PAINEWEBBER LIFE VARIABLE ANNUITY ACCOUNT, 497, 1996-01-25

PAINEWEBBER LIFE VARIABLE ANNUITY ACCOUNT
497, 1996-01-25

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<PAGE>

JANUARY 26, 1996
<PAGE>

MILESTONES
ISSUED BY
PAINEWEBBER LIFE INSURANCE COMPANY

ADMINISTRATIVE OFFICE: EXECUTIVE OFFICE:
601 6TH AVENUE 1200 HARBOR BOULEVARD
DES MOINES, IOWA 50309 WEEHAWKEN, NEW JERSEY 07087

IN CONNECTION WITH

PAINEWEBBER LIFE VARIABLE ANNUITY ACCOUNT

INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT

The Individual Deferred Variable Annuity Contract (the "Contract") described in
this prospectus is designed to provide retirement programs for individual
purchasers on a variable payment basis. The Contract may also be used to
provide annuity benefits to individual participants in connection with
retirement plans which qualify for special tax treatment under the Internal
Revenue Code ("Code"). Purchase Payments under the Contract are allocated to
the PaineWebber Life Variable Annuity Account (the "Separate Account"), a
segregated investment account of PaineWebber Life Insurance Company
("PaineWebber Life"). The Separate Account will invest in shares of PaineWebber
Series Trust, an open-end, management investment company registered under the
Investment Company Act of 1940 ("1940 Act"). The PaineWebber Series Trust
currently has nine available Portfolios, each having its own investment
objective and policies.

PaineWebber Life has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission ("Commission") under
the Securities Act of 1933, as amended, relating to the Contract offered by
this prospectus. This prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and exhibits thereto, and reference is hereby made to
such Registration Statement and exhibits for further information relating to
PaineWebber Life, the Separate Account, and the Contract. The Registration
Statement and the exhibits thereto may be inspected and copied; and copies can
be obtained at the public reference facilities of the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.

This prospectus and the prospectus for PaineWebber Series Trust set forth
information that a prospective investor should know before investing. A
Statement of Additional Information about the Separate Account dated the same
day as this prospectus has been filed with the Securities and Exchange
Commission and is incorporated herein by reference and is available without
charge upon written request to PaineWebber Life. The table of contents of the
Statement of Additional Information is contained at page 27 of this prospectus.

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

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS OF
PAINEWEBBER SERIES TRUST. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND
RETAINED FOR FUTURE REFERENCE.

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

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

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

Prospectus dated January 26, 1996

PWB 1
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
<S> <C>
DEFINITIONS................................................................ 3
SUMMARY.................................................................... 4
FEE TABLE AND EXAMPLE...................................................... 6
FINANCIAL INFORMATION...................................................... 8
CONDENSED FINANCIAL INFORMATION............................................ 8
SEPARATE ACCOUNT PERFORMANCE............................................... 9
THE INSURANCE COMPANY...................................................... 9
THE SEPARATE ACCOUNT....................................................... 10
CONTRACT CHARGES AND DEDUCTIONS............................................ 10
Withdrawal Charges....................................................... 10
Transfer Charges......................................................... 11
Contract Maintenance Charge.............................................. 12
Premium and Other Taxes.................................................. 12
Mortality Risk Charge.................................................... 12
Enhanced Death Benefit Charge............................................ 12
Expense Risk Charge...................................................... 12
Distribution Expense Charge.............................................. 13
THE FUND................................................................... 13
Money Market Portfolio................................................... 14
Strategic Fixed Income Portfolio......................................... 14
High Grade Fixed Income Portfolio........................................ 14
Global Income Portfolio.................................................. 14
Balanced Portfolio (formerly Asset Allocation Portfolio)................. 14
Growth and Income Portfolio.............................................. 15
Growth Portfolio......................................................... 15
Aggressive Growth Portfolio.............................................. 15
Global Growth Portfolio.................................................. 15
THE CONTRACT............................................................... 15
Purchase Payments........................................................ 15
Dollar Cost Averaging.................................................... 16
Asset Allocation Program................................................. 16
Systematic Purchase Program.............................................. 17
VARIABLE ACCOUNT ACCUMULATION PROVISIONS................................... 17
Accumulation Units....................................................... 17
Value of an Accumulation Unit............................................ 17
Net Investment Factor.................................................... 17
DEATH BENEFIT.............................................................. 18
Before the Annuity Date.................................................. 18
After the Annuity Date................................................... 19
EXERCISE OF RIGHTS UNDER THE CONTRACT...................................... 19
Beneficiary.............................................................. 19
Annuitant................................................................ 19
Ownership................................................................ 19
Collateral Assignment.................................................... 19
Transfers................................................................ 20
Withdrawals.............................................................. 20
Systematic Withdrawal Program............................................ 21
Substitution and Change.................................................. 22
ANNUITY PROVISIONS......................................................... 22
Minimum Annuity Payments................................................. 22
Annuity Date............................................................. 22
Proof of Age, Sex and Survival........................................... 22
Misstatement of Age or Sex............................................... 22
Change of Annuity Date or Annuity Option................................. 22
GENERAL ANNUITY OPTIONS.................................................... 22
Option 1--Payments for a Guaranteed Fixed Period......................... 23
Option 2--Life Annuity................................................... 23
Option 3--Life Annuity With Payments Guaranteed for 10 or 20 Years....... 23
Option 4--Joint and Survivor Annuity..................................... 23
ADDITIONAL VARIABLE ANNUITY PROVISIONS..................................... 23
First Variable Annuity Payment........................................... 23
Assumed Investment Rate.................................................. 23
Number of Annuity Units.................................................. 23
Value of Each Annuity Unit............................................... 23
Subsequent Variable Annuity Payments..................................... 24
MISCELLANEOUS PROVISIONS................................................... 24
Notices, Changes and Elections........................................... 24
Amendment of Contract.................................................... 24
Right to Examine......................................................... 24
Retirement Plan Conditions............................................... 24
Reports to Contract Owners............................................... 24
FEDERAL INCOME TAX STATUS.................................................. 25
HOW TO PURCHASE A CONTRACT................................................. 25
VOTING RIGHTS.............................................................. 26
LEGAL PROCEEDINGS.......................................................... 26
TABLE OF CONTENTS (Statement of Additional Information).................... 27
APPENDIX A (Withdrawals and Withdrawal Charges)............................ 28
</TABLE>

PWB 2
<PAGE>

DEFINITIONS

Accumulation Unit: A measuring unit used to determine the value of a Contract
Owner's interest in a Division of the Separate Account prior to the Annuity
Date.

Allocation Options: Each of the Divisions of the Separate Account.

Annuitant: The person on whose life Annuity payments under a Contract may be
based.

Annuity: A series of income payments made to a Contract Owner for a defined
period of time.

Annuity Date: The date on which the initial Annuity payment is determined or a
settlement option is effective. It must be the first day of a month.

Annuity Unit: A measuring unit used to compute the Variable Annuity payments
from a Division of the Separate Account.

Contract: The variable annuity contract described in this prospectus issued by
PaineWebber Life.

Contract Value: The sum of a Contract Owner's values in the Divisions.

Division: The Separate Account currently consists of nine available Divisions.
Each Division is invested in a specific Portfolio of PaineWebber Series Trust.

Early Withdrawal Charge Period: The period of five years following the date of
each Purchase Payment.

Fixed Annuity: A series of periodic guaranteed level payments. Such payments
are not based upon the investment experience of the Separate Account.

Fund: PaineWebber Series Trust.

Net Contract Value: The Contract Value less all applicable withdrawal and
contract maintenance charges and premium taxes due.

Net Purchase Payment: The Purchase Payment less any applicable premium taxes
that may be deducted.

PaineWebber Life: PaineWebber Life Insurance Company.

Purchase Payments: The money paid by or on behalf of a Contract Owner under a
Contract.

Qualified Plan: An employee or individual retirement plan or annuity qualified
for favorable tax treatment under the Internal Revenue Code.

Separate Account: PaineWebber Life Variable Annuity Account, a segregated
investment account established by PaineWebber Life to receive and invest
amounts allocated to provide variable accumulations and/or variable annuity
benefits under the Contract.

Valuation Day: Each day the New York Stock Exchange is open for trading and
valuations have not been suspended by the Securities and Exchange Commission.

Valuation Period: The interval from one Valuation Day to the following
Valuation Day.

Variable Annuity: A series of periodic payments which vary in amount according
to the investment experience of one or more Division(s) of the Separate
Account.

PWB 3
<PAGE>

SUMMARY

This prospectus contains information about the Contract, which provides fixed
benefits, variable benefits or a combination of both. It describes the uses and
objectives of the Contract, the costs of Contracts, and the rights and
privileges of Contract Owners. It also contains information about PaineWebber
Life, the Separate Account and its Divisions, and the Portfolios of the Fund in
which the Divisions invest. We urge you to read it carefully and retain it for
future reference.

The Contract has appropriate provisions relating to variable accumulation
values and variable and fixed annuity payments. On and after the Annuity Date,
annuity payments will be made to a designated payee, generally for the life of
an Annuitant. (Normally, the Contract Owner is both the payee and the
Annuitant.) PaineWebber Life assumes mortality and expense risks under the
Contract, for which it receives certain specified compensation.

Except to the extent limited by a retirement plan pursuant to which a Contract
is issued, the Contract Owner is entitled to exercise all rights of ownership
under the Contract. Net Purchase Payments for a Contract may be allocated to
one or more Divisions of the Separate Account. The Separate Account invests in
shares of the Fund.

The most significant difference between a Variable Annuity and a Fixed Annuity
is that under a Variable Annuity, all investment risk after the Annuity Date is
assumed by the Contract Owner or other payee; the amounts of the annuity
payments vary with the investment performance of the Divisions of the Separate
Account selected by the Contract Owner. Under a Fixed Annuity, in contrast, the
investment risk after the Annuity Date is assumed by PaineWebber Life and the
amounts of the annuity payments do not vary. Similarly, except to the extent
provided in the Enhanced Death Benefit, the Contract Owner bears all the
investment risk for Net Purchase Payments allocated to the Separate Account
prior to the Annuity Date.

Except as explained below, Net Contract Value may be withdrawn at any time
prior to the Annuity Date. Unless restricted by the Internal Revenue Code
("Code") or the particular retirement plan pursuant to which the Contract is
issued, the greater of (a) earnings under a Contract as of the first Valuation
Day of the Contract Year or (b) (after the first Contract Year except for
systematic withdrawals) an amount equal to 10% of the Contract Value as of the
first Valuation Day of the Contract Year may be withdrawn free of withdrawal
charge.

Under the Contract as described in this prospectus, an early withdrawal charge
of 5%, (also referred to as a contingent deferred sales charge) may be imposed
upon withdrawals. This charge is applied to withdrawals of Contract Values that
are attributable to Net Purchase Payments made less than five full years prior
to the date of withdrawal. For purposes of determining the applicability of
early withdrawal charges, withdrawals are deemed to be taken first from the
free withdrawal amount (which is not subject to the charge), and then from Net
Purchase Payments with no early withdrawal charge period remaining and then
from Net Purchase Payments with the longest early withdrawal charge period
remaining.

For purposes of determining federal income tax liability, withdrawals are
deemed to be on a last-in, first-out basis, which means taxable income is
withdrawn first. In addition, the Code imposes a 10% tax penalty to the income
portion of any premature distribution (e.g., withdrawal) from annuity contracts
generally. The penalty is not imposed on amounts received: (1) after the
taxpayer (payee) reaches age 59 1/2; (2) after the death of the Contract Owner;
(3) if the taxpayer is totally disabled; (4) in a series of substantially equal
periodic payments made for the life of the taxpayer or for the joint lives of
the taxpayer and his or her beneficiary; or (5) under an immediate annuity. The
tax consequences of distributions from Qualified Plans may differ from those
described above, and may vary with the type of Plan as well.

PWB 4
<PAGE>

Withdrawals from Tax-Sheltered Annuities described in section 403(b) of the
Code ("TSAs") of amounts attributable to contributions made pursuant to a
salary reduction agreement are limited (as required by the Code) to
circumstances only when the employee attains age 59 1/2, separates from
service, dies, becomes disabled (within the meaning of section 72(m)(7) of the
Code), or in the case of hardship. Withdrawals for hardship are restricted to
the portion of the Contract Value which represents contributions made by or on
behalf of the employee, which does not include any investment results. These
limitations on withdrawals from TSAs apply only to: (1) salary reduction
contributions made after December 31, 1988; (2) income attributable to such
contributions; and (3) income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect certain rollovers or
exchanges between Plans.

Contract Owners should consult their own tax counsel or other tax adviser
regarding any withdrawals or distributions.

The Contract Purchaser may return the Contract to PaineWebber Life within 10
days (or longer period if required by state law) after it is received by
delivering or mailing it to the PaineWebber Life Administrative Office at 601
6th Avenue, Des Moines, Iowa 50309. If the Contract is returned to PaineWebber
Life, it will be terminated and, unless otherwise required by state law,
PaineWebber Life will pay the Contract Owner an amount equal to his or her
Contract Value without the imposition of an early withdrawal charge. The
Contract Value may be more or less than the Purchase Payments made. Since state
laws differ as to the consequences of returning a Contract, a purchaser should
refer to the Contract which he or she receives for information about his or her
circumstances.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO
WHOM SUCH OFFER WOULD BE UNLAWFUL.

PWB 5
<PAGE>

FEE TABLE AND EXAMPLE

VARIABLE ANNUITY

<TABLE>
<CAPTION>
CONTRIBUTION PERCENTAGE
YEAR CHARGE
----------------- ----------
<S> <C> <C>
Contract Owner Transaction Expenses.............. 1--5 5%
Contingent Deferred Sales Load or Early With-
drawal Charge (as a percentage of Purchase Pay-
ments) (1)...................................... 6 and thereafter 0%
Transfer Fee (2)................................ $10
Charge for Excess Withdrawals (2)............... $25 or 2% (lesser)
Annual Contract Maintenance Charge.............. $30
</TABLE>

<TABLE>
<CAPTION>
BALANCED
HIGH DIVISION
STRATEGIC GRADE BALANCED (FORMERLY GROWTH
MONEY FIXED FIXED GLOBAL DIVISION ASSET AND AGGRESSIVE GLOBAL
MARKET INCOME INCOME INCOME (NO LONGER ALLOCATION INCOME GROWTH GROWTH GROWTH
DIVISION DIVISION DIVISION DIVISION AVAILABLE)(4) DIVISION) DIVISION DIVISION DIVISION DIVISION
-------- --------- -------- -------- ------------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Separate Account
Annual Expenses
(as a percentage
of average
account value)
Mortality and
Expense Risk
Fees.............. 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Enhanced Death
Benefit Fee(3).... 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Distribution
Expense
Charge(1)......... 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Total Separate
Account Annual
Expenses(1)(3).. 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%
Estimated
Portfolio Company
Annual Expenses
(as a percentage
of portfolio
company average
net assets).......
Management Fees... 0.50% 0.50% 0.50% 0.75% 0.75% 0.75% 0.70% 0.75% 0.80% 0.75%
Other Expenses.... 0.38% 0.39% 1.06% 0.42% 0.81% 0.28% 0.65% 0.25% 0.79% 0.73%
Total Portfolio
Company Annual
Expenses........ 0.88% 0.89% 1.56% 1.17% 1.56% 1.03% 1.35% 1.00% 1.59% 1.48%
</TABLE>
- ----
(1) PaineWebber Life also offers another form of this contract ("other
contract form") which is identical in most material respects to the form
described in this prospectus. The two forms differ, however, in that the
other contract form does not have a Contingent Deferred Sales Load but
does have (1) a higher Distribution Expense Charge (i.e., 0.40%), and (2)
a lower Enhanced Death Benefit charge (i.e., 0.12%). The total Separate
Account Annual Expenses for the other contract form equals 1.77%.
(2) The Contract provides that each transfer in excess of 12 in a policy year
is subject to a charge of $10. PaineWebber Life has waived this fee until
further notice. A withdrawal transaction charge equaling the lesser of $25
or 2% of the amount withdrawn will be imposed (in addition to any
Contingent Deferred Sales Load that may apply) on each withdrawal in
excess of two per policy year, except for withdrawals under a systematic
withdrawal program. An administrative fee of $1.50 per payment may be
charged for processing withdrawals under a systematic withdrawal program.
PaineWebber Life has waived this fee until further notice.
(3) The Enhanced Death Benefit is available to Contract Owners. The Enhanced
Death Benefit is not available after annuity payments begin. Thus, where
the Enhanced Death Benefit is not applicable (i.e., after annuity
commencement), the Total Separate Account Annual Expenses would be 1.40%.
(4) Shares of the Balanced Portfolio of the PaineWebber Series Trust are no
longer available for purchase or transfer by the Balanced Division of the
Separate Account. The rights of Contract Owners to surrender Contract
Values invested in the Portfolio and transfers out of the Portfolio into
others are not affected. PaineWebber Life, on behalf of the Separate
Account, obtained an Order from the Securities and Exchange Commission on
December 28, 1995 permitting the substitution of the shares of the Asset
Allocation Portfolio for shares of the Balanced Portfolio held by the
Balanced Division of the Separate Account. On January 26, 1996, the
substitution of shares of the Asset Allocation Portfolio for shares of the
Balanced Portfolio was effected pursuant to the above-described S.E.C.
Order. Also, the names of both the Asset Allocation Portfolio and Division
were changed to "Balanced Portfolio" and "Balanced Division",
respectively, to reflect the new Balanced Portfolio's investment policies.

PWB 6
<PAGE>

EXAMPLE

The purpose of the above tables is to assist the Contract Owner in
understanding the various costs and expenses that a Contract Owner will bear
directly or indirectly. Premium taxes, which are not shown in the table or
Example and which currently range from 0 to 3.5%, may be deducted when
incurred; however, PaineWebber Life may advance them when incurred and deduct
them subsequently. Note that the expense amounts shown above in the
hypothetical example are aggregate amounts for the total number of years
indicated. For additional information about expenses of the Contract, see
"Contract Charges and Deductions." THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.

PWB 7
<PAGE>

FINANCIAL INFORMATION

Financial statements of the Separate Account and PaineWebber Life are contained
in the Statement of Additional Information bearing the same date as this
prospectus. As is more fully discussed under the heading "The Insurance
Company", PaineWebber Life was acquired by PaineWebber Holdings, Inc. on
December 31, 1992 and, therefore, the historical operating information of the
insurance company prior to December 31, 1992 is believed not to be relevant to
PaineWebber Life's current operations. A copy of the Statement of Additional
Information may be obtained without charge by sending a written request to the
administrative offices of PaineWebber Life at 601 6th Avenue, Des Moines, Iowa
50309.

CONDENSED FINANCIAL INFORMATION

The following table sets forth condensed financial information on
accumulation units respecting Contracts issued under this prospectus through
the Separate Account, which is derived from the financial statements of the
Separate Account through December 31, 1994. This information should be read in
conjunction with the financial statements, related notes and other financial
information in the Statement of Additional Information.

<TABLE>
<CAPTION>
ACCUMULATION
ACCUMULATION UNIT VALUE NUMBER OF
UNIT VALUE AT AT UNITS AT END
YEAR ENDED 12/31 START OF YEAR(1) END OF YEAR OF YEAR
---------------- ---------------- ------------ ------------
<S> <C> <C> <C>
Money Market Division
1993............................. $10.00 $10.02 102,079
1994............................. 10.02 10.20 729,488
Strategic Fixed Income Division
1993............................. 10.00 9.95 22,452
1994............................. 9.95 9.27 365,568
High Grade Fixed Income Division
1993............................. 10.00 9.60 139,834
1994............................. 9.60 8.83 788,821
Global Income Division
1993............................. 10.00 10.32 311,716
1994............................. 10.32 9.61 1,567,185
Balanced Division
(No longer available)
1993............................. 10.00 9.88 188,770
1994............................. 9.88 9.40 1,091,778
Balanced Division
(formerly Asset Allocation
Division)
1993............................. 10.00 10.30 64,994
1994............................. 10.30 9.18 646,381
Growth and Income Division
1993............................. 10.00 10.06 61,392
1994............................. 10.06 9.29 308,172
Growth Division
1993............................. 10.00 10.03 157,644
1994............................. 10.03 8.72 1,561,429
Aggressive Growth Division
1993............................. 10.00 9.94 240,850
1994............................. 9.94 9.50 1,292,366
Global Growth Division
1993............................. 10.00 11.78 316,720
1994............................. 11.78 10.19 1,903,080
</TABLE>
- --------
(1) Registration became effective September 1, 1993.

PWB 8
<PAGE>

SEPARATE ACCOUNT PERFORMANCE

From time to time the Separate Account may advertise the individual Divisions'
"yields," "effective yields" or "average total returns." "Yield" and "effective
yield" will be used for the Money Market Division and "average total return"
and "yield" will be used for all other Divisions. Both yield and total return
performance figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of a Division refers to the income
generated by an investment in the Division over a stated period expressed as a
percentage of the investment. In the case of the Money Market Division, this
percentage (based upon a stated period of seven days' duration) is then
"annualized" by assuming the same percentage will be generated for each seven
day period during a year. The "effective yield" is calculated similarly but,
when annualized, the income earned by the investment in the Division is assumed
to be reinvested at the same rate in each successive seven day period during a
year. The "effective yield" will be slightly higher than the "yield" because of
the compounding effect of the assumed reinvestment of income. In the case of
Divisions other than the Money Market Division, "yield" is computed on the
basis of a one month stated period. Yield in those cases is annualized by
assuming monthly reinvestments at the same percentage over a six month period
and then doubling the six month percentage rate so obtained. The "average total
return" is computed by calculating the average annual compounded rate of return
over the stated period that would equate the initial amounts invested to the
ending redeemable Contract Value of the stated period.

Recurring charges or deductions from Contract Owner accounts are reflected in
the calculations of the performance figures. Non-recurring charges are not
reflected in the calculations of performance figures; if such charges were
incurred by the Contract Owner, the effect would be to lower the "yield,"
"effective yield," or "average total return." However, the "average total
return" does take into account the ending redeemable Contract Value as reduced
by any early withdrawal charges which would be applied if the Contract were
redeemed at that time.

In addition, an "average total return not including early withdrawal charges"
may be advertised. This performance figure will only be used in conjunction
with the "average total return" figure and is identical in its calculation
except any early withdrawal charges which would be applied if the Contract were
redeemed are not included.

THE INSURANCE COMPANY

PaineWebber Life is a stock life insurance company organized under the laws of
the State of California in 1956 as Pacific Fidelity Life Insurance Company.
Pacific Fidelity Life Insurance Company ("PFLIC") was acquired by PaineWebber
Life Holdings Inc. ("PWL Holdings") in a transaction effected December 31, 1992
when PWL Holdings acquired all the outstanding voting securities of PFLIC from
AUSA Life Insurance Company and changed the company's name to PaineWebber Life
Insurance Company. Prior to the acquisition by PWL Holdings, all of the
insurance in force of PFLIC was assumptively reinsured by affiliated life
insurance companies. Thus, as of the acquisition on December 31, 1992, the
total assets (and net worth) of PFLIC were $6,390,000. The executive and
administrative offices of PaineWebber Life are at 1200 Harbor Boulevard,
Weehawken, New Jersey 07087 and 601 6th Avenue, Des Moines, Iowa 50309,
respectively. PaineWebber Life is admitted to conduct life insurance business
in the District of Columbia and all states except Connecticut and New York. It
intends to market the Contract in all of the jurisdictions in which it is
admitted to conduct life insurance business. PaineWebber Life is a wholly-owned
subsidiary of PaineWebber Life Holdings Inc., which in turn is a wholly-owned
subsidiary of Paine Webber Group Inc.

PWB 9
<PAGE>

PaineWebber Life has entered into a contract with American Republic Insurance
Company of Des Moines, Iowa under which the latter has agreed to perform
certain of the administrative services relating to the Contract. Such
administrative services include: issuing Contracts, maintaining Contract Owner
records (accounting, valuation and reporting services) and issuing reports. The
address of the administrative office is 601 6th Avenue, Des Moines, Iowa 50309.

THE SEPARATE ACCOUNT

The Separate Account was established by PaineWebber Life (formerly Pacific
Fidelity Life Insurance Company) on December 31, 1992, pursuant to the
provisions of the California insurance laws, as a segregated investment account
of PaineWebber Life. The Separate Account currently has nine available
Divisions: the Money Market Division, the Strategic Fixed Income Division, the
High Grade Fixed Income Division, the Global Income Division, the Balanced
Division (formerly, the Asset Allocation Division), the Growth and Income
Division, the Growth Division, the Aggressive Growth Division and the Global
Growth Division, each of which is invested in shares of a designated Portfolio
of the Fund.

The Separate Account and each Division therein is administered as part of the
general business of PaineWebber Life; but the income, gains and losses, whether
or not realized, from assets allocated to each Division are credited to or
charged against that Division in accordance with the terms of the Contract,
without regard to other income, gains or losses of any other Division or
arising out of any other business PaineWebber Life may conduct. The assets
within each Division are not chargeable with liabilities arising out of the
business conducted by any other Division, nor will the Separate Account as a
whole be chargeable with liabilities arising out of any other business
PaineWebber Life may conduct.

All obligations arising under the Contract, however, including the guarantee to
make Annuity payments, are general obligations of PaineWebber Life; and all of
PaineWebber Life's assets are available to meet its expenses and obligations
under the Contract. While PaineWebber Life is obligated to make Variable
Annuity payments under the Contract, the amount of such payments is not
guaranteed. The Contract Value allocated to the Divisions and the amount of
Variable Annuity payments will vary with the investment experience of the
Division(s) to which the Contract Owner's Contract Value is allocated. Such
amounts will be subject to certain charges and deductions. See "Contract
Charges and Deductions."

PaineWebber Life has caused the Separate Account to be registered with the
Securities and Exchange Commission as a unit investment trust under the 1940
Act. Such registration does not involve supervision of the management of the
Separate Account or PaineWebber Life by the Securities and Exchange Commission.

CONTRACT CHARGES AND DEDUCTIONS

WITHDRAWAL CHARGES--No initial sales charge is deducted from Purchase Payments.
An early withdrawal charge (contingent deferred sales charge), however, may be
imposed in the event of withdrawal (redemption) of any portion of the Contract
Value or upon annuitization, unless prohibited by state law. The early
withdrawal charge is intended to recover PaineWebber Life's expenses relating
to the sale of the Contract, including commissions, preparation of sales
literature and other sales activities. In addition to the early withdrawal
charge, PaineWebber Life deducts a distribution expense charge daily from each
Division, at an annual rate of 0.15% of the total net assets of each Division.
See "Distribution Expense Charge." The amount of any sales charge imposed
(which includes both any early withdrawal charge and the distribution expense
charge), when added to any previous sales charge, will not exceed 9% of all
Purchase Payments.

PWB 10
<PAGE>

For partial withdrawals, the early withdrawal charge is 5% of the amount
withdrawn which represents Net Purchase Payments made five years or less prior
to the date of withdrawal. There is no early withdrawal charge on amounts
attributable to Net Purchase Payments made more than five years before the
withdrawal. For complete withdrawals the early withdrawal charge is 5% of the
amount withdrawn which is subject to an early withdrawal charge.

The charge will be deducted from the remaining Contract Value after the
Contract Owner is paid the amount requested. Thus, for example, assuming that a
Contract Owner requests a withdrawal of $500 which is subject to an early
withdrawal charge of 5%, a total of $525 would be deducted from the Contract
Value. For complete withdrawals, and in the case of partial withdrawals to the
extent that there is insufficient remaining Contract Value to cover the early
withdrawal charge, the charge will be assessed against the requested withdrawal
amount.

No early withdrawal charge will be made on any withdrawal representing (A) the
greater of: 1) excess of the Contract Value over the sum of Net Purchase
Payments made under the Contract not already withdrawn (i.e. gain on the
Contract) on the first Valuation Day of the Contract Year, or 2) (after the
first Contract year except for systematic withdrawals) total withdrawals in a
Contract year not in excess of 10% of the Contract Value as of the first
Valuation Day of the Contract Year; or (B) Net Purchase Payments with no early
withdrawal charge period remaining.

In determining if an early withdrawal charge is applicable, PaineWebber Life
assumes that all withdrawals are taken first from the free withdrawal amount
described in the previous paragraph, then from Net Purchase Payments with no
early withdrawal charge period remaining, and then from any Net Purchase
Payments with the longest Early Withdrawal Charge Period remaining.

Any early withdrawal charge will be deducted from affected Divisions in the
ratio of the Contract Value withdrawn from each to the total Contract Value
withdrawn. If the amount in any Division is not enough to cover its share of
the charges, the excess will be deducted from the remaining Divisions in the
ratio of the value in each to the total Contract Value.

Unless prohibited by state law, an annuitization of the Contract will be
subject to an Early Withdrawal Charge (i.e. on Purchase Payments annuitized
with an Early Withdrawal Charge Period remaining) unless the Annuity is paid
under an Annuity option containing life contingencies, or an Annuity option for
a fixed period of 5 or more years with no ability to commute the remaining
payments, or an Annuity Date that is the latest allowed.

A withdrawal transaction charge of the lesser of $25 or 2% of the amount
withdrawn will be imposed on each withdrawal in excess of two per Contract
Year, unless the withdrawal is made under a systematic withdrawal program. See
"Withdrawals."

PaineWebber Life reserves the right to waive any early withdrawal charge for
Contracts issued to officers, directors, agents, or full-time employees of
PaineWebber Life and their families; the investment adviser (and sub-adviser,
if applicable) of the Fund; the distributor and agents of the distributor and
third party administrators. In addition, any early withdrawal charge may be
waived by PaineWebber Life on any withdrawal where the amount withdrawn is used
to purchase another contract issued by PaineWebber Life.

PaineWebber Life also offers another form of this Contract that does not impose
a Withdrawal Charge. That contract form, however, offsets the loss of such a
charge by levying a Distribution Expense Charge of 0.40% of the total net
assets on an annual basis whereas the Contract form as described in this
prospectus assesses a 0.15% asset charge.

TRANSFER CHARGES--Prior to the Annuity Date, the Contract Owner has the right
to transfer part or all of his or her Contract Value from one Allocation Option
to one or more of the remaining Allocation

PWB 11
<PAGE>

Options subject to the rules and procedures relating to transfers. After the
Annuity Date, the Contract Owner may also transfer Annuity Unit values among
the Divisions of the Separate Account. The Contract provides that each transfer
in excess of 12 in a Contract Year is subject to a charge of $10. PaineWebber
Life has waived this fee until further notice. PaineWebber Life does not expect
to generate any profit from this charge.

Prior to the Annuity Date, any transfer charge will be deducted from the
Allocation Option(s) to which amounts are transferred in the ratio of the
Contract Value received by each to the total Contract Value transferred. After
the Annuity Date, any charge will be deducted from the next Annuity payment.

No transfer charge will be assessed on automatic transfers effected through an
approved automatic allocation service.

CONTRACT MAINTENANCE CHARGE--During the accumulation period, PaineWebber Life
will deduct a Contract Maintenance Charge of $30 from the Contract Value of
each Contract in force on the first Valuation Day on or after each Contract
anniversary. The charge will also be deducted upon full withdrawal of the
Contract Value, or commencement of Annuity payments, without proration, if such
withdrawal is made or Annuity payments commence prior to the first Valuation
Day on or after each contract anniversary. If the Contract Owner participates
in more than one Allocation Option, a share of the $30 charge will be made
against each in the ratio of Contact Value in each to the total Contract Value.
The Contract Maintenance Charge is waived if total premiums received in the
first Contract Year equal or exceed $100,000. PaineWebber Life does not
anticipate realizing a gain from this charge. Even though administrative
expenses may increase, the amount of the charge will not change.

PREMIUM AND OTHER TAXES--PaineWebber Life will deduct from the Contract Value
the amount of any premium and other similar policyholder taxes levied by any
state or governmental entity with respect to that particular Contract. Such
taxes, which currently range from 0 to 3.5%, may be deducted when incurred;
however, PaineWebber Life may advance them when incurred and deduct them
subsequently. If the Contract Owner participates in more than one Allocation
Option, any premium or other taxes will be charged against each Allocation
Option in the ratio of the Contract Owner's value in each to the total Contract
Value.

MORTALITY RISK CHARGE--Annuity payments will not be affected by the mortality
experience (death rate) of persons receiving Annuity payments or of the general
population. For assuming this mortality risk and the risk inherent in the death
benefit, PaineWebber Life deducts during the entire life of the Contract a
mortality risk charge daily from each Division at an annual rate of 0.85% of
the total net assets of each Division. If the mortality risk charge is
insufficient to cover the actual costs of the mortality risk, PaineWebber Life
will bear the loss; however, if the amount proves more than sufficient, the
excess will be a gain which PaineWebber Life may use at its discretion to pay
distribution and other expenses. The rate imposed for the mortality risk charge
may not be changed.

ENHANCED DEATH BENEFIT CHARGE--PaineWebber Life provides an Enhanced Death
Benefit that guarantees, should the Contract Owner die during the accumulation
phase of the Contract, a specified minimum death benefit. For assuming the
mortality and investment risk of the Enhanced Death Benefit, PaineWebber Life
deducts a daily risk charge from each Division at an annual rate of 0.20% of
the total net assets of each Division. The rate may not be changed by
PaineWebber Life. No charge will be deducted from assets attributable to
Contracts under which annuity payments have begun.

EXPENSE RISK CHARGE--PaineWebber Life guarantees that the $30 contract
maintenance charge will not increase, regardless of actual expenses incurred by
PaineWebber Life. For assuming this expense risk, PaineWebber Life deducts
during the entire life of the Contract an expense risk charge

PWB 12
<PAGE>

daily from each Division at an annual rate of 0.40% of the total net assets of
each Division. If the expense risk charge is insufficient to cover the actual
cost of the expense risk, PaineWebber Life will bear the loss; however, if the
charge is more than sufficient, the excess will be a gain which PaineWebber
Life may use at its discretion to pay distribution and other expenses. The rate
imposed for the expense risk charge may not be changed.

DISTRIBUTION EXPENSE CHARGE--PaineWebber Life guarantees that the early
withdrawal charge stated in the Contract will not be increased. Moreover,
PaineWebber Life cannot be assured that any withdrawal charges assessed will be
sufficient to pay the expense of distributing the Contracts. For assuming this
distribution expense, PaineWebber Life deducts a distribution expense charge
daily from each Division at an annual rate of 0.15% of the total net assets of
each Division. If the distribution expense charge and the early withdrawal
charge are insufficient to cover the actual cost of distribution, PaineWebber
Life will bear the loss; however, if the charges are more than sufficient, the
excess will be a gain which PaineWebber Life may use at its discretion. The
rate of the distribution expense charge may not be changed. The staff of the
Securities and Exchange Commission considers this type of charge to constitute
a sales charge. The amount of any sales charge imposed (which includes both the
early withdrawal charge and the distribution expense charge), when added to any
previous sales charge, will not exceed 9% of all Net Purchase Payments.

THE FUND

The Fund is organized as a Massachusetts business trust and is registered as an
open-end management investment company under the 1940 Act. The Fund currently
consists of nine available Portfolios: the Money Market Portfolio, the
Strategic Fixed Income Portfolio, the High Grade Fixed Income Portfolio, the
Global Income Portfolio, the Balanced Portfolio (formerly, the Asset Allocation
Portfolio), the Growth and Income Portfolio, the Growth Portfolio, the
Aggressive Growth Portfolio and the Global Growth Portfolio, each having its
own investment objective and policies. The Fund will offer its shares to
insurance company separate accounts only. The Fund has the right to add new
portfolios at any time.

The Global Income Portfolio is managed as a non-diversified investment company;
the other Portfolios are all managed as diversified investment companies. The
Trustees of the Fund may establish additional Portfolios at any time. Portfolio
assets are segregated and a shareholder's interest is limited to the
Portfolio(s) in which the shareholder invests. Each Portfolio has, and is
subject to, certain investment policies and restrictions which may not be
changed without a majority vote of shareholders in that Portfolio.

Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") acts as the
investment adviser and administrator for each Portfolio and the Fund, and as
such provides a continuous investment program for the Portfolios and
supervision of all matters relating to the operations of the Fund. In the case
of certain Portfolios, as is discussed below, Mitchell Hutchins has engaged
other investment managers to act as subadvisers for those Portfolios. Mitchell
Hutchins is a Delaware corporation and a wholly-owned subsidiary of PaineWebber
Incorporated, which is in turn a wholly-owned subsidiary of Paine Webber Group
Inc., a publicly held financial services holding company. As compensation for
its services, Mitchell Hutchins receives a fee from the Fund accrued daily and
paid monthly, based on the average daily net assets of each Portfolio.

Mitchell Hutchins has engaged the following investment management firms to
serve as subadvisers for the Portfolios indicated: (1) Pacific Investment
Management Company ("PIMCO") for the Strategic Fixed Income Division; (2)
Nicholas-Applegate Capital Management ("NACM") for the Aggressive Growth
Portfolio and (3) GE Investment Management Incorporated ("GEIM") for the Global
Growth Portfolio. Pursuant to subadvisory agreements entered into between
Mitchell

PWB 13
<PAGE>

Hutchins and those firms, each of the subadvisers is responsible for providing
all of the day-to-day investment advisory services for the respective
Portfolios for which it acts as subadviser. As compensation for such services,
Mitchell Hutchins pays each of them a subadvisory fee. Such fee is paid out of
Mitchell Hutchins' advisory fee for the relevant Portfolios, and not directly
by the Portfolios.

A summary of the investment objective of, and the investment advisory fees
charged to, each Portfolio of the Fund available for purchase is described
below. MORE DETAILED INFORMATION IS CONTAINED IN THE CURRENT PROSPECTUS OF THE
FUND WHICH ACCOMPANIES THIS PROSPECTUS.

The MONEY MARKET PORTFOLIO seeks maximum current income consistent with
liquidity and conservation of capital. To achieve its objective, the Portfolio
invests in high grade money market instruments and repurchase agreements
secured by such instruments. As compensation for its services, the Money Market
Portfolio pays the investment adviser a fee at the annual rate of .50% of
average daily net assets.

The STRATEGIC FIXED INCOME PORTFOLIO seeks total return consisting of capital
appreciation and income. To achieve this objective, this Portfolio invests
primarily in fixed income securities of varying maturities with a dollar-
weighted average portfolio duration between three and eight years. As
compensation for its services, the Strategic Fixed Income Portfolio pays the
investment adviser a fee at the annual rate of .50% of average daily net
assets; the investment adviser pays PIMCO a subadvisory fee at the annual rate
of .25% of average daily net assets.

The HIGH GRADE FIXED INCOME PORTFOLIO primarily seeks current income consistent
with the preservation of capital and secondarily seeks capital appreciation.
This Portfolio invests primarily in debt securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities and high quality corporate
debt securities and mortgage-backed securities of private issuers. As
compensation for its services, the High Grade Fixed Income Portfolio pays the
investment adviser a fee at the annual rate of .50% of average daily net
assets.

The GLOBAL INCOME PORTFOLIO primarily seeks high current income and secondarily
seeks capital appreciation. To achieve its objective, this Portfolio invests
principally in high quality debt securities of foreign and U.S. issuers. As
compensation for its services, the Global Income Portfolio pays the investment
adviser a fee at the annual rate of .75% of average daily net assets.

The BALANCED PORTFOLIO (formerly, the Asset Allocation Portfolio) seeks a high
total return with low volatility. To achieve its objective, the Portfolio
allocates investments among equity securities, investment grade debt securities
and money market instruments. As compensation for its services, the Balanced
Portfolio pays the investment adviser a fee at the annual rate of .75% of
average daily net assets.

On December 28, 1995, PaineWebber Life, on behalf of the Separate Account,
obtained regulatory approval in the form of an order of the Securities and
Exchange Commission permitting it to substitute the shares of the Asset
Allocation Portfolio for the shares of the Balanced Portfolio that were held by
the Balanced Division of the Separate Account. Contract Owners were notified
and given the opportunity to transfer Contract Values they have in the Balanced
Division to any of the other Portfolios of the Trust at no charge. On January
26, 1996, Contract Owners from whom no instructions were received had their
Contract Values which were invested in the Balanced Portfolio transferred to
the Portfolio formerly known as the Asset Allocation Portfolio.

Also on January 26, 1996, the name of the Asset Allocation Portfolio was
changed to the "Balanced Portfolio" to reflect more accurately the Asset
Allocation Portfolio's new investment policies and the Division name was
changed from "Asset Allocation Division" to "Balanced Division".

PWB 14
<PAGE>

The GROWTH AND INCOME PORTFOLIO seeks current income and capital growth. This
Portfolio invests primarily in dividend-paying equity securities believed by
Mitchell Hutchins to have the potential for rapid earnings growth. As
compensation for its services, the Growth and Income Portfolio pays the
investment adviser a fee at the annual rate of .70% of average daily net
assets.

The GROWTH PORTFOLIO seeks to provide long-term capital appreciation. To
achieve its objective, this Portfolio invests primarily in equity securities of
companies that, in the judgment of Mitchell Hutchins, have substantial
potential for capital growth. As compensation for its services, the Growth
Portfolio pays the investment adviser a fee at the annual rate of .75% of
average daily net assets.

The AGGRESSIVE GROWTH PORTFOLIO seeks to maximize long-term capital
appreciation. This Portfolio invests primarily in the common stocks of U.S.
companies. NACM serves as subadviser to this Portfolio. As compensation for its
services, the Aggressive Growth Portfolio pays the investment adviser a fee at
the annual rate of 0.80% of average daily net assets; the investment adviser
pays NACM a subadvisory fee at the annual rate of 0.50% of average daily net
assets.

The GLOBAL GROWTH PORTFOLIO seeks to provide long-term capital appreciation. To
achieve its objective, this Portfolio invests primarily in common stocks of
companies based in the U.S., Europe, Japan and the Pacific Basin. As
compensation for its services, the Global Growth Portfolio pays the investment
adviser a fee at the annual rate of .75% of average daily net assets. Under the
Interim Agreement, GEIM serves as subadviser to this Portfolio. As compensation
for its services, the investment adviser pays GEIM a subadvisory fee at the
annual rate of .29% of average daily net assets.

THE CONTRACT

PURCHASE PAYMENTS--The minimum initial Purchase Payment for a Contract not
issued pursuant to a Qualified Plan is $5,000. The minimum initial Purchase
Payment for a Contract issued pursuant to a Qualified Plan or other plan
qualified for special tax treatment is $1,000. The minimum amount of a
subsequent Purchase Payment is $500 ($100 for Contracts issued under Qualified
Plans). A program for automatic transfer of Purchase Payments is also
available. PaineWebber Life reserves the right to reduce the amount of the
minimum Purchase Payment for certain Qualified Plans, for certain automatic
purchase plans, and for Contracts issued to officers, directors, agents, or
full-time employees of PaineWebber Life, the investment adviser or subadviser
of the Fund, the distributor and agents of the distributor, or the third party
administrator. At the time a Purchase Payment is made, Contract Owners should
instruct PaineWebber Life how it is to be allocated among the Allocation
Options. If no allocation is indicated or allocations are not properly
completed, the Contract application is not in good order, and will be processed
as described in the paragraph immediately below. Subsequent Purchase Payments
may be made at any time without prior notice. Subsequent Purchase Payments with
no allocation specified, or improperly completed allocations, will be allocated
based on the last allocation made for either a Purchase Payment or a transfer,
or as previously specified in a request to change allocations for future
purchase payments. Requests to change such allocations may be made in writing
or, unless the Contract Owner has requested in writing to the contrary, by
telephone or facsimile instruction, under safeguards and conditions described
in "Transfers", Page 20. The Contract will not be in default if no subsequent
Purchase Payments are made. PaineWebber Life reserves the right to reject any
application or Purchase Payment. In addition, PaineWebber Life will not accept
a Purchase Payment which would cause total Purchase Payments to exceed
$1,500,000 without prior approval by an appropriate officer of PaineWebber
Life.

That part of an initial Purchase Payment to be allocated to a Division will be
applied to purchase Accumulation Units at a price which is next computed no
later than two business days after a properly completed application is received
by PaineWebber Life. In the event that an application fails

PWB 15
<PAGE>

to recite all of the necessary information, PaineWebber Life will promptly
request that the Contract Owner furnish further instructions and will hold the
entire initial Purchase Payment in a suspense account, without interest, for a
period of five business days pending receipt of such information. If the
necessary information is not received within five business days, PaineWebber
Life will return the entire Purchase Payment to the prospective Contract Owner,
unless the prospective Contract Owner, after being informed of the reasons for
the delay, specifically consents to PaineWebber Life retaining the initial
Purchase Payment until the application is made complete.

DOLLAR COST AVERAGING--Contract Owners who wish their Purchase Payment(s) to be
applied to purchase Accumulation Units of one or more Divisions over a period
of time will be able to do so through a dollar cost averaging ("DCA") program.
Under a DCA program, a Contract Owner may authorize the automatic transfer of
Contract Values from either the Money Market Division, the Government Division,
or the Fixed Income Division of a fixed dollar amount (until the outgoing
Division is either exhausted or reaches a minimum level set by the Contract
Owner) into one or more of the remaining Divisions of his or her choice.
Transfers will be allocated according to the most recent allocations on record
with PaineWebber Life. Any request to transfer into the outgoing Division will
instead be made proportionately to other Divisions receiving the transfer.
Under the DCA program, the minimum amount that may be transferred is $100.
Accumulation Units acquired by a DCA program will be purchased at their unit
values determined on the dates of the transfers. The intervals between transfer
purchases may be, at the option of the Contract Owner, either monthly,
quarterly, semi-annually or annually. Transfers will occur on the same day of
the month as the Contract issue date. If the resulting day is not a Valuation
Day, then the transfer will be made on the next Valuation Day.

The theory of dollar cost averaging is that greater numbers of units are
purchased at times when the unit prices are relatively low then are purchased
when the prices are higher. This has the effect of reducing the aggregate
average cost per unit to less than the average of the unit prices on the same
purchase dates. However, participation in a DCA program does not assure the
Contract Owner of a greater profit, or any profit, for his or her purchases
under the program; nor will it prevent or necessarily alleviate losses in a
declining market.

Application to participate in a DCA program must be in writing on the form
supplied by PaineWebber Life for such purpose. Participation in the program
will be effective after PaineWebber Life has received and processed the
application.

ASSET ALLOCATION PROGRAM--Contract Owners who wish to have their Contract
Values automatically invested in accordance with a pre-selected asset
investment program may elect to enroll in the Milestones Asset Allocation
Program ("MAAP"). MAAP allows Contract Owners to have their assets reallocated
monthly by PaineWebber Life between the Growth Portfolio, the Fixed Portfolio
and the Money Market Portfolio. MAAP provides three customized programs from
which a Contract Owner may select the one that best meets his or her individual
investment goals. There are three allocation programs available: aggressive,
moderate and conservative.

MAAP is based on the PaineWebber Asset Allocation Model that was designed by
Edward Kerschner, Chairman of PaineWebber's Investment Policy Committee and
Chief Investment Officer for PaineWebber. PaineWebber Life will monitor whether
MAAP presents a risk to orderly portfolio management. If PaineWebber Life
determines that such a risk is presented, it will consult with the adviser to
the Portfolios involved.

The Model for each program is reviewed to see whether changes in economic and
market conditions dictate a change in the program's asset mix. Such changes, if
any, will be made monthly and will be

PWB 16
<PAGE>

subject to certain minimum and maximum parameters. PWL is provided a copy of
the Asset Allocation Model on a monthly basis. The parameters of the three
programs are as follows:

<TABLE>
<CAPTION>
PORTFOLIOS AGGRESSIVE MODERATE CONSERVATIVE
---------- ---------- --------- ------------
<S> <C> <C> <C>
Growth.................................. 60% - 90% 40% - 70% 20% - 50%
Fixed................................... 10% - 40% 10% - 50% 40% - 70%
Money Market............................ 0% - 30% 5% - 40% 10% - 40%
</TABLE>

Once the Contract Owner selects the program with which he or she is
comfortable, MAAP then automatically adjusts the invested Contract Values each
month to comply with the asset percentage mix called for by the selected
program.

Participation in MAAP requires the specific request of a Contract Owner before
it can be initiated and may be terminated at any time. Contract Owners are not
assessed a charge for this service.

SYSTEMATIC PURCHASE PROGRAM--A Contract Owner may also arrange to have a
specific dollar amount automatically withdrawn from his or her bank account or
PaineWebber RMA at periodic intervals (monthly or quarterly) and transferred to
PaineWebber Life as Purchase Payments. The bank must be a member of the
Automated Clearing House. The payments must be at least $100 each. Payments
will be allocated among the Allocation Options in accordance with the most
recent allocation on record. The Contract Owner may terminate his or her
participation in this program at any time.

VARIABLE ACCOUNT ACCUMULATION PROVISIONS

ACCUMULATION UNITS--The number of Accumulation Units purchased for a Contract
Owner with respect to his or her initial Purchase Payment is determined by
dividing the amount credited to each Division by the Accumulation Unit value
for that Division next computed following acceptance of the application
(generally the next business day after receipt of the Purchase Payment by
PaineWebber Life). The number of Accumulation Units purchased with respect to
subsequent Purchase Payments is determined by dividing the amount credited to
each Division by the applicable Accumulation Unit value for the Valuation
Period next determined following receipt of the Purchase Payment by PaineWebber
Life. Any transactions involving the purchase, withdrawal or transfer of
amounts received after 3:00 p.m. central time will be effected on the following
business day. The Accumulation Unit value of each Division varies in accordance
with the investment experience of that Division.

VALUE OF AN ACCUMULATION UNIT--The value of an Accumulation Unit of each
Division was set at $10 when the Division was established. The value may
increase or decrease from one Valuation Period to the next. The value of an
Accumulation Unit is determined by multiplying the value of an Accumulation
Unit for the last Valuation Period by the net investment factor for that
Division for the current Valuation Period. The Contract Owners bear the
investment risk that the aggregate value of the amounts allocated to the
Divisions of the Separate Account may at any time be less than, equal to, or
more than the amounts initially invested in those Divisions.

NET INVESTMENT FACTOR--This is an index used to measure the investment
performance of a Division of the Separate Account from one Valuation Period to
the next. For any Division, the net investment factor for a Valuation Period is
found by dividing (A) by (B) and subtracting (C) where: (A) is the net asset
value per share of the Portfolio held in the Division, as of the end of the
Valuation Period, plus the per share amount of any dividend, capital gain or
other distributions made by the Portfolio in the Valuation Period; (B) is the
net asset value per share of the Portfolio held in the Division as of the end
of the immediately preceding Valuation Period; and (C) is a factor representing
the sum of the

PWB 17
<PAGE>

daily risk and expense charges attributable to the particular Contract. During
the Annuity Period, the factor will not reflect a deduction at an annual basis
of 0.20% for this Enhanced Death Benefit. See "Contract Charges and
Deductions." The net investment factor may be adjusted to make provision for
any income taxes required to be paid by the Separate Account.

DEATH BENEFIT

BEFORE THE ANNUITY DATE--If the Owner dies prior to the Annuity Date,
PaineWebber Life will pay a Death Benefit to the beneficiary. The Death Benefit
may be paid in a lump sum distribution or in the form of an annuity, as
described below. If there are Joint Spousal Owners, two Death Benefit Options
are available: the Single Life Death Benefit Option and the Joint Life Death
Benefit Option. Under the Single Life Death Benefit Option, the Death Benefit
is paid upon the death of the designated Owner. Under the Joint Life Death
Benefit Option, the Enhanced Death Benefit is paid upon the death of the last
Owner.

The Enhanced Death Benefit equals the greatest of (A), (B), or (C) as follows:

(A) The Contract Value; or

(B) The greatest of the Contract Values on the first Valuation Day of each
5 year period less any partial withdrawals, early withdrawal charges,
transfer charges, and withdrawal transaction charges, since the
beginning of the 5 year period. The first 5 year period begins on the
5th Contract Anniversary; or

(C) The sum of all amounts invested in the eligible Separate Account
Divisions, accumulated at interest, less any partial withdrawals, early
withdrawal charges, transfer charges, and withdrawal transaction
charges accumulated at interest.

For Single Life Death Benefit Options, the interest is at an effective
annual rate of 6% for Divisions other than the Money Market Division and
at a rate equal to the Net Investment Factor for each Valuation Period
for the Money Market Division.

If this Contract has Joint Spousal Owners and a Joint Life Death Benefit
Option has been selected, the interest accumulates at an effective annual
rate of 8% for Divisions other than the Money Market Division and at a
rate equal to the Net Investment Factor for each Valuation Period for the
Money Market Division.

Interest accrual terminates on the Owner's 75th birthday. If Joint
Spousal Owners exist and the Joint Life Death Benefit Option has been
selected, then interest accrual ends on the youngest Owner's 75th
birthday.

The maximum death benefit under this paragraph (C) is the sum of all Net
Purchase Payments, each accumulated at the interest rate for Divisions
other than the Money Market Division to a maximum of two times each Net
Purchase Payment, less any partial withdrawals, early withdrawal charges,
transfer charges, and withdrawal transaction charges, each accumulated at
the interest rate for Divisions other than the Money Market Division to
two times each withdrawal or deducted charge.

The Death Benefit is determined as of the Valuation Day on which PaineWebber
Life receives due proof of the Owner's death and an election of the method of
payment from the Beneficiary at its Administrative Office at 601 Sixth Avenue,
Des Moines, Iowa 50309.

If the Owner is not a natural person, the Annuitant will be treated as the
Owner for the purposes of determining if a Death Benefit is payable.

If the Contract Owner (or Annuitant if the Contract Owner is not a natural
person) dies before the Annuity Date, the entire Contract Value must be
distributed within five years. An exception to this

PWB 18
<PAGE>

requirement exists for any portion of the Contract Owner's interest payable to
(or for the benefit of) a designated beneficiary provided (a) such portion will
be distributed as an Annuity for the life or a period not exceeding the life
expectancy of the designated beneficiary and (b) such Annuity payments begin
not later than one year after the Annuitant's or Contract Owner's death. These
rules vary somewhat in the case of Qualified Plans. For example, in certain
cases, if the designated beneficiary is the Annuitant's surviving spouse, the
Annuity payments must commence no later than December 31 of the calendar year
in which the Annuitant would have become age 70 1/2.

Where permitted by law and any retirement plan involved, if the designated
beneficiary is the surviving spouse he or she will be treated as the new
Contract Owner and Annuitant unless he or she elects otherwise. If Joint
Spousal Owners exist and the Joint Life Death Benefit Option was chosen, the
surviving spouse will be treated as the new Contract Owner upon the death of
the first spouse.

AFTER THE ANNUITY DATE--If the Annuitant (or a Contract Owner who is not the
Annuitant) dies on or after the Annuity Date, the remaining portion (if any) of
his or her interest in the Contract will be distributed to the beneficiary at
least as rapidly as under the Annuity option being used at the date of the
Owner's death. A beneficiary receiving payments under a Variable Annuity option
after the death of an Annuitant may elect at any time to receive the present
value of the remaining number (if any) of guaranteed payments in a single
payment, calculated using the assumed investment rate. If no designated
beneficiary survives the Annuitant, the present value of any remaining
guaranteed payments on the date of death of the Annuitant, calculated using the
assumed investment rate, may be paid in one sum to the Contract Owner or his or
her estate unless other provisions have been made and approved by PaineWebber
Life. This value is calculated as of the date of payment following receipt of
due proof of death by PaineWebber Life. If the Owner dies on or after the
annuity date, the remaining portion (if any) of his or her interest in the
Contract will be distributed to the beneficiary at least as rapidly as under
the Annuity Option in use as of the Owner's death. If no designated beneficiary
survives the Owner, any remaining interest will be paid to the Owner's estate.

EXERCISE OF RIGHTS UNDER THE CONTRACT

BENEFICIARY--The beneficiary is named in the application. Unless the
beneficiary has been irrevocably designated, the beneficiary may be changed if
a written request of the Contract Owner is received by PaineWebber Life. The
estate or heirs of any beneficiary who dies before the Annuitant have no rights
under the Contract. If no beneficiary survives the Annuitant, payment will be
made to the Contract Owner or his or her estate.

ANNUITANT--The Annuitant is the person designated in the Application, upon
whose life annuity payments under the Contract will depend. Normally, the
Annuitant is also the Contract Owner.

OWNERSHIP--The Contract Owner is the person entitled to exercise all rights
under the Contract. Ownership of the Contract may be transferred to a new
Contract Owner with PaineWebber Life's approval. Such a transfer of ownership
does not affect a beneficiary designation. The Contract Owner should consult a
competent tax adviser prior to making any such designations or transfers.

COLLATERAL ASSIGNMENT--Unless the Contract is issued in connection with a
Qualified Plan or a non-Qualified Plan subject to Title 1 of the Employee
Retirement Income Security Act of 1974 ("ERISA"), a Contract Owner may assign
the Contract as security for an obligation. No assignment of any interest under
the Contract is binding upon PaineWebber Life until a written assignment is
filed with PaineWebber Life, and PaineWebber Life assumes no obligation with
respect to the effect or validity of any such assignment. In the event that the
Contract is issued pursuant to a Qualified Plan or a plan covered by Title 1 of
ERISA, it may not be assigned, pledged or transferred except as allowed

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<PAGE>

by law. The Contract Owner should consult a competent tax adviser prior to
assigning his or her Contract.

TRANSFERS--Prior to and after the Annuity Date, the value of any Units
(Accumulation or Annuity Units, respectively) may be transferred among the
Divisions. Transfers may be effected by writing to PaineWebber Life. The
Contract Owner may also avail himself or herself of telephone or facsimile
transfer privileges, unless he or she has made an election in writing not to
have such services made available. PaineWebber Life will employ reasonable
procedures to confirm that instructions communicated by telephone or facsimile
are genuine (including tape recording of telephone communications and requiring
that proper identification--the Contract Owner's tax I.D. number/Social
Security number and Contract number--be provided). If PaineWebber Life fails to
employ reasonable procedures to confirm that transfer instructions communicated
by telephone or facsimile are genuine, it may be liable for any losses due to
unauthorized or fraudulent transfer instructions. PaineWebber Life reserves the
right to modify or discontinue the telephone/facsimile services at any time.

Transfers among the Divisions will be effected at the unit value next computed
after the transfer request is received by PaineWebber Life. Transfer
instructions must identify the Divisions affected and the amount to be
transferred. If the request is not received in proper form, the Contract Owner
will be contacted. If the amount in any Allocation Option is not enough to
cover the requested transfer, the transfer will be executed up to the amount
available. Under certain circumstances, transfers may be subject to a transfer
charge. See "Transfer Charges."

WITHDRAWALS--A Contract Owner may effect a withdrawal by submitting a request
to PaineWebber Life. The request must be submitted in writing and must be
signed by the Contract Owner(s). The signature should be exactly the same form
as the name reflected on the Contract Owner's account. The request should
include the Contract Owner's Contract number, and should identify the
Division(s) affected and the amounts to be withdrawn from each. If the request
is not received in proper form, the Contract Owner will be contacted. The
request must be accompanied by the Contract where a complete withdrawal is
requested. To comply with Code requirements, requests for withdrawals from TSAs
and Individual Retirement Plans ("IRPs") must be in an acceptable form which
indicates the reason for withdrawal. (See tax information later in this
section.)

The Contract Owner may make a partial or complete withdrawal (redemption) of
the Net Contract Value at any time before Annuity payments begin and the death
of the Owner. Upon request for a complete withdrawal, the Contract Owner will
receive his or her Net Contract Value as of the Valuation Day a written request
for such withdrawal is received by PaineWebber Life. Partial withdrawals are
subject to a $500 minimum (unless made pursuant to a systematic withdrawal
program, below). No partial withdrawal may be effected if it would cause the
remaining Contract Value to be less than the greater of $1,000 or the early
withdrawal charge on any Net Purchase Payments with an early withdrawal charge
period remaining plus the amount of any unassessed premium taxes. In the event
a partial withdrawal is requested that would cause the Contract Value to fall
below the minimum, such a request will be treated as a request for a full
withdrawal.

Unless otherwise directed by the Contract Owner, a request for partial
withdrawal will be treated as a request for a withdrawal from each Allocation
Option in proportion to the respective Contract Values allocated thereto.

Under certain circumstances, withdrawals are subject to an early withdrawal
charge, as well as a contract maintenance charge. In addition, unless the
withdrawal is made pursuant to a systematic withdrawal program, described
below, the withdrawal may be subject to a withdrawal transaction charge equal
to the lesser of $25 or 2% of the amount withdrawn. See "Withdrawal Charges"
and "Contract Maintenance Charge."

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<PAGE>

A withdrawal may result in adverse federal income tax consequences and is
restricted in regard to TSA Plan contracts. See "Federal Income Tax Status."

The Code requires the Contract to impose restrictions on withdrawals of
Contract Value from TSAs. Section 403(b)(11) of the Code requires that for such
annuity contracts to receive tax-deferred treatment, they must provide that:

Withdrawals attributable to Purchase Payments made (after December 31, 1988
and any gain thereon) pursuant to a salary reduction agreement may be paid
ONLY:

(1) when the employee attains age 59 1/2, separates from service, dies, or
becomes disabled (within the meaning of section 72(m)(7)); or

(2) in the case of hardship. In hardship cases, only the withdrawal of
Purchase Payments is permitted; withdrawal of any income attributable
to these Purchase Payments is prohibited.

Payment of withdrawals from the Divisions will normally be made within seven
days of receipt by PaineWebber Life of a proper request. PaineWebber Life
reserves the right, however, to defer any withdrawal payment or transfer of
values if (a) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); (b) an emergency exists making disposal of the
Divisions' securities or the valuation of net assets of the Divisions not
reasonably practicable; (c) the Securities and Exchange Commission has by order
permitted suspension of redemptions for the protection of security holders; or
(d) at any other time when payment may be suspended under applicable law.

The Commission by rules and regulations determines the conditions under which
trading of securities shall be deemed to be restricted and the conditions under
which an emergency shall be deemed to exist.

SYSTEMATIC WITHDRAWAL PROGRAM--A systematic withdrawal program allows Contract
Owners to initiate a procedure for automatically withdrawing a portion of their
investment at monthly, quarterly, semi-annual or annual intervals, subject to
certain limitations. The Contract Owner can specify that the withdrawal either
be mailed to an address he or she specifies or electronically deposited into an
account of his or her choice. The Contract Owner selects the day of the month
that the electronic deposit of funds is to be made to that account. Currently,
the Contract Owner may choose either the 15th of the month or the last day of
the month. If the specified day is not a business day, the deposit will occur
on the prior business day. Withdrawals that are mailed may take additional time
to be received.

Unless a specific allocation request is made, withdrawals under the systematic
withdrawal program will be allocated to all Divisions in proportion to the
value in each Division. Under such a program, the minimum payout amount is $100
per withdrawal. Payments will be level within a Contract year. A Contract Owner
electing to participate in a systematic withdrawal program must specify (within
the foregoing limits) a fixed dollar amount to be received each period.
Applications for participating in a systematic withdrawal program must be in
writing on the form supplied by PaineWebber Life; participation under the
program will commence after PaineWebber Life has received and processed the
application. The Contract Owner may terminate his or her participation in the
systematic withdrawal program at any time. The termination will take effect
after PaineWebber Life has received and processed the request. Withdrawals made
under a systematic withdrawal program will not be subject to the normal
withdrawal transaction charge applied to withdrawals in excess of two per year;
however, such withdrawals will be subject to any applicable early withdrawal
charge (see "Contract Charges and Deductions"--"Withdrawal Charges").
PaineWebber Life may deduct an administrative fee of $1.50 for each withdrawal
pursuant to this program. PaineWebber Life, however, has waived this fee until
further notice. Like other withdrawals, withdrawals under a systematic
withdrawal program may have adverse tax consequences, including a 10 percent
tax penalty on premature withdrawals. See "Federal Income Tax Status".

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<PAGE>

SUBSTITUTION AND CHANGE--Although there is no present intent to do so,
PaineWebber Life reserves the right to offer Contract Owners, at some future
date and in accordance with the requirements of the 1940 Act, the option to
direct that their Purchase Payments be allocated to an investment company other
than the Fund or to newly created Portfolios of the Fund. If shares of the Fund
or a Portfolio are not available for purchase by the Separate Account, or if in
the judgment of PaineWebber Life, further investment in such shares is no
longer appropriate in view of the purposes of the Separate Account, then (i)
shares of another registered open-end management investment company ("mutual
fund") or another Portfolio may be substituted for Fund or Portfolio shares
held in the Separate Account and/or (ii) payments received after a date
specified by PaineWebber Life may be applied to the purchase of shares of
another mutual fund or another Portfolio in lieu of Fund or Portfolio shares.
Approval of the Securities and Exchange Commission must be obtained if shares
of another mutual fund or if shares of another Portfolio of the Fund are to be
substituted for Portfolio shares held in the Separate Account. It is intended
that any substitution would be of shares of Portfolios with investment
objectives similar to those of the Portfolios of the Fund.

ANNUITY PROVISIONS

MINIMUM ANNUITY PAYMENTS--Annuity payments generally will be made monthly, but
if any payment would be less than $100 PaineWebber Life may change the
frequency so payments are at least $100 each. If the amount to be applied at
the Annuity Date is less than $5,000, PaineWebber Life may elect to pay such
amounts in a lump sum where permitted by state regulation.

ANNUITY DATE--The Contract Owner selects the Annuity Date in the application.
It must be on the first day of a month, and it may not be later than the first
day of the next month after the Annuitant's 85th birthday. If no Annuity Date
is elected, the Annuity Date will be the first day of the month after the
Annuitant attains age 85. Provisions of the Code may require that Contracts
issued pursuant to qualified retirement plans have an earlier Annuity Date.

PROOF OF AGE, SEX AND SURVIVAL--PaineWebber Life may require proof of age, sex
or survival of any person upon whose life continuation of Annuity payments
depends.

MISSTATEMENT OF AGE OR SEX--If the age or sex of the Annuitant has been
misstated, any Annuity payable shall be that which the amount applied would
have purchased at the correct age and sex. Overpayments made by PaineWebber
Life because of such misstatement, with interest at 6% per annum, will be
charged against benefits payable subsequent to adjustment. The dollar amount of
any underpayment made by PaineWebber Life as a result of a misstatement will be
paid in full with the next payment due under the Contract, with interest at 6%
per annum.

CHANGE OF ANNUITY DATE OR ANNUITY OPTION--The Contract Owner may change the
Annuity Date and/or the Annuity option by written notice received by
PaineWebber Life at least 30 days prior to the Annuity Date previously selected
and at least 30 days prior to the Annuity Date being requested.

GENERAL ANNUITY OPTIONS

Subject to the provisions of the Code and of the retirement plan under which a
Contract is purchased, the Contract Owner may elect any one of the Annuity
options listed below. Other Annuity options may be selected by mutual agreement
between the Contract Owner and PaineWebber Life. If no Annuity option election
has been made by the Annuity Date, Variable Annuity payments will automatically
be made under Option 3, an Annuity payable for the life of the Annuitant with
ten years' payments certain. Contract Values in the Separate Account will be
applied to a Variable Annuity unless the Owner elects otherwise in writing at
least 30 days before the Annuity Date.

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<PAGE>

Changes in the optional form of Annuity payment may be made at any time up to
30 days prior to the date on which Annuity payments are to begin. All options
are available as fixed or variable annuities. The Annuity payments described
below are determined on the basis of (i) the mortality table specified in the
Contract, (ii) the age and, where permitted, the sex of the Annuitant, (iii)
the type of Annuity payment option(s) selected, and (iv) the assumed investment
rate.

OPTION 1--PAYMENTS FOR A GUARANTEED FIXED PERIOD: An Annuity payable for a
specified period of time. The period must be at least five years. If this
option is taken as a Variable Annuity, the Contract Owner may at any time
choose to receive the present value of the remaining payments in a lump sum
computed at the assumed investment rate. Because a Variable Annuity under this
option is not based on a life contingency, the Contract Owner will receive no
benefit from the deduction of the mortality risk charge from the Separate
Account.

OPTION 2--LIFE ANNUITY: Payments will be made for the life of the Annuitant.
Payments will cease with the last payment due prior to the Annuitant's death.

OPTION 3--LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS: An Annuity
payable during the lifetime of the Annuitant (no matter how long he or she
might live) with a guaranteed minimum number of payments. If the Annuitant dies
before the guaranteed number of payments have been made, the remaining payments
for the guaranteed period chosen (10 or 20 years) will continue to the
designated beneficiary.

OPTION 4--JOINT AND SURVIVOR ANNUITY: An Annuity will be paid during the
lifetimes of the Annuitant and the Annuitant's spouse. The amount of such
payments will not change by reason of the first death. Payments will end with
the last payment due prior to the second death.

ADDITIONAL VARIABLE ANNUITY PROVISIONS

FIRST VARIABLE ANNUITY PAYMENT--The dollar amount of the first monthly Annuity
payment will be determined by applying the amount to be annuitized to the
Annuity table applicable to the Annuity option chosen. If more than one
Division has been selected, the value of the interest in each Division is
applied separately to the Annuity table to determine the amount of the first
Annuity payment attributable to that Division. The Annuity tables are in the
Contract and are based on the 1983 Table "a" for Individual Annuity Valuation
with interest at 4% for the life of the Contract.

ASSUMED INVESTMENT RATE--A 4% assumed investment rate is built into the Annuity
tables in the Contract. A higher assumption would mean a higher first Annuity
payment but more slowly rising (or more rapidly falling) subsequent payments. A
lower assumption would have the opposite effect. If the actual net investment
rate is 4% annually, Annuity payments will be level.

NUMBER OF ANNUITY UNITS--The number of Annuity Units for each applicable
Division is the amount of the first monthly Variable Annuity payment
attributable to that Division divided by the value of an Annuity Unit for that
Division as of the first Valuation Day on or after the Annuity Date. The number
of Annuity Units used in computing Annuity payments attributable to a Division
will remain constant during the Annuity period unless a transfer is made.

VALUE OF EACH ANNUITY UNIT--The value of an Annuity Unit of each Division was
set at $10 when the Division was established. The value may increase or
decrease from one Valuation Period to the next. For any Valuation Period, the
value of an Annuity Unit of a particular Division is the value of that Annuity
Unit during the last Valuation Period, multiplied by the net investment factor
for that Division for the current Valuation Period. The result is then
multiplied by a factor that offsets the effect of the assumed investment rate.

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<PAGE>

SUBSEQUENT VARIABLE ANNUITY PAYMENTS--Subsequent monthly Variable Annuity
payments will vary in amount according to the investment performance of the
applicable Division(s). The part of each subsequent Variable Annuity payment
attributable to a Division is the number of Annuity Units for that Division as
determined in the first Annuity payment (adjusted for transfers, if any)
multiplied by the value of an Annuity Unit for that Division for the Valuation
Period immediately preceding the Valuation Period in which payment is made. The
amount of each subsequent Annuity payment will not be affected by variations in
mortality experience.

MISCELLANEOUS PROVISIONS

NOTICES, CHANGES AND ELECTIONS--All notices, changes and elections under the
Contract must be in writing, signed by the proper party and received by the
Administrative Office of PaineWebber Life to be effective, except that account
transfers and changes in allocation for future Purchase Payments may be made by
telephone or facsimile unless the Contract Owner has elected in writing not to
have such services made available. Instructions given by telephone and
facsimile are provided under safeguards and conditions described in
"Transfers," page 20. All such notices and elections should include the
Allocation Options involved, the Contract Owner's Contract number, and any
other information necessary to process the request. If acceptable to
PaineWebber Life, notices or elections relating to beneficiaries and ownership
will take effect as of the date signed unless PaineWebber Life has already
acted in reliance on the prior status. PaineWebber Life is not responsible for
the validity of such notices and elections.

AMENDMENT OF CONTRACT--A condition or provision of the Contract may be waived
or modified only in writing signed by the President, Vice President or
Secretary of PaineWebber Life.

The Contract may be amended at any time as required to make it conform with any
law or regulation issued by any government agency to which the Contract is
subject.

RIGHT TO EXAMINE--Within the number of days of the receipt of a Contract as
prescribed by state law, the Contract may be returned to PaineWebber Life for
cancellation. Unless state law requires otherwise, PaineWebber Life will refund
the Contract Value computed at the end of the Valuation Period in which the
Contract is received. The Contract Owner bears the investment risk during the
ten day period. In those states, however, where PaineWebber Life is required to
return the entire Purchase Payment, to minimize investment risk, PaineWebber
Life will invest all initial Purchase Payments in the Money Market Division
until the end of the "Free Look" period at which time it will be allocated
pursuant to the Owner's allocation. In such cases, the amount returned upon
cancellation prior to the end of the "Free Look" period is the greater of the
Purchase Payment or the Contract Value.

RETIREMENT PLAN CONDITIONS--A Contract acquired in connection with a retirement
plan will be subject to the conditions of the retirement plan. Such plans may
impose restrictions or special taxation consequences in the event of
withdrawal, death, disability, separation from employment, premature
distributions or excess contributions. The Contract Owner should understand the
features of any retirement plan in which he or she participates and, if
necessary, seek an explanation thereof from a qualified tax adviser.

REPORTS TO CONTRACT OWNERS--At least once a year, a report which will set forth
information regarding the Contract Value will be sent to the Contract Owner.
The Contract Owner will also be furnished notices, proxies and solicitation
materials which relate to the Fund.

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<PAGE>

FEDERAL INCOME TAX STATUS

The operations of the Separate Account form part of the operations of
PaineWebber Life but the Code provides that no federal income tax will be
payable by PaineWebber Life on the investment income and capital gains of the
Separate Account. If the Contract is used with a Qualified Plan, the employer
or Contract Owner may be permitted to deduct the Purchase Payments made. Until
a distribution is made, no federal income tax is payable by the Contract Owner
on the investment earnings of a Contract. Distributions from certain types of
Qualified Plans to a participant who is age 50 before January 1, 1986, may be
eligible for capital gains treatment on a portion of the distribution and five
year or ten year forward averaging. The Annuitant will be allowed to recover
tax-free any portion of each Annuity payment representing Purchase Payments for
which no deductions were allowed. If, however, a surrender is made before age
59 1/2, with certain exceptions, it will be subject to a 10% penalty tax on the
taxable amount withdrawn. Distributions from Qualified Plans may be eligible
for a tax-free rollover to another Qualified Plan.

Variable annuity contracts will be entitled to favorable tax treatment under
the Code so long as the investments of the separate accounts funding them are
"adequately diversified" under section 817(h) of the Code. If the investments
of a separate account are determined to be not adequately diversified, Contract
Owners in the separate account would be treated as the owners of the underlying
assets and would be taxed currently on earnings and gains. It is intended that
the investments of the Separate Account will be adequately diversified under
section 817(h) of the Code.

PaineWebber Life is required to withhold federal income tax on Annuity
payments, lump sum distributions, and partial surrenders. For certain
distributions ("Eligible Rollover Distributions") made after December 31, 1992,
payors are required to withhold 20 percent of the amount of the distribution.
An Eligible Rollover Distribution means the taxable portion of any distribution
(other than those in prescribed forms of annuity payments and required
distributions) from certain types of Qualified Plans. This withholding tax
cannot be waived, but it can be avoided by rolling the distribution over to
another eligible Qualified Plan or IRA at the election of the Contract Owner,
in a direct transfer. The plan administrator will notify Contract Owners who
are to receive Eligible Rollover Distributions of a more detailed explanation
of their distribution options and of how to elect a direct transfer of the
distribution to another eligible plan or IRA.

Except for Eligible Rollover Distributions, recipients of other distributions
are allowed to make an election not to have federal income tax withheld. After
an election is made with respect to Annuity payments, an Annuitant may revoke
the election at any time, and thereafter commence withholding. PaineWebber Life
will notify the payee at least annually of his or her right to revoke the
election. Payees are required by law to provide PaineWebber Life (as payor)
with their correct taxpayer identification number ("TIN"). If the payee is an
individual, the TIN is the same as his or her Social Security number.

HOW TO PURCHASE A CONTRACT

A Contract may be purchased by completing the application form and forwarding
it, along with the Purchase Payment, to the person from whom you received the
prospectus. Contracts may be sold only by broker-dealers who are licensed
insurance agents of PaineWebber Life, either individually or through an
insurance agency. Sales commissions are paid by PaineWebber Life on the sale of
Contracts. The commissions paid range from 1% to 6%.

PaineWebber Incorporated ("PWI"), located at 1285 Avenue of the Americas, New
York, New York 10019 serves as distributor of the Contracts pursuant to a
principal underwriting (distribution) agreement. PWI is registered as a broker-
dealer under the Securities Exchange Act of 1934, as

PWB 25
<PAGE>

amended, and is a member of the National Association of Securities Dealers,
Inc. PWI has entered into a Principal Underwriter Agreement with PaineWebber
Life to accomplish the retail distribution of Contracts.

VOTING RIGHTS

Unless otherwise restricted by the retirement plan pursuant to which a Contract
is issued, each Contract Owner invested in Divisions of the Separate Account
will have the right to instruct PaineWebber Life with respect to voting the
shares of the Fund which are the assets underlying his or her interest in the
Separate Account at all shareholders meetings. A quorum of Fund shareholders
shall be the lesser of (1) 67% or more of the voting securities present in
person or by proxy at a shareholder meeting, if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy, or (2)
more than 50% of the outstanding voting securities.

The number of Fund shares which may be voted pursuant to the instructions of a
Contract Owner is based on the number of units owned as of the record date of
the meeting. Shares for which no instructions are received will be voted in the
same proportion as the shares for which instructions have been received.
Contract Owners will periodically receive various materials which relate to
voting Fund shares such as proxy materials and voting instruction forms.
Contract Owners will also receive periodic reports relating to the Fund
Portfolio in which they have an interest.

LEGAL PROCEEDINGS

There are no material legal proceedings to which the Company, the Separate
Account or any of their property is subject.

The principal underwriter, PaineWebber Inc., is not engaged in any litigation
of any material nature to which the Separate Account is a party or to which any
of its property is subject.

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<PAGE>

TABLE OF CONTENTS

STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
TOPIC PAGE
<S> <C>
PaineWebber Life Insurance Company......................................... 3
The Separate Account....................................................... 3
The Fund................................................................... 3
The Contract............................................................... 5
Purchase Payments........................................................ 6
Accumulation Provisions.................................................. 6
Annuity Payments......................................................... 7
Distribution of Contracts................................................ 8
Additional Federal Income Tax Information.................................. 9
The Company and the Separate Account..................................... 9
Non-Qualified Plans...................................................... 9
Qualified Plans.......................................................... 10
Withholding.............................................................. 11
Diversification Requirements............................................. 11
Other Information.......................................................... 11
Reports to Contract Owners............................................... 11
Administrative Services.................................................. 12
Safekeeping of Assets.................................................... 12
Independent Auditors..................................................... 12
Registration Statement................................................... 12
Separate Account Performance............................................... 12
Financial Statements....................................................... 15
</TABLE>

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<PAGE>

APPENDIX A

EXAMPLES DEMONSTRATING
WITHDRAWALS AND WITHDRAWAL CHARGES

PART 1: SEPARATE ACCOUNT

These examples assume the following:

1) The Initial Net Purchase Payment was $10,000, allocated solely to one
Division;

2) The date of full surrender or partial withdrawal occurs during the 3rd
Year following the initial payment;

3) The Contract Owner's Contract Value as of the first Valuation Day of the
contract year of full surrender or partial withdrawal was $11,500;

4) The Contract Owner's Contract Value at the time of surrender or
withdrawal is $12,000; and

5) No other Purchase Payments or previous partial withdrawals have been
made.

EXAMPLE A--FULL SURRENDER

1) Earnings in the Division as of the first Valuation Day of the contract
year ($11,500 - $10,000 = $1,500) are not subject to the early
withdrawal charge.

2) 10% of the Contract Value as of the first Valuation Day of the contract
year would, in the alternative, be available without imposition of the
early withdrawal charge (.10 x $11,500 = $1,150). Since that amount is
less than that computed under 1) above, the amount that can be withdrawn
free of early withdrawal charges is the amount computed under 1), or
$1,500.

3) The balance of the full surrender up to the amount of Net Purchase
Payments ($12,000 - $1,500 = $10,500 or $10,000, whichever is less) is
subject to the early withdrawal charge of 5%.

4) The amount of the early withdrawal charge is .05 x $10,000 = $500.

5) The amount to be received under a full surrender is $12,000 - $500
= $11,500.

EXAMPLE B--PARTIAL WITHDRAWAL (IN THE AMOUNT OF $4,500)

1) For the same reasons as given in Steps 1 and 2 of Example A, above,
$1,500 can be withdrawn free of the early withdrawal charge.

2) The balance of the requested partial withdrawal, ($4,500 - $1,500 =
$3,000) is subject to the 5% early withdrawal charge.

3) The amount of the early withdrawal charge is equal to the amount subject
to the early withdrawal charge multiplied by .05.

Withdrawal charge = $3,000 X .05 = $150

In this example, in order for the Contract Owner to receive the amount
requested ($4,500), a gross withdrawal of $4,650 must be processed with $150
representing the early withdrawal charge calculated above.

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<PAGE>

SOME QUESTIONS AND ANSWERS ABOUT THE CONTRACT

1. For whom is the Contract designed?

The Contract is designed for anyone seeking to accumulate retirement income
through managed investments. The Contract can be used for either private
(non-qualified) plans or tax-qualified retirement plans. The Contract Owner
may designate himself, herself or another person to be the Annuitant.

2. How do you purchase a Contract?

A Contract may be purchased through persons who are licensed to sell
insurance products and securities on agreement with PaineWebber Life and
PaineWebber Incorporated, the underwriter for the Contract. A prospective
purchaser must deliver a completed application, such other completed forms
as required and the initial Purchase Payment to the licensed salesperson,
who then forwards such payment and forms to PaineWebber Life for acceptance.
See "How to Purchase a Contract."

3. What type of annuity is the Contract?

The Contract provides an accumulation period with variable Allocation
Options and offers a choice of either fixed or variable annuity payments
after the Annuity Date. The Contract Value invested in a variable option
during either the accumulation period or annuity payment period varies to
reflect the investment performance of the Division(s) to which that
Contract's Values are allocated. Thus, the investment risk is borne by the
Contract Owner.

When the variable annuity payment is chosen, only the first monthly payment
under the Contract is guaranteed in amount with subsequent payments varying
with the investment performance of the Division(s) to which Contract Values
are allocated.

When the fixed annuity payment is chosen, the amount of each payment is
determined on the Annuity Date and does not vary.

4. What expenses are charged under the Contract?

No initial sales charge is deducted from Purchase Payments. However, an
early withdrawal charge may be deducted upon partial or complete withdrawal.
For withdrawals, the early withdrawal charge is 5% of any amount which
represents Purchase Payments with an Early Withdrawal Charge Period
remaining.

No early withdrawal charge is applied to total withdrawals in a contract
year not in excess of the greater of (1) after the Contract has been in
force for one year, 10% of the Contract Value as of the first Valuation Day
of the contract year, or (2) earnings under the Contract as of the first
Valuation Day of the contract year. See "Withdrawal Charges."

Under this Contract, PaineWebber Life deducts a distribution expense charge
daily from each Division, at an annual rate of 0.15% of the total net assets
of each Division, which is included in the 1.60% charge discussed below. The
amount of any sales charge imposed (which includes both any early withdrawal
charge and the distribution expense charge), when added to any previous
sales charge, will not exceed 9% of all Purchase Payments. See "Distribution
Expense Charge."

Charges totaling 1.60%, on a yearly basis, of each Division's total net
assets are deducted from each Division. These charges consist of the
distribution expense charge discussed above (0.15%) plus an additional 1.25%
to reimburse PaineWebber Life for undertaking the mortality risk and

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<PAGE>

expense risk in connection with the Contract and, in those cases in which
the Enhanced Death Benefit is applicable, .20% which represents a premium
for the Enhanced Death Benefit. See "Contract Charges and Deductions." Where
there is no Enhanced Death Benefit available, the charges would total 1.40%.

During the accumulation period, each Contract is assessed an annual contract
maintenance charge of $30. This charge, which is guaranteed never to
increase, is designed to reimburse PaineWebber Life for the cost of
administering the Contract. See "Contract Maintenance Charge."

Transfers among the Allocation Options and withdrawals are permitted without
limit in number. The Contract provides that each transfer in excess of 12 in
a contract year is subject to a charge of $10. PaineWebber Life has waived
this transfer charge until further notice. See "Transfer Charges."

There is a withdrawal transaction charge equal to the lesser of $25 or 2% of
the amount withdrawn for each withdrawal in excess of two in any contract
year. See "Withdrawal Charges." This charge is not applied to withdrawals
made in connection with a systematic withdrawal program. See "Systematic
Withdrawal Program."

The Fund is also subject to certain charges. Mitchell Hutchins serves as
investment adviser to the Fund in return for a fee which is accrued daily
and paid monthly and is based on an annual percentage of the net assets of
each Portfolio of the Fund. See "The Fund."

Any premium taxes with respect to a Contract will be paid when due.
PaineWebber Life may advance the amount of such taxes and deduct them
subsequently. See "Premium and Other Taxes."

5. May the Contract Owner withdraw all or a portion of the Contract Value?

All or a portion of the Net Contract Value may be withdrawn at any time
during the accumulation period, with the following limits: (a) the minimum
permissible amount of partial withdrawal is $500, and (b) no partial
withdrawal may be made if it would result in a remaining Contract Value of
less than the greater of: (i) $1,000, or (ii) the early withdrawal charge on
any Net Purchase Payments with an early withdrawal charge period remaining
plus the amount of any unassessed premium taxes. Withdrawals from Tax
Sheltered Annuities described in section 403(b) of the Code are subject to
special restrictions imposed by the Code. Subject to these limitations, the
Contract Owner may make as many partial withdrawals as he or she wishes.
There is, however, a withdrawal transaction charge equal to the lesser of
$25 or 2% of the amount withdrawn for each withdrawal in excess of two in
any policy year. See "Withdrawals."

No withdrawal is permitted following the commencement of annuity payments
with the exception of Option 1 when taken as a variable annuity payment
which allows for a lump sum payment of the present value of the remaining
payments. See "General Annuity Options."

It should also be noted that a penalty tax may be imposed by the Code upon
premature withdrawal of amounts accumulated under the Contract. For federal
income tax consequences of partial or complete withdrawals, see "Exercise of
Rights Under the Contract", "Withdrawals", and "Federal Income Tax Status."

6. How are the amounts of the variable annuity payments determined?

The Contract Value available on the Annuity Date is used to provide annuity
payments. The Contract Value may be reduced by withdrawal charges or premium
taxes. An early withdrawal

PWB 30
<PAGE>

charge may be imposed on the Annuity Date unless (a) an Annuity option
involving lifetime payments or payments for 5 years or more with no ability
to commute the remaining payments is elected, or (b) the Annuity Date is the
latest allowed. See "Withdrawal Charges" and "General Annuity Options." The
Contract Owner's values in the Divisions will be converted to Annuity Units.
The Annuitant will receive annuity payments based on the Contract Value
available, the annuity tables guaranteed by the Contract and the Annuity
option selected. See "General Annuity Options."

There can be no assurance that the Contract Value during the accumulation
period or the aggregate amount of annuity payments after the Annuity Date
will equal or exceed the aggregate Purchase Payments.

7. What if the Owner dies during the accumulation period?

If the Owner dies prior to the Annuity Date, PaineWebber Life will pay the
designated beneficiaries a minimum (enhanced) death benefit equal to the
greatest of (a), (b), or (c) as follows:

(a) The Contract Value; or

(b) The greatest of the Contract Values on the first Valuation Day of
each 5 year period less any partial withdrawals, early withdrawal
charges, transfer charges, and withdrawal transaction charges, since
the beginning of the 5 year period. The first 5 year period begins on
the 5th Contract Anniversary;

(c) The sum of all amounts invested in the Separate Account Divisions,
accumulated at interest, less any partial withdrawals, early withdrawal
charges, transfer charges, and withdrawal transaction charges
accumulated at interest.

For Single Life Death Benefit Options, the interest is at an effective
annual rate of 6% for Divisions other than the Money Market Division
and at a rate equal to the Net Investment Factor for each Valuation
Period for the Money Market Division.

If this Contract has Joint Spousal Owners and a Joint Life Death
Benefit Option has been selected, the interest accumulates at an
effective annual rate of 8% for Divisions other than the Money Market
Division and at a rate equal to the Net Investment Factor for each
Valuation Period for the Money Market Division.

The maximum death benefit under this paragraph (c) is the sum of all
Net Purchase Payments, each accumulated at the interest rate for
Divisions other than the Money Market Division to a maximum of two
times each Net Purchase Payment, less any partial withdrawals, early
withdrawal charges, transfer charges, and withdrawal transaction
charges, each accumulated at the interest rate for Divisions other than
the Money Market Division to two times each withdrawal or deducted
charge.

The Death Benefit is determined as of the Valuation Day on which PaineWebber
Life receives due proof of the Owner's death and an election of the method
of payment from the Beneficiary at its Administrative Office at 601 Sixth
Avenue, Des Moines, Iowa 50309.

If the Owner is not a natural person, the Annuitant will be treated as the
Owner for the purposes of determining if a Death Benefit is payable.

8. What are the mortality risks assumed under the Contract by PaineWebber Life?

Under the Contract, PaineWebber Life guarantees that during the accumulation
period the death benefit will be the amounts as determined in response to
question 7 above. PaineWebber Life

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further guarantees that annuity payments will not be affected by a change in
the death rate assumed in establishing its obligation to provide annuity
payments under the Contract. This means that the Annuitant under a life
option will continue to receive annuity payments no matter how long he or
she lives.

9. What is the nature of the security described in the prospectus?

Because the value of an Accumulation Unit of each Division of the Separate
Account during the accumulation period is based upon the changing net asset
value of the shares of the underlying Fund Portfolio, the Contract Owner
bears the investment risks and rewards. Therefore, the Contract is
considered a security under federal law and interests therein are required
to be registered under the Securities Act of 1933. In addition, the Separate
Account is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940 as a unit investment trust.

10. Does a Contract purchaser have the right to examine and reject the Contract?

Unless state law requires otherwise, if after receiving the Contract the
purchaser is not satisfied with it and returns it within ten days after
receipt, PaineWebber Life will refund to the Contract Owner his or her
Contract Value. No withdrawal charges will be assessed.

11. May additional payments be made under a Contract after it is established?

Yes, additional payments of at least $100 for Contracts issued under
Qualified Plans and $500 under other Contracts may be made at any time prior
to the Annuity Date. PaineWebber Life may waive these minimum payments for
certain plans including automatic payment plans.

12. Can transfers be made among the Separate Account Divisions?

Transfers among Separate Account Divisions can be made at any time. See
"Transfer Charges."

13. How can Contract inquiries be made?

For further information concerning the Contract, write the administrative
offices for PaineWebber Life Insurance Company at 601 6th Avenue, Des
Moines, Iowa 50309 or call at 1-800-986-0088. American Republic Insurance
Company which is located at that address serves as the third party
administrator for the Contracts pursuant to a contract with PaineWebber Life
Insurance Company.

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<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

JANUARY 26, 1996

PAINEWEBBER LIFE VARIABLE ANNUITY ACCOUNT

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

MILESTONES

An Individual Deferred Variable Annuity Contract

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

PAINEWEBBER LIFE INSURANCE COMPANY
----------------------------------------
----------------------------------------

This Statement of Additional Information is not a prospectus. It should be read
only in conjunction with the PaineWebber Life Variable Annuity Account
prospectus dated January 26, 1996, a copy of which may be obtained without
charge by writing to PaineWebber Life Insurance Company Administrative Office at
601 6th Avenue, Des Moines, Iowa 50309.
<PAGE>

TABLE OF CONTENTS

TOPIC PAGE

PAINEWEBBER LIFE INSURANCE COMPANY...................................... 3

THE SEPARATE ACCOUNT.................................................... 3

THE FUND................................................................ 3

THE CONTRACT............................................................ 5

PURCHASE PAYMENTS.................................................. 6

ACCUMULATION PROVISIONS............................................ 6

ANNUITY PAYMENTS................................................... 7

DISTRIBUTION OF CONTRACTS.......................................... 8

ADDITIONAL FEDERAL INCOME TAX INFORMATION............................... 9

THE COMPANY AND THE SEPARATE ACCOUNT............................... 9

NON-QUALIFIED PLANS................................................ 9

QUALIFIED PLANS.................................................... 10

WITHHOLDING........................................................ 11

DIVERSIFICATION REQUIREMENTS....................................... 11

OTHER INFORMATION....................................................... 11

REPORTS TO CONTRACT OWNERS......................................... 11

ADMINISTRATIVE SERVICES............................................ 12

SAFEKEEPING OF ASSETS.............................................. 12

INDEPENDENT AUDITORS............................................... 12

REGISTRATION STATEMENT............................................. 12

SEPARATE ACCOUNT PERFORMANCE............................................ 12

FINANCIAL STATEMENTS.................................................... 15

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PAINEWEBBER LIFE INSURANCE COMPANY

PaineWebber Life Insurance Company ("Company") is a stock life insurance company
organized under the laws of the State of California as Pacific Fidelity Life
Insurance Company. The Company was acquired by PaineWebber Life Holdings, Inc.
on December 31, 1992. The administrative offices of the Company are at 601 6th
Avenue, Des Moines, Iowa 50309. The executive offices are located at 1200 Harbor
Boulevard, Weehawken, New Jersey 07087.

The Company is engaged in the issuance and sale of life insurance and annuity
contracts on a non-participating basis. It is presently licensed to do business
in the District of Columbia and all states, except New York and Connecticut. The
Company intends to market the individual variable annuity contracts described in
this Statement of Additional Information in all jurisdictions in which it is
admitted to conduct life insurance business.

The employees of the Company are covered under a life insurance company blanket
bond covering the Company and its affiliates in the aggregate amount of $100
million.

THE SEPARATE ACCOUNT

PaineWebber Life Variable Annuity Account ("Separate Account") was established
by the Company in December 1992 pursuant to the provisions of California law, as
a segregated investment account of the Company. The Separate Account currently
has nine available Divisions, each of which invests in shares of a designated
Portfolio of PaineWebber Series Trust ("Fund"). The Separate Account and each
Division therein is administered as a part of the general business of the
Company; but the income, gains and losses of each Division are credited to or
charged against the assets held for that Division in accordance with the terms
of the Contract, without regard to other income, gains or losses of any other
Divisions or arising out of any other business the Company may conduct. The
assets within each Division are not chargeable with liabilities arising out of
the business conducted by any other Divisions, nor will the Separate Account as
a whole be chargeable with liabilities arising out of any other business the
Company may conduct.

The Separate Account is registered with the Securities and Exchange Commission
as a unit investment trust under the Investment Company Act of 1940 ("1940
Act"). Such registration does not involve supervision of the management of the
Separate Account or the Company by the Securities and Exchange Commission.

THE FUND

The Fund is organized as a Massachusetts business trust and is registered as an
open-end management investment company under the 1940 Act. The Fund, which was
organized in 1986, currently consists of nine available Portfolios: the Money
Market Portfolio, the Strategic Fixed Income Portfolio, the High Grade Fixed
Income Portfolio, the Global Income Portfolio, the Balanced Portfolio (formerly,
the Asset Allocation Portfolio), the Growth and Income Portfolio, the Growth
Portfolio, the Aggressive Growth Portfolio and the Global Growth Portfolio. The
Trustees of the Fund may establish additional Portfolios at any time. Portfolio
assets are segregated and a Contract Owner's interest is limited to the
Portfolio(s) in which the Contract Owner's Purchase Payments are invested.

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Each Portfolio has, and is subject to, certain investment objectives and
restrictions which may not be changed without a majority vote of shareholders in
that Portfolio.

The Fund will offer its shares to insurance company separate accounts only.
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins") acts as the
investment adviser and administrator for each of the current Portfolios and the
Fund, and as such provides a continuous investment program for the Portfolios
and supervision of all matters relating to the operations of the Fund. Mitchell
Hutchins is a Delaware corporation and a wholly-owned subsidiary of PaineWebber
Incorporated, which is in turn a wholly-owned subsidiary of PaineWebber Group
Inc., a publicly held financial services holding company. As compensation for
its services, Mitchell Hutchins receives a fee from the Fund, accrued daily and
paid monthly, based on the average daily net assets of each Portfolio. Certain
Portfolios have subadvisers to Mitchell Hutchins who provide day-to-day
management services for those Portfolios.

A summary of the investment objective of, and the investment advisory fees
charged, each Portfolio of the Fund available for purchase is described below.
MORE DETAILED INFORMATION IS CONTAINED IN THE CURRENT PROSPECTUS OF THE FUND
WHICH ACCOMPANIES THE SEPARATE ACCOUNT PROSPECTUS.

The MONEY MARKET PORTFOLIO seeks maximum current income consistent with
liquidity and conservation of capital. To achieve its objective, this Portfolio
invests primarily in high grade money market instruments and repurchase
agreements secured by such instruments. As compensation for its services, the
Money Market Portfolio pays the investment adviser a fee at the annual rate of
.50% of average daily net assets.

The HIGH GRADE FIXED INCOME PORTFOLIO primarily seeks high current income
consistent with the preservation of capital and secondarily seeks capital
appreciation. This Portfolio invest primarily in debt securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and high
quality corporate debt securities and mortgage-backed securities of private
issuers. As compensation for its services, the High Grade Fixed Income Portfolio
pays the investment adviser a fee at the annual rate of .50% of average daily
net assets.

The GLOBAL INCOME PORTFOLIO primarily seeks high current income and secondarily
seeks capital appreciation. To achieve its objectives, this Portfolio invests
principally in high quality debt securities of foreign and U.S. issuers. As
compensation for its services, the Global Income Portfolio pays the investment
adviser a fee at the annual rate of .75% of average daily net assets.

The BALANCED PORTFOLIO (FORMERLY, THE ASSET ALLOCATION PORTFOLIO) seeks to
provide a high total return with low volatility. To achieve its objectives, this
Portfolio allocates investments among equity securities, investment grade debt
securities and money market instruments. As compensation for its services, the
Balanced Portfolio pays the investment adviser a fee at the annual rate of .75%
of the average daily net assets.

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The GROWTH AND INCOME PORTFOLIO seeks current income and capital growth. This
Portfolio invests primarily in dividend-paying equity securities believed by
Mitchell Hutchins to have potential for rapid earnings growth. As compensation
for its services, the Growth and Income Portfolio pays the investment adviser a
fee at the annual rate of .70% of average daily net assets.

The GROWTH PORTFOLIO seeks to provide long-term capital appreciation. To achieve
its objective, this Portfolio invests primarily in equity securities of
companies that, in the judgment of Mitchell Hutchins, have substantial potential
for capital growth. As compensation for its services, the Growth Portfolio pays
the investment adviser a fee at the annual rate of .75% of average daily net
assets.

The AGGRESSIVE GROWTH PORTFOLIO seeks to maximize long-term capital
appreciation. This Portfolio invests primarily in the common stocks of U.S.
companies. As compensation for its services, the Aggressive Growth Portfolio
pays the investment adviser a fee at the annual rate of .80% of average daily
net assets.

THE CONTRACT

The variable Allocation Options are funded by investments in the various
Divisions of the Separate Account. All obligations arising under a Contract,
including the guarantee to make Annuity payments, are general obligations of the
Company, and all of the Company's assets are available to meet its expenses and
obligations under the Contract. While the Company is obligated to make the
Variable Annuity payments under the Contract, the amount of such payments is not
guaranteed. The Contract Value in the Divisions of the Separate Account and the
amount of Variable Annuity payments will vary with the investment experience of
the Division(s) in which the Contract Owner's account is invested.

No initial sales charge is deducted from Purchase Payments. However, an early
withdrawal charge is deducted in the event of withdrawal of the Contract Value
or upon annuitization. The early withdrawal charge is 5% of the amount withdrawn
which represents Net Purchase Payments made during the first five years
preceding the withdrawal. There are no withdrawal charges imposed on Net
Purchase Payments made more than five years before withdrawal. There is no early
withdrawal charge applied on any amount which represents the greater of: (a)
gain in Contract Value (the excess of the Contract value over Net Purchase
Payments not already withdrawn) on the first Valuation Day of the Contract Year;
or (b) 10% of the Contract Value as of the first Valuation Day of the Contract
Year (available only after the first Contract Year except for withdrawals
through a systematic withdrawal service described herein.) The Company also
deducts a daily distribution expense charge from each Division at an annual rate
of 0.15% of the total net assets of each Division. The amount of any sales
charge imposed (which includes both any early withdrawal charge and the
distribution expense risk charge), when added to any previous sales charge, will
not exceed 9% of all Net Purchase Payments. A withdrawal transaction charge of
the lesser of $25 or 2% of the amount withdrawn will be imposed on all
withdrawals in excess of two per Contract year. For more information regarding
the withdrawal charges, see "Contract Charges and Deductions" in the prospectus.

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PURCHASE PAYMENTS

The minimum Purchase Payment for a Contract which is not a part of a plan
qualified for special tax treatment under the Internal Revenue Code ("Qualified
Plan") is $5,000 for the initial payment and $500 for subsequent payments. For
Qualified Plan Contracts, the minimum Purchase Payment is $1,000 and the minimum
additional payment is $100. The Company reserves the right to waive the minimum
Purchase Payment amounts on certain Qualified Plans, certain automatic purchase
plans, and for Contracts issued to officers, directors, agents, or full-time
employees of the Company, the investment adviser or subadviser to the Fund, the
distributor or third party administrators. Total cumulative purchase payments
will not be permitted to exceed $1,500,000 unless approved in advance by an
appropriate officer of the Company before they are accepted.

In the event that an application fails to recite all of the information
necessary to record the account properly, the Company will promptly request that
the Contract Owner furnish further instructions and will hold the initial
Purchase Payment in a suspense account, without interest, for a period not
exceeding 5 business days after receipt of the application by the Company. If
the necessary information is not received within 5 business days, the Company
will return the initial Purchase Payment to the prospective Contract Owner,
unless the prospective Contract Owner, after being informed of the reasons for
the delay, specifically consents to the Company retaining the initial Purchase
Payment until the application is made complete.

Purchase Payments will be allocated to the Divisions of the Separate Account as
directed by the Contract Owner. If no allocation is indicated or allocations are
not properly completed, the application is considered not to be complete. If the
Contract Owner forwards a subsequent Purchase Payment and does not specifically
indicate into which Allocation Option(s) the Purchase Payment is to be invested,
the Company will credit the Purchase Payment based upon the last existing
allocation made by the Contract Owner. Subsequent Purchase Payments may be made
at any time without prior notice. The Contract will not be in default if no
subsequent Purchase Payments are made. The Company reserves the right to reject
any applications or Purchase Payments.

ACCUMULATION PROVISIONS

ACCUMULATION UNITS - The number of a Division's Accumulation Units purchased by
a Contract Owner with respect to his or her initial Purchase Payment is
determined by dividing the amount credited to the Division by the Accumulation
Unit value for that Division next computed following acceptance of the
application (generally the next business day after receipt of the Purchase
Payment by the Company). The number of Accumulation Units purchased with respect
to subsequent Purchase Payments is determined by dividing the amount credited to
the Division by the applicable Accumulation Unit value for the Valuation Period
next determined following receipt of the Purchase Payment by the Company. The
Accumulation Unit value of each Division varies in accordance with the
investment experience of that Division.

VALUE OF AN ACCUMULATION UNIT - The value of an Accumulation Unit of each
Division was set at $10 when the Division was established. The value may
increase or decrease from one Valuation Period to the next. The value of an
Accumulation Unit is determined by multiplying the value of an Accumulation Unit
for the last Valuation Period by the net investment factor for that Division for
the current Valuation Period. The Contract Owner bears the investment risk that
the Contract Value may at any time be less than, equal to, or more than the
amounts invested in the Separate Account.

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ANNUITY PAYMENTS

ANNUITY PAYMENTS - The Contract Owner's value in the Allocation Options may be
applied to provide either a Variable Annuity or a Fixed Annuity as selected by
the Contract Owner. The dollar amount of Variable Annuity payments will reflect
the investment experience of the Separate Account Division(s) in which the
Contract Owner is invested but will not be affected by adverse mortality
experience which may exceed the mortality risk charge provided for under the
Contract.

1. FIRST ANNUITY PAYMENT: The amount used to establish the first monthly
payment consists of the Contract Owner's values in the Allocation Options
as of the first Valuation Day on or after the Annuity Date adjusted for
charges and deductions. The Contract contains tables showing monthly
payment factors and annuity premium rates per $1,000 of the amount applied.

At the time the first monthly Variable Annuity payment is determined, a
number of Annuity Units for each Division is established for the Owner by
dividing the monthly payment derived from the tables by the Annuity Unit
value for the Division as of the date the first Annuity payment is due. The
number of Annuity Units forming the basis of an Annuity payment will not
change during the Annuity period unless Annuity Units are transferred to or
from another Division. The value of the Annuity Units, however, will change
based upon investment results.

2. SUBSEQUENT VARIABLE ANNUITY PAYMENTS: The amount of monthly payments after
the first for any Division will be determined by multiplying the number of
Annuity Units for that Division determined for the first payment (adjusted
for transfers, if any) by the Annuity Unit value for that Division for the
Valuation Period immediately preceding the Valuation Period in which the
subsequent payment is made. It will be the Company's practice to mail
Variable Annuity payments no later than 7 days after the last day of the
Valuation Period upon which they are based or the monthly anniversary
thereof.

ASSUMED INVESTMENT RATE - The tables set forth in the Contract are based upon
the 1983 Table "a" for Individual Annuity Valuation, with an assumed investment
rate of 4%. Variable Annuity payments will vary from payments based on the
assumed investment rate depending on whether the investment experience of the
Division(s) in which the Contract Owner is invested is better or worse than the
assumed investment rate. Over a period of time, if the Division(s) achieved a
net investment result equal to the assumed investment rate, the Annuity Units
would not change in value, and the amount of the Annuity payments would be
level. However, if the Division(s) achieved a net investment result greater than
the assumed investment rate, the Annuity Units would increase in value and the
amount of the Annuity payments would increase. Similarly, if the Division(s)
achieved a net investment result smaller than the assumed investment rate, the
Annuity Units would decrease in value and the amount of the Annuity payments
would decrease.

ELECTION OF ANNUITY DATE AND FORM OF ANNUITY - The Annuity Date and the form of
Annuity payment are elected by the Contract Owner. Unless a different Annuity
Date is elected, Annuity payments will begin on the first day of the month
following the Annuitant's 85th birthday. Contracts issued under Qualified Plans
may require an earlier Annuity Date. To the extent not prohibited by any
Qualified Plan requirements, an optional Annuity Date may be elected; such date
may be the first day of any month prior to the normal Annuity Date. The election
must be made at least 30 days before the optional Annuity Date elected.

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ANNUITY OPTIONS - Subject to the provisions of the Internal Revenue Code
("Code") and the retirement plan under which a Contract is purchased, the
Contract Owner may elect any one of the Annuity Options listed below. If the
Owner does not elect otherwise, Annuity payments will be made on a variable
basis under Option 3, a life Annuity with 10 years' payments certain. Changes in
the optional form of Annuity payment may be made at any time up to 30 days prior
to the date on which Annuity payments are to begin. All Options are available as
fixed or variable payment annuities. The Annuity payments described below are
determined on the basis of (i) the mortality table specified in the Contract,
(ii) the age and, where permitted, the sex of the Annuitant, (iii) the type of
Annuity payment option(s) selected, and (iv) the assumed investment rate.

OPTION 1-PAYMENTS FOR A GUARANTEED FIXED PERIOD: An Annuity payable for a
specified period of time. The period must be at least 5 years. If this
option is taken as a Variable Annuity, the Contract Owner may at any time
choose to receive the present value of the remaining payments in a lump sum
computed at the assumed investment rate.

OPTION 2-LIFE ANNUITY: Payments will be made for the life of the Annuitant.
Payments will cease with the last payment due prior to the Annuitant's
death.

OPTION 3-LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS: An
Annuity payable during the lifetime of the individual (no matter how long
he or she might live) with a guaranteed minimum number of payments. If the
Annuitant dies before the guaranteed number of payments have been made, the
remaining payments for the guaranteed period chosen (10 or 20 years) will
continue to the Owner.

OPTION 4-JOINT AND SURVIVOR ANNUITY: An Annuity will be paid during the
lifetimes of the Annuitant and the Annuitant's spouse. The amount of such
payments will not change by reason of the first death. Payments will end
with the last payment due prior to the second death.

FREQUENCY OF PAYMENT - Payments under all options will be made on a monthly
basis, unless a different arrangement has been requested by the Contract Owner
and agreed to by the Company. If at any time any payments to be made to any
Annuitant are less than $100 each, the Company shall have the right to decrease
the frequency of payments to such interval as will result in a payment of at
least $100.

ANNUITY UNIT VALUES - The value of an Annuity Unit of each Division was set at
$10 when the Division was established. The value may increase or decrease from
one Valuation Period to the next. For any Valuation Period, the value of an
Annuity Unit of a particular Division is the value of that Annuity Unit during
the last Valuation Period, multiplied by the net investment factor for that
Division for the current Valuation Period. The result is then multiplied by a
factor that offsets the effect of the assumed investment rate.

DISTRIBUTION OF CONTRACTS

Contracts are offered on a continuous basis through licensed insurance agents of
the Company (who are also either broker-dealers or persons associated with
broker-dealers), either individually or through an insurance agency. Sales
commissions will be paid by the Company. The commissions paid by the Company
will range from 1% to 6%.

PaineWebber Inc. ("PWI"), located at 1285 Avenue of the Americas, New York, New
York 10019, serves as the principal underwriter of the Contracts pursuant to an
underwriting (distribution) agreement ("Underwriting Agreement"). PWI is
registered as a broker-dealer under the Securities Exchange Act of 1934, and is
a member of the National Association of Securities

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Dealers, Inc. ("NASD"). PWL may accomplish the retail distribution of Contracts
itself or enter into Dealer Agreements with other registered broker-dealers to
do so. The Contracts will be offered for sale by PWI and its correspondent
firms.

The Underwriting Agreement may be terminated by the Company on behalf of the
Separate Account at any time on 60 days' written notice without payment of any
penalty. The Underwriting Agreement may be terminated at any time by PWI without
payment of any penalty on 60 days' written notice to the Separate Account and
the Company. The Underwriting Agreement automatically terminates in the event of
its assignment. PWI has received no underwriting compensation from PaineWebber
Life since the Contracts were not yet available for sale on the date of this
Statement of Additional Information.

ADDITIONAL FEDERAL INCOME TAX INFORMATION

THE COMPANY AND THE SEPARATE ACCOUNT

The Company is taxed as a life insurance company under Subchapter L of the Code.
The operations of the Separate Account form, and are taxed as, a part of the
total operations of the Company. The Contracts are formulated to meet the
definition of a "variable contract" under section 817(d) of the Code. The Code
provides that if the Separate Account meets certain diversification
requirements, set forth in Treasury Regulations under section 817(h) of the
Code, the income from the assets of the Separate Account used to fund the
annuities will not be subject to current federal income tax. See
"Diversification Requirements". There is no short-term or long-term capital gain
or loss recognized with respect to the assets of the Separate Account.

NON-QUALIFIED PLANS

ACCUMULATION PERIOD - The Contract may be issued to individuals in connection
with personal retirement plans which do not qualify for the tax benefits which
are available to Qualified Plans. A non-Qualified Plan may be established by an
individual seeking to accumulate funds for retirement or by an employer for one
or more employees. With certain exceptions, a Contract held by a non-natural
person will not be treated as an Annuity contract. The tax consequences of
participation in a non-Qualified Plan will vary from plan to plan. Income
credited to a non-Qualified Contract is not includable in the gross income of
the Contract Owner. Amounts received before the Annuity Date are includable as
ordinary income to the extent Contract Value exceeds the Contract Owner's
Purchase Payments.

WITHDRAWALS - A partial or complete withdrawal of a non-Qualified Contract
before commencement of Annuity payments will be treated first as a withdrawal of
income earned on investments to the extent of such income, then as a tax-free
return of capital. Moreover, amounts received upon assignment or pledge of the
Contract will be treated as amounts withdrawn under the Contract and therefore
subject to income taxes. Taxable amounts included in a withdrawal before the
Contract Owner attains age 59 1/2 will be subject to an additional income tax of
10% of the income withdrawn. This penalty would not apply where the withdrawal
is made on account of the Contract Owner's death or disability or where
substantially equal Annuity payments are received over the life of the Contract
Owner or the lives of the Contract Owner and a designated beneficiary. After the
Annuity Date, the Owner is allowed to recover tax-free any portion of each
Annuity payment which represents Purchase Payments.

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<PAGE>

QUALIFIED PLANS

TAX ADVANTAGES - Certain tax advantages are available under a Qualified Plan (a
retirement plan which satisfies the requirements of sections 401(a), 403(b),
408(b) or 457 of the Code). The tax advantages available under a Qualified Plan
include: the deductibility of employer or Contract Owner contributions; the
inclusion of contributions and their earnings in the participant's gross income
only when received or made available to the participant and, within certain
limits, the exclusion from the decedent's gross estate and from the
beneficiary's gross income of distributions to the beneficiary of a deceased
employee. A general information outline with respect to each type is provided
below. If the contract is to be used to fund a Qualified Plan, however,
competent tax advice should be sought.

1. PLANS FOR CORPORATIONS AND SELF-EMPLOYED INDIVIDUALS: Under section 401(a)
of the Code, contributions may be made on behalf of employees up to the
limits provided by section 415 and the payments will be deductible as
provided by section 404. Plan participants are also permitted to make non-
deductible voluntary contributions subject to certain non-discrimination
rules.

A plan established by an organization which primarily benefits "key
employees" (known as a "top-heavy" plan) will be subject to special rules
on: vesting, minimum contributions and benefits for non-key employees,
compensation which may be taken into account to determine contributions or
benefits for key employees, the aggregate limit on contributions and
benefits, and rollovers.

The tax treatment of plans established by self-employed individuals (known
as "Keogh" or "H.R. 10" plans) is essentially the same as corporate plans.
Some special restrictions apply to self-employed individuals who are
"owner-employees."

2. TAX-SHELTERED ANNUITIES: Contributions made by public school systems,
churches and certain tax-exempt organizations made to purchase contracts on
behalf of their employees are excludible from the employees' gross income,
within certain limits, if the requirements of section 403(b) of the Code
are met.

3. DEFERRED COMPENSATION PLANS FOR STATE AND LOCAL GOVERNMENT EMPLOYEES:
Section 457 of the Code provides special tax treatment for certain deferred
compensation plans for employees of state and local governments, their
political subdivisions, agencies, instrumentalities and affiliates, and
certain tax-exempt rural electric cooperatives. Such plans permit the
employees to specify the form of investment for their deferred
compensation, which can include investment in the Contract. However, the
investments will be owned by, and subject to, the claims of the general
creditors of the employer.

4. INDIVIDUAL RETIREMENT ANNUITIES: Section 408(b) of the Code permits
individuals to establish an Individual Retirement Annuity ("IRA"). No more
than $2,000 or 100% of compensation may be contributed to an IRA. Under
section 219 of the Code the entire amount is deductible if the individual
is not a participant in an employer's Qualified Plan. If the individual
participates in an employer's Qualified Plan, all, a portion, or none of
the contribution may be deductible, depending on adjusted gross income. An
IRA is subject to penalty and excise taxes on excess contributions and
insufficient distributions, as well as early distributions (see below).

DISTRIBUTIONS - A participant who has attained age 50 before January 1, 1986,
may elect favorable tax treatment for a lump-sum distribution from a section
401(a) plan. This may include capital gains treatment on the pre-1974 portion
and 5-year or 10-year forward averaging. A distribution

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<PAGE>

before age 59 1/2 from a Qualified Plan (except a section 457 plan) will be
subject to a 10% additional income tax on the amount of the distribution. The
penalty does not apply to a distribution: of an Annuity for life or life
expectancy; on early retirement under the plan at age 55; used to pay medical
expenses; and after death. Distributions from Tax-Sheltered Annuities are
subject to special restrictions imposed by section 403(b)(11) of the Code. See
"Withdrawals" in the prospectus. A participant who receives a lump sum
distribution from a Qualified Plan (except a section 457 plan) can make a "tax-
free rollover" of the distribution into another employer's Qualified Plan, in
certain circumstances, or into an IRA and continue to defer taxation of the
amount rolled over. Except for the recovery of nondeductible contributions, the
entire amount of the Annuity payments will be included in the participant's
gross income. The participant is entitled to recover tax-free any portion of
each Annuity payment representing nondeductible contributions. Distributions not
made directly to the other Qualified Plan will be subject to a mandatory 20%
withholding.

WITHHOLDING

With certain exceptions, withholding on Annuity payments and other distributions
(such as lump sum distributions or partial withdrawals) is required. However,
recipients of Annuity payments or other distributions are allowed to make an
election not to have federal income tax withheld. After such election is made
with respect to Annuity payments, a payee may revoke the election at any time,
and thereafter, commence withholding. In such a case, the Company will notify
the payee at least annually of his or her right to change such election.

The withholding rate followed by the Company will be applied only against the
taxable portion of Annuity payments or other distributions. This rate will be
determined based upon the nature of the distribution(s). Federal income tax will
be withheld from Annuity payments pursuant to the recipient's withholding
certificate. If no withholding certificate is filed with the Company, federal
income tax will be withheld from Annuity payments on the basis that the payee is
married with three withholding exemptions. If the balance to the credit of a
participant in a Qualified Plan is distributed within one taxable year to the
recipient, the amount of withholding will approximate the federal income tax on
a lump sum distribution. If a qualified total distribution is made from a
Qualified Plan, there is a mandatory withholding unless the amount is rolled
over to another qualified plan on a Trustee to Trustee basis.

DIVERSIFICATION REQUIREMENTS

Non-Qualified variable contracts funded through segregated asset accounts, such
as the Separate Account, will not be treated as annuities under the Code unless
they are "adequately diversified." Whether the Separate Account is adequately
diversified is presently determined from the temporary regulations issued by the
Treasury Department in September 1986. It is intended that the Fund and the
Separate Account will be operated in such a manner as to satisfy the
requirements of the temporary regulations, and any final regulations which
follow, so that the Contracts qualify as annuities under the Code.

OTHER INFORMATION

REPORTS TO CONTRACT OWNERS

The Company will maintain all records which relate to the Contract. At least
once a year, a report which will set forth information regarding the Contract
Value will be sent to the Contract Owners. The Contract Owner will also be
furnished notices, proxies and solicitation materials which relate to the Fund.

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<PAGE>

ADMINISTRATIVE SERVICES

PaineWebber Life has entered into a contract with American Republic Insurance
Company under which the latter has agreed to perform certain of the
administrative services relating to the Contract. Such administrative services
include: issuing Contracts, maintaining Contract Owner records (accounting,
valuation and reporting services) and issuing reports. The address of the
administrative office is 601 6th Avenue, Des Moines, Iowa 50309.

SAFEKEEPING OF ASSETS

The Company maintains custody of the assets of the Separate Account. The Fund
shares owned by the Separate Account will be held in "book" form. That is,
actual certificates will not be issued by the Fund, rather, the record of shares
issued to the Separate Account will be recorded on the books of the Fund by the
Fund's transfer agent. The Company also maintains the records of portfolio
transactions of the Separate Account.

INDEPENDENT AUDITORS

Ernst & Young, LLP serves as independent auditors for the Separate Account and
the Company and performs audit and accounting services for the Separate Account
and the Company.

REGISTRATION STATEMENT

A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, with respect to the Contract. The
Prospectus and this Statement of Additional Information do not contain all
information set forth in the registration statement, its amendments and
exhibits, reference to which is made for further information concerning the
Separate Account, the Company and the Contract. Statements contained in this
Statement of Additional Information and the related Prospectus as to the content
of the Contract and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments as filed.

SEPARATE ACCOUNT PERFORMANCE

From time to time the Separate Account may advertise the individual Division
"yields," "effective yields," or "average total return." These figures will be
based on historical earnings and are not intended to indicate future
performance.

(a) YIELD - The yield quotation is based on a seven-day period. If the seven-
day period falls on a non-valuation day, a calculation will be made as if
the seventh day were a valuation day for this purpose only. The yield is
computed by determining the net change, exclusive of capital changes, in
the value of a hypothetical pre-existing account having a balance of one
accumulation unit of the Division at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from contract owner
accounts, and dividing the difference by the value of the Division at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by 365/7 with the resulting yield figure
carried to at least the nearest hundredth of one percent. Recurring charges
are prorated among the Divisions by multiplying the flat fee by a fraction,
the numerator of which is the average number of contract owner accounts
that have money allocated to the

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<PAGE>

Division and the denominator of which is the sum of the average number of
contract owner accounts that have money allocated to each of the Divisions.
A Division's prorated flat fee is divided by the average number of
accumulation units per contract owner in that Division in order to equate
the flat fee to a one-unit basis.

(b) EFFECTIVE YIELD - The effective yield quotation is based on a seven-day
period. If the seven-day period falls on a non-valuation day, a calculation
will be made as if the seventh day were a valuation day for this purpose
only. The effective yield is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one accumulation unit of the Division at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from contract owner accounts, and dividing the difference by the
value of the Division at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding
1, raising the sum to a power equal to 365 divided by 7, and subtracting 1
from the result.

(c) TOTAL RETURN - The total return quotation is based on annual periods or
from inception to the end of the Division's first fiscal year. In general,
the total return is computed by finding the average annual compounded rates
of return over the 1-, 5-, and 10-year periods or from the effective date
if the Division has been in effect less than the stated periods, that would
equate the initial amount invested to the ending redeemable value.

Recurring charges are prorated among the Divisions by multiplying the flat
fee by a fraction, the numerator of which is the average number of Contract
Owner accounts that have money allocated to the Division and the
denominator of which is the sum of the average number of Contract Owner
accounts that have money allocated to each of the Divisions. A Division's
prorated flat fee is divided by the average account value per $1,000 per
Contract Owner in that Division in order to equate the flat fee to a $1,000
account size basis.

(d) TOTAL RETURN NOT INCLUDING EARLY WITHDRAWAL CHARGES - The total return not
including early withdrawal charges quotation is based on the periods from
inception to the end of its first fiscal year and each full year
thereafter. In general, the total return is computed by finding the average
annual compounded rates of return over the 1-, 5- and 10-year periods or
from the effective date if the account has been in effect less than the
stated periods, that would equate the initial amount invested to an ending
value.

Recurring charges are prorated among the Divisions by multiplying the flat fee
by a fraction, the numerator of which is the average number of contract owner
accounts that have money allocated to the Division and the denominator of which
is the sum of the average number of Contract Owner accounts that have money
allocated to each of the Divisions. A Division's prorated flat fee is divided by
the average account value per $1,000 per Contract Owner in that Division in
order to equate the flat fee to a $1,000 account size basis.

Performance information for a Division may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices measuring performance of a pertinent
group of securities so that investors may compare a Division's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other variable annuity separate accounts
or other investment products tracked by Lipper Analytical Services, a widely
used independent research firm which ranks mutual funds and other investment
companies by overall performance, investment objectives, and assets, or tracked
by other ratings services, companies, publications, or persons such as

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<PAGE>

Variable Annuity Research and Data Service ("VARDS") and Morningstar who rank
separate accounts or other investment products on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Contract. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.

From time to time the Separate Account may seek to illustrate performance of
MAAP. Because MAAP is a new program without an operating history, such
illustration may take the form of a comparative investment in the S&P 500, 10-
year Government Bonds and 13-week Treasury bills indices simultaneously in the
proportions recommended by the PaineWebber Asset Allocator Programs since 1973,
the date of its inception.

Any such illustration will disclose that MAAP does not involve investments in a
specific index but rather in the three Milestones portfolios and that the
performance of the indices does not necessarily correspond to the three
Milestones portfolios. In addition, it will be noted that certain fees, charges
and transaction costs are assessed with the Milestones annuity contract, which
are not reflected in the illustration.

PERFORMANCE

Money Market Division Yield and Effective Yield for the seven-day period ended
March 31, 1995 were: 3.88% and 3.95%, respectively.

The average total return for all the Divisions, except the Money Market, of the
Separate Account from inception to March 31, 1995 are as follows.

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<PAGE>

AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDED MARCH 31, 1995

<TABLE>
<CAPTION>
Since
Division Inception Date (1) 1 Year 5 Years Inception (1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strategic Fixed Income 11/15/93
With Surrender Charge -3.53% 5.38% 5.42%
Without Surrender Charge 1.46% 6.18% 5.42%
- --------------------------------------------------------------------------------------------------------
High Grade Fixed Income 11/5/93
With Surrender Charge -4.64% N/A -9.89%
Without Surrender Charge 0.35% N/A -6.21%
- --------------------------------------------------------------------------------------------------------
Global Income 9/15/93
With Surrender Charge -3.45% 5.51% 6.12%
Without Surrender Charge 1.54% 6.31% 6.12%
- --------------------------------------------------------------------------------------------------------
Balanced (formerly Asset Allocation) 10/29/93
With Surrender Charge -5.02% 5.11% 6.11%
Without Surrender Charge -0.02% 5.91% 6.11%
- --------------------------------------------------------------------------------------------------------
Growth and Income 9/15/93
With Surrender Charge -0.86% N/A -2.51%
Without Surrender Charge 4.13% N/A -0.91%
- --------------------------------------------------------------------------------------------------------
Growth 10/29/93
With Surrender Charge -4.34% 7.07% 9.77%
Without Surrender Charge 0.65% 7.82% 9.77%
- --------------------------------------------------------------------------------------------------------
Aggressive Growth 11/1/93
With Surrender Charge -1.29% N/A -3.36%
Without Surrender Charge 3.70% N/A 0.19%
- --------------------------------------------------------------------------------------------------------
Global Growth 9/15/93
With Surrender Charge -17.13% 0.85% 3.56%
Without Surrender Charge -12.13% 1.80% 3.56%
- --------------------------------------------------------------------------------------------------------
</TABLE>

(1) The various Divisions of the Separate Account first became operational
beginning in September 1993. Except for the High Grade Fixed Income and
Aggressive Growth Portfolios, the PaineWebber Series Trust which funds the
contracts became operational on earlier dates. Thus, the performance shown for
periods prior to the inception date of a particular Division is the performance
of the various Portfolios of PaineWebber Series Trust for those periods less the
charges at the contract level.

FINANCIAL STATEMENTS

The financial statements of PaineWebber Life Insurance Company contained herein
should be considered only for the purposes of informing investors as to its
ability to carry out contractual obligations as a sponsor under the Contracts as
described elsewhere herein and in the Prospectus. The financial statements of
the Separate Account are also included in this Statement of Additional
Information.

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