PROVIDENTMUTUAL VARIABLE LIFE SEPARATE ACCOUNT
485BPOS, 1996-05-01
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<PAGE>   1
 
   
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL   , 1996
    
                                                               FILE NO. 33-83138
                                                                        811-8722
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
 
                                    FORM S-6
 
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933
   
                         POST-EFFECTIVE AMENDMENT NO. 2
    
                             ---------------------
 
                         PROVIDENTMUTUAL VARIABLE LIFE
                                SEPARATE ACCOUNT
                           (EXACT NAME OF REGISTRANT)
 
                        PROVIDENTMUTUAL LIFE AND ANNUITY
                               COMPANY OF AMERICA
                              (NAME OF DEPOSITOR)
 
                             300 CONTINENTAL DRIVE
                                NEWARK, DE 19713
              (ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
 
       DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 454-5260
                             ---------------------
 
   
<TABLE>
<S>                                           <C>
               LINDA E. SENKER                                   COPY TO:
                LEGAL OFFICER                             STEPHEN E. ROTH, ESQ.
           PROVIDENTMUTUAL LIFE AND                    SUTHERLAND, ASBILL & BRENNAN
          ANNUITY COMPANY OF AMERICA                  1275 PENNSYLVANIA AVENUE, N.W.
             1050 WESTLAKES DRIVE                         WASHINGTON, D.C. 20004
               BERWYN, PA 19312                               (202) 383-0158
   (NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
    
 
                             ---------------------
 
     It is proposed that this filing will become effective (check appropriate
box)
 
           / / immediately upon filing pursuant to paragraph (b)
   
           /X/ on May 1, 1996 pursuant to paragraph (b)
    
           / / 60 days after filing pursuant to paragraph (a)
           / / on (date) pursuant to paragraph (a) of rule 485
 
   
     THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S MOST RECENT YEAR
WAS FILED ON FEBRUARY 27, 1996.
    
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2
 
                CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
 
<TABLE>
<CAPTION>
         N-3B-2
           ITEM                                    CAPTION IN PROSPECTUS
- -------------------------  ---------------------------------------------------------------------
<S>                        <C>
1                          Cover Page
2                          Cover Page
3                          Not Applicable
4                          Distribution of Policies
5                          Providentmutual Variable Life Separate Account
6(a)                       Providentmutual Variable Life Separate Account
6(b)                       Not Applicable
9                          Not Applicable
10(a) and (b)              Not Applicable
10(c) and (d)              Death Benefit; Transfers; Loan Privileges; Surrender Privilege;
                           Partial Withdrawal of Net Cash Surrender Value; Free-Look Privileges;
                           Special Transfer and Conversion Rights; Accelerated Death Benefit
10(e)                      Payment and Allocation of Premiums; Accelerated Death Benefit
10(f), (g), and (h)        Voting Rights, Changes in Applicable Law, Funding and Otherwise
10(i)                      Other Policy Provisions
11                         Providentmutual Life and Annuity Company of America: Providentmutual
                           Variable Life Separate Account; The Funds
12                         Providentmutual Variable Life Separate Accounts; The Funds
13(a), (b), and (c)        Payment and Allocation of Premiums; Charges and Deductions;
                           Accelerated Death Benefit
13(d), (e), (f), and (g)   Not Applicable
13(h)                      Charges Against the Separate Account
14                         Payment and Allocation of Premiums; Distribution of Policies;
                           Accelerated Death Benefit
15                         Payment and Allocation of Premiums
16                         Providentmutual Variable Life Separate Account; The Funds
17                         See items 10(c), (d), and (e)
18(a), (b), and (c)        Providentmutual Variable Life Separate Account; Death Benefit; Policy
                           Account Value
18(d)                      Not Applicable
19                         Policy Reports
20                         Not Applicable
21(a) and (b)              Loan Privileges; Accelerated Death Benefit
21(c)                      Not Applicable
22                         Not Applicable
23                         Officers and Directors of PLACA
24                         Not Applicable
25                         PLACA
26                         See Item 13(a), (b) and (c)
27                         Providentmutual Life and Annuity Company of America
</TABLE>
<PAGE>   3
 
<TABLE>
<CAPTION>
         N-3B-2
           ITEM                                    CAPTION IN PROSPECTUS
- -------------------------  ---------------------------------------------------------------------
<S>                        <C>
28                         Officers and Directors of PLACA
29                         Providentmutual Life and Annuity Company of America
30                         Not Applicable
31                         Not Applicable
32                         Not Applicable
33(a)                      Not Applicable
33(b)                      Distribution of Policies
34                         Not Applicable
35                         Providentmutual Life and Annuity Company of America; State
                           Regulation; Accelerated Death Benefit
36                         Not Applicable
37                         Not Applicable
38                         Distribution of Policies
39                         Distribution of Policies
40(a)                      Distribution of Policies
40(b)                      The Funds
41                         Distribution of Policies
42                         Not Applicable
43                         Not Applicable
44(a)                      Death Benefit; Policy Account Value; Accelerated Death Benefit
44(b) and (c)              Not Applicable
45                         Not Applicable
46(a)                      Death Benefit; Policy Account Value; Accelerated Death Benefit
46(b)                      Not Applicable
47                         Not Applicable
48                         Not Applicable
49                         Not Applicable
50                         Providentmutual Variable Life Separate Account
51                         Not Applicable
52(a), (b), and (c)        Voting Rights, Changes in Applicable Law, Funding and Otherwise
52(d)                      Not Applicable
53(a)                      Federal Income Tax Considerations
53(b)                      Not Applicable
54                         Not Applicable
55                         Not Applicable
</TABLE>
<PAGE>   4
 
                       PROSPECTUS
                       FOR
                       FLEXIBLE PREMIUM
                       ADJUSTABLE VARIABLE
                       LIFE INSURANCE
                       ISSUED BY
                       PROVIDENTMUTUAL LIFE AND ANNUITY
                       COMPANY OF AMERICA
 
   
<TABLE>
                              <S>                                                   <C>
                                                                                                   LOGO
                              PLACA VARIABLE LIFE                                    PROVIDENTMUTUAL LIFE AND ANNUITY
                              FORM 10071 5.96                                               COMPANY OF AMERICA
</TABLE>
    
<PAGE>   5
 
LOGO
                                                                      PROSPECTUS
- --------------------------------------------------------------------------------
           FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
                                   ISSUED BY
              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
           HOME OFFICE: 300 CONTINENTAL DRIVE, NEWARK, DELAWARE 19173
   
    ADMINISTRATIVE OFFICE: 1050 WESTLAKES DRIVE, BERWYN, PENNSYLVANIA 19312
    
   
                           TELEPHONE: (610) 407-1717
    
- --------------------------------------------------------------------------------
 
    This Prospectus describes a flexible premium adjustable variable life
insurance policy (the "Policy") offered by Providentmutual Life and Annuity
Company of America ("PLACA"). The Policy has an insurance component and an
investment component. The primary intended purpose of the Policy is to provide
insurance coverage until the Insured's Attained Age 100. It is designed to
provide considerable flexibility in connection with premium payments, investment
options, and death benefits. It does so by giving the Policyowner (the "Owner")
the right to vary the frequency and amount of premium payments (after the
initial premium), to allocate Net Premiums among investment alternatives with
different investment objectives and to increase or decrease the Death Benefit
payable under the Policy.
 
   
    After certain deductions are made, Net Premiums are allocated to one or more
Subaccounts of the Providentmutual Variable Life Separate Account, or the
Guaranteed Account (which is part of PLACA's General Account and pays interest
at declared rates guaranteed to equal or exceed 4%) or both. The Providentmutual
Variable Life Separate Account has twenty-two Subaccounts, the assets of which
are used to purchase shares of a designated corresponding mutual fund portfolio
(each, a "Portfolio") that is part of one of the following funds: The Market
Street Fund, Inc.; The Alger American Fund; Neuberger & Berman Advisers
Management Trust; TCI Portfolios, Inc.; Variable Insurance Products Fund;
Variable Insurance Products Fund II; and Van Eck Investment Trust (the "Funds").
    
 
    The portion of the Policy Account Value in the Subaccounts will vary with
the investment experience of the corresponding portfolios. The Owner bears the
entire investment risk for all amounts allocated to the Subaccounts; there is no
guaranteed minimum account value for the Subaccounts.
 
    The accompanying Prospectuses for the Funds describe the investment
objectives and the attendant risks of the Portfolios.
 
    The Policy Account Value will reflect the Monthly Deductions and certain
other fees and charges such as the Mortality and Expense Risk Charge. Also, a
surrender charge may be imposed if, during the first 10 Policy Years or within
10 years after a Face Amount increase, the Policy lapses or if the Owner effects
a decrease in Face Amount. Generally, during the first three Policy Years, the
Policy will remain in force as long as the Minimum Guarantee Premium is paid or
the Net Cash Surrender Value is sufficient to pay certain monthly charges
imposed in connection with the Policy. After the third Policy Year, whether the
Policy remains in force depends upon whether the Net Cash Surrender Value is
sufficient to pay the monthly charges under the Policy.
 
    It may not be advantageous to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional protection if the
purchaser already owns an adjustable variable life insurance policy.
                            ------------------------
 
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY CURRENT PROSPECTUSES FOR THE
FUNDS.
                            ------------------------
 
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
                            ------------------------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
                            ------------------------
 
   
                          Prospectus dated May 1, 1996
    
<PAGE>   6
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
Definitions...........................................................................      1
Summary Description of the Policy.....................................................      4
     The Policy Offered...............................................................      4
     Availability of Policy...........................................................      4
     The Death Benefit................................................................      5
     Flexibility to Adjust Amount of Death Benefit....................................      5
     Policy Account Value.............................................................      5
     Allocation of Net Premiums.......................................................      6
     Transfers........................................................................      6
     Free-Look Privilege..............................................................      6
     Charges Assessed in Connection with the Policy...................................      6
          Premium Expense Charge......................................................      6
          Monthly Deductions..........................................................      7
          Surrender Charge and Additional Surrender Charge............................      7
          Face Amount Increase Charge.................................................      7
          Transfer Charge.............................................................      8
          Partial Withdrawal Charge...................................................      8
          Daily Charges Against the Subaccounts.......................................      8
     Policy Lapse and Reinstatement...................................................      8
     Loan Privilege...................................................................      8
     Partial Withdrawal of Net Cash Surrender Value...................................      8
     Surrender of the Policy..........................................................      9
     Accelerated Death Benefit........................................................      9
     Tax Treatment....................................................................      9
     Unisex Policies..................................................................      9
     Illustrations of Death Benefits, Policy Account Value and Net Cash Surrender
      Value...........................................................................     10
The Company, Variable Account and Funds...............................................     10
     Providentmutual Life and Annuity Company of America..............................     10
     The Providentmutual Variable Life Separate Account...............................     10
     The Funds........................................................................     11
          The Market Street Fund, Inc. ...............................................     11
          The Alger American Fund.....................................................     13
          Variable Insurance Product Fund and Variable Insurance Products Fund II.....     13
          Neuberger & Berman Advisers Management Trust................................     16
          TCI Portfolios, Inc.........................................................     17
          Van Eck Investment Trust....................................................     18
     The Guaranteed Account...........................................................     20
Detailed Description of Policy Provisions.............................................     21
     Death Benefit....................................................................     21
          General.....................................................................     21
          Death Benefit Options.......................................................     21
               Option A...............................................................     21
               Option B...............................................................     21
          Which Death Benefit Option to Choose........................................     22
          Change in Death Benefit Option..............................................     22
          How the Death Benefit May Vary..............................................     23
     Ability to Adjust Face Amount....................................................     23
          Increase....................................................................     23
          Decrease....................................................................     23
     Insurance Protection.............................................................     24
</TABLE>
    
 
                                        i
<PAGE>   7
 
<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
     How the Duration of the Policy May Vary..........................................     24
     Policy Account Value.............................................................     25
          Calculation of Policy Account Value.........................................     25
          Determination of Number of Units for the Subaccounts........................     25
          Determination of Unit Value.................................................     25
          Net Investment Factor.......................................................     25
     Payment and Allocation of Premiums...............................................     25
          Issuance of a Policy........................................................     25
          Amount and Timing of Premiums...............................................     26
          Premium Limitations.........................................................     26
          Allocation of Net Premiums..................................................     27
          Transfers...................................................................     27
          Policy Lapse................................................................     28
          Reinstatement...............................................................     28
Charges and Deductions................................................................     28
     Premium Expense Charge...........................................................     28
          Premium Tax Charge..........................................................     28
          Percent of Premium Sales Charge.............................................     28
          Federal Tax Charge..........................................................     28
     Surrender Charges................................................................     29
          Deferred Administrative Charge..............................................     29
          Deferred Sales Charge.......................................................     29
          Additional Surrender Charge.................................................     29
          Surrender Charge Upon Decrease in Face Amount...............................     30
          Allocation of Surrender Charges.............................................     30
     Monthly Deductions...............................................................     30
          Cost of Insurance...........................................................     30
               Cost of Insurance Rate.................................................     31
               Premium Class..........................................................     31
          Monthly Administrative Charge...............................................     31
          Additional Benefit Charge...................................................     31
     Face Amount Increase Charge......................................................     31
     Partial Withdrawal Charge........................................................     32
     Transfer Charge..................................................................     32
     Charges Against the Separate Accounts............................................     32
          Mortality and Expense Risk Charge...........................................     32
     Other Charges....................................................................     32
Contract Rights.......................................................................     32
     Loan Privileges..................................................................     32
          General.....................................................................     32
          Interest Rate Charged.......................................................     33
          Allocation of Loans and Collateral..........................................     33
          Interest Credited to Loan Account...........................................     33
          Effect of Policy Loan.......................................................     33
          Loan Repayments.............................................................     33
          Tax Considerations..........................................................     33
     Surrender Privilege..............................................................     34
     Partial Withdrawal of Net Cash Surrender Value...................................     34
</TABLE>
 
                                       ii
<PAGE>   8
 
   
<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
     Accelerated Death Benefit........................................................     35
          Tax Consequences of the ADBR................................................     36
          Amount of the Accelerated Death Benefit.....................................     36
          Conditions for Receipt of the Accelerated Death Benefit.....................     36
          Operation of the ADBR.......................................................     36
          Effect on Existing Policy...................................................     36
     Free-Look Privileges.............................................................     37
          Free-Look for Policy........................................................     37
          Free-Look for Increase in Face Amount.......................................     37
     Special Transfer and Conversion Rights...........................................     37
          Transfer Right for Policy...................................................     37
          Conversion Privilege for Increase in Face Amount............................     37
          Transfer Right for Change in Investment Policy of a Subaccount..............     38
The Guaranteed Account................................................................     38
     Minimum Guaranteed and Current Interest Rates....................................     38
          Calculation of Guaranteed Account Value.....................................     38
     Transfers from Guaranteed Account................................................     39
Other Policy Provisions...............................................................     39
     Amount Payable on Final Policy Date..............................................     39
     Payment of Policy Benefits.......................................................     39
     The Contract.....................................................................     40
     Ownership........................................................................     40
     Beneficiary......................................................................     40
     Change of Owner and Beneficiary..................................................     40
     Split Dollar Arrangements........................................................     40
     Assignments......................................................................     40
     Misstatement of Age and Sex......................................................     40
     Suicide..........................................................................     41
     Incontestability.................................................................     41
     Settlement Options...............................................................     41
     Supplementary Benefits...........................................................     41
          Disability Waiver Benefit...................................................     41
          Disability Waiver of Premium Benefit........................................     41
          Change of Insured...........................................................     42
          Children's Term Rider.......................................................     42
Federal Income Tax Considerations.....................................................     42
     Introduction.....................................................................     42
     Tax Status of the Policy.........................................................     42
     Tax Treatment of Policy Benefits.................................................     43
          In General..................................................................     43
          Modified Endowment Contracts................................................     44
          Distributions from Policies Classified as Modified Endowment Contracts......     44
          Distributions from Policies Not Classified as Modified Endowment
          Contracts...................................................................     45
          Policy Loan Interest........................................................     45
          Investment in the Policy....................................................     45
          Multiple Policies...........................................................     45
     Special Rules for Pension and Profit-Sharing Plans...............................     45
     Possible Charge for PLACA's Taxes................................................     46
Policies Issued in Conjunction with Employee Benefit Plans............................     46
Legal Developments Regarding Unisex Actuarial Tables..................................     46
Voting Rights.........................................................................     47
</TABLE>
    
 
                                       iii
<PAGE>   9
 
   
<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
Changes in Applicable Law, Funding and Otherwise......................................     47
Officers and Directors of PLACA.......................................................     48
Distribution of Policies..............................................................     49
Policy Reports........................................................................     49
State Regulation......................................................................     50
Experts...............................................................................     50
Legal Matters.........................................................................     50
Appendix A--Illustration of Death Benefits, Policy Account Values and Net Cash
  Surrender Values....................................................................    A-1
Appendix B--Long Term Market Trends...................................................    B-1
Financial Statements..................................................................    F-1
</TABLE>
    
 
THE POLICY MAY NOT BE AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS. IF GIVEN, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE
RELIED ON.
 
THE PRIMARY PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE
INSURANCE PROTECTION. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR
COMPARABLE TO AN INVESTMENT IN A MUTUAL FUND.
 
                                       iv
<PAGE>   10
 
                                  DEFINITIONS
 
ADDITIONAL SURRENDER
CHARGE.....................   The separately determined deferred sales charge
                              deducted from the Policy Account Value upon
                              surrender or lapse of the Policy within 10 years
                              of the effective date of an increase in Face
                              Amount. A pro-rata Additional Surrender Charge
                              will be deducted for a reduction in Face Amount
                              within 10 years of the effective date of a Face
                              Amount increase. The Maximum Additional Surrender
                              Charge will be shown in the Policy Schedule Pages
                              reflecting the Face Amount increase.
 
ATTAINED AGE...............   The Issue Age of the Insured plus the number of
                              full Policy Years since the Policy Date.
 
BENEFICIARY................   The person(s) or entity(ies) designated to receive
                              all or some of the Insurance Proceeds when the
                              Insured dies. The Beneficiary is desig-
                              nated in the application or if subsequently
                              changed, as shown in the latest change filed with
                              PLACA. If no Beneficiary survives and unless
                              otherwise provided, the Insured's estate will be
                              the Beneficiary.
 
CASH SURRENDER VALUE.......   The Policy Account Value minus any applicable
                              Surrender Charge or Additional Surrender Charge.
 
DEATH BENEFIT..............   Under Option A, the greater of the Face Amount or
                              a percentage of the Policy Account Value on the
                              date of death; under Option B, the greater of the
                              Face Amount plus the Policy Account Value on the
                              date of death, or a percentage of the Policy
                              Account Value on the date of death. The Death
                              Benefit Option is selected at time of application
                              but may be later changed.
 
DURATION...................   The number of full years the insurance has been in
                              force -- for the Initial Face Amount, measured
                              from the Policy Date; for any increase in Face
                              Amount, measured from the effective date of such
                              increase.
 
FACE AMOUNT................   The Initial Face Amount plus any increases in Face
                              Amount and minus any decreases in Face Amount.
 
FINAL POLICY DATE..........   The Policy Anniversary nearest Insured's Attained
                              Age 100 at which time the Policy Account Value, if
                              any, (less any outstanding Policy loan and accrued
                              interest) will be paid to the Owner if the Insured
                              is living. The Policy will end on the Final Policy
                              Date.
 
GRACE PERIOD...............   The 61-day period allowed for payment of a premium
                              following the date PLACA mails notice of the
                              amount required to keep the Policy in force.
 
INITIAL FACE AMOUNT........   The Face Amount of the Policy on the Issue Date.
                              The Face Amount may be increased or decreased
                              after issue.
 
INSURANCE PROCEEDS.........   The net amount to be paid to the Beneficiary when
                              the Insured dies.
 
INSURED....................   The person upon whose life the Policy is issued.
 
ISSUE AGE..................   The age of the Insured at his or her birthday
                              nearest the Policy Date. The Issue Age is stated
                              in the Policy.
 
LOAN ACCOUNT...............   The account to which the collateral for the amount
                              of any Policy loan is transferred from the
                              Subaccounts and/or the Guaranteed Account.
 
MINIMUM ANNUAL PREMIUM.....   The annual amount which is used to determine the
                              Minimum Guarantee Premium. This amount is stated
                              in each Policy.
 
                                        1
<PAGE>   11
 
MINIMUM FACE AMOUNT........   The Minimum Face Amount is $50,000 for all Premium
                              Classes except preferred. For the preferred
                              Premium Class, the Minimum Face Amount is
                              $100,000.
 
MINIMUM GUARANTEE
PREMIUM....................   The Minimum Annual Premium multiplied by the
                              number of months since the Policy Date (including
                              the current month) divided by 12.
 
MINIMUM INITIAL PREMIUM....   Equal to the Minimum Annual Premium multiplied by
                              the following factor for the specified premium
                              mode at issue: Annual -- 1.0; Semi-annual -- 0.5;
                              Quarterly -- 0.25; Monthly -- 0.167.
 
MONTHLY DEDUCTIONS.........   The amount deducted from the Policy Account Value
                              on each Policy Processing Day. It includes the
                              Monthly Administrative Charge, the Monthly Cost of
                              Insurance Charge, and the monthly cost of any
                              benefits provided by riders.
 
NET AMOUNT AT RISK.........   The amount by which the Death Benefit exceeds the
                              Policy Account Value.
 
NET CASH SURRENDER VALUE...   The Policy Account Value minus any applicable
                              contingent surrender charges, minus any
                              outstanding Policy loans and accrued interest.
 
NET PREMIUMS...............   The remainder of a premium after the deduction of
                              the Premium Expense Charge.
 
OWNER......................   The person(s) or entity(ies) entitled to exercise
                              the rights granted in the Policy.
 
PLANNED PERIODIC PREMIUM...   The premium amount which the Owner plans to pay at
                              the frequency selected. The Owner is entitled to
                              receive a reminder notice and change the amount of
                              the Planned Periodic Premium. The Owner is not
                              required to pay the designated amount.
 
POLICY ACCOUNT VALUE.......   The sum of the Policy's values in the Subaccounts,
                              the Guaranteed Account, and the Loan Account.
 
POLICY ANNIVERSARY.........   The same day and month as the Policy Date in each
                              later year.
 
POLICY DATE................   The date set forth in the Policy that is used to
                              determine Policy Years and Policy Processing Days.
                              The Policy Date is generally the same as the Issue
                              Date but may be another date mutually agreed upon
                              by PLACA and the proposed Insured.
 
POLICY ISSUE DATE..........   The date on which the Policy is issued. It is used
                              to measure suicide and contestable periods.
 
POLICY PROCESSING DAY......   The day in each calendar month which is the same
                              day of the month as the Policy Date. The first
                              Policy Processing Day is the Policy Date.
 
POLICY YEAR................   A year that starts on the Policy Date or on a
                              Policy Anniversary.
 
PREMIUM CLASS..............   The classification of the Insured for cost of
                              insurance purposes. The classes are: standard;
                              nonsmoker; with extra rating and nonsmoker with
                              extra rating.
 
PREMIUM EXPENSE CHARGE.....   The amount deducted from a premium payment which
                              consists of the Premium Tax Charge, the Percent of
                              Premium Sales Charge and the Federal Tax Charge.
 
                                        2
<PAGE>   12
 
SUBACCOUNT.................   A division of the Providentmutual Variable Life
                              Separate Account. The assets of each Subaccount
                              are invested exclusively in a corresponding mutual
                              fund Portfolio that is part of one of the Funds.
 
SURRENDER CHARGE...........   The amount deducted from the Policy Account Value
                              upon lapse or surrender of the Policy during the
                              first 10 Policy Years. A pro-rata Surrender Charge
                              will be deducted upon a decrease in the Initial
                              Face Amount during the first 10 Policy Years. The
                              Maximum Surrender Charge is shown in the Policy.
                              The Surrender Charge is determined separately from
                              the Additional Surrender Charge.
 
VALUATION DAY..............   Each day that the New York Stock Exchange is open
                              for business and any other day on which there is a
                              sufficient degree of trading with respect to a
                              Subaccount's portfolio of securities to materially
                              affect the value of that Subaccount.
 
VALUATION PERIOD...........   The time between two successive Valuation Days.
                              Each Valuation Period includes a Valuation Day and
                              any non-Valuation Day or consecutive non-Valuation
                              Days immediately preceding it.
 
                                        3
<PAGE>   13
 
                       SUMMARY DESCRIPTION OF THE POLICY
 
     The following summary of the Policy provisions should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus.
 
THE POLICY OFFERED
 
     The Flexible Premium Adjustable Variable Life Insurance Policy (the
"Policy") offered by this Prospectus is issued by Providentmutual Life and
Annuity Company of America ("PLACA"). The Policy allows the Owner, subject to
certain limitations, to make premium payments in any amount and at any
frequency. As long as the Policy remains in force, it will provide for:
 
     (1) Life insurance coverage on the named Insured up to the Insured's
Attained Age 100;
 
     (2) A Cash Surrender Value;
 
     (3) Surrender and withdrawal rights and Policy loan privileges; and
 
     (4) A variety of additional insurance benefits.
 
     The Policy described in this Prospectus is designed to provide insurance
coverage to help lessen the economic loss resulting from the death of the
Insured. It is not primarily offered as an investment. A potential Owner should
evaluate the need for insurance and long term investment potential before
purchasing a Policy.
 
     The Policy is called "flexible premium" because there is no fixed schedule
for premium payments, even though the Owner may establish a schedule of Planned
Periodic Premiums. The Policy is described as "adjustable" because the Owner
may, within limits, increase or decrease the Face Amount and may change the
Death Benefit Option. The Policy is called "variable" because, unlike a fixed
benefit whole life insurance policy, the Death Benefit under the Policy may, and
its Account Value will, vary to reflect the investment performance of the chosen
Subaccounts, and the crediting of interest to the Guaranteed Account, as well as
other factors.
 
     The failure to pay Planned Periodic Premiums will not itself cause the
Policy to lapse. Conversely, the payment of premiums in any amount or frequency
will not necessarily guarantee that the Policy will remain in force. In general,
the Policy will lapse if the Net Cash Surrender Value is insufficient to pay the
Monthly Deduction for cost of insurance and administrative charges. During the
first three Policy Years the Policy will not lapse if the Minimum Guarantee
Premium has been paid, even if the Net Cash Surrender Value is insufficient.
 
     After deduction of the Premium Expense Charge, Net Premiums are allocated
to one or more of the Subaccounts and/or the Guaranteed Account as selected by
the Owner. The Guaranteed Account is part of PLACA's General Account.
 
   
     Providentmutual Variable Life Separate Account consists of twenty-two
Subaccounts, the assets of which are used to purchase shares of a designated
corresponding mutual fund portfolio (each, a "Portfolio") that is part of one of
the following funds: The Market Street Fund, Inc.; The Alger American Fund;
Neuberger & Berman Advisers Management Trust; TCI Portfolios, Inc.; Van Eck
Investment Trust; Variable Insurance Products Fund; and Variable Insurance
Products Fund II (the "Funds", each, a "Fund"). There is no assurance that the
investment objectives of a particular Portfolio will be met. The Owner bears the
entire investment risk of amounts allocated to the Subaccounts.
    
 
     Before purchasing a Policy, a prospective Owner should ask his or her PLACA
representative whether changing, or adding to, current insurance coverage would
be advantageous. Generally, it is not advisable to purchase another policy as a
replacement for existing coverage.
 
AVAILABILITY OF POLICY
 
     This Policy can be issued for Insureds from Issue Ages 1 to 80. The Minimum
Face Amount is generally $50,000 ($100,000 if the Premium Class is preferred).
Before issuing a Policy, PLACA will require that the
 
                                        4
<PAGE>   14
 
   
proposed Insured meet certain underwriting standards satisfactory to PLACA. The
Premium Classes available are Standard, Nonsmoker, with extra rating and
Nonsmoker with extra rating. (See "Issuance of a Policy," Page 25.)
    
 
THE DEATH BENEFIT
 
     As long as the Policy remains in force, PLACA will pay the Insurance
Proceeds to the Beneficiary upon receipt of due proof of the death of the
Insured. The Insurance Proceeds will consist of the Policy's Death Benefit, plus
any relevant additional benefits provided by a supplementary benefit rider, less
any outstanding Policy loan and accrued interest, less any unpaid Monthly
Deductions.
 
   
     There are two Death Benefit Options available. Death Benefit Option A
provides for the greater of (a) the Face Amount and (b) the applicable
percentage of the Policy Account Value. Death Benefit Option B provides for the
greater of (a) the Face Amount plus the Policy Account Value and (b) the
applicable percentage of the Policy Account Value. (See "Death Benefit Options,"
Page 21.)
    
 
FLEXIBILITY TO ADJUST AMOUNT OF DEATH BENEFIT
 
   
     After the first Policy Year, the Owner has significant flexibility to
adjust the Death Benefit by changing the Death Benefit Option or by increasing
or decreasing the Face Amount of the Policy. (See "Change in Death Benefit
Option," Page 22, and "Ability to Adjust Face Amount," Page 23.) The minimum
amount of a requested increase in Face Amount is $25,000 (or such lesser amount
required in a particular state) and any requested increase may require evidence
of insurability. Any decrease in Face Amount must be for at least $25,000 (or
such lesser amount required in a particular state) and cannot result in a Face
Amount less than the Minimum Face Amount available. PLACA reserves the right to
establish different Minimum Face Amounts for Policies issued in the future.
    
 
   
     Any change in Death Benefit Options or in the Face Amount may affect the
charges under the Policy. Any increase in the Face Amount will result in an
increase in the Monthly Deductions and any increase in Face Amount will also
increase the surrender charges which are imposed upon lapse or surrender of the
Policy or the pro-rata surrender charges imposed upon a decrease in Face Amount
within the relevant ten-year period. For any decrease in Face Amount, that part
of the surrender charges attributable to the decrease will reduce the Policy
Account Value, and the surrender charges will be reduced by this amount. A
decrease in Face Amount may also affect cost of insurance charges. (See "Cost of
Insurance," Page 30.)
    
 
     To the extent that a requested decrease in Face Amount would result in
cumulative premiums exceeding the maximum premium limitations applicable under
the Internal Revenue Code for life insurance, PLACA will not effect the
decrease.
 
POLICY ACCOUNT VALUE
 
   
     The Policy Account Value is the total amount of value held under the Policy
at any time. It equals the sum of the amounts held in the Subaccounts, the
Guaranteed Account and the Loan Account. (See "Calculation of Policy Account
Value," Page 25.)
    
 
     The Policy Account Value in the Subaccounts will reflect the investment
performance of the chosen Subaccounts, any Net Premiums paid, any transfers, any
partial withdrawals, any loans, any loan repayments, any loan interest paid or
credited and any charges assessed in connection with the Policy. The Owner bears
the entire investment risk for amounts allocated to the Subaccounts. There is no
guaranteed minimum for the portion of the Policy Account Value in the
Subaccounts.
 
   
     The Guaranteed Account earns interest at rates PLACA declares in advance
for specific periods. The rates are guaranteed to equal or exceed 4%. The
principal, after deductions, is also guaranteed. The value of the Guaranteed
Account will reflect any amounts allocated or transferred to it plus interest
credited to it, less amounts deducted, transferred or withdrawn from it. (See
"The Guaranteed Account," Page 38.)
    
 
                                        5
<PAGE>   15
 
   
     The Loan Account will reflect any amounts transferred from the Subaccounts
and/or Guaranteed Account as collateral for Policy loans plus interest of at
least 4% credited to such amount. (See "Loan Privileges," Page 32.)
    
 
     The Policy Account Value is relevant to the computation of the Death
Benefit and cost of insurance charges.
 
ALLOCATION OF NET PREMIUMS
 
     Except as described below, Net Premiums will generally be allocated to the
Subaccounts and the Guaranteed Account in accordance with the allocation
percentages which are in effect for such premium when received by PLACA's
Administrative Office. These percentages will be those specified in the
application or as subsequently changed by the Owner or as specified for a
particular premium payment.
 
   
     Where state law requires a return of gross premiums paid when a Policy is
returned under the Free-Look provision (see "Free-Look for Policy," Page 37) any
portion of the Initial Net Premium and any Net Premiums received before the
expiration of a 15-day period beginning on the later of the Policy Issue Date or
the date PLACA receives the Minimum Initial Premium, which are to be allocated
to the Subaccounts will be allocated to the Money Market Subaccount. At the end
of the 15-day period, the amount in the Money Market Subaccount (including
investment experience) will be allocated to each of the chosen Subaccounts based
on the proportion that the allocation percentage for such Subaccount bears to
the sum of the Subaccount premium allocation percentages. (See "Allocation of
Net Premiums," Page 27.)
    
 
TRANSFERS
 
   
     The Owner may make transfers of the amounts in the Subaccounts and
Guaranteed Account between and among such accounts. Transfers between and among
the Subaccounts or into the Guaranteed Account will be made on the date we
receive the request. PLACA requires a minimum amount for each such transfer,
usually $1,000. Transfers out of the Guaranteed Account may only be made within
30 days of a Policy Anniversary and are limited in amount. If the Owner makes
more than four transfers in a Policy Year, a Transfer Charge of $25 will be
deducted from the amount being transferred. (See "Transfers," Page 27.)
    
 
FREE-LOOK PRIVILEGE
 
   
     The Policy provides for an initial Free-Look period. The Owner may cancel
the Policy before the latest of: (a) 45 days after Part I of the Application for
the Policy is signed; (b) 10 days after the Owner receives the Policy; and (c)
10 days after PLACA mails or personally delivers a Notice of Withdrawal Right to
the Owner. Upon returning the Policy to PLACA or to an agent of PLACA within
such time with a written request for cancellation, the Owner will receive a
refund equal to the sum of: (i) the Policy Account Value as of the date PLACA
receives the returned Policy; plus (ii) the amount deducted for premium taxes;
plus (iii) any Monthly Deductions charged against the Policy Account Value; plus
(iv) an amount reflecting other charges directly or indirectly deducted under
the Policy. Where state law requires a minimum refund equal to gross premiums
paid, the refund will instead equal the gross premium paid on the Policy and
will not reflect the investment experience of the Subaccounts. (See "Free-Look
Privileges," Page 37.)
    
 
   
     A Free-Look privilege also applies after a requested increase in Face
Amount. (See "Free-Look For Increase in Face Amount," Page 37.)
    
 
CHARGES ASSESSED IN CONNECTION WITH THE POLICY
 
     Premium Expense Charge.  A Premium Charge will be deducted from each
premium payment. This charge consists of:
 
     (i) Premium Tax Charge for state and local premium taxes based on the rate
for the Insured's residence at the time the premium is paid. PLACA reserves the
right to change the amount of the charge deducted from future premiums if the
Insured's residence changes or the applicable law is changed;
 
                                        6
<PAGE>   16
 
   
     (ii) Percent of Premium Sales Charge which is equal to 2% of the amount of
the premium payment. (See "Premium Expense Charge," Page 28.) PLACA currently
intends to stop deducting this charge once the aggregate amount collected equals
or exceeds a specified amount.
    
 
   
     (iii) Federal Tax Charge equal to 1.25% of the amount of the premium
payment. PLACA reserves the right to change the amount of this charge if the
applicable Federal Tax law changes PLACA's tax burden. (See "Premium Expense
Charge," Page 28.)
    
 
   
     Monthly Deductions.  On the Policy Date and on each Policy Processing Date
thereafter, the Policy Account Value will be reduced by a Monthly Deduction
equal to the sum of the monthly Cost of Insurance Charge, Monthly Administrative
Charge and a charge for additional benefits added by rider. The monthly Cost of
Insurance Charge will be determined by multiplying the Net Amount at Risk (that
is the Death Benefit less Policy Account Value) by the applicable cost of
insurance rate(s), which will depend upon the Attained Age, Sex, Premium Class
of the Insured and Duration and on PLACA's expectations as to future mortality
and expense experience, but which will not exceed the guaranteed maximum cost of
insurance rates set forth in the Policy based on the Insured's Attained Age,
Sex, Premium Class, and the "1980 Commissioners Standard Ordinary Smoker and
Nonsmoker Mortality Table." (See "Cost of Insurance," Page 30.) The Monthly
Administrative Charge is currently $7.50; the maximum permissible Monthly
Administrative Charge is $12. (See "Monthly Administrative Charge," Page 31.)
    
 
   
     Surrender Charge and Additional Surrender Charge.  A Surrender Charge is
imposed if the Policy is surrendered or lapses at any time before the end of the
tenth Policy Year. The Surrender Charge consists of a Deferred Administrative
Charge and a Deferred Sales Charge. A portion of this Surrender Charge will be
deducted if the Owner decreases the Initial Face Amount before the end of the
tenth Policy Year. (See "Surrender Charges," Page 29.) An Additional Surrender
Charge which is a Deferred Sales Charge, will be imposed if the Policy is
surrendered or lapses at any time within ten years after the effective date of
an increase in Face Amount. (See "Additional Surrender Charge," Page 29.) A
portion of an Additional Surrender Charge will be deducted if the related
increment of Face Amount is decreased within ten years after such increase took
effect. (See "Surrender Charge Upon Decrease in Face Amount," Page 30.)
    
 
     The Deferred Administrative Charge is equal to an amount per $1,000 of Face
Amount (shown below) in Policy Years 1 to 6 declining by 20% each year in Policy
Years 7 to 10 until it is zero in Policy Year 11.
 
<TABLE>
<CAPTION>
              CHARGE PER $1,000
ISSUE AGE      OF FACE AMOUNT
- ----------    -----------------
<S>           <C>
   1-5               $ 2
    15                 3
    25                 4
  35-80                5
</TABLE>
 
     For Issue Ages not shown the charge will increase by a ratable portion for
each full year.
 
     The Deferred Sales Charge is equal to 28% of the premiums received during
the first Policy Year (or, for the Additional Surrender Charge, the first twelve
policy months after an increase) up to one target premium (which is an amount,
based on the age, Sex and Premium Class of the Insured, used solely for the
purpose of calculating the Surrender Charge) plus 7% of all other premiums
received to the date of surrender, lapse or decrease. The Deferred Sales Charge
and any Deferred Additional Sales Charges, however, will not exceed the Maximum
Deferred Sales Charge and Maximum Deferred Additional Sales Charges,
respectively. During Policy Years one through six (or for six years following
the effective date of an increase in Face Amount), this maximum equals 60% of
the target premium for the Initial Face Amount (or 60% of the target premium for
the increase, as the case may be). The maximum declines to 48% of the relevant
target premiums during the seventh year, 36% during the eighth year, 24% during
the ninth year and 12% during the tenth year.
 
     Face Amount Increase Charge.  A charge, currently $100 plus $1.00 per
$1,000 Face Amount increase, will be deducted from the Policy Account Value on
the effective date of an increase in Face Amount to compensate PLACA for
administrative expenses in connection with the increase. This charge may be
 
                                        7
<PAGE>   17
 
   
increased in the future but in no event will it exceed $100 plus $3.00 per
$1,000 Face Amount increase. (See "Face Amount Increase Charge," Page 31.)
    
 
   
     Transfer Charge.  After the fourth transfer between accounts in a Policy
Year, a $25 charge for each additional transfer will be deducted from the amount
transferred to compensate PLACA for administrative costs in handling such
transfers. (See "Transfer Charge," Page 32.)
    
 
   
     Partial Withdrawal Charge.  A charge equal to $25 will be deducted by PLACA
from the Policy Account Value to compensate it for its costs. (See "Partial
Withdrawal Charge," Page 32.)
    
 
   
     Daily Charges Against the Subaccounts.  A daily charge for PLACA's
assumption of certain mortality and expense risks incurred in connection with
the Policy will be imposed at an annual rate which is currently 0.65% of the
average daily net assets of the Separate Account. This charge may be increased
in the future but in no event will it exceed an annual rate of 0.90%. (See
"Charges Against the Separate Accounts," Page 32.)
    
 
     Shares of the Portfolios are purchased by the Subaccounts at net asset
value which reflects management fees and expenses deducted from the assets of
the Portfolios.
 
POLICY LAPSE AND REINSTATEMENT
 
   
     During the first three Policy Years, the Policy will lapse if the Minimum
Guarantee Premium has not been paid and if the Net Cash Surrender Value is
insufficient to cover the Monthly Deductions and a 61-day Grace Period expires
without a sufficient premium payment. After the third Policy Year the Policy
will lapse if the Net Cash Surrender Value is insufficient and the Grace Period
lapses without a sufficient premium payment. The failure to pay a Planned
Periodic Premium will not itself cause a Policy to lapse. (See "Policy Lapse,"
Page 28.)
    
 
   
     Subject to certain conditions, including evidence of insurability
satisfactory to PLACA and the payment of a sufficient premium, a Policy may be
reinstated at any time within three years (or such longer period as may be
required in a particular state) after the expiration of the Grace Period and
before the Final Policy Date. (See "Reinstatement," Pages 28.)
    
 
LOAN PRIVILEGE
 
     The Owner may obtain Policy loans in a minimum amount of $500 (or such
lesser minimum as may be required in a particular state) but not exceeding, in
the aggregate, the Net Cash Surrender Value.
 
     Policy loans will bear interest at a fixed rate of 6% per year, payable at
the end of each Policy Year. If interest is not paid when due, it will be added
to the outstanding loan balance. Policy loans may be repaid at any time and in
any amount prior to the Final Policy Date.
 
   
     Policy loans are allocated to the Subaccounts and the Guaranteed Account
based on the proportion that each account's value bears to the total unloaned
Policy Account Value. Based on this allocation, the collateral for the loan is
deducted from each account and transferred to the Loan Account. This amount in
the Loan Account will earn interest at an effective annual rate PLACA will
determine prior to each calendar year. This rate will not be less than 4%. (See
"Loan Privileges," Page 32.)
    
 
   
     Depending upon the investment performance of the Subaccounts and the
amounts borrowed, loans may cause a Policy to lapse. Lapse of the Policy with
outstanding loans may result in adverse tax consequences. (See "Tax Treatment of
Policy Benefits," Page 43.)
    
 
PARTIAL WITHDRAWAL OF NET CASH SURRENDER VALUE
 
     After the first Policy Year, the Owner may, subject to certain
restrictions, request a partial withdrawal of Net Cash Surrender Value. The
minimum amount for such withdrawal is $1,500. An expense charge of $25 will be
deducted from the Policy Account Value for each withdrawal. The withdrawal
amount and expense charge will be allocated to the Subaccounts and the
Guaranteed Account based on the proportion that the value in each account bears
to the total unloaned Policy Account Value. If Death Benefit Option A is in
effect,
 
                                        8
<PAGE>   18
 
   
PLACA will reduce the Face Amount by the amount of the withdrawal. (See "Partial
Withdrawal of Net Cash Surrender Value," Page 34.)
    
 
SURRENDER OF THE POLICY
 
   
     The Owner may at any time fully surrender the Policy and receive the Net
Cash Surrender Value, if any. The Net Cash Surrender Value will equal the Policy
Account Value less any Policy loan and any applicable surrender charges. (See
"Surrender Privilege," Page 34.)
    
 
ACCELERATED DEATH BENEFIT
 
   
     Under the Accelerated Death Benefit Rider, an Owner may receive, at his or
her request and upon approval by PLACA, accelerated payment of part of the
Policy's Death Benefit if the Insured develops a Terminal Illness or is
permanently confined to a Nursing Care Facility (see "Accelerated Death
Benefit," Page 35.)
    
 
TAX TREATMENT
 
     PLACA believes (based upon Notice 88-128 and the proposed Regulations under
Section 7702, issued on July 5, 1991) that a Policy issued on a standard premium
class basis generally should meet the Section 7702 definition of a life
insurance contract. With respect to a Policy issued on an extra rating (i.e.,
substandard) basis, there is insufficient guidance to determine if such a Policy
would satisfy the Section 7702 definition of a life insurance contract,
particularly if the Owner pays the full amount of premiums permitted under such
a Policy. An Owner of a Policy issued on an extra rating basis may, however,
adopt certain self-imposed limitations on the amount of premiums paid for such a
Policy which should cause the Policy to meet the Section 7702 definition of a
life insurance contract. Any Owner contemplating the adoption of such
limitations should do so only after consulting a tax adviser.
 
   
     Assuming that a Policy qualifies as a life insurance contract for Federal
income tax purposes, a Policyowner should not be deemed to be in constructive
receipt of Policy Account Value under a Policy until there is a distribution
from the Policy. Moreover, death benefits payable under a Policy should be
completely excludable from the gross income of the Beneficiary. As a result, the
Beneficiary generally should not be taxed on these proceeds. (See "Tax Status of
the Policy," Page 42.)
    
 
   
     Under certain circumstances, a Policy may be treated as a "Modified
Endowment Contract." If the Policy is a Modified Endowment Contract, then all
pre-death distributions, including Policy loans, will be treated first as a
distribution of taxable income and then as a return of basis or investment in
the contract. In addition, prior to age 59 1/2 any such distributions generally
will be subject to a 10% penalty tax. (For further discussion on the
circumstances under which a Policy will be treated as a Modified Endowment
Contract, See "Tax Treatment of Policy Benefits," Page 43.)
    
 
   
     If the Policy is not a Modified Endowment Contract, distributions generally
will be treated first as a return of basis or investment in the contract and
then as disbursing taxable income. Moreover, loans will not be treated as
distributions. Finally, neither distributions nor loans from a Policy that is
not a Modified Endowment Contract are subject to the 10% penalty tax. (See
"Distributions from Policies Not Classified as Modified Endowment Contracts,"
Page 44.)
    
 
   
UNISEX POLICIES
    
 
   
     Policies issued in states which require "unisex" policies (currently
Montana) provide for policy values which do not vary by the sex of the Insured.
(See "Cost of Insurance," Page 30.) In addition, Policies issued in conjunction
with employee benefit plans provide for policy values which do not vary by the
sex of the Insured. (See "Policies Issued in Conjunction with Employee Benefit
Plans," Page 46.) Thus, references in this Prospectus to sex-distinct and any
values that vary by the sex of the Insured are not applicable to Policies issued
in states which require "unisex" policies or to Policies issued in conjunction
with employee benefit
    
 
                                        9
<PAGE>   19
 
plans. Illustrations of the effect of these unisex rates on premiums, cash
surrender values, and Death Benefits are available from PLACA on request.
 
ILLUSTRATIONS OF DEATH BENEFITS, POLICY ACCOUNT VALUE AND NET CASH SURRENDER
VALUE
 
     Illustrations of how investment performance of the Subaccounts may cause
Death Benefits, the Policy Account Value and the Net Cash Surrender Value to
vary are included in Appendix A commencing on page A-1. Illustrations in this
Prospectus or used in connection with the purchase of the Policy are based on
hypothetical investment rates of return. These rates are not guaranteed. They
are illustrative only and should not be deemed a representation of past or
future performance. Actual rates of return may be more or less than those
reflected in the illustrations and, therefore, actual values will be different
than those illustrated.
 
                    THE COMPANY, VARIABLE ACCOUNT AND FUNDS
 
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
 
   
     The Contracts are issued by PLACA which is a stock life insurance company
incorporated under the name of Washington Square Life Insurance Company in the
Commonwealth of Pennsylvania in 1958. The name of the Company was changed from
Washington Square to PLACA in 1991 and the Company was redomiciled as a Delaware
insurance company in December, 1992. PLACA is currently licensed to transact
life insurance business in 48 states and the District of Columbia. As of
December 31, 1995, PLACA had total assets of approximately $625 million.
    
 
   
     PLACA is a wholly-owned subsidiary of Provident Mutual Life Insurance
Company ("PMLIC"). PMLIC was chartered by the Commonwealth of Pennsylvania in
1865 and at the end of 1995 had total assets of approximately $4.9 billion.
PMLIC and PLACA entered into a Support Agreement on April 5, 1993, pursuant to
which PMLIC agreed to ensure that PLACA's capital and surplus will be maintained
at certain levels and that PLACA will maintain cash or cash equivalents in an
amount sufficient for the payment of benefits and other contractual claims under
contracts issued by PLACA. This agreement may not be modified or terminated
prior to January 1, 1998, and then only under certain circumstances. Other than
this Support Agreement, PMLIC is under no obligation to invest money in PLACA
nor is it in any way a guarantor of PLACA's contractual obligations or
obligations under the Contract.
    
 
     PLACA is subject to regulation by the Insurance Department of the State of
Delaware as well as by the insurance departments of all other states and
jurisdictions in which it does business. PLACA submits annual statements on its
operations and finances to insurance officials in such states and jurisdictions.
The forms for the Contract described in this Prospectus are filed with and
(where required) approved by insurance officials in each state and jurisdiction
in which Contracts are sold.
 
THE PROVIDENTMUTUAL VARIABLE LIFE SEPARATE ACCOUNT
 
     The Providentmutual Variable Life Separate Account (the "Variable Account")
is a separate investment account of PLACA, established by the Board of Directors
of PLACA, under Delaware law to support the operation of the Policy and to
support other variable life insurance policies. PLACA has caused the Variable
Account to be registered with the Securities and Exchange Commission (the "SEC")
as a unit investment trust under the Investment Company Act of 1940 (the "1940
Act"). Such registration does not involve supervision by the SEC of the
management or investment policies or practices of the Variable Account.
 
   
     The assets of the Variable Account are owned by PLACA. However, these
assets are held separate from other assets and are not part of PLACA's General
Account. The portion of the assets of the Variable Account equal to the reserves
or other contract liabilities of the Variable Account will not be charged with
liabilities that arise from any other business PLACA conducts. PLACA may
transfer to its General Account any assets of the Variable Account that exceed
the reserves and the Contract liabilities of the Variable Account (which will
always be at least equal to the aggregate Contract value allocated to the
Variable Account under the Contracts).
    
 
                                       10
<PAGE>   20
 
     The income, gains and losses, realized or unrealized, from assets allocated
to the Variable Account are credited to or charged against the Variable Account
without regard to other income, gains or losses of PLACA. PLACA may accumulate
in the Variable Account the charge for mortality and expense risks, mortality
gains and losses and investment results applicable to those assets that are in
excess of the net assets supporting the Contracts. An Owner will share only in
the income, gains and losses of the particular Subaccounts to which his or her
Net Premium payments have been allocated or to which portions of the Policy
Account Value have been transferred.
 
   
     The Variable Account currently has twenty-two Subaccounts: Growth; Money
Market; Bond; Managed; Aggressive Growth; International; Alger American Small
Capitalization; Fidelity Asset Manager; Fidelity Contrafund; Fidelity Equity
Income; Fidelity Growth; Fidelity High Income; Fidelity Index 500; Fidelity
Investment Grade Bond; Fidelity Overseas; Neuberger & Berman Balanced; Neuberger
& Berman Growth; Neuberger & Berman Limited Maturity Bond; TCI Growth; Van Eck
Global Bond; Van Eck Gold and Natural Resources; and Van Eck Worldwide Emerging
Markets. The assets of each Subaccount are invested exclusively in shares of a
corresponding Portfolio of a designated Fund.
    
 
THE FUNDS
 
   
     The Variable Account currently consists of twenty-two Subaccounts and
currently invests in portfolios of seven series-type mutual funds: Market Street
Fund, Inc.; The Alger American Fund; Neuberger & Berman Advisers Management
Trust; TCI Portfolios, Inc.; Van Eck Investment Trust; Variable Insurance
Products Fund; and Variable Insurance Products Fund II (collectively, the
"Funds"). Each of the Funds are registered with the SEC under the 1940 Act as an
open-end diversified investment company. The SEC does not, however, supervise
the management or the investment practices and policies of the Funds.
    
 
     The assets of each Fund portfolio are separate from other portfolios of
that Fund and each portfolio has separate investment objectives and policies. As
a result, each portfolio operates as a separate investment portfolio and the
investment performance of one portfolio has no effect on the investment
performance of any other portfolio. Some of the Funds may, in the future, create
additional portfolios. The investment experience of each of the Subaccounts of
the Variable Account depends on the investment performance of its corresponding
portfolio.
 
   
     Each of the Funds sells its shares to the Variable Account in accordance
with the terms of a participation agreement between the Fund and PLACA. The
termination provisions of those agreements vary (See "Termination of
Participation Agreements," Page 19.). Should an agreement between PLACA and a
Fund terminate, the Variable Account will not be able to purchase additional
shares of that Fund. In that event, Owners will no longer be able to allocate
Account Values or premium payments to Subaccounts investing in portfolios of
that Fund.
    
 
     Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to the Variable Account
despite the fact that the participation agreement between the Fund and PLACA has
not been terminated. Should a Fund or a portfolio of a Fund decide not to sell
its shares to PLACA, PLACA will not be able to honor requests of Owners to
allocate their Account Values or premium payments to Subaccounts investing in
shares of that Fund or portfolio.
 
     Certain Subaccounts invest in portfolios that have similar investment
objectives and/or policies; therefore before choosing Subaccounts, carefully
read the individual prospectuses for the Funds along with this prospectus.
 
THE MARKET STREET FUND, INC.
 
     The Variable Account has six Subaccounts that invest exclusively in shares
of The Market Street Fund, Inc., a "series" type of mutual fund which is
registered with the SEC under the 1940 Act as a diversified open-end management
investment company. The Fund currently issues six "series" or classes of shares,
each of which represents an interest in a separate Portfolio within the Fund:
the Growth Portfolio, the Money Market Portfolio, the Bond Portfolio, the
Managed Portfolio, the Aggressive Growth Portfolio and the International
 
                                       11
<PAGE>   21
 
Portfolio. Shares of each portfolio currently are purchased and redeemed by the
corresponding Subaccount. The Fund sells and redeems its shares at net asset
value without a sales charge.
 
     The Fund presently serves as an investment medium for other variable life
and variable annuity contracts issued both by PLACA and Provident Mutual Life
Insurance Company of Philadelphia which wholly-owns PLACA. At some later date,
the Fund may serve as an investment medium for other variable life policies and
variable annuity contracts issued by PLACA and may be made available as an
investment medium for variable contracts issued by other insurance companies,
including affiliated and unaffiliated companies of PLACA. PLACA currently does
not foresee any disadvantages to Owners arising out of the fact that the Fund
will offer its shares to fund products other than PLACA's policies. However, the
Fund's Board of Directors intends to monitor events in order to identify any
material irreconcilable conflicts that possibly may arise and to determine what
action, if any, should be taken in response to those events or conflicts.
 
     The investment objectives of the Fund's portfolios are set forth below. The
investment experience of each of the Subaccounts depends on the investment
performance of the corresponding portfolio. There is no assurance that any
portfolio will achieve its stated objective.
 
     The Growth Portfolio.  This portfolio seeks intermediate and long-term
growth of capital by investing in common stocks of companies believed to offer
above-average growth potential over both the intermediate and the long-term.
Current income is a secondary consideration.
 
     The Money Market Portfolio.  The Money Market Portfolio seeks to provide
maximum current income consistent with capital preservation and liquidity by
investing in high-quality money market instruments.
 
     The Bond Portfolio.  The Bond Portfolio seeks to generate a high level of
current income consistent with prudent investment risk by investing in a
diversified portfolio of marketable debt securities.
 
     The Managed Portfolio.  The Managed Portfolio seeks to realize as high a
level of long-term total rate of return as is consistent with prudent investment
risk by investing in stocks, bonds, money market instruments or a combination
thereof.
 
     The Aggressive Growth Portfolio.  The Aggressive Growth Portfolio seeks to
achieve a high level of long-term capital appreciation by investing in
securities of a diverse group of smaller emerging companies.
 
     The International Portfolio.  The International Portfolio seeks long-term
growth of capital principally through investments in a diversified portfolio of
marketable equity securities of established non-United States companies.
 
     With respect to the Growth Portfolio, the Fund is advised by Newbold's
Asset Management, Inc. (NAM) which is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940. As compensation for its
services, NAM receives monthly compensation at an effective annual rate of 0.50%
of the first $20 million of the average daily net assets of the Growth
Portfolio, 0.40% of the next $20 million of the average daily net assets of the
portfolio, and 0.30% of the average daily net assets in excess of $40 million.
 
     With respect to the Money Market Portfolio, the Fund is advised by
Providentmutual Investment Management Company (PIMC), which is registered with
the SEC as an investment adviser under the Investment Advisers Act of 1940. As
compensation for its services, PIMC receives monthly compensation at an
effective annual rate of 0.25% of the average daily net assets of the portfolio.
 
     With respect to the Bond, Managed and Aggressive Growth Portfolios, the
Fund is advised by Sentinel Advisors Company (SAC), which is registered with the
SEC as an investment adviser under the Investment Advisers Act of 1940. As
compensation for its services, SAC receives monthly compensation as follows:
 
          Bond Portfolio -- 0.35% of the first $100 million of the average daily
     net assets of the portfolio and 0.30% of the average daily net assets in
     excess of $100 million.
 
          Managed Portfolio -- 0.40% of the first $100 million of the average
     daily net assets of the portfolio and 0.35% of the average daily net assets
     in excess of $100 million.
 
                                       12
<PAGE>   22
 
          Aggressive Growth Portfolio -- 0.50% of the first $20 million of the
     average daily net assets of the portfolio, 0.40% of the next $20 million of
     the average daily net assets of the portfolio and 0.30% of the average
     daily net assets in excess of $40 million.
 
     With respect to the International Portfolio, the Fund is advised by PIMC
which receives monthly compensation at an effective annual rate of 0.75% of the
first $500 million of the average daily net assets of the portfolio and 0.60% of
the average daily net assets in excess of $500 million. PIMC has employed The
Boston Company Asset Management, Inc. (the "Boston Company") to provide
investment advisory services in connection with the portfolio. As compensation
for the investment advisory services rendered, PIMC pays The Boston Company a
monthly fee at an effective rate of 0.375% of the first $500 million of the
average daily net assets of the portfolio and 0.30% of the average daily net
assets in excess of $500 million.
 
     In addition to the fee for the investment advisory services, the Fund pays
its own expenses generally, including brokerage costs, administrative costs,
custodial costs, and legal, accounting and printing costs. However, PMLIC has
entered into an agreement with the Fund whereby it will reimburse the Fund for
all ordinary operating expenses, excluding advisory fees in excess of an annual
rate of 0.40% of the average daily net assets of each portfolio except the
International Portfolio, and 0.75% for the International Portfolio. It is
anticipated that this agreement will continue; if it is terminated, Fund
expenses may increase.
 
     A more extensive description of the Fund, its investment objectives and
policies, its risks, expenses, and all other aspects of its operations is
contained in the Prospectus for the Fund, which accompanies this Prospectus and
should be read together with this Prospectus.
 
   
THE ALGER AMERICAN FUND
    
 
   
     The Variable Account has twenty-two Subaccounts, one of which invests
exclusively in shares of a Portfolio of The Alger American Fund ("Alger
American"). Alger American is a "series" type mutual fund registered with the
SEC as a diversified open-end management investment company issuing a number of
series or classes of shares, each of which represents an interest in a Portfolio
of Alger American.
    
 
   
     The Alger American Small Capitalization Subaccount of the Variable Account
invests in shares of the Alger American Small Capitalization Portfolio of Alger
American. (Alger American has other investment portfolios that are not offered
to the Variable Account or under the Policies.) Shares of the Alger American
Small Capitalization Portfolio are purchased and redeemed by the Variable
Account at net asset value without a sales charge. The Variable Account
purchases shares of Alger American Small Capitalization Portfolio from Alger
American in accordance with a participation agreement between Alger American and
PLACA. The termination provisions of this participation agreement is described
below.
    
 
   
     Alger American Small Capitalization Portfolio seeks long-term capital
appreciation by focusing on small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding marketplace.
    
 
   
     The investment adviser for the Alger American Small Capitalization
Portfolio is Fred Alger Management, Inc. ("Alger Management"), which is
registered with the SEC as an Investment Adviser under the Investment Advisors
Act of 1940. As compensation for its services, Alger Management receives a fee
at the end of each month at an annual rate of .85% of the average net assets of
the Alger American Small Capitalization Portfolio.
    
 
   
     A more extensive description of Alger American and the Alger American Small
Capitalization Portfolio, including the Portfolio's investment objectives and
policies, risks, expenses and other aspects of its operations are contained in
the Prospectus for Alger American which accompanies this Prospectus.
    
 
VARIABLE INSURANCE PRODUCT FUND AND VARIABLE INSURANCE PRODUCTS FUND II
 
   
     Variable Account has eight Subaccounts that invest exclusively in shares of
Portfolios of the Variable Insurance Products Fund (the "VIP Fund") or of the
Variable Insurance Products Fund II (the "VIP Fund II"). The VIP Fund and the
VIP Fund II are each "series" type mutual funds registered with the SEC
    
 
                                       13
<PAGE>   23
 
as diversified open-end management investment companies issuing a number of
series or classes of shares, each of which represents an interest in a Portfolio
of the Fund.
 
   
     The Fidelity Equity-Income Subaccount, Fidelity Growth Subaccount, Fidelity
High Income Subaccount and Fidelity Overseas Subaccount of the Variable Account
invest in shares of the Equity-Income Portfolio, Growth Portfolio, High Income
Portfolio and Overseas Portfolio, respectively, of the VIP Fund. The Fidelity
Asset Manager Subaccount, Contrafund Subaccount, Fidelity Index 500 Subaccount
and Fidelity Investment Grade Bond Subaccount of the Variable Account invest in
shares of the Asset Manager Portfolio, Contrafund Portfolio, Index 500 Portfolio
and Investment Grade Bond Portfolio, respectively, of the VIP Fund II. (The VIP
Fund and VIP Fund II have other investment portfolios that are not offered to
the Variable Account or under the Policies.) Shares of these Portfolios are
purchased and redeemed by the Variable Account at net asset value without a
sales charge. The Variable Account purchases shares of the Portfolios from the
VIP Fund and the VIP Fund II in accordance with a participation agreement
between each Fund and PLACA. The termination provisions of these participation
agreements are described below.
    
 
     The investment objectives of the Portfolios of the VIP Fund and the VIP
Fund II in which the Subaccounts will invest are set forth below. The investment
experience of each Subaccount depends upon the investment performance of the
corresponding Portfolio. There is no assurance that any Portfolio will achieve
its stated objective.
 
  VIP Fund
 
     Equity-Income Portfolio.  This Portfolio seeks reasonable income by
investing primarily in income-producing equity securities. In choosing these
securities, the Equity-Income Portfolio considers the potential for capital
appreciation. The Portfolio's goal is to achieve a yield which exceeds the
composite yield of the securities comprising the Standard and Poor's 500
Composite Stock Price Index.
 
     Growth Portfolio.  This Portfolio seeks to achieve capital appreciation.
The Growth Portfolio normally purchases common stocks, although its investments
are not restricted to any one type of security. Capital appreciation may also be
found in other types of securities, including bonds and preferred stocks.
 
     High Income Portfolio.  This Portfolio seeks to obtain a high level of
current income by investing primarily in high-yielding, lower-rated,
fixed-income securities, while also considering growth of capital.
 
     Overseas Portfolio.  This Portfolio seeks long term growth of capital
primarily through investments in foreign securities. The Overseas Portfolio
provides a means for diversification by participating in companies and economies
outside of the United States.
 
  VIP Fund II
 
     Asset Manager Portfolio.  This Portfolio seeks to obtain high total return
with reduced risk over the long-term by allocating its assets among stocks,
bonds and short-term fixed-income instruments.
 
   
     Contrafund Portfolio.  This Portfolio seeks capital appreciation by
investing in companies believed to be undervalued due to an overly pessimistic
appraisal by the public.
    
 
     Index 500 Portfolio.  This Portfolio seeks to provide investment results
that correspond to the total return (i.e., the combination of capital changes
and income) of common stocks publicly traded in the United States. In seeking
this objective, the Index 500 Portfolio attempts to duplicate the composition
and total return of the Standard and Poor's 500 Composite Stock Price Index
while keeping transaction costs and other expenses low. The Portfolio is
designed as a long-term investment option.
 
     Investment Grade Bond Portfolio.  This Portfolio seeks as high a level of
current income as is consistent with the preservation of capital by investing in
a broad range of investment-grade fixed-income securities. The Portfolio will
maintain a dollar-weighted average portfolio maturity of ten years or less.
 
   
     The Equity-Income, Growth, High Income, and Overseas Portfolios of the VIP
Fund and the Asset Manager, Contrafund, Index 500 and Investment Grade Bond
Portfolios of the VIP Fund II are managed by
    
 
                                       14
<PAGE>   24
 
Fidelity Management & Research Company ("FMR"). For managing its investments and
business affairs, each Portfolio pays FMR a monthly fee.
 
     For the Equity-Income, Growth, Overseas and Asset Manager Portfolios, the
annual fee rate is the sum of two components:
 
     1.   A group fee rate based on the monthly average net assets of all the
          mutual funds advised by FMR. This rate cannot rise above 0.52% and it
          drops (to as low as a marginal rate of 0.30% when average group assets
          exceed $174 billion) as total assets in all these funds rise.
 
   
     2.   An individual fund fee rate of 0.20% for the Equity-Income Portfolio,
          0.30% for the Contrafund and Growth Portfolios, 0.40% for the Asset
          Manager Portfolio and 0.45% for the Overseas Portfolio.
    
 
     One-twelfth of the combined annual fee rate is applied to each Portfolio's
net assets averaged over the most recent month, giving a dollar amount which is
the fee for that month.
 
     The Index 500 Portfolio pays FMR a monthly management fee at the annual
rate of 0.28% of the Portfolio's average net assets. One-twelfth of this annual
fee rate is applied to the net assets averaged over the most recent month,
giving a dollar amount which is the fee for that month.
 
     For the High Income and Investment Grade Bond Portfolios, the annual fee
rate is the sum of two components:
 
     1.   A group fee rate based on the monthly average net assets of all the
          mutual funds advised by FMR. This rate cannot rise above 0.37%, and it
          drops (to as low as a marginal rate of 0.14%) as total assets in all
          these funds rise.
 
     2.   An individual fund fee rate of 0.35% for the High Income Portfolio and
          0.30% for the Investment Grade Bond Portfolio.
 
          One twelfth of the combined annual fee rate is applied to the
     Portfolio's net assets averaged over the most recent month, giving a dollar
     amount which is the fee for that month.
 
   
          On behalf of the Asset Manager Portfolio and the Contrafund Portfolio,
     FMR has entered into sub-advisory agreements with Fidelity Management &
     Research (U.K.) Inc. ("FMR (U.K.)") and Fidelity Management & Research (Far
     East) Inc. ("FMR Far East"), pursuant to which these entities provide
     research and investment recommendations with respect to companies based
     outside the United States. FMR (U.K.) primarily focuses on companies based
     in Europe while FMR Far East focuses primarily on companies based in Asia
     and the Pacific Basin. Under the sub-advisory agreements, FMR and not the
     Portfolios pay FMR (U.K.) and FMR Far East fees equal to 100% and 105%,
     respectively, of each sub-advisor's costs incurred in connection with its
     sub-advisory agreement.
    
 
          On behalf of the Overseas Portfolio, FMR has entered into sub-advisory
     agreements with FMR (U.K.), FMR Far East, and Fidelity International
     Investment Advisors ("FIIA"). FIIA, in turn, has entered into a
     sub-advisory agreement with its wholly owned subsidiary Fidelity
     International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the
     sub-advisory agreements, FMR may receive investment advice and research
     services with respect to companies based outside the U.S. and may grant
     them investment management authority as well as the authority to buy and
     sell securities if FMR believes it would be beneficial to the Portfolio.
 
          Currently, FMR (U.K.), FMR Far East, FIIA and FIIAL U.K. each focus on
     investment opportunities in countries other than the U.S., including
     countries in Europe, Asia and the Pacific Basin.
 
          Under the sub-advisory agreements FMR pays the fees of FMR (U.K.), FMR
     Far East, and FIIA. FIIA, in turn, pays the fees of FIIAL U.K.
 
                                       15
<PAGE>   25
 
          For providing investment advice and research services the sub-advisors
     are compensated as follows:
 
     - FMR pays FMR (U.K.) and FMR Far East fees equal to 110% and 105%,
       respectively, of FMR (U.K.)'s and FMR Far East's costs incurred in
       connection with providing investment advice and research services.
 
     - FMR pays FIIA 30% of its monthly management fee with respect to the
       average market value of investments held by the Portfolio for which FIIA
       has provided FMR with investment advice.
 
     - FIIA pays FIIAL U.K. a fee equal to 110% of FIIAL U.K.'s costs incurred
       in connection with providing investment advice and research services.
 
          For providing investment management services, the sub-advisors are
     compensated according to the following formulas:
 
     - FMR pays FMR (U.K.), FMR Far East, and FIIA 50% of its monthly management
       fee with respect to the Portfolio's average net assets managed by the
       sub-advisor on a discretionary basis.
 
     - FIIA pays FIIAL U.K. 110% of FIIAL U.K.'s costs incurred in connection
       with providing investment management.
 
     Each Portfolio utilizes Fidelity Investments Institutional Operations
Company ("FIIOC"), an affiliate of FMR, to maintain the master accounts of the
participating insurance companies. Under the transfer agent agreement with
FIIOC, each Portfolio pays fees based on the type, size, and number of accounts
in each Portfolio and the number of transactions made by shareholders of each
Portfolio.
 
     Each Portfolio also has an agreement with Fidelity Service Co. ("Service"),
an affiliate of FMR under which each Portfolio pays Service to calculate its
daily share prices and to maintain the portfolio and general accounting records
of each Portfolio and to administer each Portfolio's securities lending program.
The fees for pricing and bookkeeping services are based on each Portfolio's
average net assets but must fall within a range of $45,000 to $750,000. The fees
for securities lending services are based on the number and duration of
individual securities loans.
 
     FMR may, from time to time, agree to reimburse a Portfolio for management
fees and other expenses above a specified percentage of average net assets.
Reimbursement arrangements, which may be terminated at any time without notice,
will increase a Portfolio's yield. If FMR discontinues a reimbursement
arrangement, each Portfolio's expenses will go up and its yield will be reduced.
FMR retains the right to be repaid by a Portfolio for expense reimbursements if
expenses fall below the limit prior to the end of a fiscal year. Repayment by a
Portfolio will lower its yield. FMR has voluntarily agreed to reimburse the
management fees and all other expenses (excluding taxes, interest and
extraordinary expenses) in excess of 1.50% of the average net assets of the
Equity-Income and Growth Portfolios, 1.25% of the average net assets of the
Asset Manager Portfolio and 0.28% of the average net assets of the Index 500
Portfolio.
 
     A more extensive description of the VIP Fund and the VIP Fund II, the
investment of objectives and policies of the Portfolios, the risks, expenses and
all other aspects of their operation is contained in the prospectuses for the
VIP Fund and VIP Fund II which accompany this Prospectus. You should note that
the VIP Fund and VIP Fund II have other investment portfolios that are not
available with the variable life insurance policies issued by PLACA.
 
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
 
     The Variable Account has three Subaccounts that invest exclusively in
shares of Portfolios of the Neuberger & Berman Advisers Management Trust
("AMT"). AMT is a "series" type mutual fund registered with the SEC as a
diversified open-end management investment company issuing a number of series or
classes of shares, each of which represents an interest in a Portfolio of AMT.
 
     The Neuberger & Berman Balanced Subaccount, Neuberger & Berman Growth
Subaccount and Neuberger & Berman Limited Maturity Bond Subaccount of the
Variable Account invest in shares of the Balanced Portfolio, Growth Portfolio
and Limited Maturity Bond Portfolio, respectively, of AMT. (AMT has
 
                                       16
<PAGE>   26
 
other investment portfolios that are not offered to the Variable Account or
under the Policies.) Shares of these Portfolios are purchased and redeemed by
the Variable Account at net asset value without a sales charge. The Variable
Account purchases shares of the Portfolios from AMT in accordance with a
participation agreement between AMT and PLACA. The termination provisions of
this participation agreement is described below.
 
     Each Portfolio of AMT invests all of its net investable assets in its
corresponding Series (each, a "Series") of Advisers Managers Trust ("Managers
Trust"), an open-end management investment company. Each Series invests in
securities in accordance with an investment objective, policies and limitations
identical to those of its corresponding Portfolio. This "master/feeder fund"
structure is different from that of many other investment companies which
directly acquire and manage their own portfolios of securities. For more
information regarding this structure, see the prospectus for AMT.
 
     In that the investment objective of each Portfolio matches that of its
corresponding Series, the following describes the investment objective of each
Series underlying the Portfolio of AMT in which the Subaccounts will invest. The
investment objectives of the Portfolios of AMT in which the Subaccounts will
invest are set forth below. The investment experience of each Subaccount depends
upon the investment performance of its corresponding Portfolio. There is no
assurance that any Portfolio will achieve its stated objective.
 
     Balanced Portfolio.  The Series corresponding to this Portfolio seeks
long-term capital growth and reasonable current income without undue risk to
principal through investment of a portion of its assets in common stocks and a
portion of its assets in debt securities.
 
     Growth Portfolio.  The Series corresponding to this Portfolio seeks capital
growth through investments in common stocks of companies that the investment
adviser believes will have above-average earnings or otherwise provide investors
with above-average potential for capital appreciation.
 
     Limited Maturity Bond Portfolio.  The Series corresponding to this
Portfolio seeks the highest current income consistent with low risk to principal
and liquidity through investment in a diversified portfolio of Limited Maturity
debt securities.
 
     The Investment Adviser for the Series of Managers Trust corresponding to
the Balanced, Growth and Limited Maturity Bond Portfolios of AMT is Neuberger &
Berman Management Incorporated. The Investment Adviser retains Neuberger &
Berman, without cost to AMT, as sub-adviser to furnish it with investment
recommendations and research information.
 
     As compensation for its services under the Investment Advisory Agreement
AMT pays a fee to the Investment Adviser at the end of each month. For the
Balanced Portfolio this fee is paid at the annual rate of 0.80% of the average
daily net assets of the Portfolio, for the Growth Portfolio, at the annual rate
of 0.70% of the first $250 million of the average of the total net asset value
determined on each calendar day throughout the month (hereinafter called
"average asset value"), 0.675% of the next $250 million of average asset value,
0.650% of the next $250 million of average asset value, 0.625% of the next $250
million of average asset value and 0.60% of the average asset value in excess of
$1 billion and for the Limited Maturity Bond Portfolio, at the annual rate of
0.60% of the average daily net assets of the Portfolio.
 
     In addition to the investment advisory fee, AMT incurs other expenses,
including certain costs of distributing its shares in accordance with a plan
adopted pursuant to Rule 12b-1 under the 1940 Act. The distributor, Neuberger &
Berman Management, Incorporated, has agreed to reimburse each of the Portfolios
for certain expenses.
 
     A more extensive description of AMT, the Investment objectives of the
available Portfolios, the risks, expenses and all other aspects of their
operation is contained in the prospectuses for the Balanced, Growth and Limited
Maturity Bond Portfolios of AMT which accompany this Prospectus.
 
TCI PORTFOLIOS, INC.
 
     The Variable Account has one Subaccount that invests exclusively in shares
of a Portfolio of the TCI Portfolios, Inc. ("TCI"). TCI is a "series" type
mutual fund registered with the SEC as a diversified open-end
 
                                       17
<PAGE>   27
 
management investment company issuing a number of series or classes of shares,
each of which represents an interest in a Portfolio of TCI.
 
     The TCI Growth Subaccount of the Variable Account invests in shares of the
TCI Growth Portfolio of TCI. (TCI has other investment portfolios that are not
offered to the Variable Account or under the Policies.) Shares of the TCI Growth
Portfolio are purchased and redeemed by the Variable Account at net asset value
without a sales charge. The Variable Account purchases shares of TCI Growth
Portfolio from TCI in accordance with a participation agreement between TCI and
PLACA. The termination provisions of this participation agreement is described
below.
 
     TCI Growth Portfolio seeks capital growth by investing primarily in common
stocks that are considered by management to have better-than-average prospects
for appreciation. There is no assurance that TCI Growth Portfolio will achieve
its stated objective.
 
     The investment adviser for the TCI Growth Portfolio is Investors Research
Corporation ("Investors Research"). As compensation for its services, Investors
Research receives a fee at the end of each month at an annual rate of 1% of the
average net assets of the TCI Growth Portfolio.
 
     A more extensive description of TCI and the TCI Growth Portfolio, including
the Portfolio's investment objectives and policies, risks, expenses and other
aspects of its operations are contained in the Prospectus for TCI which
accompanies this Prospectus.
 
VAN ECK INVESTMENT TRUST
 
   
     The Variable Account has three Subaccounts that invest exclusively in
shares of Portfolios of Van Eck Investment Trust (the "Van Eck Trust"). The Van
Eck Trust is a "series" type mutual fund registered with the SEC as a
diversified open-end management investment company issuing a number of series or
classes of shares, each of which represents an interest in a Portfolio of Van
Eck Trust.
    
 
   
     The Van Eck Global Bond Subaccount, the Van Eck Gold and Natural Resources
Subaccount and the Van Eck Worldwide Emerging Markets Subaccount of the Variable
Account invest in shares of the Van Eck Worldwide Bond Portfolio and the Van Eck
Gold and Natural Resources Portfolio and the Van Eck Worldwide Emerging Markets
Portfolio, respectively, of Van Eck Trust. Shares of the Van Eck Worldwide Bond
Portfolio and Gold and Natural Resources Portfolio and Worldwide Emerging
Markets Portfolio are purchased and redeemed by the Variable Account at net
asset value without a sales charge. The Variable Account purchases shares of the
Portfolios from Van Eck Trust in accordance with a participation agreement
between the Trust and PLACA. The termination provisions of this participation
agreement are described below.
    
 
     The investment objectives of the Portfolios of Van Eck Trust are set forth
below. The investment experience of each Subaccount depends upon the investment
performance of its corresponding Portfolio. There is no assurance that these
Portfolios will achieve their stated objectives.
 
   
     Van Eck Gold and Natural Resources Portfolio seeks long-term capital
appreciation by investing in equity and debt securities of companies engaged in
the exploration, development, production and distribution of gold and other
natural resources such as strategic and other metals, minerals, forest products,
oil, natural gas and coal. Current income is not an investment objective.
    
 
   
     Van Eck Worldwide Bond Portfolio seeks high total return through a flexible
policy of investing globally, primarily in debt securities.
    
 
   
     Van Eck Worldwide Emerging Markets Portfolio seeks long-term capital
appreciation by investing primarily in equity securities in emerging markets
around the world.
    
 
   
     The investment adviser for the Van Eck Gold and Natural Resources
Portfolio, Worldwide Bond Portfolio and Worldwide Emerging Markets Portfolio is
Van Eck Associates Corporation ("Van Eck Associates"). As compensation for its
services, Van Eck Associates receives a monthly fee at an annual rate of 0.75%
of the first $500 million of the average daily net assets of the Portfolios,
0.65% of the next $250 million
    
 
                                       18
<PAGE>   28
 
of the daily net assets of the Portfolios, and 0.50% of the average daily net
assets of the Portfolios in excess of $750 million.
 
   
     Peregrine Asset Management (Hong Kong) Limited ("PAM") serves as
sub-investment adviser to the Worldwide Emerging Markets Portfolio pursuant to a
sub-investment advisory agreement with Van Eck Associates. As compensation for
its services, PAM is paid a monthly fee at an annual rate of 0.50% of average
daily net assets by Van Eck Associates from the advisory fees it receives from
Van Eck Trust with respect to this Portfolio.
    
 
   
     A more extensive description of Van Eck Trust, Van Eck Gold and Natural
Resources Portfolio, Van Eck Worldwide Bond Portfolio and Van Eck Worldwide
Emerging Markets Portfolio, including each Portfolio's investment objectives and
policies, risks, expenses and other aspects of its operations are contained in
the Prospectus for the Trust which accompanies this Prospectus.
    
 
TERMINATION OF PARTICIPATION AGREEMENTS
 
     The participation agreements pursuant to which the Funds sell their shares
to Subaccounts of the Variable Account contain varying provisions regarding
termination. The following summarizes those provisions:
 
   
          The Alger American Fund.  The Agreement with The Alger American Fund
     provides for termination: 1) by either party on 60 days written notice to
     the other; 2) by Alger if the Policies cease to qualify as annuity
     contracts or life insurance policies under the Code or the Policies are not
     registered, issued or sold in accordance with applicable laws; 3) by any
     party in the event of a material irreconcilable conflict; 4) by PLACA in
     the event that formal proceedings are initiated against Alger or the
     distributor by the SEC or another regulator; 5) by PLACA in the event the
     Portfolio or trust fails to meet the diversification requirements; 6) by
     PLACA if shares are not reasonably available; 7) by PLACA if shares of the
     Portfolio are not registered, issued or sold in accordance with applicable
     laws or applicable law precludes the use of such shares; 8) by PLACA if
     Alger fails to qualify as a regulated investment company under Subchapter M
     of the Code; or 9) by Alger's principal underwriter if it determines that
     PLACA has suffered a material adverse change in its business, operation,
     financial condition or prospects.
    
 
   
          Fidelity Variable Insurance Products Fund and Variable Insurance
     Products Fund II.  The Agreements provide for termination 1) upon six
     months' advance notice by either party, 2) at PLACA's option if shares of
     the Fund are not reasonably available to meet requirements of the policies,
     3) at PLACA's option if shares of the Fund are not registered, issued, or
     sold in accordance with applicable laws, if the Fund ceases to qualify as a
     regulated investment company under the Code or for a Portfolio of the Fund
     in the event such Portfolio fails to meet diversification requirements
     under the Code, 4) at the option of the Fund or its principal underwriter
     if it determines that PLACA has suffered material adverse changes in its
     business or financial condition or is subject to material adverse
     publicity, 5) at the option of PLACA if the Fund has suffered material
     adverse changes in its business or financial condition or is a subject of
     material adverse publicity, or 6) at the option of the Fund or its
     principal underwriter if PLACA decides to make another mutual fund
     available as a funding vehicle for its policies.
    
 
          Neuberger & Berman Advisers Management Trust.  This Agreement may be
     terminated by either party on six months' written notice to the other.
 
          TCI Portfolios, Inc.  The agreement with TCI provides for termination
     1) by PLACA or TCI upon six months prior written notice or in the event
     that formal proceedings are initiated against the other party by the SEC or
     another regulator, 2) by PLACA or TCI in the event that shares of TCI
     subject to the agreement are not registered, offered or sold in conformity
     with applicable law, 3) by PLACA upon reasonable notice if shares of one of
     the then available Portfolios of TCI are not longer available or upon sixty
     days notice if PLACA should substitute shares of another fund or Fund for
     those of TCI, 4) upon assignment of the agreement unless both parties agree
     to the assignment in writing or upon termination of TCI's investment
     management agreement with Investor's Research (unless a new management
 
                                       19
<PAGE>   29
 
     agreement is entered into by TCI with Investor's Research), and 5) by TCI
     if PLACA breaches the agreement.
 
          Van Eck Investment Trust.  The agreement with Van Eck Trust provides
     for termination 1) by PLACA or Van Eck Trust upon six months prior written
     notice or in the event that formal proceedings are initiated against the
     other party by the SEC or another regulator, 2) by PLACA or Van Eck Trust
     in the event that shares of Van Eck Trust subject to the agreement are not
     registered, offered or sold in conformity with applicable law, 3) by PLACA
     upon reasonable notice if shares of one of the then available Portfolios of
     Van Eck Trust are not longer available or upon sixty days notice if PLACA
     should substitute shares of another fund or Fund for those of Van Eck
     Trust, 4) upon assignment of the agreement unless both parties agree to the
     assignment in writing.
 
   
     Should an agreement between PLACA and a Fund terminate, the subaccounts
that invest in that Fund will not be able to purchase additional shares of such
Fund. In that event, Owners will no longer be able to allocate cash values or
net premiums to Subaccounts investing in Portfolios of such Fund.
    
 
     Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to a Subaccount despite the
fact that the participation agreement between the Fund and PLACA has not been
terminated. Should a Fund or portfolio of such Fund decide not to sell its
shares to PLACA, PLACA will not be able to honor requests by Owners to allocate
cash values or net premiums to Subaccounts investing in shares of that Fund or
portfolio.
 
   
     The Company has entered into agreements with the investment advisers of
several of the Funds pursuant to which each such investment adviser will pay the
Company a servicing fee based upon an annual percentage of the average aggregate
net assets invested by the Company on behalf of the Variable Account. These
agreements reflect administrative services provided to the Funds by the Company.
Payments of such amounts by an adviser will not increase the fees paid by the
Funds or their shareholders.
    
 
RESOLVING MATERIAL CONFLICTS
 
     The VIP Fund and VIP Fund II are used as investment vehicles for variable
life insurance policies and variable annuity contracts issued by PMLIC and
variable annuity contracts issued by PLACA. AMT is used as the investment
vehicle for variable life insurance policies issued by PMLIC. In addition, the
Funds, other than The Market Street Fund, Inc., are also available to registered
separate accounts of insurance companies, other than PLACA or its affiliates,
offering variable annuity and variable life insurance policies. As a result,
there is a possibility that a material conflict may arise between the interest
of Owners whose policy values are allocated to the Variable Account and the
owners of life insurance policies and variable annuities issued by such other
companies whose values are allocated to one or more other separate accounts
investing in any one of the Funds.
 
   
     In addition, certain Funds may sell shares to certain retirement plans
qualifying under Section 401 of the Code (including cash or deferred
arrangements under Section 401(k) of the Code). As a result, there is a
possibility that a material conflict may arise between the interests of Owners
of policies generally, or certain classes of Owners, and such retirement plans
or participants in such retirement plans.
    
 
     In the event of a material conflict, PLACA will take any necessary steps,
including removing the Variable Account from that Fund, to resolve the matter.
The Board of Directors or Trustees of the Funds intend to monitor events in
order to identify any material conflicts that possible may arise and to
determine what action, if any, should be taken in response to those events or
conflicts. See the Individual Fund Prospectuses for more information.
 
THE GUARANTEED ACCOUNT
 
   
     For information on the Guaranteed Account, see page 38.
    
 
                                       20
<PAGE>   30
 
                   DETAILED DESCRIPTION OF POLICY PROVISIONS
 
DEATH BENEFIT
 
     General.  As long as the Policy remains in force, the Insurance Proceeds of
the Policy will, upon due proof of the Insured's death (and fulfillment of
certain other requirements), be paid to the named Beneficiary in accordance with
the designated Death Benefit Option. The Insurance Proceeds will be determined
as of the date of the Insured's death and will be equal to:
 
     1. the Death Benefit;
 
     2. plus any additional benefits due under a supplementary benefit rider
        attached to the Policy;
 
     3. less any loan and accrued loan interest on the Policy;
 
     4. less any overdue deductions if the death of the Insured occurs during
        the Grace Period.
 
     The Insurance Proceeds may be paid in cash or under one of the Settlement
Options set forth in the Policy. The amount payable under the designated Death
Benefit Option will be increased by any additional benefits, and will be
decreased by any outstanding Policy loan and accrued interest and by any unpaid
Monthly Deductions.
 
   
     Death Benefit Options.  The Policy provides two Death Benefit Options:
Option A and Option B. The Owner designates the Death Benefit Option in the
application and may change it as described in "Change in Death Benefit Option,"
Page 22. Under either Option, the duration of the Death Benefit coverage depends
upon the Policy's Net Cash Surrender Value. (See "How the Duration of the Policy
May Vary," Page 24.)
    
 
     Option A.  The Death Benefit is equal to the greater of: (a) the Face
Amount of the Policy and (b) the Policy Account Value on the Valuation Date on
or next following the Insured's date of death multiplied by the specified
percentage shown in the table below:
 
<TABLE>
<CAPTION>
ATTAINED AGE     PERCENTAGE      ATTAINED AGE     PERCENTAGE
- -------------    ----------     --------------    ----------
<S>              <C>            <C>               <C>
40 and under      250%                60           130%
     45           215%                65           120%
     50           185%                70           115%
     55           150%          75 through 90      105%
                                95 through 99      100%
</TABLE>
 
For Attained Ages not shown, the percentages will decrease by a ratable portion
for each full year.
 
     Illustration of Option A -- For purposes of this illustration, assume that
the Insured is under Attained Age 40 and there is no Policy loan outstanding.
 
     Under Option A, a Policy with a Face Amount of $200,000 will generally pay
a Death Benefit of $200,000. The specified percentage for an Insured under
Attained Age 40 on the Policy Anniversary prior to the date of death is 250%.
Because the Death Benefit must be equal to or be greater than 2.50 times the
Policy Account Value, any time the Policy Account Value exceeds $80,000 the
Death Benefit will exceed the Face Amount. Each additional dollar added to the
Policy Account Value will increase the Death Benefit by $2.50. Thus, a 35 year
old Insured with a Policy Account Value of $150,000 will have a Death Benefit of
$375,000 (2.50 X $150,000); a Policy Account Value of $300,000 will yield a
Death Benefit of $750,000 (2.50 X $300,000); a Policy Account Value of $400,000
will yield a Death Benefit of $1,000,000 (2.50 X $400,000).
 
     Similarly, any time the Policy Account Value exceeds $80,000, each dollar
taken out of the Policy Account Value will reduce the Death Benefit by $2.50. If
at any time, however, the Policy Account Value multiplied by the specified
percentage is less than the Face Amount, the Death Benefit will be the Face
Amount of the Policy.
 
     Option B.  The Death Benefit is equal to the greater of: (a) the Face
Amount of the Policy plus the Policy Account Value and (b) the Policy Account
Value multiplied by the specified percentage shown in the
 
                                       21
<PAGE>   31
 
table above. (The Policy Account Value in each case is determined on the
Valuation Day on or next following the Insured's date of death.)
 
     Illustration of Option B -- For purposes of this illustration, assume that
the Insured is under Attained Age 40 and there is no outstanding Policy loan.
 
     Under Option B, a Policy with a Face Amount of $200,000 will generally pay
a Death Benefit of $200,000 plus the Policy Account Value. Thus, for example, a
Policy with a $50,000 Policy Account Value will have a Death Benefit of $250,000
($200,000 plus $50,000); and a Policy Account Value of $100,000 will yield a
Death Benefit of $300,000. Since the specified percentage is 250%, the Death
Benefit will be at least 2.50 times the Policy Account Value. As a result, if
the Policy Account Value exceeds $133,333, the Death Benefit will be greater
than the Face Amount plus the Policy Account Value. Each additional dollar added
to the Policy Account Value above $133,333 will increase the Death Benefit by
$2.50. An Insured with a Policy Account Value of $150,000 will therefore have a
Death Benefit of $375,000 (2.50 X $150,000); a Policy Account Value of $300,000
will yield a Death Benefit of $750,000 (2.50 X $300,000); and a Policy Account
Value of $500,000 will yield a Death Benefit of $1,250,000 (2.50 X $500,000).
Similarly, any time the Policy Account Value exceeds $133,333, each dollar taken
out of the Policy Account Value will reduce the Death Benefit by $2.50. If at
any time, however, the Policy Account Value multiplied by the applicable
percentage is less than the Face Amount plus the Policy Account Value, the Death
Benefit will be the Face Amount plus the Policy Account Value.
 
     Which Death Benefit Option to Choose.  If an Owner prefers to have premium
payments and favorable investment performance reflected partly in the form of an
increasing Death Benefit, the Owner should choose Option B. If an Owner is
satisfied with the amount of the Insured's existing insurance coverage and
prefers to have premium payments and favorable investment performance reflected
to the maximum extent in the Policy Account Value, the Owner should choose
Option A.
 
     Change in Death Benefit Option.  After the first Policy Year, at any time
while the Policy is in force, the Death Benefit Option in effect may be changed
by sending PLACA a completed application for change. No charges will be imposed
to make a change in the Death Benefit Option. The effective date of any such
change will be the Policy Processing Day on or next following the date PLACA
receives the completed application for change.
 
     If the Death Benefit Option is changed from Option A to Option B, on the
effective date of the change, the Death Benefit will not change and the Face
Amount will be decreased by the Policy Account Value on that date. However, this
change may not be made if it would reduce the Face Amount to less than the
Minimum Face Amount.
 
     If the Death Benefit Option is changed from Option B to Option A, on the
effective date of the change, the Death Benefit will not change and the Face
Amount will be increased by the Policy Account Value on that date.
 
     A change in the Death Benefit Option may affect the Net Amount at Risk over
time which, in turn, would affect the monthly Cost of Insurance Charge. Changing
from Option A to Option B will generally result in a Net Amount at Risk that
remains level. Such a change will result in a relative increase in the cost of
insurance charges over time because the Net Amount at Risk will, unless the
Death Benefit is based on the applicable percentage of Policy Account Value,
remain level rather than decreasing as the Policy Account Value increases.
Unless the Death Benefit is based on the applicable percentage of Policy Account
Value, changing from Option B to Option A will, if the Policy Account Value
increases, decrease the Net Amount at Risk over time, thereby reducing the cost
of insurance charge.
 
     The effects of these Death Benefit Option changes on the Face Amount, Death
Benefit and Net Amount at Risk can be illustrated as follows. Assume that a
contract under Option A has a Face Amount of $500,000 and a Policy Account Value
of $100,000 and, therefore, a Death Benefit of $500,000 and a Net Amount at Risk
of $400,000 ($500,000 - $100,000). If the Death Benefit Option is changed from
Option A to Option B, the Face Amount will decrease from $500,000 to $400,000
and the Death Benefit and Net Amount at Risk would remain the same. Assume that
a contract under Option B has a Face Amount of $500,000 and a Policy
 
                                       22
<PAGE>   32
 
Account Value of $50,000 and, therefore, the Death Benefit is $550,000
($500,000 + $50,000) and a Net Amount at Risk of $500,00 ($550,000 - $50,000).
If the Death Benefit Option is changed from Option B to Option A, the Face
Amount will increase to $550,000, and the Death Benefit and Net Amount at Risk
would remain the same.
 
     If a change in the Death Benefit Option would result in cumulative premiums
exceeding the maximum premium limitations under the Internal Revenue Code for
life insurance, PLACA will not effect the change.
 
   
     A change in the Death Benefit Option may have Federal income tax
consequences. (See "Tax Treatment of Policy Benefits," Page 43.)
    
 
     How the Death Benefit May Vary.  The amount of the Death Benefit may vary
with the Policy Account Value. The Death Benefit under Option A will vary with
the Policy Account Value whenever the specified percentage of Policy Account
Value exceeds the Face Amount of the Policy. The Death Benefit under Option B
will always vary with the Policy Account Value because the Death Benefit equals
the greater of (a) the Face Amount plus the Policy Account Value and (b) the
Policy Account Value multiplied by the specified percentage.
 
ABILITY TO ADJUST FACE AMOUNT
 
   
     Subject to certain limitations, an Owner may generally, at any time after
the first Policy Year, increase or decrease the Policy's Face Amount by
submitting a written application to PLACA. The effective date of the increase or
decrease will be the Policy Processing Day on or next following PLACA's approval
of the request. An increase in Face Amount may have tax consequences. (See "Tax
Treatment of Policy Benefits," Page 43.) The effect of changes in Face Amount on
Policy charges, as well as other considerations, are described below.
    
 
     Increase.  A request for an increase in Face Amount may not be for less
than $25,000 (or such lesser amount required in a particular state). The Owner
may not increase the Face Amount after the Insured's Attained Age 75 or if the
Face Amount was increased during the prior 12-month period. To obtain the
increase, the Owner must submit an application for the increase and provide
evidence satisfactory to PLACA of the Insured's insurability.
 
     On the effective date of an increase, and taking the increase into account,
the Net Cash Surrender Value must be equal to the Monthly Deductions then due
and the expense charge for the increase in Face Amount. If the Net Cash
Surrender Value is not sufficient, the increase will not take effect until the
Owner makes a sufficient additional premium payment to increase the Net Cash
Surrender Value.
 
   
     An increase in the Face Amount will generally affect the total Net Amount
at Risk which will increase the monthly Cost of Insurance Charges. An increase
in Face Amount will increase the amount of any Additional Surrender Charge. A
Face Amount increase expense charge will also be deducted. (See "Face Amount
Increase Charge," Page 31.) In addition, different cost of insurance rates may
apply to the increase in insurance coverage. (See "Cost of Insurance," Page 30.)
    
 
   
     After increasing the Face Amount, the Owner will have the right: (i) during
the Free-Look Period following the effective date of the increase, to have the
increase cancelled and receive a credit or refund; and (ii) during the first 24
months following the increase, to exchange the increase in Face Amount for a
fixed benefit permanent life insurance policy issued by PLACA. (See "Conversion
Privilege for Increase in Face Amount," Page 37.)
    
 
     Decrease.  The amount of a Face Amount decrease must be for at least
$25,000 (or such lesser amount required in a particular state). The Face Amount
after any decrease may not be less than the Minimum Face Amount. A decrease in
Face Amount will not be permitted if the Face Amount was increased during the
prior 12-month period. To the extent a decrease in the Face Amount could result
in cumulative premiums exceeding the maximum premium limitations applicable for
life insurance under the Internal Revenue Code, PLACA will not effect the
decrease.
 
     A decrease in the Face Amount generally will decrease the total Net Amount
at Risk which will decrease an Owner's monthly insurance charges. A decrease in
the Face Amount may result in the imposition of a
 
                                       23
<PAGE>   33
 
   
surrender charge as of the Policy Processing Day on which the decrease becomes
effective. (See "Surrender Charge Upon Decrease in Face Amount," Page 30.)
    
 
     Any surrender charge applicable to a decrease will be deducted from the
Policy Account Value and the remaining surrender charge will be reduced by the
amount deducted. The surrender charge will be deducted from the Subaccounts and
the Guaranteed Account based on the proportion that the value in such account
bears to the total unloaned Policy Account Value.
 
     For purposes of determining the cost of insurance charge and surrender
charges, any decrease in the Face Amount will reduce the Face Amount in the
following order: (a) the Face Amount provided by the most recent increase; (b)
the next most recent increases, successively; and (c) the Initial Face Amount.
 
INSURANCE PROTECTION
 
     An Owner may increase or decrease the insurance protection provided by the
Policy (i.e, the Net Amount at Risk) in one of several ways, as insurance needs
change. These ways include increasing or decreasing the Face Amount, changing
the level of premium payments, and, to a lesser extent, by making a partial
withdrawal of Net Cash Surrender Value. The consequences of each are summarized
below.
 
     A decrease in Face Amount will, subject to applicable percentage
limitations, decrease the insurance protection. It will not reduce the Policy
Account Value, except for the deduction of any surrender charge applicable to
the decrease. The Monthly Deductions will generally be correspondingly lower
following the decrease.
 
     An increase in Face Amount will generally increase the amount of insurance
protection, depending on the Policy Account Value and applicable percentage. If
the insurance protection is increased, Monthly Deductions will increase as well.
 
     Under Death Benefit Option A, until the applicable percentage of Policy
Account Value exceeds the Face Amount, then (i) if the Owner increases the
premium payments from the current level, the amount of insurance protection will
generally be reduced, and (ii) if the Owner reduced the premium payments from
the current level, the amount of insurance protection will generally be
increased.
 
     Under Death Benefit Option B, until the applicable percentage of Policy
Account Value exceeds the Face Amount plus the Policy Account Value, the level
of premium payments will not affect the amount of insurance protection.
(However, both the Policy Account Value and Death Benefit will be increased if
premium payments are increased and reduced if premium payments are reduced.)
Under either Death Benefit Option, if the Death Benefit is the applicable
percentage of Policy Account Value, then (i) if the Owner increases premium
payments from the current level, the amount of insurance protection will
increase and (ii) if the Owner reduces the premium payments from the current
level, the amount of insurance protection will be lower.
 
   
     A partial withdrawal of Net Cash Surrender Value will reduce the Death
Benefit. It will not reduce the amount of insurance protection unless the Death
Benefit is based on the applicable percentage of Policy Account Value. This is
because if the Death Benefit is based on the applicable percentage, the decrease
in the Death Benefit will be greater than the amount of a withdrawal. Since the
primary use of a partial withdrawal is to withdraw cash which reduced the Policy
Account Value, the Net Cash Surrender Value is reduced, thereby increasing the
likelihood that the Policy will lapse. (See "Policy Lapse," Page 28.)
    
 
HOW THE DURATION OF THE POLICY MAY VARY
 
   
     The Policy will remain in force as long as the Net Cash Surrender Value of
the Policy is sufficient to pay the Monthly Deductions and the charges under the
Policy. When the Net Cash Surrender Value is insufficient to pay the charges and
the Grace Period expires without an adequate premium payment by the Owner, the
Policy will lapse and terminate without value. Notwithstanding the foregoing,
during the first three Policy Years the Policy will not lapse if the Minimum
Guarantee Premium has been paid. The Owner has certain rights to reinstate the
Policy. (See "Reinstatement," Page 28.)
    
 
                                       24
<PAGE>   34
 
POLICY ACCOUNT VALUE
 
     The Policy Account Value is the total amount of value held under the Policy
at any time. It is equal to the sum of the Policy's values in the Subaccounts,
the Guaranteed Account and the Loan Account. The Policy Account Value minus any
applicable Surrender Charge or Additional Surrender Charge is equal to the Cash
Surrender Value. There is no guaranteed minimum for the portion of the Policy
Account Value in any of the Subaccounts and, because the Policy Account Value on
any future date depends upon a number of variables, it cannot be predetermined.
 
     The Policy Account Value and Cash Surrender Value will reflect the
investment performance of the chosen Subaccounts, the crediting of interest in
excess of 4% (the guaranteed minimum) for the Guaranteed Account and the Loan
Account, any Net Premiums paid, any transfers, any partial withdrawals, any
loans, any loan repayments, any loan interest paid, and any charges assessed in
connection with the Policy.
 
     Calculation of Policy Account Value.  The Policy Account Value is
determined first on the Policy Date and thereafter at the close of each
Valuation Day. On the Policy Date, the Policy Account Value will be the Net
Premiums received less any Monthly Deductions due on the Policy Date. On each
Valuation Day after the Policy Date, the Policy Account Value will be:
 
          (1) The aggregate of the values attributable to the Policy in each
     Subaccount, determined by multiplying the number of units the Policy has in
     the Subaccount by the Subaccount's Unit Value on that date;
 
   
          (2) The value attributable to the Policy in the Guaranteed Account
     (See "The Guaranteed Account," Page 38); plus
    
 
   
          (3) The value attributable to the Policy in the Loan Account. (See
     "Loan Privileges," Page 32.)
    
 
     Determination of Number of Units for the Subaccounts.  Amounts allocated,
transferred or added to a Subaccount under a Policy are used to purchase units
of that Subaccount; units are redeemed when amounts are deducted, transferred or
withdrawn. The number of units a Policy has in a Subaccount at any time equals
the number of units purchased minus the number of units redeemed up to such
time. For each Subaccount, the number of units purchased or redeemed in
connection with a particular transaction is determined by dividing the dollar
amount by the unit value.
 
     Determination of Unit Value.  The unit value of a Subaccount on any
Valuation Day is equal to the unit value on the immediately preceding Valuation
Day multiplied by the Net Investment Factor for that Subaccount on that
Valuation Day.
 
     Net Investment Factor.  Each Subaccount has its own Net Investment Factor.
The Net Investment Factor measures the daily investment performance of a
Subaccount. The factor will increase to reflect investment income and capital
gains, realized and unrealized, for the securities of the underlying portfolio
or series. The factor will decrease to reflect any capital losses, realized or
unrealized, for the securities of the underlying portfolio or series.
 
     The asset charge for mortality and expense risks will be deducted in
determining the applicable Net Investment Factor.
 
PAYMENT AND ALLOCATION OF PREMIUMS
 
   
     Issuance of a Policy.  In order to purchase a Policy, an individual must
make application to PLACA through a licensed PLACA agent who is also a
registered representative of 1717 Capital Management Company ("1717") (formerly
PML Securities Company) or a broker/dealer having a Selling Agreement with 1717
or a broker/dealer having a Selling Agreement with such a broker/dealer. If
PLACA accepts the application, a Policy will be issued in consideration of
payment of the Minimum Initial Premium set forth in the Policy. The Minimum Face
Amount of a Policy under PLACA's rules is $50,000 for all Premium Classes except
preferred. For the preferred Premium Class, the Minimum Face Amount is $100,000.
    
 
                                       25
<PAGE>   35
 
   
     PLACA reserves the right to revise its rules from time to time to specify a
different Minimum Face Amount for subsequently issued policies. A Policy will be
issued only with respect to Insureds who have an Issue Age of 80 or less and who
provide PLACA with satisfactory evidence of insurability. Acceptance is subject
to PLACA's underwriting rules. PLACA reserves the right to reject an application
for any reason permitted by law. (See "Distribution of Policies," Page 49.)
    
 
     At the time the application for a Policy is signed, an applicant can,
subject to PLACA's underwriting rules, obtain temporary insurance protection,
pending issuance of the Policy, by answering "no" to the Health Questions of the
Temporary Agreement and submitting payment of the Minimum Initial Premium with
the Application. The Minimum Initial Premium will equal the Minimum Annual
Premium multiplied by the following factor:
 
<TABLE>
<CAPTION>
                                 PREMIUM BILLING MODE
                                   SELECTED AT ISSUE              FACTOR
                      ------------------------------------------  ------
                      <S>                                         <C>
                      Annual....................................   1.000
                      Semi-annual...............................   0.500
                      Quarterly.................................   0.250
                      Monthly...................................   0.167
</TABLE>
 
     The amount of coverage under the agreement is the lesser of the Face Amount
applied for or $500,000. Coverage under the agreement will end on the earliest
of: (a) the 90th day from the date of the agreement; (b) the date that insurance
takes effect under the Policy; (c) the date a policy, other than as applied for,
is offered to the Applicant; or (d) five days from the date PLACA mails a notice
of termination of coverage.
 
     Amount and Timing of Premiums.  The Minimum Initial Premium is due on or
before the date the Policy is delivered. No insurance will take effect until the
Minimum Initial Premium is paid while the health and other conditions of the
Insured stay the same as described in the application for the Policy. Prior to
the Final Policy Date and while the Policy is in force an Owner may make
additional premium payments at any time and in any amount, subject to the
limitation set forth below. Each premium payment must be for at least $20. PLACA
may increase this minimum amount upon 90 days written notice to Owners of such
increase, but the minimum amount will never exceed $500. Subject to certain
limitations described below, an Owner has considerable flexibility in
determining the amount and frequency of premium payments.
 
     At the time of application, each Owner will select a Planned Periodic
Premium schedule, based on a periodic billing mode of annual, semi-annual, or
quarterly payment. The Owner is entitled to receive a premium reminder notice
from PLACA at the specified interval. The Owner may change the Planned Periodic
Premium frequency and amount. Also, under the Automatic Payment Plan, the Owner
can select a monthly payment schedule pursuant to which premium payments will be
automatically deducted from a bank account or other source, rather than being
"billed".
 
     Any payments made while there is an outstanding Policy loan will be applied
as loan repayments, unless PLACA is notified in writing that the amount is to be
applied as a premium payment. The Owner is not required to pay the Planned
Periodic Premiums in accordance with the specified schedule. The Owner has the
flexibility to alter the amount, frequency and time period over which premiums
are paid. Payment of the Planned Periodic Premiums will not, however, guarantee
that the Policy will remain in force. Instead, the duration of the Policy
depends upon the Policy's Net Cash Surrender Value. Thus, even if Planned
Periodic Premiums are paid, the Policy will lapse whenever the Net Cash
Surrender Value is insufficient to pay the Monthly Deductions and any other
charges under the Policy and if a Grace Period expires without an adequate
payment by the Owner.
 
     Premium Limitations.  With regard to a Policy's inside build-up, the
Internal Revenue Code of 1986 (the "Code") provides for exclusion of the Death
Benefit from gross income if total premium payments do not exceed certain stated
limits. In no event can the total of all premiums paid under a Policy exceed
such limits. PLACA has established adequate safeguards to monitor whether
aggregate premiums paid under a Policy exceed those limits. If at any time a
premium is paid which would result in total premiums exceeding such limits,
PLACA will only accept that portion of the premium which would make total
premiums equal the
 
                                       26
<PAGE>   36
 
maximum amount which may be paid under the Policy. The excess will be refunded.
Even if total premiums were to exceed the maximum premium limitations
established by the Code, the excess of a Policy's Death Benefit over the
Policy's Cash Surrender Value would still be excludable from gross income under
the Code.
 
   
     The maximum premium limitations set forth in the Code depend in part upon
the amount of the Death Benefit at any time. As a result, any Policy changes
which affect the amount of the Death Benefit may affect whether cumulative
premiums paid under the Policy exceed the maximum premium limitations. To the
extent that any such change would result in cumulative premiums exceeding the
maximum premium limitations, PLACA will not effect such change. (See "Federal
Income Tax Considerations," Page 42.)
    
 
     Unless the Insured provides satisfactory evidence of insurability, PLACA
reserves the right to limit the amount of any premium payment if it increases
the Death Benefit more than it increases the Policy Account Value.
 
     Allocation of Net Premiums.  The Net Premium equals the premium paid less
the Premium Expense Charge. The application for the Policy will indicate how Net
Premiums should be allocated among the Subaccounts and/or the Guaranteed
Account. The percentages of each Net Premium that may be allocated to any
account must be in whole numbers and the sum of the allocation percentages must
be 100%. PLACA will allocate the Net Premiums on the date it receives such
premium at its Administrative Office.
 
   
     Where state law requires a refund of premiums paid when a policy is
returned under the Free-Look provisions (See "Free-Look for Policy," Page 37)
any portion of the Initial Premium and any subsequent premiums received by PLACA
before the expiration of a 15-day period beginning on the later of the Policy
Issue Date or the date PLACA receives the Minimum Initial Premium, which are to
be allocated to the Subaccounts will be allocated to the Market Subaccount. At
the end of the 15-day period PLACA will allocate the amount in the Money Market
Subaccount to each of the chosen Subaccounts based on the proportion that the
allocation percentage for such Subaccount bears to the sum of the Subaccount
premium allocation percentages.
    
 
     For example, assume a Policy was issued with Net Premiums allocated 25% to
the Growth Subaccount, 25% to the Bond Subaccount and 50% to the Guaranteed
Account. During the 15-day period stated above, 50% (25% + 25%) of the premiums
will be allocated to the Money Market Subaccount. At the end of the 15-day
period, 50% (25% / 50%) of the amount in the Money Market Subaccount will be
transferred to the Growth Subaccount and 50% to the Bond Subaccount.
 
     For premium payments received after the 15-day period, Net Premiums will be
allocated based on the allocation percentages then in effect. The allocation
schedules may be changed at any time by providing PLACA with written notice.
 
     The values of the Subaccounts will vary with their investment experience
and the Owner bears the entire investment risk. Owners should periodically
review their allocation schedule in light of market conditions and the Owner's
overall financial objectives.
 
     Transfers.  The Owner may transfer the Policy Account Value between and
among the Subaccounts of the Variable Account and the Guaranteed Account by
making a written transfer request to PLACA. The amount transferred each time
must be at least $1,000, unless the total value in an account is less than
$1,000, in which case the entire amount will be transferred.
 
   
     The Owner may, at any time, transfer all or part of the amount in one of
the Subaccounts to another Subaccount and/or to the Guaranteed Account. (For
transfers from the Guaranteed Account to the Subaccounts, see "Transfers from
Guaranteed Account," Page 39.)
    
 
     After four transfers have been made in any Policy Year, a $25 transfer
charge will be deducted from each transfer during the remainder of such Policy
Year. All transfers included in a request are treated as one transfer
transaction. Transfers (other than transfers from Guaranteed Account Value) will
be made as of the date PLACA receives a written request at its Administrative
Office. Transfers resulting from Policy loans, the exercise of exchange
privileges, and the reallocation from the Money Market Subaccount following the
15-day
 
                                       27
<PAGE>   37
 
period after the Issue Date, will not be subject to a transfer charge and will
not count against the four free transfers in any Policy Year. Under present law,
transfers are not taxable transactions.
 
     Policy Lapse.  The failure to make a premium payment will not itself cause
a Policy to lapse. Lapse will only occur when the Net Cash Surrender Value is
insufficient to cover the Monthly Deductions and other charges under the Policy
and the Grace Period expires without a sufficient payment. During the first
three Policy Years, the Policy will not lapse if the Minimum Guarantee Premium
has been paid.
 
     The Policy provides for a 61-day Grace Period that is measured from the
date on which notice is sent by PLACA. Thus, the Policy does not lapse, and the
insurance coverage continues, until the expiration of this Grace Period. In
order to prevent lapse, the Owner must during the Grace Period make a premium
payment equal to three Monthly Deductions. The notice sent by PLACA will specify
the payment required to keep the Policy in force. Failure to make a sufficient
payment within the Grace Period will result in lapse of the Policy without
value.
 
     Reinstatement.  A Policy that lapses without value may be reinstated at any
time within three years (or longer period required in a particular state) after
the expiration of the Grace Period and before the Final Policy Date by
submitting evidence of the Insured's insurability satisfactory to PLACA and
payment of an amount sufficient to keep the Policy in force for at least three
months following the effective date of reinstatement, which is the date the
reinstatement application is approved. Upon reinstatement, the Policy Account
Value will be based upon the premium paid to reinstate the Policy and the Policy
will be reinstated with the same Policy Date as it had prior to the lapse.
 
                             CHARGES AND DEDUCTIONS
 
     Charges will be deducted in connection with the Policy to compensate PLACA
for (a) providing the insurance benefits set forth in the Policy; (b)
administering the Policy; (c) assuming certain risks in connection with the
Policy; and (d) incurring expenses in distributing the Policy.
 
PREMIUM EXPENSE CHARGE
 
     Prior to allocation of Net Premiums, premiums paid are reduced by a Premium
Expense Charge which consists of:
 
     Premium Tax Charge.  Various states and some of their subdivisions impose a
tax on premiums received by insurance companies. Premium taxes vary from state
to state. A deduction of a percentage of the premium will be made from each
premium payment. The applicable percentage will be based on the rate for the
Insured's residence.
 
   
     Percent of Premium Sales Charge.  A 2% percent of premium charge will be
deducted from each premium payment to partially compensate PLACA for the cost of
selling the Policy. Currently, PLACA deducts the percent of premium sales charge
from each premium payment until the cumulative amount deducted equals PLACA's
current maximum premium sales charge. The current maximum sales charge is equal
to 20% of one sales load target premium established at issue. The sales load
target premium varies by Issue Age and Sex of the Insured and the Policy's Face
Amount at issue. However, if an Owner increases the Face Amount, PLACA will
establish a new maximum amount corresponding to the amount of the increase.
Currently the 2% charge will be deducted from a portion of each premium payment
until the maximum amount is collected. Premium payments made on or after the
effective date of the increase are allocated between the Initial Face Amount and
the increase using the ratio of the SEC guideline premiums as described under
Additional Surrender Charge, (page 29). However, PLACA reserves the right to
deduct the entire 2% charge from each premium payment at any time during the
life of the policy.
    
 
     Federal Tax Charge.  PLACA will deduct 1.25% from each premium payment to
cover the cost of Federal taxes resulting from its receipt of such premium
payment under the Policy. Section 848 of the Internal Revenue Code (enacted by
the Omnibus Budget Reconciliation Act of 1990) ties PLACA's corporate tax
liability (i.e., "tax burden"), in part, to the receipt of such premium
payments. PLACA represents that this
 
                                       28
<PAGE>   38
 
charge is reasonable in relation to its increased tax burden under Section 848
of the code. In addition, PLACA reserves the right to change the amount of this
charge if the applicable Federal tax law changes PLACA's tax burden.
 
SURRENDER CHARGES
 
     A Surrender Charge, which consists of a Deferred Administrative Charge and
a Deferred Sales Charge, is imposed if the Policy is surrendered or lapses at
any time before the end of the tenth Policy Year. A portion of this Surrender
Charge will be deducted if the Owner decreases the Initial Face Amount before
the end of the tenth Policy Year. An Additional Surrender Charge, which is a
Deferred Additional Sales Charge, will be imposed if the Policy is surrendered
or lapses at any time within ten years after the effective date of an increase
in Face Amount. A portion of an Additional Surrender Charge also will be
deducted if the related increment of Face Amount is decreased within ten years
after such increase took effect.
 
     These surrender charges are designed partially to compensate PLACA for the
cost of administering, issuing and selling the Policy, including agent sales
commissions, the cost of printing the prospectuses and sales literature, any
advertising costs, medical exams, review of applications for insurance,
processing of the applications, establishing policy records and Policy issue.
PLACA does not expect the surrender charges to cover all of these costs. To the
extent that they do not, PLACA will cover the short-fall from its general
account assets, which may include profits from the mortality and expense risk
charge.
 
     Deferred Administrative Charge.  The Deferred Administrative Charge is as
follows:
 
<TABLE>
<CAPTION>
                   CHARGE PER $1,000 FACE AMOUNT
                -----------------------------------
                            ISSUE AGES
                -----------------------------------
POLICY YEAR      1-5       15        25       35-80
- ------------    -----     -----     -----     -----
<S>             <C>       <C>       <C>       <C>
1-6             $2.00     $3.00     $4.00     $5.00
7                1.60      2.40      3.20      4.00
8                1.20      1.80      2.40      3.00
9                0.80      1.20      1.60      2.00
10               0.40      0.60      0.80      1.00
11                  0         0         0         0
</TABLE>
 
     For Issue Ages not shown, the charge will increase by a ratable portion for
each full year. The actual Deferred Administrative Charge will be the charge
described above less the amount of any Deferred Administrative Charge previously
paid at the time of a decrease in Face Amount.
 
     Deferred Sales Charge.  The Deferred Sales Charge will not exceed the
Maximum Deferred Sales Charge specified in the Policy. During Policy Years 1
through 6, this maximum equals 60% of the Surrender Charge target premium (which
is an amount, based on the Initial Face Amount, Issue Age, Sex and Premium Class
of the Insured, used solely for the purpose of calculating the Deferred Sales
Charge) for the Face Amount. It equals 48% of that target premium during Policy
Year 7, 36% during Policy Year 8, 24% during Policy Year 9, 12% during Policy
Year 10, and 0% during Policy Years 11 and later. The Deferred Sales Charge
actually imposed will equal the lesser of this maximum and an amount equal to
28% of the premiums actually received during the first Policy Year up to one
Surrender Charge target premium plus 7% of all other premiums paid to the date
of surrender or lapse, less any Deferred Sales Charge previously paid at the
time of a decrease in Face Amount.
 
     Additional Surrender Charge.  A Deferred Additional Sales Charge is
associated with each increase in Face Amount. Each Additional Surrender Charge
is calculated in a manner similar to the Deferred Sales Charge associated with
the Initial Face Amount. The Maximum Additional Surrender Charge for an increase
in Face Amount is 60% of the target premium for that increase (which in an
amount based upon the amount of the increase, Attained Age, Sex and Premium
Class of the Insured at the time of such increase). This maximum remains level
for six years following the effective date of an increase. It equals 48% of that
target premium during the seventh year, and declines by 12% per year to 0% by
the beginning of the eleventh year after the effective date of the increase. The
Deferred Additional Sales Charge actually deducted will equal the
 
                                       29
<PAGE>   39
 
lesser of this maximum and 28% of premiums received, up to the first target
premium for that increase, during the first twelve policy months after an
increase and 7% of all premiums thereafter, less any Deferred Additional Sales
Charge for such increase previously paid at the time of a decrease in Face
Amount. As explained below, only a portion of premiums received after the
effective date of an increase will be counted for this purpose. However, a
portion of the Policy Account Value on the effective date of an increase also
will be considered a "premium" for purposes of calculating the amount of each
Deferred Additional Sales Charge.
 
     Additional premium payments may not be required to fund a requested
increase in Face Amount. Instead, a special method, based on a guideline annual
premium calculated according to SEC rules, is used to allocate a portion of the
existing Policy Account Value to the increase and to allocate subsequent premium
payments between the Initial Face Amount and the increase. The Policy Account
Value is allocated according to the ratio between the SEC guideline annual
premium for the Initial Face Amount and the SEC guideline annual premium for the
total Face Amount on the effective date of the increase before any deductions
are made. For example, if the guideline annual premium is equal to $4,500 before
an increase and is equal to $6,000 after an increase, the Policy Account Value
on the effective date of the increase would be allocated 75% ($4,500/$6,000) to
the Initial Face Amount and 25% to the increase. Premium payments made on or
after the effective date of the increase are allocated between the Initial Face
Amount and the increase using the same ratio as is used to allocate the Policy
Account Value. In the event there is more than one increase in Face Amount, SEC
guideline annual premiums for each increment of Face Amount are used to allocate
Policy Account Values and premium payments among the various increments of Face
Amounts.
 
     Surrender Charge Upon Decrease in Face Amount.  A surrender charge may be
deducted on a decrease in Face Amount. In the event of a decrease, the surrender
charge deducted is a fraction of the charge that would apply to a full surrender
of the Policy. If there have been no increases in Face Amount, the fraction will
be determined by dividing the amount of the decrease by the current Face Amount
and multiplying the result by the Surrender Charge. If more than one Surrender
Charge is in effect (i.e., pursuant to one or more increases in Face Amount),
the surrender charge will be applied in the following order: (1) the most recent
increase followed by (2) the next most recent increases, successively, and (3)
the Initial Face Amount. Where a decrease causes a partial reduction in an
increase or in the Initial Face Amount, a proportionate share of the Surrender
Charge for that increase or for the Initial Face Amount will be deducted.
 
     Allocation of Surrender Charges.  The Surrender Charge and any Additional
Surrender Charge will be deducted from the Policy Account Value. For surrender
charges resulting from Face Amount decreases, that part of any such surrender
charge will reduce the Policy Account Value and will be allocated among the
accounts based on the proportion that the value in each of the Subaccounts and
the Guaranteed Account Value bear to the total unloaned Policy Account Value.
 
MONTHLY DEDUCTIONS
 
     Charges will be deducted from the Policy Account Value on the Policy Date
and on each Policy Processing Day to compensate PLACA for administrative
expenses and for the insurance coverage provided by the Policy. The Monthly
Deduction consists of three components -- (a) the cost of insurance, (b) monthly
administrative charges, and (c) the cost of any additional benefits provided by
rider. Because portions of the Monthly Deduction, such as the cost of insurance,
can vary from month to month, the Monthly Deduction may vary in amount from
month to month. The Monthly Deduction will be deducted from the Subaccounts and
the Guaranteed Account in accordance with the allocation percentages for Monthly
Deductions chosen by the Owner at the time of application, or as later changed
by PLACA pursuant to the Owner's written request. If PLACA cannot make a monthly
deduction on the basis of the allocation schedule then in effect, PLACA will
make such deduction and future deductions based on the proportion that the
Owner's Guaranteed Account Value and the value in the Owner's Subaccounts bear
to the total unloaned Policy Account Value.
 
     Cost of Insurance.  Because the cost of insurance depends upon several
variables, the cost for each Policy Month can vary. PLACA will determine the
monthly Cost of Insurance Charge by multiplying the applicable cost of insurance
rate or rates by the Net Amount at Risk for each Policy Month.
 
                                       30
<PAGE>   40
 
     The Net Amount at Risk on any Policy Processing Day is the amount by which
the Death Benefit exceeds the Policy Account Value. The Net Amount at Risk is
determined separately for the Initial Face Amount and any increases in Face
Amount. In determining the Net Amount at Risk for each increment of Face Amount,
the Policy Account Value is first considered part of the Initial Face Amount. If
the Policy Account Value exceeds the Initial Face Amount, it is considered as
part of any increases in Face Amount in the order such increases took effect.
 
     A cost of insurance is also determined separately for the Initial Face
Amount and any increases in Face Amount. In calculating the cost of insurance
charge, the rate for the Premium Class on the Policy Date is applied to the Net
Amount at Risk for the Initial Face Amount. For each increase in Face Amount,
the rate for the Premium Class applicable to the increase is used. If, however,
the Death Benefit is calculated as the Policy Account Value times the specified
percentage, the rate for the Premium Class for the Initial Face Amount will be
used for the amount of the Death Benefit in excess of the total Face Amount.
 
     Any change in the Net Amount at Risk will affect the total cost of
insurance charges paid by the Owner.
 
     Cost of Insurance Rate.  The cost of insurance rate will be based on the
Attained Age, Sex, Premium Class of the Insured and Duration. The actual monthly
cost of insurance rates will be based of PLACA's expectations as to future
mortality and expense experience. They will not, however, be greater than the
guaranteed maximum cost of insurance rates set forth in the Policy. These
guaranteed maximum rates are based on the Insured's Attained Age, Sex, Premium
Class, and the 1980 Commissioners Standard Ordinary Smoker and Nonsmoker
Mortality Table. For Policies issued in states which require "unisex" policies
(currently Montana) or in conjunction with employee benefit plans, the maximum
cost of insurance charge depends only on the Insured's Age, Premium Class and
the 1980 Commissioners Standard Ordinary Mortality Table NB and SB. Any change
in the cost of insurance rates will apply to all persons of the same Attained,
Age, Sex, and Premium Class and Duration.
 
     Premium Class.  The Premium Class of the Insured will affect the cost of
insurance rates. PLACA currently places Insureds into standard classes and
classes with extra ratings, which reflect higher morality risks. In an otherwise
identical Policy, an Insured in the standard class will have a lower cost of
insurance than an Insured in a class with extra ratings. The standard Premium
Class is divided into three categories: smoker, nonsmoker and preferred. The
preferred Premium Class is only available if the Face Amount equals or exceeds
$100,000. Nonsmoking insureds will generally incur lower cost of insurance rates
than Insureds who are classified as smokers in the same Premium Class. Preferred
Insureds will generally incur lower cost of insurance rates than Insureds who
are classified as nonsmokers.
 
     Since the nonsmoker designation is not available for Insureds under
Attained Age 21, shortly before an Insured attains age 21, PLACA will notify the
Insured about possible classification as a nonsmoker and will send the Insured
an Application for Change in Premium Class. If the Insured does not qualify as a
nonsmoker or does not return the application, cost of insurance rates will
remain as shown in the Policy. However, if the insured returns the application
and qualifies as a nonsmoker, the cost of insurance rates will be changed to
reflect the nonsmoker classification.
 
     Monthly Administrative Charges.  A Monthly Administrative Charge (presently
$7.50) will be deducted from the Policy Account Value on the Policy Date and
each Policy Processing Day as part of the Monthly Deduction. This charge may be
increased, but in no event will it be greater than $12 per month. This charge is
intended to reimburse PLACA for ordinary administrative expenses expected to be
incurred, including record keeping, processing claims and certain Policy
changes, preparing and mailing reports, and overhead costs.
 
     Additional Benefit Charges.  The Monthly Deduction will include charges for
any additional benefits added to the Policy. The monthly charges will be
specified in the applicable Rider.
 
FACE AMOUNT INCREASE CHARGE
 
     If the Face Amount is increased, an increase charge will be deducted from
the Policy Account Value on the effective date of such increase. This charge,
equal to $100 plus $1.00 per $1,000 Face Amount increase, will be deducted from
the accounts based on the allocation schedule for Monthly Deductions in effect
at such
 
                                       31
<PAGE>   41
 
time. This charge may be increased, but in no event will it be greater than $100
plus $3.00 per $1,000 Face Amount increase. This charge is intended to reimburse
PLACA for administrative expenses in connection with the Face Amount increase,
including medical exams, review of the application for the increase,
underwriting decisions and processing of the application, and changing Policy
records and the Policy. PLACA does not expect to make a profit on this charge.
 
PARTIAL WITHDRAWAL CHARGE
 
     A charge of $25 will be deducted from the Policy Account Value for each
partial withdrawal of Net Cash Surrender Value. This charge is intended to
compensate PLACA for the administrative costs in effecting the requested payment
and in making all calculations which may be required by reason of the partial
withdrawal.
 
TRANSFER CHARGE
 
     After four transfers have been made in any Policy Year, a transfer charge
of $25 will be deducted for each transfer during the remainder of such Policy
Year to compensate PLACA for the costs of processing such transfers.
 
     The transfer charge will be deducted from the amount being transferred. The
transfer charge will not apply to transfers resulting from Policy loans, the
exercise of special transfer rights and the initial reallocation of account
values from the Money Market Subaccount to other Subaccounts. These transfers
will not count against the four free transfers in any Policy Year.
 
CHARGES AGAINST THE SEPARATE ACCOUNTS
 
     Mortality and Expense Risk Charge.  A daily charge will be deducted from
the value of the net assets of the Separate Accounts to compensate PLACA for
mortality and expense risks assumed in connection with the Policy. This charge
will be deducted at an annual rate of 0.65% (or a daily rate of .001781%) of the
average daily net assets of each Subaccount. This charge may be increased, but
in no event will it be greater than an annual rate of 0.90% of the average daily
net assets of each Separate Account. The mortality risk assumed by PLACA is that
Insureds may live for a shorter time than projected and, therefore, greater
death benefits than expected will be paid in relation to the amount of premiums
received. The expense risk assumed is that expenses incurred in issuing and
administering the Policies will exceed the administrative charges provided in
the Policy.
 
     If the Mortality and Expense Risk Charge proves insufficient, PLACA will
provide for all death benefits and expenses and any loss will be borne by PLACA.
Conversely, PLACA will realize a gain from this charge to the extent all money
collected from this charge is not needed to provide for benefits and expenses
under the Policies.
 
OTHER CHARGES
 
     The Subaccounts purchase shares of the Funds at net asset value. The net
asset value of those shares reflect management fees and expenses already
deducted from the assets of the Fund's Portfolios. The fees and expenses for the
Funds and their Portfolios are described briefly in connection with a general
description of each Fund.
 
     More detailed information is contained in the Funds Prospectuses which are
attached to or accompany this Prospectus.
 
                                CONTRACT RIGHTS
 
LOAN PRIVILEGES
 
     General.  The Owner may at any time after the Issue Date borrow money from
PLACA using the Policy as the only security for the loan. The Owner may obtain
Policy loans in a minimum amount of $500 (or such lesser
 
                                       32
<PAGE>   42
 
minimum required in a particular state) but not exceeding the Policy's Net Cash
Surrender Value on the date of the loan. While the Insured is living, the Owner
may repay all or a portion of a loan and accrued interest.
 
     Interest Rate Charged.  The interest rate charged on Policy loans will be
at the fixed rate of 6% per year. Interest is due at the end of each Policy
Year. If interest is not paid when due, it will be added to the loan balance and
bear interest at the same rate. Unpaid interest will be allocated based on the
proportion that the Guaranteed Account Value and the Value of the Subaccounts
under a Policy bear to the total unloaned Policy Account Value.
 
     Allocation of Loans and Collateral.  PLACA will allocate the amount of a
Policy loan among the Subaccounts and/or the Guaranteed Account based upon the
proportion that the value of the Subaccounts and/or the Guaranteed Account Value
bear to the total unloaned Policy Account Value at the time the loan is made.
 
     The collateral for a Policy loan will be the loan amount plus accrued
interest to the next Policy Anniversary, less interest at 4% per annum which
will be earned to such Policy Anniversary. PLACA will deduct the collateral for
the loan from each account based on the loan allocation and transfer this amount
to the Loan Account. The collateral for any existing loan will be
recalculated:  (a) when loan interest is repaid or treated as part of the loaned
amount; (b) when a new loan is made; and (c) when a loan repayment is made. A
transfer to or from the Loan Account will be made to reflect any recalculation
of collateral. At any time, the amount of the outstanding loan under a Policy
equals the sum of all loans (including due and unpaid interest added to the loan
balance) minus any loan repayments.
 
     Interest Credited to Loan Account.  As long as the Policy is in force,
PLACA will credit the amount in the Loan Account with interest at effective
annual rates it determines, but not less than 4% or such higher minimum rate
required under state law. The rate will apply to the calendar year which follows
the date of determination. Loan interest credited will be transferred to the
accounts: (1) when loan interest is paid or treated as part of the loaned
amount; (2) when a loan repayment is made; and (3) when a new loan is made.
 
     Effect of Policy Loan.  Policy loans, whether or not repaid, will have a
permanent effect on the Policy Account Value, the Cash Surrender Value, and Net
Cash Surrender Value and may permanently affect the Death Benefit under the
Policy. The effect on the Policy Account Value and Death Benefit could be
favorable or unfavorable, depending on whether the investment performance of the
Subaccounts and the interest credited to the Guaranteed Account is less than or
greater than the interest being credited on the assets in the Loan Account while
the loan is outstanding. Compared to a Policy under which no loan is made,
values under a Policy will be lower when the credited interest rate is less than
the investment experience of assets held in the Subaccounts and interest
credited to the Guaranteed Account. The longer a loan is outstanding, the
greater the effect of a Policy loan is likely to be. The Death Proceeds will be
reduced by the amount of any outstanding Policy loan.
 
   
     Loan Repayments.  An Owner may repay all or part of a Policy loan at any
time while the Insured is alive and the Policy is in force. Unless prohibited by
a particular state, PLACA will assume that any payments made while there is an
outstanding loan on the Policy is a loan repayment, unless it receives written
instructions that it is a premium payment. Repayments up to the amount of the
outstanding loan will be allocated to the accounts based on the amount of the
outstanding loan allocated to each account as of the date of repayment; any
repayment in excess of the amount of the outstanding loan will be allocated to
the accounts based on the amount of interest due on the portion of the
outstanding loan allocated to each account. For this purpose, the amount of the
interest due is determined as of the next Policy Anniversary. Failure to repay a
loan or to pay loan interest will not cause the Policy to lapse unless the Net
Cash Surrender Value on the Policy Processing Day is less than the monthly
deduction due. In that event, the Grace Period provision will apply. (See
"Payment and Allocation of Premiums -- Policy Lapse," Page 28.)
    
 
   
     Tax Considerations.  Any loans taken from a "Modified Endowment Contract"
will be treated as a taxable distribution. In addition, with certain exceptions,
a 10% additional income tax penalty will be imposed on the portion of any loan
that is included in income. (See "Distributions from Policies Classified as
Modified Endowment Contracts," Page 45.) Depending upon the investment
performance of the Subaccounts and the amounts borrowed, loans may cause the
Policy to lapse. If the Policy is not a modified endowment contract,
    
 
                                       33
<PAGE>   43
 
   
lapse of the Policy with outstanding loans may result in adverse tax
consequences. (See "Distributions from Policies Not Classified as Modified
Endowment Contracts," Page 45.)
    
 
SURRENDER PRIVILEGE
 
     At any time before the earlier of the death of the Insured and the Final
Policy Date, the Owner may surrender the Policy for its Net Cash Surrender
Value. The Net Cash Surrender Value is the Policy Account Value minus any Policy
loan and accrued interest and less any surrender charges. The Net Cash Surrender
Value will be determined by PLACA on the date it receives, as its Administrative
Office, a surrender request signed by the Owner. Coverage under the Policy will
end on the day the Owner mails or otherwise sends the written surrender request
to PLACA.
 
   
     A surrender may have Federal income tax consequences. (See "Tax Treatment
of Policy Benefits," Page 43.)
    
 
PARTIAL WITHDRAWAL OF NET CASH SURRENDER VALUE
 
     After the first Policy Year, at any time before the earlier of the death of
the Insured and the Final Policy Date, the Owner may withdraw a portion of the
Policy's Net Cash Surrender Value. The minimum amount which may be withdrawn is
$1,500. A withdrawal charge will be deducted from the Policy Account Value. A
partial withdrawal will not result in the imposition of pro-rata surrender
charges.
 
     The withdrawn amount and expense charge will be allocated based on the
proportion that the value in the Subaccounts and the Guaranteed Account Value
bear to the total unloaned Policy Account Value.
 
   
     The effect of a partial withdrawal on the Death Benefit and Face Amount
will vary depending upon the Death Benefit Option in effect and whether the
Death Benefit is based on the applicable percentage of Policy Account Value.
(See "Death Benefit Options," Page 21.)
    
 
     Option A.  The effect of a partial withdrawal on the Face Amount and Death
Benefit under Option A can be described as follows:
 
          If the Death Benefit equals the Face Amount, a partial withdrawal will
     reduce the Face Amount and the Death Benefit by the amount of the partial
     withdrawal.
 
          For the purposes of this illustration (and the following illustrations
     of partial withdrawals), assume that the Attained Age of the Insured is
     under 40 and there is no indebtedness. The applicable percentage is 250%
     for an Insured with an Attained Age under 40.
 
          Under Option A, a contract with a Face Amount of $300,000 and a Policy
     Account Value of $30,000 will have a Death Benefit of $300,000. Assume that
     the policyowner takes a partial withdrawal of $10,000. The partial
     withdrawal will reduce the Policy Account Value to $19,975
     ($30,000 - $10,000 - $25) and the Death Benefit and Face Amount to $290,000
     ($300,000 - $10,000).
 
          If the Death Benefit immediately prior to the partial withdrawal is
     based on the applicable percentage of Policy Account Value, the Face Amount
     will be reduced by an amount equal to the amount of the partial withdrawal.
     The Death Benefit will be reduced to equal the greater of (a) the Face
     Amount after the partial withdrawal, and (b) the applicable percentage of
     the Policy Account Value after deducting the amount of the partial
     withdrawal and expense charge.
 
          Under Option A, a policy with a Face Amount of $300,000 and a Policy
     Account Value of $300,000 will have a Death Benefit of $750,000. Assume
     that the policyowner takes a partial withdrawal of $49,975. The partial
     withdrawal will reduce the Policy Account Value to $250,000 ($300,000 -
     $49,975 - $25) and the Face Amount to $250,025 ($300,000 - $49,975). The
     Death Benefit is the greater of (a) the Face Amount of $250,025 and (b) the
     applicable percentage of the Policy Account Value $625,000
     ($250,000 X 2.5). Therefore, the Death Benefit will be $625,000.
 
     Option B.  The Face Amount will never be decreased by a partial withdrawal.
A partial withdrawal will, however, always decrease the Death Benefit.
 
                                       34
<PAGE>   44
 
          If the Death Benefit equals the Face Amount plus the Policy Account
     Value, a partial withdrawal will reduce the Policy Account Value by the
     amount of the partial withdrawal and expense charge and thus the Death
     Benefit will also be reduced by the amount of the partial withdrawal and
     the expense charge.
 
          Under Option B, a policy with a Face Amount of $300,000 and a Policy
     Account Value of $90,000 will have a Death Benefit of $390,000
     ($300,000 + $90,000). Assume the policyowner takes a partial withdrawal of
     $20,000. The partial withdrawal will reduce the Policy Account Value to
     $69,975 ($90,000 - $20,000 - $25) and the Death Benefit to $369,975
     ($300,000 + $69,975). The Face Amount is unchanged.
 
          If the Death Benefit immediately prior to the partial withdrawal is
     based on the applicable percentage of Policy Account Value, The Death
     Benefit will be reduced to equal the greater of (a) the Face Amount plus
     the Policy Account Value after deducting the partial withdrawal and expense
     charge and (b) the applicable percentage of Policy Account Value after
     deducting the amount of the partial withdrawal and the expense charge.
 
          Under Option B, a policy with a Face Amount of $300,000 and a Policy
     Account Value of $300,000 will have a Death Benefit of $750,000
     ($300,000 X 2.5). Assume the policyowner takes a partial withdrawal of
     $149,975. The partial withdrawal will reduce the Policy Account Value to
     $150,000 ($300,000 - $149,975 - $25) and the Death Benefit to the greater
     of (a) the Face Amount plus the Policy Account Value $450,000
     ($300,000 + $150,000) and (b) the Death Benefit based on the applicable
     percentage of the Policy Account Value $375,000 ($150,000 X 2.5).
     Therefore, the Death Benefit will be $450,000. The Face Amount is
     unchanged.
 
     Any decrease in Face Amount due to a partial withdrawal will first reduce
the most recent increase in Face Amount, then the most recent increases,
successively, and lastly, the Initial Face Amount.
 
   
     Because a partial withdrawal can affect the Face Amount and the Death
Benefit as described above, a partial withdrawal may also affect the Net Amount
at Risk which is used to calculate the cost of insurance charge under the
Policy. (See "Cost of Insurance," Page 30.) A request for partial withdrawal may
not be allowed if or to the extent such withdrawal would reduce the Face Amount
below the Minimum Face Amount for the Policy. Also, if a partial withdrawal
would result in cumulative premiums exceeding the maximum premium limitations
applicable under the Code for life insurance, PLACA will not allow such partial
withdrawal.
    
 
   
     A partial withdrawal of Net Cash Surrender Value may have Federal income
tax consequences. (See "Tax Treatment of Policy Benefits," Page 43.)
    
 
ACCELERATED DEATH BENEFIT
 
     Applicants residing in states that have approved the Accelerated Death
Benefit Rider (the "ADBR") may elect to add it to their Policy at issue, subject
to PLACA receiving satisfactory additional evidence of insurability. The ADBR is
not yet available in all states and the terms under which it is available may
vary from state-to-state. There is no assurance that the ADBR will be approved
in all states or that it will be approved under the terms described herein.
 
     The ADBR permits the Owner to receive, at his or her request and upon
approval by PLACA, an accelerated payment of part of the Policy's Death Benefit
when one of the following two events occurs:
 
     1. Terminal Illness.  The Insured develops a non-correctable medical
        condition which is expected to result in his or her death within 12
        months; or
 
     2. Permanent Confinement to a Nursing Care Facility.  The Insured has been
        confined to a Nursing Care Facility for 180 days and is expected to
        remain in such a facility for the remainder of his or her life.
 
                                       35
<PAGE>   45
 
     There is no charge for adding the ADBR to a Policy. However, an
administrative charge, currently $100 and not to exceed $250, will be deducted
from the accelerated death benefit at the time it is paid.
 
     Tax Consequences of the ADBR.  The Federal Income tax consequences
associated with adding the ADBR or receiving the accelerated death benefit are
uncertain. Accordingly, we urge you to consult a tax adviser before adding the
ADBR to your Policy or requesting an accelerated death benefit.
 
     Amount of the Accelerated Death Benefit.  The ADBR provides for a minimum
accelerated death benefit payment of $10,000 and a maximum benefit payment equal
to 75% of the Eligible Death Benefit less 25% of any outstanding policy loans
and accrued interest. The ADBR also restricts the total of the accelerated death
benefits paid from all life insurance policies issued to an Owner by PLACA and
its subsidiaries to $250,000. This $250,000 maximum may be increased, as
provided in the ADBR, to reflect inflation. The term Eligible Death Benefit
under the ADBR means:
 
     The Insurance Proceeds payable under a Policy if the Insured died at the
time a claim for an accelerated death benefit is approved by PLACA, minus:
 
        1. any Premium Refund payable at death if the Insured died at such time;
           and
        2. any insurance payable under the terms of any other rider attached to
           a Policy.
 
     An Owner may request only one accelerated death benefit payment (except to
pay premiums and policy loan interest) and there are no restrictions on the
Owner's use of the benefit. An Owner may elect to receive the accelerated death
benefit payment in a lump sum or in 12 or 24 equal monthly installments. If
installments are elected and the Insured dies before all of the payments have
been made, the present value (at the time of the Insured's death) of the
remaining payments and the remaining Insurance Proceeds at Death under the
Policy will be paid to the Beneficiary in a lump sum.
 
     Conditions for Receipt of the Accelerated Death Benefit.  In order to
receive an accelerated death benefit payment, a Policy must be in force other
than as Extended Term Insurance and an Owner must submit Due Proof of
Eligibility and a completed claim form to PLACA at its Home Office. Due Proof of
Eligibility means a written certification (described more fully in the ADBR) in
a form acceptable to PLACA, from a treating physician stating that the Insured
has a Terminal Illness or is expected to be permanently confined in a Nursing
Care Facility.
 
     PLACA may request additional medical information from an Owner's physician
and/or may require an independent physical examination (at its expense) before
approving the claim for payment of the accelerated death benefit. PLACA will not
approve a claim for an accelerated death benefit payment if a Policy is assigned
in whole or in part, if the Terminal Illness or Permanent Confinement is the
result of intentionally self-inflicted injury or if the Owner is required to
elect it in order to meet the claims of creditors or to obtain a government
benefit.
 
     Operation of the ADBR.  The ADBR provides that the accelerated death
benefit be made in the form of a policy loan up to the amount of the maximum
loan available under a Policy at the time the claim is approved. Therefore, a
request for an accelerated death benefit payment in an amount less than or equal
to the maximum loan available at that time will result in a policy loan being
made in the amount of the requested benefit. This policy loan operates as would
any loan under the Policy.
 
     To the extent that the amount of a requested accelerated death benefit
payment exceeds the maximum available loan amount, the benefit will be advanced
to the Owner and a lien will be placed on the Death Benefit payable under the
Policy (the "death benefit lien") in the amount of this advance. Under the ADBR,
interest will accrue daily, at a rate determined as described in the ADBR, on
the amount of this advance and upon the death of the Insured the amount of the
advance and accrued interest thereon will be subtracted from the amount of
Insurance Proceeds at Death.
 
     Effect on Existing Policy.  The Insurance Proceeds at Death otherwise
payable under a Policy at the time of an Insured's death will be reduced by the
amount of any death benefit lien and accrued interest thereon. If the Owner
makes a request for a surrender, a policy loan or a withdrawal, the Policy's Net
Cash Surrender Value and Loan Value will be reduced by the amount of any
outstanding death benefit lien plus
 
                                       36
<PAGE>   46
 
accrued interest. Therefore, depending upon the size of the death benefit lien,
this may result in the Net Cash Surrender Value and the Loan Value being reduced
to zero.
 
     Premiums and policy loan interest must be paid when due. However, if
requested with the accelerated death benefit claim, future premiums and policy
loan interest may be paid through additional accelerated death benefits. If
future premiums and policy loan interest are to be paid through additional
accelerated death benefits, Periodic Planned Premiums and policy loan interest
will be paid in this manner automatically.
 
     In addition to lapse under the applicable provisions of the Policy, a
Policy will also terminate on any Policy Anniversary when the death benefit lien
exceeds the Insurance Proceeds at Death.
 
FREE-LOOK PRIVILEGES
 
     Free-Look for Policy.  The Policy provides for an initial Free-Look Period.
The Owner may cancel the Policy until the latest of: (a) 45 days after Part I of
the application for the Policy is signed; (b) 10 days after the Owner receives
the Policy; and (c) 10 days after PLACA mails the Notice of Withdrawal Right to
the Owner. Upon giving written notice of cancellation and returning the Policy
to PLACA's Administrative Office, to one of PLACA's other offices, or to the
PLACA representative from whom it was purchased, the Owner will receive a refund
equal to the sum of: (i) the Policy Account Value as of the date the returned
Policy is received by PLACA at its Administrative Office or the PLACA
representative through whom the Policy was purchased; plus (ii) any Premium
Expense Charges deducted from premiums paid; plus (iii) any Monthly Deductions
charged against the accounts; plus (iv) any Mortality and Expense Risk charges
deducted from the value of the net assets of the Subaccounts attributable to the
Policy; plus (v) any advisory fees and any other fees and expenses of the Fund.
 
     When state law requires a refund equal to gross premiums paid, the refund
will instead equal the gross premiums paid on the Policy and will not reflect
the investment experience of the Subaccounts or interest earnings for the
Guaranteed Account.
 
     Free-Look for Increase in Face Amount.  Any requested increase in Face
Amount is also subject to a Free-Look privilege. The Owner may cancel a
requested increase in Face Amount until the latest of: (a) 45 days after the
application for the increase is signed; (b) 10 days after the Owner receives the
new Policy Schedule pages reflecting the increase; and (c) 10 days after PLACA
mails a Notice of Withdrawal Right to the Owner.
 
     Upon requesting cancellation of the increase, an amount equal to all cost
of insurance charges attributable to the increase plus the increase expense
charge will be reallocated to the accounts in the same proportion as they were
deducted, unless the Owner requests a refund of such amount.
 
SPECIAL TRANSFER AND CONVERSION RIGHTS
 
     Transfer Right for Policy.  During the first two years following Policy
issue, the Owner may, on one occasion, transfer the entire Policy Account Value
in the Subaccounts to the Guaranteed Account without such transfer counting
toward the four transfers permitted without charge during a Policy Year. If such
transfer is made after four transfers have been made during a Policy Year, no
transfer charge will be deducted.
 
   
     Conversion Privilege for Increase in Face Amount.  During the first two
years following an increase in Face Amount, the Owner may, on one occasion,
without evidence of insurability, exchange the amount of the increase in Face
Amount for a fixed-benefit permanent life insurance policy. (Such an exchange
may, however, have Federal income tax consequences. See "Tax Treatment of Policy
Benefits," Page 43). Premiums under this new policy will be based on the Sex,
Attained Age and Premium Class of the Insured on the effective date of the
increase in the Face Amount of the Policy. The new policy will have the same
Face Amount and Issue Date as the amount and effective date of the increase.
PLACA will refund the monthly deductions for the increase made on each Policy
Processing Day between the effective date of the increase to the date of
conversion and the expense charge for such increase.
    
 
                                       37
<PAGE>   47
 
     Transfer Right for Change in Investment Policy of a Subaccount.  If the
investment policy of a Subaccount is materially changed, the Owner may transfer
the portion of the Policy Account Value in such Subaccount to another Subaccount
or to the Guaranteed Account without having such transfer count toward the four
transfers permitted without charge during a Policy Year. If such transfer is
made after four transfers have been made during a Policy Year, no transfer
charge will be deducted.
 
                             THE GUARANTEED ACCOUNT
 
     An Owner may allocate some or all of the Net Premiums and transfer some or
all of the Policy Account Value to the Guaranteed Account, which is part of
PLACA's General Account and pays interest at declared rates guaranteed for each
calendar year (subject to a minimum guaranteed interest rate of 4%). The
principal, after deductions, is also guaranteed. PLACA's General Account
supports its insurance and annuity obligations. The Guaranteed Account has not,
and is not required to be, registered with the SEC under the Securities Act of
1933, and neither the Guaranteed Account nor PLACA's General Account has been
registered as an investment company under the Investment Company Act of 1940.
Therefore, neither PLACA's General Account, the Guaranteed Account, nor any
interest therein are generally subject to regulation under the 1933 Act or the
1940 Act. The disclosures relating to these accounts which are included in this
Prospectus are for prospective Owners' information and have not been reviewed by
the SEC. However, such disclosures may be subject to certain general applicable
provisions of the Federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
 
     The portion of the Policy Account Value allocated to the Guaranteed Account
will be credited with rates of interest, as described below. Since the
Guaranteed Account is part of PLACA's General Account, PLACA assumes the risk of
investment gain or loss on this amount. All assets in the General Account are
subject to PLACA's general liabilities from business operations.
 
MINIMUM GUARANTEED AND CURRENT INTEREST RATES.
 
     The Guaranteed Account Value is guaranteed to accumulate at a minimum
effective annual interest rate of 4%. PLACA will credit the Guaranteed Account
Value with current rates in excess of the minimum guarantee but is not obligated
to do so. These current interest rates are influenced by, but do not necessarily
correspond to, prevailing general market interest rates. Since PLACA, in its
sole discretion, anticipates changing the current interest rate from time to
time, different allocations to and from the Guaranteed Account Value will be
credited with different current interest rates. The interest rate to be credited
to each amount allocated or transferred to the Guaranteed Account will apply to
the end of the calendar year in which such amount is received or transferred. At
the end of the calendar year, PLACA reserves the right to declare a new current
interest rate on such amount and accrued interest thereon (which may be a
different current interest rate than the current interest rate on new
allocations to the Guaranteed Account on that date). The rate declared on such
amount and accrued interest thereon at the end of each calendar year will be
guaranteed for the following calendar year. Any interest credited on the amounts
in the Guaranteed Account in excess of the minimum guaranteed rate of 4% per
year will be determined in the sole discretion of PLACA. The Owner assumes the
risk that interest credited may not exceed the guaranteed minimum rate.
 
     Amounts deducted from the Guaranteed Account for partial withdrawals,
Policy loans, transfers to the Separate Accounts, Monthly Deductions or other
changes are currently, for the purpose of crediting interest, accounted for on a
last in, first out ("LIFO") method.
 
     PLACA reserves the right to change the method of crediting interest from
time to time, provided that such changes do not have the effect of reducing the
guaranteed rate of interest below 4% per annum or shorten the period for which
the interest rate applies to less than a calendar year (except for the year in
which such amount is received or transferred).
 
     Calculation of Guaranteed Account Value.  The Guaranteed Account Value at
any time is equal to amounts allocated and transferred to it plus interest
credited to it, minus amounts deducted, transferred or withdrawn from it.
 
                                       38
<PAGE>   48
 
     Interest will be credited to the Guaranteed Account on each Policy
Processing Day as follows: for amounts in the account for the entire Policy
Month, from the beginning to the end of the month; for amounts allocated to the
account during the prior Policy Month, from the date the Net Premium or loan
repayment is allocated to the end of the month; for amounts transferred to the
account during the Policy Month, from the date of transfer to the end of the
month; and for amounts deducted or withdrawn from the account during the prior
Policy Month, from the beginning of the month to the date of deduction or
withdrawal.
 
   
     Surrenders and partial withdraws from the Guaranteed Account may be delayed
for up to six months. (See "Other Policy Provisions -- Payment of Policy
Benefits," Page 39.)
    
 
TRANSFERS FROM GUARANTEED ACCOUNT.
 
     Within 30 days prior to or following any Policy Anniversary, one transfer
is allowed from the Guaranteed Account to any or all of the Subaccounts. The
amount transferred from the Guaranteed Account may not exceed 25% of the value
of such account if the value of such account exceeds $1,000 or, if less, then
the entire Guaranteed Account Value may be transferred on the applicable Policy
Anniversary. If the written request for such transfer is received prior to the
Policy Anniversary, the transfer will be made as of the Policy Anniversary; if
the written request is received after the Policy Anniversary, the transfer will
be made as of the date PLACA receives the written request at its Administrative
Office.
 
                            OTHER POLICY PROVISIONS
 
     Amount Payable on Final Policy Date.  If the Insured is living on the Final
Policy Date (at Insured's Attained Age 100), PLACA will pay the Owner the Policy
Account Value less any outstanding Policy loan and accrued interest and any
unpaid Monthly Deductions. Insurance coverage under the Policy will then end.
Payment will generally be made within seven days of the Final Policy Date.
 
     Payment of Policy Benefits.  Insurance Proceeds under a Policy will
ordinarily be paid to the Beneficiary within seven days after PLACA receives
proof of the Insured's death at its Administrative Office and all other
requirements are satisfied. Insurance proceeds will be paid in a single sum
unless an alternative settlement option has been selected.
 
     If Insurance Proceeds are payable in a single sum, interest at the annual
rate of 3% or any higher rate declared by PLACA or required by law is paid on
the Insurance Proceeds from the date of death until payment is made.
 
     Any amounts payable as a result of surrender, partial withdrawal, or Policy
loan will ordinarily be paid within seven days of receipt of written request at
PLACA's Administrative Office in a form satisfactory to PLACA.
 
     Generally, the amount of a payment from the Variable Account will be
determined as of the date of receipt by PLACA of all required documents.
However, PLACA may defer the determination or payment of such amounts if the
date for determining such amounts falls within any period during which: (1) the
disposal or valuation of a Subaccount's assets is not reasonably practicable
because the New York Stock Exchange is closed or conditions are such that, under
the SEC's rules and regulations, trading is restricted or an emergency is deemed
to exist; or (2) the SEC by order permits postponement of such actions for the
protection of PLACA policyholders. As to amounts allocated to the Guaranteed
Account, PLACA may defer payment of any withdrawal or surrender of Net Cash
Surrender Value and the making of a loan for up to six months after PLACA
receives a written request at its Administrative Office. PLACA will allow
interest, at a rate of 3% a year, on any payment PLACA defers for 30 days or
more as described above.
 
     The Owner may decide the form in which proceeds will be paid. During the
Insured's lifetime, the Owner may arrange for the Insurance Proceeds to be paid
in a lump sum or under a Settlement Option. These choices are also available
upon surrender of the Policy for its Net Cash Surrender Value and for payment of
the Policy Account Value on the Final Policy Date. If no election is made,
payment will be made in a lump sum. The Beneficiary may also arrange for payment
of the Insurance Proceeds in a lump sum or under a Settlement
 
                                       39
<PAGE>   49
 
Option. If the Beneficiary is changed, any prior arrangements with respect to
the Payment Option will be cancelled.
 
     The Contract.  The Policy and a copy of the applications attached thereto
are the entire contract. Only statements made in the applications can be used to
void the Policy or deny a claim. PLACA assumes that all statements in an
application are made to the best of the knowledge and belief of the person(s)
who made them, and, in the absence of fraud, those statements are considered
representations and not warranties. PLACA relies on those statements when it
issues or changes a Policy. Only the President or a Vice President of PLACA can
agree to change or waive any provisions of the Policy and only in writing. As a
result of differences in applicable state laws, certain provisions of the Policy
may vary from state to state.
 
     Ownership.  The Owner is the Insured unless a different Owner is named in
the application or thereafter changed. While the Insured is living, the Owner is
entitled to exercise any of the rights stated in the Policy or otherwise granted
by PLACA. If the Insured and Owner are not the same, and the Owner dies before
the Insured, these rights will vest in the estate of the Owner, unless otherwise
provided.
 
     Beneficiary.  The Beneficiary is designated in the application for the
Policy, unless thereafter changed by the Owner during the Insured's lifetime by
written notice to PLACA. Any Insurance Proceeds for which there is not a
designated Beneficiary surviving at the Insured's death are payable in a single
sum to the Insured's executors or administrators.
 
     Change of Owner and Beneficiary.  As long as the Policy is in force, the
Owner or Beneficiary may be changed by written request in a form acceptable to
PLACA. If two or more persons are named as Beneficiaries, those surviving the
Insured will share the Insurance Proceeds equally, unless otherwise stated. The
change will take effect as of the date it is signed, whether or not the Insured
is living when the request is received by PLACA. PLACA will not be responsible
for any payment made or action taken before it receives the written request.
 
     Split Dollar Arrangements.  The Owner or Owners may enter into a Split
Dollar Arrangement between each other or another person or persons whereby the
payment of premiums and the right to receive the benefits under the Policy
(i.e., Net Cash Surrender Value or Death Proceeds) are split between the
parties. There are different ways of allocating such rights.
 
     For example, an employer and employee might agree that under a Policy on
the life of the employee, the employer will pay the premiums and will have the
right to receive the Net Cash Surrender Value. The employee may designate the
Beneficiary to receive any Death Proceeds in excess of the Net Cash Surrender
Value. If the employee dies while such an arrangement is in effect, the employer
would receive from the Death Proceeds the amount which he would have been
entitled to receive upon surrender of the policy and the employee's Beneficiary
would receive the balance of the proceeds.
 
     No transfer of Policy rights pursuant to a Split Dollar Arrangement will be
binding on PLACA unless in writing and received by PLACA.
 
     The parties who elect to enter into a Split Dollar Arrangement should
consult their own tax advisers regarding the tax consequences of such an
arrangement.
 
     Assignments.  The Owner may assign any and all rights under the Policy. No
assignment binds PLACA unless in writing and received by PLACA at it's
Administrative Office. PLACA assumes no responsibility for determining whether
an assignment is valid and the extent of the assignee's interest. All
assignments will be subject to any Policy loan. The interest of any Beneficiary
or other person will be subordinate to any assignment. A Beneficiary may not
commute, encumber, or alienate Policy benefits, and to the extent permitted by
applicable law, such benefits are not subject to any legal process for the
payment of any claim against the payee. To the extent permitted by applicable
laws, no right or benefit under the Policy will be subject to claims of
creditors, except as may be provided by assignment.
 
     Misstatement of Age and Sex.  If the Insured's age or sex has been
misstated in the application, the Death Benefit and any benefits provided by
riders will be such as the most recent Monthly Deductions would have provided at
the correct age and sex. No adjustment will be made to the Policy Account Value.
 
                                       40
<PAGE>   50
 
     Suicide.  In the event of the Insured's suicide within two years from the
Issue Date of the Policy (except where state law requires a shorter period)
PLACA's liability is limited to the payment to the Beneficiary of a sum equal to
the premiums paid less any Policy loan and accrued interest and any partial
withdrawals.
 
     If the Insured commits suicide within two years (or shorter period required
by state law) from the effective date of any Policy change which increases the
Death Benefit, the amount which PLACA will pay with respect to the increase will
be the Monthly Deductions for the cost of insurance attributable to such
increase and the expense charge for the increase.
 
     Incontestability.  PLACA has the right to contest the validity of a Policy
based on material misstatements made in the initial application for the Policy.
PLACA also has a right to contest the validity of any policy change based on
material misstatements made in any application for that change. However, the
Policy will be incontestable after it has been in force during the Insured's
lifetime for two years from the Issue Date (or such other date as required by
state law) except for nonpayment of the Minimum Initial Premium. Similar
incontestability will apply to an increase in Face Amount or reinstatement after
it has been in force during the Insured's lifetime for two years from its
effective date.
 
     Settlement Options.  In lieu of a single sum payment on death or surrender,
an election may be made to apply the proceeds under any one of the fixed-benefit
Settlement Options provided in the Policy. A guaranteed interest rate of 3% per
year applies to all Options. Additional interest may be declared each year by
PLACA in its sole discretion. The options are briefly described below. Please
refer to the Policy for more details.
 
     Proceeds at Interest Option.  Left on deposit to accumulate with PLACA with
interest payable at 12, 6, 3, or 1 month intervals, as elected at a rate of at
least 3% per year.
 
     Instalments of a Specified Amount Option.  Payable in equal instalments of
the amount elected with PLACA's consent at 12, 6, 3, or 1 month intervals, as
elected until proceeds applied under the Option and interest on the unpaid
balance at 3% per year and any additional interest are exhausted.
 
     Instalments for a Specified Period Option.  Payable in the number of equal
monthly instalments set forth in the election. Payments may be increased by
additional interest which would increase the instalments certain. The guaranteed
interest rate is 3% per year.
 
     Life Income Option.  Payable in equal monthly instalments during the
payee's life. Payments will be made either with or without a guaranteed minimum
number. If there is to be a minimum number of payments, they will be for either
120 or 240 months or until the proceeds applied under the Option are exhausted,
as elected.
 
     Joint and Survivor Life Income.  Payable in equal monthly instalments, with
a number of instalments certain, during the joint lives of the payee and one
other person and during the life of the survivor. The minimum number of payments
will be for either 120 or 240 months, as elected.
 
     Supplementary Benefits.  The following supplementary benefits, which are
subject to the restrictions and limitations set forth therein, may be included
in a Policy:
 
     Disability Waiver Benefit.  Subject to certain age and underwriting
restrictions, the Policy may include a Disability Waiver Benefit Rider providing
that in the event of the Insured's total disability before Attained Age 60 and
continuing for at least six months, PLACA will apply a premium payment to the
Policy on each Policy Processing Day during the first three Policy Years (the
amount of the payment will be based on the Minimum Annual Premium). PLACA will
also waive all monthly deductions after the commencement of and during the
continuance of such total disability after the first three Policy Years. If this
rider is added, the Monthly Deduction will be increased to include the cost of
this rider.
 
     Disability Waiver of Premium Benefit.  Subject to certain age and
underwriting restrictions, a Policy may include the Disability Waiver of Premium
Benefit providing that, in the event of the Insured's total disability before
Attained Age 60 and continuing for at least 180 days, PLACA will apply a premium
payment to the Policy on each Policy Processing Day prior to Insured's Attained
Age 65 and while the Insured remains totally disabled.
 
                                       41
<PAGE>   51
 
     At the time of application, a Monthly Benefit Amount is selected by the
applicant. This amount is generally intended to reflect the amount of the
premiums expected to be paid monthly. In the event of Insured's total disability
the amount of the premium payment applied on each Policy Processing Day will be
the lesser of: (a) the Monthly Benefit Amount; or (b) the monthly average of the
premium payments less partial withdrawals for the Policy since its Policy Date.
 
     If the Policy is issued with the Disability Waiver of Premium Benefit
Rider, each Monthly Deduction will be increased to include the cost of the rider
which is a specified percentage of the Monthly Benefit Amount.
 
     This supplementary benefit must be selected at the time of application and
cannot be added after issue. An Owner cannot elect to have both this rider and
another disability waiver benefit rider attached as supplementary benefits with
the same Policy.
 
     Change of Insured.  Upon request, the Policy may include a Change of
Insured Rider by which the Insured under a Policy may be changed to a New
Insured, subject to certain conditions and evidence of insurability. The Monthly
Deduction for cost of insurance will be changed to that for the New Insured as
of the effective date of the change.
 
     Children's Term Rider.  Subject to certain age and underwriting
restrictions, the Policy may include a Children's Term Insurance Rider providing
level term insurance on each insured child until the earlier of age 25 of the
child or the Policy Anniversary nearest the insured's 65th birthday. When the
term insurance expires on the life of an insured child, it may be converted
without evidence of insurability to a whole life policy providing a level face
amount of insurance and a level premium. The new policy may be up to five times
the amount of the term insurance.
 
     The rider is issued to provide between $5,000 and $15,000 of term insurance
on each insured child. Each insured child under a rider will have the same
amount of insurance. If this rider is added, the Monthly Deduction will be
increased to include the cost of this rider. This supplementary benefit must be
selected at the time of application for the Policy or an increase in Face
Amount.
 
                       FEDERAL INCOME TAX CONSIDERATIONS
 
INTRODUCTION
 
     The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisors should be consulted for more
complete information. This discussion is based upon PLACA's understanding of the
present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
 
TAX STATUS OF THE POLICY
 
     Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code")
sets forth a definition of a life insurance contract for Federal tax purposes.
Although the Secretary of the Treasury (the "Treasury") is authorized to
prescribe regulations implementing Section 7702, while proposed regulations and
other interim guidance has been issued, final regulations have not been adopted.
Guidance as to how Section 7702 is to be applied is limited. If a Policy were
determined not to be a life insurance contract for purposes of Section 7702,
such Policy would not provide the tax advantages normally provided by a life
insurance policy.
 
     With respect to a Policy issued on the basis of a standard premium class,
PLACA believes (largely in reliance on IRS Notice 88-128 and the proposed
regulations under Section 7702, issued on July 5, 1991) that such a Policy
should meet the Section 7702 definition of a life insurance contract, as long s
the Owner does not pay the full amount of premiums permitted under the Policy.
 
                                       42
<PAGE>   52
 
     With respect to a Policy that is issued on a substandard basis (i.e., a
premium class with extra rating involving higher than standard mortality risk),
there is less guidance, in particular as to how the mortality and other expense
requirements of Section 7702 are to be applied in determining whether such a
Policy meets the Section 7702 definition of a life insurance contract. Thus, it
is not clear whether or not such a Policy would satisfy Section 7702,
particularly if the Owner pays the full amount of premiums permitted under the
Policy. An Owner of a Policy issued on a substandard basis may, however, adopt
certain self-imposed limitations on the amount of premiums paid for such a
Policy which should cause the Policy to meet the Section 7702 definition of a
life insurance contract. An Owner contemplating the adoption of such limitations
should do so only after consulting a tax adviser.
 
     If it is subsequently determined that a Policy does not satisfy Section
7702, PLACA may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, PLACA
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
 
     Section 817(h) of the Code requires that the investments of each of the
Subaccounts must be "adequately diversified" in accordance with Treasury
regulations in order for the Policy to qualify as a life insurance contract
under Section 7702 of the Code (discussed above). The Subaccounts, through the
Fund, intend to comply with the diversification requirements prescribed in
Treas. Reg. sec. 1.817-5, which affect how the Fund's assets are to be invested.
PLACA believes that the Subaccounts will, thus, meet the diversification
requirement, and PLACA will monitor continued compliance with this requirement.
 
     In certain circumstances, owners of variable life insurance contracts may
be considered the owners, for federal income tax purposes, of the assets of the
Subaccounts used to support their contracts. In those circumstances, income and
gains from the Subaccount assets would be includible in the variable contract
owner's gross income. The IRS has stated in published rulings that a variable
contract owner will be considered the owner of Subaccount assets if the contract
owner possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury Department has also
announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets."
 
     The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of Subaccount assets. For example,
the Owner has additional flexibility in allocating premium payments and Policy
Values and the investment objective of certain Portfolios (i.e. the Gold and
Natural Resources Portfolio) may be narrower. These differences could result in
an Owner being treated as the owner of a pro rata portion of the assets of the
Subaccounts. In addition, PLACA does not know what standards will be set forth,
if any, in the regulations or rulings which the Treasury Department has stated
it expects to issue. PLACA therefore reserves the right to modify the Policy as
necessary to attempt to prevent an Owner from being considered the owner of a
pro rata share of the assets of the Subaccounts.
 
   
     The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
    
 
TAX TREATMENT OF POLICY BENEFITS
 
     In General.  PLACA believes that the proceeds and cash value increases of a
Policy should be treated in a manner consistent with a fixed-benefit life
insurance policy for Federal income tax purposes. Thus, the Death Benefit under
the Policy should be excludable from the gross income of the Beneficiary under
Section 101(a)(1) of the Code.
 
                                       43
<PAGE>   53
 
     Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option (i.e., a change from Death Benefit Option A to
Death Benefit Option B or vice versa), a Policy loan, a partial withdrawal, a
surrender, the addition of an Accelerated Death Benefit Rider, the receipt of an
Accelerated Death Benefit, a change in ownership, or an assignment of the Policy
may have Federal income tax consequences. In addition, Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Owner or Beneficiary.
 
     The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
advisor regarding the tax attributes of the particular arrangement.
 
     Generally, the Owner will not be deemed to be in constructive receipt of
the Policy Account Value, including increments thereof, until there is a
distribution. The tax consequences of distributions from, and loans taken from
or secured by, a Policy depend on whether the Policy is classified as a
"Modified Endowment Contract". Whether a Policy is or is not a Modified
Endowment Contract, upon a complete surrender or lapse of a Policy or when
benefits are paid at a Policy's maturity date, if the amount received plus the
amount of indebtedness exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to tax.
 
     Modified Endowment Contracts.  Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts," which applies
to Policies entered into or materially changed after June 20, 1988.
 
     Due to the Policy's flexibility, classification as a Modified Endowment
Contract will depend on the individual circumstances of each Policy. In general,
a Policy will be a Modified Endowment Contract if the accumulated premiums paid
at any time during the first seven Policy Years exceeds the sum of the net level
premiums which would have been paid on or before such time if the Policy
provided for paid-up future benefits after the payment of seven level annual
premiums. The determination of whether a Policy will be a Modified Endowment
Contract after a material change generally depends upon the relationship of the
Death Benefit and Policy Account Value at the time of such change and the
additional premiums paid in the seven years following the material change. At
the time a premium is credited which would cause the Policy to become a Modified
Endowment Contract, PLACA will notify the Owner that unless a refund of the
excess premium is requested by the Owner, the Policy will become a Modified
Endowment Contract. The Owner will have 30 days after receiving such
notification to request the refund. The excess premium paid (with either the 4%
required interest or positive Subaccount earnings, if any) will be returned to
the Owner upon receipt by PLACA of the refund request. The amount to be refunded
will be deducted from the Policy Account Value in the Subaccounts and in the
Guaranteed Account in the same proportion as the premium payment was allocated
to such accounts. In the event that earnings on such excess premium is not at
least 4%, the premium plus an amount equal to interest at an annual rate of 4%
will be returned.
 
   
     The rules relating to whether a Policy will be treated as a Modified
Endowment Contract are complex and cannot be fully described in the limited
confines of this summary. Therefore, a current or prospective Owner should
consult with a competent tax advisor to determine whether a policy transaction
will cause the Policy to be treated as a Modified Endowment Contract.
    
 
     Distributions from Policies Classified as Modified Endowment
Contracts.  Policies classified as Modified Endowment Contract will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender and partial withdrawals from such a Policy are treated as
ordinary income subject to tax up to the amount equal to the excess (if any) of
the Policy Account Value immediately before the distribution over the investment
in the Policy (described below) at such time. Second, loans taken from or
secured by, such a Policy are treated as distributions from such a Policy and
taxed accordingly. Past due loan interest that is added to the loan amount will
be treated as a loan. Third, a 10 percent additional income tax is imposed on
the portion of any distribution from, or loan taken from or secured by, such a
Policy that is included in income
 
                                       44
<PAGE>   54
 
except where the distribution or loan is made on or after the Owner attains age
59 1/2, is attributable to the Owner's becoming disabled, or is part of a series
of substantially equal periodic payments for the life (or life expectancy) of
the Owner or the joint lives (or joint life expectancies) or the Owner and the
Owner's Beneficiary.
 
   
     If a Policy becomes a modified endowment contract after it is issued,
distributions made during the policy year in which it becomes a modified
endowment contract, distributions in any subsequent policy year and
distributions within two years before the Policy becomes a modified endowment
contract will be subject to the tax treatment described above. This means that a
distribution from a Policy that is not a modified endowment contract could later
become taxable as a distribution from a modified endowment contract.
    
 
     Distributions From Policies Not Classified as Modified Endowment
Contracts.  Distributions from a Policy that is not a Modified Endowment
Contract, are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's Death Benefit or any other change that
reduces benefits under the Policy in the first 15-years after the policy is
issued and that results in a cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
 
     Loans from, or secured by, a Policy that is not a Modified Endowment
Contract are not treated as distributions. Instead, such loans are treated as
indebtedness of the Owner.
 
     Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10 percent additional tax.
 
   
     Policy Loan Interest.  Interest paid on any loan under a Policy may not be
deductible. An Owner should consult a tax advisor before deducting any policy
loan interest.
    
 
     Investment in the Policy.  Investment in the Policy means: (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any loan from, or secured by, a
Policy that is a Modified Endowment Contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
loan from, or secured by, a Policy that is a Modified Endowment Contract to the
extent that such amount is included in the gross income of the Owner.
 
     Multiple Policies.  All Modified Endowment Contracts that are issued by
PLACA (or its affiliates) to the same Owner during any calendar year are treated
as one Modified Endowment Contract for purposes of determining the amount
includible in the gross income under Section 72(e) of the Code.
 
SPECIAL RULES FOR PENSION AND PROFIT-SHARING PLANS
 
     If Policies are purchased by a trust forming part of a pension or
profit-sharing plan meeting the qualification requirements of Section 401(a) of
the Code, various special tax rules will apply. Because these rules are
extensive and complicated, it is not possible to describe all of them here.
Accordingly, counsel or other competent tax advisors familiar with qualified
plan matters should be consulted in connection with any such purchase.
 
     Generally, a plan participant on whose behalf a Policy is purchased will be
treated as having annual imputed income based on a cost of insurance factor
multiplied by the Net Amount at Risk under the Policy. This imputed income is to
be reported by the employer to the employee and the Service annually and
included in the employee's gross income. In the event of the death of a plan
participant while covered by the plan, Insurance Proceeds paid to the
participant's Beneficiary generally will not be completely excludable from the
Beneficiary's gross income under Section 101(a) of the Code. Any Death Benefit
in excess of the Policy Account Value will be excludable. The portion of the
Death Benefit equal to the Policy Account Value, however, generally will be
subject to Federal income tax to the extent it exceeds the sum of $5,000 plus
the participant's "investment in the contract" as defined in the Code, which
will include the imputed income
 
                                       45
<PAGE>   55
 
noted above. Special rules may apply in certain circumstances (e.g., to
Owner-employees or participants who have borrowed from the plan).
 
     The Service has interpreted the plan qualification provisions of the Code
to require that non-retirement benefits, including death benefits, payable under
a qualified plan be "incidental to" retirement benefits provided by the plan.
These interpretations, which are primarily set forth in a series of Revenue
Rulings issued by the Service, should be considered in connection with any
purchase of life insurance policies to provide benefits under a qualified plan.
 
POSSIBLE CHARGE FOR PLACA'S TAXES
 
     At the present time, PLACA makes no charge for any Federal, state or local
taxes (other than the Federal Tax Charge and the charge for state premium taxes)
that the Company incurs that may be attributable to the Subaccounts or to the
Policies. PLACA, however, reserves the right in the future to make additional
charges for any such tax or other economic burden resulting from the application
of the tax laws that it determines to be properly attributable to the
Subaccounts or to the Policies. If any tax charges are made in the future, they
will be accumulated daily and transferred from the applicable Subaccount to
PLACA's General Account. Any investment earnings on tax charges accumulated in a
Subaccount will be retained by PLACA.
 
           POLICIES ISSUED IN CONJUNCTION WITH EMPLOYEE BENEFIT PLANS
 
     Policies may be acquired in conjunction with employee benefit plans ("EBS
Policies"), including the funding of qualified pension plans meeting the
requirements of Section 401 of the Code.
 
   
     For EBS Policies, the maximum mortality rates used to determine the monthly
Cost of Insurance Charge are based on the Commissioners' 1980 Standard Ordinary
Mortality Tables NB and SB. Under these Tables, mortality rates are the same for
male and female Insureds of a particular Attained Age and Premium Class. (See
"Cost of Insurance," Page 30.)
    
 
     Illustrations reflecting the premiums and charges for EBS Policies will be
provided upon request to purchasers of such Policies.
 
   
     There is no provision for misstatement of sex in the EBS Policies. (See
"Misstatement of Age and Sex," Page 40.) Also, the rates used to determine the
amount payable under a particular Settlement Option will be the same for male
and female Insureds. (See "Settlement Options," Page 41.)
    
 
              LEGAL DEVELOPMENTS REGARDING UNISEX ACTUARIAL TABLES
 
   
     In 1983, the United States Supreme Court held in Arizona Governing
Committee v. Norris that optional annuity benefits provided under an employee's
deferred compensation plan could not, under Title VII of the Civil Rights Act of
1964, vary between men and women on the basis of sex. In that case, the Court
applied its decision only to benefits derived from contributions made on or
after August 1, 1983. Subsequent decisions of lower federal courts indicate that
in other factual circumstances the Title VII prohibition of sex-distinct
benefits may apply at an earlier date. In addition, legislative, regulatory, or
decisional authority of some states may prohibit use of sex-distinct mortality
tables under certain circumstances. The Policies offered by this Prospectus
(other than Policies issued in states which require "unisex" policies (currently
Montana) and EBS Policies (see "Policies Issued in Conjunction with Employee
Benefit Plans," Page 46)) are based upon actuarial tables which distinguish
between men and women and, thus, the Policy provides different benefits to men
and women of the same age. Accordingly, employers and employee organizations
should consider, in consultation with legal counsel, the impact of these
authorities on any employment-related insurance or benefits program before
purchasing the Policy and in determining whether an EBS Policy is appropriate.
    
 
                                       46
<PAGE>   56
 
                                 VOTING RIGHTS
 
     All of the assets held in the Subaccounts of the Variable Account will be
invested in shares of corresponding portfolios of the Funds. The Funds do not
hold routine annual shareholders' meetings. Shareholders' meetings will be
called whenever each Fund believes that it is necessary to vote to elect the
Board of Directors of the Fund and to vote upon certain other matters that are
required by the 1940 Act to be approved or ratified by the shareholders of a
mutual fund. PLACA is the legal owner of Fund shares and as such has the right
to vote upon any matter that may be voted upon at a shareholders' meeting.
However, in accordance with its view of present applicable law, PLACA will vote
the shares of the Funds at meetings of the shareholders of the appropriate Fund
or Portfolio in accordance with instructions received from Owners. Fund shares
held in each Subaccount for which no timely instructions from policyowners are
received will be voted by PLACA in the same proportion as those shares in that
Subaccount for which instructions are received.
 
     Each Owner having a voting interest will be sent proxy material and a form
for giving voting instructions. Owners may vote, by proxy or in person, only as
to the Portfolios that correspond to the Subaccounts in which their Policy
values are allocated. The number of shares held in each Subaccount attributable
to a Policy for which the Owner may provide voting instructions will be
determined by dividing the Policy's value in that account by the net asset value
of one share of the corresponding Portfolio as of the record date for the
shareholder meeting. Fractional shares will be counted. For each share of a
Portfolio for which Owners have no interest, PLACA will cast votes, for or
against any matter, in the same proportion as Owners vote.
 
     If required by state insurance officials, PLACA may disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the investment objectives or policies of one or more of the
Portfolios, or to approve or disapprove an investment policy or investment
adviser of one or more of the Portfolios. In addition, PLACA may disregard
voting instructions in favor of changes initiated by an Owner or the Fund's
Board of Directors provided that PLACA's disapproval of the change is reasonable
and is based on a good faith determination that the change would be contrary to
state law or otherwise inappropriate, considering the portfolio's objectives and
purposes, and the effect the change would have on PLACA. If PLACA does disregard
voting instructions, it will advise Owners of that action and its reasons for
such action in the next semi-annual report to Owners.
 
     At some later time, the Market Street Fund, Inc. shares may be held by
separate accounts of insurance companies not affiliated with PLACA. PLACA
expects that those shares will be voted in accordance with instructions of the
owners of insurance policies and contracts issued by those other insurance
companies. This will dilute the effect of voting instructions of Owners.
 
     Shares of the Funds other than The Market Street Fund, Inc. are currently
being offered to variable life insurance and variable annuity separate accounts
of life insurance companies other than PLACA that are not affiliated with PLACA.
PLACA understands that shares of these Funds also will be voted by such other
life insurance companies in accordance with instructions from their policyowners
invested in such separate accounts. This will dilute the effect of voting
instructions of Owners of the Policies.
 
                CHANGES IN APPLICABLE LAW, FUNDING AND OTHERWISE
 
     The voting rights described in this Prospectus are created under applicable
Federal securities laws. To the extent that such laws or regulations promulgated
thereunder eliminate the necessity to solicit voting instructions from Owners or
restrict such voting rights, PLACA reserves the right to proceed in accordance
with any such laws or regulations.
 
     PLACA also reserves the right, subject to compliance with applicable law,
including approval of Owners, if so required: (1) to transfer assets determined
by PLACA to be associated with the class of policies to which the Policies
belong from one Subaccount or Separate Account to another Subaccount or Separate
Account by withdrawing the same percentage of each investment in the account
with appropriate adjustments to avoid odd lots and fractions (such transfers
will not count against the four free transfers during a Policy Year); (2) to
create additional separate investment accounts, to create divisions (or
Subaccounts) from, or combine or
 
                                       47
<PAGE>   57
 
remove divisions (or Subaccounts) from Separate Accounts, or to combine any two
or more accounts including the Subaccounts, (3) to operate one or more of the
Subaccounts as a management investment company under the 1940 Act, or in any
other form permitted by law; (4) to deregister the unit investment trust under
the 1940 Act; and (5) to modify the provisions of the Policies to comply with
applicable laws. PLACA has reserved all rights in respect of its corporate name
and any part thereof, including without limitation the right to withdraw its use
and to grant its use to one or more other separate accounts and other entities.
 
     Although PLACA believes it to be highly unlikely, it is possible that in
the judgment of its management, one or more of the Portfolios may become
unsuitable for investment by the corresponding Subaccount because of a change in
investment policy, or a change in the tax laws, or because the shares or units
are no longer available for investment or for any other reasonable cause. In
that event, PLACA may seek to substitute the shares of another Portfolio or of
an entirely different mutual fund or trust. Before this would be done, the
approval of the SEC and possible one or more state insurance departments would
be obtained, to the extent legally required.
 
                        OFFICERS AND DIRECTORS OF PLACA
 
<TABLE>
<CAPTION>
                                                        PRINCIPAL OCCUPATION
         NAME AND POSITION*                          DURING THE PAST FIVE YEARS
- -------------------------------------  ------------------------------------------------------
<S>                                    <C>
L. J. Rowell, Jr.....................  1994 to present -- Chairman and Chief Executive
   Chairman of the Board,              Officer of PMLIC; 1992 to 1994 -- Chairman, President
   and President                         and Chief Executive Officer of PMLIC; 1991 to
                                         1994 -- President and Chief Executive Officer of
                                         PMLIC; 1987 to 1991 -- President and Chief Operating
                                         Officer of PMLIC.
Gerald B. Beam.......................  1995 to present -- Executive Vice
   Director                            President -- Individual Insurance Operations of PMLIC;
                                         1988 to 1995 -- Executive Vice
                                         President -- Corporate of PMLIC; 1987 to
                                         1988 -- Senior Vice President -- Corporate of PMLIC;
                                         1983 to 1987 -- Senior Vice
                                         President -- Administration of PMLIC.
John R. McClelland...................  1988 to present -- Executive Vice President and Chief
   Director                              Financial Officer of PMLIC; 1968 to 1988 Senior Vice
                                         President and Chief Financial Officer of Continental
                                         American Life Insurance Company.
Stanley R. Reber.....................  1988 to present -- Executive Vice President and Chief
   Director                              Investment Officer of PMLIC; 1985 to 1988 -- Senior
                                         Vice President -- Investments of PMLIC.
Robert W. Kloss......................  1994 to present -- President and Chief Operating
   Director                            Officer of PMLIC; 1986 to 1994 -- Chief Executive
                                         Officer of Covenant Life Insurance Company.
David N. Ingram......................  1994 to present -- Vice President -- Annuities of
   Director and Executive Vice         PMLIC; 1993 to 1994 -- Vice President &
   President                             Actuary -- Annuities of PMLIC; 1988 to 1993 -- Vice
                                         President & Actuary of PMLIC.
Charlene Parsons.....................  1995 to present -- Executive Vice
   Director                            President -- Corporate of PMLIC; 1991 to 1995 -- Vice
                                         President -- Human Resources of PMLIC; 1989 to
                                         1991 -- Assistant Vice President -- Human Resources
                                         of PMLIC.
Mary Lynn Finelli....................  1986 to present -- Vice President and Controller of
   Vice President and Controller       PMLIC; 1976 to 1986 -- Principal of Arthur Young
                                         Company.
</TABLE>
 
                                       48
<PAGE>   58
 
   
<TABLE>
<CAPTION>
                                                        PRINCIPAL OCCUPATION
         NAME AND POSITION*                          DURING THE PAST FIVE YEARS
- -------------------------------------  ------------------------------------------------------
<S>                                    <C>
William P. Loesche...................  1994 to present -- Counsel and Secretary of PMLIC;
   Secretary                           1988 to 1994 -- Associate Counsel and Assistant
                                         Secretary of PMLIC; 1985 to 1988 -- Associate
                                         Counsel and Assistant Secretary of PMLIC.
Rosanne Gatta........................  1994 to present -- Vice President and Treasurer of
   Treasurer                           PMLIC; 1985 to 1994 -- Assistant Vice President and
                                         Treasurer of PMLIC..
</TABLE>
    
 
- ---------------
   
* Unless otherwise indicated, the address is 1050 Westlakes Drive, Berwyn,
  Pennsylvania 19312.
    
 
     A Fidelity Bond in the amount of $5 million covering PLACA's officers and
employees has been issued by National Union Insurance Company, a subsidiary of
American International Group.
 
                            DISTRIBUTION OF POLICIES
 
   
     Applications for the Policies are solicited by agents who are licensed by
state insurance authorities to sell PLACA's variable life insurance policies,
and who are also registered representatives of 1717 Capital Management Company
("1717") (formerly PML Securities Company) or registered representatives of
broker/dealers who have Selling Agreements with 1717 or registered
representatives of broker/dealers who have Selling Agreements with such
broker/dealers. 1717, whose address is Christiana Executive Campus, P.O. Box
15626, Wilmington, Delaware 19850, is a registered broker/dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"). 1717 is an indirect
wholly-owned subsidiary of PMLIC. 1717 acts as the principal underwriter, as
defined in the 1940 Act, of the Policies (as well as other variable life
policies) for the Subaccounts pursuant to an Underwriting Agreement to which the
Accounts, 1717 and PLACA are parties. The Policies are offered and sold only in
those states where their sale is lawful.
    
 
     The insurance underwriting and the determination of a proposed Insured's
Premium Class and whether to accept or reject an application for a Policy is
done by PLACA. PLACA will refund any premiums paid if a Policy ultimately is not
issued or will refund the applicable amount if the Policy is returned under the
Free-Look provision.
 
     Agents are compensated for sales of the Policies on a commission and
service fee basis and with other forms of compensation. During the first Policy
Year, agent commissions will not be more than 81% of the premiums paid up to a
target amount (used only to determine commission payments) and 2% of the
premiums paid in excess of that amount. Agent commissions will not be more than
2% of premiums paid for Policy Years 2 through 10 and for years 11 and later, 0%
of the premiums paid. However, for each premium received within 10 years
following an increase in Face Amount, agent commissions on the premium paid up
to the target amount for the increase in each year will be calculated using the
commission rates for the corresponding Policy Year. Agents may also receive
annual renewal compensation of up to 0.25% of the unloaned Policy Account Value,
depending upon the circumstances. The annual renewal compensation will be
computed on the Policy Anniversary beginning at the end of the second Policy
Year. Agents may also receive expense allowances or bonuses. The agent may be
required to return the first year commission less the deferred sales charge
imposed if a Policy is not continued through the first Policy Year.
 
                                 POLICY REPORTS
 
     At least once each Policy Year a statement will be sent to the Owner
describing the status of the Policy, including setting forth the Face Amount,
the current Death Benefit, any Policy loans and accrued interest, the current
Policy Account Value, the Guaranteed Account Value, the Loan Account Value, the
value in each Subaccount, premiums paid since the last report, charges deducted
since the last report, any partial withdrawals since the last report, and the
current Net Cash Surrender Value. At the present time, PLACA
 
                                       49
<PAGE>   59
 
plans to send these Policy Statements on a quarterly basis. In addition, a
statement will be sent to an Owner showing the status of the Policy following
the transfer of amounts from one Subaccount to another, the taking out of a
loan, a repayment of a loan, a partial withdrawal and the payment of any
premiums (excluding those paid by bank draft or otherwise under the Automatic
Payment Plan). An Owner may request that a similar report be prepared at other
times. PLACA may charge a reasonable fee for such requested reports and may
limit the scope and frequency of such requested reports.
 
     An Owner will be sent a semi-annual report containing the financial
statements of the Subaccounts and the Funds and Trust as required by the 1940
Act.
 
                                STATE REGULATION
 
     PLACA is subject to regulation and supervision by the Insurance Department
of the State of Delaware which periodically examines its affairs. It is also
subject to the insurance laws and regulations of all jurisdictions where it is
authorized to do business. A copy of the Policy form has been filed with, and
where required approved by, insurance officials in each jurisdiction where the
Policies are sold. PLACA is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business for the purposes of determining
solvency and compliance with local insurance laws and regulations.
 
                                    EXPERTS
 
     The Financial Statements listed on Page F-1, have been included in this
Prospectus, in reliance on the reports of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
 
   
     Actuarial matters included in the Prospectus have been examined by Scott V.
Carney, FSA, MAAA, Actuary of PMLIC, as stated in his opinion filed as an
exhibit to the Registration Statement.
    
 
                                 LEGAL MATTERS
 
     Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on
legal matters relating to certain aspects of Federal securities law applicable
to the issue and sale of the Policies. Matters of the State of Delaware law
pertaining to the Policies, including PLACA's right to issue the Policies and
its qualification to do so under applicable laws and regulations issued
thereunder, have been passed upon by Linda E. Senker, Legal Officer of PLACA.
 
                              FINANCIAL STATEMENTS
 
     The most current financial statements of PLACA are those of the most recent
fiscal year. PLACA does not prepare financial statements more often than
annually and believes that any incremental benefit to prospective policy owners
that may result from preparing and delivering more current financial statements,
though unaudited, does not justify the additional cost that would be incurred.
In addition, PLACA represents that there have been no adverse changes in the
financial condition or operations of the company between the end of the most
current fiscal year and the date of this prospectus.
 
                                       50
<PAGE>   60
 
                                   APPENDIX A
             ILLUSTRATION OF DEATH BENEFITS, POLICY ACCOUNT VALUES
                         AND NET CASH SURRENDER VALUES
 
     The following tables illustrate how the Death Benefits, Policy Account
Values and Net Cash Surrender Values of a Policy may change with the investment
experience of the Separate Accounts. The tables show how the Death Benefits,
Policy Account Values and Net Cash Surrender Values of a Policy issued to an
Insured of a given age and sex would vary over time if the investment return on
the assets held in each Portfolio of the Fund and Trust were a uniform, gross,
annual rate of 0%, 6% and 12%.
 
   
     The tables on pages A-3 to A-8 illustrate a Policy issued to a male
Insured, Age 40 in the Preferred Premium Class with a Face Amount of $100,000
and a Planned Periodic Premium of $1,000 paid at the beginning of each Policy
Year. The Death Benefits, Policy Account Values and Net Cash Surrender Values
would be lower if the Insured was in a nonsmoker, smoker or special class, or a
Class with extra ratings, since the cost of insurance charges would increase.
Also, the values would be different from those shown if the gross annual
investment returns averaged 0%, 6% and 12% over a period of years, but
fluctuated above and below those averages for individual Policy years.
    
 
     The second column of the tables show the amount to which the premiums would
accumulate if an amount equal to those premiums were invested to earn interest,
after taxes, at 5% compounded annually. The columns shown under the heading
"Guaranteed" assume that throughout the life of the Policy, the monthly charge
for cost of insurance is based on the maximum level permitted under the Policy
(based on the 1980 CSO Smoker/Nonsmoker Table), a Premium Expense Charge of 2%,
maximum monthly administrative fee of $12 and a daily charge for mortality and
expense risks equivalent to an annual rate of 0.90%; the columns under the
heading "Current" assume that throughout the life of the Policy, the monthly
charge for cost of insurance is based on the current cost of insurance rate, a
Premium Expense Charge of 2%, up until the current maximum premium sales charge
is deducted, current monthly administrative fee of $7.50 and a daily charge for
mortality and expense risks equivalent to an annual rate of 0.65%.
 
   
     The amounts shown in all tables reflect an averaging of certain other asset
charges described below that may be assessed under the Policy, depending upon
how premiums are allocated. The total of the asset charges reflected in the
Current and Guaranteed illustrations, including the Mortality and Expense Risk
Charge listed above, is 1.47% and 1.72%, respectively. This total charge is
based on an assumption that an Owner allocates the Policy values equally among
each SubAccount of the Variable Account.
    
 
   
     These asset charges reflect an investment advisory fee of 0.61% which
represents an average of the fees incurred by the Portfolios during the most
recent fiscal years and expenses of 0.21% which is based on an average of the
actual expenses incurred by the Portfolios during the most recent fiscal years.
For all of the Portfolios, the annual expenses used in the illustrations are net
of certain reimbursements that may or may not continue.
    
 
   
     Currently there is an expense reimbursement agreement between PMLIC and The
Market Street Fund, Inc. pursuant to which PMLIC reimburses Fund expenses,
excluding investment advisory fees, in excess of 0.40% for all Portfolios except
the International Portfolio and 0.75% for the International Portfolio. There was
no reimbursement in 1995. The Fund expenses, excluding advisory fees, during
1995 were 0.27% for the Growth Portfolio, 0.25% for the Money Market Portfolio,
0.25% for the Bond Portfolio, 0.26% for the Managed Portfolio, 0.27% for the
Aggressive Growth Portfolio and 0.40% for the International Portfolio. It is
anticipated that this agreement will continue past the current year. If it does
not continue, Fund expenses may increase.
    
 
   
     Absent reimbursements, the investment advisory fees and other expenses
during the most recent fiscal years for the portfolios were:
    
 
   
          VIP Fund Equity-Income Portfolio 0.61%, VIP Fund Growth Portfolio
     0.70%, VIP Fund High Income Portfolio 0.71%, VIP Fund Overseas Portfolio
     0.91%, VIP Fund II Asset Manager Portfolio 0.81%, VIP Fund II Index 500
     Portfolio 0.47%, VIP Fund II Investment Grade Bond Portfolio 0.59%, VIP
     Fund II Contrafund Portfolio 0.72%, Alger American Small Capitalization
     Portfolio 0.92%, AMT
    
 
                                       A-1
<PAGE>   61
 
   
     Growth Portfolio 0.89%, AMT Balanced Portfolio 0.97%, AMT Limited Maturity
     Bond Portfolio 0.72%, TCI Growth Portfolio 1.0%, and Van Eck Worldwide Bond
     Portfolio 0.98% and Van Eck Gold and Natural Resources Portfolio 0.96%. Van
     Eck Worldwide Emerging Markets portfolio was not available in 1995.
    
 
     The tables also reflect the fact that no charges for Federal or state
income taxes are currently made against the Subaccounts. If such a charge is
made in the future, it would take a higher gross annual rate of return to
produce the same Policy values.
 
     The tables illustrate the Policy values that would result based upon the
hypothetical investment rates of return if premiums are paid and allocated as
indicated, no amounts are allocated to the Guaranteed Account, and no Policy
loans are made. The tables are also based on the assumption that the Owner has
not requested an increase or decrease in the Face Amount, that no partial
withdrawals have been made and no transfers have been made in any Policy Year.
 
     Upon request, PLACA will provide a comparable illustration of future
benefits under the Policy based upon the proposed Insured's Age and Premium
Class, the Death Benefit Option, Face Amount, Planned Periodic Premiums and
riders requested. PLACA reserves the right to charge a reasonable fee for this
service to persons who request more than one policy illustration during a Policy
Year.
 
                                       A-2
<PAGE>   62
 
     PROVIDENTMUTUAL -- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
 
<TABLE>
<S>                         <C>
$100,000 FACE AMOUNT        MALE INSURED ISSUE AGE 40 PREFERRED
DEATH BENEFIT OPTION A      ANNUAL PREMIUM $1,000
</TABLE>
 
              ASSUMING HYPOTHETICAL GROSS ANNUAL RATE OF RETURN 0%
 
   
<TABLE>
<CAPTION>
                                      GUARANTEED                              CURRENT
            PREMIUMS       ---------------------------------     ---------------------------------
END OF     ACCUMULATED     POLICY      NET CASH                  POLICY      NET CASH
POLICY     AT 5% INT.      ACCOUNT     SURRENDER      DEATH      ACCOUNT     SURRENDER      DEATH
 YEAR       PER YEAR        VALUE        VALUE       BENEFIT      VALUE        VALUE       BENEFIT
- ------     -----------     -------     ---------     -------     -------     ---------     -------
<S>        <C>             <C>         <C>           <C>         <C>         <C>           <C>
   1           1,050          563             0      100,000        649             0      100,000
   2           2,153        1,101           251      100,000      1,273           423      100,000
   3           3,310        1,613           693      100,000      1,871           951      100,000
   4           4,526        2,097         1,107      100,000      2,441         1,451      100,000
   5           5,802        2,554         1,494      100,000      2,982         1,922      100,000
   6           7,142        2,980         1,850      100,000      3,492         2,362      100,000
   7           8,549        3,375         2,375      100,000      3,977         2,977      100,000
   8          10,027        3,736         2,986      100,000      4,436         3,686      100,000
   9          11,578        4,068         3,568      100,000      4,872         4,372      100,000
  10          13,207        4,377         4,127      100,000      5,294         5,044      100,000
  11          14,917        4,648         4,648      100,000      5,688         5,688      100,000
  12          16,713        4,874         4,874      100,000      6,047         6,047      100,000
  13          18,599        5,050         5,050      100,000      6,370         6,370      100,000
  14          20,579        5,170         5,170      100,000      6,652         6,652      100,000
  15          22,657        5,227         5,227      100,000      6,890         6,890      100,000
  16          24,840        5,215         5,215      100,000      7,207         7,207      100,000
  17          27,132        5,127         5,127      100,000      7,491         7,491      100,000
  18          29,539        4,959         4,959      100,000      7,741         7,741      100,000
  19          32,066        4,705         4,705      100,000      7,958         7,958      100,000
  20          34,719        4,354         4,354      100,000      8,138         8,138      100,000
  25          50,113          629           629      100,000      8,421         8,421      100,000
  30          69,760            0             0            0      7,113         7,113      100,000
</TABLE>
    
 
The death benefit may, and the policy account values and net cash surrender
values will differ if premiums are paid in different amounts or frequencies.
 
   
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH
BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO
THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SUBACCOUNTS AND THE DIFFERENT RATES OF RETURN OF THE SUBACCOUNTS IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR PARTICULAR SUBACCOUNTS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
    
 
                                       A-3
<PAGE>   63
 
     PROVIDENTMUTUAL -- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
 
<TABLE>
<S>                         <C>
$100,000 FACE AMOUNT        MALE INSURED ISSUE AGE 40 PREFERRED
DEATH BENEFIT OPTION A      ANNUAL PREMIUM $1,000
</TABLE>
 
              ASSUMING HYPOTHETICAL GROSS ANNUAL RATE OF RETURN 6%
 
   
<TABLE>
<CAPTION>
                                      GUARANTEED                              CURRENT
            PREMIUMS       ---------------------------------     ---------------------------------
END OF     ACCUMULATED     POLICY      NET CASH                  POLICY      NET CASH
POLICY     AT 5% INT.      ACCOUNT     SURRENDER      DEATH      ACCOUNT     SURRENDER      DEATH
 YEAR       PER YEAR        VALUE        VALUE       BENEFIT      VALUE        VALUE       BENEFIT
- ------     -----------     -------     ---------     -------     -------     ---------     -------
<S>        <C>             <C>         <C>           <C>         <C>         <C>           <C>
   1           1,050          608             0      100,000        696             0      100,000
   2           2,153        1,224           374      100,000      1,407           557      100,000
   3           3,310        1,849           929      100,000      2,133         1,213      100,000
   4           4,526        2,482         1,492      100,000      2,871         1,881      100,000
   5           5,802        3,121         2,061      100,000      3,621         2,561      100,000
   6           7,142        3,765         2,635      100,000      4,382         3,252      100,000
   7           8,549        4,412         3,412      100,000      5,160         4,160      100,000
   8          10,027        5,060         4,310      100,000      5,954         5,204      100,000
   9          11,578        5,712         5,212      100,000      6,768         6,268      100,000
  10          13,207        6,378         6,128      100,000      7,613         7,364      100,000
  11          14,917        7,039         7,039      100,000      8,476         8,476      100,000
  12          16,713        7,690         7,690      100,000      9,350         9,350      100,000
  13          18,599        8,323         8,323      100,000     10,235        10,235      100,000
  14          20,579        8,934         8,934      100,000     11,126        11,126      100,000
  15          22,657        9,513         9,513      100,000     12,021        12,021      100,000
  16          24,840       10,054        10,054      100,000     13,041        13,041      100,000
  17          27,132       10,547        10,547      100,000     14,082        14,082      100,000
  18          29,539       10,987        10,987      100,000     15,145        15,145      100,000
  19          32,066       11,366        11,366      100,000     16,232        16,232      100,000
  20          34,719       11,670        11,670      100,000     17,343        17,343      100,000
  25          50,113       11,450        11,450      100,000     23,230        23,230      100,000
  30          69,760        5,752         5,752      100,000     29,388        29,388      100,000
</TABLE>
    
 
The death benefit may, and the policy account values and net cash surrender
values will differ if premiums are paid in different amounts or frequencies.
 
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH
BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO
THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SUBACCOUNTS AND THE DIFFERENT RATES OF RETURN OF THE SUBACCOUNTS IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR PARTICULAR SUBACCOUNTS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                       A-4
<PAGE>   64
 
     PROVIDENTMUTUAL -- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
 
<TABLE>
<S>                        <C>
$100,000 FACE AMOUNT       MALE INSURED ISSUE AGE 40 PREFERRED
DEATH BENEFIT OPTION A     ANNUAL PREMIUM $1,000
</TABLE>
 
             ASSUMING HYPOTHETICAL GROSS ANNUAL RATE OF RETURN 12%
 
   
<TABLE>
<CAPTION>
                                      GUARANTEED                              CURRENT
            PREMIUMS       ---------------------------------     ---------------------------------
END OF     ACCUMULATED     POLICY      NET CASH                  POLICY      NET CASH
POLICY     AT 5% INT.      ACCOUNT     SURRENDER      DEATH      ACCOUNT     SURRENDER      DEATH
 YEAR       PER YEAR        VALUE        VALUE       BENEFIT      VALUE        VALUE       BENEFIT
- ------     -----------     -------     ---------     -------     -------     ---------     -------
<S>        <C>             <C>         <C>           <C>         <C>         <C>           <C>
   1           1,050          652             0      100,000        743             0      100,000
   2           2,153        1,352           502      100,000      1,547           607      100,000
   3           3,310        2,107         1,187      100,000      2,417         1,497      100,000
   4           4,526        2,918         1,928      100,000      3,357         2,367      100,000
   5           5,802        3,792         2,732      100,000      4,374         3,314      100,000
   6           7,142        4,731         3,601      100,000      5,474         4,344      100,000
   7           8,549        5,743         4,743      100,000      6,672         5,072      100,000
   8          10,027        6,831         6,081      100,000      7,976         7,226      100,000
   9          11,578        8,008         7,508      100,000      9,403         8,903      100,000
  10          13,207        9,293         9,043      100,000     10,977        10,727      100,000
  11          14,917       10,679        10,679      100,000     12,697        12,697      100,000
  12          16,713       12,171        12,171      100,000     14,573        14,573      100,000
  13          18,599       13,775        13,775      100,000     16,621        16,621      100,000
  14          20,670       15,501        15,501      100,000     18,858        18,858      100,000
  15          22,657       17,354        17,354      100,000     21,301        21,301      100,000
  16          24,840       19,346        19,346      100,000     24,085        24,085      100,000
  17          27,132       21,488        21,488      100,000     27,146        27,146      100,000
  18          29,539       23,797        23,797      100,000     30,516        30,516      100,000
  19          32,066       26,288        26,288      100,000     34,231        34,231      100,000
  20          34,719       28,979        28,979      100,000     38,330        38,330      100,000
  25          50,113       46,232        46,232      100,000     66,332        66,332      100,000
  30          69,760       73,537        73,537      100,000     113,105      113,105      131,202
</TABLE>
    
 
The death benefit may, and the policy account values and net cash surrender
values will differ is premiums are paid in different amounts or frequencies.
 
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH
BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO
THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFITS,
POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SUBACCOUNTS AND THE DIFFERENT RATES OF RETURN OF THE SUBACCOUNTS IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR PARTICULAR SUBACCOUNTS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OR RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                       A-5
<PAGE>   65
 
     PROVIDENTMUTUAL -- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
 
<TABLE>
<S>                        <C>
$100,000 FACE AMOUNT       MALE INSURED ISSUE AGE 40 PREFERRED
DEATH BENEFIT OPTION B     ANNUAL PREMIUM $1,000
</TABLE>
 
              ASSUMING HYPOTHETICAL GROSS ANNUAL RATE OF RETURN 0%
 
   
<TABLE>
<CAPTION>
                                      GUARANTEED                              CURRENT
            PREMIUMS       ---------------------------------     ---------------------------------
END OF     ACCUMULATED     POLICY      NET CASH                              NET CASH
POLICY     AT 5% INT.      ACCOUNT     SURRENDER      DEATH      POLICY      SURRENDER      DEATH
 YEAR       PER YEAR        VALUE        VALUE       BENEFIT     ACCOUNT       VALUE       BENEFIT
- ------     -----------     -------     ---------     -------     -------     ---------     -------
<S>        <C>             <C>         <C>           <C>         <C>         <C>           <C>
   1           1,050          562            0       100,562        648            0       100,648
   2           2,153        1,096          246       101,096      1,268          418       101,268
   3           3,310        1,603          683       101,603      1,862          942       101,862
   4           4,526        2,081        1,091       102,081      2,425        1,435       102,425
   5           5,802        2,529        1,469       102,529      2,958        1,898       102,958
   6           7,142        2,945        1,815       102,045      3,467        2,327       103,457
   7           8,549        3,328        2,328       103,328      3,929        2,929       103,929
   8          10,027        3,675        2,925       103,675      4,372        3,622       104,372
   9          11,578        3,989        3,489       103,989      4,790        4,290       104,790
  10          13,207        4,270        4,029       104,279      5,192        4,942       105,192
  11          14,917        4,527        4,527       104,527      5,562        5,562       105,562
  12          16,713        4,727        4,727       104,727      5,895        5,895       105,895
  13          18,599        4,874        4,874       104,874      6,187        6,187       106,187
  14          20,579        4,961        4,961       104,961      6,435        6,435       106,435
  15          22,657        4,981        4,981       104,981      6,634        6,634       106,634
  16          24,840        4,929        4,929       104,929      6,920        6,920       106,920
  17          27,132        4,798        4,798       104,798      7,167        7,167       107,167
  18          29,539        4,583        4,583       104,583      7,377        7,377       107,377
  19          32,066        4,280        4,280       104,280      7,550        7,550       107,550
  20          34,719        3,879        3,879       103,879      7,684        7,684       107,684
  25          50,113            0            0             0      7,875        7,875       107,875
  30          69,760            0            0             0      5,969        5,969       105,969
</TABLE>
    
 
The death benefit may, and the policy account values and net cash surrender
values will differ if premiums are paid in different amounts or frequencies.
 
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH
BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO
THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SUBACCOUNTS AND THE DIFFERENT RATES OF RETURN OF THE SEPARATE SUBACCOUNTS IF THE
ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR
12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR PARTICULAR SUBACCOUNTS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                       A-6
<PAGE>   66
 
     PROVIDENTMUTUAL -- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
 
<TABLE>
<S>                        <C>
$100,000 FACE AMOUNT       MALE INSURED ISSUE AGE 40 PREFERRED
DEATH BENEFIT OPTION B     ANNUAL PREMIUM $1,000
</TABLE>
 
              ASSUMING HYPOTHETICAL GROSS ANNUAL RATE OF RETURN 6%
 
   
<TABLE>
<CAPTION>
                                      GUARANTEED                              CURRENT
            PREMIUMS       ---------------------------------     ---------------------------------
END OF     ACCUMULATED     POLICY      NET CASH                              NET CASH
POLICY     AT 5% INT.      ACCOUNT     SURRENDER      DEATH      POLICY      SURRENDER      DEATH
 YEAR       PER YEAR        VALUE        VALUE       BENEFIT     ACCOUNT       VALUE       BENEFIT
- ------     -----------     -------     ---------     -------     -------     ---------     -------
<S>        <C>             <C>         <C>           <C>         <C>         <C>           <C>
   1           1,050          606             0      100,606        695             0      100,695
   2           2,153        1,218           368      101,218      1,402           552      101,402
   3           3,310        1,838           918      101,838      2,122         1,202      102,122
   4           4,526        2,462         1,472      102,462      2,852         1,862      102,852
   5           5,802        3,091         2,031      103,091      3,591         2,531      103,591
   6           7,142        3,720         2,590      103,720      4,337         3,207      104,337
   7           8,549        4,349         3,349      104,349      5,095         4,095      105,095
   8          10,027        4,973         4,223      104,973      5,864         5,114      105,864
   9          11,578        5,507         5,097      105,597      6,649         6,149      106,649
  10          13,207        6,227         5,977      106,227      7,458         7,208      107,458
  11          14,917        6,846         6,846      106,846      8,276         8,276      108,276
  12          16,713        7,445         7,445      107,445      9,099         9,099      109,099
  13          18,599        8,018         8,018      108,018      9,920         9,920      109,920
  14          20,579        8,556         8,556      108,556     10,738        10,738      110,738
  15          22,657        9,019         9,049      109,049     11,544        11,544      111,544
  16          24,840        9,488         9,488      109,488     12,479        12,479      112,479
  17          27,132        9,863         9,863      109,863     13,420        13,420      113,420
  18          29,539       10,165        10,165      110,165     14,368        14,368      114,368
  19          32,066       10,385        10,385      110,385     15,324        15,324      115,324
  20          34,719       10,506        10,506      110,506     16,283        16,283      116,283
  25          50,113        8,957         8,957      108,957     21,038        21,038      121,038
  30          69,760        1,305         1,305      101,305     25,010        25,010      125,010
</TABLE>
    
 
The death benefit may, and the policy account values and net cash surrender
values will differ if premiums are paid in different amounts or frequencies.
 
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH
BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO
THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SUBACCOUNTS AND THE DIFFERENT RATES OF RETURN OF THE SUBACCOUNTS IF THE ACTUAL
RATES OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR PARTICULAR SUBACCOUNTS. NO
REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                       A-7
<PAGE>   67
 
     PROVIDENTMUTUAL -- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE
 
<TABLE>
<S>                         <C>
$100,000 FACE AMOUNT        MALE INSURED ISSUE AGE 40 PREFERRED
DEATH BENEFIT OPTION B      ANNUAL PREMIUM $1,000
</TABLE>
 
             ASSUMING HYPOTHETICAL GROSS ANNUAL RATE OF RETURN 12%
 
   
<TABLE>
<CAPTION>
                                      GUARANTEED                              CURRENT
            PREMIUMS       ---------------------------------     ---------------------------------
END OF     ACCUMULATED     POLICY      NET CASH                  POLICY      NET CASH
POLICY     AT 5% INT.      ACCOUNT     SURRENDER      DEATH      ACCOUNT     SURRENDER      DEATH
 YEAR       PER YEAR        VALUE        VALUE       BENEFIT      VALUE        VALUE       BENEFIT
- ------     -----------     -------     ---------     -------     -------     ---------     -------
<S>        <C>             <C>         <C>           <C>         <C>         <C>           <C>
   1           1,050          650             0      100,650        742             0      100,742
   2           2,153        1,346           496      101,346      1,541           691      101,541
   3           3,310        2,094         1,174      102,094      2,404         1,484      102,404
   4           4,526        2,895         1,905      102,895      3,334         2,344      103,334
   5           5,802        3,754         2,694      103,754      4,336         3,276      104,336
   6           7,142        4,673         3,543      104,673      5,415         4,285      105,415
   7           8,549        5,657         4,657      105,657      6,585         5,585      106,585
   8          10,027        6,709         5,959      106,709      7,852         7,102      107,852
   9          11,578        7,839         7,839      107,839      9,230         8,730      100,230
  10          13,207        9,064         8,814      109,064     10,742        10,492      110,742
  11          14,917       10,373        10,373      110,373     12,383        12,383      112,383
  12          16,713       11,767        11,767      111,767     14,159        14,159      114,159
  13          18,599       13,248        13,248      113,248     16,082        16,082      116,062
  14          20,579       14,818        14,818      114,818     18,162        18,162      118,162
  15          22,657       16,477        16,477      116,477     20,408        20,408      120,408
  16          24,840       18,226        18,226      118,226     22,982        22,982      122,982
  17          27,132       20,066        20,066      120,066     25,786        25,786      125,786
  18          29,539       22,001        22,001      122,001     28,845        28,845      128,845
  19          32,066       24,032        24,032      124,032     32,185        32,185      132,185
  20          34,719       26,158        26,158      126,158     35,831        35,831      135,831
  25          50,113       37,979        37,979      137,979     59,766        59,766      159,766
  30          69,760       50,483        50,483      150,483     96,727        96,727      196,727
</TABLE>
    
 
The death benefit may, and the policy account values and net cash surrender
values will differ if premiums are paid in different amounts or frequencies.
 
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH
BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO
THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE
DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE
SEPARATE ACCOUNTS AND THE DIFFERENT RATES OF RETURN OF THE SEPARATE ACCOUNTS IF
THE ACTUAL RATES OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6%
OR 12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR PARTICULAR SEPARATE ACCOUNTS.
NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
 
                                       A-8
<PAGE>   68
 
                                   APPENDIX B
 
                            LONG TERM MARKET TRENDS
 
     The information below is a record of the compound annual returns of common
stocks, high-grade corporate bonds and 30-day U.S. Treasury bills over 20 year
holding periods.* The compound annual returns assume the reinvestment of
dividends, capital gains and interest. This is an historical record and is not
intended as a projection of future performance. Charges associated with a
variable life policy are not reflected.
 
     The data indicates that, historically, the investment performance of common
stocks over long periods of time has been positive and has generally been
superior to that of long-term, high-grade debt securities. Common stocks have,
however, been subject to more dramatic market adjustments over short periods of
time. To the extent that cash value is allocated to separate accounts which
invest in common stocks, these trends indicate the potential advantages of
holding a variable life insurance policy for a long period of time.
 
   
     The following chart illustrates the compound annual returns of the S&P 500
Composite Stock Price Index for each of the 20-year periods shown. These returns
are compared to the compound annual returns of high-grade corporate bonds and
U.S. Treasury bills for the same periods. (The 20-year periods selected for the
chart begin in 1936 and have ending periods at five year intervals.)
    
 
COMPOUND ANNUAL RETURNS (PER ANNUM) TWENTY YEAR HOLDING PERIODS CHART SHOWING
RETURNS ON STOCKS, BONDS AND U.S. TREASURY BILLS FOR THE YEARS 1955 THROUGH
1995

- ---------------
   
* Sources: Common stock returns-Standard & Poor's 500 Composite Stock Price
  Index. Corporate bond returns -- Salomon Brothers Long Term High Grade
  Corporate Bond Index, and U.S. Treasury Bill returns -- C.R.S.P. U.S.
  Government Bond File through 1976 and The Wall Street Journal thereafter. All
  data from: (C)Ibbotson, Roger G., and Rex A. Sinquefield, Stocks, Bonds, Bills
  and Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills and Inflation 1996
  Yearbook(TM), Ibbotson Associates, Inc., Chicago. All rights reserved.
    
 
                                       B-1
<PAGE>   69
 
   
     Over the 51 20-year time periods beginning in 1926 and ending in 1995 (i.e.
1926-1945, 1927-1946, and so on through 1976-1995):
    
 
   
     -- The compound annual return of common stocks was superior to that of
        high-grade, long-term corporate bonds in 48 of the 51 periods.
    
 
   
     -- The compound annual return of common stocks surpassed that of U.S.
        Treasury bills in each of the 51 periods.
    
 
   
     -- Common stock compound annual returns exceeded the average annual rate of
        inflation in each of the 51 periods.
    
 
   
     Over the 41 30-year time periods beginning in 1926 and ending in 1995, the
compound annual return of common stocks was superior to that of high-grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 41 periods.
    
 
   
     From 1926 through 1995 the compound annual return for common stocks was
10.5%, compared to 5.7% for high-grade, long-term corporate bonds, 5.2% for
Long-Term Government Bonds, 3.7% for U.S. Treasury bills and 3.1% for the
Consumer Price Index.
    
                            ------------------------
 
       SUMMARY TABLE: HISTORIC S&P 500 COMPOSITE STOCK INDEX RESULTS FOR
                            SPECIFIC HOLDING PERIODS
 
   
     The following chart categorizes the historical results of the Standard &
Poor's 500 Composite Stock Index, with dividends reinvested, over one-year,
five-year, ten-year and twenty-year periods beginning in 1926 and ending in
1995.
    
 
     The chart shows that historically, the longer that a portfolio matching the
S&P 500 Composite Stock Index was held, the less likely was the chance of a
loss. Conversely, the shorter the holding period of such a portfolio, the more
likely was the chance of a loss. The chart also shows that shorter time results
tend to be more extreme than longer term results.
 
     THE CHART IS NOT A PROJECTION OR REPRESENTATION OF FUTURE STOCK MARKET
RESULTS. IT CANNOT BE TAKEN AS REPRESENTATIVE OF THE PERFORMANCE OF ANY ONE
SEPARATE ACCOUNT. Rather it shows the historic performance of a broad index of
stocks over arbitrarily selected time periods.
 
             PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
 
   
<TABLE>
<CAPTION>
                                                                                                                GREATER
                                                                                                                 THAN
                HOLDING              NEGATIVE     0.5.00%     5.01-10.00%     10.01-15.00%     15.01-20.00%     20.00%
                 PERIOD               RETURN      RETURN        RETURN           RETURN           RETURN        RETURN
     ------------------------------  --------     -------     -----------     ------------     ------------     -------
     <S>                             <C>          <C>         <C>             <C>              <C>              <C>
      1 year                           28.6%         4.3%         11.4%            7.1%            11.4%          37.1%
      5 years                          10.6%        15.2%         15.2%           33.3%            16.7%           9.1%
     10 years                           3.3%        11.7%         36.1%           23.0%            24.6%           1.6%
     20 years                           0.0%         5.9%         33.3%           54.9%             5.9%           0.0%
</TABLE>
    
 
- ---------------
   
Source: All basic data from: (C)Ibbotson, Roger G., and Rex A. Sinquefield,
Stocks, Bonds, Bills and Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills
and Inflation 1996 Yearbook(TM), Ibbotson Associates, Inc., Chicago. All rights
reserved.
    
 
                                       B-2
<PAGE>   70
 
                     TREASURY BILLS ADJUSTED FOR INFLATION
 
     The data below show the annual rate of return over 20-year holding periods
of U.S. Treasury Bills after adjusting for inflation as measured by the Urban
Consumer Price Index. This annual rate, as adjusted, is also called the real
interest rate and is represented as the real interest rate in the chart below.
U.S. Treasury Bills are considered to be one of the safest kinds of investments,
as they are backed by the U.S. government. However, the highest
inflation-adjusted return of U.S. Treasury Bills over the historic 20-year
periods presented below has been modest.
 
TREASURY BILLS ADJUSTED FOR INFLATION AVERAGE ANNUAL RETURNS TWENTY-YEAR
HOLDING PERIODS

Selected 20-year periods ending on year shown above.
- ---------------
Source: All basic data from: (C)Ibbotson, Roger G., and Rex A. Sinquefield,
Stocks, Bonds, Bills and Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills
and Inflation 1996 Yearbook(TM), Ibbotson Associates, Inc., Chicago. All rights
reserved.
                          ---------------------------
 
                 THE "DOLLAR COST AVERAGING" INVESTMENT METHOD
 
     As the Compound Annual Returns graph indicates, the investment performance
of many common stocks has generally been positive over certain relatively long
periods. Common stocks have, however, also been subject to market declines,
often dramatic ones, and general volatility of prices over shorter time periods.
The price fluctuations of common stocks has historically been greater than that
of high-grade debt securities.
 
     The relative volatility of common stock prices as compared with prices of
high-grade debt instruments offers both advantages and disadvantages to
investors. Unfortunately, many investors who otherwise might be interested in
common stocks see only the disadvantages and not the advantages of stock price
fluctuation. The primary disadvantage, of course, is that price declines can be
prolonged and substantial, and when this occurs, investors cannot liquidate
their investments without realizing losses. Price declines, however, also offer
investors important opportunities.
 
     Opportunity arises from the fact that investors can purchase more common
stock for the same amount of money than they would before prices declined.
Investors may take advantage of this if they remain willing to
 
                                       B-3
<PAGE>   71
 
continue investing in both rising and falling markets. The dollar cost averaging
method of investing demonstrates this.
 
     In this method of investing:
 
     - Relatively constant dollar amounts are invested at regular intervals
       (monthly, quarterly, or annually).
 
     - Stock market fluctuations, especially the savings on purchases from price
       declines, are exploited for the investor's benefit.
 
                        HOW DOLLAR COST AVERAGING WORKS
 
<TABLE>
<CAPTION>
 INVESTMENTS AT       COMMON STOCK      SHARES
REGULAR INTERVALS     MARKET PRICE     PURCHASED
- -----------------     ------------     ---------
<S>                   <C>              <C>
      $ 150               $ 20               7.5
        150                 15              10.0
        150                 10              15.0
        150                  5              30.0
        150                 10              15.0
        150                 15              10.0
     ------                            ---------
      $ 900                                 87.5
Total Value of 87.5 shares @ 15/share  $1,312.50
Less Investment made                     (900.00)
                                       ---------
Gain/Profit                            $  412.50
</TABLE>
 
     Though the market price has not returned to the initial high of $20 per
share, dollar cost averaging has permitted the investor to purchase more shares
at a savings and thus realize a significant gain. Obviously, the dollar cost
averaging method only works if the investor continues to invest relatively
constant amounts over a long period of time.
 
     This plan of investing does not assure a profit or protect against a loss
in declining markets; it does allow investors to take advantage of market
fluctuations. Since the success of this strategy is dependent on systematic
investing, purchasers should consider their ability to sustain their payments
through all periods of marketing fluctuations.
 
     How does the dollar cost averaging method relate to a variable life
insurance policy? A policyowner may invest his or her net premiums in a separate
account, and, although a Policy's value in the separate accounts is affected by
several factors other than investment experience (e.g., cash value charges and
charges against the separate account), the dollar cost averaging method can be
generally applied to the Policy to the extent that the policyowner pays premiums
on a regular basis and he or she allocates net premiums to separate accounts
which invest in common stocks in relatively constant amounts.
 
                                       B-4
<PAGE>   72
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
Report of Independent Accountants
 
- --------------------------------------------------------------------------------
 
To the Policyowners and
  Board of Directors of
The Providentmutual Life and Annuity
  Company of America
Newark, Delaware
 
We have audited the accompanying statements of assets and liabilities of the
Providentmutual Variable Life Separate Account (comprising the nineteen
subaccounts) as of December 31, 1995, and the related statements of operations
and changes in net assets for the period February 1, 1995 (Date of Inception) to
December 31, 1995. These financial statements are the responsibility of the
management of the Variable Life Separate Account. Our responsibility is to
express an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence with
the transfer agents. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Providentmutual Variable
Life Separate Account as of December 31, 1995, and the results of its operations
and the changes in its net assets for the period February 1, 1995 (Date of
Inception) to December 31, 1995 in conformity with generally accepted accounting
principles.
 
   
                                            COOPERS & LYBRAND L.L.P.
    
 
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 14, 1996
 
                                       F-2
<PAGE>   73
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
   
Statements of Assets and Liabilities, December 31, 1995
    
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                                                    MONEY                                AGGRESSIVE
                                       GROWTH       MARKET        BOND       MANAGED       GROWTH     INTERNATIONAL
                                     SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT    SUBACCOUNT
<S>                                  <C>          <C>          <C>          <C>          <C>          <C>
- ------------------------------------------------------------------------------------------------------------------
ASSETS
Investment in the Market Street
  Fund, Inc., at market value:
  Growth Portfolio.................   $151,294
  Money Market Portfolio...........                $265,823
  Bond Portfolio...................                             $ 49,507
  Managed Portfolio................                                          $ 38,625
  Aggressive Growth Portfolio......                                                       $151,008
  International Portfolio..........                                                                      $98,465
Dividends receivable...............                   1,059
Receivable from Providentmutual
  Life and Annuity Company of
  America..........................                  16,681
                                     ----------   ----------   ----------   ----------   ----------   -------------
Total Assets.......................    151,294      283,563       49,507       38,625      151,008        98,465
                                     ----------   ----------   ----------   ----------   ----------   -------------
LIABILITIES
Payable to Providentmutual Life and
  Annuity Company of America.......                                                                           13
                                     ----------   ----------   ----------   ----------   ----------   -------------
NET ASSETS.........................   $151,294     $283,563     $ 49,507     $ 38,625     $151,008       $98,452
                                     ===========  ===========  ===========  ===========  ===========  ============
Held for the benefit of
  policyowners.....................   $119,374     $257,251     $ 19,910     $  8,069     $123,038       $69,123
Attributable to Providentmutual
  Life and Annuity Company of
  America..........................     31,920       26,312       29,597       30,556       27,970        29,329
                                     ----------   ----------   ----------   ----------   ----------   -------------
                                      $151,294     $283,563     $ 49,507     $ 38,625     $151,008       $98,452
                                     ===========  ===========  ===========  ===========  ===========  ============
</TABLE>
    
 
   
See accompanying notes to financial statements
    
 
                                       F-3
<PAGE>   74
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1995
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                               FIDELITY                FIDELITY                FIDELITY                FIDELITY
                               EQUITY-     FIDELITY      HIGH      FIDELITY     ASSET      FIDELITY   INVESTMENT
                                INCOME      GROWTH      INCOME     OVERSEAS    MANAGER    INDEX 500   GRADE BOND
                              SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT
<S>                           <C>         <C>         <C>         <C>         <C>         <C>         <C>
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Investment in the Variable
  Insurance Products Fund, at
  market value:
  Equity-Income Portfolio....  $465,836
  Growth Portfolio...........              $635,375
  High Income Portfolio......                          $145,774
  Overseas Portfolio.........                                      $212,684
Investment in the Variable
  Insurance Products Fund II,
  at market value:
  Asset Manager Portfolio....                                                  $ 71,829
  Index 500 Portfolio........                                                              $220,128
  Investment Grade Bond
    Portfolio................                                                                          $ 60,423
                              ----------- -----------  --------   ----------  ----------- ----------   --------
NET ASSETS...................  $465,836    $635,375    $145,774    $212,684    $ 71,829    $220,128    $ 60,423
                              =========== ===========  ========   ==========  =========== ==========   ========
Held for the benefit of
  policyowners...............  $432,730    $601,163    $115,984    $184,088    $ 42,403    $186,727    $ 31,514
Attributable to
  Providentmutual Life and
  Annuity Company
  of America.................    33,106      34,212      29,790      28,596      29,426      33,401      28,909
                              ----------- -----------  --------   ----------  ----------- ----------   --------
                               $465,836    $635,375    $145,774    $212,684    $ 71,829    $220,128    $ 60,423
                              =========== ===========  ========   ==========  =========== ==========   ========
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-4
<PAGE>   75
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1995
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                               NEUBERGER   NEUBERGER      NEUBERGER                   VAN ECK        VAN ECK
                                & BERMAN    & BERMAN   & BERMAN LIMITED     TCI      WORLDWIDE   GOLD AND NATURAL
                                BALANCED     GROWTH     MATURITY BOND      GROWTH       BOND        RESOURCES
                               SUBACCOUNT  SUBACCOUNT     SUBACCOUNT     SUBACCOUNT  SUBACCOUNT     SUBACCOUNT
<S>                            <C>         <C>         <C>               <C>         <C>         <C>
- -----------------------------------------------------------------------------------------------------------------
ASSETS
Investment in the Neuberger &
  Berman Advisers Management
  Trust, at market value:
  Balanced Portfolio..........  $ 70,877
  Growth Portfolio............              $214,176
  Limited Maturity Bond Portfolio...                       $ 32,352
Investment in TCI Portfolios,
  Inc., at market value:
  TCI Growth Portfolio........                                            $180,497
Investment in the Van Eck
  Worldwide Insurance Trust,
  at market value:
  Worldwide Bond Portfolio....                                                        $ 55,505
  Gold and Natural Resources
    Portfolio.................                                                                       $ 38,197
                                 -------    --------        -------       --------     -------        -------
NET ASSETS....................  $ 70,877    $214,176       $ 32,352       $180,497    $ 55,505       $ 38,197
                                 =======    ========        =======       ========     =======        =======
Held for the benefit of
  policyowners................  $ 40,234    $181,496       $  4,931       $147,018    $ 26,439       $  7,681
Attributable to
  Providentmutual Life and
  Annuity Company of
  America.....................    30,643      32,680         27,421         33,479      29,066         30,516
                                 -------    --------        -------       --------     -------        -------
                                $ 70,877    $214,176       $ 32,352       $180,497    $ 55,505       $ 38,197
                                 =======    ========        =======       ========     =======        =======
</TABLE>
    
 
See accompanying notes to financial statements
 
                                       F-5
<PAGE>   76
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
   
Statements of Operations for the Period February 1, 1995 (Date of Inception)
    
   
to December 31, 1995
    
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                                                        MONEY                             AGGRESSIVE
                                            GROWTH      MARKET       BOND      MANAGED      GROWTH    INTERNATIONAL
                                          SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT   SUBACCOUNT
<S>                                       <C>         <C>         <C>         <C>         <C>         <C>
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends................................  $  1,144     $5,330      $1,517      $  914
                                            -------     ------      ------      ------      ------        ------
EXPENSES
Mortality and expense risks..............       190        500          42           9      $  215       $    73
                                            -------     ------      ------      ------      ------        ------
Net investment income (loss).............       954      4,830       1,475         905        (215)          (73)
                                            -------     ------      ------      ------      ------        ------
NET REALIZED AND UNREALIZED GAIN
  ON INVESTMENTS
Net realized gain from redemption of
  investment shares......................     1,386                    134          40         481           266
                                            -------     ------      ------      ------      ------        ------
Net realized gain on investments.........     1,386                    134          40         481           266
                                            -------     ------      ------      ------      ------        ------
Net unrealized appreciation of
  investments:
  Beginning of period
  End of period..........................    10,721                  3,919       4,931       6,340         5,545
                                            -------     ------      ------      ------      ------        ------
Net unrealized appreciation of
  investments during the period..........    10,721                  3,919       4,931       6,340         5,545
                                            -------     ------      ------      ------      ------        ------
Net realized and unrealized gain
  on investments.........................    12,107                  4,053       4,971       6,821         5,811
                                            -------     ------      ------      ------      ------        ------
Net increase in net assets resulting
  from operations........................  $ 13,061     $4,830      $5,528      $5,876      $6,606       $ 5,738
                                            =======     ======      ======      ======      ======        ======
</TABLE>
    
 
   
See accompanying notes to financial statements
    
 
                                       F-6
<PAGE>   77
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
   
Statements of Operations for the Period February 1, 1995 (Date of Inception)
    
   
to December 31, 1995
    
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                               FIDELITY                FIDELITY                FIDELITY                FIDELITY
                               EQUITY-     FIDELITY      HIGH      FIDELITY     ASSET      FIDELITY   INVESTMENT
                                INCOME      GROWTH      INCOME     OVERSEAS    MANAGER    INDEX 500   GRADE BOND
                              SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT
<S>                           <C>         <C>         <C>         <C>         <C>         <C>         <C>
- ----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends....................  $  3,295    $    141     $1,794      $  100      $  529     $    412     $  872
                                -------     -------     ------      ------      ------      -------     ------
EXPENSES
Mortality and expense
  risks......................       581         774        114         250          82          259         80
                                -------     -------     ------      ------      ------      -------     ------
Net investment income
  (loss).....................     2,714        (633)     1,680        (150)        447          153        792
                                -------     -------     ------      ------      ------      -------     ------
NET REALIZED AND UNREALIZED
  GAIN ON INVESTMENTS
Realized gain distributions
  reinvested.................     1,251                                100                       56
Net realized gain from
  redemption of investment
  shares.....................     1,814       2,933        562         455         654        1,999        196
                                -------     -------     ------      ------      ------      -------     ------
Net realized gain on
  investments................     3,065       2,933        562         555         654        2,055        196
                                -------     -------     ------      ------      ------      -------     ------
Net unrealized appreciation
  of investments:
  Beginning of period
  End of period..............    26,993      10,036      4,518       6,809       5,339       16,619      4,575
                                -------     -------     ------      ------      ------      -------     ------
Net unrealized appreciation
  of investments during the
  period.....................    26,993      10,036      4,518       6,809       5,339       16,619      4,575
                                -------     -------     ------      ------      ------      -------     ------
Net realized and unrealized
  gain on investments........    30,058      12,969      5,080       7,364       5,993       18,674      4,771
                                -------     -------     ------      ------      ------      -------     ------
Net increase in net assets
  resulting from
  operations.................  $ 32,772    $ 12,336     $6,760      $7,214      $6,440     $ 18,827     $5,563
                                =======     =======     ======      ======      ======      =======     ======
</TABLE>
    
 
   
See accompanying notes to financial statements
    
 
                                       F-7
<PAGE>   78
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
   
Statements of Operations for the Period February 1, 1995 (Date of Inception)
    
   
to December 31, 1995
    
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                               NEUBERGER   NEUBERGER      NEUBERGER                   VAN ECK        VAN ECK
                                & BERMAN    & BERMAN   & BERMAN LIMITED     TCI      WORLDWIDE   GOLD AND NATURAL
                                BALANCED     GROWTH     MATURITY BOND      GROWTH       BOND        RESOURCES
                               SUBACCOUNT  SUBACCOUNT     SUBACCOUNT     SUBACCOUNT  SUBACCOUNT     SUBACCOUNT
<S>                            <C>         <C>         <C>               <C>         <C>         <C>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends.....................   $  478      $   61         $1,375                     $2,583         $  294
                                 ------      ------         ------         ------      ------         ------
EXPENSES
Mortality and expense risks...       81         247             10         $  123          67             11
                                 ------      ------         ------         ------      ------         ------
Net investment income
  (loss)......................      397        (186)         1,365           (123)      2,516            283
                                 ------      ------         ------         ------      ------         ------
NET REALIZED AND UNREALIZED
  GAIN ON INVESTMENTS
Realized gain distributions
  reinvested..................      154         818
Net realized gain from
  redemption of investment
  shares......................      172       1,767              6          1,594         201            197
                                 ------      ------         ------         ------      ------         ------
Net realized gain on
  investments.................      326       2,585              6          1,594         201            197
                                 ------      ------         ------         ------      ------         ------
Net unrealized appreciation of
  investments:
  Beginning of period
  End of period...............    5,547       5,688          1,194          7,429       1,924          5,371
                                 ------      ------         ------         ------      ------         ------
Net unrealized appreciation of
  investments during the
  period......................    5,547       5,688          1,194          7,429       1,924          5,371
                                 ------      ------         ------         ------      ------         ------
Net realized and unrealized
  gain on investments.........    5,873       8,273          1,200          9,023       2,125          5,568
                                 ------      ------         ------         ------      ------         ------
Net increase in net assets
  resulting from operations...   $6,270      $8,087         $2,565         $8,900      $4,641         $5,851
                                 ======      ======         ======         ======      ======         ======
</TABLE>
    
 
   
See accompanying notes to financial statements
    
 
                                       F-8
<PAGE>   79
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Period February 1, 1995 (Date of
Inception) to December 31, 1995
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                    MONEY                                AGGRESSIVE
                                       GROWTH       MARKET        BOND       MANAGED       GROWTH     INTERNATIONAL
                                     SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT    SUBACCOUNT
<S>                                  <C>          <C>          <C>          <C>          <C>          <C>
- ------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss).......   $    954    $   4,830     $  1,475     $    905     $   (215)      $   (73)
Net realized gain on investments...      1,386                       134           40          481           266
Net unrealized appreciation of
  investments during the period....     10,721                     3,919        4,931        6,340         5,545
                                      --------    ----------     -------      -------     --------       -------
Net increase in net assets
  from operations..................     13,061        4,830        5,528        5,876        6,606         5,738
                                      --------    ----------     -------      -------     --------       -------
FROM VARIABLE LIFE POLICY
  TRANSACTIONS
Policyowners' net premiums.........     82,812    1,226,779       16,686        6,530       89,173        60,462
Cost of insurance and
  administrative charges...........    (11,377)     (64,764 )     (2,472)        (722)     (12,356)       (6,573)
Surrenders and forfeitures.........        (90)         (16 )        (50)                     (118)          (81)
Transfers between investment
  portfolios.......................     41,888     (908,266 )      4,815        1,941       42,703        13,906
                                      --------    ----------     -------      -------     --------       -------
Net increase in net assets derived
  from policy transactions.........    113,233      253,733       18,979        7,749      119,402        67,714
                                      --------    ----------     -------      -------     --------       -------
Capital contribution from
  Providentmutual Life and Annuity
  Company of America...............     25,000       25,000       25,000       25,000       25,000        25,000
                                      --------    ----------     -------      -------     --------       -------
Total increase in net assets.......    151,294      283,563       49,507       38,625      151,008        98,452
NET ASSETS
  Beginning of period..............         --           --           --           --           --            --
                                      --------    ----------     -------      -------     --------       -------
  End of period....................   $151,294    $ 283,563     $ 49,507     $ 38,625     $151,008       $98,452
                                      ========    ==========     =======      =======     ========       =======
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-9
<PAGE>   80
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Period February 1, 1995 (Date of
Inception) to December 31, 1995
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                               FIDELITY                FIDELITY                FIDELITY                FIDELITY
                               EQUITY-     FIDELITY      HIGH      FIDELITY     ASSET      FIDELITY   INVESTMENT
                                INCOME      GROWTH      INCOME     OVERSEAS    MANAGER    INDEX 500   GRADE BOND
                              SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT  SUBACCOUNT
<S>                           <C>         <C>         <C>         <C>         <C>         <C>         <C>
- ----------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income
  (loss).....................  $  2,714    $   (633)   $  1,680    $   (150)   $    447    $    153    $    792
Net realized gain on
  investments................     3,065       2,933         562         555         654       2,055         196
Net unrealized appreciation
  investments during the
  period.....................    26,993      10,036       4,518       6,809       5,339      16,619       4,575
                               --------    --------    --------    --------     -------    --------     -------
Net increase in net assets
  from operations............    32,772      12,336       6,760       7,214       6,440      18,827       5,563
                               --------    --------    --------    --------     -------    --------     -------
FROM VARIABLE LIFE POLICY
  TRANSACTIONS
Policyowners' net premiums...   281,421     389,708      51,880     133,848      22,049     121,634      22,856
Cost of insurance and
  administrative charges.....   (31,287)    (46,543)     (7,891)    (11,367)     (4,044)    (12,939)     (3,801)
Surrenders and forfeitures...      (362)       (372)        (18)       (174)        (48)        (88)        (28)
Transfers between investment
  portfolios.................   158,292     255,246      70,043      58,163      22,432      67,694      10,833
                               --------    --------    --------    --------     -------    --------     -------
Net increase in net assets
  derived from policy
  transactions...............   408,064     598,039     114,014     180,470      40,389     176,301      29,860
                               --------    --------    --------    --------     -------    --------     -------
Capital contribution from
  Providentmutual Life and
  Annuity Company of
  America....................    25,000      25,000      25,000      25,000      25,000      25,000      25,000
                               --------    --------    --------    --------     -------    --------     -------
Total increase in net
  assets.....................   465,836     635,375     145,774     212,684      71,829     220,128      60,423
NET ASSETS
  Beginning of period........        --          --          --          --          --          --          --
                               --------    --------    --------    --------     -------    --------     -------
  End of period..............  $465,836    $635,375    $145,774    $212,684    $ 71,829    $220,128    $ 60,423
                               ========    ========    ========    ========     =======    ========     =======
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-10
<PAGE>   81
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Period February 1, 1995 (Date of
Inception) to December 31, 1995
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                  NEUBERGER                             VAN ECK
                                        NEUBERGER   NEUBERGER     & BERMAN                  VAN ECK     GOLD AND
                                         & BERMAN    & BERMAN      LIMITED        TCI      WORLDWIDE    NATURAL
                                         BALANCED     GROWTH    MATURITY BOND    GROWTH       BOND     RESOURCES
                                        SUBACCOUNT  SUBACCOUNT   SUBACCOUNT    SUBACCOUNT  SUBACCOUNT  SUBACCOUNT
<S>                                     <C>         <C>         <C>            <C>         <C>         <C>
- -----------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss)...........  $    397    $   (186)     $ 1,365      $   (123)   $  2,516    $    283
Net realized gain on investments.......       326       2,585            6         1,594         201         197
Net unrealized appreciation of
  investments during the period........     5,547       5,688        1,194         7,429       1,924       5,371
                                          -------    --------      -------      --------     -------     -------
Net increase in net assets from
  operations...........................     6,270       8,087        2,565         8,900       4,641       5,851
                                          -------    --------      -------      --------     -------     -------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyowners' net premiums.............    31,568     106,593        1,457        94,924      27,665       9,441
Cost of insurance and administrative
  charges..............................    (2,111)    (11,044)        (475)       (9,264)     (1,906)     (2,639)
Surrenders and forfeitures.............                   (71)         (11)         (290)         (4)
Transfers between investment
  portfolios...........................    10,150      85,611        3,816        61,227         109         544
                                          -------    --------      -------      --------     -------     -------
Net increase in net assets derived from
  policy transactions..................    39,607     181,089        4,787       146,597      25,864       7,346
                                          -------    --------      -------      --------     -------     -------
Capital contribution from
  Providentmutual Life and Annuity
  Company of America...................    25,000      25,000       25,000        25,000      25,000      25,000
                                          -------    --------      -------      --------     -------     -------
Total increase in net assets...........    70,877     214,176       32,352       180,497      55,505      38,197
NET ASSETS
  Beginning of period..................        --          --           --            --          --          --
                                          -------    --------      -------      --------     -------     -------
  End of period........................  $ 70,877    $214,176      $32,352      $180,497    $ 55,505    $ 38,197
                                          =======    ========      =======      ========     =======     =======
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-11
<PAGE>   82
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements
 
- --------------------------------------------------------------------------------
 
   
1. ORGANIZATION
    
 
     The Providentmutual Variable Life Separate Account (Separate Account) was
established by Providentmutual Life and Annuity Company of America
(Providentmutual) under the provisions of Delaware law and commenced operations
on February 1, 1995. Providentmutual is a wholly-owned subsidiary of Provident
Mutual Life Insurance Company. The Separate Account is an investment account to
which assets are allocated to support the benefits payable under flexible
premium adjustable variable life insurance policies (the Policies).
 
     The Policies are distributed principally through personal producing general
agents and brokers.
 
     Providentmutual has structured the Separate Account as a unit investment
trust registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended. The Separate Account is comprised of
nineteen subaccounts: the Growth, Money Market, Bond, Managed, Aggressive Growth
and International Subaccounts invest in the corresponding portfolios of the
Market Street Fund, Inc.; the Fidelity Equity-Income, Fidelity Growth, Fidelity
High Income and Fidelity Overseas Subaccounts invest in the corresponding
portfolios of the Variable Insurance Products Fund; the Fidelity Asset Manager,
Fidelity Index 500 and Fidelity Investment Grade Bond Subaccounts invest in the
corresponding portfolios of the Variable Insurance Products Fund II; the
Neuberger & Berman Balanced, Neuberger & Berman Growth and Neuberger & Berman
Limited Maturity Bond Subaccounts invest in the corresponding portfolios of the
Neuberger & Berman Advisers Management Trust; the TCI Growth Subaccount invests
in the corresponding portfolio of the TCI Portfolios, Inc.; and the Van Eck
Worldwide Bond and Van Eck Gold and Natural Resources Subaccounts invest in the
corresponding portfolios of the Van Eck Worldwide Insurance Trust.
 
     Net premiums from in-force Policies are allocated to the Subaccounts in
accordance with policyowner instructions and are recorded as variable life
policy transactions in the statements of changes in net assets. Such amounts are
used to provide money to pay benefits under the Policies (Note 4). The Separate
Account's assets are the property of Providentmutual.
 
     Transfers between investment portfolios include transfers between the
Subaccounts and the Guaranteed Account (not shown), which is part of
Providentmutual's General Account.
 
                                      F-12
<PAGE>   83
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     The following is a summary of the significant accounting policies followed
by the Separate Account in the financial statements.
 
 Investment Valuation:
 
     Investment shares are valued at the net asset values of the respective
Portfolios. Transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date.
 
 Realized Gains and Losses:
 
     Realized gains and losses on sales of investment shares are determined
using the specific identification basis for financial reporting and income tax
purposes.
 
   
 Federal Income Taxes:
    
 
     The operations of the Separate Account are included in the Federal income
tax return of Providentmutual. Under the provisions of the Policies,
Providentmutual has the right to charge the Separate Account for Federal income
tax attributable to the Separate Account. No charge is currently being made
against the Separate Account for such tax.
 
   
 Estimates:
    
 
   
     The preparation of the accompanying financial statements required
management to make estimates and assumptions that affect the reported values of
assets and liabilities as of December 31, 1995 and the reported amounts from
operations and policy transactions during 1995. Actual results could differ from
those estimates.
    
 
                                      F-13
<PAGE>   84
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
   
of Providentmutual Life and Annuity Company of America
    
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS
 
   At December 31, 1995, the investments of the respective Subaccounts are as
follows:
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                        SHARES         COST      MARKET VALUE
<S>                                                   <C>          <C>           <C>
- ----------------------------------------------------------------------------------------------
Market Street Fund, Inc.:
  Growth Portfolio..................................        9,248      $140,573       $151,294
  Money Market Portfolio............................      265,823      $265,823       $265,823
  Bond Portfolio....................................        4,500       $45,588        $49,507
  Managed Portfolio.................................        2,722       $33,694        $38,625
  Aggressive Growth Portfolio.......................        8,689      $144,668       $151,008
  International Portfolio...........................        7,657       $92,920        $98,465
Variable Insurance Products Fund:
  Equity-Income Portfolio...........................       24,174      $438,843       $465,836
  Growth Portfolio..................................       21,759      $625,339       $635,375
  High Income Portfolio.............................       12,097      $141,256       $145,774
  Overseas Portfolio................................       12,474      $205,875       $212,684
Variable Insurance Products Fund II:
  Asset Manager Portfolio...........................        4,549       $66,490        $71,829
  Index 500 Portfolio...............................        2,908      $203,509       $220,128
  Investment Grade Bond Portfolio...................        4,842       $55,848        $60,423
Neuberger & Berman Advisers Management Trust:
  Balanced Portfolio................................        4,046       $65,330        $70,877
  Growth Portfolio..................................        8,282      $208,488       $214,176
  Limited Maturity Bond Portfolio...................        2,199       $31,158        $32,352
TCI Portfolios, Inc.:
  TCI Growth Portfolio..............................       14,967      $173,068       $180,497
Van Eck Worldwide Insurance Trust:
  Worldwide Bond Portfolio..........................        4,982       $53,581        $55,505
  Gold and Natural Resources Portfolio..............        2,649       $32,826        $38,197
</TABLE>
 
                                      F-14
<PAGE>   85
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
   
Notes to Financial Statements -- continued
    
 
- --------------------------------------------------------------------------------
 
   
3. INVESTMENTS, CONTINUED
    
 
   During the period February 1, 1995 to December 31, 1995, transactions in
investment shares were as follows:
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                                                                    MARKET STREET FUND, INC.
  ------------------------------------------------------------------------------------------------------------------
                                            GROWTH     MONEY MARKET     BOND      MANAGED                INTERNATIONAL
                                           PORTFOLIO    PORTFOLIO     PORTFOLIO   PORTFOLIO AGGRESSIVE     PORTFOLIO
                                                                                              GROWTH
                                                                                            PORTFOLIO
<S>                                        <C>         <C>            <C>         <C>       <C>          <C>
- ------------------------------------------------------------------------------------------------------------------
Shares purchased..........................     9,742      874,800        4,493     2,676        9,089         7,846
Shares received from reinvestment of
  dividends...............................        76        5,330          146        70
                                             -------      -------       ------    ------      -------       -------
Total shares acquired.....................     9,818      880,130        4,639     2,746        9,089         7,846
Total shares redeemed.....................      (570)    (614,307)        (139)      (24 )       (400)         (189)
                                             -------      -------       ------    ------      -------       -------
Net increase in shares owned..............     9,248      265,823        4,500     2,722        8,689         7,657
Shares owned, beginning of period.........
                                             -------      -------       ------    ------      -------       -------
Shares owned, end of period...............     9,248      265,823        4,500     2,722        8,689         7,657
                                             =======      =======       ======    ======      =======       =======
Cost of shares acquired................... $ 148,035     $880,130      $46,940    $33,984    $150,890       $94,994
                                             =======      =======       ======    ======      =======       =======
Cost of shares redeemed................... $   7,462     $614,307      $ 1,352    $  290     $  6,222       $ 2,074
                                             =======      =======       ======    ======      =======       =======
</TABLE>
    
 
                                      F-15
<PAGE>   86
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
   
Notes to Financial Statements -- continued
    
 
- --------------------------------------------------------------------------------
 
   
3. INVESTMENTS, CONTINUED
    
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                                 VARIABLE INSURANCE PRODUCTS FUND             VARIABLE INSURANCE PRODUCTS FUND II
- ------------------------------------------------------------------------------------------------------------------
                                        FIDELITY     FIDELITY     FIDELITY     FIDELITY      FIDELITY
                        EQUITY-INCOME    GROWTH     HIGH INCOME   OVERSEAS   ASSET MANAGER   INDEX 500
                          PORTFOLIO     PORTFOLIO    PORTFOLIO    PORTFOLIO    PORTFOLIO     PORTFOLIO    FIDELITY
                                                                                                         INVESTMENT
                                                                                                         GRADE BOND
                                                                                                         PORTFOLIO
<S>                     <C>             <C>         <C>           <C>        <C>             <C>         <C>
- ------------------------------------------------------------------------------------------------------------------
Shares purchased.......      24,671        22,131       12,589     12,757         5,010         3,044        5,032
Shares received from
  reinvestment of:
  Dividends............         179             6          177          7            39             7           80
  Capital gain
    distributions......          83                                     7                           1
                           --------      --------     --------    --------      -------      --------      -------
Total shares
  acquired.............      24,933        22,137       12,766     12,771         5,049         3,052        5,112
Total shares
  redeemed.............        (759)         (378)        (669)      (297 )        (500)         (144 )       (270)
                           --------      --------     --------    --------      -------      --------      -------
Net increase in shares
  owned................      24,174        21,759       12,097     12,474         4,549         2,908        4,842
Shares owned, beginning
  of period............
                           --------      --------     --------    --------      -------      --------      -------
Shares owned, end
  of period............      24,174        21,759       12,097     12,474         4,549         2,908        4,842
                           ========      ========     ========    ========      =======      ========      =======
Cost of shares
  acquired.............   $ 450,678     $ 633,382    $ 148,527    $210,331      $73,342      $211,867     $ 58,875
                           ========      ========     ========    ========      =======      ========      =======
Cost of shares redeemed...   $  11,835  $   8,043    $   7,271    $ 4,456       $ 6,852      $  8,358     $  3,027
                           ========      ========     ========    ========      =======      ========      =======
</TABLE>
    
 
                                      F-16
<PAGE>   87
 
- --------------------------------------------------------------------------------
   
The Providentmutual Variable Life Separate Account
    
   
of Providentmutual Life and Annuity Company of America
    
   
Notes to Financial Statements -- continued
    
 
- --------------------------------------------------------------------------------
 
   
3. INVESTMENTS, CONTINUED
    
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                                                                             TCI PORT-
                                        NEUBERGER & BERMAN ADVISERS           FOLIOS,         VAN ECK WORLDWIDE
                                              MANAGEMENT TRUST                  INC.           INSURANCE TRUST
- ------------------------------------------------------------------------------------------------------------------
                                  NEUBERGER   NEUBERGER      NEUBERGER                     VAN ECK
                                  & BERMAN    & BERMAN        & BERMAN                    WORLDWIDE
                                  BALANCED     GROWTH     LIMITED MATURITY   TCI GROWTH     BOND
                                  PORTFOLIO   PORTFOLIO      PORTFOLIO       PORTFOLIO    PORTFOLIO      VAN ECK
                                                                                                      GOLD & NATURAL
                                                                                                        RESOURCES
                                                                                                        PORTFOLIO
<S>                               <C>         <C>         <C>                <C>          <C>         <C>
- ------------------------------------------------------------------------------------------------------------------
Shares purchased.................    4,065       8,555           2,127          15,511       4,991          2,712
Shares received from
  reinvestment of:
  Dividends......................       32           3             101                         234             22
  Capital gain distributions.....       10          39
                                   -------    --------         -------        --------     -------        -------
Total shares acquired............    4,107       8,597           2,228          15,511       5,225          2,734
Total shares redeemed............      (61)       (315 )           (29)           (544)       (243)           (85)
                                   -------    --------         -------        --------     -------        -------
Net increase in shares owned.....    4,046       8,282           2,199          14,967       4,982          2,649
Shares owned, beginning
  of period......................
                                   -------    --------         -------        --------     -------        -------
Shares owned, end of period......    4,046       8,282           2,199          14,967       4,982          2,649
                                   =======    ========         =======        ========     =======        =======
Cost of shares acquired..........  $66,229    $214,940        $ 31,573        $177,972     $56,085       $ 33,835
                                   =======    ========         =======        ========     =======        =======
Cost of shares redeemed..........  $   899    $  6,452        $    415        $  4,904     $ 2,504       $  1,009
                                   =======    ========         =======        ========     =======        =======
</TABLE>
    
 
                                      F-17
<PAGE>   88
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- concluded
 
- --------------------------------------------------------------------------------
 
4. RELATED PARTY TRANSACTIONS
 
   
     Providentmutual makes certain deductions from premiums before amounts are
allocated to each Subaccount selected by the policyowner. The deductions may
include (1) state premium taxes, (2) sales charges and (3) Federal tax charges.
See original policy documents for specific charges assessed.
    
 
     In addition to the aforementioned charges, a daily charge will be deducted
from the Separate Account for mortality and expense risks assumed by
Providentmutual. The charge is deducted at an annual rate of 0.65% of the
average daily net assets of the Separate Account. This charge may be increased,
but in no event will it be greater than 0.90% of the average daily net assets of
the Separate Account.
 
   
     The Separate Account is also charged monthly by Providentmutual for the
cost of insurance protection. The amount of the charge is computed based upon
the amount of insurance provided during the year and the insured's attained age.
Additional monthly deductions may be made for (1) administrative charges, (2)
minimum death benefit charges, (3) first year policy charges and (4)
supplementary charges. See original policy documents for additional monthly
charges. These charges are included in the statements of changes in net assets.
    
 
     During any given policy year, the first four transfers by a policyowner of
amounts in the Subaccounts are free of charge. A fee of $25 is assessed for each
additional transfer.
 
     The Policies provide for an initial free-look period. If a policy is
cancelled within certain time constraints, the policyowner will receive a refund
equal to the policy account value plus certain deductions made under the policy.
Where state law requires a minimum refund equal to gross premiums paid, the
refund will instead equal the gross premiums paid on the policy and will not
reflect investment experience.
 
     If a policy is surrendered or lapses within the first ten policy years, a
contingent deferred sales load charge and/or contingent deferred administrative
charge are assessed. A deferred sales charge will be imposed if a policy is
surrendered or lapses at any time within ten years after the effective date of
an increase in face amount. A portion of the deferred sales charge will be
deducted if the related increment of face amount is decreased within ten years
after such increase took effect. These charges are recorded as administrative
charges in the statements of changes in net assets.
 
                                      F-18
<PAGE>   89
 
- --------------------------------------------------------------------------------
   
Provident Mutual Life and Annuity Company of America
    
   
Report of Independent Accountants
    
 
- --------------------------------------------------------------------------------
 
To the Shareholder and Board of Directors
  Providentmutual Life and Annuity Company of America
 
We have audited the accompanying statements of financial condition of
Providentmutual Life and Annuity Company of America (a wholly-owned stock life
insurance subsidiary of Provident Mutual Life Insurance Company) as of December
31, 1995 and 1994, and the related statements of operations, changes in capital
and surplus and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Providentmutual Life and
Annuity Company of America as of December 31, 1995 and 1994, and the results of
its operations and cash flows for each of the three years in the period ended
December 31, 1995, in conformity with accounting principles prescribed or
permitted by the Insurance Department of the State of Delaware, which are
considered generally accepted accounting principles for wholly-owned stock life
insurance subsidiaries of mutual life insurance companies.
 
   
                                          COOPERS & LYBRAND L.L.P.
    
 
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 6, 1996
 
                                      F-19
<PAGE>   90
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
   
Statements of Financial Condition
    
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                        ---------------------
                                                                          1995         1994
- ---------------------------------------------------------------------------------------------
                                                                           (IN THOUSANDS)
<S>                                                                     <C>          <C>
ADMITTED ASSETS
  Bonds..............................................................   $359,778     $335,502
  Preferred stocks...................................................        970          970
  Common stocks......................................................        661        1,400
  Policy loans.......................................................      5,446        4,457
  Mortgage loans.....................................................     38,917       39,317
  Real estate........................................................      3,221        3,367
  Other long-term investments........................................        434          434
  Cash and short-term investments....................................     12,555       13,457
                                                                        --------     --------
       Total cash and invested assets................................    421,982      398,904
  Premiums due and deferred..........................................      2,408        1,484
  Investment income due and accrued..................................      6,675        7,520
  Due from parent....................................................         --          720
  Other assets.......................................................      1,929          644
  Separate account assets............................................    191,774       95,433
                                                                        --------     --------
       Total admitted assets.........................................   $624,768     $504,705
                                                                        ========     ========
LIABILITIES
  Aggregate policy and claim reserves................................   $379,545     $360,461
  Other policyowner obligations......................................      5,466        3,717
  Payable to parent..................................................      1,751           --
  Other liabilities..................................................     12,937       11,867
  Asset valuation reserve............................................      3,939        4,271
  Separate account liabilities.......................................    190,493       95,007
                                                                        --------     --------
       Total liabilities.............................................    594,131      475,323
                                                                        --------     --------
CAPITAL AND SURPLUS
  Common stock, $10 par value;
     authorized 500,000 shares; issued
     and outstanding 250,000 shares..................................      2,500        2,500
  Contributed capital in excess of par...............................     29,665       29,665
  Unassigned deficit.................................................     (1,528)      (2,783)
                                                                        --------     --------
       Total capital and surplus.....................................     30,637       29,382
                                                                        --------     --------
       Total liabilities, capital and surplus........................   $624,768     $504,705
                                                                        ========     ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                      F-20
<PAGE>   91
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
   
Statements of Operations
    
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                          ----------------------------------
                                                            1995         1994         1993
<S>                                                       <C>          <C>          <C>
- --------------------------------------------------------------------------------------------
                                                                    (IN THOUSANDS)
INCOME
  Premium income......................................    $137,923     $124,383     $ 82,402
  Net investment income...............................      32,299       29,591       30,835
  Other income, net...................................       3,509        2,099          982
  Commissions and reserve adjustments
     on reinsurance ceded.............................       8,459        6,810        2,759
                                                          --------     --------     --------
       Total income...................................     182,190      162,883      116,978
                                                          --------     --------     --------
BENEFITS AND EXPENSES
  Life, accident and health, and other policy
     benefits.........................................      63,047       59,385       69,322
  Increase in aggregate policy reserves...............      25,408       17,365       11,779
  Transfers to separate account, net..................      62,452       59,856       21,155
                                                          --------     --------     --------
       Total benefits.................................     150,907      136,606      102,256
  Commissions.........................................      14,702       13,004        4,641
  General insurance expenses..........................       9,894        8,225        5,903
  Insurance taxes, licenses and fees..................         752          585          358
  Federal income tax expense..........................       3,591        2,085          822
                                                          --------     --------     --------
       Total benefits and expenses....................     179,846      160,505      113,980
                                                          --------     --------     --------
       Net income before dividends to policyowners
          and realized capital losses.................       2,344        2,378        2,998
  Dividends to policyowners...........................         443          294          106
                                                          --------     --------     --------
       Net income before realized capital losses......       1,901        2,084        2,892
  Realized capital losses, net of tax.................        (320)      (1,358)      (2,318)
                                                          --------     --------     --------
       Net income.....................................    $  1,581     $    726     $    574
                                                          ========     ========     ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                      F-21
<PAGE>   92
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
   
Statements of Changes in Capital and Surplus
    
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                          FOR THE YEARS ENDED
                                                                    DECEMBER 31, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------------------------
                                                           COMMON               CONTRIBUTED              TOTAL
                                                            STOCK                 CAPITAL               CAPITAL
                                                         OUTSTANDING    PAR      IN EXCESS    SURPLUS     AND
                                                           SHARES      VALUE      OF PAR      (DEFICIT) SURPLUS
<S>                                                      <C>           <C>      <C>           <C>       <C>
- ---------------------------------------------------------------------------------------------------------------
                                                                                                 (IN THOUSANDS)
Balance, January 1, 1993...............................    250,000     $2,500     $21,665     $(3,611)  $20,554
Net income.............................................                                           574       574
Net unrealized gain on investments.....................                                         1,095     1,095
Capital contribution...................................                             8,000                 8,000
Other changes, net of increase in nonadmitted assets...                                            58        58
Increase in asset valuation reserve....................                                        (1,691)   (1,691)
                                                           -------      -----      ------     -------   -------
Balance, December 31, 1993.............................    250,000      2,500      29,665      (3,575)   28,590
Net income.............................................                                           726       726
Net unrealized gain on investments.....................                                         1,599     1,599
Other changes, net of increase in nonadmitted assets...                                          (134)     (134)
Increase in asset valuation reserve....................                                        (1,399)   (1,399)
                                                           -------      -----      ------     -------   -------
Balance, December 31, 1994.............................    250,000      2,500      29,665      (2,783)   29,382
Net income.............................................                                         1,581     1,581
Net unrealized loss on investments.....................                                          (933)     (933)
Other changes, net of increase in nonadmitted assets...                                           275       275
Decrease in asset valuation reserve....................                                           332       332
                                                           -------      -----      ------     -------   -------
Balance, December 31, 1995.............................    250,000     $2,500     $29,665     $(1,528)  $30,637
                                                           =======      =====      ======     =======   =======
</TABLE>
 
See accompanying notes to financial statements.
 
                                      F-22
<PAGE>   93
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
   
Statements of Cash Flows
    
 
- --------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                          ----------------------------------
                                                            1995         1994         1993
<S>                                                       <C>          <C>          <C>
- --------------------------------------------------------------------------------------------
                                                                              (IN THOUSANDS)
CASH PROVIDED
  Net cash provided by operations:
     Premiums and annuity considerations..............    $140,390     $125,316     $ 85,283
     Allowances and reserve adjustments received on
       reinsurance....................................       8,535        6,734          140
     Investment income received, net of expenses......      33,882       29,806       30,364
     Other income received............................          44          134          625
     Life, accident and health claims paid............        (745)        (651)        (437)
     Surrender benefits paid..........................     (52,574)     (50,523)     (62,725)
     Other benefits paid to policyowners..............      (9,610)      (8,206)      (6,190)
     Commissions, insurance expenses and other taxes
       paid...........................................     (25,073)     (20,480)     (10,701)
     Funds transferred to separate accounts, net......     (66,763)     (63,382)     (22,901)
     Dividends paid to policyowners...................        (259)        (105)         (25)
     Federal income taxes (paid) recovered............      (1,679)        (293)         519
     Net decrease in policy loans and premium notes...        (989)        (327)        (129)
                                                            ------      -------      -------
       Net cash provided by operations................      25,159       18,023       13,823
                                                            ------      -------      -------
  Investments sold, matured or repaid:
     Bonds............................................      49,616       49,448       67,847
     Stocks...........................................       2,746          220          258
     Mortgage loans...................................       8,066        1,374        7,370
     Real estate and other invested assets............         940        1,793        2,769
                                                            ------      -------      -------
       Total investments sold, matured or repaid......      61,368       52,835       78,244
                                                            ------      -------      -------
  Other cash provided.................................         241           --        8,104
                                                            ------      -------      -------
       Total cash provided............................      86,768       70,858      100,171
                                                            ------      -------      -------
CASH APPLIED
  Cost of investments acquired:
     Bonds............................................      75,566       59,752      128,094
     Stocks...........................................       1,562          497            9
     Mortgage loans...................................       8,418        7,515        3,855
     Real estate......................................         214        1,010          218
                                                            ------      -------      -------
       Total investments acquired.....................      85,760       68,774      132,176
                                                            ------      -------      -------
  Other cash applied..................................       1,910          836          522
                                                            ------      -------      -------
       Total cash applied.............................      87,670       69,610      132,698
                                                            ------      -------      -------
       Net change in cash and short-term
          investments.................................        (902)       1,248      (32,527)
Cash and short-term investments:
  Beginning of year...................................      13,457       12,209       44,736
                                                            ------      -------      -------
  End of year.........................................    $ 12,555     $ 13,457     $ 12,209
                                                          ========      =======      =======
</TABLE>
    
 
See accompanying notes to financial statements.
 
                                      F-23
<PAGE>   94
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements
 
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
   Organization
 
     Providentmutual Life and Annuity Company of America (the Company) is a
stock life insurance company and a wholly-owned subsidiary of Provident Mutual
Life Insurance Company (Provident Mutual).
 
     The Company sells life and annuity products principally through a personal
producing general agency (PPGA) and brokerage sales force. The Company is
licensed to operate in 48 states, which are responsible for product regulation.
Sales in 9 states accounted for 65% of the Company's sales for the year ended
December 31, 1995. For many of the life and annuity products, the insurance
departments of the states in which the Company conducts business must approve
products and policy forms in advance of sales. In addition, benefits are
determined by statutes and regulations in each of these states.
 
   Basis of Presentation
 
     The Company's financial statements have been prepared on the basis of
accounting principles prescribed or permitted by the National Association of
Insurance Commissioners (NAIC) and the Insurance Department of the State of
Delaware. These financial statements vary from those filed for statutory
purposes only as to presentation. All amounts are presented in thousands of
dollars. Certain prior year amounts have been reclassified to conform with the
current year presentation.
 
     The preparation of the accompanying financial statements required
management to make estimates and assumptions that affect the reported values of
assets and liabilities as of December 31, 1995 and 1994 and the reported amounts
of revenues and expenses during 1995, 1994 and 1993. Actual results could differ
from those estimates.
 
     In January 1995, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards No. 120, "Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Long-Duration Participating Contracts" (SFAS 120). SFAS 120 extends the
requirements of FASB Statements No. 60, "Accounting and Reporting by Insurance
Enterprises", No. 97, "Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments", and No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts," to mutual life insurance companies.
The American Institute of Certified Public Accountants has established
accounting for certain participating life insurance contracts of mutual life
insurance enterprises in its Statement of Position 95-1, "Accounting for Certain
Insurance Activities of Mutual Life Insurance Enterprises" (SOP 95-1). SFAS 120
is effective for financial statements issued for fiscal years beginning after
December 15, 1995 and will be applied retroactively to the earliest year
presented when adopted.
 
     SFAS 120 also amends FASB Interpretation No. 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises" (Interpretation No. 40), to defer the effective date of the general
provisions of that Interpretation to fiscal years beginning after December 15,
1995, so
 
                                      F-24
<PAGE>   95
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
 
   
   Basis of Presentation, continued
    
that Interpretation No. 40, SFAS 120, and SOP 95-1 are concurrently effective.
When the Company prepares financial statements in conformity with Interpretation
No. 40, the accounting treatment for certain items, such as policy reserves, new
business acquisition costs, asset valuation reserves and income taxes will be
different than for financial statements issued in conformity with statutory
accounting principles. In addition, the Company believes surplus presented in
accordance with Interpretation No. 40 will be greater than surplus presented in
accordance with statutory accounting principles.
 
   Invested Assets
 
     Bonds are stated at amortized cost, except bonds in default, which are
stated at market value as prescribed by the NAIC. Private placements are stated
as prescribed by the NAIC or at amortized cost.
 
     Common stocks are carried at market value. The cost of common stocks was
$752 and $1,682 at December 31, 1995 and 1994, respectively. Preferred stocks
are carried at cost if designated "in good standing", otherwise at market value
as prescribed by the NAIC.
 
     Short-term investments include those investments whose maturities at the
time of acquisition were one year or less. These investments are carried at
amortized cost which approximates market value.
 
     Mortgage loans and policy loans are stated primarily at unpaid principal
balances.
 
     Foreclosed real estate is carried at lower of cost or market value and is
held for sale. Foreclosed real estate is depreciated using the straight-line
method. Accumulated depreciation for real estate totalled $244 and $197 at
December 31, 1995 and 1994, respectively.
 
     Other invested assets consist of limited partnerships carried on the cost
basis.
 
   
   Investment Valuation Reserves
    
 
     The asset valuation reserve (AVR) is designed to mitigate the effect of
valuation and credit-related losses on surplus. The interest maintenance reserve
(IMR) is designed to reduce fluctuations in surplus resulting from market
interest rate movements. The AVR covers all invested asset classes with risk of
loss, including bonds, common stocks, mortgage loans and real estate. The IMR
captures realized gains on the sale of all types of fixed income securities
which resulted from changes in the overall level of interest rates. These gains
are amortized into income over the remaining life of each investment sold.
 
     Separate investment valuation reserves in addition to the AVR have been
provided for impairments of mortgage loans and totalled $1,075 and $1,328 at
December 31, 1995 and 1994, respectively. Changes in the reserves are reflected
as charges or credits to surplus in unrealized capital gains and losses.
 
                                      F-25
<PAGE>   96
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
 
   Policy Reserves
 
     Reserves for traditional life insurance policies are computed principally
on the net level premium method and the Commissioners' Reserve Valuation Method
using the 1958 and 1980 Commissioners' Standard Ordinary (CSO) mortality tables
with assumed interest rates ranging from 2.5% to 6%.
 
     Reserves for deferred annuities are computed principally on the
Commissioners' Annuity Reserve Valuation Method (CARVM) using the 1971 and 1983
Individual Annuity Mortality (IAM) Tables with assumed interest rates ranging
from 5.5% to 8.5%. Reserves for variable annuities are computed principally on
the CARVM using the 1983 IAM mortality table with assumed interest rates ranging
from 5.5% to 6.25%. Reserves for immediate annuities and supplementary contracts
with life contingencies are based principally on the 1971 and 1983 IAM mortality
tables at assumed interest rates ranging from 6.5% to 11.25%.
 
     Reserves for deposit funds are based upon the accumulated balance values,
including accrued interest.
 
   Premium and Expense Recognition
 
     Life and health premiums are recognized as income when due. Annuity fund
deposits are recognized as income when received. Policy acquisition costs, such
as commissions and other marketing and policy issuance expenses incurred in
connection with acquiring new business, are charged to operations as incurred.
Revenues from supplementary contracts with and without life contingencies are
classified as other income in the statements of operations.
 
   
   Capital Gains and Losses
    
 
     Realized capital gains and losses from sales of investments, net of related
Federal income taxes, resulting from changes in interest rates are included in
the IMR and are amortized into operating income over the remaining lives of the
investments sold. Credit-related realized gains and losses are recorded as
capital gains and losses in the statements of operations. Capital gains and
losses are recognized on a specific identification basis.
 
     Unrealized gains and losses on investments are reflected as a change in
surplus and represent the difference between cost and market values as
prescribed by the NAIC.
 
   Policyowner Dividends
 
     A portion of the Company's life insurance business is written on the
participating basis. Annually, the Board of Directors declares the amount of
dividends to be paid in the following calendar year. Declared dividends are
included in the accompanying financial statements as a liability and as a charge
to operations.
 
                                      F-26
<PAGE>   97
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
 
   Reinsurance
 
     Premiums, benefits and expenses are reported net of experience refunds,
reserve adjustments and amounts assumed from or ceded to reinsurers, including
commission and expense allowances.
 
   Separate Accounts
 
     Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of variable annuity
contractowners and variable life insurance policyowners. Separate account assets
are carried at market values determined as of the balance sheet date.
 
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The following table presents the fair values and statement values of the
Company's financial instruments at December 31, 1995 and 1994:
 
<TABLE>
<CAPTION>
                                                     DECEMBER 31, 1995      DECEMBER 31, 1994
                                                    --------------------   --------------------
                                                      FAIR     STATEMENT     FAIR     STATEMENT
                                                     VALUE       VALUE      VALUE       VALUE
                                                    --------   ---------   --------   ---------
                                                       (IN THOUSANDS)      (IN THOUSANDS)
<S>                                                 <C>        <C>         <C>        <C>
ASSETS
Bonds.............................................  $374,276    $359,778   $323,344    $335,502
Common stock......................................      $661        $661     $1,400      $1,400
Redeemable preferred stocks.......................    $1,104        $970     $1,020        $970
Commercial mortgage loans.........................   $42,128     $38,917    $39,416     $39,317
LIABILITIES FOR INVESTMENT-TYPE INSURANCE
  CONTRACTS
Supplementary contracts
  without life contingencies......................    $4,701      $4,399     $2,913      $2,951
Individual annuities..............................  $516,240    $518,697   $393,360    $396,667
</TABLE>
 
     The underlying investment risk of the Company's variable annuity and
variable life contracts is assumed by the owner. These reserve liabilities are
primarily reported in the separate accounts. The liabilities in the separate
accounts are recorded at amounts equal to the related assets at market value.
 
     Fair values for the Company's insurance contracts other than
investment-type contracts are not required to be disclosed under Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Values of
Financial Instruments". However, the estimated fair value and future cash flows
of liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts. The estimated fair value of all assets
without a corresponding revaluation of all liabilities associated with insurance
contracts can be misinterpreted.
 
                                      F-27
<PAGE>   98
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
   
2. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
    
     The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments:
 
   Investment Securities
 
     Bonds, common stocks and preferred stocks are valued based upon quoted
market prices, where available. If quoted market prices are not available, as in
the case of private placements, fair values are based on quoted market prices of
comparable instruments. (See Note 3).
 
   Mortgage Loans
 
     Mortgage loans were valued using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality. For mortgage loans classified as nonperforming, the
fair value was set equal to the lesser of the unpaid principal balance or the
market value of the underlying property.
 
   Policy Loans
 
     Policy loans are issued with either fixed or variable interest rates,
depending upon the terms of the policies. For those loans with fixed interest
rates, the interest rates range from 5% to 8%. For loans with variable interest
rates, the interest rates are primarily adjusted quarterly based upon changes in
a corporate bond index. Future cash flows of policy loans are uncertain and
difficult to predict. As a result, management deems it impractical to calculate
the fair value of policy loans.
 
   Individual Annuities and Supplementary Contracts
 
     The fair value of individual annuities and supplementary contracts without
life contingencies is based primarily on surrender values. For those individual
annuities and supplementary contracts that are not surrenderable, discounted
future cash flows are used for calculating fair value.
 
   Policyowner Dividends and Coupon Accumulations
 
     The policyowners' dividend and coupon accumulation liabilities will
ultimately be settled in cash, applied towards the payment of premiums, or left
on deposit with the Company at interest. Management deems it impractical to
calculate the fair value of these liabilities due to valuation difficulties
involving the uncertainties of final settlement.
 
                                      F-28
<PAGE>   99
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. DEBT SECURITIES AND REDEEMABLE PREFERRED STOCKS
 
     The statement value and estimated fair value of investments in debt
securities and redeemable preferred stocks as of December 31, 1995 and 1994 are
as follows:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 1995
                                               -----------------------------------------------------
                                                               GROSS          GROSS        ESTIMATED
                                               STATEMENT     UNREALIZED     UNREALIZED       FAIR
                                                 VALUE         GAINS          LOSSES         VALUE
                                               ---------     ----------     ----------     ---------
<S>                                            <C>           <C>            <C>            <C>
U.S. Treasury securities and obligations of
  U.S. government corporations and
  agencies.................................    $   5,811      $    536       $      8      $   6,339
Obligations of states and political
  subdivisions.............................        6,198           374             --          6,572
Corporate securities including mortgage-
  backed securities........................      347,769        14,782          1,186        361,365
                                                --------       -------        -------       --------
       Subtotal -- bonds...................      359,778        15,692          1,194        374,276
Redeemable preferred stocks................          970           134             --          1,104
                                                --------       -------        -------       --------
       Total...............................    $ 360,748      $ 15,826       $  1,194      $ 375,380
                                                ========       =======        =======       ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 1994
                                               -----------------------------------------------------
                                                               GROSS          GROSS        ESTIMATED
                                               STATEMENT     UNREALIZED     UNREALIZED       FAIR
                                                 VALUE         GAINS          LOSSES         VALUE
                                               ---------     ----------     ----------     ---------
<S>                                            <C>           <C>            <C>            <C>
U.S. Treasury securities and obligations of
  U.S. government corporations and
  agencies.................................    $  11,704      $     29       $    204      $  11,529
Obligations of states and political
  subdivisions.............................        5,575            85             40          5,620
Debt securities issued by foreign
  governments..............................        1,014            --             38            976
Corporate securities including mortgage-
  backed securities........................      317,209         1,205         13,195        305,219
                                               ---------     ----------     ----------     ---------
       Subtotal -- bonds...................      335,502         1,319         13,477        323,344
Redeemable preferred stocks................          970            50             --          1,020
                                               ---------     ----------     ----------     ---------
       Total...............................    $ 336,472      $  1,369       $ 13,477      $ 324,364
                                               =========      ========       ========      =========
</TABLE>
 
                                      F-29
<PAGE>   100
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
   
3. DEBT SECURITIES AND REDEEMABLE PREFERRED STOCKS, CONTINUED
    
     The statement value and estimated fair value of debt securities and
redeemable preferred stocks at December 31, 1995, by contractual maturity, are
as follows:
 
<TABLE>
<CAPTION>
                                                                       STATEMENT     ESTIMATED
                                                                         VALUE       FAIR VALUE
                                                                       ---------     ----------
<S>                                                                    <C>           <C>
Due in one year or less............................................    $  14,947      $  15,116
Due after one year through five years..............................      158,693        162,689
Due after five years through ten years.............................      126,110        133,786
Due after ten years................................................       60,028         62,685
                                                                        --------       --------
       Subtotal -- bonds...........................................      359,778        374,276
Redeemable preferred stocks........................................          970          1,104
                                                                        --------       --------
       Total.......................................................    $ 360,748      $ 375,380
                                                                        ========       ========
</TABLE>
 
     Expected maturities may differ from contractual maturities because
borrowers may have the right to call or repay obligations with or without call
or prepayment penalties. Mortgage-backed securities are included based on their
final maturity.
 
     Proceeds from sales and maturities of investments in debt securities during
1995, 1994 and 1993 were $49,616, $49,448 and $67,847, respectively. Gross gains
of $550, $299 and $1,511 and gross losses of $8, $795 and $39 were realized on
those sales in 1995, 1994 and 1993, respectively.
 
4. RESERVES
 
     The withdrawal characteristics of the Company's annuity actuarial reserves
and deposit liabilities as of December 31, 1995 are as follows:
 
<TABLE>
<S>                                                                                <C>
Reserves
Subject to discretionary withdrawal--with adjustment:
  --with market value adjustment...............................................    $178,311
  --at book value less surrender charges.......................................      82,525
                                                                                   --------
       Subtotal................................................................     260,836
Subject to discretionary withdrawal--without adjustment:
  --at book value (minimal or no charge or adjustment).........................     321,552
Not subject to discretionary withdrawal provision..............................      34,212
                                                                                   --------
Total annuity actuarial reserves and deposit liabilities (gross)...............     616,600
                                                                                   --------
  Less: reinsurance............................................................      78,551
                                                                                   --------
Total annuity actuarial reserves and deposit liabilities (net).................    $538,049
                                                                                   ========
</TABLE>
 
                                      F-30
<PAGE>   101
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
   
4. RESERVES, CONTINUED
    
     The amounts above are included in the statement of financial condition as
aggregate policy and claim reserves totalling $359,738 and separate account
liabilities totalling $178,311.
 
5. ACQUISITION
 
     On December 18, 1992, the Company entered into an agreement (the Agreement)
with an unaffiliated life insurance company (third party) which provided for the
acquisition of certain single premium deferred annuity contracts (the Policies)
in 1992 and 1993. On December 31, 1992, the Company entered a coinsurance
reinsurance agreement for specified Policies under the terms of the Agreement.
The third party transferred net cash to the Company totalling $51,547
representing the accumulated values of the Policies totalling $54,033 less
consideration paid by the Company of approximately $2,486.
 
     On January 31, 1993, the Company entered a second coinsurance agreement for
specified Policies under the terms of the Agreement. On February 1, 1993, the
third party transferred cash to the Company totalling $48,687 representing the
accumulated values of the Policies on January 31, 1993. Consideration is paid by
the Company on a monthly basis as defined in the Agreement for the life of the
policies in force. Under the terms of the Agreement, the Company assumed all
obligations and liabilities under the Policies through an assumption reinsurance
agreement as state approvals were obtained.
 
                                      F-31
<PAGE>   102
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
   
6. REINSURANCE
    
 
     The Company has assumed and ceded reinsurance on certain life, health and
annuity contracts under various agreements. The table below highlights the
amounts shown in the accompanying financial statements which are net of
reinsurance activity:
 
<TABLE>
<CAPTION>
                                                               CEDED TO     ASSUMED
                                                    GROSS        OTHER     FROM OTHER     NET
                                                    AMOUNT     COMPANIES   COMPANIES     AMOUNT
                                                  ----------   ---------   ----------   --------
<S>                                               <C>          <C>         <C>          <C>
DECEMBER 31, 1995
Life insurance in force.........................  $1,142,970   $923,876     $ 46,163    $265,257
                                                  ==========   ========      =======    ========
Premiums........................................  $  165,585   $ 27,815     $    153    $137,923
                                                  ==========   ========      =======    ========
Reserves........................................  $  456,145   $ 81,118     $  4,518    $379,545
                                                  ==========   ========      =======    ========
DECEMBER 31, 1994
Life insurance in force.........................  $  776,036   $471,735     $ 50,198    $354,499
                                                  ==========   ========      =======    ========
Premiums........................................  $  144,408   $ 20,151     $    126    $124,383
                                                  ==========   ========      =======    ========
Reserves........................................  $  415,301   $ 59,705     $  4,865    $360,461
                                                  ==========   ========      =======    ========
DECEMBER 31, 1993
Life insurance in force.........................  $  486,215   $209,795     $ 53,947    $330,367
                                                  ==========   ========      =======    ========
Premiums........................................  $   88,878   $  4,041     $    184    $ 85,021
                                                  ==========   ========      =======    ========
Reserves........................................  $  388,399   $ 44,804     $  5,207    $348,802
                                                  ==========   ========      =======    ========
</TABLE>
 
     The Company has a reinsurance contract with a third party to cede 65
percent (75 percent prior to July 1, 1992) of the premiums and reserves related
to its single premium deferred annuity (SPDA) product. Total premiums ceded and
reserve credits taken related to this treaty were $24,262 and $78,551,
respectively, at December 31, 1995, $16,572 and $57,631, respectively, at
December 31, 1994, and $3,965 and $44,320, respectively, at December 31, 1993.
 
     A coinsurance agreement exists between Provident Mutual and the Company
with respect to annuities. Prior to 1992, the agreement covered SPDA's issued
after 1984. The agreement was amended in 1992 to include single premium
immediate annuities and supplementary contracts. The Company retains full
statutory minimum reserves on all policies and supplementary contracts covered.
Pursuant to this agreement, the Company has taken no reserve credits at December
31, 1995, 1994 and 1993.
 
     Approximately $733,258, $235,712 and $133,489 of the Company's life
insurance in force is ceded to Provident Mutual under reinsurance agreements at
December 31, 1995, 1994 and 1993, respectively.
 
     The Company remains contingently liable with respect to ceded insurance
should any reinsurer be unable to meet its contractual obligations.
 
                                      F-32
<PAGE>   103
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
7. FEDERAL INCOME TAXES
 
     The Company files a consolidated Federal income tax return with Provident
Mutual. The tax liability is accrued on a separate company basis which includes
an allocation of an equity tax by Provident Mutual to the Company. In accordance
with statutory accounting practices, deferred taxes are not provided for timing
differences between pretax accounting income and taxable income.
 
The Federal income tax expense includes an equity tax expense with the following
components:
 
<TABLE>
<CAPTION>
                                                                  1995       1994       1993
                                                                 ------     ------     ------
<S>                                                              <C>        <C>        <C>
Current year equity tax......................................    $  625     $  550     $  420
True down of prior years' equity tax.........................        --       (333)      (371)
                                                                 ------     ------     ------
                                                                 $  625     $  217     $   49
                                                                 ======     ======     ======
</TABLE>
 
     The provision for Federal income taxes from operations differs from the
normal relationship of Federal income tax to pretax income as follows:
 
<TABLE>
<CAPTION>
                                                                  1995       1994       1993
                                                                 ------     ------     ------
<S>                                                              <C>        <C>        <C>
Federal income tax at statutory rate.........................    $1,922     $1,460     $1,300
  Equity tax expense.........................................       625        217         49
  Difference between tax and statutory reserves..............       666        354         (9)
  Bad debt deduction.........................................      (118)       (69)      (594)
  Other......................................................       496        123         76
                                                                 ------     ------     ------
Federal income tax expense...................................    $3,591     $2,085     $  822
                                                                 ======     ======     ======
</TABLE>
 
     Under current tax law, stock life insurance companies are taxed at current
rates on distributions from the special surplus account for the benefit of
policyowners designated "Policyholder Surplus" (the Account). The Tax Reform Act
of 1984 eliminated further additions to the Account as of December 31, 1983. The
aggregate accumulation at December 31, 1983 was $2,037. The Company has no
present plans to make any distributions which would subject the Account to
current taxation.
 
8. RELATED PARTY TRANSACTIONS
 
     Provident Mutual and its subsidiaries provided certain investment and
administrative services to the Company. In 1995, 1994 and 1993, PLACA paid
$9,238, $7,174 and $5,475, respectively, to Provident Mutual for these services.
 
     The contractual obligations under the Company's SPDA contracts in force and
issued before September 1, 1988 are guaranteed by Provident Mutual. Total SPDA
contracts affected by this guarantee in force at December 31, 1995 and 1994
approximated $117,169 and $134,097, respectively.
 
                                      F-33
<PAGE>   104
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
9. COMMITMENTS AND CONTINGENCIES
 
   Financial Instruments With Off-Balance-Sheet Risk
 
     The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its borrowers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include investment commitments related to its interest in
mortgage loans, marketable securities lending and interest rate futures
contracts. Those instruments involve, to varying degrees, elements of credit and
interest risk in excess of the amount recognized in the statements of financial
condition but which are not deemed to be material.
 
     At December 31, 1995, the Company had outstanding mortgage loan commitments
of approximately $2,586 expiring through April 1996. These commitments were
issued in late 1995 at interest rates consistent with rates applicable on
December 31, 1995. As a result, the fair value of these commitments approximates
the face amount.
 
     It is the Company's policy to use derivatives (exchange-traded or
over-the-counter financial instruments whose value is based upon or derived from
a specific underlying index or commodity) for the purpose of reducing exposure
to interest rate fluctuations, and not for income generation or speculative
purposes. Derivative options utilized by the Company are long and short
positions on United States Treasury notes and bond futures and certain interest
rate swaps.
 
     Derivative products are used for hedging existing bonds (including cash
reserves) against adverse price or interest rate movements and for fixing
liability costs at the time of product sales. During 1995, the Company closed
out hedge positions consisting of 20 treasury futures contracts with a dollar
value of $2,000. The approximate net gains generated from the hedge positions
were $22 for the year ended December 31, 1995. The Company had no hedging
activity during 1994 and 1993.
 
     Periodically the Company enters securities lending agreements to earn
additional investment income on its securities. The borrower must first provide
cash collateral prior to or at the inception of the loan. There were no
securities lending positions at December 31, 1995.
 
   Investment Portfolio Credit Risk
 
     Bonds
 
     The Company's bond investment portfolio is predominately comprised of
     investment grade securities. At December 31, 1995 and 1994 approximately
     $8,856 and $11,320, respectively, in debt security investments (2.5% and
     3.2%, respectively, of the total debt security portfolio) are considered
     "below investment grade". Securities are classified as "below investment
     grade" by utilizing rating criteria established by the NAIC. These criteria
     are not necessarily equivalent to the rating criteria employed by
     independent bond rating agencies.
 
                                      F-34
<PAGE>   105
 
- --------------------------------------------------------------------------------
   
Providentmutual Life and Annuity Company of America
    
Notes to Statutory Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
   
9. COMMITMENTS AND CONTINGENCIES, CONTINUED
    
   
   Investment Portfolio Credit Risk, continued
    
   
     Bonds, continued
    
     The Company had debt security investments in the financial services
     industry at December 31, 1995 and in the utilities and financial services
     industries at December 31, 1994 that exceeded 5% of total assets.
 
   
     Mortgage Loans
    
 
     The Company originates mortgage loans either directly or through mortgage
     correspondents and brokers throughout the country. Loans are primarily
     related to underlying real property investments in office and apartment
     buildings and retail/commercial and industrial facilities. Mortgage loans
     are collateralized by the related properties and such collateral generally
     approximates a minimum of 133% of the original loan value at the time the
     loan is made.
 
     At December 31, 1995 and 1994, there were no delinquent mortgage loans
     (i.e., loans where payments on principal and/or interest are over 90 days
     past due).
 
     The Company had loans outstanding in Pennsylvania where principal balances
     in the aggregate exceeded 20% of the Company's surplus.
 
   Litigation and Unasserted Claims
 
     The Company is involved in various litigation, as both plaintiff and
defendant, which has arisen in the ordinary course of business and which, in the
opinion of management and legal counsel, will not have a material effect on the
Company's financial position.
 
     Insurance companies are subject to assessments, up to statutory limits, by
state guaranty funds for losses of policyholders of insolvent insurance
companies. In the opinion of management, the outcome of the proceedings and
assessments will not have a material adverse effect on the financial position of
the Company. Guaranty fund assessments totalled $343, $293 and $144 in 1995,
1994 and 1993, respectively. Of those amounts, $285, $162 and $52 in 1995, 1994
and 1993, respectively, are creditable against future years' premium taxes.
 
                                      F-35
<PAGE>   106
 
                                    PART II
 
                               OTHER INFORMATION
                          UNDERTAKING TO FILE REPORTS
 
     Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
 
                              RULE 484 UNDERTAKING
 
     Article VIII of PLACA's By-Laws provides, in part:
 
          To the fullest extent permitted by law, the Company shall indemnify
     any present, former or future Director, officer, or employee of the Company
     or any person who may serve or has served at its request as officer or
     Director of another corporation of which the Company is a creditor or
     stockholder, against the reasonable expenses, including attorney's fees,
     necessarily incurred in connection with the defense of any action, suit or
     other proceeding to which any of them is made a party because of service as
     Director, officer or employee of the Company or such other corporation, or
     in connection with any appeal therein, and against any amounts paid by such
     Director, officer or employee in settlement of, or in satisfaction of a
     judgement or fine in, any such action or proceeding, except expenses
     incurred in defense of or amounts paid in connection with any action, suit
     or other proceeding in which such Director, officer or employee shall be
     adjudged to be liable for negligence or misconduct in the performance of
     his duty.
 
     Insofar as indemnification or liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provision, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that any claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
 
                    REPRESENTATIONS PURSUANT TO RULE 6e-3(T)
 
     This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940. Registrant elects to be governed by Rule
6e-3(T)(b)(13)(i)(A).
 
     Registrant makes the following representations:
 
          (1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.
 
          (2) The level of the Mortality and Expense Risk Charge is within the
     range of industry practice for comparable flexible premium variable life
     insurance policies. The methodology used to support this representation is
     based on analysis of other policies registered under the Securities Act of
     1933, including the level of other expense charges, and uncertainties in
     terms of expense and mortality factors. Registrant undertakes to keep and
     make available to the Commission upon request the documents used to support
     this representation.
 
          (3) Registrant has concluded that there is a reasonable likelihood
     that the distribution financing arrangement of the Separate Account
     comprising the Registrant will benefit the Separate Account and
 
                                      II-1
<PAGE>   107
 
     Owners and the Registrant will keep and make available to the Commission on
     request a memorandum setting forth the basis for this representation.
 
          (4) The Separate Account comprising the Registrant will invest only in
     management investment companies which have undertaken to have a board of
     directors, a majority of whom are not interested persons of the company,
     formulate and approve any plan under Rule 12b-1 to finance distribution
     expenses.
 
                       CONTENTS OF REGISTRATION STATEMENT
 
     This Registration Statement comprises the following papers and documents:
 
          The facing sheet.
 
          A reconciliation and tie-in of the information shown in the Prospectus
     with items of Form N-8B-2.
 
          The Prospectus consisting of pages.
 
          The undertaking to file report.
 
          Rule 484 undertaking.
 
          Representations pursuant to Rule 6e-3(T).
 
          The signatures.
 
     The following exhibits:
 
<TABLE>
<S>    <C>  <C> <C>     <C>
1.A.   (1)  (a)         Resolution adopted by the Board of Directors of PLACA establishing the
                        Providentmutual Variable Life Separate Account(1)
       (2)              None
       (3)  (a)    (i)  Underwriting Agreement(2)
            (b)    (i)  Personal Producing General Agent's Agreement, Supplement and Commission
                        Schedule(2)
                  (ii)  Personal Producing Agent's Agreement, Supplement and Commission Schedule(2)
                 (iii)  Personal General Agent's Agreement, Supplement and Commission Schedule(2)
            (d)         Form of Selling Agreement between PML and Broker-Dealers(2)
       (4)              Inapplicable
       (5)  (a)         Individual Flexible Premium Adjustable Variable Life Insurance Policy(1)
       (6)  (a)         Charter of PLACA(1)
            (b)         By-Laws of PLACA(1)
       (7)              Inapplicable
       (8)              Inapplicable
       (9)              Inapplicable
       (10)             The form of Application (see Exhibit 1.A.(5)(a)(i))(3) (1)
2.                      See Exhibits 1.A.(5)
3.                      Opinion and consent of Linda E. Senker, Esquire
4.                      Inapplicable
5.                      Inapplicable
6.                      Opinion and consent of Scott V. Carney, FSA, MAAA
7.A.                    Consent of Sutherland, Asbill & Brennan
  B.                    Consent of Coopers & Lybrand L.L.P.
</TABLE>
 
                                      II-2
<PAGE>   108
 
   
<TABLE>
<S>                     <C>
8.                      Memorandum on Issuance, Transfer and Redemption(2)
9.A.                    Participation Agreement among Market Street Fund, Inc., Provident Mutual
                        Life Insurance Company of Philadelphia and PML Securities Company(2)
  B.                    Participation Agreement among Variable Insurance Products Fund, Fidelity
                        Distributors Corporation and PLACA(2)
  C.                    Participation Agreement among Variable Insurance Products Fund II,
                        Fidelity Distributors Corporation and PLACA(2)
  D.                    Sales Agreement between Neuberger & Berman Advisers Management Trust and
                        PLACA(2)
  E.                    Participation Agreement between TCI Portfolios, Inc. and PLACA(2)
  F.                    Participation Agreement between Van Eck Investment Trust and PLACA(2)
  G.                    Participation Agreement among The Alger American Fund, Provident Mutual
                        Life Insurance Company, Providentmutual Life and Annuity Company of
                        America and Fred Alger and Company Incorporated.
</TABLE>
    
 
- ---------------
(1) Incorporated herein by reference to the Registration Statement filed on Form
    S-6 on August 23, 1994 (File No. 33-83138).
 
(2) Incorporated herein by reference to the Pre-Effective Amendment No. 1 to the
    Registration Statement filed on Form S-6 on January 18, 1995 (File No.
    33-83138).
 
                                      II-3
<PAGE>   109
 
                                   SIGNATURES
 
   
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, PROVIDENTMUTUAL VARIABLE LIFE SEPARATE ACCOUNT
CERTIFIES THAT IT MEETS ALL THE REQUIREMENTS FOR EFFECTIVENESS OF THIS
POST-EFFECTIVE AMENDMENT PURSUANT TO RULE 485(b) UNDER THE SECURITIES ACT OF
1933 AND HAS CAUSED THIS POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW
CASTLE COUNTY, STATE OF DELAWARE ON THIS DAY OF APRIL, 1996.
    
 
                                            PROVIDENTMUTUAL VARIABLE LIFE
                                              SEPARATE ACCOUNT (Registrant)
 
<TABLE>
<S>                                             <C>
Attest:       /s/  LINDA E. SENKER              By:       /s/  L. J. ROWELL,
- ---------------------------------------         ----------------------------------------                                          
                                                JR. L. J. ROWELL, JR.
                                                    President

                                                By:PROVIDENTMUTUAL LIFE AND ANNUITY
                                                    Company of America (Depositor)
Attest:       /s/  LINDA E. SENKER              By:       /s/  L. J. ROWELL, JR.
- ---------------------------------------         ----------------------------------------                                          
                                                    L. J. ROWELL, JR.
                                                    President
</TABLE>
 
     AS REQUESTED BY THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS
BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
 
   
<TABLE>
<CAPTION>
               SIGNATURES                                 TITLE                       DATE
- ----------------------------------------    ---------------------------------    ---------------
<C>                                         <S>                                  <C>
         /s/  L. J. ROWELL, JR.             President and Director (Principal    April   , 1996
- ----------------------------------------      Executive Officer)
           L. J. ROWELL, JR.
         /s/  STEPHEN L. WHITE              Actuarial Officer (Principal         April   , 1996
- ----------------------------------------      Financial Officer)
            STEPHEN L. WHITE
         /s/  MARY LYNN FINELLI             Financial Reporting Officer          April   , 1996
- ----------------------------------------      (Principal Accounting Officer)
           MARY LYNN FINELLI
          /s/  ROBERT W. KLOSS              Director                             April   , 1996
- ----------------------------------------
            ROBERT W. KLOSS
          /s/  GERALD B. BEAM               Director                             April   , 1996
- ----------------------------------------
             GERALD B. BEAM
        /s/  JOHN R. MCCLELLAND             Director                             April   , 1996
- ----------------------------------------
           JOHN R. MCCLELLAND
         /s/  STANLEY R. REBER              Director                             April   , 1996
- ----------------------------------------
            STANLEY R. REBER
</TABLE>
    
 
                                      II-4
<PAGE>   110
 
   
<TABLE>
<CAPTION>
               SIGNATURES                                 TITLE                       DATE
- ----------------------------------------    ---------------------------------    ---------------
<C>                                         <S>                                  <C>
         /s/  CHARLENE PARSONS              Director                             April   , 1996
- ----------------------------------------
            CHARLENE PARSONS
          /s/  DAVID N. INGRAM              Director                             April   , 1996
- ----------------------------------------
            DAVID N. INGRAM
</TABLE>
    
 
                                      II-5

<PAGE>   1
                                                                      EXHIBIT 3

                                        April 19, 1996





Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19713


Gentlemen:

I hereby consent to the reference to my name under the
caption "Legal Matters" in the Prospectus filed as
part of Post-Effective Amendment No. 2 to the Registration
Statement on Form S-6 (File No. 33-83138) for the 
Providentmutual Variable Life Separate Account.

                                        Sincerely,



                                        Linda E. Senker
                                        Legal Officer

LES/ja

<PAGE>   1
                                                                      EXHIBIT 6

                                        April 19, 1996






Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19713




Gentlemen:

I hereby consent to the reference to my name under the caption 
"Experts" in the Prospectus filed as part of Post-Effective
Amendment No. 2 to the Registration Statement on Form S-6
(File No. 33-83138) for the Providentmutual Variable Life
Separate Account.

                                        Sincerely,





                                        Scott V. Carney, FSA, MAAA
                                        Actuary

SVC\LES\ja

<PAGE>   1
                                                                EXHIBIT 7.A

                      [SUTHERLAND, ASBILL & BRENNAN LETTERHEAD]

                                 April 29, 1996

Board of Directors
Providentmutual Life and Annuity
 Company of America
300 Continental Drive
Newark, DE 19713

Directors:

        We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus for certain flexible premium variable life insurance
policies filed as part of post-effective amendment number 2 to the registration
statement on Form S-6 for Providentmutual Variable Life Separate Account (File
No. 33-83138). In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.

                                                Very truly yours,

                                                SUTHERLAND, ASBILL & BRENNAN

                                                By: ________________________
                                                        Stephen E. Roth


<PAGE>   1
                                                                EXHIBIT 7.B

                       CONSENT OF INDEPENDENT ACCOUNTANTS

        We hereby consent to the inclusion, in this Post-Effective Amendment
No. 2 to the Registration Statement under the Securities Act of 1933, as
amended, filed on Form S-6 (File No. 33-83138) for the Providentmutual Variable
Life Separate Account, of the following reports:

        1.      Our report dated February 6, 1996 on our audits of the
                financial statements of Providentmutual Life and Annuity
                Company of America as of December 31, 1995 and 1994 and for each
                of the three years in the period ending December 31, 1995.

        2.      Our report dated February 14, 1996 on our audit of the
                financial statements of the Providentmutual Variable Life
                Separate Account (comprising the nineteen Subaccounts) as of
                December 31, 1995 and for the period February 1, 1995 (Date of
                Inception) to December 31, 1995.

                We also consent to the reference to our Firm under the caption
                "Experts".


Coopers & Lybrand L.L.P.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 24, 1996




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