualifying as an
annuity contract.
Taxation of Annuities
The discussion below applies only to those Policies owned by natural
persons, and that qualify as annuity contracts for federal income tax purposes.
With respect to Owners who are natural persons, the Policy should be treated as
an annuity contract for federal income tax purposes.
In General. Except as described below with respect to Owners who are not
natural persons, an Owner who holds a Policy satisfying the diversification and
distribution requirements described in the Statement of Additional Information
should not be taxed on increases in the Policy Value until an amount is received
or deemed received, e.g., upon a partial withdrawal or surrender or as Annuity
Payments under the Annuity Option selected. Generally, any amount received or
deemed received under a Nonqualified Annuity Contract prior to the Annuity
Commencement Date is deemed to come first from any "Income on the Contract" and
then from the "Investment in the Contract." The "Investment in the Contract"
generally equals total premium payments less amounts received which were not
includable in gross income. To the extent that the Policy Value (Cash Value in
the event of a surrender) exceeds the "Investment in the Contract," such excess
constitutes the "Income on the Contract." For these purposes such "Income on the
Contract" shall be computed by reference to the aggregation rules described
below, and the amount includable in gross income will be taxable as ordinary
income. If at the time that any amount is received or deemed received there is
no "Income on the Contract" (e.g., because the gross Policy Value does not
exceed the "Investment in the Contract" and no aggregation rule applies), then
such amount received or deemed received will not be includable in gross income,
and will simply reduce the "Investment in the Contract."
For this purpose, the assignment, pledge or agreement to assign or pledge
any portion of the Policy Value (including assignment of Owner's right to
receive Annuity Payments prior to the
52
<PAGE>
Annuity Commencement Date) generally will be treated as a distribution in the
amount of such portion of the Policy Value. Additionally, if an Owner designates
a new Owner prior to the Annuity Commencement Date without receiving full and
adequate consideration, the old Owner generally will be treated as receiving a
distribution under the Policy in an amount equal to the Policy Value. A transfer
of ownership or an assignment of a Policy, or designation of an Annuitant or
Beneficiary who is not also the Owner, as well as the selection of certain
Annuity Commencement Dates, may result in certain tax consequences to the Owner
that are not discussed herein. An Owner contemplating any such transfer,
designation, selection or assignment of a Policy should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
Aggregation Rules. Generally all nonqualified deferred annuity contracts
issued by the same company (or an affiliated company) to the same owner during
any calendar year shall be treated as one annuity contract, and "aggregated" for
purposes of determining the amount includable in gross income. In addition, for
such purposes all individual retirement annuities and accounts under Section 408
of the Code for an individual are aggregated, and generally all distributions
therefrom during a calendar year are treated as one distribution made as of the
end of such year.
Surrenders or Partial Withdrawals. In the case of a partial withdrawal
(including systematic partial withdrawals) under a Nonqualified Policy, the
amount received generally will be includable in gross income to the extent that
it does not exceed the "Income on the Contract," which is generally equal to the
excess of the Policy Value immediately before the partial withdrawal over the
"Investment in the Contract" at that time. However, for these purposes the
Policy Value immediately before a partial withdrawal may have to be increased by
any positive Excess Interest Adjustment which results from such a partial
withdrawal or which could result from a simultaneous surrender, and may need
further adjustments if the aggregation rules apply. There is, however, no
definitive guidance on the proper tax treatment of Excess Interest Adjustments,
and the Owner should contact a competent tax adviser with respect to the
potential tax consequences of an Excess Interest Adjustment that may apply in
the case of a Non-Qualified Policy or a Qualified Policy. In the case of a
partial withdrawal (including systematic partial withdrawals) under a Qualified
Policy (other than one qualified under Section 457 of the Code), a ratable
portion of the amount received is generally excludable from gross income, based
on the ratio of the "Investment in the Contract" to the individual's total
Policy Value or accrued benefit under the retirement plan at the time of each
such payment. For a Qualified Policy, the "Investment in the Contract" can be
zero. Special tax rules may be available for certain distributions from a
Qualified Policy. In the case of a surrender under a Nonqualified Policy or a
Qualified Policy, the amount received generally will be taxable only to the
extent it exceeds the "Investment in the Contract", unless the aggregation rules
apply.
Annuity Payments. Although the tax consequences may vary depending on the
Annuity Payment Option elected under the Policy, in general only a portion of
the Annuity Payments received after the Annuity Commencement Date will be
includable in the gross income of the recipient.
For Fixed Annuity Payments, in general the excludable portion of each
payment is determined by dividing the "Investment in the Contract" on the
Annuity Commencement Date by the total expected return resulting from the
Annuity Payments for the term of the payments. The remainder of each Annuity
Payment is includable in gross income. Once the "Investment in the Contract" has
been fully recovered, the full amount of any additional Annuity Payments
received is includable in gross income.
For Variable Annuity Payments, the includable portion is generally
determined by an equation that establishes a specific dollar amount of each
payment that is excludable from gross income. This dollar amount is determined
by dividing the "Investment in the Contract" on the Annuity Commencement Date by
the total number of expected periodic payments. The remainder of each Annuity
Payment is includable in gross income. Once the "Investment
53
<PAGE>
in the Contract" has been fully recovered, the full amount of any additional
Annuity Payments is includable in gross income.
Where an Owner allocates a portion of the Adjusted Policy Value on the
Annuity Commencement Date to more than one annuity payment option (fixed or
variable), special rules govern the allocation of the Policy's entire
"Investment in the Contract" on such date to each such option, for purposes of
determining the excludable amount of each payment received under that option.
PFL makes no attempt to describe these allocation rules, because they would
prescribe a complex variety of results, depending on how the allocations were
made among the various types of annuity payment options. Instead, any Owner is
advised to consult a competent tax adviser as to the potential tax effects of
allocating any amount of Adjusted Policy Value to any particular annuity payment
option.
If, after the Annuity Commencement Date, Annuity Payments cease by reason
of the death of the Annuitant, the excess (if any) of the "Investment in the
Contract" as of the Annuity Commencement Date over the aggregate amount of
Annuity Payments received on or after the Annuity Commencement Date that was
excluded from gross income is allowable as a deduction for the last taxable year
of the Annuitant.
Taxation of Death Benefit Proceeds. Amounts may be distributed from the
Policy because of the death of an Owner or the Annuitant. Generally, such
amounts are includable in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a surrender, as
described above, or (2) if distributed under an Annuity Payment Option, they are
taxed in the same manner as Annuity Payments, as described above. For these
purposes, the "Investment in the Contract" is not affected by the Owner's or
Annuitant's death. That is, the "Investment in the Contract" remains generally
the total premium payments less amounts received which were not includable in
gross income.
Penalty Taxes. In the case of any amount received or deemed received from
the Policy, e.g., upon a surrender of a Policy or a deemed distribution under a
Policy resulting from a pledge, assignment or agreement to pledge or assign or
an Annuity Payment with respect to a Policy, there may be imposed on the
recipient a federal penalty tax equal to 10% of the amount includable in gross
income. The penalty tax generally will not apply to any distribution: (i) made
on or after the date on which the taxpayer attains age 59 1/2; (ii) made as a
result of the death of the holder (generally the Owner); (iii) attributable to
the disability of the taxpayer; or (iv) which is part of a series of
substantially equal periodic payments made (not less frequently than annually)
for the life (or life expectancy) of the taxpayer or the joint lives (or joint
life expectancies) of such taxpayer and the taxpayer's beneficiary. Other rules
may apply to Qualified Policies.
Withholding. The portion of any distribution under a Policy that is
includable in gross income will be subject to federal income tax withholding
unless the recipient of such distribution elects not to have federal income tax
withheld. Election forms will be provided at the time distributions are
requested or made. For certain Qualified Policies, certain distributions are
subject to mandatory withholding.
Qualified Policies. The Qualified Policy is designed for use with several
types of tax-qualified retirement plans. The tax rules applicable to
participants and beneficiaries in tax-qualified retirement plans vary according
to the type of plan and the terms and conditions of the plan. Special favorable
tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Some retirement plans are
subject to distribution and other requirements that are not incorporated into
our Policy administration procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions with respect to the Policies comply with applicable law.
54
<PAGE>
PFL makes no attempt to provide more than general information about use of
the Policy with the various types of retirement plans. Purchasers of Policies
for use with any retirement plan should consult their legal counsel and tax
adviser regarding the suitability of the Policy.
Individual Retirement Annuities. In order to qualify as an individual
retirement annuity under Section 408(b) of the Code, a Policy must contain
certain provisions: (i) the Owner must be the Annuitant; (ii) the Policy
generally is not transferable by the Owner, e.g., the Owner may not designate a
new Owner, designate a Contingent Owner or assign the Policy as collateral
security; (iii) the total Premium Payments for any calendar year may not exceed
$2,000, except in case of a rollover amount or contribution under Sections
402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code; (iv) Annuity Payments or
partial withdrawals must begin no later than April 1 of the calendar year
following the calendar year in which the Annuitant attains age 70 1/2; (v) an
Annuity Payment Option with a Period Certain that will guarantee Annuity
Payments beyond the life expectancy of the Annuitant and the Beneficiary may not
be selected; and (vi) certain payments of Death Benefits must be made in the
event the Annuitant dies prior to the distribution of the Policy Value. Policies
intended to qualify as individual retirement annuities under Section 408(b) of
the Code contain such provisions.
Section 408 of the Code also indicates that no part of the funds for an
individual retirement account or annuity ("IRA") should be invested in a life
insurance contract, but the regulations thereunder allow such funds to be
invested in an annuity contract that provides a death benefit that equals the
greater of the premiums paid or the cash value for the contract. The Policy
provides an enhanced death benefit that could exceed the amount of such a
permissible death benefit, but it is unclear to what extent such an enhanced
death benefit could disqualify the Policy under Section 408 of the Code. The
Internal Revenue Service has not reviewed the Policy for qualification as an
IRA, and has not addressed in a ruling of general applicability whether an
enhanced death benefit provision, such as the provision in the Policy, comports
with IRA qualification requirements.
Section 403(b) Plans. Under Section 403(b) of the Code, payments made by
public school systems and certain tax exempt organizations to purchase Policies
for their employees are excludable from the gross income of the employee,
subject to certain limitations. However, such payments may be subject to FICA
(Social Security) taxes. Additionally, in accordance with the requirements of
the Code, Section 403(b) annuities generally may not permit distribution of (i)
elective contributions made in years beginning after December 31, 1988, and (ii)
earnings on those contributions and (iii) earnings on amounts attributed to
elective contributions held as of the end of the last year beginning before
January 1, 1989. Distributions of such amounts will be allowed only upon the
death of the employee, on or after attainment of age 59 1/2, separation from
service, disability, or financial hardship, except that income attributable to
elective contributions may not be distributed in the case of hardship.
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans. Sections
401(a) and 403(a) of the Code permit corporate employers to establish various
types of retirement plans for employees and self-employed individuals to
establish qualified plans for themselves and their employees. Such retirement
plans may permit the purchase of the Policies to accumulate retirement savings.
Adverse tax consequences to the plan, the participant or both may result if the
Policy is assigned or transferred to any individual as a means to provide
benefit payments.
Deferred Compensation Plans. Section 457 of the Code, while not actually
providing for a qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service for state
governments, local governments, political sub-divisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The Policies can be used with such
plans. Under such plans a participant may specify the form of investment in
which his or her participation will be made. All such investments, however, are
owned by, and are subject to, the claims of the general creditors of the
sponsoring employer. Depending on the terms of the particular plan, the employer
may be entitled to draw on deferred amounts for purposes unrelated to its
Section 457 plan obligations. In general, all amounts received under a Section
457 plan are taxable and are subject to federal income tax withholding as wages.
55
<PAGE>
Non-natural Persons. Pursuant to Section 72(u) of the Code, an annuity
contract held by a taxpayer other than a natural person generally will not be
treated as an annuity contract under the Code; accordingly, an Owner who is not
a natural person will recognize as ordinary income for a taxable year the excess
of (i) the sum of the Annuity Purchase Value as of the close of the taxable year
and all previous distributions under the Policy over (ii) the sum of the Premium
Payments paid for the taxable year and any prior taxable year and the amounts
includable in gross income for any prior taxable year with respect to the
Policy. For these purposes, the Policy Value at year end may have to be
increased by any positive Excess Interest Adjustment which could result from a
surrender at such time. There is, however, no definitive guidance on the proper
tax treatment of Excess Interest Adjustments, and the Owner should contact a
competent tax adviser with respect to the potential tax consequences of an
Excess Interest Adjustment. Notwithstanding the preceding sentences in this
paragraph, Section 72(u) of the Code does not apply to (i) a Policy the nominal
Owner of which is not a natural person but the beneficial Owner of which is a
natural person, (ii) a Policy acquired by the estate of a decedent by reason of
such decedent's death, (iii) a Qualified Policy (other than one qualified under
Section 457) or (iv) a single-payment annuity the Annuity Commencement Date for
which is no later than one year from the date of the single Premium Payment;
instead, such Policies are taxed as described above under the heading "Taxation
of Annuities."
Possible Changes in Taxation. In past years, legislation has been proposed
in the U.S. Congress that would have adversely modified the federal taxation of
certain annuities. For example, one such proposal would have changed the tax
treatment of non-qualified annuities that did not have "substantial life
contingencies" by taxing income as it is credited to the annuity. Although as of
the date of this Prospectus Congress was not actively considering any
legislation regarding the taxation of annuities, there is always the possibility
that the tax treatment of annuities could change by legislation or other means
(such as IRS regulations, revenue rulings, judicial decisions, etc.). Moreover,
it is also possible that any change could be retroactive (that is, effective
prior to the date of the change).
DISTRIBUTOR OF THE POLICIES
AEGON USA Securities, Inc., an affiliate of PFL, is the principal
underwriter of the Policies. AEGON USA Securities, Inc. has entered or will
enter into one or more agreements with various broker-dealers for the
distribution of the Policies. Commissions on Policy sales are paid to
broker/dealers. Commissions payable to broker/dealers will be up to 6% of
Premium Payments, or 5% plus an annual continuing fee based on Policy Values. In
addition, certain broker/dealers may receive additional commissions, expense
allowances, and additional annual continuing fees based upon sales volume, agent
or service training responsibilities, and other factors. The Distribution
Financing Charge will be used by PFL to support these activities and
reimbursements. These commissions are not deducted from Premium Payments, they
are paid by PFL.
VOTING RIGHTS
To the extent required by law, PFL will vote the Underlying Funds shares
held by the Mutual Fund Account at regular and special shareholder meetings of
the Underlying Funds in accordance with instructions received from persons
having voting interests in the portfolios. If, however, the 1940 Act or any
regulation thereunder should be amended or if the present interpretation thereof
should change, and as a result PFL determines that it is permitted to vote the
Underlying Funds' shares in its own right, it may elect to do so.
56
<PAGE>
Before the Annuity Commencement Date, the Policy Owner holds the voting
interest in the selected Portfolios. The number of votes that an Owner has the
right to instruct will be calculated separately for each Subaccount. The number
of votes that an Owner has the right to instruct for a particular Subaccount
will be determined by dividing the Owner's Policy Value in the Subaccount by the
net asset value per share of the corresponding Portfolio in which the Subaccount
invests. Fractional shares will be counted.
After the Annuity Commencement Date, the person receiving Annuity Payments
has the voting interest, and the number of votes decreases as Annuity Payments
are made and as the reserves for the Policy decrease. The person's number of
votes will be determined by dividing the reserve for the Policy allocated to the
applicable Subaccount by the net asset value per share of the corresponding
Portfolio. Fractional shares will be counted.
The number of votes that the Owner or person receiving income payments has
the right to instruct will be determined as of the date established by the
Underlying Funds for determining shareholders eligible to vote at the meeting of
the Underlying Funds. PFL will solicit voting instructions by sending Owners or
other persons entitled to vote written requests for instructions prior to that
meeting in accordance with procedures established by the Underlying Funds.
Portfolio shares as to which no timely instructions are received and shares held
by PFL in which Owners or other persons entitled to vote have no beneficial
interest will be voted in proportion to the voting instructions that are
received with respect to all Policies participating in the same Subaccount.
Each person having a voting interest in a Subaccount will receive proxy
material, reports, and other materials relating to the appropriate Portfolio.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Mutual Fund Account is a party
or to which the assets of the Account are subject. PFL is not involved in any
litigation that is of material importance in relation to its total assets or
that relates to the Mutual Fund Account.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available (at no cost) which
contains more details concerning the subjects discussed in this Prospectus. The
following is the Table of Contents for that Statement:
57
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
The Policy--General Provisions.................................... 3
Owner......................................................... 3
Entire Policy................................................. 3
Deferment of Payment and Transfers............................ 3
Misstatement of Age or Sex.................................... 4
Reallocation of Policy Values After the Annuity
Commencement Date.......................................... 4
Assignment.................................................... 4
Evidence of Survival.......................................... 4
Non-Participating............................................. 5
Amendments.................................................... 5
Federal Tax Matters............................................... 5
Tax Status of the Policy...................................... 5
Taxation of PFL............................................... 6
Investment Experience............................................. 6
State Regulation of PFL........................................... 11
Administration.................................................... 11
Records and Reports............................................... 11
Distribution of the Policies...................................... 11
Custody of Assets................................................. 11
Historical Performance Data....................................... 12
Money Market Yields........................................... 12
Other Subaccount Yields....................................... 13
Total Returns................................................. 13
Other Performance Data........................................ 14
Hypothetical Performance Data 14
Legal Matters..................................................... 15
Independent Auditors.............................................. 15
Other Information................................................. 15
Financial Statements.............................................. 15
</TABLE>
58
<PAGE>
APPENDIX A
Excess Interest Adjustment(1)
The formula which will be used to determined the Excess Interest Adjustment
(EIA) is:
S*(G - C)* (M divided by 12)
S = Gross amount being withdrawn that is subject to the EIA
G = Guaranteed Interest Rate in effect for the policy
C = Current Guaranteed Interest Rate then being offered on new premiums for
the next longer option period than "M". If this policy form or such an
option period is no longer offered, "C" will be the U.S. Treasury rate for
the next longer maturity (in whole years) than "M" on the 25th day of the
previous calendar month, plus up to 2%.
M = Number of months remaining in the current option period, rounded up to the
next higher whole number of months.
Example 1 (Surrender, rates increase by 3%):
Single Premium:
$50,000
Guarantee Period:
5 Years
Guarantee Rate:
5.50% per annum
Surrender:
Middle of Contract Year 3
Policy Value at middle of Contract Year 3
= 50,000* (1.055) /2.5/ = 57,161.18
Penalty Free Amount at middle of Contract Year 3
= 57,161.18* .10 = 5,716.12
Amount Subject to EIA
= 57,161.18 - 5,716.12 = 51,445.06
EIA Floor
= 50,000* (1.03) /2.5/ = 53,834.80
Excess Interest Adjustment
G = .055
C = .085
M = 30
Excess Interest Adjustment
= S* (G/- C/)* (M divided by 12)
= 51,445.06* (.055 - .085)* (30 divided by 12)
= -3,858.38, but Excess Interest Adjustment cannot
cause the Adjusted Policy Value to fall below the
floor, so the adjustment is limited to
53,834.80 - 57,161.18 = (-3,326.38)
Adjusted Policy Value ("APV")
= APV + EIA = 57,161.18 + (-3,326.38) = 53,834.80
Surrender Charges
= (50,000 - 5,716.12)* .05
= 2,214.19
Net Surrender Value at middle of Contract Year 3
= 53,834.80 - 2,214.19
= 51,620.61
Example 2 (Surrender, rates decrease by 1%):
Single Premium:
$50,000
Guarantee Period:
5 Years
Guarantee Rate:
5.50% per annum
Surrender:
Middle of Contract Year 3
Policy Value at middle of Contract Year 3
= 50,000* (1.055) /2.5/ = 57,161.18
Penalty Free Amount at middle of Contract Year 3
= 57,161.18* .10 = 5,716.12
Amount Subject to EIA
= 57,161.18 - 5,716.12 = 51,445.06
EIA Floor
= 50,000* (1.03) /2.5/ = 53,834.80
59
<PAGE>
Excess Interest Adjustment
G = .055
C = .045
M = 30
Excess Interest Adjustment
= S* (G/- C/)* (M divided by 12)
= 51,445.06* (.055/-.045/)* (30 divided by 12)
= 1,286.13
Adjusted APV
= 57,161.18 + 1,286.13 = 58,447.31
Surrender Charges
= (50,000/-5,716.12/)* .05
= 2,214.19
Net Surrender Value at middle of
Contract Year 3
= 58,447.31/-2,214.19/
= 56,233.12
On a partial withdrawal, PFL will pay the policy holder the full amount of
withdrawal requested (as long as the Policy Value is sufficient). Surrender
Charge free/adjustment free partial withdrawals will reduce the APV by the
amount withdrawn. Amounts withdrawn in excess of the Surrender Charge
free/adjustment free portion will reduce the APV by an amount equal to:
X-Y+Z
X = Excess Partial Withdrawal
Y = Excess Interest Adjustment = (X)*(G-C)*(M divided by 12) where G, C, and M
are defined above.
Z = Surrender Charge on X - Y.
Example 3 (Partial Withdrawal, rates increase by 1%):
Single Premium:
$50,000
Guarantee Period:
5 Years
Guarantee Rate:
5.50% per annum
Partial withdrawal:
$20,000; Middle of Contract Year 3
61
<PAGE>
Policy Value at middle of Contract Year 3
= 50,000* (1.055) /2.5/ = 57,161.18
Penalty Free Amount at middle of Contract Year 3
= 57,161.18* .10 = 5,716.12
Excess Interest/Surrender Charge (SC) Adjustment
X = 20,000 - 5,716.12 = 14,283.88
G = .055
C = .065
M = 30
Y = 14,283.88* (.055 - .065)* (30 divided by 12) = (-357.10)
Z = .05* (20,000 - 5,716.12 - (-357.10)) = 732.05
Reduction to APV for Excess
Withdrawal:
= X - Y + Z
= 14,283.88 - (-357.10) + 732.05
= 15,373.03
Remaining Policy Value at middle of Contract Year 3
= 57,161.18 - 5,716.12 - 15,373.03
= 36,072.03
Example 4 (Partial Withdrawal, rates decrease by 1%):
Single Premium:
$50,000
Guarantee Period:
5 Years
Guarantee Rate:
5.50% per annum
Partial withdrawal:
$20,000; Middle of Contract Year 3
Policy Value at middle of Contract Year 3
62
<PAGE>
= 50,000* (1,055) # 2.5 = 57,161.18
Penalty Free Amount at middle of Contract Year 3
= 57,161.18* .10 = 5,716.12
Excess Interest/Surrender Charge Adjustment
X = 20,000/-5,716.12/ = 14,283.88
G = .055
C = .045
M = 30
Y = 14.283.88*(.055/-.045/)*(30 divided by 12) = 357.10
Z = .05* (20,000 - 5,716.12 - 357.10) = 696.34
Reduction to APV for Excess Withdrawal:
= X-Y + Z
= 14,283.88 - 357.10 + 696.34
= 14,623.12
Remaining Policy Value at
middle of Contract Year 3
= 57,161.18/-5,716.12/ /-14,623.12/
= 36,821.94
(1) * represents multiplication;
// represents exponentiation.
<PAGE>
APPENDIX B
The dates shown below are the approximate first issue dates of the various
versions of the Policy. These dates will vary by state in many cases. This
Appendix describes certain of the more significant differences in features of
the various versions of the Policy. There may be additional variations. Please
see your actual policy and any attachments for determining your specific
coverage.
<TABLE>
- - -----------------------------------------------------------------------------------------------------------------------------------
Policy Form/Endorsement Approximate First Issue Date
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
AV201 101 65 189 (Policy Form) January 1991
- - -----------------------------------------------------------------------------------------------------------------------------------
AE830 292 (endorsement) May 1992
- - -----------------------------------------------------------------------------------------------------------------------------------
AE847 394 (endorsement) June 1994
- - -----------------------------------------------------------------------------------------------------------------------------------
AE871 295 (endorsement) May 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
AV254 101 87 196 (Policy Form) June 1996
- - -----------------------------------------------------------------------------------------------------------------------------------
AE909 496 (endorsement) June 1996
- - -----------------------------------------------------------------------------------------------------------------------------------
AE890 196 (endorsement) June 1996
- - -----------------------------------------------------------------------------------------------------------------------------------
AV320 101 99 197 (Policy Form) Anticipated: May 1997
- - -----------------------------------------------------------------------------------------------------------------------------------
AE945 197 (endorsement) Anticipated: May 1997
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
Product Feature AV201 101 65 189 AV201 101 65 189,
AE830 292, and
AE847 394
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Excess Interest Adjustment N/A N/A
- - ------------------------------------------------------------------------------------------------------
Guaranteed Minimum Death Total Premiums Paid, less any 5% Annually Compounding
Benefit Option(s) partial withdrawals and any (Option A).
surrender charges made before
death, accumulated at 4% to the
date we receive due proof of death
or the Policy Value on the date we
receive due proof of death, which
ever is greater.
- - ------------------------------------------------------------------------------------------------------
Guaranteed Period Options 1 and 3 year guaranteed periods 1 and 3 year guaranteed
(available in the Fixed Account) available. periods available.
- - ------------------------------------------------------------------------------------------------------
Minimum effective annual interest 4% 4%
rate applicable to the fixed
account
- - ------------------------------------------------------------------------------------------------------
Asset Rebalancing N/A N/A
- - ------------------------------------------------------------------------------------------------------
Death Proceeds Greater of 1) the Policy Value on Greater of (a) Policy Value
the date we receive due proof of and (b) 5% Annually
death, or 2) the total premiums Compounding Death Benefit
paid for this policy, less any
partial withdrawals and any
surrender charges made before
death, accumulated at 4% interest
per annum to the date we receive
due proof of death
- - ------------------------------------------------------------------------------------------------------
Distribution Financing Charge N/A N/A
- - ------------------------------------------------------------------------------------------------------
Dollar Cost Averaging Fixed N/A N/A
Account Option
- - ------------------------------------------------------------------------------------------------------
Service Charge $35 assessed on each Policy $35 assessed on each Policy
Anniversary. Not deducted from Anniversary. Not deducted
the Fixed Account. from the Fixed Account.
- - ------------------------------------------------------------------------------------------------------
Nursing Care and Terminal N/A yes
Condition Withdrawal Option
- - ------------------------------------------------------------------------------------------------------
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
AV201 101 65 189, AV254 101 87 196, AV320 101 99 197, and AE945
AE847 394, and AE909 496, and 197
AE871 295 AE890 196
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
N/A yes yes
- - ------------------------------------------------------------------------------------------------------
5% Annually Compounding 5% Annually Compounding 5% Annually Compounding
(Option A) or Annual Step-Up (Option A) or Annual (Option A), Annual Step-Up
(Option B). Option A is only Step-Up (Option B). Option (Option B), or Return of
available if Owner and A is only available if Premium (Option C). Option A
Annuitant are both under age Owner and Annuitant are is only available if Owner
75. both under age 75. and Annuitant are both under
age 75. Option B is only
available if Owner and
Annuitant are under age 81.
- - ------------------------------------------------------------------------------------------------------
1 and 3 year guaranteed 1, 3, 5, and 7 year 1, 3, 5, and 7 year
periods available. guaranteed periods guaranteed periods available.
available.
- - ------------------------------------------------------------------------------------------------------
4% 3% 3%
- - ------------------------------------------------------------------------------------------------------
N/A Yes Yes
- - ------------------------------------------------------------------------------------------------------
Greatest of (a) Annuity Greatest of (a) Annuity Greatest of (a) Policy Value,
Purchase Value, (b) Cash Purchase Value, (b) Cash (b) Cash Value, and (c)
Value, and (c) Guaranteed Value, and (c) Guaranteed Guaranteed Minimum Death
Minimum Death Benefit Minimum Death Benefit. Benefit.
- - ------------------------------------------------------------------------------------------------------
N/A N/A Applicable
- - ------------------------------------------------------------------------------------------------------
N/A yes yes
- - ------------------------------------------------------------------------------------------------------
Assessed only on a Policy Assessed only on a Policy Assessed either on a Policy
Anniversary; Waived if Sum of Anniversary; Waived if Sum Anniversary or on Surrender;
Premium Payments less partial of Premium Payments less Waived if Sum of Premium
withdrawals is at least partial withdrawals is at Payments less partial
$50,000 on the Policy least $50,000 on the Policy withdrawals or the Policy
Anniversary. Not deducted Anniversary. Not deducted Value is at least $50,000 on
from the Fixed Account. from the Fixed Account. the Policy Anniversary or at
the time of Surrender. The
Service Charge is deducted
pro-rata from the Fixed
Account and the Sub-Accounts
of the Mutual Fund.
- - ------------------------------------------------------------------------------------------------------
yes yes yes
- - ------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE ENDEAVOR VARIABLE ANNUITY
Issued through
PFL ENDEAVOR VARIABLE
ANNUITY ACCOUNT
Offered by
PFL LIFE INSURANCE COMPANY
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-0001
This Statement of Additional Information expands upon subjects discussed
in the current Prospectus for the Endeavor Variable Annuity (the "Policy")
offered by PFL Life Insurance Company. You may obtain a copy of the Prospectus
dated May 1, 1997 by calling 1-800-525-6205, or by writing to the Administrative
and Service Office, Financial Markets Division--Variable Annuity Dept., 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499-0001. Terms used in the current
Prospectus for the Policy are incorporated in this Statement of Additional
Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES FOR THE POLICY, ENDEAVOR SERIES
TRUST AND THE GROWTH PORTFOLIO OF THE WRL SERIES FUND, INC.
Dated: May 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
The Policy--General Provisions............................................................... 3
Owner................................................................................. 3
Entire Policy......................................................................... 3
Deferment of Payment and Transfers.................................................... 3
Misstatement of Age or Sex............................................................ 4
Reallocation of Policy Values After the Annuity Commencement Date..................... 4
Assignment............................................................................ 4
Evidence of Survival.................................................................. 4
Non-Participating..................................................................... 5
Amendments............................................................................ 5
Federal Tax Matters (49).................................................................... 5
Tax Status of the Policy.............................................................. 5
Taxation of PFL....................................................................... 6
Investment Experience....................................................................... 6
State Regulation of PFL..................................................................... 11
Administration.............................................................................. 11
Records and Reports......................................................................... 11
Distribution of the Policies (55)........................................................... 11
Custody of Assets........................................................................... 11
Historical Performance Data (19)............................................................ 12
Money Market Yields................................................................... 12
Other Subaccount Yields............................................................... 13
Total Returns......................................................................... 13
Other Performance Data................................................................ 14
Hypothetical Performance Data......................................................... 14
Legal Matters............................................................................... 15
Independent Auditors........................................................................ 15
Other Information........................................................................... 15
Financial Statements (18)................................................................... 15
</TABLE>
(Numbers in parenthesis indicate corresponding pages of the Prospectus).
2
<PAGE>
In order to supplement the description in the Prospectus, the following
provides additional information about PFL and the Policy which may be of
interest to an Owner.
THE POLICY--GENERAL PROVISIONS
Owner
The Policy shall belong to the Owner upon issuance of the Policy after
completion of an application and delivery of the initial Premium Payment. While
the Annuitant is living, the Owner may: (1) assign the Policy; (2) surrender the
Policy; (3) amend or modify the Policy with PFL's consent; (4) receive annuity
payments or name a Payee to receive the payments; and (5) exercise, receive and
enjoy every other right and benefit contained in the Policy. The exercise of
these rights may be subject to the consent of any assignee or irrevocable
Beneficiary; and of the Owner's spouse in a community of marital property
state.
A Successor Owner can be named in the Policy application or in a Written
Notice. The Successor Owner will become the new Owner upon the Owner's death, if
the Owner predeceases the Annuitant. If no Successor Owner survives the Owner
and the Owner predeceases the Annuitant, the Owner's estate will become the
Owner.
The Owner may change the ownership of the Policy in a Written Notice. When
this change takes effect, all rights of ownership in the Policy will pass to the
new Owner. A change of ownership may have adverse tax consequences.
When there is a change of Owner or Successor Owner, the change will take
effect as of the date the Owner signs the Written Notice, subject to any payment
PFL has made or action PFL has taken before recording the change. Changing the
Owner or naming a new Successor Owner cancels any prior choice of Successor
Owner, but does not change the designation of the Beneficiary or the Annuitant.
If ownership is transferred (except to the Owner's spouse) because the
Owner dies before the Annuitant, the Cash Value generally must be distributed to
the Successor Owner within five years of the Owner's death, or payments must be
made for a period certain or for the Successor Owner's lifetime so long as any
period certain does not exceed that Successor Owner's life expectancy, if the
first payment begins within one year of the Owner's death.
Entire Policy
The Policy and any endorsements thereon and the Policy application
constitute the entire contract between PFL and the Owner. All statements in the
application are representations and not warranties. No statement will cause the
Policy to be void or to be used in defense of a claim unless contained in the
application.
Deferment of Payment and Transfers
Payment of any amount due from the Mutual Fund Account in respect of a
surrender, the Death Benefit or the death of the Owner of a Nonqualified Policy
generally will occur within seven business days from the date the Written Notice
(and any other required documentation or information) is received, except that
PFL may be permitted to defer such payment from the Mutual Fund Account if: (1)
the New York Stock Exchange is closed for other than usual weekends or holidays
or trading on the Exchange is otherwise restricted; or (2) an emergency exists
as defined by the SEC or the SEC requires that trading be restricted; or (3) the
SEC permits a delay for the
3
<PAGE>
protection of Owners. In addition, transfers of amounts from the Subaccounts may
be deferred under these circumstances.
Certain delays and restrictions apply to transfers of amounts out of the
Fixed Account. See page 26 of the Policy Prospectus.
Misstatement of Age or Sex
If the age or sex of the Annuitant has been misstated, PFL will change the
annuity benefit payable to that which the Premium Payments would have purchased
for the correct age or sex. The dollar amount of any underpayment made by PFL
shall be paid in full with the next payment due such person or the Beneficiary.
The dollar amount of any overpayment made by PFL due to any misstatement shall
be deducted from payments subsequently accruing to such person or Beneficiary.
Any underpayment or overpayment will include interest at 5% per year, from the
date of the wrong payment to the date of the adjustment. The age of the
Annuitant may be established at any time by the submission of proof satisfactory
to PFL.
Reallocation of Annuity Purchase Values After the Annuity Commencement Date
After the Annuity Commencement Date, the Policy Owner may reallocate the
value of a designated number of Annuity Units of a Subaccount of the Mutual Fund
Account then credited to a Policy into an equal value of Annuity Units of one or
more other Subaccounts of the Mutual Fund Account, or the Fixed Account. The
reallocation shall be based on the relative value of the Annuity Units of the
Account(s) or Subaccount(s) at the end of the Business Day on the next payment
date. The minimum amount which may be reallocated is the lesser of (1) $10 of
monthly income or (2) the entire monthly income of the Annuity Units in the
Account or Subaccount from which the transfer is being made. If the monthly
income of the Annuity Units remaining in an Account or Subaccount after a
reallocation is less than $10, PFL reserves the right to include the value of
those Annuity Units as part of the transfer. The request must be in writing to
PFL's Administrative and Service Office. There is no charge assessed in
connection with such reallocation. PFL reserves the right to limit the number of
times a reallocation of Annuity Purchase Value may be made in any given Policy
Year.
Assignment
During the lifetime of the Annuitant the Policy Owner may assign any
rights or benefits provided by the Policy. An assignment will not be binding on
PFL until a copy has been filed at its Administrative and Service Office. The
rights and benefits of the Policy Owner and Beneficiary are subject to the
rights of the assignee. PFL assumes no responsibility for the validity or effect
of any assignment. Any claim made under an assignment shall be subject to proof
of interest and the extent of the assignment. An assignment may have tax
consequences.
Unless the Policy Owner so directs by filing written notice with PFL, no
Beneficiary may assign any payments under the Policy before they are due. To the
extent permitted by law, no payments will be subject to the claims of any
Beneficiary's creditors.
Evidence of Survival
PFL reserves the right to require satisfactory evidence that a person is
alive if a payment is based on that person being alive. No payment will be made
until PFL receives such evidence.
4
<PAGE>
Non-Participating
The Policy will not share in PFL's surplus earnings; no dividends will be
paid.
Amendments
No change in the Policy is valid unless made in writing by PFL and
approved by one of PFL's officers. No Registered Representative has authority to
change or waive any provision of the Policy.
PFL reserves the right to amend the Policies to meet the requirements of
the Code, regulations or published rulings. A Policy Owner can refuse such a
change by giving Written Notice, but a refusal may result in adverse tax
consequences.
FEDERAL TAX MATTERS
Tax Status of the Policy
Diversification Requirements. Section 817(h) of the Code provides that in
order for a variable contract which is based on a segregated asset account to
qualify as an annuity contract under the Code, the investments made by such
account must be "adequately diversified" in accordance with Treasury
regulations. The Treasury regulations issued under Section 817(h) (Treas. Reg.
ss. 1.817-5) apply a diversification requirement to each of the Subaccounts of
the Mutual Fund Account. The Mutual Fund Account, through the Underlying Funds
and their Portfolios, intends to comply with the diversification requirements of
the Treasury. PFL has entered into agreements regarding participation in the
Endeavor Series Trust and WRL Series Fund, Inc. that require the Underlying
Funds and their Portfolios to be operated in compliance with the Treasury
regulations.
Owner Control. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for Federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includable in the variable annuity contractowner's gross income. Several years
ago, the IRS state in published rulings that a variable contract owner will be
considered the owner of separate account assets if the contractowner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. More recently, the Treasury Department
announced, in connection with the issuance of regulations concerning investment
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor, rather than the insurance company, to be treated
as the owner of the assets in the account." This announcement also stated that
guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular subaccounts
without being treated as owners of underlying assets."
The ownership rights under the contract are similar to, but different
in certain respects from those described by the IRS in rulings in which it was
determined that contractowners were not owners of separate account assets. For
example, the Owner of a Policy has the choice of one or more Subaccounts in
which to allocate premiums and Policy Values, and may be able to transfer among
these accounts more frequently than in such rulings. These differences could
result in policyowners being treated as the owners of the assets of the Mutual
Fund Account. In addition, PFL does not know what standards will be set forth,
if any, in the regulations or rulings with the Treasury Department has stated it
expects to issue. PFL therefore reserves the right to modify the Policies as
necessary to attempt to prevent the policyowners from being considered the
owners of a pro rata share of the assets of the Mutual Fund Account.
5
<PAGE>
Distribution Requirements. The Code also requires that Nonqualified
Policies contain specific provisions for distribution of Policy proceeds upon
the death of any Owner. In order to be treated as an annuity contract for
federal income tax purposes, the Code requires that such Policies provide that
if any Owner dies on or after the Annuity Commencement Date and before the
entire interest in the Policy has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on such Owner's
death. If any Owner dies before the Annuity Commencement Date, the entire
interest in the Policy must generally be distributed within 5 years after such
Owner's date of death or be used to purchase an immediate annuity under which
payments will begin within one year of such Owner's death and will be made for
the life of the Beneficiary or for a period not extending beyond the life
expectancy of the Beneficiary. However, if upon such Owner's death prior to the
Annuity Commencement Death, such Owner's surviving spouse becomes the sole new
Owner under the Policy, then the Policy may be continued with the surviving
spouse as the new Owner. If any Owner is not a natural person, then for purposes
of these distribution requirements, the primary Annuitant shall be treated as
the Owner and any death or change of such primary Annuitant shall be treated as
the Death of the Owner. The Nonqualified Policies contain provisions intended to
comply with these requirements of the Code. No regulations interpreting these
requirements of the Code have yet been issued and thus no assurance can be given
that the provisions contained in the Policies satisfy all such Code
requirements. The provisions contained in the Policies will be reviewed and
modified if necessary to assure that they comply with the Code requirements when
clarified by regulation or otherwise.
Taxation of PFL
PFL at present is taxed as a life insurance company under part I of
Subchapter L of the Code. The Mutual Fund Account is treated as part of PFL and,
accordingly, will not be taxed separately as a "regulated investment company"
under Subchapter M of the Code. PFL does not expect to incur any federal income
tax liability with respect to investment income and net capital gains arising
from the activities of the Mutual Fund Account retained as part of the reserves
under the Policy. Based on this expectation, it is anticipated that no charges
will be made against the Mutual Fund Account for federal income taxes. If, in
future years, any federal income taxes are incurred by PFL with respect to the
Mutual Fund Account, PFL may make a charge to the Mutual Fund Account.
INVESTMENT EXPERIENCE
An "Investment Experience Factor" is used to determine the value of
Accumulation Units and Annuity Units, and to determine annuity payment rates.
Accumulation Units
6
<PAGE>
Upon allocation to the selected Subaccount of the Mutual Fund Account,
Premium Payments are converted into Accumulation Units of the Subaccount. The
number of Accumulation Units to be credited is determined by dividing the dollar
amount allocated to each Subaccount by the value of an Accumulation Unit for
that Subaccount as next determined after the Premium Payment is received at the
Administrative and Service Office or, in the case of the initial Premium
Payment, when the Policy application is completed, whichever is later. The value
of an Accumulation Unit was arbitrarily established at $1 (except the WRL Growth
Subaccount which was established at $10) at the inception of each Subaccount.
Thereafter, the value of an Accumulation Unit is determined as of the close of
trading on each day the New York Stock Exchange and PFL's Administrative and
Service Office are open for business.
An index (the "Investment Experience Factor") which measures the
investment performance of a Subaccount during a Valuation Period is used to
determine the value of an Accumulation Unit for the next subsequent Valuation
Period. The Investment Experience Factor may be greater or less than or equal to
one; therefore, the value of an Accumulation Unit may increase, decrease or
remain the same from one Valuation Period to the next. The Policy Owner bears
this investment risk. The Net Investment Performance of a Subaccount and
deduction of certain charges affect the Accumulation Unit Value.
The Investment Experience Factor for any Subaccount for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result,
where:
(a) is the net result of:
(1) the net asset value per share of the shares held in the
Subaccount determined at the end of the current Valuation Period,
plus
(2) The per share amount of any dividend or capital gain
distribution made with respect to the shares held in the Subaccount
if the ex-dividend date occurs during the current Valuation Period,
plus or minus
(3) a per share charge or credit for any taxes determined by
PFL to have resulted from the investment operations of the
Subaccount.
(b) is the net result of:
(1) the net asset value per share of the shares held in the
Subaccount determined as of the end of the immediately preceding
Valuation Period, plus or minus
(2) the per share charge or credit for taxes pertaining to the
immediately preceding Valuation Period for which PFL has created a
reserve; and
(c) is the charge for Mortality and Expense Risk during the
Valuation Period (equal on an annual basis to 1.25% for both the 5%
Annually Compounding Death Benefit and the Annual Step-Up Death Benefit
and 1.10% for the Return of Premium Death Benefit) of the daily net asset
value of the Subaccount, plus the .15% Administrative Charge plus the
Distribution Financing Charge of .15%. The Distribution Financing Charge
is assessed only during the first seven Policy Years. The cumulative
amount of the Distribution Financing Charge, plus the Surrender Charge,
will never exceed 8.5% of the cumulative Premium Payments for a
Policy.
Illustration of Accumulation Unit Value Calculations
Formula and Illustration for Determining
7
<PAGE>
the Investment Experience Factor
Assume either the 5% Annually Compounding Death Benefit
or the Annual Step-Up Death Benefit is in effect
Investment Experience Factor = (A + B - C) - F
(D - E)
Where: A = The Net Asset Value of an Underlying Fund share as of the
end of the current Valuation Period. Assume A = $11.57
B = The per share amount of any dividend or capital gains
distribution since the end of the immediately preceding
Valuation Period.
Assume B = 0
C = The per share charge or credit for any taxes reserved for
at the end of the current Valuation Period.
Assume C = 0
D = The Net Asset Value of an Underlying Fund share at the end
of the immediately preceding Valuation Period.
Assume D = $11.40
E = The per share amount of any taxes reserved for at the end
of the immediately preceding Valuation Period.
Assume E = 0
F = The daily deduction for the Mortality and Expense Risk
Fee, the Administrative Charge, and the Distribution
Financing Charge, which totals 1.55% on an annual basis for
the first seven years and 1.40% thereafter.
On a daily basis, F equals .0000421409 for the first seven
years, and .0000380909 thereafter.
<TABLE>
<CAPTION>
<S> <C> <C>
Then, the Investment Experience Factor = (11.57 + 0 - 0) - .0000421409 = Z = 1.0148701398 for the first seven years and
---------------
(11.40 - 0)
(11.57 + 0 - 0) - .0000380909 = 1.0148741898 thereafter.
--------------------------------------------------------
(11.40 - 0)
</TABLE>
Formula and Illustration for Determining Accumulation Unit Value
Accumulation Unit Value = A x B
8
<PAGE>
Where: A = The Accumulation Unit Value for the immediately preceding
Valuation Period. Assume = $ X
B = The Net Investment Factor for the current Valuation Period.
Assume = Y
Then, the Accumulation Unit Value = $ X x Y = $ Z
Annuity Unit Value And Annuity Payment Rates
The amount of Variable Annuity Payments will vary with Annuity Unit
Values. Annuity Unit Values rise if the net investment performance of the
Subaccount exceeds the assumed interest rate of 5% annually. Conversely, Annuity
Unit Values fall if the net investment performance of the Subaccount is less
than the assumed rate. The value of a variable Annuity Unit in each Subaccount
was established at $1.00 on the date operations began for that Subaccount. The
value of a variable Annuity Unit on any subsequent Business Day is equal to (a)
multiplied by (b) multiplied by (c), where:
(a) is the variable Annuity Unit Value on the immediately preceding
Business Day;
(b) is the net investment factor of the valuation period; and
(c) is the investment result adjustment factor for the valuation
period.
The investment result adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5% effective
annual Assumed Investment Return. The valuation period is the period from the
close of the immediately preceding Business Day to the close of the current
Business Day.
The net investment factor for the Policy used to calculate the value of a
variable Annuity Unit in each Subaccount for the valuation period is determined
by dividing (i) by (ii) and subtracting (iii) from the result, where:
(i) is the result of:
(1) the net asset value of a fund share held in the Mutual
Fund Account for that Subaccount determined at the end of the
current valuation period; plus
(2) the per share amount of any dividend or capital gain
distributions made by the fund for shares held in the Mutual Fund
Account for that Subaccount if the ex-dividend date occurs during
the valuation period.
(ii) is the net asset value of a fund share held in the Mutual Fund
Account for that Subaccount determined as of the end of the immediately
preceding valuation period.
(iii) is a factor representing the Mortality and Expense Risk Fee,
the Administrative Charge and the Distribution Financing Charge (only
applies during the first seven policy years and only applies before the
Annuity Commencement Date). This factor is equal, on an annual basis and
assuming the Distribution Financing Charge is still applicable, to 1.55%
for the 5% Annually Compounding Death Benefit and the Annual Step-Up Death
Benefit (1.40% for the Return of Premium Death Benefit) of the daily net
asset value of a fund share held in the Mutual Fund Account for that
Subaccount.
9
<PAGE>
The dollar amount of subsequent Variable Annuity Payments will depend upon
changes in applicable Annuity Unit Values.
The annuity payment rates vary according to the Annuity Option elected and
the sex and adjusted age of the Annuitant at the Annuity Commencement Date. The
Policy also contains a table for determining the adjusted age of the Annuitant.
Illustration of Calculations for Annuity Unit Value
and Variable Annuity Payments
Formula and Illustration for Determining Annuity Unit Value
Annuity Unit Value = A x B x C
Where: A = Annuity Unit Value for the immediately preceding Valuation
Period.
Assume = $ X
B = Investment Experience Factor for the Valuation Period for
which the Annuity Unit Value is being calculated.
Assume = Y
C = A factor to neutralize the assumed interest rate of 5%
built into the Annuity Tables used.
Assume = Z
Then, the Annuity Unit Value is: $ X x Y x Z = $ Q
Formula and Illustration for Determining Amount
of First Monthly Variable Annuity Payment
First Monthly Variable Annuity Payment = A x B
------
$1,000
Where: A = The Annuity Purchase Value as of the Annuity Commencement
Date.
Assume = $ X
B = The Annuity purchase rate per $1,000 based upon the option
selected, the sex and adjusted age of the Annuitant
according to the tables contained in the Policy.
Assume = $ Y
Then, the first Monthly Variable Annuity Payment = $ X x $ Y = $ Z
-------
1,000
10
<PAGE>
Formula and Illustration for Determining the Number of Annuity
Units Represented by Each Monthly Variable Annuity Payment
Number of Annuity Units = A
---
B
Where: A = The dollar amount of the first monthly Variable Annuity
Payment.
Assume = $ X
B = The Annuity Unit Value for the Valuation Date on which the
first monthly payment is due.
Assume = $ Y
Then, the number of Annuity Units = $ X = Z
---
$ Y
STATE REGULATION OF PFL
PFL is subject to the laws of Iowa governing insurance companies and to
regulation by the Iowa Division of Insurance. An annual statement in a
prescribed form is filed with the Division of Insurance each year covering the
operation of PFL for the preceding year and its financial condition as of the
end of such year. Regulation by the Division of Insurance includes periodic
examination to determine PFL's contract liabilities and reserves so that the
Division may determine the items are correct. PFL's books and accounts are
subject to review by the Division of Insurance at all times and a full
examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. In addition, PFL is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
ADMINISTRATION
PFL performs administrative services for the Policies. These services
include issuance of the Policies, maintenance of records concerning the
Policies, and certain valuation services.
RECORDS AND REPORTS
All records and accounts relating to the Mutual Fund Account will be
maintained by PFL. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, PFL will mail to all Policy Owners at
their last known address of record, at least annually, reports containing such
information as may be required under that Act or by any other applicable law or
regulation. Policy Owners will also receive confirmation of each financial
transaction and any other reports required by law or regulation.
DISTRIBUTION OF THE POLICIES
The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws. The offering of the Policies
is continuous and PFL does not anticipate discontinuing the offering of the
Policies. However, PFL reserves the right to discontinue the offering of the
Policies.
11
<PAGE>
AEGON USA Securities, Inc., an affiliate of PFL, will be the principal
underwriter of the Policies. AEGON USA Securities, Inc. has entered into
agreements with broker-dealers for the distribution of the Policies. During
1996, 1995, and 1994, the amount paid to AEGON USA Securities, Inc. and/or the
broker-dealers for their services was $19,668,001, $13,569,474, and $19,983,219,
respectively.
CUSTODY OF ASSETS
The assets of each of the Subaccounts of the Mutual Fund Account are held
by PFL. The assets of each of the Subaccounts of the Mutual Fund Account are
segregated and held separate and apart from the assets of the other Subaccounts
and from PFL's general account assets. PFL maintains records of all purchases
and redemptions of shares of the Underlying Funds held by each of the
Subaccounts. Additional protection for the assets of the Mutual Fund Account is
afforded by PFL's fidelity bond, presently in the amount of $5,000,000, covering
the acts of officers and employees of PFL.
HISTORICAL PERFORMANCE DATA
Money Market Yields
PFL may from time to time disclose the current annualized yield of the TCW
Money Market Subaccount, which invests in the TCW Money Market Portfolio, for a
7-day period in a manner which does not take into consideration any realized or
unrealized gains or losses on shares of the TCW Money Market Portfolio or on its
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation) at the end of the 7-day period in
the value of a hypothetical account having a balance of 1 unit of the TCW Money
Market Subaccount at the beginning of the 7-day period, dividing such net change
in account value by the value of the account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis. The net change in account value reflects (i) net income from the
Portfolio attributable to the hypothetical account; and (ii) charges and
deductions imposed under a Policy that are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for (i) the Administrative Charges; and (ii) the Mortality
and Expense Risk Fee and Distribution Financing Charge. Current Yield will be
calculated according to the following formula:
Current Yield = ((NCS-ES)/UV) x (365/7)
Where:
NCS = The net change in the value of the Portfolio (exclusive of realized
gains and losses on the sale of securities and unrealized appreciation
and depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 Subaccount unit.
ES = Per unit expenses of the Subaccount for the 7-day period.
UV = The unit value on the first day of the 7-day period.
Because of the charges and deductions imposed under a Policy, the yield
for the TCW Money Market Subaccount will be lower than the yield for the TCW
Money Market Portfolio. The yield calculations do not reflect the effect of any
premium taxes or Surrender Charges that may be applicable to a particular
Policy. Surrender Charges range from 7% to 0% of the amount of premium withdrawn
based on the number of years since payment of the premium.
12
<PAGE>
PFL may also disclose the effective yield of the TCW Money Market
Subaccount for the same 7-day period, determined on a compounded basis. The
effective yield is calculated by compounding the base period return according to
the following formula:
Effective Yield = (1 + ((NCS - ES) / UV))/365/7/ - 1
Where:
NCS = The net change in the value of the Portfolio (exclusive of realized
gains and losses on the sale of securities and unrealized appreciation
and depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 Subaccount unit.
ES = Per unit expenses of the Subaccount for the 7-day period.
UV = The unit value on the first day of the 7-day period.
The yield on amounts held in the TCW Money Market Subaccount normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The TCW Money Market Subaccount's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the TCW
Money Market Portfolio, the types and quality of portfolio securities held by
the TCW Money Market Portfolio and its operating expenses. For the seven days
ended December 31, 1996, the yield of the TCW Money Market Subaccount was 2.73%,
and the effective yield was 2.76%.
Other Subaccount Yields
PFL may from time to time advertise or disclose the current annualized
yield of one or more of the Subaccounts of the Mutual Fund Account (except the
TCW Money Market Subaccount) for 30-day periods. The annualized yield of a
Subaccount refers to income generated by the Subaccount over a specific 30-day
period. Because the yield is annualized, the yield generated by a Subaccount
during the 30-day period is assumed to be generated each 30-day period over a
12-month period. The yield is computed by: (i) dividing the net investment
income of the Subaccount less Subaccount expenses for the period, by (ii) the
maximum offering price per unit on the last day of the period times the daily
average number of units outstanding for the period, (iii) compounding that yield
for a 6-month period, and (iv) multiplying that result by 2. Expenses
attributable to the Subaccount include (i) the Administrative Charge and (ii)
the Mortality and Expense Risk Fee and Distribution Financing Charge. The 30-day
yield is calculated according to the following formula:
Yield = 2 x ((((NI - ES)/(U x UV)) + 1)/6/- 1)
Where:
NI = Net investment income of the Subaccount for the 30-day period
attributable to the Subaccount's unit.
ES = Expenses of the Subaccount for the 30-day period.
U = The average number of units outstanding.
UV = The unit value at the close (highest) of the last day in the 30-day
period.
13
<PAGE>
Because of the charges and deductions imposed by the Mutual Fund Account,
the yield for a Subaccount of the Mutual Fund Account will be lower than the
yield for its corresponding Portfolio. The yield calculations do not reflect the
effect of any premium taxes that may be applicable to a particular Policy.
Surrender Charges range from 7% to 0% of the amount of premium withdrawn based
on the number of years since payment of the premium.
The yield on amounts held in the Subaccounts of the Mutual Fund Account
normally will fluctuate over time. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates of
return. A Subaccount's actual yield is affected by the types and quality of its
investments and its operating expenses.
Total Returns
PFL may from time to time also advertise or disclose total returns for one
or more of the Subaccounts of the Mutual Fund Account for various periods of
time. One of the periods of time will include the period measured from the date
the Subaccount commenced operations. When a Subaccount has been in operation for
1, 5 and 10 years, respectively, the total return for these periods will be
provided. Total returns for other periods of time may from time to time also be
disclosed. Total returns represent the average annual compounded rates of return
that would equate an initial investment of $1,000 to the redemption value of
that investment as of the last day of each of the periods. The ending date for
each period for which total return quotations are provided will be for the most
recent month end practicable, considering the type and media of the
communication and will be stated in the communication.
Total returns will be calculated using Subaccount Unit Values which PFL
calculates on each Business Day based on the performance of the Subaccount's
underlying Portfolio, and the deductions for the Mortality and Expense Risk Fee,
the Distribution Financing Charge, and the Administrative Charges. Total return
calculations will reflect the effect of Surrender Charges that may be applicable
to a particular period. The total return will then be calculated according to
the following formula:
P(1 + T)/n/ = ERV
Where:
T = The average annual total return net of Subaccount recurring charges.
ERV = The ending redeemable value of the hypothetical account at the end of the
period.
P = A hypothetical initial payment of $1,000.
N = The number of years in the period.
Other Performance Data
PFL may from time to time also disclose average annual total returns in a
non-standard format in conjunction with the standard format described above. The
non-standard format will be identical to the standard format except that the
Surrender Charge percentage will be assumed to be 0%.
PFL may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the Surrender
Charge percentage will be 0%.
14
<PAGE>
CTR = (ERV / P) - 1
Where:
CTR = The cumulative total return net of Subaccount recurring charges for the
period.
ERV = The ending redeemable value of the hypothetical investment at the end of
the period.
P = A hypothetical initial payment of $1,000.
All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required period, is
also disclosed.
Hypothetical Performance Data
From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Mutual Fund Account
commenced operations. Such performance information for the Subaccounts will be
calculated based on the performance of the various Portfolios and the assumption
that the Subaccounts were in existence for the same periods as those indicated
for the Portfolios, with the level of Policy charges that were in effect at the
inception of the Subaccounts.
LEGAL MATTERS
Legal advice relating to certain matters under the federal securities laws
applicable to the issue and sale of the Policies has been provided to PFL by
Sutherland, Asbill & Brennan L.L.P., of Washington D.C.
INDEPENDENT AUDITORS
The Financial Statements of PFL as of December 31, 1996 and 1995, and for
each of the three years in the period ended December 31, 1996, and the Financial
Statements of PFL Endeavor Variable Annuity Account (which comprises a portion
of the PFL Endeavor VA Separate Account) at December 31, 1996, and for each of
the two years in the period then ended, included in this Statement of Additional
Information have been audited by Ernst & Young LLP, Independent Auditors, Des
Moines, Iowa.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in the Prospectus or this Statement of Additional
Information. Statements contained in the Prospectus and this Statement of
Additional Information concerning the content of the Policies and other legal
instruments are intended to be summaries. For a complete statement of the terms
of these documents, reference should be made to the instruments filed with the
Securities and Exchange Commission.
FINANCIAL STATEMENTS
15
<PAGE>
The values of the interest of Policy Owners in the Mutual Fund Account
will be affected solely by the investment results of the selected Subaccount(s).
Financial Statements of PFL Endeavor Variable Annuity Account (which comprises a
portion of the PFL Endeavor VA Separate Account) are contained herein. The
Financial Statements of PFL, which are included in this Statement of Additional
Information, should be considered only as bearing on the ability of PFL to meet
its obligations under the Policies. They should not be considered as bearing on
the investment performance of the assets held in the Mutual Fund Account.
16
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements will be included in a future
amendment.
(b) Exhibits: The following exhibits are filed herewith:
(1) (a) Resolution of the Board of Directors of PFL Life
Insurance Company authorizing establishment of the Mutual
Fund Account. Note 1.
(b) Authorization Changing Name of the Mutual Fund Account.
Note 9.
(2) Not Applicable.
(3) (a) Principal Underwriting Agreement by and between PFL Life
Insurance Company, on its own behalf and on the behalf of
the Mutual Fund Account, and MidAmerica Management
Corporation. Note 3.
(b) Form of Broker/Dealer Supervision and Sales Agreement by
and between MidAmerica Management Corporation and the
Broker/Dealer. Note 3.
(4) (a) Form of Policy for the Endeavor Variable Annuity. Note 3.
(b) Form of Policy Endorsement (Required Distributions). Note
3.
(c) Form of Policy Endorsement (Death Benefits). Note 4.
(d) Form of Policy Endorsement (Nursing Care). Note 7.
(e) Form of Policy Endorsement (Death Benefit). Note 8.
(f) Form of Policy for the Endeavor Variable Annuity. Note
10.
(g) Form of Policy Endorsement (Nursing Care). Note 10.
(5) Form of Application for the Endeavor Variable Annuity.
Note 11.
(6) (a) Articles of Incorporation of PFL Life Insurance Company.
Note 3.
(b) Bylaws of PFL Life Insurance Company. Note 3.
1
<PAGE>
(7) Not Applicable.
(8) (a) Participation Agreement by and between PFL Life Insurance
Company and Endeavor Series Trust. Note 3.
(b) Participation Agreement with WRL Series Fund, Inc. Note
5.
(c) Administrative Services Agreement by and between PFL Life
Insurance Company and State Street Bank and Trust Company
(assigned to Vantage Computer Systems, Inc.). Note 2.
(d) Amendment and Assignment of Administrative Services
Agreement. Note 3.
(e) Second Amendment to Administrative Services Agreement.
Note 4.
(f) Termination Notice of Administrative Services Agreement
by and between PFL Life Insurance Company and Vantage
Computer Systems, Inc. Note 10.
(9) (a) Opinion and Consent of Counsel. Note 2.
(b) Consent of Counsel. Note 2.
(10) (a) Consent of Independent Auditors. Note 11.
(b) Opinion and Consent of Actuary. Note 10.
(11) Not Applicable.
(12) Not Applicable.
(13) Performance Data Calculations. Note 7.
(14) Powers of Attorney (P.S. Baird, W.L. Busler, P.E.
Falconio, D.C. Kolsrud, R.J. Kontz). Note 6.
(Craig D. Vermie) Note 9. (Brenda K. Clancy) Note 10.
Note 1. Filed with the initial filing of this Form N-4 Registration
Statement (File No. 33-33085 on January 23, 1990.
Note 2. Filed with Pre-Effective Amendment No. 1 to this Form N-4
Registration Statement (File No. 33-33085) on April 9, 1990.
Note 3. Filed with Post-Effective Amendment No. 2 to this Form N-4
Registration Statement (File No. 33-33085) on April 1, 1991.
Note 4. Filed with Post-Effective Amendment No. 3 to this Form N-4
Registration Statement (File No. 33-33085) on April 29, 1992.
Note 5. Filed with Post-Effective Amendment No. 5 to this Form N-4
Registration Statement (File No. 33-33085) on April 30, 1993.
2
<PAGE>
Note 6. Filed with Post-Effective Amendment No. 6 to this Form N-4
Registration Statement (File No. 33-33085) on January 28,
1994.
Note 7. Filed with Post-Effective Amendment No. 7 to this Form N-4
Registration Statement (File No. 33-33085) on March 29, 1994.
Note 8. Filed with Post-Effective Amendment No. 10 to this Form N-4
Registration Statement (File No. 33-33085) on April 27, 1995.
Note 9. Filed with Post-Effective Amendment No. 11 to this Form N-4
Registration Statement (File No. 33-33085) on April 24, 1996.
Note 10. Filed herewith.
Note 11. To be filed in a future Amendment.
3
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
PRINCIPAL POSITIONS
NAME AND AND OFFICES WITH
BUSINESS ADDRESS DEPOSITOR
- - ---------------- ---------
<S> <C>
William L. Busler Director, Chairman of
4333 Edgewood Road, N.E. the Board and President
Cedar Rapids, IA 52499
Patrick S. Baird Director, Senior Vice President
4333 Edgewood Road, N.E. and Chief Financial
Cedar Rapids, IA 52499 Officer
Craig D. Vermie Director
4333 Edgewood Road, N.E. Vice President,
Cedar Rapids, IA 52499 Secretary, and Corporate
Counsel
Douglas C. Kolsrud Director, Vice President
4333 Edgewood Road, N.E. and Corporate Actuary
Cedar Rapids, IA 52499
Robert J. Kontz Vice President and
4333 Edgewood Road, N.E. Controller
Cedar Rapids, IA 52499
Patrick E. Falconio Director, Senior Vice
4333 Edgewood Road, N.E. President and Chief
Cedar Rapids, IA 52499 Investment Officer
Brenda K. Clancy Vice President
4333 Edgewood Road, N.E. Treasurer and Chief
Cedar Rapids, IA 52499 Financial Officer
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
DEPOSITOR OR REGISTRANT
<TABLE>
<S> <C> <C> <C> <C> <C>
---------------------------
VERENIGING AEGON
NETHERLANDS MEMBERSHIP
ASSOCIATION
---------------------------
+
53.00%
---------------------------
AEGON N.V.
NETHERLANDS CORPORATION
----------------------------
+
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ + + +
100% 100% 100% 100%
---------------------- ------------------------ ------------------------ -----------------------------
AEGON Netherland N.V. AEGON INTERNATIONAL N.V. AEGON NEWAK HOLDING S.V. GRONINGER FINANCIERINGEN B.V.
Netherlands Corporation Netherlands Corporation Netherlands Corporation Netherlands Corporation
---------------------- ------------------------ ------------------------ -----------------------------
+
DE
-------------------
VOTING TRUST
Trustees: K.J. Storm
Donald J. Sheperd
H.B. Van Wild
Dennis Hersch
-------------------
+
DE 100%
-------------------
AEGON U.S. HOLDING
CORPORATION
-------------------
+ +
++++++++++++++++++++++++++++++++++++ +
+ IA 100%(1)
+ -------------------
+ AEGON USA, INC.
+ -------------------
+ +
+ +++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ + +
+ MD 100% MD
+ ----------------- ------------
+ FIRST AUSA LIFE AUSA HOLDING
+ INSURANCE COMPANY COMPANY
+ ----------------- ------------
+ + +
+ + ++++++++++++++++++++++++++++++++++++++++++++++
+ + + ++
+ + MD 100% IA 100% DE
+ + -------------------- ------------- ++ ----------------------
+ + MONUMENTAL GENERAL AUSA FINACIAL +++ DIVERSIFIED INVESTMENT
+ + INSURANCE GROUP, INC ++ MARKETS, INC. ++ ADVISORS, INC.
+ + -------------------- + ------------- ++ ----------------------
NJ 100% + NY + MD 100% + ++
- - ----------------- + ------------------- + ----------------- + ++
SHORT HILLS + AUSA LIFE INSURANCE +++ MONUMENTAL LIFE + IA 100% ++ DE 100%
MANAGEMENT COMPANY+ COMPANY, INC + INSURANCE COMPANY++ MD 100% + ----------- ++ ---------------------
- - ----------------- + ------------------- + ----------------- + ------------------- + UNIVERSAL ++ DIVERSIFIED INVESTORS
+ + + MONUMENTAL GENERAL + BENEFITS +++++++ SECURITIES CORP.
+ + + ADMINISTRATORS, INC.+ CORPORATION ++ --------------------
+ + MD 100% + ------------------- + ++
NY + ----------------- + ----------------- + + ----------- ++
- - ---------------- + LIFE INVESTORS + MONUMENTAL GENERAL+ + + ++ IA 100%
CORPA REINSURANCE + INSURANCE COMPANY + CASUALTY COMPANY + + IA 100% ++ ----------------
COMPANY ++ ++ OF AMERICA ++ ----------------- + MD 100% + ---------- ++++++++ AEGON USA
- - ---------------- ++ ----------------- + MD 100% + ----------------- + INVESTORS ++ +++ SECURITIES, INC.
++ + --------------- + EXECUTIVE MANAGE- + WARRANTY ++ + ----------------
IN 100% ++ ------------------- + UNITED FINACIAL + MENT AND CONSULT- + OF AMERICA, ++ +
- - ---------------- +++BANKERS UNITED LIFE + SERVICES, INC. +++ ANT SERVICES, INC.+ + INC. ++ +
AEGON MANAGEMENT ++ ASSURANCE COMPANY +++ --------------- + ----------------- + ---------- ++ + MD
COMPANY + ------------------- + + MD 100% + IA 100% ++ + -----------------
- - ---------------- + + AZ (*) + ------------------ + ------------- ++ +++ AEGON USA MANAGED
+ ----------------- + ---------------- + MONUMENTAL GENERAL+ + MASSACHUSETTS ++ PORTFOLIOS INC.
DE 100% + PFL LIFE ++++ BANKERS FINACIAL + MASS MARKETING INC. FIDELTY TRUST +++ -----------------
- - ----------------- + INSURANCE COMPANY + LIFE INSURANCE +++ ------------------- COMPANY ++
RCC NORTH AMERICA + ----------------- + COMPANY + ------------ ++
INC. ++ AZ 100% VOTING + ---------------- + DE 100% ++ IA 100%
- - ----------------- + CHAIRMAN MD 100% + ------------------ ++ ------------------
---------------------+ -------------- + MONEY SERVICES, INC.++++ AMERICAN FORUM FOR
SOUTHWEST EQUITY LIFE+ THE WHITESTONE + ------------------- ++ FISCAL FITNESS, INC.
INSURANCE COMPANY+++ CORPORATION +++++ CA 100% -------------------
---------------------+ -------------- ------------------- ++ IN 100%
AZ 100% Voting Chairman (2) + IA 100% ZAHORIK COMPANY INC+++ --------------
----------------------- + ------------------ --------------------++ SUPPLEMENTAL
IOWA FIDELITY LIFE +++ CADET HOLDING CORP + ++ INSURANCE
INSURANCE COMPANY + ------------------ AL 100% ++ DIVISION INC.
----------------------- + ---------- +++++++ --------------
OH 100% + ZCI, INC. ++ MI 100%
--------------------- --------- +++++++ ------------------
WESTERN RESERVE LIFE + +++++++++++++++++++++++++++++++++++++ CREDITOR RESOURCES
++++ ASSURANCE CO. OF OHIO+++ DE + ++ INC.
+ --------------------- --------------- + ++ ------------------
+ --------------- INTERSECURITIES+++++++++++++ ++ +
++++++++ WRL SERIES FUND ++++++ INC. +++++ + ++ CN 100%
INC. + --------------- + + ++ -------------------
--------------- + + + ++ CRC CREDITOR
MA + CA 100% + + MN 100% RESOURCES CANADIAN
--------- + ---------------- + + ------------------------ ++ DEALER NETWORK, INC.
IDEX FUND++++++ ISI INSURANCE + + AUSA INSTITUTIONAL ++++++++++ -------------------
--------- + AGENCY INC. AND+++++ + MARKETING PARTNERS, INC. ++
+ ITS SUBSIDIARIES + + ------------------------ ++ IA 100%
MA + ---------------- + + MN 100% ++ --------------------
----------- + MN 100% + + ---------------- ++++ AEGON USA INVEST-
IDEX II +++++++ ------------------- + + COLORADO ANNUITY+++++++++++++++ MENT MANAGEMENT, INC.
SERIES FUND + ASSOCIATED MARINER ++ + AGENCY INC. + ---------------------
----------- + FINANCIAL GROUP, INC.+++ + ---------------- + IA 100%(12)
MA + ------------------- + + + -----------------
----------- + MI 100% + +++++ AEGON USA REALTY
IDEX FUND 3 +++++ ----------------- + + ++++ ADVISORS, INC.
----------- + MARINER FINANCIAL+++++ + + -----------------
+ SERVICES, INC. + + + DE 100%
+ ----------------- + + + -----------
+ + + +++++++ QUANTRA
+ MI 100% + + + CORPORATION
+ ------------------ + + + -----------
+ MARINER'S PLANNING + + + +
+ CORPORATION + + + DE 100%
+ ------------------ + + + ----------------
+ + + + QUANTRA SOFTWARE
+ MI 100%(10) + + + CORPORATION
+ ------------------- + + + ----------------
+ ASSOCIATED MARINER + + + IA 100%
+ AGENCY INC. AND ITS++++ + + ---------------
+ SUBSIDIARIES + + ++++LANDAUER REALTY
+ ------------------- + + + ADVISORS, INC.
+ MI 100% + + + ---------------
+ ---------------- + + + DE 100%
+ MARINER MORTGAGE + + + ----------------
+ CORP. ++++++ + ++++++ LANDAUER
+ ---------------- + + ASSOCIATES, INC.
+ + + ----------------
+ FL 100% + + IA 100%
+ -------------- + + ----------------
+ IDEX INVESTOR +++++++++++++ ++++++ AEGON USA REALTY
+++++SERVICES, INC. + + MANAGEMENT, INC
+ -------------- + + ----------------
+ DE 50%(7) + + IA 100%(11)
+ --------------- + + ------------------
+ IDEX MANAGEMENT,+++++++++++ +++++ REALTY INFORMATION
++++ INC. SYSTEMS, INC.
--------------- ------------------
IA (4)
----------------
USP REAL ESTATE++++
INVESTMENT TRUST +
---------------- +
(5) +
----------------- +
CEDAR INCOME FUND+++
LTD.
-----------------
</TABLE>
See Footnotes Page 2
Effective January 1, 1997
Page 2
Footnotes
(1) 150,000 shares of Class B Non-Voting Common Stock owned by Ennia
Reinsurance Antilles N.V.
(2) Ordinary common stock is allowed 60% of total cumulative vote.
Participating common stock is allowed 40% of total cumulative vote.
(3) Denotes relationships as advisor, administrator, sponsor, underwriter or
general partner.
(4) First AUSA Life Insurance Company owns 12.89%. PFL Life Insurance Company
owns 13.11%. Bankers United Life Assurance Company owns 4.86%.
(5) PFL Life Insurance Company owns 16.73%. Bankers United Life Assurance
Company owns 3.77%. Life Investors Insurance Company of America owns
3.38%. AEGON USA Realty Advisors, Inc. owns 1.97%. First AUSA Life
Insurance Company owns .18%.
(6) Class B Common stock is allocated 75% of total cumulative vote. Class A
Common stock is allocated 25% of total cumulative vote.
(7) 50% of Idex Management, Inc. is owned by Janus Capital Corporation, a
Colorado corporation.
(8) RCC Group: FGH Realty Credit Corp., FGH USA, Inc., RCC North America,
Inc., FGH USA Realty, Inc., FGH Eastern Region, Inc., FGH Appraisal
Services, Inc., FGH Western Region, Inc., ALH Properties, Inc., First FGP,
Inc., Second FGP, Inc., Third FGP, Inc., Fourth FGP, Inc., Fifth FGP, Inc.,
Sixth FGP, Inc., Seventh FGP, Inc., FGP Midwood, Inc., FGP Parsippany,
Inc., ALH Properties Two, Inc., ALH Properties Three, Inc., ALH Properties
Four, Inc., ALH Properties Five, Inc., ALH Properties Six, Inc., ALH
Properties Seven, Inc., ALH Properties Eight, Inc., ALH Properties Nine,
Inc., ALH Properties Ten, Inc., ALH Properties Eleven, Inc., ALH Properties
Twelve, Inc., ALH Properties Thirteen, Inc., ALH Properties Fourteen, Inc.,
ALH Properties Fifteen, Inc., ALH Properties Sixteen, Inc., ALH Properties
Seventeen, Inc., FGP Keene, Inc., FGP Broadway, Inc., FGP West Street,
Inc., FGP West Street Two, Inc., FGP 90 West Street, Inc., FGP Branford,
Inc., FGP Franklin, Inc., FGP Bala, Inc., FGP Twenty-One, Inc., FGP Twenty-
Two, Inc., FGP Twenty-Five, Inc., FGP Schenectady, Inc., FGP Country
Estates, Inc., FGP Eleventh Street, Inc., FGP 109th Street, Inc., FGP
Seventy-Second Street, Inc., FGP Gaithersburg, Inc., FGP West 32nd Street,
Inc., FGP Beekman, Inc., Dutch Hotel Management, Inc., FGP Landmark, Inc.,
FGP Islandia, Inc., FGP Bridgeport, Inc., FGP Varick, Inc., The RCC Group,
Inc., FGP Union Gardens, Inc., FGP Burkewood, Inc., FGP Stamford, Inc., FGP
Meadow Lane, Inc., FGP Main Street, Inc., FGP Property Services, Inc., FGP
Merrick, Inc., FGP West 14th Street, Inc., FGP 106 Fulton, Inc., FGP Bush
Terminal, Inc., FGP Northern Boulevard, Inc., FGP Seventh Avenue, Inc., FGP
Parsons, Inc., FGP City Hall, Inc., FGP West 88th Street, Inc., FGP
Lincoln, Inc., FGP Emerson, Inc., FGP Brooke, Inc., FGP 86th Street, Inc.,
FGP Edison, Inc., FGP Rider Avenue, Inc., FGP Remsen, Inc., FGP Rockbeach,
Inc., FGP Carter Drive, Inc., FGP Centereach, Inc., FGP Colonial Plaza,
Inc., FGP Coram, Inc., FGP Herald Center, Inc., Eighty Six Yorkville, Inc.
(9) Subsidiaries of ISI Insurance Agency, Inc. are: ISI Insurance Agency of
Ohio, Inc., ISI Insurance Agency of Massachusetts, Inc., and ISI Insurance
Agency of Texas, Inc.
(10) Subsidiaries of Associated Mariner Agency, Inc. are Associated Mariner
Agency of Hawaii, Inc., Associated Mariner Insurance Agency of
Massachusetts, Inc., Associated Mariner Agency Ohio, Inc., Associated
Mariner Agency Texas, Inc., and Associated Mariner Agency New Mexico, Inc.
(11) Owns 50% interest in DJA Partners (a.k.a. "Teleres"), a Delaware general
partnership. Also owns 10% interest in Datalytics, Inc., an Ohio
corporation.
(12) Owns 49% of Quantra Consulting, Inc., a Delaware corporation.
*Includes qualifying shares for Directors.
AEGON USA, Inc. - Holding Company
Life Investors Insurance Company of America - Insurance
International Life Investors Insurance Company - Insurance
Transunion Casualty Company - Insurance
Investors Warranty of America, Inc. - Provider of automobile extended
maintenance contracts
Supplemental Insurance Division, Inc. - Insurance
4
<PAGE>
Creditor Resources, Inc. - Credit Insurance
AEGON USA Investment Management, Inc. - Investment Advisor
AEGON USA Realty Advisors, Inc. - Provides real estate administrative
and real estate investment services
AEGON USA Realty Management, Inc. - Real Estate Management
AEGON USA Securities, Inc. - Broker-Dealer
AEGON USA Managed Portfolios, Inc. - Mutual Fund
USP Real Estate Investment Trust - Real Estate Investment Trust
Cedar Income Fund, Ltd. - Real Estate Investment Trust
First AUSA Life Insurance Company - Insurance
Bankers United Life Assurance Company - Insurance
Universal Benefits Corporation - Third party administrator
Massachusetts Fidelity Trust Company - Trust company
Money Services, Inc. - Provides financial counseling for employees and
agents of affiliated companies
Zahorik Company, Inc. - Broker-Dealer
Cadet Holding Corp. - Holding company
ISI Insurance Agency, Inc. - Broker/Dealer
Southwest Equity Life Insurance Company - Insurance
Iowa Fidelity Life Insurance Company - Insurance
The Whitestone Corporation - Insurance agency
Monumental Life Insurance Company - Insurance
5
<PAGE>
United Financial Services, Inc. - General agency
Monumental General Insurance Group, Inc. - Holding company
Monumental General Administrators, Inc. - Provides management services
to unaffiliated third party administrator
Executive Management and Consultant Services, Inc. - Provides
actuarial consulting services
Monumental General Mass Marketing, Inc. - Marketing arm for sale of
mass marketed insurance coverages
Bankers Financial Life Insurance Company - Insurance
Monumental General Casualty Company - Insurance
AUSA Holding Company - Holding company
JLW Financial Management Systems, Inc. - Management and Administrative
Services
ZCI, Inc. - Insurance agency
AUSA Financial Markets, Inc. - Marketing
CRC Creditor Resources Canadian Dealer Network Inc. - Insurance agency
American Forum For Fiscal Fitness, Inc. - Marketing
Western Reserve Life Assurance Co. of Ohio - Insurance
Landauer Realty Advisors, Inc. - Real estate counseling
Landauer Associates, Inc. - Real estate counseling
WRL Series Fund, Inc. - Mutual fund
Intersecurities, Inc. - Broker-dealer
Idex Investor Services, Inc. - Shareholder services
Idex Management, Inc. - Investment advisor
Idex Total Income Trust - Mutual fund
Idex Fund - Mutual fund
Idex II Series Fund - Mutual fund
6
<PAGE>
Idex Fund 3 - Mutual fund
AUSA Life Insurance Company, Inc. - Insurance
Diversified Investment Advisors, Inc. - Registered Investment Advisor
Diversified Investors Securities Corp. - Broker-Dealer
Associated Mariner Financial Group, Inc. - Holding company management
services
Mariner Financial Services, Inc. - Broker/Dealer
Mariner/ISI Planning Corporation - Financial planning
Associated Mariner Agency, Inc. - Insurance agency
Mariner Mortgage Corp. - Mortgage origination
AUSA Institutional Marketing Group, Inc. - Insurance Agency
Colorado Annuity Agency, Inc. - Insurance agency
Realty Information Systems, Inc. - Information Systems for real estate
investment management
Melson and Associates, Inc. - Real estate financial management consulting
ITEM 27. NUMBER OF POLICYOWNERS
As of December 31, 1996, there were 19,013 Owners of the Policies.
ITEM 28. INDEMNIFICATION
The Iowa Code (Sections 490.850 et. seq.) provides for permissive
indemnification in certain situations, mandatory indemnification in other
situations, and prohibits indemnification in certain situations. The Code also
specifies procedures for determining when indemnification payments can be made.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person in connection with the
securities being registered), the Depositor will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
7
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
AEGON USA Securities, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
The directors and officers of
AEGON USA Securities, Inc.
are as follows:5
Patrick E. Falconio Lisa Wachendorf
Director Vice President
William L Busler Linda Gilmer
Director Vice President and Treasurer
Brenda K. Clancy Donna M. Craft
Director Vice President
Robert A. Thelen Frank A. Camp
Senior Vice-President Secretary
Lorri E. Mehaffey Shelley Davenport
President Assistant Vice President
Billy J. Berger
Vice President and Assistant Treasurer
_____________________
/5/ The principal business address of each person listed is AEGON USA
Securities, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
Commissions and Other Compensation Received by Principal Underwriter.
AEGON USA Securities, Inc. and/or the broker-dealers received $19,668,001
from the Registrant during the last fiscal year for its services in distributing
the Policies. No other commission or compensation was received by the principal
underwriter, directly or indirectly, from the Registrant during the fiscal
year.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder,
are maintained by PFL Life Insurance Company at 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499.
ITEM 31. MANAGEMENT SERVICES.
8
<PAGE>
All management Policies are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as necessary to ensure
that the audited financial statements in the registration statement are never
more than 16 months old for so long as Premiums under the Policy may be
accepted.
(b) Registrant undertakes that it will include either (i) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information or (ii) a space in the Policy application that an applicant can
check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to PFL at the address or phone
number listed in the Prospectus.
(d) PFL Life Insurance Company hereby represents that the fees and
charges deducted under the policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by PFL Life Insurance Company.
SECTION 403(B) REPRESENTATIONS
PFL represents that it is relying on a no-action letter dated November
28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88),
regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, in connection with redeemability restrictions on Section 403(b) Policies,
and that paragraphs numbered (1) through (4) of that letter will be complied
with.
STATEMENT PURSUANT TO RULE 6C-7: TEXAS OPTIONAL RETIREMENT PROGRAM
PFL and the Mutual Fund Account rely on 17 C.F.R. Sec. 270.6c-7, and
represent that the provisions of that Rule have been or will be complied with.
9
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Cedar Rapids and State of Iowa, on this 27th day of
February, 1997.
PFL ENDEAVOR VA SEPARATE
ACCOUNT
PFL LIFE INSURANCE COMPANY
Depositor
/s/ William L. Busler
----------------------------
William L. Busler
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.
Signatures Title Date
- - ---------- ----- ----
/s/ Patrick S. Baird Director February 27, 1997
- - -----------------------
Patrick S. Baird
/s/ Craig D. Vermie Director February 27, 1997
- - -----------------------
Craig D. Vermie
/s/ William L. Busler Director February 27, 1997
- - -----------------------
William L. Busler (Principal Executive Officer)
/s/ Patrick E. Falconio Director February 27, 1997
- - -----------------------
Patrick E. Falconio
/s/ Douglas C. Kolsrud Director February 27, 1997
- - -----------------------
Douglas C. Kolsrud
/s/ Robert J. Kontz Vice President and February 27, 1997
- - ----------------------- Corporate Controller
Robert J. Kontz
/s/ Brenda K. Clancy Treasurer February 27, 1997
- - -----------------------
Brenda K. Clancy
<PAGE>
Registration No.
33-33085
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
TO
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOR
PFL ENDEAVOR VARIABLE ANNUITY ACCOUNT
---------------
<PAGE>
EXIBIT INDEX
------------
Exhibit No. Description of Exhibit Page No.
- - ----------- ---------------------- --------
(4)(f) Form of Policy for the Endeavor Variable Annuity.
(4)(g) Form of Policy Endorsement. (Nursing Care)
(8)(f) Termination Notice of Adminstrative Services
Agreement by and between PFL Life Insurance
Company and Vantage Computer Systems, Inc.
(10)(b) Opinion and Consent of Actuary
(14) Powers of Attorney
- - --------------------------
.Page numbers included only in mannually executed original.
<PAGE>
EXHIBIT (4)(f)
--------------
FORM OF POLICY FOR THE
ENDEAVOR VARIABLE ANNUITY.
<PAGE>
PFL Life Insurance Company
PFL A Stock Company
LIFE Home Office located at 4333 Edgewood Road NE., Cedar Rapids, Iowa 52499
(Hereafter called the Company, we, our or us) (319) 398-8511
ANNUITANT: JOHN DOE
OWNER(S): JOHN DOE
POLICY NUMBER: 7 -0123
POLICY DATE: December 15, 1996
WE AGREE
*To provide annuity payments as set forth in this policy;
*Or to pay withdrawal benefits in accordance with Section 5 of this policy;
*Or to pay death proceeds in accordance with Section 9 of this policy.
Withdrawals may be subject to an Excess Interest Adjustment reflecting changes
in interest rates in accordance with Section 5 of this policy.
These agreements are subject to the provisions of this policy. This policy is
issued in consideration of any application and payment of the initial premium
This policy may be applied for and issued to qualify as a tax-qualified annuity
under the applicable sections of the Internal Revenue Code.
/s/ Craig D. Vermie
SECRETARY
20 DAY RIGHT TO CANCEL
You may cancel this policy by delivering or mailing a written notice or sending
a telegram to us. You must return the policy before midnight of the twentieth
day after the day you receive it. Notice given by mail and return of the policy
by mail are effective on being postmarked, properly addressed and postage
prepaid.
We will pay you an amount equal to the sum of:
*the premiums paid; and
*the accumulated gains or losses, if any, in the Separate Account on the date of
cancellation;
unless otherwise required by law.
<PAGE>
/s/ William L. Busler
PRESIDENT
This policy is a legal contract between the policyowner and the company.
READ YOUR POLICY CAREFULLY
Flexible Premium Variable Annuity
Income Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount (See Sections 6 and 10C)
Non-Participating
AV320 101 99 197
<PAGE>
SECTION 1
DEFINITIONS
ANNUITANT
The person to whom annuity payments will be made, unless another payee is named.
ANNUITY COMMENCEMENT DATE
Date the annuitant will begin receiving payments from this policy, which may not
be later than the last day of the policy month starting after the Annuitant
attains age 85, except as expressly allowed by us, but in no event later than
the last day of the month following the month in which the Annuitant attains age
95.
ADJUSTED POLICY VALUE
Amount, defined in Section 4, that can be used to fund one of the Payment
Options.
CASH VALUE
Amount, defined in Section 5, that can be withdrawn if the annuity is
surrendered.
DISTRIBUTION
A withdrawal or disbursement of funds from the Policy Value or Cash Value.
PAYEE
The person to whom annuity payments will be made.
PAYMENT OPTIONS
Options through which the distribution of the Adjusted Policy Value can be
directed.
POLICY ANNIVERSARY
The anniversary of the Policy Date for each year the policy remains in force.
POLICY DATE
The date shown on page 3 of this policy and the date on which this policy
becomes effective.
POLICY YEAR
The 12 month periods following the Policy Date shown on the Policy Data page.
The first Policy Year starts on the Policy Date. Each subsequent year starts on
the anniversary of the Policy Date.
SUB-ACCOUNT
A division of the Separate Account, as described in Section 6.
SURRENDER
A partial or full withdrawal of funds from the Policy Value or Cash Value.
WITHDRAWAL
A distribution of funds from the Policy Value or Cash Value.
YIELD
The effective annual interest rate applicable to the Fixed Account
YOU, YOUR
The owner of this policy. Unless otherwise specified on the Policy Data page,
the annuitant and the owner shall be one and the same person.
AVB320
PAGE 2
<PAGE>
SECTION 2 - POLICY DATA
POLICY NUMBER: ANNUITANT:
INITIAL PREMIUM
PAYMENT: ISSUE AGE/SEX:
POLICY DATE: OWNER(S):
ANNUITY
COMMENCEMENT DEATH BENEFIT
DATE: OPTION:
Distribution Financing Charge: .15% (deducted during the first 7 policy
years only)
Death Benefit Option A or B -
Mortality and Expense Risk Fee and Administrative Charge: 1.40%
Death Benefit Option C -
Mortality and Expense Risk Fee and Administrative Charge: 1.25%
AV320 101 99 197 SP
PAGE 3
<PAGE>
SECTION 3 - PREMIUM PAYMENTS
PAYMENT OF PREMIUMS
Premium payments may be made any time while this policy is in force before the
Annuity Commencement Date. You may start or stop, increase or decrease, or skip
any premium payments.
MAXIMUM AND MINIMUM PREMIUM PAYMENT
The premium payments may not be more than the amount permitted by law if this is
a tax-qualified annuity. The minimum initial premium payment is $5,000. If
this policy is being used as a tax-qualified annuity, the minimum initial
premium is $1,000, except that no minimum initial premium payment will be
required for 403(b) annuities. The minimum subsequent premium payment we will
accept is $50. The maximum total premium payments which we will accept without
prior Company approval is $1,000,000.
PREMIUM PAYMENT DATE
The premium payment date is the date on which the premium payment is credited to
the policy. The initial premium payment less any applicable premium taxes will
be credited to the policy within two business days of receipt of the premium
payment and the information needed. Subsequent additional premium payments will
be credited to the policy as of the business day when the premium payment and
required information are received. A business day is any day on which the New
York Stock Exchange is open for trading.
ALLOCATION OF PREMIUM PAYMENTS
Premium payments may be applied to various Guaranteed Period Options of the
Fixed Account and/or to one or more of the Subaccounts which we make available.
You must indicate what percent of each premium payment to allocate to various
Guaranteed Period Options of the Fixed Account, the Dollar Cost Averaging Option
of the Fixed Account and/or among one or more of the Subaccounts. Each percent
may be either zero or any whole number, however, the allocation among all
accounts must total 100%.
CHANGE OF ALLOCATION
You may change the allocation of premium payments to various Guaranteed Period
Options of the Fixed Account and/or among the Subaccounts. You must tell us in
a notice you sign which gives us the facts that we need. Premium payments
received after the date on which we receive your notice will be applied on the
basis of the new allocation.
PREMIUM TAXES
Your state may impose a premium tax. It may be imposed either when a premium
payment is made, on the Annuity Commencement Date, on the date of death, or on
the date of full surrender. When permitted by state law, we will not deduct the
tax until the Annuity Commencement Date, date of death, or date of full
surrender.
SECTION 4 - POLICY VALUE
POLICY VALUE
On or before the Annuity Commencement Date, the Policy Value is equal to your:
(a) premium payments; minus
(b) partial withdrawals; plus
(c) interest credited in the Fixed Account; plus
(d) accumulated gains or losses in the Separate Account; minus
(e) service charges, premium taxes and transfer fees, if any.
ADJUSTED POLICY VALUE
The Adjusted Policy Value is the Policy Value increased or decreased by any
Excess Interest Adjustment
<PAGE>
You may use the Adjusted Policy Value on the Annuity Commencement Date to
provide lifetime income or income for a period of no less than 60 months under
the Payment Options in Section 10.
SERVICE CHARGE
On each Policy Anniversary and at the time of surrender during any Policy Year
before the Annuity Commencement Date, we reserve the right to charge up to $35
for policy administration expenses. It will be deducted from each Subaccount,
Guaranteed Period Option (GPO) and/or Dollar Cost Averaging (DCA) Fixed Account
Option in proportion to the portion of Policy Value (prior to such charge) in
each Subaccount, GPO or DCA on the Policy Anniversary. In no event will the
Service Charge exceed 2% of the Policy Value on the Policy Anniversary or at the
time of surrender.
The Service Charge will not be deducted on a Policy Anniversary or at the time
of surrender if either (1) or (2) equals or exceeds $50,000 on the Policy
Anniversary or at the time of surrender where (1) equals the sum of all premium
payments made less the sum of all withdrawals taken and (2) equals the Policy
Value.
M770
PAGE 4
<PAGE>
SECTION 5 - CASH VALUE AND PARTIAL WITHDRAWALS
CASH VALUE
The Cash Value may be partially withdrawn or will be paid in the event of a full
surrender of the policy. We must receive your written withdrawal or surrender
request before the Annuity Commencement Date.
The current amount of your policy's Cash Value is available upon request On or
before the Annuity Commencement Date, the Cash Value is equal to the Adjusted
Policy Value less any Surrender Charges. However, upon full Surrender, the
Owner will always receive at least the premium payments applied to the Fixed
Account, less prior partial withdrawals and transfers from, the Fixed Account
plus interest at the effective annual interest rate of 3%, less Surrender
Charges. There is no Cash Value after annuity payments have commenced.
EXCESS INTEREST ADJUSTMENT
Full Surrenders, Partial Withdrawals, transfers and amounts applied to a Payment
Option (prior to the end of any Guaranteed Period) from the Fixed Account
Guaranteed Period Options described in Section 7, will be subject to an Excess
Interest Adjustment (EIA) except as provided for in the Partial Withdrawals
provision below.
Excess Interest Adjustment = S x (G-C) x (M/ 12)
where: S is the gross (i.e. before surrender charges and premium taxes, if
any) amount being surrendered, withdrawn, transferred or applied to
a Payment Option that is subject to the Excess Interest Adjustment.
G is the guaranteed interest rate applicable to S.
C is the current guaranteed interest rate then being offered on new
premium payments for the next longer Guaranteed Period than "M". If
this policy form or such a Guaranteed Period is no longer offered,
"C" will be the U.S. Treasury rate for the next longer maturity (in
whole years) than "M" on the 25th day of the previous calendar
month, plus up to 2% .
M is the number of months remaining in the Guaranteed Period for S,
rounded up to the next higher whole number of months.
Upon transfer from any Guaranteed Period or partial or full surrender, the
Excess Interest Adjustment (EIA) for each Guaranteed Period Option will not
reduce the Adjusted Policy Value for that Guaranteed Period Option below the
amount paid into, less any prior withdrawals and transfers from that Guaranteed
Period Option, plus interest at the 3% guaranteed effective annual interest
rate.
PARTIAL WITHDRAWALS
You may withdraw all or any portion of the Cash Value provided we receive your
written request while the policy is in effect and before the Annuity
Commencement Date. When you request a Partial Withdrawal you must tell us how
it is to be allocated among the various Guaranteed Period Options of the Fixed
Account and/or the Subaccounts. If your request for a Partial Withdrawal from
any Guaranteed Period Option of the Fixed Account and/or a Subaccount is greater
than the Cash Value in that account, we will pay you the Cash Value of that
account
Partial Withdrawals may be made free of Surrender Charges and free of Excess
Interest Adjustment in three different ways:
1 . LUMP SUM
After the first Policy Year, amounts ($500 minimum) up to 10% of the Policy
Value at the time of withdrawal are available as a lump sum distribution
once per Policy Year with no Excess Interest Adjustment and no Surrender
Charges.
<PAGE>
2. SYSTEMATIC PAYOUT OPTION
During any Policy Year, including the first, a Systematic Payout Option
(SPO) is available on a monthly, quarterly, semi-annual or annual basis.
SPO payouts must be at least $50 and may not exceed 10% of the Policy Value
at the time a SPO payout is made divided by the number of payouts made per
year (e.g. 12 for monthly). No Surrender Charges and no Excess Interest
Adjustment will apply to the SPO payout. Monthly and quarterly payouts
must be sent through electronic funds transfer directly to your checking or
savings account. You may start or stop SPO payouts at any time; however,
30 days written notice is required to stop SPO payouts.
Once you have elected a SPO, you must wait a minimum time before the first
SPO payment: one month for a monthly SPO, three months for quarterly, six
months for semi-annual, or twelve months for annual.
U770
PAGE 5
<PAGE>
SECTION 5 - CONT
3. MINIMUM REQUIRED DISTRIBUTION
For tax-qualified plans, Partial Withdrawals taken to satisfy minimum
distribution requirements under Section 401(a)(9) of the Internal Revenue
Code (IRC) are available with no Surrender Charges and no EIA. The amount
available from this policy with respect to the minimum distribution
requirement is based solely on this policy.
The owner must be at least 70 1/2 years old in the calendar year of
distribution, must submit a written request to us and must take the
distribution before year end. If the owner attains age 70 1/2 in the
calendar year of distribution, a written request which is postmarked no
later than the end of the current calendar year must be submitted to us.
Systematic minimum distributions must be at least $50 or a lump sum
distribution is available if minimum required distributions are less that
$50.
Any amount requested in excess of the IRC minimum required distribution
will have the appropriate Surrender Charges and EIA applied, unless the
excess distribution qualifies as Surrender Charge-free or EIA-free under 1.
or 2. above.
Surrender Charge-free / EIA-free withdrawals will reduce the Policy Value by the
amounts withdrawn.
Excess Partial Withdrawals are withdrawal amounts in excess of the Surrender
Charge-free / EIA-free portion. Excess Partial Withdrawals will reduce the
Policy Value by an amount equal to (X-Y+Z) where:
X = Excess Partial Withdrawal
Y = Excess Interest Adjustment = (X) x (G-C) x (M/ 1 2) where G, C and M are
defined in the Excess Interest Adjustment provision above.
Z = Surrender Charge on X minus Y
Thus, each Partial Withdrawal request may consist of a portion that is free from
Surrender Charges and Excess Interest Adjustments, and a portion that is subject
to those charges and adjustments.
However, the total amount deducted from the Policy Value as a result of each
Partial Withdrawal is an amount equal to the Surrender Charge-free withdrawal
plus (X+Y-Z), as defined above. (X-Y+Z) represents the amount deducted from the
Policy Value due to Excess Partial Withdrawal, including the effect of any
Excess Interest Adjustment and/or Surrender Charge. The total amount deducted
from the Policy Value may be more or less than the actual amount you receive
(i.e., your requested Partial Withdrawal) depending on whether Surrender
Charge(s) and/or Excess Interest Adjustment(s) are applicable at the time you
request a Partial Withdrawal.
If any Partial Withdrawal reduces the Cash Value below $500, we reserve the
right to pay the full Cash Value and terminate this policy.
We may delay payment of the Cash Value from the Fixed Account for up to 6 months
after we receive your request. If the Owner dies after the request is received,
but before the request is processed, the request will be processed before the
death proceeds are determined.
Premium payments withdrawn seven or more years after their payment date are not
subject to Surrender Charges.
SURRENDER CHARGES
<PAGE>
Amounts withdrawn in excess of the Surrender Charge free withdrawal provisions
above are subject to a Surrender Charge. The amount of this charge, if any,
will be a percentage, as shown in the table below, of the amount of premium
withdrawn:
<TABLE>
<CAPTION>
Number of Years Percentage of
Since Premium Premium Withdrawn
Payment Date
<S> <C>
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5-6 2%
6-7 1%
7 or more 0%
</TABLE>
For Surrender Charge purposes, the oldest premium payment is considered to be
withdrawn first. If the amount withdrawn exceeds this, the next oldest premium
payment is considered to be withdrawn, and so on until the most recent premium
payment is considered to be withdrawn. Premium payments are deemed to be
withdrawn before earnings.
After all premium payments are considered to be withdrawn, the remaining
Adjusted Policy Value may be withdrawn free of any Surrender Charge.
GUARANTEED RETURN OF FIXED ACCOUNT PREMIUM PAYMENTS
Upon full surrender of the policy, you will always receive at least the premium
payments made to, less prior withdrawals and transfers from, the Fixed Account.
MINIMUM VALUES
Benefits available under this policy are not less than those required by any
statute of the state in which the policy is delivered.
P906
PAGE 6
<PAGE>
SECTION 6 - SEPARATE ACCOUNT
SEPARATE ACCOUNT
We have established and will maintain a Separate Account under the laws of the
state of Iowa. Any realized or unrealized income, net gains and losses from the
assets of the Separate Account are credited to or charged against it without
regard to our other income, gains or losses. Assets are put in the Separate
Account for this policy, as well as for other variable life insurance and
annuity policies. The Separate Account may invest assets in shares of one or
more mutual funds. Fund shares are purchased, redeemed and valued on behalf of
the Separate Account
The Separate Account is divided into Subaccounts. Each Subaccount invests
exclusively in shares of one of the portfolios of an underlying fund. We
reserve the right to add or remove any Subaccount of the Separate Account
The assets of the Separate Account are our property. These assets will equal or
exceed the reserves and other contract liabilities of the Separate Account.
These assets will not be chargeable with liabilities arising out of any other
business we conduct. We reserve the right to transfer assets of a Subaccount,
in excess of the reserves and other contract liabilities with respect to that
Subaccount, to another Subaccount or to our General Account.
We will determine the fair market value of the assets of the Separate Account in
accordance with a method of valuation which we establish in good faith.
Valuation Period means the period of time from one determination of the value of
each Subaccount to the next Such determinations are made when the value of the
assets and liabilities of each Subaccount is calculated. This is generally each
day on which the New York Stock Exchange is open.
We also reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the
term "Separate Account", as used in this policy, shall then mean the separate
account to which the assets were transferred.
We also reserve the right, when permitted by law, to:
(a) deregister the Separate Account under the Investment Company Act of 1940;
(b) manage the Separate Account under the direction of a committee at any time;
(c) restrict or eliminate any voting rights of policyowners or other persons
who have voting rights as to the Separate Account; and
(d) combine the Separate Account with one or more other separate accounts;
(e) create new Separate Accounts;
(f) add new Subaccounts to or remove existing Subaccounts from the Separate
Account, or combine Subaccounts;
(g) add new underlying mutual funds, remove existing mutual funds, or
substitute a new fund for an existing fund.
CHANGE IN INVESTMENT OBJECTIVE OR POLICY OF A MUTUAL FUND
If required by law or regulation, an investment policy of the Separate Account
will only be changed if approved by the appropriate insurance official of the
state of Iowa or deemed approved in accordance with such law or regulation. If
so required, the process for obtaining such approval is filed with the insurance
official of the state or district in which this policy is delivered.
<PAGE>
CHARGES AND DEDUCTIONS
The Mortality and Expense Risk Fee and the Administrative Charge are each
deducted during the accumulation phase and during the annuitization phase to
compensate for increased mortality and expenses not anticipated by the mortality
and maintenance charges guaranteed in the contract.
The Service Charge is deducted during the accumulation phase only. In addition,
a Distribution Financing Charge is deducted (during the first seven policy years
of the accumulation phase only) to compensate for costs of distributing the
policy.
If the Mortality and Expense Risk Fee(s) and/or Distribution Financing Charge(s)
are more than sufficient, the Company will retain the balance as profit
ACCUMULATION UNITS
The Policy Value in the Separate Account before the Annuity Commencement Date is
represented by accumulation units. The dollar value of accumulation units for
each Subaccount may change from day to day reflecting the investment experience
of the Subaccount
Premium payments allocated to and any amounts transferred to the Subaccounts
will be applied to provide accumulation units in those Subaccounts. The number
of accumulation units purchased in a Subaccount will be determined by dividing
the premium payment allocated to or any amount transferred to that Subaccount,
by the value of an accumulation unit for that Subaccount on the premium payment
or transfer date.
The number of accumulation units withdrawn or transferred from the Subaccounts
will be determined by dividing the amount withdrawn or transferred by the value
of an accumulation unit for that Subaccount on the withdrawal or transfer date.
PB906
PAGE 7
<PAGE>
SECTION 6 - SEPARATE ACCOUNT - CONT
The value of an accumulation unit on any business day is determined by
multiplying the value of that unit at the end of the immediately preceding
valuation period by the net investment factor for the valuation period.
The net investment factor used to calculate the value of an accumulation unit in
each Subaccount for the Valuation Period is determined by dividing (a) by (b)
and subtracting (c) from the result, where:
(a) is the result of:
(1) the net asset value of a fund share held in that Subaccount determined
as of the end of the current valuation period; plus
(2) the per share amount of any dividend or capital gain distributions made
by the fund for shares held in that Subaccount if the ex-dividend date
occurs during the valuation period; plus or minus
(3) a per share charge or credit for any taxes reserved for, which we
determine to have resulted from the investment operations of that
Subaccount.
(b) is the net asset value of a fund share held in that Subaccount determined
as of the end of the immediately preceding valuation period.
(c) is a factor representing the Mortality and Expense Risk Fee and
Administrative Charge and Distribution Financing Charge. This factor is
less than or equal to, on an annual basis, the sum of the percentages shown
on page 3 of the daily net asset value of a fund share held in that
Subaccount.
Since the net investment factor may be greater or less than one, the
accumulation unit value may increase or decrease.
SECTION 7 - FIXED ACCOUNT
FIXED ACCOUNT
Premium payments applied to and any amounts transferred to the Fixed Account
will reflect a fixed interest rate. The interest rates we set will be credited
for increments of at least one year measured from each premium payment or
transfer date. These rates will never be less than an effective annual interest
rate of 3%.
GUARANTEED PERIODS
We may offer optional Guaranteed Periods, i.e. Guaranteed Period Option(s), into
which premium payments may be paid or amounts transferred. The current interest
rate we set for funds entering each Guaranteed Period Option (GPO) is guaranteed
until the end of that option's Guaranteed Period. At that time, the premium
payment made or amount transferred into the GPO less any withdrawals or
transfers from that GPO, plus interest, will be rolled into a new GPO or may be
transferred to any Subaccount(s) within the Separate Account.
You may choose the GPO(S) or Subaccount(s) you want the funds rolled into by
giving us notice within 30 days before the end of the expiring option's
Guaranteed Period. However, any Guaranteed Period elected may not extend beyond
the maximum Annuity Commencement Date defined in Section 11. In the absence of
such election, the funds will be rolled into a new GPO which is the same as the
expiring GPO unless that GPO is no longer offered, in which case, the next
shorter GPO offered will be used. We reserve the right for new premium
payments, transfers, or rollovers to offer or not to offer any GPO, except that
we will always offer at least a one year GPO.
For purposes of crediting interest when funds are withdrawn from or transferred
into a Guaranteed Period Option, the amount of the oldest premium payment or
rollover into that Guaranteed Period Option is considered to be
<PAGE>
withdrawn first. If the amount withdrawn exceeds this amount, the next oldest
premium payment or rollover is considered to be withdrawn next, and so on until
the most recent premium payment or rollover is considered to be withdrawn (this
is a "First-in, First-Out' or FIFO procedure). Premium payment(s) or rollover(s)
are deemed to be withdrawn first, then interest credited.
Partial withdrawals, full Surrenders and transfers from a Guaranteed Period
Option which occur prior to the end of that option's Guaranteed Period are
subject to an Excess Interest Adjustment, as described in Section 5.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
We may offer a Dollar Cost Averaging (DCA) Fixed Account Option separate from
the Guaranteed Period Options (GPO's). This option will have a one year
interest rate guarantee. The current interest rate we set for the DCA Fixed
Account may differ from the rates credited on other GPO(S) in the Fixed Account
In addition, the rate we credit may differ on the portion of the DCA Fixed
Account that is currently making transfers than on the portion of the DCA Fixed
Account which is not making transfers. The credited interest rate will never be
less than the minimum effective annual interest rate of 3%. The DCA Fixed
Account Option will only be available under a Dollar Cost Averaging program as
described in Section 8.
V936
PAGE 8
<PAGE>
SECTION 8 - TRANSFERS
A. TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the Annuity Commencement Date, you may transfer the value of the
accumulation units from one Subaccount to another within the Separate Account or
to any Guaranteed Period Option (GPO) of the Fixed Account, or from the
Guaranteed Periods of the Fixed Account to the Separate Account. If you want to
transfer, you must tell us in a notice you sign or through an electronic notice
which gives us the facts that we need.
You may choose which Guaranteed Period to transfer to or from, however, any
Guaranteed Period elected may not extend beyond the maximum Annuity Commencement
Date defined in Section 11. Transfers from a Guaranteed Period prior to the end
of that Guaranteed Period are subject to the Excess Interest Adjustment
described in Section 5. If the Excess Interest Adjustment at the time of a
transfer request from any Guaranteed Period is a negative adjustment, then the
maximum amount that can be transferred is 25% of that Guaranteed Period's Policy
Value, less amounts previously transferred out of that Guaranteed Period during
the current policy year. No maximum will apply to amounts transferred from any
Guaranteed Period if the Excess Interest Adjustment is a positive adjustment at
the time of transfer. We may, at our discretion, offer you the option to
transfer an amount equal to the interest credited in the Guaranteed Period
Options to any Subaccount(s) of the Separate Account on a "First-in, First-out"
basis. Each transfer will be subject to a minimum amount of $50. No Excess
Interest Adjustment will apply to such transfers of interest
No transfers will be allowed out of the Dollar Cost Averaging Fixed Account
Option except through dollar cost averaging.
The minimum amount which may be transferred is the lesser of $500 or the entire
Subaccount or Guaranteed Period Option value(s). However, if the remaining
Subaccount or Guaranteed Period Option value(s) is less than $500, we have the
right to include that amount as part of the transfer.
We reserve the right to limit transfers to no more than 12 in any one policy
year. Any transfers in excess of 12 per policy year may be charged a $10 fee
per transfer.
DOLLAR COST AVERAGING OPTION
Prior to the Annuity Commencement Date, you may instruct us to automatically
transfer a specified amount from the Money Market Subaccount, the Dollar Cost
Averaging (DCA) Fixed Account Option, or the U.S. Government Securities
Subaccount to any other Subaccount(s) of the Separate Account. The automatic
transfers can occur monthly or quarterly. If the Dollar Cost Averaging request
is received prior to the 28th day of any month, the first transfer will occur on
the 28th day of that month. If the Dollar Cost Averaging request is received on
or after the 28th day of any month, the first transfer will occur on the 28th
day of the following month.
Prior to the Annuity Commencement Date, no transfers (except through Dollar Cost
Averaging) will be allowed from the DCA Fixed Account.
Transfers will continue until the elected Subaccount or DCA Fixed Account value
is depleted. The amount transferred each time must be at least $500. No
changes to the amount transferred will be allowed but changes can be made to the
Subaccounts to which these transfers are allocated. Transfers must be scheduled
for at least 6, but not more than 24 months or for at least 4, but not more than
8 quarters each time the Dollar Cost Averaging program is started or restarted
following termination of the program for any reason. Dollar Cost Averaging
transfers from the elected Subaccount or DCA Fixed Account will not be subject
to an Excess Interest Adjustment.
You may discontinue Dollar Cost Averaging after satisfying the minimum number of
required transfers by sending written notice to us.
ASSET REBALANCING
<PAGE>
Prior to the Annuity Commencement Date, you may instruct us to automatically
transfer amounts among the Subaccounts of the Separate Account on a regular
basis to maintain a desired allocation of the Policy Value among the various
Subaccounts offered. Rebalancing will occur on a monthly, quarterly, semi-
annual or annual basis, beginning on a date you select. You must select the
percentage of the Policy Value you desire in each of the various Subaccounts
offered (totaling 100%). Any amounts in the Fixed Account are ignored for the
purposes of asset rebalancing. Rebalancing can be started, stopped or changed
at any time, except that rebalancing will not be available when:
1) Dollar Cost Averaging is in effect, or
2) any other transfer is requested.
B. TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
After the Annuity Commencement Date, you may transfer the value of the variable
annuity units from one Subaccount to another within the Separate Account or to
the Guaranteed Period Options of the Fixed Account. If you want to transfer the
value of the variable annuity units, you must tell us in a notice you sign or
through an electronic notice which gives us the facts that we need.
The minimum amount which may be transferred is the lesser of $10 monthly income
or the entire monthly income of the variable annuity units in the Subaccount
from which the transfer is being made. If the monthly income of the remaining
units in a Subaccount is less than $10, we have the right to include the value
of those variable annuity units as part of the transfer.
After the Annuity Commencement Date, no transfers may be made from the Fixed
Account to the Separate Account.
We reserve the right to limit transfers between the Subaccounts or to the Fixed
Account to once per Policy Year except under the Dollar Cost Averaging Option.
VB936
PAGE 9
<PAGE>
SECTION 9 - DEATH PROCEEDS
A. DEATH PROCEEDS PRIOR TO ANNUITY COMMENCEMENT DATE
The amount of death proceeds will be the greatest of (a), (b) or (c) where:
(a) is the Policy Value on the date we receive due proof of death and an
election of a method of settlement;
(b) is the Cash Value on the date we receive due proof of death and an election
of a method of settlement, and;
(c) is the Guaranteed Minimum Death Benefit (GMDB), plus any additional premium
payments received, less any withdrawals from the date of death to the date
of payment of death proceeds.
If you have not selected a payment option by the date of death, the beneficiary
may make such election within one year of the date we receive due proof of the
Owner's or Annuitant's death as described in C. below. The beneficiary may
elect to receive the death proceeds as a lump sum payment or may use the death
proceeds to provide any of the annuity payment options described in Section 10.
Interest on death proceeds will be paid as required by law..
B. GUARANTEED MINIMUM DEATH BENEFIT
The amount of the Guaranteed Minimum Death Benefit (GMDB) depends on the option
shown on page 3. You may not change the GMDB option after the policy is issued.
Option A: 5% Annually Compounding Death Benefit
The GMDB is equal to the total premiums paid for this policy, less any partial
withdrawals, accumulated at 5% interest per annum from the payment or withdrawal
date to the date of death.
Option B: Annual Step-Up Death Benefit
The GMDB is equal to the largest Policy Value on the issue date or on any Policy
Anniversary prior to the earlier of the date of death or prior to the owner's
81st birthday plus any premiums paid, less any partial withdrawals taken,
subsequent to the date of the largest anniversary Policy Value.
Option C: Return of Premium Death Benefit
The GMDB is equal to the total premiums paid for this policy, less any partial
withdrawals, as of the date of death.
The total amount deducted from the GMDB as a result of a Partial Withdrawal as
used in each the above GMDB definitions, is the sum of (1) and (2) where:
(1) = The Surrender Charge-free/Excess Interest Adjustment-free withdrawal, as
described in Section 5 (Partial Withdrawals), and
(2) = (X-Y+Z) as defined in Section 5, times (a) divided by (b) where:
(a) = death proceeds prior to the Partial Withdrawal, less the
Surrender Charge-free portion of the Partial Withdrawal.
(b) = Policy Value prior to the Partial Withdrawal, less the Surrender
Charge-free portion of the Partial Withdrawal.
(X-Y+Z) represents the amount deducted from the Policy Value due to the
Excess Partial Withdrawal, including the effect of any Excess Interest
Adjustment and/or Surrender Charge.
C. DEATH PRIOR TO ANNUITY COMMENCEMENT DATE
Death proceeds are payable contingent upon the relationships between the owner,
annuitant, successor owner and beneficiary as outlined below. The policy must
be surrendered upon settlement or on proof of death.
<PAGE>
1. Annuitant and owner are the same.
When we have due proof that the owner died before the Annuity Commencement
Date, we will provide the death proceeds to the beneficiary.
a) Beneficiary is the deceased owner's surviving spouse. The beneficiary may
elect to continue this policy rather than receiving the death proceeds. If
the policy is continued, an amount equal to the excess, if any, of the
Guaranteed Minimum Death Benefit over the Policy Value will then be added
to the Policy Value. This amount will be added only once, at the time of
such election.
If this beneficiary elects to have the death proceeds paid, the death
proceeds must be distributed:
(1) by the end of 5 years after the date of the deceased owner's death, or
(2) payments must begin no later than one year after the deceased owner's
death and must be made for a period certain or for this beneficiary's
lifetime, so long as any period certain does not exceed this
beneficiary's life expectancy.
S885
PAGE 10
<PAGE>
SECTION 9 - CONT
b) Beneficiary is not the deceased owner's surviving spouse. The death
proceeds must be distributed as provided in I.a)(1) or I.a)(2) above.
c) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
deceased owner's death.
II. Annuitant and owner are different and the annuitant dies.
When we have due proof that the annuitant died prior to the Annuity
Commencement Date, the owner will become the new annuitant and no death
proceeds are payable. If the owner is also the deceased annuitant's
surviving spouse, an amount equal to the excess, if any, of the Guaranteed
Minimum Death Benefit over the Policy Value will then be added to the
Policy Value. This amount will be added only once.
However, the owner may elect to have the death proceeds paid upon the
annuitants death if the election is made prior to the annuitant's death and
we agree to such an election. In such case, when we have due proof that the
annuitant died prior to the Annuity Commencement Date, we will provide the
death proceeds to the beneficiary.
a) If the owner has elected to have the death proceeds paid as a lump
sum, the beneficiary must, within 60 days of our receipt of due proof of
the annuitant's death, either:
1) receive the lump sum proceeds; or
2) elect to receive annuity payments. Such payments must begin within
one year of our receipt of due proof of the annuitant's death and
must be made for a period certain or for this beneficiary's
lifetime, so long as any period certain does not exceed this
beneficiary's life expectancy.
c) Death proceeds which are not paid to or for the benefit of a natural
person must be distributed by the end of 5 years after the date of the
annuitant's death.
III. Annuitant and owner are different and the owner dies.
If the owner dies prior to the Annuity Commencement Date and before the
entire interest in the policy is distributed, the successor owner will
become the new owner. The remaining portion of any interest in the policy
must be distributed to the extent provided below in III.a), III.b), III.c),
or III.d).
a) Successor owner is the deceased owner's surviving spouse. The successor
owner may elect to continue this policy rather than receive the Adjusted
Policy Value. If the successor owner elects to receive the Adjusted
Policy Value, the Adjusted Policy Value must be distributed:
(1) by the end of 5 years after the date of the deceased owner's death,
or
(2) payments must begin no later than one year after the deceased
owner's death and must be made for a period certain or for the
successor owner's lifetime, so long as any period certain does not
exceed the successor owner's life expectancy.
b) Successor owner is not the deceased owner's surviving spouse. The
Adjusted Policy Value must be distributed as provided in III.a)(1) or
III.a)(2) above.
c) Successor owner is not a natural person. The Adjusted Policy Value must
be distributed as provided in III.a)(1) above.
<PAGE>
d) No successor owner survives the deceased owner. The deceased owner's
estate will become the new owner (or the estate may name a new owner).
The executor or Administrator must be named in a form acceptable to us.
The Adjusted Policy Value must be distributed by the end of 5 years after
the date of the deceased owner's death.
IV. More than one Owner.
If there is more than one owner, then the death of any owner will be
treated the same as the death of the owner.
D. DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
The death proceeds on or after the Annuity Commencement Date depend on the
payment option selected. If any owner dies on or after the Annuity Commencement
Date, but before the entire interest in the policy is distributed, the remaining
portion of such interest in the policy will be distributed to the beneficiary at
least as rapidly as under the method of distribution being used as of the date
of that owner's death.
E. AN OWNER IS NOT AN INDIVIDUAL
In the case of a non tax-qualified annuity, if any owner or beneficial owner, is
not an individual, then for purposes of the federal income tax mandatory
distribution provisions in subsection C or D above, (1) the primary annuitant
will be treated as the owner of the policy, and (2) if there is any change in
the primary annuitant, such a change will be treated as the death of the owner.
SB885
PAGE 11
<PAGE>
SECTION 10 - ANNUITY PAYMENTS
A. GENERAL PAYMENT PROVISIONS
Payment
If this policy is in force on the Annuity Commencement Date, we will use the
Fixed Account portion and/or the Separate Account portion of the Adjusted Policy
Value to make annuity payments to the Payee under Option 3 and/or 3-V,
respectively, with 10 years certain, or if elected, under one or more of the
other options described in this section. However, the option(s) elected must
provide for lifetime income or income for a period of at least 60 months. You
will become the annuitant at the Annuity Commencement Date. Payments will be
made at 1, 3, 6 or 12 month intervals. We reserve the right to change the
frequency of payments to avoid making payments of less than $50.00.
Before the Annuity Commencement Date, if the death proceeds become payable or if
you surrender this policy, we will pay any proceeds in one sum, or if elected,
all or part of these proceeds may be placed under one or more of the options
described in this section. If we agree, the proceeds may be placed under some
other method of payment instead.
Election of Optional Method of Payment
Before the Annuity Commencement Date you can elect or change a payment option.
You may elect, in a notice you sign which gives us the facts that we need,
annuity payments that may be either variable, fixed, or a combination of both.
If you elect a combination, you must also tell us what part of the policy
proceeds on the Annuity Commencement Date are to be applied to provide each type
of payment. (You must also specify which Subaccounts.) The amount of a combined
payment will be the sum of the variable and fixed payments. Payments under a
variable payment option will reflect the investment performance of the selected
Subaccount of the Separate Account.
Payee
Unless you specify otherwise, the payee shall be the annuitant, or the
beneficiary as defined in the Beneficiary provision.
Proof of Age
We may require proof of the age of any person who has an annuity purchased under
Options 3, 3-V, 5 and 5-V of this section before we make the first payment
Minimum Proceeds
If the proceeds are less than $2,000, we reserve the right to pay them out as a
lump sum instead of applying them to a payment option.
Premium Tax
We may be required by law to pay premium tax on the amount applied to a payment
option. If so, we will deduct the premium tax before applying the proceeds.
Supplementary Contract
Once proceeds become payable and a payment option has been selected, this policy
will terminate and we will issue a supplementary contract to reflect the terms
of the selected option. The contract will name the payees and will describe the
payment schedule.
B. FIXED ACCOUNT PAYMENTS
Guaranteed Payment Options
The fixed account payment is determined by multiplying each $ 1,000 of policy
proceeds allocated to a fixed payment option by the amounts shown on page 12 for
the option you select Options 1, 2 and 4 are based on a
<PAGE>
guaranteed interest rate of 3%. Options 3 and 5 are based on a guaranteed
interest rate of 3% and the "1983 Table a" (male, female, and unisex if required
by law) mortality table improved to the year 2000 with projection scale G. (The
"1983 Table a" mortality rates are adjusted based on improvements in mortality
since 1983 to more appropriately reflect increased longevity. This is
accomplished using a set of improvement factors referred to as projection scale
G.)
Option 1 - Interest Payments
The policy proceeds may be left with us for any term agreed to. We will pay the
interest in periodic payments or it may be left to accumulate. Withdrawal
rights will be agreed upon by you and us when the option is elected. The
interest rate we declare for this option may be different than the interest
rate(s) credited prior to the Annuity Commencement Date.
Option 2 - Income for a Specified Period
Payments are made for the fixed period elected. In the event of the death of
the person receiving payments prior to the end of the guaranteed period,
payments will be continued to that person's beneficiary or their present value
may be paid in a single sum.
Option 3 - Life Income
An election may be made between "No Period Certain", " 10 Years Certain" or
"Guaranteed Return of Policy Proceeds". In the event of the death of the person
receiving payments prior to the end of the guaranteed period, payments will be
continued to that person's beneficiary or their present value may be paid in a
single sum.
Option 4 - Income of a Specified Amount
Payments are made for any specified amount until the proceeds with interest are
exhausted. In the event of the death of the person receiving payments prior to
the time proceeds with interest are exhausted, payments will be continued to
that person's beneficiary or their present value may be paid in a single sum.
Option 5 - Joint and Survivor Annuity
Payments are made during the joint lifetime of the payee and a nominee of your
selection. Payments will be made as long as either person is living.
PAGE 11(A)
<PAGE>
SECTION 10 - CONT
Current Payment Options
The amounts shown in the tables on page 12 are the guaranteed amounts. Current
amounts may be obtained from us.
C. VARIABLE ACCOUNT PAYMENT OPTIONS
Variable Annuity Units
The policy proceeds you tell us to apply to a variable payment option will be
used to purchase variable annuity units in your chosen Subaccounts. The dollar
value of variable annuity units in your chosen Subaccounts will increase or
decrease reflecting the investment experience of your chosen Subaccounts. The
value of a variable annuity unit in a particular Subaccount on any business day
is equal to (a) multiplied by (b) multiplied by (c), where:
(a) is the variable annuity unit value for that Subaccount on the immediately
preceding business day;
(b) is the net investment factor for that Subaccount for the Valuation Period;
and
(c) is the Assumed Investment Return adjustment factor for the Valuation Period.
The Assumed Investment Return adjustment factor for the valuation period is the
product of discount factors of .99986634 per day to recognize the 5.0% effective
annual Assumed Investment Return.
The net investment factor used to calculate the value of a variable annuity unit
in each Subaccount for the Valuation Period is determined by dividing (a) by (b)
and subtracting (c) from the result, where:
(a) is the net result of:
(1) the net asset value of a fund share held in that Subaccount determined
as of the end of the current valuation period; plus
(2) the per share amount of any dividend or capital gain distributions made
by the fund for shares held in that Subaccount if the ex-dividend date
occurs during the Valuation Period; plus or minus
(3) a per share charge or credit for any taxes reserved for, which we
determine to have resulted from the investment operations of the
Subaccount.
(b) is the net asset value of a fund share held in that Subaccount determined as
of the end of the immediately preceding Valuation Period.
(c) is a factor representing the Mortality and Expense Risk Fee and
Administrative Charge. This factor is less than or equal to, on an annual
basis, the percentage shown on page 3 of the daily net asset value of a fund
share held in the Separate Account for that Subaccount.
Determination of the First Variable Payment
The amount of the first variable payment is determined by multiplying each
$1,000 of policy proceeds allocated to a variable payment option by the amounts
shown on page 13 for the variable option you select. The tables are based on a
5% effective annual Assumed Investment Return and the "1983 Table a" (male,
female, and unisex if required by law) mortality table improved to the year 2000
with projection scale G. (The " 1983 Table a" mortality rates are adjusted based
on improvements in mortality since 1983 to more appropriately reflect increased
longevity. This is accomplished using a set of improvement factors referred to
as projection scale G.)
The amount of the first payment depends upon the adjusted age of the annuitant.
The adjusted age is the annuitant's actual age on the annuitant's nearest
birthday, at the Annuity Commencement Date, adjusted as follows:
<PAGE>
<TABLE>
<CAPTION>
Annuity
Commencement Date Adjusted Age
<S> <C>
Before 2001 Actual Age
2001 - 2010 Actual Age minus 1
2011 - 2020 Actual Age minus 2
2021 - 2030 Actual Age minus 3
2031 - 2040 Actual Age minus 4
After 2040 as determined by us.
</TABLE>
Option 3-V - Life Income
An election may be made between:
1. "No Period Certain" - Payments will be made during the lifetime of the
annuitant
2. "10 Years Certain" - Payments will be made for the longer of the annuitants
lifetime or 1 0 years.
Option 5-V - Joint and Survivor Annuity
Payments are made as long as either the annuitant or the joint annuitant is
living.
Determination of Subsequent Variable Payments
The amount of each variable annuity payment after the first will increase or
decrease according to the value of the variable annuity units which reflect the
investment experience of the selected Subaccounts. Each variable annuity
payment after the first will be equal to the number of variable annuity units in
the selected Subaccounts multiplied by the variable annuity unit value on the
date the payment is made. The number of variable annuity units in each selected
Subaccount is determined by dividing the first variable annuity payment
allocated to the Subaccount by the variable annuity unit value of that
Subaccount on the Annuity Commencement Date.
PAGE 11(B)
<PAGE>
GUARANTEED FIXED ACCOUNT PAYMENT OPTIONS
The amounts shown in these tables are the guaranteed amounts for each $1,000 of
the policy proceeds. Higher current amounts may be available at the time of
settlement.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Option 2, Table 1 Option 3, Table II Option 3, Table III Option . Table IV
- - ------------------------------------------------------------------------------------------------------------------------------------
Number Amount Monthly Installment Monthly Installment For Life
of Years Payable of Monthly For Life Monthly Installment for Life Guaranteed Return Of Policy
Installment No Period Certain 10 Years Certain Proceeds
- - ------------------------------------------------------------------------------------------------------------------------------------
Age Male Female Unisex Male Female Unisex Male Female Unisex
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $3.87 $3.55 $3.71 $3.84 $3.54 $3.70 $3.73 $3.49 $3.61
- - ------------------------------------------------------------------------------------------------------------------------------------
51 3.93 3.60 3.77 3.90 3.59 3.75 3.79 3.53 3.66
- - ------------------------------------------------------------------------------------------------------------------------------------
52 4.00 3.65 3.83 3.97 3.64 3.81 3.84 3.58 3.71
- - ------------------------------------------------------------------------------------------------------------------------------------
53 4.07 3.71 3.90 4.04 3.70 3.87 3.90 3.63 3.76
- - ------------------------------------------------------------------------------------------------------------------------------------
5 $17.91 54 4.15 3.77 3.97 4.11 3.75 3.94 3.96 3.68 3.82
- - ------------------------------------------------------------------------------------------------------------------------------------
6 15.14 55 4.23 3.83 4.04 4.19 3.82 4.01 4.03 3.73 3.88
- - ------------------------------------------------------------------------------------------------------------------------------------
7 13.16 56 4.32 3.90 4.11 4.27 3.88 4.08 4.10 3.79 3.94
- - ------------------------------------------------------------------------------------------------------------------------------------
8 11.68 57 4.41 3.97 4.19 4.35 3.95 4.15 4.17 3.85 4.00
- - ------------------------------------------------------------------------------------------------------------------------------------
9 10.53 58 4.50 4.05 4.28 4.44 4.02 4.24 4.24 3.91 4.07
- - ------------------------------------------------------------------------------------------------------------------------------------
10 9.61 59 4.61 4.13 4.37 4.53 4.10 4.32 4.32 3.97 4.14
- - ------------------------------------------------------------------------------------------------------------------------------------
11 8.86 60 4.72 4.21 4.47 4.63 4.18 4.41 4.40 4.04 4.22
- - ------------------------------------------------------------------------------------------------------------------------------------
12 8.24 61 4.84 4.30 4.57 4.74 4.26 4.51 4.49 4.12 4.30
- - ------------------------------------------------------------------------------------------------------------------------------------
13 7.71 62 4.96 4.40 4.68 4.85 4.35 4.61 4.58 4.19 4.38
- - ------------------------------------------------------------------------------------------------------------------------------------
14 7.26 63 5.10 4.50 4.80 4.97 4.45 4.71 4.68 4.28 4.47
- - ------------------------------------------------------------------------------------------------------------------------------------
15 6.87 64 5.24 4.61 4.93 5.09 4.55 4.83 4.78 4.36 4.56
- - ------------------------------------------------------------------------------------------------------------------------------------
16 6.53 65 5.40 4.73 5.06 5.22 4.66 4.95 4.88 4.45 4.66
- - ------------------------------------------------------------------------------------------------------------------------------------
17 6.23 66 5.56 4.85 5.21 5.36 4.77 5.07 4.99 4.55 4.76
- - ------------------------------------------------------------------------------------------------------------------------------------
18 5.96 67 5.74 4.99 5.36 5.50 4.89 5.20 5.11 4.65 4.87
- - ------------------------------------------------------------------------------------------------------------------------------------
19 5.73 68 5.93 5.13 5.53 5.65 5.02 5.34 5.24 4.76 4.98
- - ------------------------------------------------------------------------------------------------------------------------------------
20 5.51 69 6.13 5.29 5.71 5.80 5.15 5.49 5.37 4.87 5.10
- - ------------------------------------------------------------------------------------------------------------------------------------
70 6.34 5.45 5.90 5.96 5.30 5.64 5.51 4.99 5.23
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Option 5, Table V
Monthly Installment For Joint and Full Survivor
<TABLE>
<CAPTION>
Age of Male Annuitant Age of Female Annuitant
- - --------------------------------------------------------------------------------
15 12 9 6 3 3
Years Years Years Years Years Same Years
Less Less Less Less Less As More
Than Than Than Than Than Male Than
Male Male Male Male Male Male
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $2.99 $3.05 $3.11 $3.18 $3.25 $3.32 $3.39
- - --------------------------------------------------------------------------------
55 3.11 3.19 3.27 3.35 3.44 3.53 3.63
- - --------------------------------------------------------------------------------
60 3.27 3.37 3.47 3.58 3.70 3.82 3.95
- - --------------------------------------------------------------------------------
65 3.47 3.60 3.74 3.89 4.05 4.22 4.39
- - --------------------------------------------------------------------------------
70 3.74 3.91 4.10 4.31 4.53 4.77 5.02
- - --------------------------------------------------------------------------------
</TABLE>
Monthly Installment for Unisex Joint and Full Survivor
<TABLE>
<CAPTION>
Age of First Annuitant* Age of Joint Annuitant *
- - --------------------------------------------------------------------------------
15 12 9 6 3 3
Years Years Years Years Years Same Years
Less Less Less Less Less As More
Than Than Than Than Than First Than
First First First First First First
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $3.04 $3.09 $3.15 $3.21 $3.27 $3.33 $3.39
- - --------------------------------------------------------------------------------
55 3.17 3.24 3.32 3.40 3.48 3.56 3.63
- - --------------------------------------------------------------------------------
60 3.34 3.44 3.54 3.64 3.75 3.85 3.95
- - --------------------------------------------------------------------------------
65 3.57 3.70 3.83 3.97 4.11 4.26 4.39
- - --------------------------------------------------------------------------------
70 3.87 4.04 4.22 4.42 4.62 4.82 5.01
- - --------------------------------------------------------------------------------
</TABLE>
* Age nearest birthday
- - --------------------------------------------------------------------------------
The annual, semi-annual or quarterly installments under Option 2 shall be the
monthly installment shown multiplied by 11.84, 5.96 or 2.99 respectively, and
for Options 3 and 5 the monthly installment shown multiplied by 11.80, 5.95 or
2.99 respectively.
- - --------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be
calculated on the same basis as those shown and may be obtained from the
Company.
PAGE 12
<PAGE>
VARIABLE PAYMENT OPTIONS
BASED ON ASSUMED INVESTMENT RETURN
The amounts shown in these tables are the initial payment amounts based on a
5.0% Assumed Investment Return for each $1,000 of the policy proceeds.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Option 3 - V, Table II Option 3 - V, Table III
- - --------------------------------------------------------------------------------
Monthly Installment for Life Monthly Installment For Life
No Period Certain 10 Years Certain
- - --------------------------------------------------------------------------------
Age Male Female Unisex Male Female Unisex
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $5.11 $4.81 $4.96 $5.07 $4.79 $4.94
-----------------------------------------------------------------
51 5.17 4.85 5.02 5.13 4.83 4.99
-----------------------------------------------------------------
52 5.24 4.90 5.07 5.19 4.88 5.04
-----------------------------------------------------------------
53 5.31 4.95 5.13 5.25 4.93 5.10
-----------------------------------------------------------------
54 5.38 5.01 5.20 5.32 4.98 5.16
-----------------------------------------------------------------
55 5.46 5.06 5.26 5.39 5.04 5.22
-----------------------------------------------------------------
56 5.54 5.12 5.34 5.47 5.09 5.28
-----------------------------------------------------------------
57 5.63 5.19 5.41 5.54 5.16 5.36
-----------------------------------------------------------------
58 5.72 5.26 5.49 5.63 5.22 5.43
-----------------------------------------------------------------
59 5.82 5.34 5.58 5.72 5.29 5.51
-----------------------------------------------------------------
60 5.93 5.42 5.68 5.81 5.37 5.60
-----------------------------------------------------------------
61 6.04 5.50 5.78 5.91 5.44 5.69
-----------------------------------------------------------------
62 6.17 5.60 5.89 6.02 5.53 5.78
-----------------------------------------------------------------
63 6.30 5.69 6.00 6.13 5.62 5.88
-----------------------------------------------------------------
64 6.44 5.80 6.13 6.25 5.71 5.99
-----------------------------------------------------------------
65 6.60 5.91 6.26 6.37 5.82 6.10
-----------------------------------------------------------------
66 6.76 6.04 6.40 6.50 5.92 6.22
-----------------------------------------------------------------
67 6.94 6.17 6.56 6.63 6.04 6.35
-----------------------------------------------------------------
68 7.13 6.31 6.72 6.77 6.16 6.48
-----------------------------------------------------------------
69 7.33 6.46 6.90 6.92 6.29 6.62
-----------------------------------------------------------------
70 7.55 6.63 7.09 7.07 6.43 6.76
-----------------------------------------------------------------
</TABLE>
Option 5V, Table V
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Monthly Installment For Joint and Full Survivor
- - --------------------------------------------------------------------------------
Age of Male Annuitant * Age of Female Annuitant
- - --------------------------------------------------------------------------------
15 12 9 6 3 3
Years Years Years Years Years Years
Less Less Less Less Less Same More
Than Than Than Than Than As Than
Male Male Male Male Male Male Male
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.32 $4.36 $4.41 $4.46 $4.51 $4.57 $4.62
- - --------------------------------------------------------------------------------
55 4.42 4.47 4.53 4.60 4.67 4.75 4.83
- - --------------------------------------------------------------------------------
60 4.54 4.62 4.70 4.80 4.90 5.01 5.12
- - --------------------------------------------------------------------------------
65 4.72 4.82 4.94 5.07 5.22 5.37 5.53
- - --------------------------------------------------------------------------------
70 4.95 5.10 5.27 5.46 5.67 5.89 6.13
- - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Monthly Installment for Unisex Joint and Full Survivor
- - --------------------------------------------------------------------------------
Age of First Annuitant* Age of Joint Annuitant *
- - --------------------------------------------------------------------------------
15 12 9 6 3 3
Years Years Years Years Years Years
Less Less Less Less Less Same More
Than Than Than Than Than As Than
First First First First First First First
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.40 $4.45 $4.50 $4.55 $4.61 $4.67 $4.72
- - --------------------------------------------------------------------------------
55 4.52 4.59 4.66 4.73 4.81 4.89 4.96
- - --------------------------------------------------------------------------------
60 4.69 4.78 4.87 4.97 5.08 5.19 5.29
- - --------------------------------------------------------------------------------
65 4.91 5.04 5.17 5.31 5.46 5.62 5.77
- - --------------------------------------------------------------------------------
70 5.22 5.40 5.59 5.79 6.02 6.24 6.47
- - --------------------------------------------------------------------------------
</TABLE>
* Age nearest birthday
- - --------------------------------------------------------------------------------
The annual, semi-annual or quarterly installments under Option 2 shall be the
monthly installment shown multiplied by 11.84, 5.96 or 2.99 respectively, and
for Options 3-V and 5-V the monthly installment shown multiplied by 11.80,
5.95 or 2.99 respectively.
- - --------------------------------------------------------------------------------
Dollar amounts of monthly installments not shown in the above tables will be
calculated on the same basis as those shown and may be obtained from the
Company.
PAGE 13
<PAGE>
SECTION 11 - GENERAL PROVISIONS
THE CONTRACT
The entire contract consists of this policy, endorsements, if any, and any
application signed by you.
MODIFICATION OF POLICY
No change in this policy is valid unless made in writing by us and approved by
one of our officers. No Registered Representative has authority to change or
waive any provision of your policy.
TAX QUALIFICATION
This policy is intended to qualify as an annuity contract for federal income tax
purposes. The provisions of this policy are to be interpreted to maintain such
qualification, notwithstanding any other provisions to the contrary. To
maintain such tax qualification, we reserve the right to amend this policy to
reflect any clarifications that may be needed or are appropriate to maintain
such tax qualification or to conform this policy to any applicable changes in
the tax qualification requirements. We will send you a copy in the event of any
such amendment If you refuse such an amendment it must be by giving us written
notice, and your refusal may result in adverse tax consequences.
NON-PARTICIPATING
This policy will not share in our surplus earnings.
AGE OR SEX CORRECTIONS
If the age or sex of the annuitant has been misstated, the benefits will be
those which the premiums paid would have purchased for the correct age and sex.
If required by law to ignore differences in the sex of the annuitant, the
payment options will be determined using the unisex factors in Section 10.
Any underpayment made by us will be paid with the next payment Any overpayment
made by us will be deducted from future payments. Any underpayment or
overpayment, will include interest at 5% per year, from the date of the wrong
payment to the date of the adjustment.
INCONTESTABILITY
This policy shall be incontestable from the Policy Date.
EVIDENCE OF SURVIVAL
We have the right to require satisfactory evidence that a person was alive if a
payment is based on that person being alive. No payment will be made until we
receive the evidence.
SETTLEMENT
Any payment by us under this policy is payable at our Home Office.
RIGHTS OF OWNER
The owner may, while the annuitant is living:
1. Assign this policy.
2. Surrender the policy to us.
3. Amend or modify the policy with our consent
4. Receive annuity payments or name a Payee to receive the payments.
5. Exercise, receive and enjoy every other right and benefit contained in the
policy.
The use of these rights may be subject to the consent of any assignee or
irrevocable beneficiary; and of the spouse in a community or marital property
state.
SUCCESSOR OWNER
<PAGE>
A successor owner can be named in any application, or in a notice you sign which
gives us the facts that we need. The successor owner will become the new owner
when you die, if you die before the annuitant If no successor owner survives you
and you die before the annuitant, your estate will become the new owner.
CHANGE OF OWNERSHIP
In the case of a non-tax qualified annuity, you can change the owner of this
policy, from yourself to a new owner, in a notice you sign which gives us the
facts that we need. When this change takes effect, all rights of ownership in
this policy will pass to the new owner.
A change of owner or successor owner will not be effective until it is recorded
in our records. After it has been so recorded, the change will take effect as
of the date you signed the notice. However, if the annuitant dies before the
notice has been so recorded, it will not be effective as to those proceeds we
have paid before the change was recorded in our records. We may require that
the change be endorsed in the policy. Changing the owner or naming a new
successor owner cancels any prior choice of successor owner, but does not change
the beneficiary or the annuitant
A change of ownership may result in adverse tax consequences.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date annuity payments begin. This date may
not be later than the last day of the policy month starting after the Annuitant
attains age 85, except as expressly allowed by us, but in no event later than
the last day of the policy month following the month in which the Annuitant
attains age 95. You may change the Annuity Commencement Date at any time before
the Annuity Commencement Date by giving us 30 days' written notice.
H567
PAGE 14
<PAGE>
SECTION 11 - CONT
ASSIGNMENT
(a) In the case of a non tax-qualified annuity, this policy may be assigned.
The assignment must be in writing and filed with us.
(b) We assume no responsibility for the validity of any assignment Any claim
made under an assignment shall be subject to proof of interest and the
extent of the assignment
(c) This policy may be applied for and issued to qualify as a tax-qualified
annuity under certain sections of the Internal Revenue Code. Ownership of
this policy then is restricted so that it will comply with provisions of the
Internal Revenue Code.
Assignment of this policy may result in adverse tax consequences.
BENEFICIARY
Death proceeds, when payable in accordance with Section 9, are payable to the
designated beneficiary or beneficiaries. Such beneficiary(ies) must be named in
any application and may be changed without consent (unless irrevocably
designated or required by law) by notifying us in writing on a form acceptable
to us. The change will take effect upon the date you sign it, whether or not
you are living when we receive it The notice must have been postmarked (or show
other evidence of delivery that is acceptable to us) on or before the date of
death. Your most recent change of beneficiary notice will replace any prior
beneficiary designations. No change will apply to any payment we made before
the written notice was received. If an irrevocable beneficiary dies, you may
designate a new beneficiary.
You may direct that the beneficiary shall not have the right to withdraw, assign
or commute any sum payable under an option. In the absence of such election or
direction, the beneficiary may change the manner of payment or make an election
of any option.
If any primary or contingent beneficiary dies before the annuitant, that
beneficiary's interest in this policy ends with that beneficiary's death. Only
those beneficiaries living at the time of the annuitant's death will be eligible
to receive their share of the Death Proceeds. In the event no contingent
beneficiaries have been named and all primary beneficiaries have died before the
death proceeds become payable, the owner(s) will become the beneficiary(ies)
unless elected otherwise in accordance with Section 9. If both primary and
contingent beneficiaries have been named, payment will be made to the named
primary beneficiaries living at the time the death proceeds become payable. If
there is more than one beneficiary and you failed to specify their interest,
they will share equally. Payment will be made to the named contingent
beneficiary(ies) only if all primary beneficiaries have died before the death
proceeds become payable. If any primary beneficiary is alive at the time the
death proceeds become payable, but dies before receiving their payment, their
share will be paid to their estate.
In cases where the annuitant dies and the owner (who is not the annuitant)
elected to receive the death benefit in accordance with Section 9, if the
annuitant's estate has been named as beneficiary, then payment will be made to
the owner.
PROTECTION OF PROCEEDS
Unless you so direct by filing written notice with us, no beneficiary may assign
any payments under this policy before the same are due. To the extent permitted
by law, no payments under this policy will be subject to the claims of creditors
of any beneficiary.
DEFERMENT
We will pay any partial withdrawals or surrender proceeds within 7 days after we
receive all requirements that we need. However, it may happen that the New York
Stock Exchange is closed for trading (other than the usual
<PAGE>
weekend or holiday closings), or the Securities and Exchange Commission
restricts trading or determines that an emergency exists. If so, it may not be
practical for us to determine the investment experience of the Separate Account
In that case, we may defer transfers among the Subaccounts and to the Fixed
Account, and determination or payment of partial withdrawals or surrender
proceeds.
When permitted by law, we may defer paying any partial withdrawals or surrender
proceeds from the Fixed Account for up to 6 months from the date we receive your
request If the Owner dies after the request is received, but before the request
is processed, the request will be processed before the death proceeds are
determined. Interest will be paid on any amount deferred for 30 days or more.
This rate will be 3% per year unless otherwise required by law.
REPORTS TO OWNER
We will give you an annual report at least once each Policy Year. This report
will show the number and value of the accumulation units held in each of the
Subaccounts as well as the value of the Fixed Account It will also give you any
other facts required by law or regulation.
PAGE 15
<PAGE>
PFL Life Insurance Company
Home Office located at 4333 Edgewood Road N.E., Cedar Rapids, Iowa 52499
PFL
LIFE
Flexible Premium Variable Annuity
Income Payable At Annuity Commencement Date
Benefits Based On The Performance Of The Separate Account
Are Variable And Are Not Guaranteed As To Dollar Amount
(See Sections 6 and 10C.)
Non-Participating
INDEX
<TABLE>
<CAPTION>
........................................Page
<S> <C>
Accumulation Units.........................7
Age or Sex Corrections....................14
Annuity Commencement Date.................14
Annuity Payments.......................1l(A)
Adjusted Policy Value....................2,4
Assignment................................15
Beneficiary...............................15
Cash Value.................................5
Contract..................................14
Death Proceeds............................10
Definitions................................2
Dollar Cost Averaging......................9
Evidence of Survival......................14
Excess Interest Adjustment...............5,6
Fixed Account..............................8
Guaranteed Minimum Death Benefit..........10
Guaranteed Return of Fixed Account
Premium Payments...........................6
Guaranteed Periods.........................8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
........................................Page
<S> <C>
Incontestability..........................14
Modification of Policy....................14
Nonparticipation..........................14
Owner.....................................14
Partial Withdrawals......................5,6
Payee..................................1l(A)
Payment Option Tables..................12,13
Policy Data Page...........................3
Policy Value...............................4
Premium Payments...........................4
Proof of Age...........................1l(A)
Protection of Proceeds....................15
Right to Cancel............................1
Separate Account...........................7
Service Charge.............................4
Settlement................................14
Surrender Charges..........................6
Transfers..................................9
</TABLE>
<PAGE>
EXHIBIT (4)(g)
--------------
FORM OF POLICY ENDORSEMENT
(NURSING CARE)
<PAGE>
PFL Life Insurance Company
PFL A Stock Company
LIFE Home Office located at 4333 Edgewood Road NE., Cedar Rapids, Iowa 52499
(Hereafter called the Company, we, our or us) (319) 398-8511
AMENDATORY ENDORSEMENT
The Policy to which this Amendatory Endorsement is attached is amended by the
addition of the following language:
DEFINITIONS
Custodial Care - Care designed essentially to help a person with the activities
of daily living which does not require the continuous attention of trained
medical or paramedical personnel.
Hospital - An institution which 1) is operated pursuant to the laws of the
jurisdiction in which it is located, 2) operates primarily for the care and
treatment of sick and injured persons on an inpatient basis, 3) provides 24-hour
a day nursing service by or under the supervision of registered graduate
professional nurses, 4) is supervised by a staff of one or more licensed
physicians, and 5) has medical, surgical and diagnostic facilities or access to
such facilities.
Nursing Facility - A facility in which 1) is operated pursuant to the laws of
the jurisdiction in which it is located, 2) provides Nursing Care or Custodial
Care, 3) primarily provides nursing care under the direction of a licensed
physician, registered graduate professional nurse, or licensed vocational nurse,
except when receiving custodial care, and 4), is not other than incidentally a
hospital, a home for the aged, a retirement home, a rest home, a community
living center or a place mainly for the treatment of alcoholism, mental illness
or drug abuse.
Nursing Care - Nursing care prescribed by a physician and performed or
supervised by a registered graduate nurse. Such care includes nursing and
rehabilitation services available 24 hours a day.
Physician - Doctor of Medicine or Doctor of Osteopathy who is licensed as such
and operating within the scope of the license.
Terminal Condition - A condition resulting from and accident or illness which,
as determined by a physician, has reduced life expectancy to not more than 12
months, despite appropriate medical care.
NURSING CARE AND TERMINAL CONDITION WITHDRAWAL OPTION
If the owner or owner's spouse (annuitant or annuitant's spouse if the owner is
not a natural person) has been 1) confined in a Hospital or Nursing Facility for
30 consecutive days or 2) diagnosed as having a Terminal Condition, you may
elect to withdraw all or a portion of the Policy Value without Surrender Charges
or Excess Interest Adjustments.
For Nursing Care, we must receive each withdrawal request and proof of
eligibility with each request not later than 90 days following the date that
confinement has ceased, unless it can be shown that it was not reasonably
possible to provide the notice and proof within the above time period and that
the notice and proof were given as soon as reasonably possible. However, in no
event, except the absence of legal capacity, shall the notice and proof be
provided later than one year following the date that confinement has ceased.
For a Terminal Condition, we must receive each withdrawal request and the
applicable proof of eligibility no later than one year following diagnosis of
the Terminal Condition. Proof of a Terminal Condition is required only with the
initial withdrawal request and must be furnished by the owner's or the owner's
spouse's (annuitant or annuitant's spouse if the owner is not a natural person)
physician. Proof of confinement may be a physician's statement or a statement
from a hospital or nursing facility administrator.
The minimum withdrawal under this option is $1000. The withdrawal will reduce
the Policy Value by the amount withdrawn. A partial withdrawal taken in
accordance with this provision will not affect the Excess Interest Adjustment-
free / Surrender Charge-free withdrawals, available under the Partial
Withdrawals Provision.
We may terminate the Policy and pay you the full Cash Value if the withdrawal
reduces the Cash Value below $500.
This Amendatory Endorsement takes effect and expires concurrently with the
Policy to which it is attached and is subject to all the terms and conditions of
the Policy not inconsistent herewith.
Signed for us at our home office.
/s/ Craig D. Vermie /s/ William L. Busler
SECRETARY PRESIDENT
AE 945 197
<PAGE>
EXHIBIT (8)(f)
--------------
TERMINATION NOTICE OF ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN PFL LIFE INSURANCE COMPANY
AND VANTAGE COMPUTER SYSTEMS, INC.
<PAGE>
/PFL Life Insurance Company Letterhead/
May 4, 1995
Mr. Paul D. Carter, Jr.
Senior Vice President
Vantage Computer Systems, Inc.
301 W. 11th Street
Kansas City, MO 64105
Re: Remote Service Agreement
Dear Paul:
Our Remote Services Agreement with Vantage Computer Systems, Inc. provides
that the remote services will be provided on a month to month basis and "...can
be terminated with two weeks notice".
Both our staffs have been working hard toward the successful relocation of
our variable annuity inforce block from the DST Data Center in Kansas City to
the AEGON USA Data Center in Cedar Rapids. Due to an unfortunate price problem
from the Boston Company during parallel testing, a slight delay has now caused
the target date to move to May 20, 1995.
This letter will serve as the required termination notice. In the event of
any unplanned delays, we do not anticipate slippage past the weekend of May
27th.
For billing purposes, we assume our Vantage Remote Service Charges for May,
1995, will be calculated on a daily pro-rata basis up to the actual termination
date the data center is moved.
Even though the Remote Service Agreement will terminate in May, we fully
expect Vantage's continued commitment to met it's legal obligation in completing
the transfer of policy file records acceptable to PFL Life.
We greatly appreciate your assistance in migrating our inforce block from
full service, to remote service, to PFL Life in Cedar Rapids. It has been a
learning experience for both parties, to say the least. The main goal of making
the migration as invisible to the outside world (policyholders, marketing
organizations, etc.) as possible has been successful, I believe.
<PAGE>
If I can be of any further assistance or if any questions should arise,
please let me know.
Sincerely,
/s/ Michael A. Wapp
Michael A. Wapp, CLU, ChFC, FLMI
Chief Administrative Officer
Financial Markets Division
PFL Life Insurance Company
cc: Steve Geisinger, Vantage Project Director
Steve Price, PFL Life
JoAnn Herndon, PFL Life
<PAGE>
EXHIBIT (10)(b)
---------------
OPINION AND CONSENT OF ACTUARY
------------------------------
<PAGE>
February 20, 1997
PFL Life Insurance Company
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-0001
Re: PFL Endeavor Variable Annuity Account Registration on Form N-4
SEC File No. 33-33085
Dear Sir/Madam:
With regard to the above registration statement, I have examined such documents
and made such inquiries as I have deemed necessary and appropriate, and on the
basis of such examination, have the following opinions:
Fees and charges deducted under the Endeavor Variable Annuity policies are those
deemed necessary to appropriately reflect:
(1) the expenses incurred in the acquisition and distribution of the Policies,
(2) the expenses associated with the development and servicing of the policies,
(3) the assumption of certain risks arising from the operation and management
of the Policies and that provides for a reasonable margin of profit.
Fees and charges assessed against the policy values in the Variable Account
include:
(i) Service Charge and Administrative Charge
(ii) Contingent Deferred Sales Charge (Surrender Charge)
(iii) Mortality and Expense Risk Fee (M&E)
(iv) Distribution Financing Charge
(v) Taxes (including Premium and other Taxes if applicable)
The magnitude of each of the individual charges listed above in (i) through (v)
is established in the pricing of the Endeavor Variable Annuity, to achieve a
reasonable Return on Investment (ROI), which is within the range of industry
practice with respect to comparable variable annuity products.
In the process of determining the reasonable ROI, each individual charge is also
established within the reasonable range of industry practice. For example, in
conjunction with the pricing process
<PAGE>
PFL Life Insurance Company
February 20, 1997
Page 2
the company has analyzed publicly available information pertaining to similar
industry products, taking into consideration such factors as current charge
levels, the existence of charge level guarantees, guaranteed death benefits, and
guaranteed annuity rates. The methodology and results of the comparative surveys
included in this analysis are maintained at the company's administrative
offices.
Except by coincidence, it is not expected that actual charges assessed in a
given year would exactly offset actual expenses incurred. Acquisition expenses
(as well as major product and/or systems development expenses) are incurred "up
front" and recovered, with a reasonable profit margin, through future years'
charges. In addition, the company cannot increase certain charges under the
Policies in the pricing process.
Therefore, in my opinion, the fees and charges deducted under the Policies, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the company.
I hereby consent to the use of this opinion, which is included as an Exhibit to
the Registration Statement.
/s/ Calvin R. Birkey
- - --------------------
Calvin R. Birkey, FSA, MAAA
Managing Actuary
PFL Life Insurance Company
<PAGE>
EXHIBIT (14)
------------
POWERS OF ATTORNEY
------------------
